UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-05742
BlackRock FundsSM
|
| (Exact name of registrant as specified in charter) |
| | |
100 Bellevue Parkway Wilmington, DE | | 19809 |
| (Address of principal executive offices) | | (Zip code) |
Brian Kindelan, Esq.
BlackRock Advisors, Inc.
100 Bellevue Parkway
Wilmington, Delaware 19809
|
| (Name and address of agent for service) |
Registrant’s telephone number, including area code: (800) 441-7762
Date of fiscal year end: September 30, 2006
Date of reporting period: March 31, 2006
| Item 1. | Reports to Stockholders. |
The Registrant’s semi-annual report to shareholders is as follows:
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED
INCOME LIQUIDITYREAL ESTATE BlackRock Funds
Equity Portfolios
Semi-Annual Report
March 31, 2006 (Unaudited)
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BLACKROCK FUNDS
EQUITY PORTFOLIOS
*Investment Trust
*Large Cap Value Equity
*Large Cap Growth Equity
*Dividend AchieversTM
*Legacy
*Mid-Cap Value Equity
*Mid-Cap Growth Equity
*Aurora
*Small/Mid-Cap Growth
*Small Cap Value Equity
*Small Cap Core Equity
*Small Cap Growth Equity
*Global Science & Technology Opportunities
*Global Resources
*All-Cap Global Resources
*Health Sciences
*U.S. Opportunities
*Global Opportunities
*International
Opportunities
*Asset Allocation
*Index Equity
TABLE OF CONTENTS
Shareholder Letter......................................................1
Portfolio Summaries
Investment Trust....................................................2-3
Large Cap Value Equity..............................................4-5
Large Cap Growth Equity.............................................6-7
Dividend Achievers/TM/..............................................8-9
Legacy............................................................10-11
Mid-Cap Value Equity..............................................12-13
Mid-Cap Growth Equity.............................................14-15
Aurora............................................................16-17
Small/Mid-Cap Growth..............................................18-19
Small Cap Value Equity............................................20-21
Small Cap Core Equity.............................................22-23
Small Cap Growth Equity...........................................24-25
Global Science & Technology Opportunities.........................26-27
Global Resources..................................................28-29
All-Cap Global Resources..........................................30-31
Health Sciences...................................................32-33
U.S. Opportunities................................................34-35
Global Opportunities..............................................36-37
International Opportunities.......................................38-39
Asset Allocation..................................................40-41
Index Equity......................................................42-43
Note on Performance Information......................................44
Schedules of Investments.........................................45-114
Key To Investment Abbreviations.....................................115
Portfolio Financial Statements
Statements of Assets and Liabilities............................116-121
Statements of Operations........................................122-125
Statements of Changes in Net Assets.............................126-133
Financial Highlights............................................134-161
Notes to Financial Statements...................................163-204
Additional Information..........................................205-208
The DFA Investment Trust Company Financial Statements...........209-237
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 generally receive any nonpublic personal information
relating to its shareholders who purchase shares through their broker-dealers.
However, in certain limited circumstances, BlackRock receives a limited amount
of nonpublic personal information from broker-dealers in connection with
monitoring for inappropriate trading activity. 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.
BLACKROCK FUNDS
March 31, 2006
Dear Shareholder:
You may be aware that on February 15, 2006, we announced that BlackRock
and Merrill Lynch Investment Managers (MLIM) intended to unite to create a new
independent asset management company.
We believe this combination of asset management strength will benefit our
investors. BlackRock is one of the largest publicly traded investment
management firms in the United States, with approximately $463 billion in
assets under management and over 1,800 employees. We manage assets on behalf of
institutional and individual investors worldwide through a variety of equity,
fixed income, cash management and alternative investment products. MLIM is also
a leading investment management organization, with over $576 billion in assets
under management globally and over 2,700 employees in 17 countries. It offers
over 100 investment strategies in vehicles ranging from mutual funds to
institutional portfolios.
At the completion of the transaction, which is expected at the end of the
third quarter of this year, the combined firm will be a top-ten investment
manager worldwide, with more than $1 trillion in assets under management. The
combined company will provide a wider selection of high-quality investment
solutions across a range of asset classes and investment styles. BlackRock and
MLIM possess complementary capabilities that together create a well-rounded
organization, uniting some of the finest money managers in the industry. At the
same time, the firms share similar values and beliefs - focused on delivering
excellence to clients, they both make investment performance their most
important mission. In short, the combination reinforces our commitment to
shareholders.
As a shareholder in one or more BlackRock-advised mutual funds, you will
receive proxy materials in the coming weeks in connection with this
transaction. After you receive this information, do not hesitate to contact
your financial advisor should you have any questions or concerns.
As always, we thank you for entrusting us with your investment assets, and
we look forward to continuing to serve your investment needs with even greater
strength and scale.
Sincerely,
[GRAPHIC OMITTED]
Anne F. Ackerley
Managing Director
BlackRock Advisors, Inc.
Data, including assets under management, are as of March 31, 2006.
1
INVESTMENT TRUST PORTFOLIO
Total Net Assets (3/31/06): $1.3 billion
Performance Benchmark:
S&P 500(Reg. TM) Index
Investment Approach:
Seeks long-term capital appreciation. The portfolio management team uses
quantitative techniques to analyze a universe of approximately 800 companies,
including those in the S&P 500(Reg. TM) Index and about 300 other large and
medium capitalization companies. Using a multi-factor model, the management
team identifies stocks with rising earnings expectations that sell at low
relative valuations when compared with their sector peers. Based on this
information, and using sophisticated risk measurement tools, the portfolio
management team selects stocks, together with their appropriate weightings,
that it believes will maximize the Portfolio's return per unit of risk. The
Portfolio seeks to maintain market capitalization, sector allocations and style
characteristics similar to the S&P 500(Reg. TM) Index.
Recent Portfolio Management Activity:
o All share classes underperformed the benchmark for the semi-annual
period.
o The equity market, as measured by the S&P 500(Reg. TM) Index, was up
6.38% with the bulk of the returns coming from the first quarter of 2006.
While large capitalization stocks returns were solid, small capitalization
stocks outperformed large by almost 9% over the semi-annual period continuing a
trend seen over the last several years. Within large capitalization stocks,
value stocks outperformed growth stocks - the Russell 1000(Reg. TM) Value Index
was up 7.3% while the Russell 1000(Reg. TM) Growth Index was up 6.2%.
o During the first half of the semi-annual period, the model was
negative. Both components of the model, valuation and earnings expectations,
were essentially negative during the quarter. Within the valuation group of
factors, weakness can be attributed to the forecast earnings-to-price,
book-to-price and return on equity factors. Within the earnings expectation
group of factors, the earnings revisions up and earnings revisions down factors
produced negative results, while forecast estimate dispersion and estimate
momentum proved to be the most predictive factors. Relative to the index, the
strongest performing sectors were the consumer cyclicals and information
technology sectors. The most notable contributors to performance in these
sectors were highly ranked Barnes and Noble and AutoNation, within the consumer
cyclicals sector, and CheckFree, within the information technology sector.
However, strength in these sectors was overshadowed by weak relative
performance in the commercial services, basic materials, energy and financials
sectors. The Portfolio was hurt by positions in Cendant, in the commercial
services sector, Lyondell Chemical and Consol Energy, in the basic materials
sector, and Patterson UTI Energy, in the energy sector. Lack of exposure to
J.P. Morgan Chase and Wells Fargo, which performed well during the quarter,
also contributed to the underperformance.
o During the second half of the semi-annual period, the model was
modestly negative leading to the weakness in performance. The valuation
factors, like cash-flow-to-price and return on equity, struggled through the
quarter hurting relative performance. On a positive note, the earnings
expectation factors experienced solid power - particularly from factors like
earnings surprise and revisions down. From a relative return perspective, the
sectors that struggled during the quarter included the technology,
transportation, and the energy sectors. The biggest disappointments for the
technology sector included our overweight position in highly-ranked Intel,
which performed poorly, and our lack of exposure to poorly-ranked Qualcomm,
which performed well. In the transportation sector, our overweight position in
YRC Worldwide hurt relative returns. Our lack of exposure to poorly-ranked
oilfield services operator, Schlumberger, which performed well, led to the
disappointing performance in the energy sector. The consumer non-cyclical and
financial sectors were relatively the strongest sectors for the quarter. In
the non-cyclical sector our overweight position in highly ranked
Archer-Daniels-Midland led the way. In the financial sector, our positions in
highly-ranked KeyCorp and W.R. Berkley helped mute the impact of the weaker
sectors.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INVESTMENT TRUST
PORTFOLIO
AND THE S&P 500(REG. TM) INDEX FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A S&P 500(R) Index
- - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,428 10,000
06/30/1996 10,458 9,850 10,449
09/30/1996 10,761 10,125 10,772
12/31/1996 11,773 11,074 11,670
03/31/1997 12,084 11,354 11,983
06/30/1997 14,196 13,318 14,074
09/30/1997 15,335 14,371 15,129
12/31/1997 15,477 14,489 15,563
03/31/1998 17,612 16,473 17,734
06/30/1998 18,000 16,818 18,320
09/30/1998 15,959 14,892 16,497
12/31/1998 19,287 17,973 20,010
03/31/1999 20,146 18,766 21,008
06/30/1999 21,694 20,181 22,488
09/30/1999 20,262 18,829 21,084
12/31/1999 23,293 21,619 24,222
03/31/2000 23,672 21,962 24,777
06/30/2000 22,660 20,993 24,119
09/30/2000 21,912 20,268 23,885
12/31/2000 19,838 18,318 22,016
03/31/2001 16,625 15,332 19,406
06/30/2001 17,318 15,950 20,542
09/30/2001 14,179 13,055 17,527
12/31/2001 15,604 14,339 19,400
03/31/2002 14,999 13,779 19,453
06/30/2002 12,743 11,688 16,847
09/30/2002 10,713 9,820 13,936
12/31/2002 11,537 10,553 15,112
03/31/2003 11,180 10,223 14,637
06/30/2003 12,799 11,684 16,890
09/30/2003 13,156 11,990 17,337
12/31/2003 14,749 13,422 19,448
03/31/2004 15,355 13,968 19,777
06/30/2004 15,509 14,086 20,117
09/30/2004 15,406 13,979 19,741
12/31/2004 16,898 15,306 21,563
03/31/2005 16,587 15,008 21,100
06/30/2005 16,872 15,258 21,389
09/30/2005 17,366 15,698 22,160
12/31/2005 17,574 15,859 22,623
03/31/2006 18,232 16,436 23,575
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
---------- ----------- ---------- ----------
Institutional Class 9.92% 17.71% 1.86% 6.19%
Service Class 9.58% 17.37% 1.55% 5.86%
Investor A Class (Load Adjusted) 3.21% 14.86% 0.21% 5.09%
Investor A Class (NAV) 9.51% 17.15% 1.40% 5.71%
Investor B Class (Load Adjusted) 4.25% 15.47% 0.28% 4.92%
Investor B Class (NAV) 8.75% 16.34% 0.67% 4.92%
Investor C Class (Load Adjusted) 7.74% 16.33% 0.67% 4.92%
Investor C Class (NAV) 8.74% 16.33% 0.67% 4.92%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 9/13 /93; SERVICE SHARES,
9/15/93; INVESTOR A SHARES, 10/13/93; INVESTOR B SHARES, 3/27/96; AND INVESTOR
C SHARES, 9/27/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 44 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED,INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
2
INVESTMENT TRUST PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)
General Electric Co. 4.2%
Exxon Mobil Corp. 4.1
Microsoft Corp. 3.0
Pfizer, Inc. 2.4
International Business Machines Corp. 2.0
Cisco Systems, Inc. 1.8
J.P. Morgan Chase & Co. 1.8
ConocoPhillips 1.7
Citigroup, Inc. 1.7
Wyeth 1.6
----
Total 24.3%
====
Top Ten Industries (% of long-term
investments)
Oil & Gas 9.8%
Manufacturing 9.7
Banks 8.9
Pharmaceuticals 6.7
Computer Software & Services 5.8
Insurance 5.8
Finance 5.3
Computer & Office Equipment 5.1
Retail Merchandising 5.0
Telecommunications 4.5
----
Total 66.6%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,049.80 1,047.50 1,047.00 1,044.30 1,043.40
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.99 5.41 5.92 9.73 9.68
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,021.06 1,019.65 1,019.14 1,015.36 1,015.41
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.94 5.35 5.86 9.64 9.59
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.78%, 1.06%, 1.16%, 1.91%, and 1.90% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
3
LARGE CAP VALUE EQUITY PORTFOLIO
Total Net Assets (3/31/06): $355.2 million
Performance Benchmark:
Russell 1000(Reg. TM) Value Index
Investment Approach:
Seeks long-term capital appreciation with a secondary objective of current
income by investing at least 80% of its net assets in equity securities issued
by U.S. large capitalization value companies (defined as those with market
capitalizations equal to those within the universe of Russell 1000(Reg. TM)
Value Index stocks). The portfolio management team uses quantitative techniques
to analyze a universe of approximately 800 value companies. The management team
uses a multi-factor model, which identifies the key factors that drive the
performance of value stocks. Using this multi-factor model, the management team
identifies stocks with low relative valuations and improving earnings
expectations when compared with their sector peers. Based on this information,
and using sophisticated risk measurement tools, the management team selects
stocks, together with their appropriate weightings, that it believes will
maximize the Portfolio's return per unit of risk. The Portfolio seeks to
maintain market capitalization, sector allocations and style characteristics
similar to those of the Russell 1000(Reg. TM) Value Index.
Recent Portfolio Management Activity:
o All share classes underperformed the benchmark for the semi-annual
period.
o The equity market, as measured by the S&P 500(Reg. TM) Index, was up
6.38% with the bulk of the returns coming from the first quarter of 2006.
While large capitalization stocks returns were solid, small capitalization
stocks outperformed large by almost 9% over the semi-annual period continuing a
trend seen over the last several years. Within large capitalization stocks,
value stocks outperformed growth stocks - the Russell 1000(Reg. TM) Value Index
was up 7.3% while the Russell 1000(Reg. TM) Growth Index was up 6.2%.
o During the first half of the semi-annual period, the model was modestly
negative, leading to weakness in performance. Both components of the model,
valuation and earnings expectations, were essentially negative during the
quarter. Within the valuation group of factors, weakness can be attributed to
the book-to-price and return on equity factors, while forecast
earnings-to-price and cash flow-to-price were flat for the quarter. Within the
earnings expectation group of factors, the earnings revisions up and earnings
revisions down factors produced negative results, while price momentum,
forecast estimate dispersion and earnings surprise proved to be the most
predictive factors. Relative to the index, the strongest performing sectors
were the consumer cyclicals and information technology sectors. The most
notable contributors to performance in these sectors were highly ranked Barnes
and Noble and AutoNation, within the consumer cyclicals sector, and Western
Digital Corp., within the information technology sector. Lack of exposure to
General Motors and Ford also contributed positively to relative performance.
However, strength in these sectors was offset by weak relative performance in
the utilities, commercial services and energy sectors. The Portfolio was hurt
by positions in highly ranked PPL Corp. and Centerpoint Energy, in the
utilities sector, Cendant, in the commercial services sector, and
ConocoPhillips and Amerada Hess, in the energy sector.
o During the second half of the semi-annual period, the overall model
continued to be slightly negative, leading to the weakness in performance. The
valuation factors, like cash-flow-to-price and return on equity, struggled
through the quarter hurting relative performance. On a positive note, the
earnings expectation factors experienced solid power - particularly from
factors like earnings surprise and revisions down. Another bright spot was the
price momentum factor which helped offset the recent weakness in the valuation
factors. From a relative return perspective, the sectors that struggled during
the quarter included the telecommunications and industrial sectors. Big
disappointments in each sector were lack of exposure to BellSouth and Deere.
The consumer services and consumer non-cyclical sectors were relatively the
strongest sectors for the quarter. In the non-cyclical sector our overweight
position in highly ranked Archer-Daniels-Midland led the way. In the consumer
services sector our relative positions in highly-ranked McGraw-Hill and Disney
helped mute the impact of the weaker sectors.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE LARGE CAP VALUE
EQUITY PORTFOLIO
AND THE RUSSELL 1000(REG. TM) VALUE INDEX FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A Russell 1000(R) Value Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,422 10,000
06/30/1996 10,344 9,739 10,172
09/30/1996 10,698 10,062 10,468
12/31/1996 11,753 11,051 11,512
03/31/1997 11,949 11,217 11,807
06/30/1997 13,589 12,735 13,548
09/30/1997 14,727 13,787 14,897
12/31/1997 15,120 14,148 15,562
03/31/1998 17,019 15,899 17,376
06/30/1998 16,763 15,644 17,454
09/30/1998 14,392 13,424 15,432
12/31/1998 16,705 15,558 17,995
03/31/1999 16,895 15,719 18,253
06/30/1999 18,823 17,487 20,311
09/30/1999 16,606 15,417 18,322
12/31/1999 17,313 16,068 19,318
03/31/2000 17,059 15,804 19,411
06/30/2000 16,272 15,058 18,501
09/30/2000 17,642 16,298 19,956
12/31/2000 19,040 17,581 20,674
03/31/2001 17,923 16,515 19,464
06/30/2001 18,446 16,990 20,414
09/30/2001 16,191 14,890 18,178
12/31/2001 17,179 15,778 19,519
03/31/2002 17,104 15,693 20,317
06/30/2002 14,324 13,124 18,586
09/30/2002 11,753 10,766 15,097
12/31/2002 13,064 11,940 16,489
03/31/2003 12,358 11,282 15,687
06/30/2003 14,360 13,106 18,397
09/30/2003 14,565 13,277 18,777
12/31/2003 16,431 14,947 21,441
03/31/2004 17,146 15,581 22,091
06/30/2004 17,200 15,611 22,285
09/30/2004 17,429 15,825 22,629
12/31/2004 19,164 17,371 24,978
03/31/2005 19,251 17,436 25,000
06/30/2005 19,571 17,708 25,418
09/30/2005 20,356 18,400 26,405
12/31/2005 20,582 18,587 26,739
03/31/2006 21,746 19,617 28,325
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
----------- ----------- ---------- ----------
Institutional Class 12.96% 20.73% 3.94% 8.08%
Service Class 12.56% 20.37% 3.63% 7.76%
Investor A Class (Load Adjusted) 6.03% 17.91% 2.29% 6.97%
Investor A Class (NAV) 12.52% 20.25% 3.50% 7.61%
Investor B Class (Load Adjusted) 7.15% 18.48% 2.34% 6.77%
Investor B Class (NAV) 11.65% 19.31% 2.70% 6.77%
Investor C Class (Load Adjusted) 10.66% 19.32% 2.71% 6.79%
Investor C Class (NAV) 11.66% 19.32% 2.71% 6.79%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 4 /20/92; INVESTOR A
SHARES, 5/2/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 1/18/96; AND
INVESTOR C SHARES, 8/16/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 44
FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING
IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
4
LARGE CAP VALUE EQUITY PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term
investments)
Exxon Mobil Corp. 6.6%
J.P. Morgan Chase & Co. 3.6
Citigroup, Inc. 3.3
Pfizer, Inc. 3.3
Bank of America Corp. 2.5
ConocoPhillips 2.5
Wachovia Corp. 2.4
AT&T, Inc. 2.3
General Electric Co. 2.2
Verizon Communications, Inc. 1.8
----
Total 30.5%
====
Top Ten Industries (% of long-term
investments)
Banks 17.6%
Oil & Gas 14.5
Insurance 7.1
Finance 6.4
Manufacturing 6.3
Telecommunications 6.2
Pharmaceuticals 5.6
Energy & Utilities 5.6
Security Brokers & Dealers 2.5
Computer & Office Equipment 2.4
----
Total 74.2%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,068.20 1,066.40 1,066.20 1,061.80 1,062.00
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.97 5.62 6.03 10.08 9.87
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,021.11 1,019.50 1,019.09 1,015.10 1,015.31
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.89 5.50 5.91 9.90 9.69
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.77%, 1.09%, 1.17%, 1.96%, and 1.92% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
5
LARGE CAP GROWTH EQUITY PORTFOLIO
Total Net Assets (3/31/06): $54.3 million
Performance Benchmark:
Russell 1000(Reg. TM) Growth Index
Investment Approach:
Seeks long-term capital appreciation by investing at least 80% of its net
assets in equity securities issued by U.S. large capitalization growth
companies (defined as those with market capitalizations equal to those within
the universe of Russell 1000(Reg. TM) Growth Index stocks). The portfolio
management team uses quantitative techniques to analyze a universe of
approximately 700 growth companies. The management team uses a multi-factor
model, which identifies the key factors that drive the performance of growth
stocks. Using this multi-factor model, the management team identifies stocks
with rising earnings expectations that sell at attractive relative valuations
when compared with their sector peers. Based on this information, and using
sophisticated risk measurement tools, the management team selects stocks,
together with their appropriate weightings, that it believes will maximize the
Portfolio's return per unit of risk. The Portfolio seeks to maintain market
capitalization, sector allocations and style characteristics similar to those
of the Russell 1000(Reg. TM) Growth Index.
Recent Portfolio Management Activity:
o All share classes underperformed the benchmark for the semi-annual
period.
o The equity market, as measured by the S&P 500(Reg. TM) Index, was up
6.38% with the bulk of the returns coming from the first quarter of 2006.
While large capitalization stocks returns were solid, small capitalization
stocks outperformed large by almost 9% over the semi-annual period continuing a
trend seen over the last several years. Within large capitalization stocks,
value stocks outperformed growth stocks - the Russell 1000(Reg. TM) Value Index
was up 7.3% while the Russell 1000(Reg. TM) Growth Index was up 6.2%.
o During the first half of the semi-annual period, the model was modestly
negative, but performance improved throughout the quarter. Both components of
the model, valuation and earnings expectations, were essentially negative
during the quarter. The strongest performing sectors were the consumer
cyclicals, financials and information technology sectors. The most notable
contributors to performance in these sectors were highly ranked Nordstrom,
Claires Stores and Advanced Auto Parts, within the consumer cyclicals sector,
E*Trade and W.R. Berkley, within the financials sector, and Apple, within the
information technology sector. Lack of exposure to low- ranked Dell Computer,
which did not perform well, also contributed positively to relative
performance. However, strength in these sectors was offset by weak relative
performance in the commercial services, health care and industrials sectors.
The Portfolio was hurt by positions in highly ranked Cendant, Alliance Data
Systems and ITT Industries in the industrials sector. Avoiding or holding an
underweight position in lower ranked 3M, Invitrogen and Millennium
Pharmaceutical also contributed to the underperformance.
o During the second half of the semi-annual period, the model was modestly
positive leading to the improving performance. On a positive note, the
earnings expectation factors experienced solid power. The valuation factors,
like cash-flow-to-price and book-to-price, struggled through the quarter muting
relative performance. Another bright spot was the price momentum factor, which
helped offset the recent weakness in the valuation factors. From a relative
return perspective, the strongest sectors on the quarter included the consumer
cyclical, financial, and basic material sectors. In the cyclical sector our
overweight positions in highly-ranked Martin Marietta Materials and Cummins led
the way. In financials our positions in high rated E*Trade Financial and W.R.
Berkley helped overall performance. NuCor, in the basic materials sector was
particularly strong. Unfortunately, weakness in the technology, industrials,
and energy sectors offset much of the strength found elsewhere. Semiconductor
stock selection hurt performance in technology. Our lack of exposure to
Rockwell Automation and Halliburton, which performed well, hurt performance in
the industrial and energy sectors.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE LARGE CAP GROWTH
EQUITY
PORTFOLIO AND THE RUSSELL 1000(REG. TM) GROWTH INDEX FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A Russell 1000(R) Growth Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,425 10,000
06/30/1996 10,588 9,966 10,636
09/30/1996 10,887 10,233 11,019
12/31/1996 11,319 10,625 11,685
03/31/1997 11,248 10,553 11,748
06/30/1997 13,379 12,541 13,969
09/30/1997 14,555 13,629 15,019
12/31/1997 14,536 13,589 15,247
03/31/1998 16,984 15,854 17,558
06/30/1998 18,060 16,844 18,355
09/30/1998 16,266 15,149 16,687
12/31/1998 20,541 19,113 21,149
03/31/1999 22,161 20,593 22,493
06/30/1999 22,571 20,959 23,359
09/30/1999 22,034 20,438 22,504
12/31/1999 28,039 25,992 28,162
03/31/2000 29,682 27,469 30,169
06/30/2000 28,724 26,570 29,354
09/30/2000 27,080 24,997 27,775
12/31/2000 20,925 19,290 21,847
03/31/2001 15,188 13,986 17,281
06/30/2001 15,849 14,570 18,736
09/30/2001 12,029 11,055 15,099
12/31/2001 13,681 12,558 17,385
03/31/2002 13,311 12,197 16,935
06/30/2002 10,667 9,775 13,773
09/30/2002 8,870 8,111 11,700
12/31/2002 9,464 8,645 12,537
03/31/2003 9,332 8,508 12,403
06/30/2003 10,456 9,527 14,178
09/30/2003 10,813 9,837 14,733
12/31/2003 11,883 10,806 16,267
03/31/2004 12,174 11,055 16,395
06/30/2004 12,333 11,179 16,713
09/30/2004 11,791 10,682 15,839
12/31/2004 12,941 11,713 17,292
03/31/2005 12,531 11,328 16,585
06/30/2005 12,994 11,738 16,994
09/30/2005 13,337 12,024 17,676
12/31/2005 13,685 12,335 18,202
03/31/2006 14,138 12,722 18,766
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
----------- ----------- ------------- ----------
Institutional Class 12.82% 14.85% (1.42)% 3.52%
Service Class 12.41% 14.47% (1.73)% 3.21%
Investor A Class (Load Adjusted) 5.81% 12.10% (3.04)% 2.44%
Investor A Class (NAV) 12.31% 14.35% (1.88)% 3.05%
Investor B Class (Load Adjusted) 6.97% 12.53% (3.00)% 2.29%
Investor B Class (NAV) 11.47% 13.45% (2.61)% 2.29%
Investor C Class (Load Adjusted) 10.48% 13.53% (2.60)% 2.28%
Investor C Class (NAV) 11.48% 13.53% (2.60)% 2.28%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 11/1/89; INVESTOR A
SHARES, 3/14/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 1/24/96; AND
INVESTOR C SHARES, 1/24/97. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 44
FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING
IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
6
LARGE CAP GROWTH EQUITY PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)
General Electric Co. 5.4%
Microsoft Corp. 4.1
The Procter & Gamble Co. 3.5
Cisco Systems, Inc. 3.2
International Business Machines Corp. 2.7
PepsiCo, Inc. 2.1
The Home Depot, Inc. 1.8
Johnson & Johnson 1.8
The Boeing Co. 1.5
Motorola, Inc. 1.4
----
Total 27.5%
====
Top Ten Industries (% of long-term
investments)
Manufacturing 11.7%
Computer Software & Services 10.0
Retail Merchandising 7.6
Computer & Office Equipment 7.3
Medical & Medical Services 6.2
Pharmaceuticals 5.9
Medical Instruments & Supplies 4.9
Semiconductors & Related Devices 4.3
Soaps & Cosmetics 4.1
Electronics 3.5
----
Total 65.5%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,060.00 1,057.90 1,058.10 1,053.10 1,054.30
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.80 5.64 6.21 10.19 9.99
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,021.26 1,019.45 1,018.89 1,014.95 1,015.16
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.74 5.55 6.11 10.05 9.84
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.74%, 1.10%, 1.21%, 1.99%, and 1.95% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
7
DIVIDEND ACHIEVERSTM PORTFOLIO
Total Net Assets (3/31/06): $34.0 million
Performance Benchmark:
Russell 1000(Reg. TM) Value Index
Investment Approach:
Seeks to provide total return through a combination of current income and
capital appreciation by investing primarily in U.S. large capitalization common
stocks with long-term consistent dividend history. The Portfolio normally
invests at least 80% of its assets in common stocks included in the universe of
common stocks which Mergent(Reg. TM), a recognized provider of financial
information, has identified as Dividend AchieversTM. To qualify for the
Dividend AchieversTM universe, an issuer must have raised its annual regular
cash dividend on a pre-tax basis for at least each of the last ten consecutive
years. These issuers are also subject to additional screening criteria applied
by Mergent(Reg. TM) such as liquidity. The Portfolio will be constructed from
a broad universe of stocks that the portfolio management team believes to be
value stocks and all stocks in the Dividend AchieversTM universe. The
portfolio management team screens these issuers utilizing BlackRock's
proprietary Quantitative Equity Model, which uses earnings momentum and
valuation factors to rank stocks within a sector and industry based upon their
expected return, to continuously evaluate Portfolio holdings. The Portfolio
will be constructed with consideration of the characteristics of the Russell
1000(Reg. TM) Value Index, such as style, sector, industry, capitalization and
volatility. The Portfolio may invest up to 20% of its assets in common stocks
of issuers that are not included in the Dividend AchieversTM universe, and in
fixed income securities when, in the opinion of the portfolio management team,
it is advantageous for the Portfolio to do so.
Recent Portfolio Management Activity:
o All share classes underperformed the benchmark for the semi-annual
period.
o The equity market, as measured by the S&P 500(Reg. TM) Index, was up
6.38% with the bulk of the returns coming from the first quarter of 2006.
While large capitalization stocks returns were solid, small capitalization
stocks outperformed large by almost 9% over the semi-annual period continuing a
trend seen over the last several years. Within large capitalization stocks,
value stocks outperformed growth stocks - the Russell 1000(Reg. TM) Value Index
was up 7.3% while the Russell 1000(Reg. TM) Growth Index was up 6.2%.
o During the semi-annual period, the three criteria that stock selection
is based on in the Portfolio did not help identify outperforming stocks.
Dividend paying stocks performed in line with non-dividend paying stocks,
though significantly high yielding stocks actually produced negative returns.
Mergent's Dividend AchieversTM as a group did not perform significantly better
than the broader market. Finally, the quantitative equity model was modestly
negative during the period. These factors led to Portfolio underperformance.
From the model perspective, both the valuation and earnings expectation
components were negative. Relative to the index, the strongest performing
sectors were the consumer non-cyclicals and consumer services sectors. The
most notable contributors to performance in these sectors were highly ranked
Reynolds American and Altria, within the consumer non-cyclicals sector, and
McGraw-Hill and McDonald's, within the consumer services sector. Lack of
exposure to Comcast also contributed positively to relative performance.
However, strength in these sectors was overshadowed by weak relative
performance in the financials and utilities sectors. The Portfolio was hurt by
positions in highly ranked HRPT Property Trust, UGI Corp and Energen Corp.
Lack of exposure to J.P. Morgan Chase and U.S. Bancorp, and an underweight to
American International Group, also contributed to the relative
underperformance.
o During the second half of the semi-annual period, the overall model was
slightly negative for the quarter leading to the weakness in performance. The
valuation factors, like cash-flow-to-price and return on equity, struggled
through the quarter. On a positive note, the earnings expectation factors
experienced solid power - particularly from factors like earnings surprise and
revisions down. Another bright spot was the price momentum factor which helped
offset the recent weakness in the valuation factors. It is encouraging to note
that the Portfolio was able to keep pace with the Russell 1000(Reg. TM) Value
Index in spite of continued headwinds during the quarter. Those headwinds
included: a slightly negative model, the relative underperformance of high
yielding stocks,and the relative underperformance of Dividend AchieversTM as a
group. Fortunately, strong stock selection was able to counter these headwinds
and deliver modest outperformance. From a relative return perspective, the
sectors that struggled on the quarter included the technology and financial
sectors. The biggest disappointment for the technology sector was our lack of
exposure to non-Dividend AchieversTM Hewlett-Packard, which performed well. In
the financial sector, our lack of exposure to non-Dividend AchieversTM Goldman
Sachs and Morgan Stanley, which performed well, hurt relative returns.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE DIVIDEND
ACHIEVERSTM
PORTFOLIO AND THE RUSSELL 1000(REG. TM) VALUE INDEX FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A Russell 1000(R) Value Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
09/08/2004 10,000 9,425 10,000
09/30/2004 9,960 9,387 10,026
12/31/2004 10,743 10,132 11,067
03/31/2005 10,549 9,932 11,077
06/30/2005 10,642 10,020 11,262
09/30/2005 10,939 10,279 11,700
12/31/2005 10,926 10,257 11,848
03/31/2006 11,576 10,866 12,550
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year From Inception
---------- ----------------
Institutional Class 9.73% 9.84%
Service Class 9.44% 9.42%
Investor A Class (Load Adjusted) 3.10% 5.47%
Investor A Class (NAV) 9.41% 9.55%
Investor B Class (Load Adjusted) 4.02% 6.40%
Investor B Class (NAV) 8.52% 8.86%
Investor C Class (Load Adjusted) 7.49% 8.76%
Investor C Class (NAV) 8.49% 8.76%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO ON
9/8/04. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 44 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
8
DIVIDEND ACHIEVERSTM PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term
investments)
Exxon Mobil Corp. 5.9%
Pfizer, Inc. 3.9
Chevron Corp. 3.6
AT&T, Inc. 3.1
Bank of America Corp. 3.1
Citigroup, Inc. 3.1
J.P. Morgan Chase & Co. Inc. 2.6
Altria Group, Inc. 2.3
General Electric Co. 2.3
ConocoPhillips 2.2
----
Total 32.1%
====
Top Ten Industries (% of
long-term investments)
Banks 17.2%
Oil & Gas 14.0
Manufacturing 8.2
Finance 7.7
Pharmaceuticals 6.6
Telecommunications 6.5
Insurance 6.1
Energy & Utilities 5.7
Real Estate 4.5
Tobacco 2.3
----
Total 78.8%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,058.20 1,056.80 1,057.10 1,052.80 1,052.60
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 4.62 6.15 6.67 10.44 10.39
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,020.46 1,018.94 1,018.44 1,014.70 1,014.75
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 4.54 6.06 6.56 10.30 10.25
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.90%, 1.20%, 1.30%, 2.04%, and 2.03% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
9
LEGACY PORTFOLIO
Total Net Assets (3/31/06): $275.7 million
Performance Benchmark:
Russell 1000(Reg. TM) Growth Index
Investment Approach:
Seeks to provide long-term growth of capital by normally investing at
least 80% of its total assets in common and preferred stock and securities
convertible into common and preferred stocks of mid- and large-capitalization
companies. The Portfolio seeks to invest in fundamentally sound companies with
strong management, superior earnings growth prospects and attractive relative
valuations. The disciplined investment process uses a bottom-up stock selection
approach as the primary driver of returns. The Portfolio emphasizes large
companies that exhibit stable growth and accelerated earnings.
Recent Portfolio Management Activity:
o All share classes of the Portfolio outperformed the benchmark for the
semi-annual period.
o U.S. equity markets exhibited a strong upswing during the first quarter
of 2006, building on the modest gains experienced in the fourth quarter of
2005. For the six month period, the large-capitalization S&P 500(Reg. TM) Index
returned 6.4%, while smaller-capitalization stocks, as represented by the
Russell 2000(Reg. TM) Index, surged during January and posted their strongest
first quarter performance in fifteen years. Broad-based strength across the
U.S. equity market spectrum during the first quarter of 2006 was particularly
satisfying after what was considered a lackluster year for stocks in 2005.
o In this environment, all the major sectors within both the Portfolio
and its benchmark, the Russell 1000(Reg. TM) Growth Index, posted absolute
gains. Strong stock selection was the primary driver of relative portfolio
gains during the period. In particular, stock selection decisions in the
information technology, energy, and materials sectors produced favorable
results.
o While our bottom-up portfolio construction has resulted in an
overweight within the information technology sector, our holdings' returns in
this segment significantly topped those of the benchmark. Strength was not
concentrated in a particular industry, as several stocks posted impressive
results over the six-month period. Google was the top individual contributor to
relative gains, as the internet services firm benefited from the trend in
advertising dollars shifting towards the internet and away from traditional
media such as print and radio. Other notable contributors included positions in
Hewlett-Packard and Corning.
o Although oil prices have exhibited some volatile swings over the last
six months, a charged geopolitical environment continued to support elevated
prices, and crude oil closed the first quarter of 2006 above $65/bbl.
Diversified oil services and drilling companies such as portfolio holdings
Schlumberger and GlobalSantaFe have flourished in this environment. Strong
demand for their products and services has helped contribute to the healthy
gains in the stock prices
o In contrast, weakness in both the consumer discretionary and
industrials sectors created a drag on Portfolio performance as Portfolio
positions tended to underperform benchmark holdings. Within the consumer
discretionary sector, positions in XM Satellite Radio and Kohl's hurt returns.
In industrials, the combination of an underweight to the sector and poor stock
selection detracted from gains.
o Sector positioning within the Portfolio shifted over the course of the
semi-annual period, as bottom-up stock selection decisions led us to make a
number of adjustments to the Portfolio. We remain wary of the consumer's
ability to maintain current spending levels given higher interest rates and
elevated energy costs and eliminated several consumer discretionary names from
the Portfolio during the period. We also eliminated our health care overweight
due to a combination of company-specific reasons and Medicare reimbursement
concerns. At the close of the first quarter of 2006, the Portfolio's largest
overweights were in energy, financials and information technology, while the
largest underweights were in consumer discretionary, industrials and consumer
staples.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE LEGACY
PORTFOLIO AND THE RUSSELL 1000(REG. TM) GROWTH INDEX FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A Russell 1000(R) Growth Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
12/31/1997 10,000 9,425 10,000
03/31/1998 11,470 10,801 11,515
06/30/1998 12,290 11,565 12,038
09/30/1998 10,730 10,085 10,944
12/31/1998 13,227 12,429 13,871
03/31/1999 13,907 13,070 14,752
06/30/1999 14,908 13,994 15,320
09/30/1999 14,027 13,164 14,759
12/31/1999 16,608 15,569 18,470
03/31/2000 16,668 15,616 19,786
06/30/2000 16,228 15,116 19,252
09/30/2000 16,849 15,672 18,217
12/31/2000 15,698 14,597 14,328
03/31/2001 13,037 12,108 11,334
06/30/2001 13,547 12,579 12,288
09/30/2001 11,376 10,561 9,903
12/31/2001 12,787 11,853 11,402
03/31/2002 12,867 11,919 11,107
06/30/2002 10,896 10,081 9,033
09/30/2002 9,285 8,591 7,674
12/31/2002 9,815 9,072 8,223
03/31/2003 9,655 8,921 8,135
06/30/2003 10,966 10,118 9,299
09/30/2003 11,336 10,458 9,663
12/31/2003 12,686 11,693 10,669
03/31/2004 12,787 11,778 10,753
06/30/2004 13,057 12,014 10,961
09/30/2004 12,586 11,580 10,388
12/31/2004 13,957 12,825 11,341
03/31/2005 13,207 12,127 10,878
06/30/2005 13,657 12,532 11,145
09/30/2005 14,197 13,032 11,593
12/31/2005 14,898 13,654 11,938
03/31/2006 15,258 13,975 12,308
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
----------- ----------- ---------- ---------------
Institutional Class 15.53% 16.48% 3.20% 5.26%
Service Class 15.15% 16.14% 2.91% 4.89%
Investor A Class (Load Adjusted) 8.65% 13.86% 1.70% 4.14%
Investor A Class (NAV) 15.24% 16.14% 2.91% 4.89%
Investor B Class (Load Adjusted) 9.84% 14.42% 1.80% 4.13%
Investor B Class (NAV) 14.34% 15.30% 2.17% 4.13%
Investor C Class (Load Adjusted) 13.43% 15.33% 2.17% 4.13%
Investor C Class (NAV) 14.43% 15.33% 2.17% 4.13%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 12/31/97; INVESTOR A
SHARES, 12/31/97; INVESTOR C SHARES, 12/31/97; INVESTOR B SHARES, 1/1/99; AND
SERVICE SHARES, 1/28/05. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 44 FOR
FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
10
LEGACY PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term
investments)
Microsoft Corp. 5.1%
The Procter & Gamble Co. 3.4
EMC Corp. 3.3
CONSOL Energy, Inc. 3.0
Hewlett-Packard Co. 2.8
General Electric Co. 2.8
PepsiCo, Inc. 2.7
GlobalSantaFe Corp. 2.4
Corning, Inc. 2.3
Danaher Corp. 2.3
----
Total 30.1%
====
Top Ten Industries (% of long-term
investments)
Computer Software & Services 18.7%
Manufacturing 14.3
Finance 9.8
Pharmaceuticals 9.0
Retail Merchandising 7.3
Medical Instruments & Supplies 6.0
Oil & Gas 5.1
Semiconductors & Related Devices 4.5
Computer & Office Equipment 4.2
Telecommunications 3.8
----
Total 82.7%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,074.70 1,073.10 1,072.40 1,068.20 1,068.90
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.22 6.87 6.98 10.83 10.63
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,019.90 1,018.29 1,018.18 1,014.40 1,014.60
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.10 6.71 6.82 10.60 10.40
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.01%, 1.33%, 1.35%, 2.10%, and 2.06% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
11
MID-CAP VALUE EQUITY PORTFOLIO
Total Net Assets (3/31/06): $823.4 million
Performance Benchmark:
Russell Midcap(Reg. TM) Value Index
Investment Approach:
Seeks long-term capital appreciation by investing primarily in
mid-capitalization stocks believed by the Portfolio management team to be worth
more than is indicated by current market price. The Portfolio normally invests
at least 80% of its assets in equity securities issued by U.S.
mid-capitalization value companies. The Portfolio defines these companies as
those with market capitalizations comparable in size to the companies in the
Russell Midcap(Reg. TM) Value Index. The Portfolio management team uses
fundamental analysis to examine each company for financial strength before
deciding to purchase the stock.
Recent Portfolio Management Activity:
o All share classes underperformed the benchmark for the semi-annual
period.
o The Russell Midcap(Reg. TM) Value Index posted solid gains during the
semi-annual period. Telecommunication services, industrials and materials were
the strongest performing sectors within the benchmark, while energy and
utilities were the lone sectors in negative territory. During the semi-annual
period, the Portfolio's holdings in the health care, energy and consumer
discretionary sectors aided returns relative to the benchmark. However, these
gains were overshadowed by weakness in the industrials, information technology
and financials sectors.
o Stock selection proved to be the primary driver of performance in the
health care sector. Key areas of strength included pharmaceutical names and
health care equipment & supply manufacturers. A modest underweight in health
care providers also contributed to relative gains as this was among the weaker
industries within the sector. In energy, the positive impact of stock
selection more than compensated for the negative effect of an overweight in the
sector relative to the benchmark. Equipment and service names held in the
Portfolio appreciated significantly during the period, fueling favorable sector
comparisons. Similarly, stock selection in consumer discretionary resulted in
sector outperformance. Stocks of household durables producers and apparel and
luxury goods manufacturers held in the Portfolio were the most notable
contributors.
o Despite the positive impact of an overweight position relative to the
benchmark, disappointing results from stock selection led to relative
underperformance in the industrials sector. Areas that detracted the most
included building products, electrical equipment and commercial services.
Information technology ("IT") stocks produced strong gains during the period.
However, stock selection among IT services and computer & peripheral stocks,
along with an underweight in communications equipment names, contributed to
relative weakness in the sector. In addition, the combined effects of stock
selection and sector allocation resulted in poor relative performance in the
financials sector. Specifically, stock selection in insurance and consumer
finance and an underweight in real estate investment trusts ("REITs") were the
most significant detractors from relative sector performance.
o The Portfolio continues to be focused on adding value through bottom-up
stock selection. Our team of investment professionals conducts rigorous
fundamental research to identify stocks of solid companies trading at a
temporary discount to our estimation of fair value, where broader market
expectations for immediate gains are low. During the semi-annual period, the
Portfolio was overweight in consumer discretionary and industrials, and
underweight in financials, IT and consumer staples relative to the benchmark
Russell Midcap(Reg. TM) Value Index.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MID-CAP VALUE
EQUITY PORTFOLIO
AND THE RUSSELL MIDCAP(REG. TM) VALUE INDEX FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A Russell Midcap(R) Value Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,428 10,000
06/30/1996 10,441 9,831 10,192
09/30/1996 10,941 10,303 10,486
12/31/1996 11,941 11,229 11,389
03/31/1997 12,099 11,371 11,583
06/30/1997 13,338 12,529 13,042
09/30/1997 15,018 14,099 14,706
12/31/1997 15,265 14,322 15,304
03/31/1998 17,183 16,114 16,833
06/30/1998 17,133 16,056 16,400
09/30/1998 14,513 13,602 14,161
12/31/1998 16,120 15,097 16,082
03/31/1999 15,592 14,594 15,582
06/30/1999 17,160 16,050 17,324
09/30/1999 15,367 14,364 15,482
12/31/1999 15,674 14,632 16,066
03/31/2000 15,765 14,716 16,229
06/30/2000 15,515 14,463 15,956
09/30/2000 17,325 16,149 17,496
12/31/2000 19,795 18,435 19,149
03/31/2001 19,990 18,603 18,472
06/30/2001 22,326 20,754 19,774
09/30/2001 18,707 17,388 17,490
12/31/2001 23,440 21,766 19,594
03/31/2002 25,526 23,693 21,141
06/30/2002 23,040 21,367 20,153
09/30/2002 17,556 16,266 16,535
12/31/2002 18,807 17,418 17,703
03/31/2003 17,072 15,790 16,985
06/30/2003 20,687 19,100 20,024
09/30/2003 21,868 20,185 21,214
12/31/2003 25,424 23,440 24,442
03/31/2004 27,070 24,954 25,749
06/30/2004 27,893 25,691 26,194
09/30/2004 28,011 25,773 26,649
12/31/2004 31,421 28,902 30,236
03/31/2005 31,282 28,746 30,471
06/30/2005 32,323 29,696 31,904
09/30/2005 34,058 31,247 33,612
12/31/2005 34,662 31,809 34,061
03/31/2006 36,842 33,771 36,656
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
----------- ----------- ----------- -----------
Institutional Class 17.78% 29.23% 13.01% 13.93%
Service Class 17.58% 28.86% 12.68% 13.61%
Investor A Class (Load Adjusted) 10.70% 26.32% 11.34% 12.94%
Investor A Class (NAV) 17.48% 28.84% 12.67% 13.61%
Investor B Class (Load Adjusted) 12.18% 27.24% 11.63% 12.78%
Investor B Class (NAV) 16.68% 27.96% 11.89% 12.78%
Investor C Class (Load Adjusted) 15.68% 27.96% 11.89% 12.80%
Investor C Class (NAV) 16.68% 27.96% 11.89% 12.80%
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, 8/25/86; INSTITUTIONAL
SHARES, 6/1/93; INVESTOR C SHARES, 6/1/93; INVESTOR B SHARES, 1/1/99; AND
SERVICE SHARES, 1/28/05; . SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 44 FOR
FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
12
MID-CAP VALUE EQUITY PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)
Endurance Specialty Holdings, Ltd. 2.5%
The Brink's Co. 2.0
Ashland, Inc. 1.9
CONSOL Energy, Inc. 1.7
Equitable Resources, Inc. 1.6
Boston Properties, Inc. 1.6
R.R. Donnelley & Sons Co. 1.6
Hudson City Bancorp, Inc. 1.6
AGL Resources, Inc. 1.6
Public Service Enterprise Group, Inc. 1.6
---
Total 17.7%
====
Top Ten Industries (% of long-term
investments)
Retail Merchandising 10.7%
Energy & Utilities 9.8
Banks 8.3
Insurance 8.2
Finance 7.0
Business Services 6.3
Oil & Gas 5.8
Manufacturing 4.4
Metal & Mining 4.4
Computer Software & Services 3.4
----
Total 68.3%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,081.80 1,080.80 1,080.80 1,077.00 1,077.00
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.14 6.48 6.48 10.36 10.36
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,020.00 1,018.69 1,018.69 1,014.90 1,014.90
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.00 6.31 6.31 10.10 10.10
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.99%, 1.25%, 1.25%, 2.00%, and 2.00% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
13
MID-CAP GROWTH EQUITY PORTFOLIO
Total Net Assets (3/31/06): $463.5 million
Performance Benchmark:
Russell Midcap(Reg. TM) Growth Index
Investment Approach:
Seeks long-term capital appreciation by normally investing at least 80% of
its net assets in equity securities issued by U.S. mid-capitalization growth
companies that the portfolio management team believes have above-average
earnings growth potential. The Portfolio generally defines these companies as
those with market capitalizations comparable in size to the companies in the
Russell Midcap(Reg. TM) Growth Index. The management team would expect these
companies to have products, technologies, management, markets and opportunities
which will facilitate earnings growth over time that is well above the growth
rate of the overall economy and the rate of inflation. The portfolio management
team uses a bottom up investment style to select securities based upon
fundamental analysis (such as analysis of earnings, cash flows, competitive
position and management's abilities).
Recent Portfolio Management Activity:
o All share classes of the Portfolio underperformed the benchmark for the
semi-annual period.
o Solid results in the fourth quarter of 2005 combined with a significant
rise in the first quarter of 2006 produced excellent gains for
mid-capitalization stocks, though they still underperformed small
capitalization stocks. The U.S. equity market appreciated as investors began to
anticipate the end of the Federal Reserve's interest rate hikes. Continued
global economic growth helped cyclical sectors such as materials and
industrials to the largest gains.
o Many sectors contributed significantly to the Portfolio's double-digit
return during the period. Our investments in the consumer discretionary sector
added the most value relative to the Russell Midcap(Reg. TM) Growth Index.
Stock selection was strongest in the hotels, restaurants & leisure industry
group, where our positions in Ruby Tuesday and Orient Express Hotels both
appreciated substantially. The Portfolio also benefited from the relative
underweight position in consumer discretionary, especially in household
durables where many Index holdings were negatively affected by the slowing
housing market.
o On the negative side, the Portfolio's energy investments detracted from
relative return comparisons. A flat return for crude oil combined with sinking
natural gas prices dampened the enthusiasm for energy stocks. As a result, the
energy sector underperformed the broader market during the semi-annual period,
and our overweight positioning hindered the Portfolio's return. In addition,
the Portfolio's coal investments underperformed the rest of the sector due to
production difficulties. The fundamental outlook remains strong and we maintain
our exposure to coal.
o In addition to energy, sector allocation decisions also negatively
affected the Portfolio's performance in the industrials and financials
industries. Within the Index, the machinery and electrical equipment
industries rose approximately 20%, and the Portfolio's relative underweight in
these segments led our investments to lag the Index in industrials. In
financials, the diversified financial services industry returned 37% during the
six-month period, and an underweight position in this industry hindered the
Portfolio's relative return.
o Sector weightings have remained stable during the semi-annual period.
We have modestly reduced the allocation to energy, while adding to our
positions in the information technology and financials sectors. At the
beginning of the period, the Portfolio held a significant overweight in
information technology where we have found many diverse opportunities across
the sector. The largest underweight at this time is in the consumer
discretionary sector due to our lack of exposure to household durables and
multiline retail stocks.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MID-CAP GROWTH
EQUITY PORTFOLIO
AND THE RUSSELL MIDCAP(REG. TM) GROWTH INDEX FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A Russell Midcap(R) Growth Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
12/27/1996 10,000 9,425 10,000
12/31/1996 10,040 9,463 10,009
03/31/1997 8,930 8,407 9,644
06/30/1997 10,570 9,934 11,063
09/30/1997 12,200 11,442 12,612
12/31/1997 11,521 10,802 12,265
03/31/1998 12,963 12,133 13,729
06/30/1998 13,135 12,285 13,721
09/30/1998 11,218 10,478 11,430
12/31/1998 14,093 13,141 14,456
03/31/1999 16,050 14,957 14,951
06/30/1999 18,058 16,801 16,508
09/30/1999 19,288 17,923 15,682
12/31/1999 31,151 28,920 21,874
03/31/2000 37,868 35,115 26,494
06/30/2000 34,322 31,767 24,531
09/30/2000 36,964 34,166 25,151
12/31/2000 27,667 25,545 19,305
03/31/2001 20,360 18,789 14,462
06/30/2001 20,852 19,200 16,802
09/30/2001 16,002 14,723 12,131
12/31/2001 18,865 17,331 15,414
03/31/2002 18,673 17,147 15,142
06/30/2002 15,660 14,354 12,377
09/30/2002 12,947 11,849 10,251
12/31/2002 13,481 12,321 11,191
03/31/2003 13,545 12,383 11,189
06/30/2003 15,810 14,415 13,288
09/30/2003 16,173 14,723 14,239
12/31/2003 18,074 16,448 15,971
03/31/2004 19,442 17,680 16,743
06/30/2004 19,677 17,845 16,919
09/30/2004 18,715 16,962 16,186
12/31/2004 20,894 18,933 18,443
03/31/2005 20,467 18,522 18,135
06/30/2005 21,364 19,323 18,757
09/30/2005 22,305 20,165 19,986
12/31/2005 23,119 20,866 20,674
03/31/2006 24,806 22,364 22,246
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
----------- ----------- ---------- ---------------
Institutional Class 21.20% 22.35% 4.03% 10.31%
Service Class 20.63% 21.95% 3.71% 9.99%
Investor A Class (Load Adjusted) 13.80% 19.39% 2.32% 9.08%
Investor A Class (NAV) 20.74% 21.78% 3.54% 9.78%
Investor B Class (Load Adjusted) 15.38% 20.10% 2.43% 9.02%
Investor B Class (NAV) 19.88% 20.90% 2.79% 9.02%
Investor C Class (Load Adjusted) 18.88% 20.90% 2.82% 9.02%
Investor C Class (NAV) 19.88% 20.90% 2.82% 9.02%
THE INCEPTION DATE OF THE PORTFOLIO'S INSTITUTIONAL, SERVICE, INVESTOR A,
INVESTOR B AND INVESTOR C SHARES WAS 12 /27/96. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 44 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
14
MID-CAP GROWTH EQUITY PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)
CONSOL Energy, Inc. 2.8%
Shire PLC - ADR 2.4
Amdocs Ltd. 2.4
Ceridian Corp. 2.0
American Tower Corp. - Class A 2.0
Williams-Sonoma, Inc. 1.9
ENSCO International, Inc. 1.9
EOG Resources, Inc. 1.9
Freescale Semiconductor, Inc. - Class B 1.9
Massey Energy Co. 1.9
----
Total 21.1%
====
Top Ten Industries (% of long-term
investments)
Telecommunications 10.1%
Computer Software & Services 8.8
Medical Instruments & Supplies 8.1
Medical & Medical Services 7.6
Oil & Gas 7.0
Semiconductors & Related Devices 6.8
Retail Merchandising 6.7
Metal & Mining 5.7
Business Services 5.2
Electronics 4.1
----
Total 70.1%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,112.10 1,109.30 1,109.00 1,105.60 1,105.60
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.95 8.05 8.26 12.23 12.13
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,019.30 1,017.28 1,017.07 1,013.24 1,013.34
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.70 7.72 7.93 11.76 11.66
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.13%, 1.53%, 1.57%, 2.33%, and 2.31% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
15
AURORA PORTFOLIO
Total Net Assets (3/31/06): $2.4 billion
Performance Benchmark:
Russell 2500TM Value Index
Investment Approach:
Seeks high total return, consisting principally of capital appreciation by
investing at least 80% of its total assets in small- and mid-capitalization
common and preferred stocks and securities convertible into common and
preferred stock. The Portfolio considers issuers of small- and
mid-capitalization value stocks to be companies that are comparable in size to
the companies in the Russell 2500TM Value Index or a similar index. In choosing
among small- and mid-capitalization stocks, the management team takes a value
approach, searching for those companies that appear to be trading below their
true worth.
Recent Portfolio Management Activity:
o All share classes underperformed the benchmark for the semi-annual
period.
o The Russell 2500TM Value Index posted strong gains during the
semi-annual period. All major sectors except utilities were in positive
territory, with telecommunication services, industrials, materials and
information technology producing the most significant gains. During the
semi-annual period, the Portfolio's holdings in the industrials, consumer
discretionary and utilities sectors aided returns relative to the benchmark.
However, these gains were overshadowed by weakness in the energy, materials and
information technology sectors.
o Continued strength in the domestic economy helped propel industrials
stocks higher during the period. The Portfolio's overweight in the sector,
specifically among machinery, aerospace & defense, building products and
transportation-related names, proved to be a key driver of relative
performance. In consumer discretionary, the positive impact of stock selection
more than compensated for the negative effect of allocation within the sector.
Hotel, restaurant and gaming holdings showed the greatest strength as consumer
spending remained robust. Within the benchmark Russell 2500TM Value Index,
utilities was the lone sector in negative territory during the period.
Accordingly, the Portfolio's underweight in the sector had a positive impact on
relative returns.
o Despite strong performance from equipment and service companies, the
energy sector as a whole posted only modest gains. Within the sector, an
overweight and stock selection hampered relative return comparisons. Metals
and mining stocks were among the strongest performers during the period as the
prices of gold, silver and other metals appreciated sharply. Unfortunately,
the Portfolio's underweight in these names was largely responsible for relative
underperformance in the materials sector. Information technology stocks also
produced strong gains during the period. However, stock selection among
software and electronic equipment companies, along with underweights in
communications equipment and semiconductor-related names, contributed to
relative weakness in the sector.
o Portfolio performance benefited from increased merger and acquisition
("M&A") activity as several holdings were acquired at significant premiums
during the period. Looking ahead, we expect M&A activity to remain strong as
large corporations and an increasing number of private equity and hedge funds
look to put their significant cash balances to work. We believe our focus on
investing in attractively valued companies with solid fundamentals and
catalysts for growth has resulted in a Portfolio that includes a number of
attractive M&A candidates.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE AURORA PORTFOLIO,
AND THE RUSSELL 2500TM VALUE INDEX FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A Russell 2500(TM) Value Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,427 10,000
06/30/1996 11,611 10,940 10,307
09/30/1996 12,292 11,575 10,627
12/31/1996 13,871 13,059 11,692
03/31/1997 14,382 13,523 11,787
06/30/1997 17,344 16,293 13,457
09/30/1997 21,277 19,989 15,133
12/31/1997 20,389 19,150 15,561
03/31/1998 22,662 21,269 17,046
06/30/1998 21,102 19,795 16,436
09/30/1998 16,121 15,107 13,729
12/31/1998 17,340 16,240 15,262
03/31/1999 16,524 15,469 14,041
06/30/1999 20,244 18,935 16,290
09/30/1999 19,862 18,564 14,883
12/31/1999 23,220 21,689 15,490
03/31/2000 25,690 23,935 16,213
06/30/2000 27,653 25,722 16,116
09/30/2000 30,650 28,486 17,226
12/31/2000 32,006 29,719 18,710
03/31/2001 32,929 30,559 18,341
06/30/2001 36,901 34,220 20,172
09/30/2001 30,453 28,208 17,660
12/31/2001 37,171 34,422 20,533
03/31/2002 40,694 37,657 22,281
06/30/2002 36,924 34,092 21,503
09/30/2002 28,191 25,995 17,552
12/31/2002 29,946 27,611 18,507
03/31/2003 27,852 25,664 17,625
06/30/2003 34,009 31,315 21,376
09/30/2003 37,552 34,547 23,038
12/31/2003 44,974 41,341 26,823
03/31/2004 46,967 43,140 28,480
06/30/2004 48,133 44,179 28,625
09/30/2004 46,095 42,283 28,695
12/31/2004 51,850 47,522 32,610
03/31/2005 50,166 45,949 31,917
06/30/2005 51,441 47,076 33,617
09/30/2005 53,756 49,165 34,812
12/31/2005 53,517 48,897 35,134
03/31/2006 57,706 52,673 38,812
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
----------- ----------- ----------- -----------
Institutional Class 15.03% 27.48% 11.87% 19.16%
Service Class 14.64% 27.09% 11.51% 18.78%
Investor A Class (Load Adjusted) 8.04% 24.60% 10.19% 18.08%
Investor A Class (NAV) 14.63% 27.08% 11.50% 18.77%
Investor B Class (Load Adjusted) 9.65% 25.43% 10.44% 17.90%
Investor B Class (NAV) 13.77% 26.17% 10.71% 17.90%
Investor C Class (Load Adjusted) 12.89% 26.19% 10.71% 17.90%
Investor C Class (NAV) 13.80% 26.19% 10.71% 17.90%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 2/13/95; INVESTOR A
SHARES, 2/13/95; INVESTOR C SHARES, 2/13/95; INVESTOR B SHARES, 1/1/99; AND
SERVICE SHARES, 1/28/05. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 44 FOR
FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
16
AURORA PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)
The Brink's Co. 3.0%
The Hanover Insurance Group, Inc. 2.6
Affiliated Managers Group, Inc. 2.5
Walter Industries, Inc. 2.3
Ingram Micro, Inc. - Class A 2.1
Amdocs Ltd. 2.0
Compass Bancshares, Inc. 1.8
City National Corp. 1.8
Gaylord Entertainment Co. 1.6
Massey Energy Co. 1.5
----
Total 21.2%
====
Top Ten Industries (% of long-term
investments)
Retail Merchandising 9.4%
Banks 7.9
Insurance 7.7
Manufacturing 6.1
Energy & Utilities 6.0
Entertainment & Leisure 5.8
Business Services 5.3
Computer Software & Services 4.7
Finance 4.2
Medical Instruments & Supplies 4.1
----
Total 61.2%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,073.20 1,071.50 1,071.40 1,067.30 1,067.40
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.79 7.44 7.44 11.29 11.29
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,019.35 1,017.73 1,017.73 1,013.94 1,013.94
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.65 7.27 7.27 11.06 11.06
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.12%, 1.44%, 1.44%, 2.19%, and 2.19% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
17
SMALL/MID-CAP GROWTH PORTFOLIO
Total Net Assets (3/31/06): $306.9 million
Performance Benchmark:
Russell 2500TM Growth Index
Investment Approach:
Seeks to provide growth of capital by investing at least 80% of its total
assets in small-capitalization and mid-capitalization companies. The Portfolio
views small- and mid-capitalization companies as those that are less mature and
appear to have the potential for rapid growth. The Portfolio generally defines
small- and mid-capitalization companies as those that have similar market
capitalizations to those in the Russell 2500TM Growth Index or a similar index.
The portfolio management team uses research to identify potential investments,
examining such features as a company's financial condition, business prospects,
competitive position and business strategy.
Recent Portfolio Management Activity:
o All share classes of the Portfolio underperformed the benchmark for the
semi-annual period.
o Modest results in the fourth quarter of 2005 combined with a powerful
surge in the first quarter of 2006 produced excellent gains for small- to mid-
capitalization stocks. Small capitalization stocks dramatically outperformed
their larger counterparts during this period as investors began to anticipate
the end of the Federal Reserve's interest rate hikes.
o The Portfolio produced strong absolute performance during this period,
generating positive results in every sector of the Portfolio except energy.
The Portfolio trailed the benchmark's impressive return, however, as a result
of negative sector positioning across the Portfolio and weak stock selection in
information technology.
o Poor stock selection in the semiconductor industry created a
significant drag on performance and overpowered the strong results generated in
other areas of technology. Within the Russell 2500TM Growth Index, the
semiconductor industry catapulted higher by 32% for the semi-annual period.
Our exposure to lower risk companies in this space, combined with disappointing
results from portfolio holding O2Micro International accounted for the
underperformance in this industry and sector. Elsewhere in technology,
positions in VeriFone Holdings and Global Payments helped produce excellent
results in the information technology services industry.
o Strong stock selection in health care contributed to the Portfolio's
rise. Hologic, a maker of medical imaging equipment and a top-performer
throughout 2005, continued its extended ascent as a result of increasing demand
for its digital mammography systems. Biotechnology holdings Digener and
Alkermes both climbed more than 30% over this period. Digene rose after
announcing excellent quarterly results and the withdrawal of a patent suit by a
competitor, while Alkermes rode investor excitement for its coming alcoholism
drug, Vivitor.
o Sector allocation decisions, particularly in energy, contributed to the
Portfolio's underperformance. A relatively flat return for crude oil combined
with sinking natural gas prices dampened the enthusiasm for energy stocks. As
a result, the energy sector underperformed the broader market during the
semi-annual period, and our overweight positioning hindered the Portfolio's
return. Underweights in the materials and industrials sectors also detracted
modestly.
o During the semi-annual period we have increased our weighting in
industrials while reducing our allocation to the energy and consumer
discretionary sectors. As we begin the second quarter of 2006, the Portfolio
holds a significant overweight in the information technology sector where we
have found many diverse opportunities in the information technology services
industry. The largest underweight at this time is in the financials sector,
where we do not find many compelling long-term growth opportunities.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL/MID-CAP
GROWTH PORTFOLIO AND THE RUSSELL 2500TM GROWTH INDEX FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A Russell 2500(TM) Growth Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,425 10,000
06/30/1996 11,251 10,594 10,511
09/30/1996 11,544 10,863 10,655
12/31/1996 12,030 11,305 10,755
03/31/1997 11,464 10,787 9,894
06/30/1997 13,870 13,034 11,502
09/30/1997 17,125 16,077 13,416
12/31/1997 15,614 14,651 12,342
03/31/1998 18,105 16,976 13,717
06/30/1998 16,213 15,185 13,048
09/30/1998 12,017 11,258 10,151
12/31/1998 15,102 14,125 12,724
03/31/1999 14,494 13,544 12,590
06/30/1999 16,928 15,801 14,706
09/30/1999 15,573 14,534 14,196
12/31/1999 23,027 21,491 19,784
03/31/2000 25,862 24,118 22,780
06/30/2000 23,483 21,887 21,206
09/30/2000 22,792 21,227 20,582
12/31/2000 19,646 18,263 16,600
03/31/2001 16,383 15,227 13,294
06/30/2001 20,029 18,599 16,121
09/30/2001 16,016 14,828 11,756
12/31/2001 19,979 18,455 14,802
03/31/2002 19,895 18,375 14,364
06/30/2002 17,015 15,755 11,975
09/30/2002 15,084 13,949 9,692
12/31/2002 14,984 13,837 10,495
03/31/2003 14,834 13,693 10,159
06/30/2003 18,847 17,384 12,467
09/30/2003 20,162 18,583 13,710
12/31/2003 23,009 21,187 15,355
03/31/2004 25,090 23,104 16,201
06/30/2004 23,791 21,890 16,222
09/30/2004 20,794 19,110 15,313
12/31/2004 23,608 21,682 17,596
03/31/2005 22,742 20,868 16,834
06/30/2005 23,542 21,587 17,433
09/30/2005 25,240 23,136 18,530
12/31/2005 26,115 23,912 19,034
03/31/2006 28,683 26,248 21,285
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
----------- ----------- ----------- -----------
Institutional Class 26.12% 24.58% 11.85% 11.11%
Service Class 25.69% 24.22% 11.51% 10.79%
Investor A Class (Load Adjusted) 18.52% 21.81% 10.20% 10.13%
Investor A Class (NAV) 25.79% 24.22% 11.51% 10.79%
Investor B Class (Load Adjusted) 20.28% 22.59% 10.49% 10.02%
Investor B Class (NAV) 24.78% 23.36% 10.76% 10.02%
Investor C Class (Load Adjusted) 23.82% 23.34% 10.81% 10.05%
Investor C Class (NAV) 24.82% 23.34% 10.81% 10.05%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 10/4/93; INVESTOR A
SHARES, 2/1/94; INVESTOR C SHARES, 2/1/94; INVESTOR B SHARES, 1/1/99 AND
SERVICE SHARES, 1/28/05. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 44 FOR
FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
18
SMALL/MID-CAP GROWTH PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)
Laureate Education, Inc. 2.3%
Polycom, Inc. 2.1
Foundry Networks, Inc. 2.1
Digene Corp. 1.9
Airgas, Inc. 1.9
Amdocs Ltd. 1.8
Station Casinos, Inc. 1.8
SonicWALL, Inc. 1.8
Endo Pharmaceuticals Holdings, Inc. 1.8
Microsemi Corp. 1.7
----
Total 19.2%
====
Top Ten Industries (% of long-term
investments)
Computer Software & Services 14.8%
Medical & Medical Services 9.4
Business Services 9.1
Telecommunications 8.3
Medical Instruments & Supplies 8.2
Retail Merchandising 6.3
Oil & Gas 5.5
Semiconductors & Related Devices 5.2
Manufacturing 4.5
Entertainment & Leisure 4.0
----
Total 75.3%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,136.40 1,135.30 1,134.50 1,130.90 1,130.60
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.54 7.13 7.18 11.16 11.16
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,019.75 1,018.23 1,018.18 1,014.40 1,014.40
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.25 6.77 6.82 10.60 10.60
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.04%, 1.34%, 1.35%, 2.10%, and 2.10% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
19
SMALL CAP VALUE EQUITY PORTFOLIO
Total Net Assets (3/31/06): $121.4 million
Performance Benchmark:
Russell 2000(Reg. TM) Value Index
Investment Approach:
Seeks long-term capital appreciation by investing in small capitalization
stocks of companies believed by the portfolio manager to be worth more than is
indicated by current market price. The Portfolio normally invests at least 80%
of its net assets in equity securities issued by U.S. small capitalization
value companies (market capitalizations under $2 billion). The portfolio
manager uses fundamental analysis to examine each company for financial
strength before deciding to purchase the stock.
Recent Portfolio Management Activity:
o All share classes underperformed the benchmark for the semi-annual
period.
o The Russell 2000(Reg. TM) Value Index posted strong gains during the
semi-annual period. All major sectors except utilities were in positive
territory, with telecommunication services, materials and information
technology producing the most significant gains. During the semi-annual
period, the Portfolio's holdings in the industrials, financials and health care
sectors aided returns relative to the benchmark. However, these gains were
overshadowed by weakness in the materials, consumer discretionary and
information technology sectors.
o Continued strength in the domestic economy helped to fuel robust demand
for goods, benefiting profit margins at many shipping and
transportation-related names in the industrials sector. Positive stock
selection and an overweight in these areas contributed to outperformance. In
financials, solid stock selection, particularly among commercial banks and
capital markets names, was the key contributor to favorable sector comparisons.
Relative returns also benefited from underweight exposure to thrifts and
mortgage finance companies, which proved to be among the weakest areas within
the financials sector during the period. The positive impact of stock
selection decisions in the health care sector also buoyed Portfolio
performance. Specifically, share price gains from select health care providers
and equipment & supply manufacturers provided the most significant boost to
relative sector returns.
o Metals and mining stocks were among the strongest performers during the
period as the prices of gold, silver and other metals appreciated sharply.
Unfortunately, the Portfolio's underweight in these names was largely
responsible for relative underperformance in the materials sector. In consumer
discretionary, both stock selection and allocation within the sector hampered
relative returns as Portfolio exposure to specialty retailers and household
durable names proved to be the greatest drag on sector comparisons.
Information technology stocks produced strong gains during the period. However,
stock selection among software and communications equipment companies, along
with underweights in electronic equipment and semiconductor-related names,
contributed to relative weakness in the sector.
o Portfolio performance benefited from increased merger and acquisition
("M&A") activity as several holdings were acquired at significant premiums
during the period. Looking ahead, we expect M&A activity to remain strong as
large corporations and an increasing number of private equity and hedge funds
look to put their significant cash balances to work. We believe our focus on
investing in attractively valued companies with solid fundamentals and
catalysts for growth has resulted in a Portfolio that includes a number of
attractive M&A candidates.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP VALUE
EQUITY PORTFOLIO AND THE RUSSELL 2000(REG. TM) VALUE INDEX FOR THE PAST TEN
YEARS.
[GRAPHIC OMITTED]
Institutional Investor A Russell 2000(R) Value Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,426 10,000
06/30/1996 10,344 9,733 10,409
09/30/1996 10,389 9,764 10,563
12/31/1996 11,378 10,696 11,627
03/31/1997 11,287 10,592 11,598
06/30/1997 13,384 12,549 13,348
09/30/1997 15,309 14,338 15,069
12/31/1997 15,444 14,443 15,322
03/31/1998 16,657 15,555 16,603
06/30/1998 15,783 14,722 16,003
09/30/1998 12,702 11,839 13,143
12/31/1998 14,484 13,488 14,337
03/31/1999 12,356 11,483 12,947
06/30/1999 14,494 13,453 15,090
09/30/1999 13,365 12,396 13,911
12/31/1999 13,782 12,767 14,124
03/31/2000 14,129 13,071 14,663
06/30/2000 14,357 13,274 14,949
09/30/2000 15,657 14,454 16,046
12/31/2000 16,588 15,314 17,347
03/31/2001 16,065 14,815 17,516
06/30/2001 17,939 16,521 19,554
09/30/2001 15,730 14,466 16,947
12/31/2001 17,554 16,125 19,780
03/31/2002 19,052 17,480 21,676
06/30/2002 17,936 16,445 21,216
09/30/2002 14,432 13,206 16,699
12/31/2002 14,639 13,386 17,522
03/31/2003 14,454 13,203 16,631
06/30/2003 17,326 15,807 20,411
09/30/2003 18,756 17,085 21,987
12/31/2003 21,657 19,704 25,586
03/31/2004 23,384 21,253 27,356
06/30/2004 23,265 21,130 27,588
09/30/2004 22,669 20,567 27,630
12/31/2004 26,025 23,603 31,278
03/31/2005 25,844 23,420 30,034
06/30/2005 26,801 24,270 31,558
09/30/2005 27,378 24,770 32,534
12/31/2005 27,589 24,948 32,750
03/31/2006 30,330 27,408 37,172
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
----------- ----------- ----------- -----------
BlackRock Class 17.16% 27.98% 13.53% 11.72%
Institutional Class 17.35% 28.02% 13.55% 11.73%
Service Class 16.95% 27.62% 13.22% 11.39%
Investor A Class (Load Adjusted) 10.28% 25.08% 11.76% 10.61%
Investor A Class (NAV) 17.03% 27.57% 13.09% 11.26%
Investor B Class (Load Adjusted) 11.94% 25.87% 12.05% 10.41%
Investor B Class (NAV) 16.03% 26.60% 12.23% 10.41%
Investor C Class (Load Adjusted) 15.13% 26.59% 12.24% 10.42%
Investor C Class (NAV) 16.04% 26.59% 12.24% 10.42%
THE FUND IS CLOSED TO NEW INVESTORS. EXISTING SHAREHOLDERS MAY MAKE ADDITIONAL
INVESTMENTS IN CURRENT ACCOUNTS. IN ADDITION, NEW ACCOUNTS MAY BE OPENED BY (I)
ANY INVESTOR IF THE TAX ID # FOR THE NEW ACCT WILL BE THE SAME AS THAT FOR A
CURRENT ACCT AND (II) 401(K), 403(B), 457 AND OTHER SIMILAR GROUP RETIREMENT
PLAN PROGRAMS OR CERTAIN DISCRETIONARY WRAP FEE PROGRAMS THAT HAVE CURRENT
ACCOUNTS.
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 4/13/92; INVESTOR A
SHARES, 6/2/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 10/3/94; INVESTOR C
SHARES, 10/1/96; AND BLACKROCK SHARES, 4/12/04. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 44 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
20
SMALL CAP VALUE EQUITY PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)
The Brink's Co. 3.5%
Piper Jaffray Cos., Inc. 3.2
Walter Industries, Inc. 2.9
American Commercial Lines, Inc. 2.4
Washington Group International, Inc. 2.4
Thomas & Betts Corp. 2.1
Gaylord Entertainment Co. 2.1
Hanover Insurance Group, Inc. 2.0
Jarden Corp. 2.0
National Financial Partners Corp. 1.9
----
Total 24.5%
====
Top Ten Industries (% of long-term
investments)
Banks 12.0%
Retail Merchandising 11.0
Business Services 7.9
Energy & Utilities 7.0
Manufacturing 5.9
Restaurants 5.5
Insurance 5.2
Medical Instruments & Supplies 5.1
Entertainment & Leisure 4.9
Oil & Gas 3.3
----
Total 67.8%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,107.50 1,107.80 1,106.10 1,106.50 1,100.90 1,101.90
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.57 4.68 6.46 6.46 10.79 10.53
Hypothetical Expenses
(5% return before expenses)
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,019.65 1,020.51 1,018.79 1,018.79 1,014.60 1,014.85
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.35 4.49 6.21 6.21 10.40 10.15
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.06%, 0.89%, 1.23%, 1.23%, 2.06%, and 2.01% for BlackRock, the
Institutional, Service, Investor A, B and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period).
21
SMALL CAP CORE EQUITY PORTFOLIO
Total Net Assets (3/31/06): $81.8 million
Performance Benchmark:
Russell 2000(Reg. TM) Index
Investment Approach:
Seeks long-term capital appreciation by normally investing at least 80% of
assets in the equity securities of U.S. small capitalization companies (market
capitalizations under $2 billion). The portfolio management team seeks to
achieve consistent and sustainable performance through various market cycles by
emphasizing stock selection. Stock selection is determined by looking at
companies using a range of valuation criteria, including the strength of their
management and business franchise. The portfolio management team uses
fundamental analysis to examine each company for financial strength before
deciding to purchase the stock.
Recent Portfolio Management Activity:
o All share classes underperformed the benchmark for the semi-annual
period.
o The Russell 2000(Reg. TM) Index posted unusually strong gains, during
the semi-annual period, generally led by lower quality, higher beta stocks.
During the semi-annual period, the Portfolio underperformed the benchmark as
our focus on investing in attractively valued stocks of companies with strong
business fundamentals was not rewarded in this market environment. At the
sector level, the Portfolio's holdings in health care, industrials and energy
aided returns relative to the benchmark. However, these gains were
overshadowed by weakness in the financials, materials and information
technology sectors.
o The positive impact of stock selection decisions in the health care
sector was among the most significant contributors to Portfolio performance
relative to the benchmark Russell 2000(Reg. TM) Index during the period. Key
areas of strength included health care equipment & supply manufacturers and
health care service providers. In addition, continued strength in the domestic
economy helped to fuel robust demand for goods, benefiting profit margins at
many shipping and transportation-related names in the industrials sector.
Positive stock selection in these areas contributed to sector outperformance.
Likewise, solid stock selection in the energy sector also proved beneficial to
relative performance comparisons. Stocks of oil and gas production and coal
mining companies held in the Portfolio were among the most notable
contributors.
o Although allocation within the financials sector added value during the
period, these gains were overshadowed by the negative effect of stock
selection. Weakness from Portfolio holdings in insurance and real estate
investment trusts ("REITs") were the primary drivers of sector
underperformance. Metals and mining stocks were among the strongest performers
during the period as the prices of gold, silver and other metals appreciated
sharply. Unfortunately, the Portfolio's underweight in these names was largely
responsible for relative underperformance in the materials sector. Information
technology stocks produced strong gains during the period. However,
disappointing stock selection among software and semiconductor-related
companies contributed to relative weakness in the sector.
o Portfolio performance benefited from increased merger and acquisition
("M&A") activity as several holdings were acquired at significant premiums
during the period. Looking ahead, we expect M&A activity to remain strong as
large corporations and an increasing number of private equity and hedge funds
look to put their significant cash balances to work. We believe our focus on
investing in attractively valued companies with solid fundamentals and
catalysts for growth has resulted in a Portfolio that includes a number of
attractive M&A candidates.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP CORE
EQUITY PORTFOLIO
AND THE RUSSELL 2000(REG. TM) INDEX FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A Russell 2000(R) Index
- - - - - - - - - - - - - - - - - - - - - - - - - -
01/02/2002 10,000 9,425 10,000
03/31/2002 10,680 10,066 10,420
06/30/2002 10,010 9,435 9,550
09/30/2002 8,350 7,870 7,506
12/31/2002 8,900 8,388 7,968
03/31/2003 8,570 8,077 7,610
06/30/2003 10,750 10,132 9,392
09/30/2003 12,000 11,310 10,245
12/31/2003 14,009 13,185 11,733
03/31/2004 15,566 14,633 12,467
06/30/2004 15,586 14,642 12,526
09/30/2004 14,929 14,013 12,168
12/31/2004 17,004 15,950 13,883
03/31/2005 16,444 15,413 13,142
06/30/2005 17,156 16,056 13,709
09/30/2005 17,930 16,775 14,352
12/31/2005 18,219 17,018 14,515
03/31/2006 19,948 18,619 16,538
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year From Inception
----------- ----------- ---------------
Institutional Class 21.31% 32.53% 17.68%
Service Class 20.95% 32.37% 17.58%
Investor A Class (Load Adjusted) 13.86% 29.53% 15.78%
Investor A Class (NAV) 20.80% 32.10% 17.41%
Investor B Class (Load Adjusted) 15.46% 30.62% 16.63%
Investor B Class (NAV) 19.96% 31.30% 16.91%
Investor C Class (Load Adjusted) 18.96% 31.30% 16.91%
Investor C Class (NAV) 19.96% 31.30% 16.91%
THE INCEPTION DATE OF THE PORTFOLIO'S INSTITUTIONAL, SERVICE, INVESTOR A,
INVESTOR B AND INVESTOR C SHARES WAS 1/2/02. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 44 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.
22
SMALL CAP CORE EQUITY PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)
DJ Orthopedics, Inc. 2.5%
Aviall, Inc. 2.4
Pediatrix Medical Group, Inc. 2.2
Electronics for Imaging, Inc. 1.8
Per-Se Technologies, Inc. 1.7
Vital Images, Inc. 1.7
SkillSoft PLC - ADR 1.7
Laureate Education, Inc. 1.7
Aladdin Knowledge Systems, Ltd. 1.6
National Financial Partners Corp. 1.6
----
Total 18.9%
====
Top Ten Industries (% of long-term
investments)
Medical Instruments & Supplies 10.6%
Business Services 10.5
Computer Software & Services 8.2
Medical & Medical Services 8.0
Manufacturing 7.7
Banks 7.5
Retail Merchandising 5.5
Oil & Gas 4.9
Aerospace 4.1
Insurance 3.2
----
Total 70.2%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,112.60 1,110.40 1,109.90 1,105.70 1,106.30
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 6.85 8.31 8.89 12.86 12.71
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,018.44 1,017.02 1,016.47 1,012.63 1,012.78
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 6.56 7.98 8.53 12.37 12.22
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.30%, 1.58%, 1.69%, 2.45%, and 2.42% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
23
SMALL CAP GROWTH EQUITY PORTFOLIO
Total Net Assets (3/31/06): $689.0 million
Performance Benchmark:
Russell 2000(Reg. TM) Growth Index
Investment Approach:
Seeks long-term capital appreciation by investing at least 80% of its net
assets in equity securities issued by U.S. small capitalization growth
companies. The management team would expect these companies to have products,
technologies, management, markets and opportunities which will facilitate
earnings growth over time that is well above the growth rate of the overall
economy and the rate of inflation. The management team uses a bottom up
investment style and selects securities based upon fundamental analysis (such
as analysis of earnings, cash flows, competitive position and management's
abilities).
Recent Portfolio Management Activity:
o All share classes of the Portfolio underperformed the benchmark for the
semi-annual period.
o Modest results in the fourth quarter of 2005 combined with a powerful
surge in the first quarter of 2006 produced excellent gains for small
capitalization stocks. Small capitalization stocks dramatically outperformed
their larger counterparts during this period as investors began to anticipate
the end of the Federal Reserve's interest rate hikes.
o The Portfolio produced strong absolute performance during this period,
generating positive results in every sector of the Portfolio. The Portfolio
trailed the benchmark's impressive return, however, as a result of modestly
negative sector positioning across the Portfolio and weak stock selection in
information technology.
o Strong results from our health care investments contributed to the
Portfolio's rise. Hologic, a maker of medical imaging equipment and a
top-performer throughout 2005, continued its extended ascent as a result of
increasing demand for its digital mammography systems. IntraLase, another
equipment company, and Noven Pharmaceuticals also performed especially well.
Positive stock selection in the consumer discretionary and financials sectors
also helped the Portfolio's absolute and relative returns.
o In information technology, our overweight positioning relative to the
benchmark added value. Poor stock selection in the semiconductor industry
created a significant drag on performance and overpowered the strong results
generated in other areas of technology. Within the Russell 2000(Reg. TM)
Growth Index, the semiconductor industry catapulted higher by 34% for this
six-month period. Our exposure to lower risk companies in this space, combined
with disappointing results from portfolio holdings O2Micro International and
Kulicke & Soffa accounted for the underperformance in this industry and sector.
Elsewhere in technology, VeriFone Holdings and Foundry Networks led to
outperformance in the information technology services and communications
equipment sectors, respectively.
o A relatively flat return for crude oil combined with sinking natural
gas prices dampened the enthusiasm for energy stocks. As a result, the energy
sector underperformed the broader market during this six-month period, and our
overweight positioning hindered the Portfolio's return. In addition, the
Portfolio's coal investments underperformed the rest of the sector due to
production difficulties. The fundamental outlook remains strong and we maintain
our exposure to coal.
o During the last six months we have increased our weightings in health
care and industrials while substantially reducing our allocation to the energy
sector. As we begin the second quarter, the Portfolio holds a significant
overweight in the information technology sector where we have found many
diverse opportunities in the information technology services industry. The
largest underweight at this time is in the financials sector, where we do not
find compelling long-term growth opportunities.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP GROWTH
EQUITY PORTFOLIO
AND THE RUSSELL 2000(REG. TM) GROWTH INDEX FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A Russell 2000(R) Growth Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,425 10,000
06/30/1996 11,449 10,779 10,584
09/30/1996 12,042 11,338 10,494
12/31/1996 11,663 10,968 10,522
03/31/1997 9,394 8,819 9,418
06/30/1997 11,438 10,731 11,072
09/30/1997 13,955 13,071 12,945
12/31/1997 12,736 11,916 11,884
03/31/1998 13,962 13,042 13,296
06/30/1998 13,433 12,538 12,533
09/30/1998 10,894 10,155 9,731
12/31/1998 13,675 12,728 12,031
03/31/1999 14,049 13,072 11,829
06/30/1999 14,677 13,641 13,574
09/30/1999 15,791 14,660 12,907
12/31/1999 23,585 21,878 17,217
03/31/2000 28,379 26,293 18,815
06/30/2000 25,709 23,758 17,428
09/30/2000 25,745 23,744 16,736
12/31/2000 20,447 18,850 13,355
03/31/2001 15,414 14,204 11,324
06/30/2001 16,581 15,257 13,360
09/30/2001 11,913 10,946 9,608
12/31/2001 13,425 12,314 12,122
03/31/2002 12,633 11,576 11,885
06/30/2002 10,878 9,951 10,020
09/30/2002 9,133 8,347 7,864
12/31/2002 9,751 8,898 8,453
03/31/2003 9,335 8,514 8,126
06/30/2003 11,558 10,532 10,088
09/30/2003 12,441 11,320 11,144
12/31/2003 15,140 13,761 12,557
03/31/2004 16,246 14,745 13,258
06/30/2004 15,901 14,430 13,270
09/30/2004 14,734 13,357 12,473
12/31/2004 16,712 15,149 14,354
03/31/2005 16,144 14,617 13,374
06/30/2005 16,388 14,834 13,839
09/30/2005 17,545 15,867 14,713
12/31/2005 17,788 16,074 14,950
03/31/2006 19,980 18,043 17,097
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
----------- ----------- ---------- ----------
Institutional Class 23.76% 28.87% 5.33% 7.17%
Service Class 23.43% 28.52% 5.04% 6.86%
Investor A Class (Load Adjusted) 16.31% 25.92% 3.67% 6.08%
Investor A Class (NAV) 23.43% 28.44% 4.90% 6.71%
Investor B Class (Load Adjusted) 18.00% 26.75% 3.78% 5.92%
Investor B Class (NAV) 22.50% 27.47% 4.13% 5.92%
Investor C Class (Load Adjusted) 21.48% 27.50% 4.14% 5.93%
Investor C Class (NAV) 22.48% 27.50% 4.14% 5.93%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 9/14/93; SERVICE AND
INVESTOR A SHARES, 9/15/93; INVESTOR B SHARES, 1/18/96; AND INVESTOR C SHARES,
9/6/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 44 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
24
SMALL CAP GROWTH EQUITY PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term
investments)
Hologic, Inc. 2.4%
SkillSoft PLC - ADR 2.2
Laureate Education, Inc. 2.1
Foundry Networks, Inc. 2.1
Pediatrix Medical Group, Inc. 2.1
Watson Wyatt Worldwide, Inc. 2.1
Polycom, Inc. 2.0
SonicWALL, Inc. 2.0
Digene Corp. 1.9
Red Robin Gourmet Burgers, Inc. 1.9
----
Total 20.8%
====
Top Ten Industries (% of long-term
investments)
Computer Software & Services 18.0%
Business Services 10.2
Medical Instruments & Supplies 10.0
Medical & Medical Services 7.5
Retail Merchandising 5.8
Oil & Gas 5.6
Manufacturing 5.4
Entertainment & Leisure 5.2
Semiconductors & Related Devices 5.1
Finance 3.9
----
Total 76.7%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,138.80 1,137.20 1,137.10 1,132.80 1,132.70
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 4.64 6.02 6.18 10.79 10.47
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,020.61 1,019.30 1,019.14 1,014.75 1,015.05
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 4.39 5.70 5.86 10.25 9.95
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.87%, 1.13%, 1.16%, 2.03%, and 1.97% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
25
GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO
Total Net Assets (3/31/06): $34.2 million
Performance Benchmark:
NYSE Arca Tech 100 IndexSM (Formerly known as the Pacific Stock Exchange
Technology Index)
Investment Approach:
Seeks long-term capital appreciation by investing primarily in equity
securities of U.S. and non-U.S. companies in all capitalization ranges selected
for their rapid and sustainable growth potential from the development,
advancement and use of science and/or technology. The Portfolio normally
invests at least 80% of its net assets in equity securities issued by science
and technology companies in all market capitalization ranges. The Portfolio
may invest up to 25% of its net assets in stocks of issuers in emerging market
countries. The Portfolio management team uses a multi-factor screen to
identify stocks that have above-average return potential. The factors and
weights assigned to a factor may change depending on market conditions. The
most influential factors over time have been revenue and earnings growth,
estimate revisions, profitability and relative value.
Recent Portfolio Management Activity:
o All share classes of the Portfolio outperformed the benchmark for the
semi-annual period.
o After posting modest gains during the fourth quarter of 2005, U.S.
equity markets exhibited a strong upswing during the first quarter of 2006. In
particular, the S&P 500(Reg. TM) Index rose 6.4% for the six-month period.
Stocks benefited from mostly benign inflation data and robust earnings growth.
Smaller-capitalization stocks, as represented by the Russell 2000(Reg. TM)
Index, surged during January and posted their strongest first quarter
performance in fifteen years. Non-U.S. market indices also performed very well
throughout the period due to a robust corporate sector and strong global
economic activity.
o Stock selection in semiconductors and internet software & services were
significant positive contributors, outweighing the negative effects of
overweights in these two industries. Semiconductor stocks such as Atheros
Communications and NVIDIA rose sharply during the period. Atheros
Communications has benefited from strength in emerging market demand for its
wireless local area network ("WLAN") and power amplifier ("PAS") products. In
the communication equipment and internet software & services industries, Option
NV and Akamai Technologies were the most notable positive contributors.
Conversely, an underweight in Network Appliance and the avoidance of
strong-performing Index holdings such as Tektronix and NCR hurt performance
comparisons.
o Strength in the health care segment of the Portfolio was the result of
strong stock selection and an underweight in biotechnology. Alexion
Pharmaceuticals and Vertex Pharmaceuticals drove relative gains in health care.
Alexion Pharmaceuticals was rewarded following news of positive results from a
late-stage trial of its drug candidate Soliris, which is a treatment for
patients suffering from a rare type of anemia. Stock selection in
pharmaceuticals dampened returns primarily as a result of our position in
ViroPharma, which lost ground due to a change in FDA policy that significantly
eased the bioequivalence testing requirements for generic drug makers. The
stock has since been eliminated from the Portfolio.
o Lastly, stock selection and a modest underweight in industrials aided
returns. Strength from Japanese machinery holdings such as Nabtesco and
Hitachi Construction overcame the negative effect of an underweight in Lockheed
Martin, which rose 24% during the period and is a large Index holding.
o With about 63% of the Portfolio invested in information technology at
the end of March, we remain overweight in communications equipment names in
order to capitalize on the demand for mobility and broadband access. At the
same time, our concerns about future margin compression associated with rising
inventory levels have led us to reduce our semiconductor exposure in the
Portfolio. In health care, our biotechnology holdings have a large emphasis on
small- and mid- capitalization names that compare favorably to their
large-capitalization counterparts. Additionally, we remain positive on the
fundamentals of health maintenance organizations ("HMOs"), which continue to
benefit from decelerating medical cost trends.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GLOBAL SCIENCE &
TECHNOLOGY
OPPORTUNITIES PORTFOLIO AND THE NYSE ARCA TECH 100 INDEXSM FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A NYSE Arca Tech 100 Index(SM)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
05/15/2000 10,000 9,425 10,000
06/30/2000 11,400 10,745 10,789
09/30/2000 12,490 11,753 10,178
12/31/2000 9,490 8,926 7,983
03/31/2001 6,190 5,815 6,494
06/30/2001 6,830 6,400 7,121
09/30/2001 4,410 4,128 5,077
12/31/2001 5,850 5,476 6,752
03/31/2002 5,680 5,306 6,732
06/30/2002 4,520 4,213 5,049
09/30/2002 3,600 3,355 3,795
12/31/2002 3,820 3,553 4,512
03/31/2003 3,660 3,402 4,497
06/30/2003 4,760 4,420 5,545
09/30/2003 5,470 5,071 6,084
12/31/2003 6,070 5,627 6,887
03/31/2004 6,270 5,796 7,059
06/30/2004 5,820 5,382 7,275
09/30/2004 5,410 5,005 6,736
12/31/2004 6,230 5,749 7,719
03/31/2005 5,650 5,212 7,190
06/30/2005 5,950 5,485 7,403
09/30/2005 6,610 6,079 8,136
12/31/2005 6,950 6,390 8,322
03/31/2006 7,550 6,927 8,709
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
----------- ----------- ---------- ---------------
Institutional Class 33.63% 27.30% 4.05% (4.67)%
Service Class 33.15% 26.97% 3.75% (4.93)%
Investor A Class (Load Adjusted) 25.21% 24.27% 2.33% (6.06)%
Investor A Class (NAV) 32.91% 26.74% 3.56% (5.10)%
Investor B Class (Load Adjusted) 27.40% 25.07% 2.42% (5.98)%
Investor B Class (NAV) 31.90% 25.81% 2.78% (5.82)%
Investor C Class (Load Adjusted) 30.90% 25.81% 2.78% (5.82)%
Investor C Class (NAV) 31.90% 25.81% 2.78% (5.82)%
THE INCEPTION DATE OF THE PORTFOLIO'S INSTITUTIONAL, SERVICE, INVESTOR A,
INVESTOR B, AND INVESTOR C SHARES WAS 5/15/00. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 44 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.
26
GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term
investments)
Hewlett-Packard Co. 2.1%
Cisco Systems, Inc. 2.1
NVIDIA Corp. 2.0
Atheros Communications 1.9
Qualcomm, Inc. 1.9
Alexion Pharmaceuticals, Inc. 1.9
Broadcom Corp. - Class A 1.8
Nokia Corp. - ADR 1.7
Microsoft Corp. 1.6
Oracle Corp. 1.6
----
Total 18.6%
====
Top Ten Industries (% of long-term
investments)
Computer Software & Services 21.2%
Semiconductors & Related Devices 13.4
Telecommunications 13.2
Pharmaceuticals 12.2
Computer & Office Equipment 8.4
Electronics 7.9
Medical & Medical Services 4.1
Business Services 4.1
Manufacturing 3.0
Medical Instruments & Supplies 2.3
----
Total 89.8%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,142.20 1,141.30 1,139.50 1,135.70 1,135.70
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 6.84 8.81 9.39 13.74 12.94
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,018.54 1,016.67 1,016.11 1,011.97 1,012.73
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 6.46 8.33 8.89 13.03 12.27
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.28%, 1.65%, 1.76%, 2.58%, and 2.43% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
27
GLOBAL RESOURCES PORTFOLIO
Total Net Assets (3/31/06): $1.2 billion
Performance Benchmark:
Lipper Natural Resources Funds Index
S&P 500(Reg. TM) Index
Investment Approach:
Seeks to provide long-term growth of capital by investing at least 80% of
its total assets in securities of global energy and natural resources companies
and companies in associated businesses, as well as utilities. The Portfolio
may invest without limit in companies located anywhere in the world and will
generally invest in at least three countries and in companies tied economically
to a number of countries. In selecting investments, the management team seeks
to invest in companies and industries that appear to have the potential for
above average long-term performance. These may include companies that are
expected to show above-average growth over the long term as well as those that
appear to be trading below their true worth. The Portfolio may invest up to
20% of its assets in other U.S. and foreign investments including stocks and
bonds of companies not associated with energy or natural resources. The
Portfolio may not invest more than 10% of its total assets in non-investment
grade bonds. While the Portfolio tends to emphasize smaller companies, from
time to time it may emphasize companies of other sizes.
Recent Portfolio Management Activity:
o All share classes outperformed the S&P 500(Reg. TM) Index for the
semi-annual period. All share classes underperformed the Lipper Natural
Resources Funds Index for the semi-annual period.
o Energy and natural resources stocks performed well over the last six
months gaining nearly 10% despite significant volatility. On the heels of a
very strong third quarter, energy stocks fell sharply in October but recovered
most of those losses in November and December. Soon after the beginning of the
new year, large capital inflows and rising geo-political tensions pushed energy
stocks markedly higher in January. While the value of commodities and energy
stocks rapidly increased in January, warmer than normal winter weather dampened
energy consumption in the U.S., leaving heating oil and natural gas inventory
at high levels. Following this consolidation, investors re-entered the sector
in early March as elevated geo-political risks and concerns over U.S. ability
to meeting rising gasoline demand as we approach the summer driving season
provided a boost to the underlying stocks as the quarter came to a close.
o Consistent with the manner in which the sector has traded recently,
most areas of exposure positively contributed to absolute returns. Strong stock
selection within metals and mining and drilling companies provided a boost to
relative return comparisons. Additionally, our significant underweight within
the integrated oil and gas industry also boosted relative returns. Conversely,
the Portfolio's exposure to coal and consumable fuels and exploration and
production stocks created a modest drag on performance comparisons as both
segments lagged the broader sector during the period. Significant exposure to
drilling stocks lifted portfolio returns in the period. While this segment
lagged other areas of the energy sector for much of last year, the group
significantly outperformed during the period as increased capital expenditure
by exploration and production companies resulted in higher demand for oil & gas
services and equipment. Greater demand and limited availability of equipment
and services has solidified pricing power and boosted profitability for these
companies. Exposure to gold stocks provided a lift to Portfolio returns as
holdings gained in excess of 80% with prices reaching their highest levels in
over 25 years.
o During the period, our coal holdings generated modest losses as Massey
Energy posted double-digit declines. We continue to believe that fundamentals
within the sector are strong and we have maintained our significant exposure to
the industry. Our positioning in the industry remains largely unchanged as we
maintain significant positions in Consol Energy, Massey Energy, Arch Coal and
Peabody Energy. Ultimately, if investors are unwilling to reward these
companies for the value of their companies in the stock market, it is likely
that merger and acquisition activity will accelerate and further consolidation
will occur. We continue to believe that longer-term supply-demand dynamics
remain favorable and should continue to support elevated long-term energy
prices.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GLOBAL RESOURCES
PORTFOLIO,
THE LIPPER NATURAL RESOURCES FUNDS INDEX AND THE S&P 500(REG. TM) INDEX FOR
THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A S&P 500(R) Index Lipper Natural Resources Funds Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,426 10,000 10,000
06/30/1996 11,432 10,772 10,449 10,462
09/30/1996 12,579 11,840 10,772 10,853
12/31/1996 14,719 13,849 11,670 11,916
03/31/1997 14,250 13,395 11,983 11,459
06/30/1997 15,243 14,323 14,074 12,637
09/30/1997 19,379 18,196 15,129 14,757
12/31/1997 15,582 14,620 15,563 13,673
03/31/1998 15,515 14,563 17,734 14,189
06/30/1998 13,092 12,277 18,320 13,266
09/30/1998 9,550 8,952 16,497 11,115
12/31/1998 8,042 7,531 20,010 10,512
03/31/1999 8,137 7,615 21,008 11,476
06/30/1999 9,906 9,262 22,488 13,627
09/30/1999 10,799 10,093 21,084 13,765
12/31/1999 9,309 8,698 24,222 14,035
03/31/2000 10,775 10,062 24,777 15,692
06/30/2000 13,716 12,799 24,119 16,292
09/30/2000 15,724 14,659 23,885 17,459
12/31/2000 17,199 16,015 22,016 18,137
03/31/2001 17,079 15,886 19,406 17,242
06/30/2001 17,637 16,389 20,542 16,732
09/30/2001 14,641 13,599 17,527 14,138
12/31/2001 16,768 15,566 19,400 15,854
03/31/2002 18,872 17,471 19,453 17,440
06/30/2002 18,737 17,334 16,847 16,370
09/30/2002 15,971 14,720 13,936 13,676
12/31/2002 17,733 16,328 15,112 14,709
03/31/2003 17,462 16,069 14,637 14,533
06/30/2003 21,399 19,674 16,890 15,971
09/30/2003 22,570 20,734 17,337 15,951
12/31/2003 28,501 26,164 19,448 18,569
03/31/2004 31,157 28,578 19,777 19,826
06/30/2004 33,487 30,704 20,117 20,830
09/30/2004 37,620 34,475 19,741 23,328
12/31/2004 42,190 38,624 21,563 25,114
03/31/2005 48,250 44,158 21,100 28,575
06/30/2005 50,508 46,191 21,389 29,875
09/30/2005 67,103 61,316 22,160 37,076
12/31/2005 66,320 60,560 22,623 36,769
03/31/2006 73,181 66,761 23,575 40,547
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
----------- ----------- ----------- -----------
Institutional Class 51.67% 61.23% 33.78% 22.02%
Investor A Class (Load Adjusted) 42.50% 57.61% 31.69% 20.91%
Investor A Class (NAV) 51.18% 60.76% 33.26% 21.62%
Investor B Class (Load Adjusted) 45.61% 59.23% 32.24% 20.75%
Investor B Class (NAV) 50.11% 59.69% 32.37% 20.75%
Investor C Class (Load Adjusted) 49.14% 59.66% 32.40% 20.77%
Investor C Class (NAV) 50.14% 59.66% 32.40% 20.77%
THE FUND IS CLOSED TO NEW INVESTORS. EXISTING SHAREHOLDERS MAY MAKE ADDITIONAL
INVESTMENTS IN CURRENT ACCOUNTS. IN ADDITION, NEW ACCOUNTS MAY BE OPENED BY (I)
ANY INVESTOR IF THE TAX ID NUMBER FOR THE NEW ACCOUNT WILL BE THE SAME AS THAT
FOR A CURRENT ACCOUNT AND (II) 401(K), 403 (B), 457 AND OTHER SIMILAR GROUP
RETIREMENT PLAN PROGRAMS OR CERTAIN DISCRETIONARY WRAP FEE PROGRAMS THAT HAVE
CURRENT ACCOUNTS.
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, 3/2/90; INSTITUTIONAL SHARES,
6/1/93; INVESTOR C SHARES, 6/1/93; AND INVESTOR B SHARES, 1/1/99. SEE "NOTE ON
PERFORMANCE INFORMATION" ON PAGE 44 FOR FURTHER INFORMATION ON HOW PERFORMANCE
DATA WAS CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
28
GLOBAL RESOURCES PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)
CONSOL Energy, Inc. 7.0%
Peabody Energy Corp. 5.7
Massey Energy Co. 5.0
Arch Coal, Inc. 4.6
Transocean, Inc. 4.4
Penn West Energy Trust 4.3
Diamond Offshore Drilling, Inc. 4.1
Newfield Exploration Co. 3.9
Plains Exploration & Production Co. 3.5
Penn Virginia Corp. 3.3
----
Total 45.8%
====
Industries (% of long-term
investments)
Oil & Gas 64.1%
Metal & Mining 27.9
Transportation 2.3
Manufacturing 2.0
Energy & Utilities 1.9
Conglomerates 1.6
Finance 0.2
-----
Total 100.0%
=====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
---------------------------------------------------------------
Institutional Investor Investor Investor
Class A Class B Class C Class
--------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,090.60 1,088.80 1,084.90 1,085.00
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.26 6.87 10.60 10.50
Hypothetical Expenses
(5% return before expenses)
---------------------------------------------------------------
Institutional Investor Investor Investor
Class A Class B Class C Class
--------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,019.90 1,018.34 1,014.70 1,014.80
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.10 6.66 10.30 10.20
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.01%, 1.32%, 2.04%, and 2.02% for the Institutional, Investor A, B
and C share classes, respectively, multiplied by the average account value over
the period, multiplied by 182/365 (to reflect the one-half year period).
29
ALL-CAP GLOBAL RESOURCES PORTFOLIO
Total Net Assets (3/31/06): $565.7 million
Performance Benchmark:
Lipper Natural Resources Funds Index
S&P 500(Reg. TM) Index
Investment Approach:
Seeks to provide long-term growth of capital by investing at least 80% of
its total assets in securities of global energy and natural resources companies
and companies in associated businesses, as well as utilities. The Portfolio
may invest without limit in companies located anywhere in the world and will
generally invest in at least three countries and in companies tied economically
to a number of countries. In selecting investments, the management team seeks
to invest in companies and industries that appear to have the potential for
above average long-term performance. These may include companies that are
expected to show above-average growth over the long term as well as those that
appear to be trading below their true worth. The Portfolio may invest up to
20% of its assets in other U.S. and foreign investments including stocks and
bonds of companies not associated with energy or natural resources. The
Portfolio may not invest more than 10% of its total assets in non-investment
grade bonds. The Portfolio does not limit its investments to companies of any
particular size, and may invest in securities of companies with small to large
capitalizations.
Recent Portfolio Management Activity:
o All share classes outperformed the S&P 500(Reg. TM) Index for the
semi-annual period. All share classes underperformed the Lipper Natural
Resources Funds Index for the semi-annual period.
o Energy and natural resources stocks performed well over the last six
months gaining nearly 10% despite significant volatility. On the heels of a
very strong third quarter, energy stocks fell sharply in October but recovered
most of those losses in November and December. Soon after the beginning of the
new year, large capital inflows and rising geo-political tensions pushed energy
stocks markedly higher in January. While the value of commodities and energy
stocks rapidly increased in January, warmer than normal winter weather dampened
energy consumption in the U.S., leaving heating oil and natural gas inventory
levels at high levels. Following this consolidation, investors re-entered the
sector in early March as elevated geo-political risks and concerns over U.S.
ability to meeting rising gasoline demand as we approach the summer driving
season provided a boost to the underlying stocks as the quarter came to a
close.
o Consistent with the manner in which the sector has traded recently,
most areas of exposure positively contributed to returns. Strong stock
selection within integrated oil and gas, metals and mining and drilling
companies provided a boost to relative return comparisons. Conversely, the
Portfolio's exposure to coal and consumable fuels and disappointing selection
within exploration and production stocks detracted from return comparisons with
the Lipper Natural Resources Funds Index. Significant exposure to drilling
stocks lifted portfolio returns in the period. While this segment lagged other
areas of the energy sector for much of last year, the group significantly
outperformed during the period as increased capital expenditure by exploration
and production companies resulted in higher demand for oil & gas services and
equipment. Greater demand and limited availability of equipment and services
has solidified pricing power and boosted profitability for these companies.
Select integrated oil & gas positions such as Suncor, Statoil and BG Group
rallied over 20% during the quarter, driving returns higher. Lastly, our
underweight to major integrated oil companies such as Exxon Mobil and Conoco
Phillips also aided return comparisons.
o During the period, our coal holdings generated modest losses as Massey
Energy posted double-digit declines. We continue to believe that fundamentals
within the sector are strong and we have maintained our significant exposure to
the industry. Our positioning in the industry remains largely unchanged as we
maintain significant positions in Consol Energy, Massey Energy, Arch Coal and
Peabody Energy. Ultimately, if investors are unwilling to reward these
companies for the value of their companies in the stock market, it is likely
that merger and acquisition activity will accelerate and further consolidation
will occur. We continue to believe that longer-term supply-demand dynamics
remain favorable and should continue to support elevated long-term energy
prices.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ALL-CAP GLOBAL
RESOURCES PORTFOLIO, THE LIPPER NATURAL RESOURCES FUNDS INDEX AND THE S&P
500(REG. TM) INDEX FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A S&P 500(R) Index Lipper Natural Resources Funds Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
02/16/2005 10,000 9,425 10,000 10,000
02/28/2005 10,190 9,604 9,950 10,449
03/31/2005 10,060 9,482 9,774 10,248
04/30/2005 9,490 8,944 9,589 9,590
05/31/2005 9,890 9,321 9,894 9,943
06/30/2005 10,670 10,057 9,908 10,715
07/31/2005 11,610 10,933 10,276 11,646
08/31/2005 12,640 11,904 10,183 12,479
09/30/2005 13,560 12,724 10,265 13,297
10/31/2005 12,410 11,640 10,094 12,325
11/30/2005 12,770 11,979 10,476 12,736
12/31/2005 13,370 12,545 10,479 13,187
01/31/2006 15,360 14,411 10,757 15,212
02/28/2006 13,900 13,025 10,786 13,769
03/31/2006 14,760 13,855 10,921 14,542
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
From
1 Year Inception
----------- ----------
Institutional Class 46.72% 41.67%
Service Class 46.12% 41.15%
Investor A Class (Load Adjusted) 37.77% 33.87%
Investor A Class (NAV) 46.12% 41.15%
Investor B Class (Load Adjusted) 40.72% 36.68%
Investor B Class (NAV) 45.22% 40.12%
Investor C Class (Load Adjusted) 44.13% 40.29%
Investor C Class (NAV) 45.13% 40.29%
THE INCEPTION DATE OF THE PORTFOLIO'S INSTITUTIONAL, SERVICE, INVESTOR A,
INVESTOR B, AND INVESTOR C SHARES WAS 02/16/2005. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 44 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED,INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
30
ALL-CAP GLOBAL RESOURCES PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term
investments)
Transocean, Inc. 3.5%
GlobalSantaFe Corp. 3.2
Canadian Natural Resources Ltd. 2.9
Massey Energy Co. 2.9
Statoil ASA - ADR 2.8
Goldcorp, Inc. 2.8
CONSOL Energy, Inc. 2.8
Talisman Energy, Inc. - ADR 2.8
EOG Resources, Inc. 2.6
Cairn Energy PLC 2.4
----
Total 28.7%
====
Industries (% of long-term investments)
Oil & Gas 74.4%
Metal & Mining 19.0
Energy & Utilities 3.7
Machinery & Heavy Equipment 1.3
Manufacturing 1.1
Food & Agriculture 0.5
-----
Total 100.0%
=====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,088.50 1,087.30 1,088.90 1,084.80 1,084.70
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.26 6.61 6.82 10.60 10.55
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,019.90 1,018.59 1,018.39 1,014.70 1,014.75
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.10 6.41 6.61 10.30 10.25
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.01%, 1.27%, 1.31%, 2.04%, and 2.03% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the period the
fund was open during the one-half year period).
31
HEALTH SCIENCES PORTFOLIO
Total Net Assets (3/31/06): $731.4 million
Performance Benchmark:
Lipper Health/Biotechnology Funds Index
S&P 500(Reg. TM) Index
Investment Approach:
Seeks to provide long-term growth of capital by investing at least 80% of
its total assets in securities of companies in health sciences and related
industries. The management team expects to invest in health sciences companies
comparable in size to those in the health care sector of the Russell 3000(Reg.
TM) Index or similar companies, including non-U.S. companies. In selecting
investments, the management team seeks to invest in companies and industries
that appear to have the potential for above-average growth over the long term.
Recent Portfolio Management Activity:
o All share classes of the Portfolio outperformed the Lipper
Health/Biotechnology Funds Index and the S&P 500(Reg. TM) Index for the
semi-annual period.
o U.S. equity markets exhibited a strong upswing during the first quarter
of 2006, building on the modest gains experienced in the fourth quarter of
2005. During the semi-annual period, the large capitalization S&P 500(Reg. TM)
Index returned 6.4%, while smaller-capitalization stocks, as represented by the
Russell 2000(Reg. TM) Index, surged during January and posted their strongest
first quarter performance in fifteen years. Broad-based strength across the
U.S. equity market spectrum during the first quarter of 2006 was particularly
satisfying after what was considered a lackluster year for stocks in 2005.
o In this environment, cyclical sectors such as industrials and materials
performed particularly well as a result of the rebound in economic activity and
rapid increase in a wide range of commodity prices. In comparison, more
defensive groups including the health care sector underperformed the broader
market.
o Performance was driven by strength across the majority of sub-sectors,
with biotechnology holdings making the largest positive impact, followed by
health care equipment & supplies and pharmaceuticals. While returns were
positive in the health care providers & services industry, they trailed the
broader group.
o Within biotechnology, strong stock picking drove performance higher for
the period. Several of the Portfolio's small- and mid- capitalization
selections made sizable contributions to gains. Alexion Pharmaceuticals was one
of the largest individual contributors. Other holdings that added value
included Vertex Pharmaceuticals and Abgenix Inc., both of which posted healthy
double-digit gains. Additionally, the decision to underweight Amgen proved
beneficial.
o Medical device names struggled as a group throughout 2005 and during
the first quarter of 2006; however, our stock selection decisions had a
substantial positive impact on performance. Positions in Varian Medical Systems
and Advanced Magnetics keyed gains. Within pharmaceuticals, underweighting
domestic large-capitalization names made a positive impact on returns over the
six month period.
o In contrast, portfolio positioning in health care services created a
drag on overall Portfolio returns. After being one of our strongest performing
areas during 2005, managed care names retreated in the first quarter of 2006,
dampening return comparisons in health care services over the period as a
whole.
o The Portfolio remains diversified across industries and major changes
within the Portfolio have largely been a result of stock selection decisions.
We cautiously added back to domestic large-capitalization pharmaceutical stocks
during the period, after being negative on the group throughout 2005. We also
continue to emphasize small-to-mid-capitalization biotechnology names and have
reduced our exposure to health maintenance organizations (HMOs) for
company-specific reasons.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE HEALTH SCIENCES
PORTFOLIO, THE LIPPER HEALTH/BIOTECHNOLOGY FUNDS INDEX AND THE S&P 500(REG. TM)
INDEX FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A S&P 500(R) Index Lipper Health/Biotechnology Funds Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
12/21/1999 10,000 9,425 10,000 10,000
12/31/1999 10,580 9,972 10,253 10,647
03/31/2000 11,930 11,244 10,488 11,651
06/30/2000 14,295 13,473 10,209 13,747
09/30/2000 17,001 16,024 10,111 15,153
12/31/2000 16,434 15,479 9,319 15,297
03/31/2001 14,074 13,265 8,215 12,311
06/30/2001 16,242 15,288 8,695 13,942
09/30/2001 14,869 13,984 7,419 12,610
12/31/2001 17,075 16,042 8,212 13,697
03/31/2002 15,972 15,003 8,234 12,811
06/30/2002 13,560 12,730 7,131 10,851
09/30/2002 12,119 11,361 5,899 9,973
12/31/2002 13,192 12,362 6,397 10,107
03/31/2003 13,387 12,546 6,196 10,198
06/30/2003 18,048 16,898 7,149 11,892
09/30/2003 19,750 18,471 7,338 12,190
12/31/2003 22,040 20,600 8,232 13,193
03/31/2004 23,317 21,782 8,371 13,881
06/30/2004 23,507 21,940 8,515 14,090
09/30/2004 22,717 21,184 8,356 13,534
12/31/2004 25,324 23,599 9,128 14,741
03/31/2005 23,888 22,245 8,932 13,912
06/30/2005 26,359 24,542 9,054 14,918
09/30/2005 28,784 26,774 9,380 16,082
12/31/2005 29,664 27,571 9,576 16,433
03/31/2006 31,366 29,131 9,979 17,053
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
----------- ----------- ----------- ---------------
Institutional Class 31.30% 32.82% 17.38% 19.98%
Service Class 31.14% 32.50% 17.08% 19.73%
Investor A Class (Load Adjusted) 23.44% 29.83% 15.66% 18.57%
Investor A Class (NAV) 30.95% 32.42% 17.04% 19.70%
Investor B Class (Load Adjusted) 25.49% 30.80% 16.01% 19.02%
Investor B Class (NAV) 29.99% 31.48% 16.23% 19.02%
Investor C Class (Load Adjusted) 29.00% 31.51% 16.25% 18.99%
Investor C Class (NAV) 30.00% 31.51% 16.25% 18.99%
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, 12/21/99; INSTITUTIONAL
SHARES, 10/16/00; INVESTOR B SHARES, 10/16/00; INVESTOR C SHARES, 10/16/00; AND
SERVICE SHARES, 1/28/05 . SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 44 FOR
FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
32
HEALTH SCIENCES PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term
investments)
Caremark Rx, Inc. 5.6%
Alexion Pharmaceuticals, Inc. 4.5
Medco Health Solutions, Inc. 4.0
Schering-Plough Corp. 3.9
Aetna, Inc. 3.8
Amgen, Inc. 3.7
Wyeth 3.5
Amylin Pharmaceuticals, Inc. 3.3
Merck & Co., Inc. 3.3
Cigna Corp. 3.2
----
Total 38.8%
====
Industries (% of long-term investments)
Pharmaceuticals 51.3%
Medical & Medical Services 22.6
Medical Instruments & Supplies 14.7
Insurance 9.9
Retail Merchandising 1.5
-----
Total 100.0%
=====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,089.70 1,088.30 1,088.10 1,084.10 1,084.30
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.52 6.61 6.98 11.02 10.65
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,019.65 1,018.59 1,018.23 1,014.30 1,014.65
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 5.35 6.41 6.77 10.70 10.35
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.06%, 1.27%, 1.34%, 2.12%, and 2.05% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
33
U.S. OPPORTUNITIES PORTFOLIO
Total Net Assets (3/31/06): $117.3 million
Performance Benchmark:
S&P/Citigroup Extended Market Index U.S. ("S&P/Citigroup EMI U.S.")
Investment Approach:
Seeks long-term capital appreciation by normally investing at least 80% of
its net assets in equity securities of U.S. emerging capitalization companies
(defined as those with market capitalizations equal to those within the
universe of the S&P/Citigroup EMI U.S. stocks) with relatively attractive
earnings growth potential and valuation. The Portfolio management team uses a
multi-factor screen to identify stocks that have above-average return
potential. The factors and the weight assigned to a factor may change
depending on market conditions. The most influential factors over time have
been revenue and earnings growth, estimate revisions, profitability and
relative value.
Recent Portfolio Management Activity:
o All share classes of the Portfolio outperformed the benchmark for the
semi-annual period.
o After posting modest gains during the fourth quarter of 2005, U.S.
equity markets exhibited a strong upswing during the first quarter of 2006. In
particular, the S&P 500(Reg. TM) Index rose 6.4% during the semi-annual period.
o Stock selection comparisons were positive across all sectors during the
period. However, stock selection gains in financials and health care were the
two primary drivers of relative performance.
o In financials, our position in CB Richard Ellis Group, which rose 64%
during the period, drove relative outperformance among real estate names.
o Biotechnology holdings Abgenix and Alexion Pharmaceuticals generated
strong gains for the Portfolio. Specifically, Alexion Pharmaceuticals was
rewarded following news of positive results from a late-stage trial of its drug
candidate, Soliris, which is a treatment for patients suffering from a rare
type of anemia.
o In contrast, our decision to overweight energy and underweight
financials during the period created a modest drag on relative return
comparisons.
o The most notable stock-specific detractor was tutoring company Educate,
which lost ground in early February after releasing weak earnings as a result
of operational and management issues at its Sylvan Learning unit. The stock
has since been eliminated from the Portfolio.
o We continue to emphasize industrials and telecommunications services as
we feel these areas will benefit from greater global industrialization. In
particular, we feel that telecommunications services stocks will benefit from
rising wireless substitution and greater connectivity.
o From a positioning standpoint, we remain underweight within financials
and have decreased the Portfolio's weighting within energy during the
semi-annual period. We also have recently lowered our exposure to
semiconductor related holdings as we feel rising inventory levels may
contribute to deteriorating profit margins in the industry going forward.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE U.S. OPPORTUNITIES
PORTFOLIO
AND THE S&P/CITIGROUP EMI U.S. FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A S&P/Citigroup EMI U.S.
- - - - - - - - - - - - - - - - - - - - - - - - - -
05/01/1998 10,000 9,425 10,000
06/30/1998 10,950 10,320 9,519
09/30/1998 9,390 8,841 7,732
12/31/1998 13,030 12,253 9,126
03/31/1999 15,880 14,920 8,645
06/30/1999 20,950 19,661 9,897
09/30/1999 24,730 23,186 9,234
12/31/1999 41,897 39,221 11,107
03/31/2000 55,260 51,678 12,415
06/30/2000 53,197 49,701 11,970
09/30/2000 50,359 46,992 12,452
12/31/2000 38,649 36,015 11,544
03/31/2001 30,128 28,045 10,447
06/30/2001 36,305 33,752 11,892
09/30/2001 27,054 25,120 9,716
12/31/2001 33,256 30,851 11,524
03/31/2002 30,464 28,220 12,034
06/30/2002 25,578 23,660 11,072
09/30/2002 20,257 18,721 9,084
12/31/2002 20,381 18,809 9,693
03/31/2003 19,854 18,312 9,318
06/30/2003 23,732 21,848 11,230
09/30/2003 25,686 23,631 12,104
12/31/2003 30,122 27,679 13,843
03/31/2004 31,503 28,907 14,689
06/30/2004 31,782 29,141 14,773
09/30/2004 31,549 28,907 14,495
12/31/2004 35,644 32,634 16,519
03/31/2005 34,807 31,830 16,031
06/30/2005 36,451 33,306 16,769
09/30/2005 39,646 36,185 17,732
12/31/2005 40,856 37,252 18,075
03/31/2006 46,983 42,791 19,973
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
----------- ----------- ---------- ---------------
Institutional Class 34.98% 33.26% 9.29% 21.59%
Service Class 34.53% 32.80% 8.92% 21.20%
Investor A Class (Load Adjusted) 26.70% 30.12% 7.53% 20.16%
Investor A Class (NAV) 34.44% 32.70% 8.82% 21.06%
Investor B Class (Load Adjusted) 28.91% 31.04% 7.72% 20.19%
Investor B Class (NAV) 33.41% 31.72% 8.02% 20.19%
Investor C Class (Load Adjusted) 32.40% 31.71% 7.99% 20.17%
Investor C Class (NAV) 33.40% 31.71% 7.99% 20.17%
THE INCEPTION DATE OF THE PORTFOLIO'S INSTITUTIONAL, SERVICE, INVESTOR A,
INVESTOR B, AND INVESTOR C SHARES WAS 5/1/98. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 44 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.
34
U.S. OPPORTUNITIES PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term
investments)
E*TRADE Financial Corp. 1.5%
EMCOR Group, Inc. 1.3
Joy Global, Inc. 1.3
Alexion Pharmaceuticals, Inc. 1.2
NII Holdings, Inc. 1.2
American Tower Corp. - Class A 1.2
Jones Lang Lasalle Inc. 1.1
Oregon Steel Mills, Inc. 1.1
Gardner Denver, Inc. 1.1
Diamond Offshore Drilling, Inc. 1.1
----
Total 12.1%
====
Top Ten Industries (% of long-term
investments)
Manufacturing 9.3%
Entertainment & Leisure 7.0
Pharmaceuticals 6.8
Oil & Gas 6.8
Real Estate 6.0
Telecommunications 5.8
Retail Merchandising 5.3
Metal & Mining 4.5
Computer Software & Services 4.1
Business Services 3.7
----
Total 59.3%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,185.10 1,183.10 1,182.60 1,178.30 1,178.00
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 7.74 9.69 10.01 13.96 13.90
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,017.83 1,016.01 1,015.71 1,012.03 1,012.08
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 7.17 8.99 9.29 12.97 12.92
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.42%, 1.78%, 1.84%, 2.57%, and 2.56% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
35
GLOBAL OPPORTUNITIES PORTFOLIO
Inception Date: January 31, 2006
Total Net Assets (3/31/06): $15.5 million
Performance Benchmark:
S&P/Citigroup Global Broad Market Index ("S&P/Citigroup Global BMI")
Investment Approach:
Seeks long-term capital appreciation by normally investing at least 75% of
its total assets in global equity securities any market capitalization. The
Portfolio will invest, under normal market conditions, at least 40% of its
total assets in issuers located outside of the U.S. The Portfolio may invest
up to 25% of its total assets in stocks of issuers of emerging market
countries. The Portfolio may also invest up to 25% of its total assets in
global fixed income securities including emerging market debt. Investment in
fixed income securities will be made purely on an opportunistic basis. The
Portfolio management team uses a multi-factor screen to identify stocks that
have above-average return potential. The factors and the weight assigned to a
factor may change depending on market conditions. The most influential factors
over time have been relative value and earnings estimate revisions.
Recent Portfolio Management Activity:
o The Institutional Share class of the Portfolio outperformed the
benchmark since inception. The Service and Investor A Share classes performed
in-line with the benchmark and the Investor B and C share classes
underperformed the benchmark since inception.
o During the semi-annual period, the S&P Global Broad Market Index (BMI)
rose 11.7% in the six months ending March 31, 2006. Equity market trends that
date back to 2002 remain in place: non-U.S. equities are outperforming U.S.
equities, smaller-capitalization stocks are outperforming large-capitalization
stocks, and equities that comprise value indices are outperforming those that
make up the growth indices. Emerging markets posted the strongest returns,
followed by Asia-Pacific, developed Europe, and the U.S. The S&P Extended
Market Index (EMI) - Global, which is comprised of the companies in the bottom
twenty percent of equity market capitalization in each country, handily
outperformed the Primary Market Index (PMI) - Global of large capitalization
stocks. Value outperformed growth among large- and small-capitalization
stocks.
o Wall Street strategists have been predicting changes in market
leadership for the past two years, from small-capitalization stocks to
large-capitalization stocks, and from value to growth, coinciding with the
maturing of the economic cycle. We believe the reason global equity markets
have not followed the play book of the last twenty-five years is that the
primary driver of the current economic expansion is "globalization," while
personal consumption and technology were the primary drivers previously. The
beneficiaries of globalization are commodities, energy, industrials and
financials, which make up a greater proportion of (1) non-U.S. indices versus
the U.S., (2) smaller-capitalization indices versus large-capitalization
indices, and (3) value indices versus growth. While there will inevitably be
downturns in world growth in the years ahead, we believe that commodities,
including energy, industrials and financials, powered by globalization, will
lead equity markets over the next decade.
o Sector allocation contributed modestly to performance since inception
of the Portfolio. Country exposures also contributed positively: an overweight
in Europe and an underweight in the U.S. contributed most. Stock selection was
mixed, but net positive: selections in the financials, consumer discretionary,
healthcare, and energy sectors contributed positively, and selections in the
consumer staples, telecommunication, utilities, industrials, technology, and
materials sectors detracted from performance.
o The Portfolio continues to be geared to businesses benefiting from
globalization. Overweights relative to the benchmark include the industrials
and materials sectors while underweights include the consumer discretionary and
technology sectors. Additionally, the Portfolio is underweight to emerging
markets relative to the benchmark. While emerging market valuations are
attractive, we are cautious on account of the potential for carry-trade
unwinding in a rising interest rate environment. We remain constructive on
global equities, particularly non-U.S. equities, industrials and commodities on
a one-year view.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GLOBAL
OPPORTUNITIES PORTFOLIO
AND THE S&P/CITIGROUP GLOBAL BROAD MARKET INDEX SINCE INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A S&P/Citigroup Global Broad Market Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
01/31/2006 10,000 9,425 10,000
02/28/2006 9,930 9,359 9,983
03/31/2006 10,240 9,642 10,230
FOR PERIOD ENDING MARCH 31, 2006
Total Return
From Inception*
----------------
Institutional Class 2.40%
Service Class 2.30%
Investor A Class (Load Adjusted) (3.58)%
Investor A Class (NAV) 2.30%
Investor B Class (Load Adjusted) (2.30)%
Investor B Class (NAV) 2.20%
Investor C Class (Load Adjusted) 1.20%
Investor C Class (NAV) 2.20%
* Not Annualized.
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO ON
1/31/06. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 44 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.
36
GLOBAL OPPORTUNITIES PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)
The Sumitomo Trust and Banking Co., Ltd. 2.2%
Mitsubishi Tokyo Financial Group, Inc. 2.1
Kubota Corp. 1.9
BP PLC 1.7
International Power PLC 1.5
China Mobile Ltd. 1.5
Diamond Offshore Drilling, Inc. 1.5
ThyssenKrupp AG 1.5
ABN AMRO Holding NV 1.5
ENSCO International, Inc. 1.5
----
Total 16.9%
====
Top Ten Countries (% of
long-term investments)
United States 24.6%
Japan 22.5
United Kingdom 10.4
Germany 9.2
Canada 4.8
Sweden 4.8
France 3.6
Hong Kong 3.5
Netherlands 3.0
Norway 2.5
----
Total 88.9%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the
commencement of operations and held for the period January 31, 2006 to March
31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (1/31/06) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,024.00 1,023.00 1,023.00 1,022.00 1,022.00
Expenses Incurred
During Period
(1/31/06 - 3/31/06) 1.91 2.70 2.70 3.92 3.92
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (1/31/06) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,023.09 1,022.30 1,022.30 1,012.88 1,012.88
Expenses Incurred
During Period
(1/31/06 - 3/31/06) 1.91 2.70 2.70 3.93 3.93
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.17%, 1.65%, 1.65%, 2.40%, and 2.40% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by number of days 60/365 (to reflect
the period the fund was open during the period).
37
INTERNATIONAL OPPORTUNITIES PORTFOLIO
Total Net Assets (3/31/06): $1.2 billion
Performance Benchmark:
S&P/Citigroup Extended Market Index Global Ex-U.S. ("S&P/Citigroup EMI
Global Ex-U.S.")
Investment Approach:
Seeks long-term capital appreciation by normally investing at least 80% of
its net assets in equity securities issued by international emerging
capitalization companies (defined as those with market capitalizations equal to
those within the universe of S&P/Citigroup EMI Global Ex-U.S. stocks). The
Portfolio may invest up to 25% of its net assets in stocks of issuers in
emerging market countries. The Portfolio management team uses a multi-factor
screen to identify stocks that have above average-return potential. The
factors and the weight assigned to a factor may change depending on market
conditions. The most influential factors over time have been revenue and
earnings growth, estimate revisions, profitability and relative value.
Recent Portfolio Management Activity:
o All share classes of the Portfolio outperformed the benchmark for the
semi-annual period.
o The S&P/Citigroup Global Broad Market Index (BMI) rose 11.7% in the six
months ending March 31, 2006. Equity market trends that date back to 2002
remain in place: non-U.S. equities are outperforming U.S. equities,
smaller-capitalization stocks are outperforming large-capitalization stocks,
and equities that comprise value indices are outperforming those that make up
growth indices. Emerging markets posted the strongest returns, followed by
Asia-Pacific, developed Europe, and the U.S. The S&P Extended Market Index
(EMI) - Global, which is comprised of the companies in the bottom 20% of equity
market capitalization in each country, handily outperformed the S&P/Citigroup
Primary Market Index (PMI) - Global of large capitalization stocks. Value
outperformed growth among large- and small-capitalization stocks.
o Wall Street strategists have been predicting changes in market
leadership for the past two years, from small-capitalization stocks to
large-capitalization stocks, and from value to growth, coinciding with the
maturing of the economic cycle. We believe the reason global equity markets
have not followed the play book of the last twenty-five years is that the
primary driver of the current economic expansion is "globalization," while
personal consumption and technology were the primary drivers previously. It is
our belief that the beneficiaries of globalization are commodities, energy,
industrials and financials, which make up a greater proportion of (1) non-U.S.
indices versus the U.S., (2) smaller-capitalization indices versus
large-capitalization indices, and (3) value indices versus growth. While there
will inevitably be downturns in world growth in the years ahead, we believe
that commodities, including energy, industrials and financials, powered by
globalization, will lead equity markets over the next decade.
o During the period, the S&P/Citigroup EMI Global ex-U.S., earned a
return of 20.0% for the six month period. Materials, industrials and
financials outperformed the market, while technology, consumer discretionary,
energy, telecom, utilities, staples and healthcare underperformed the market.
Sector allocation contributed modestly to performance: overweights in
industrials and materials, and underweights in healthcare, consumer
discretionary, technology and telecommunications benefited performance.
Country exposures had no influence on performance. Stock selection was very
positive, particularly in consumer discretionary and financials.
o Following a strong fourth quarter, the investment team reduced exposure
to extended markets on a tactical basis, with the current intention of
re-allocating to these markets upon consolidation. We reduced our exposure to
Japan, South Korea, and South Africa, and increased our exposure to Europe. We
also tactically reduced the Portfolio's exposure to materials. From a
fundamental point of view, we increased exposure to industrials and financials,
and we reduced our exposure to consumer discretionary.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INTERNATIONAL
OPPORTUNITIES
PORTFOLIO AND THE S&P/CITIGROUP EMI GLOBAL EX-U.S. FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A S&P/Citigroup EMI Global Ex-U.S.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
09/26/1997 10,000 9,497 10,000
09/30/1997 9,970 9,468 10,029
12/31/1997 9,483 8,996 8,904
03/31/1998 11,384 10,788 10,356
06/30/1998 11,997 11,350 10,158
09/30/1998 9,614 9,092 8,574
12/31/1998 10,538 9,935 9,681
03/31/1999 10,764 10,127 9,846
06/30/1999 12,722 11,963 10,587
09/30/1999 14,601 13,702 11,070
12/31/1999 26,522 24,889 12,137
03/31/2000 33,056 30,958 12,420
06/30/2000 28,509 26,693 12,053
09/30/2000 28,037 26,213 11,372
12/31/2000 24,365 22,749 10,613
03/31/2001 21,041 19,625 9,586
06/30/2001 21,601 20,118 9,847
09/30/2001 18,501 17,205 8,290
12/31/2001 20,182 18,744 9,056
03/31/2002 22,684 21,046 9,630
06/30/2002 22,821 21,140 9,742
09/30/2002 18,961 17,546 8,045
12/31/2002 19,572 18,098 8,433
03/31/2003 18,812 17,370 8,064
06/30/2003 21,825 20,130 9,934
09/30/2003 24,850 22,890 11,272
12/31/2003 29,217 26,892 13,071
03/31/2004 30,974 28,478 14,351
06/30/2004 29,828 27,397 14,316
09/30/2004 30,463 27,949 14,481
12/31/2004 36,235 33,219 16,899
03/31/2005 37,105 34,002 17,441
06/30/2005 37,142 33,990 17,370
09/30/2005 43,280 39,578 19,327
12/31/2005 47,908 43,781 20,616
03/31/2006 53,797 49,144 23,189
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
----------- ----------- ----------- ---------------
Institutional Class 44.99% 41.94% 20.65% 21.86%
Service Class 44.57% 41.54% 20.28% 21.49%
Investor A Class (Load Adjusted) 37.30% 39.03% 18.93% 20.58%
Investor A Class (NAV) 44.54% 41.44% 20.15% 21.31%
Investor B Class (Load Adjusted) 38.95% 39.78% 19.06% 20.43%
Investor B Class (NAV) 43.45% 40.38% 19.26% 20.43%
Investor C Class (Load Adjusted) 42.45% 40.39% 19.27% 20.43%
Investor C Class (NAV) 43.45% 40.39% 19.27% 20.43%
THE FUND IS CLOSED TO NEW INVESTORS. EXISTING SHAREHOLDERS MAY MAKE ADDITIONAL
INVESTMENTS IN CURRENT ACCOUNTS. IN ADDITION, NEW ACCOUNTS MAY BE OPENED BY (I)
ANY INVESTOR IF THE TAX ID NUMBER FOR THE NEW ACCOUNT WILL BE THE SAME AS THAT
FOR A CURRENT ACCOUNT AND (II) 401(K), 403(B), 457 AND OTHER SIMILAR GROUP
RETIREMENT PLAN PROGRAMS OR CERTAIN DISCRETIONARY WRAP FEE PROGRAMS THAT HAVE
CURRENT ACCOUNTS.
THE INCEPTION DATE OF THE PORTFOLIO'S INSTITUTIONAL, SERVICE, INVESTOR A,
INVESTOR B, AND INVESTOR C SHARES WAS 9/26/97. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 44 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.
38
INTERNATIONAL OPPORTUNITIES PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)
MAN AG 1.5%
IVG Immobilien AG 1.3
Pan Fish ASA 1.3
Bilfinger Berger AG 1.3
Buzzi Unicem SPA 1.3
Piraeus Bank SA 1.2
CapitaLand Ltd. 1.2
Mitsui Trust Holdings, Inc. 1.1
Hanjin Heavy Industries Co. Ltd. 1.1
Orix Corp. 1.1
----
Total 12.4%
====
Top Ten Countries (% of
long-term investments)
Japan 27.9%
United Kingdom 12.2
Germany 8.5
Norway 5.7
South Korea 4.3
Sweden 4.2
Canada 3.8
France 3.7
Netherlands 3.1
Italy 3.0
----
Total 76.4%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,243.00 1,241.50 1,241.70 1,236.60 1,236.80
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 7.49 8.83 9.00 13.33 13.11
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,018.23 1,017.02 1,016.87 1,012.93 1,013.14
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 6.77 7.98 8.13 12.07 11.86
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.34%, 1.58%, 1.61%, 2.39%, and 2.35% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
39
ASSET ALLOCATION PORTFOLIO
Total Net Assets (3/31/06): $790.8 million
Performance Benchmark:
60% S&P 500(Reg. TM) Index / 40% Lehman Brothers U.S. Aggregate Index
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management. The Portfolio uses an asset allocation
strategy, investing varying percentages of its portfolio in three major
categories: stocks, bonds and, to a lesser extent, money market instruments.
The portfolio management team uses a combination of quantitative and
fundamental analysis to evaluate the relative attractiveness of various
segments in the equity universe, defined by style, capitalization range and
geographic location. The portfolio management team regularly reviews and
allocates varying percentages of the Portfolio to equity investment management
team members responsible for security selection within these distinctive
disciplines, including stocks of large, middle and small capitalization
companies, companies that appear to be trading below their true worth,
companies with significant growth opportunities, firms in specialized sectors
and international companies. Within each discipline, investment decisions are
primarily the result of bottom-up security selection that, in turn, drives
sector and industry weightings as well as average market capitalization. The
fixed income investment management team selects bonds from several sectors
including: U.S. Treasuries and agency securities, commercial and residential
mortgage-backed securities, collateralized mortgage obligations, asset-backed
securities and corporate bonds. The Portfolio invests primarily in
dollar-denominated investment grade bonds, but may invest up to 20% of its
fixed income allocation in any combination of non-investment grade bonds (high
yield or junk bonds), non-dollar denominated bonds and bonds of emerging market
issuers.
Recent Portfolio Management Activity:
o All share classes of the Portfolio outperformed the benchmark for the
semi-annual period.
o The equity market, as measured by the S&P 500(Reg. TM) Index, returned
6.4% for the semi-annual period, with much of the strength driven by a positive
first quarter of 2006. While the U.S. equity market began the period on a sour
note, falling through much of October, as oil prices began to drop and economic
news began to improve, the market rallied through November. From a broad
perspective, the second half of the period could best be described as a
continuation of the trends experienced over the last 6 years - namely the
dominance of small capitalization stocks and the dominance of international
stock over domestic equity. Higher quality stocks (as measured by S&P(Reg. TM))
also underperformed low quality stocks for the second half of the period. The
increased demand for smaller, low yielding, low-quality stocks indicates a
continued appetite for riskier stocks.
o In the fixed income markets, interest rates, as measured by the 10-year
Treasury bond, increased by 0.52% ending the period at 4.85%. The rise in
yields can be attributed to a continued tightening of monetary policy. During
the semi-annual period, the Federal Open Market Committee increased the Federal
Funds target rate four times, in 25 basis point increments, to 4.75%. The Fed
has now raised rates 25 basis points at 15 consecutive meetings.
o During the semi-annual period, the Portfolio maintained an overweight
position to equity, and shifted the position in fixed income, which built up
the cash position. Due to equity market outperformance versus the fixed income
market, the Portfolio's overweight to equity aided performance. The main driver
for the Portfolio's outperformance was the tactical allocation among the
different equity styles. The Portfolio maintained an emphasis in the small-
and mid-capitalization stocks which contributed to performance as small- and
mid-capitalization stocks outperformed large capitalization stocks. The
Portfolio's emphasis in the growth style, especially in the mid- and
small-capitalization spaces, also benefited the fund's performance, as they
outperformed their value style counterparts. The Portfolio maintained its
exposure to the energy sector, which positively contributed to performance for
the period. The portfolio management team added more to the energy position
during February's retreat in the sector, which helped the performance. The
team continued to believe in the potential of energy stocks due to the
long-term imbalance between limited supply and growing global demand. The
Portfolio maintained its overweight allocation to international stocks due to
their attractive relative valuations and earnings growth prospects. During the
semi-annual period, the Portfolio added exposure to international small
capitalization stocks, an enhancement that has benefited performance. Within
the fixed income portion of the Portfolio, the Portfolio continued to favor
short duration, high quality fixed income securities. The Portfolio increased
exposure to both high yield and emerging debt at the start of the year, which
helped enhance portfolio return. The Portfolio continued to emphasize equities
over fixed income; ending the quarter with a 69% equity/24% fixed income/7%
cash target allocation. This represents an overweight position to equities and
underweight position to fixed income relative to the normal strategic
allocation of 60% equity/40% fixed income/0% cash allocation.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ASSET ALLOCATION
PORTFOLIO
AND 60% S&P 500(REG. TM) INDEX / 40% LEHMAN BROTHERS U.S. AGGREGATE INDEX FOR
THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A 60% S&P 500(R) Index, 40% Lehman Brothers U.S. Aggregate Index
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,423 10,000
06/30/1996 10,412 9,806 10,292
09/30/1996 10,812 10,176 10,564
12/31/1996 11,454 10,772 11,220
03/31/1997 11,277 10,600 11,380
06/30/1997 12,375 11,626 12,724
09/30/1997 13,641 12,807 13,472
12/31/1997 13,349 12,525 13,870
03/31/1998 14,652 13,740 15,106
06/30/1998 14,653 13,733 15,549
09/30/1998 13,326 12,480 14,902
12/31/1998 14,488 13,558 16,780
03/31/1999 14,592 13,650 17,248
06/30/1999 15,271 14,276 17,914
09/30/1999 14,757 13,786 17,286
12/31/1999 16,405 15,314 18,794
03/31/2000 17,097 15,953 19,241
06/30/2000 16,981 15,822 19,067
09/30/2000 17,520 16,329 19,197
12/31/2000 17,855 16,630 18,607
03/31/2001 17,193 15,999 17,492
06/30/2001 18,050 16,784 18,155
09/30/2001 16,030 14,894 16,839
12/31/2001 18,673 17,320 17,917
03/31/2002 18,650 17,303 17,962
06/30/2002 17,126 15,877 16,746
09/30/2002 15,289 14,163 15,262
12/31/2002 15,765 14,593 16,157
03/31/2003 15,457 14,297 15,941
06/30/2003 17,416 16,080 17,557
09/30/2003 17,980 16,607 17,833
12/31/2003 19,827 18,300 19,143
03/31/2004 20,628 19,007 19,543
06/30/2004 20,625 19,008 19,551
09/30/2004 20,463 18,828 19,581
12/31/2004 22,106 20,325 20,732
03/31/2005 21,795 20,037 20,429
06/30/2005 22,212 20,387 20,845
09/30/2005 23,137 21,216 21,243
12/31/2005 23,533 21,560 21,562
03/31/2006 24,580 22,484 22,048
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
----------- ----------- ---------- ----------
Institutional Class 12.78% 16.72% 7.41% 9.41%
Service Class 12.32% 16.33% 7.07% 9.10%
Investor A Class (Load Adjusted) 5.74% 14.01% 5.77% 8.44%
Investor A Class (NAV) 12.21% 16.29% 7.04% 9.09%
Investor B Class (Load Adjusted) 6.86% 14.57% 5.95% 8.31%
Investor B Class (NAV) 11.36% 15.45% 6.27% 8.31%
Investor C Class (Load Adjusted) 10.41% 15.48% 6.28% 8.29%
Investor C Class (NAV) 11.41% 15.48% 6.28% 8.29%
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, 12/29/88; INSTITUTIONAL
SHARES, 6/1/93; INVESTOR C SHARES, 6/1/93; INVESTOR B SHARES, 1/1/99; AND
SERVICE SHARES, 1/28/05. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 44 FOR
FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
40
ASSET ALLOCATION PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)
Federal National Mortgage Association 7.4%
Federal Home Loan Mortgage Corp. Gold 2.2
iShares Russell 2000 Value Index Fund 1.6
iShares Russell 2000 Growth Index Fund 1.3
Exxon Mobil Corp. 1.1
General Electric Co. 0.9
Microsoft Corp. 0.9
CONSOL Energy, Inc. 0.8
General Electric Capital Corp., Unsecured Notes 0.7
iShares Russell Midcap Growth Index Fund 0.6
----
Total 17.5%
====
Credit Quality (% of
fixed income portfolio)1
AAA 64.8%
AA 10.7
A 9.7
BBB 7.2
\qBBB 7.6
-----
Total 100.0%
=====
Top Ten Industries (% of long-term
investments)
Oil & Gas 8.3%
Banks 6.1
Finance 5.4
Manufacturing 4.3
Security Brokers & Dealers 4.1
Pharmaceuticals 4.1
Telecommunications 3.9
Computer Software & Services 3.9
Retail Merchandising 3.7
Insurance 3.1
----
Total 46.9%
====
1 Using the higher of Standard & Poor's ("S&P") or Moody's Investor Service
("Moody's").
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,062.40 1,060.30 1,059.80 1,055.80 1,056.20
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 4.22 5.75 6.27 10.15 9.89
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,020.86 1,019.35 1,018.84 1,015.00 1,015.26
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 4.14 5.65 6.16 10.00 9.74
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.82%, 1.12%, 1.22%, 1.98%, and 1.93% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
41
INDEX EQUITY PORTFOLIO
Advisor to the Index Master Portfolio
Dimensional Fund Advisors Inc.
Total Net Assets (3/31/06): $1.2 billion
Performance Benchmark:
S&P 500(Reg. TM) Index
Investment Approach:
Seeks to approximate the investment performance of the S&P 500(Reg. TM)
Index, in terms of its total investment return. In pursuit of this goal, the
Portfolio invests all of its assets indirectly, through the The U.S. Large
Company Series (the Index Master Portfolio) of The DFA Investment Trust
Company, in the stocks of the S&P 500(Reg. TM) Index. The Index Master
Portfolio, under normal market conditions, invests at least 95% of its total
assets in substantially all the stocks of the S&P 500(Reg. TM) Index in
approximately the same proportion as they are represented in the Index.
Recent Portfolio Management Activity:
o All share classes of the Portfolio underperformed the benchmark for the
semi-annual period. The Portfolio, through the investment of all of its assets
in The U.S. Large Company Series of The DFA Investment Trust Company, holds
substantially all of the stocks contained in the S&P 500(Reg. TM) Index in
approximately the same proportion as the Index. For the semi-annual period
ended March 31, 2006, the S&P 500(Reg. TM) Index returned 6.4%. The
Institutional, Service, Investor A, Investor B and Investor C class shares of
the Portfolio posted total returns of 6.3%, 6.2%, 6.2%, 5.8% and 5.8%,
respectively, for the semi-annual period. The return of each class was less
than the return of the S&P 500(Reg. TM) Index primarily because of Portfolio
and class-specific expenses.
o U.S. equity markets performed well during the semi-annual period.
Stocks benefited from benign inflation data, robust earnings growth, and
optimism that the Federal Reserve is nearing the end of its current rate hike
campaign. Smaller-capitalization stocks, as represented by the Russell
2000(Reg. TM) Index, surged during January and posted their strongest first
quarter performance in fifteen years. Additionally, the large-capitalization
S&P 500(Reg. TM) Index had its best first quarter in seven years. Broad-based
strength across the U.S. equity market spectrum was particularly satisfying
after a lackluster end to 2005.
o At the sector level, performance was almost universally positive, as
only utilities lost ground during the semi-annual period. The energy sector
posted positive return after a weak first half but significantly trailed the
telecommunications sector, which has recovered from recent weakness. Cyclical
sectors, such as materials and industrials, continued to be top performing
sectors as economic activity maintained a healthy pace without a severe rise in
inflation measures. Utilities stocks were noticeable laggards among
large-capitalization stocks, due to having less significant leverage to changes
in economic activity. Consumer sectors also underperformed, as the rising
interest rate environment has investors concerned about potentially weakening
consumer spending trends for the latter half of the year.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INDEX EQUITY
PORTFOLIO
AND THE S&P 500(REG. TM) INDEX FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A S&P 500(R) Index
- - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,697 10,000
06/30/1996 10,438 10,113 10,449
09/30/1996 10,754 10,404 10,772
12/31/1996 11,638 11,255 11,670
03/31/1997 11,941 11,534 11,983
06/30/1997 14,009 13,518 14,074
09/30/1997 15,054 14,513 15,129
12/31/1997 15,469 14,887 15,563
03/31/1998 17,619 16,933 17,734
06/30/1998 18,190 17,479 18,320
09/30/1998 16,395 15,728 16,497
12/31/1998 19,886 19,059 20,010
03/31/1999 20,842 19,954 21,008
06/30/1999 22,272 21,291 22,488
09/30/1999 20,881 19,933 21,084
12/31/1999 23,987 22,870 24,222
03/31/2000 24,531 23,351 24,777
06/30/2000 23,820 22,638 24,119
09/30/2000 23,617 22,410 23,885
12/31/2000 21,770 20,633 22,016
03/31/2001 19,184 18,144 19,406
06/30/2001 20,285 19,159 20,542
09/30/2001 17,294 16,317 17,527
12/31/2001 19,130 18,016 19,400
03/31/2002 19,169 18,024 19,453
06/30/2002 16,597 15,582 16,847
09/30/2002 13,722 12,870 13,936
12/31/2002 14,878 13,927 15,112
03/31/2003 14,402 13,464 14,637
06/30/2003 16,610 15,504 16,890
09/30/2003 17,042 15,883 17,337
12/31/2003 19,113 17,780 19,448
03/31/2004 19,427 18,050 19,777
06/30/2004 19,754 18,332 20,117
09/30/2004 19,379 17,964 19,741
12/31/2004 21,155 19,595 21,563
03/31/2005 20,704 19,155 21,100
06/30/2005 20,978 19,391 21,389
09/30/2005 21,737 20,074 22,160
12/31/2005 22,177 20,467 22,623
03/31/2006 23,115 21,317 23,575
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
----------- ----------- ---------- ----------
Institutional Class 11.64% 17.08% 3.80% 8.74%
Service Class 11.29% 16.65% 3.38% 8.34%
Investor A Class (Load Adjusted) 7.94% 15.38% 2.65% 7.86%
Investor A Class (NAV) 11.29% 16.55% 3.28% 8.20%
Investor B Class (Load Adjusted) 5.92% 14.81% 2.13% 7.40%
Investor B Class (NAV) 10.42% 15.69% 2.50% 7.40%
Investor C Class (Load Adjusted) 9.44% 15.68% 2.49% 7.40%
Investor C Class (NAV) 10.44% 15.68% 2.49% 7.40%
THE INVESTOR B AND C CLASSES OF THE BLACKROCK INDEX EQUITY PORTFOLIO ARE CLOSED
TO INVESTORS AS OF 4:00 P.M., MAY 28, 2004.
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 4/20/92; INVESTOR A
SHARES, 6/2/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 2/7/96; AND
INVESTOR C SHARES, 8/14/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 44
FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING
IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
42
INDEX EQUITY PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)1
Exxon Mobil Corp. 3.2%
General Electric Co. 3.1
Microsoft Corp. 2.1
Citigroup, Inc. 2.0
Bank of America Corp. 1.8
Procter & Gamble Co. 1.6
Pfizer, Inc. 1.6
Johnson & Johnson 1.5
American International Group, Inc. 1.5
Altria Group, Inc. 1.3
----
Total 19.7%
====
Sector Allocation (% of long-term
investments)2
Financials 20.3%
Technology 15.4
Health Care 12.9
Industrials 11.6
Consumer Discretionary 10.3
Energy 9.8
Consumer Staples 9.3
Telecommunications 3.3
Utilities 3.2
Materials 3.1
Real Estate Investment Trusts 0.8
-----
Total 100.0%
=====
1 Represents the Top Ten Holdings of The U.S. Large Company Series of The DFA
Investment Trust Company.
2 Represents the Sector Allocation of The U.S. Large Company Series of The
DFA Investment Trust Company.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,063.40 1,062.00 1,061.90 1,057.90 1,058.00
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 0.87 2.31 2.31 6.31 6.26
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,024.14 1,022.73 1,022.73 1,018.79 1,018.84
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 0.86 2.27 2.27 6.21 6.16
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.17%, 0.45%, 0.45%, 1.23%, and 1.22% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).The Example reflects the expenses for both the Index Equity
Portfolio and The U.S. Large Company Series of The DFA Investment Trust
Company.
43
BLACKROCK FUNDS
NOTE ON PERFORMANCE INFORMATION
The performance information on the previous pages 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/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. Additionally, the
performance information above does not reflect accounting adjustments required
under accounting principles generally accepted in the United States of America
and as a result there may be variances between what is reported within this
section and that reported in the total return calculation in the Financial
Highlights.
Performance for the Legacy, Mid-Cap Value Equity, Aurora, Small/Mid-Cap
Growth, Global Resources, Health Sciences and Asset Allocation Portfolios for
the periods prior to January 31, 2005 is based on performance of certain former
State Street Research mutual funds that reorganized with the Portfolios on that
date.
Performance information is restated to reflect the current maximum
front-end sales charge (in the case of Investor A Shares) or the maximum
contingent deferred sales charge (in the case of Investor B and Investor C
Shares), and assumes the reinvestment of dividends and distributions. The
maximum front-end sales charges for Investor A Shares are as follows:
Investment Trust, Large Cap Value Equity, Large Cap Growth Equity, Dividend
AchieversTM, Legacy, Mid-Cap Value Equity, Mid-Cap Growth Equity, Aurora,
Small/Mid Cap Growth, Small Cap Value Equity, Small Cap Core Equity, Small Cap
Growth Equity, Global Science &Technology
Opportunities, Global Resources, All-Cap Global Resources, Health Sciences,
U.S.Opportunities, and Asset Allocation Portfolios - 5.75%; International
Opportunities Portfolio - 5.00%; Index Equity Portfolio - 3.00%. 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 and reimbursements
that subsidize and reduce the total operating expenses of each Portfolio. The
Portfolios' returns would have been lower if there were no such waivers and
reimbursements. BlackRock Advisors, Inc. is under no obligation to waive or
continue waiving its fees after February 1, 2007 as described in the prospectus
of the Portfolios. 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.
The performance shown in the line graphs is that of Institutional Shares
and Investor A Shares of the Portfolios. The actual performance of Investor B,
Investor C and Service Shares is lower than the performance of Institutional
Shares because Investor B, Investor C and Service Shares have higher expenses
than Institutional Shares. Excluding the effects of sales charges, the actual
performance of Investor B and Investor C Shares is lower than the performance
of Investor A Shares because Investor B and Investor C Shares have higher
expenses than Investor A Shares. Purchasers of Investor A Shares generally pay
a front-end sales charge, while purchasers of Investor B and Investor C Shares
may pay a contingent deferred sales charge (depending on how long they hold
their shares) when they sell their shares.
44
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INVESTMENT TRUST PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
-------------------- -------------------
COMMON STOCKS - 99.7%
Aerospace - 0.7%
Raytheon Co. 204,600 $ 9,378,864
-----------
Banks - 8.9%
Bank of America Corp. 282,100 12,846,834
Citigroup, Inc. 443,828 20,966,435
City National Corp. 84,700 6,504,113
J.P. Morgan Chase & Co. 535,200 22,285,728
Key Corp. 367,800 13,535,040
U.S. Bancorp. 478,900 14,606,450
Wachovia Corp.(b) 325,600 18,249,880
Zions Bancorp. 48,784 4,035,900
-----------
113,030,380
-----------
Beverages & Bottling - 1.7%
Pepsi Bottling Group, Inc. 250,800 7,621,812
PepsiCo, Inc. 234,600 13,557,534
-----------
21,179,346
-----------
Chemicals - 1.4%
The Dow Chemical Co. 263,400 10,694,040
The Lubrizol Corp. 173,500 7,434,475
-----------
18,128,515
-----------
Computer & Office Equipment - 5.1%
Cisco Systems, Inc.(c) 1,107,200 23,993,024
Hewlett-Packard Co. 447,700 14,729,330
International Business Machines
Corp. 312,100 25,738,887
-----------
64,461,241
-----------
Computer Software & Services - 5.8%
Advanced Micro Devices, Inc.(c) 166,700 5,527,772
Checkfree Corp.(c) 152,200 7,686,100
Computer Sciences Corp.(c) 137,800 7,654,790
eBay, Inc.(b)(c) 114,800 4,484,088
Google, Inc. - Class A(c) 11,400 4,446,000
Microsoft Corp. 1,375,400 37,424,634
Oracle Corp.(c) 466,900 6,391,861
-----------
73,615,245
-----------
Conglomerates - 1.1%
Time Warner, Inc.(b) 840,900 14,118,711
-----------
Electronics - 2.3%
Emerson Electric Co. 114,200 9,550,546
Jabil Circuit, Inc.(c) 176,600 7,569,076
L-3 Communications Holdings,
Inc. 143,300 12,293,707
-----------
29,413,329
-----------
Energy & Utilities - 3.4%
FirstEnergy Corp. 169,700 8,298,330
PG&E Corp.(b) 343,600 13,366,040
PPL Corp. 465,000 13,671,000
Sempra Energy 162,200 7,535,812
-----------
42,871,182
-----------
Entertainment & Leisure - 2.1%
Sabre Holdings Corp.(b) 334,600 7,873,138
The Walt Disney Co.(b)(d) 649,400 18,111,766
-----------
25,984,904
-----------
Finance - 5.3%
Affiliated Managers Group,
Inc.(b)(c) 70,200 7,484,022
NUMBER
OF SHARES VALUE
-------------------- -------------------
COMMON STOCKS (Continued)
Finance (Continued)
American Express Co. 269,900 $14,183,245
The Bear Stearns Cos., Inc. 81,500 11,304,050
CIT Group, Inc. 208,600 11,164,272
Countrywide Financial Corp.(b) 169,398 6,216,907
Golden West Financial Corp.(b) 99,100 6,728,890
State Street Corp.(b) 174,500 10,545,035
-----------
67,626,421
-----------
Food & Agriculture - 1.4%
Archer-Daniels-Midland Co. 271,700 9,142,705
General Mills, Inc.(b)
171,000 8,666,280
-----------
17,808,985
-----------
Insurance - 5.7%
Aetna, Inc. 248,400 12,206,376
The Allstate Corp.
132,800 6,920,208
American International Group,
Inc.(b)
227,000 15,002,430
CHUBB Corp. 93,800 8,952,272
Genworth Financial, Inc. 217,900 7,284,397
Hartford Financial Services Group 89,600 7,217,280
Prudential Financial, Inc.
117,300 8,892,513
W.R. Berkley Corp.
112,150 6,511,429
-----------
72,986,905
-----------
Machinery & Heavy Equipment - 0.8%
Caterpillar, Inc. 136,200 9,780,522
-----------
Manufacturing - 9.7%
Black & Decker Corp.
72,200 6,273,458
Dade Behring Holdings, Inc. 155,700 5,560,047
Fortune Brands, Inc. 121,200 9,772,356
General Electric Co.(d) 1,518,300 52,806,474
Ingersoll-Rand Co. - Class A 182,500 7,626,675
Newell Rubbermaid, Inc.(b) 249,700 6,289,943
Nike, Inc.(b) 71,300 6,067,630
Nucor Corp.(b) 114,800 12,029,892
Reynold American, Inc.(b) 92,600 9,769,300
Textron, Inc.
78,000 7,284,420
-----------
123,480,195
-----------
Medical & Medical Services - 2.0%
Coventry Health Care, Inc.(c) 200,306 10,812,518
HCA, Inc.(b) 156,800 7,179,872
McKesson Corp. 145,700 7,595,341
-----------
25,587,731
-----------
Medical Instruments & Supplies - 3.0%
Beckman Coulter, Inc. 143,600 7,836,252
Becton, Dickinson & Co. 137,000 8,436,460
Invitrogen Corp.(c) 112,100 7,861,573
Johnson & Johnson 107,400 6,360,228
Waters Corp.(c) 164,200 7,085,230
-----------
37,579,743
-----------
Motor Vehicles - 1.3%
Harley-Davidson, Inc.(b) 150,600 7,813,128
PACCAR, Inc. 126,600 8,922,768
-----------
16,735,896
-----------
Oil & Gas - 9.7%
ConocoPhillips(b) 349,300 22,058,295
Devon Energy Corp. 188,800 11,548,896
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INVESTMENT TRUST PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
-------------------- -------------------
COMMON STOCKS (Continued)
Oil & Gas (Continued)
Exxon Mobil Corp. 853,000 $ 51,913,580
Marathon Oil Corp. 114,800 8,744,316
Nabors Industries Ltd.(b)(c) 128,900 9,226,662
Patterson-UTI Energy, Inc. 374,800 11,978,608
Valero Energy Corp. 138,600 8,285,508
-------------
123,755,865
-------------
Paper & Forest Products - 0.8%
Louisiana-Pacific Corp. 348,500 9,479,200
-------------
Pharmaceuticals - 6.7%
Abbott Laboratories(d) 219,200 9,309,424
Gilead Sciences, Inc.(c) 126,500 7,870,830
Merck & Co., Inc. 499,900 17,611,477
Pfizer, Inc. 1,233,000 30,726,360
Wyeth 406,100 19,703,972
-------------
85,222,063
-------------
Publishing & Printing - 1.0%
The McGraw-Hill Cos., Inc. 224,800 12,952,976
-------------
Railroad & Shipping - 1.1%
Burlington Northern Santa Fe
Corp. 169,800 14,149,434
-------------
Real Estate - 1.3%
CB Richard Ellis Group, Inc. -
Class A(c) 110,900 8,949,630
Simon Property Group, Inc.(b) 89,300 7,513,702
-------------
16,463,332
-------------
Restaurants - 0.8%
McDonald's Corp. 312,300 10,730,628
-------------
Retail Merchandising - 5.0%
AutoNation, Inc.(c) 49 1,056
Barnes & Noble, Inc.(b) 144,728 6,693,670
Best Buy Co., Inc. 192,300 10,755,339
The Home Depot, Inc. 452,200 19,128,060
J.C. Penney Co., Inc. 159,400 9,629,354
The Kroger Co.(c) 293,800 5,981,768
Nordstrom, Inc. 284,800 11,158,464
-------------
63,347,711
-------------
Security Brokers & Dealers - 1.3%
Lehman Brothers Holdings, Inc. 111,100 16,057,283
-------------
Semiconductors & Related Devices - 2.5%
Freescale Semiconductor, Inc. -
Class A(c) 194,400 5,406,264
Freescale Semiconductor, Inc. -
Class B(c) 194,400 5,398,488
Lam Research Corp.(c) 134,700 5,792,100
LSI Logic Corp.(c) 645,800 7,465,448
MEMC Electronic Materials,
Inc.(b)(c) 204,300 7,542,756
-------------
31,605,056
-------------
Soaps & Cosmetics - 1.4%
The Procter & Gamble Co. 298,500 17,199,570
-------------
Telecommunications - 4.5%
AT&T, Inc.(b) 626,200 16,932,448
Motorola, Inc.(b) 677,200 15,514,652
Sprint Nextel Corp. 398,337 10,293,028
Verizon Communications, Inc.(b) 421,391 14,352,577
-------------
57,092,705
-------------
NUMBER
OF SHARES VALUE
-------------------- -------------------
COMMON STOCKS (Continued)
Tobacco - 0.7%
Altria Group, Inc. 131,300 $ 9,303,918
-------------
Transportation - 1.2%
FedEx Corp. 75,800 8,560,852
Ryder Systems, Inc.(b) 158,100 7,079,718
-------------
15,640,570
-------------
TOTAL COMMON STOCKS
(Cost $1,007,774,779) 1,266,768,426
-------------
SHORT TERM INVESTMENTS - 0.5%
Galileo Money Market Fund
(Cost $6,033,504) 6,033,504 6,033,504
-------------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 100.2%
(Cost $1,013,808,283) 1,272,801,930
-------------
PAR
MATURITY (000)
---------- ---------
SECURITIES LENDING COLLATERAL - 2.8%
Banco Santander, Certificate of
Deposit
4.34%(e) 04/10/06 $ 6,619 6,619,375
Bank of America, Master Notes
4.08%(e)(f) 04/03/06 22,064 22,064,217
Morgan Stanley, Floating Rate
Notes
4.94%(e)(f) 04/03/06 7,414 7,414,072
----------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $36,097,664) 36,097,664
----------
NUMBER
OF SHARES
-------------
INVESTMENT IN AFFILIATE - 9.8%
Institutional Money Market
Trust(e)
(Cost $124,481,024) 124,481,024 124,481,024
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
46
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INVESTMENT TRUST PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
VALUE
-----------------
TOTAL INVESTMENTS IN SECURITIES - 112.8%
(Cost $1,174,386,971(a)) $1,433,380,618
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (12.6)% (160,578,688)
LIABILITIES IN EXCESS OF
OTHER ASSETS - (0.2)% (2,010,311)
--------------
TOTAL NET ASSETS - 100% $1,270,791,619
==============
- -------------------
(a) Cost for federal income tax purposes is $1,175,713,598. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $265,406,778
Gross unrealized depreciation (7,739,758)
------------
$257,667,020
============
(b) Total or partial securities on loan.
(c) Non-income producing security.
(d) Securities, or a portion thereof, pledged as collateral with a value of
$1,817,380 on 23 long S&P 500 futures contracts expiring June 2006. The
notional value of such contracts on March 31, 2006 was $7,493,975, with
an unrealized gain of $77,697 (including commissions of $72).
(e) Securities purchased with the cash proceeds from securities loaned.
(f) Rates shown are the rates as of March 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LARGE CAP VALUE EQUITY PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 99.3%
Aerospace - 1.1%
Lockheed Martin Corp. 25,300 $ 1,900,789
Raytheon Co. 46,000 2,108,640
-----------
4,009,429
-----------
Banks - 17.5%
Bank of America Corp.(b) 197,300 8,985,042
Citigroup, Inc.(b) 248,797 11,753,170
City National Corp. 37,900 2,910,341
Colonial BancGroup, Inc. 105,900 2,647,500
J.P. Morgan Chase & Co. 305,700 12,729,348
Key Corp. 118,700 4,368,160
SunTrust Banks, Inc. 44,600 3,245,096
U.S. Bancorp. 165,400 5,044,700
Wachovia Corp.(c) 153,500 8,603,675
Zions Bancorp. 21,771 1,801,115
-----------
62,088,147
-----------
Beverages & Bottling - 0.9%
Constellation Brands, Inc.(c)(d) 57,000 1,427,850
Pepsi Bottling Group, Inc. 63,100 1,917,609
-----------
3,345,459
-----------
Chemicals - 1.7%
The Dow Chemical Co. 54,400 2,208,640
The Lubrizol Corp. 39,400 1,688,290
Rohm and Haas Co. 46,600 2,277,342
-----------
6,174,272
-----------
Computer & Office Equipment - 2.4%
Hewlett-Packard Co. 97,300 3,201,170
International Business Machines
Corp. 42,400 3,496,728
Western Digital Corp.(c)(d) 89,700 1,742,871
-----------
8,440,769
-----------
Computer Software & Services - 1.2%
Computer Sciences Corp.(d) 36,400 2,022,020
Microsoft Corp. 78,900 2,146,869
-----------
4,168,889
-----------
Conglomerates - 1.7%
Time Warner, Inc.(c) 368,600 6,188,794
-----------
Electronics - 1.1%
Jabil Circuit, Inc.(d) 45,300 1,941,558
L-3 Communications Holdings,
Inc. 22,800 1,956,012
-----------
3,897,570
-----------
Energy & Utilities - 5.6%
CenterPoint Energy, Inc. 205,800 2,455,194
CMS Energy Corp.(d) 185,300 2,399,635
FirstEnergy Corp. 46,400 2,268,960
PG&E Corp. 92,100 3,582,690
PPL Corp.(c) 175,600 5,162,640
Sempra Energy 52,900 2,457,734
TXU Corp. 34,700 1,553,172
-----------
19,880,025
-----------
Entertainment & Leisure - 2.2%
Sabre Holdings Corp.(c) 71,300 1,677,689
The Walt Disney Co.(c) 217,700 6,071,653
-----------
7,749,342
-----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Finance - 6.3%
Affiliated Managers Group,
Inc.(c)(d) 29,800 $ 3,176,978
The Bear Stearns Cos., Inc. 26,200 3,633,940
Capital One Financial Corp.
26,500 2,133,780
CIT Group, Inc.
51,200 2,740,224
Countrywide Financial Corp.(c) 53,300 1,956,110
Fannie Mae 54,400 2,796,160
Golden West Financial Corp.(c) 52,000 3,530,800
State Street Corp.(c) 42,600 2,574,318
-----------
22,542,310
-----------
Food & Agriculture - 1.5%
Archer-Daniels-Midland Co. 103,800 3,492,870
General Mills, Inc.(c) 38,800 1,966,384
-----------
5,459,254
-----------
Insurance - 7.1%
ACE Ltd.
36,200 1,882,762
The Allstate Corp. 54,800 2,855,628
American International Group,
Inc. 70,000 4,626,300
CHUBB Corp. 35,500 3,388,120
Genworth Financial, Inc.
59,900 2,002,457
Hartford Financial Services Group
49,900 4,019,445
MetLife, Inc. 43,000 2,079,910
Nationwide Financial Services,
Inc. 41,300 1,776,726
W.R. Berkley Corp. 43,600 2,531,416
-----------
25,162,764
-----------
Manufacturing - 6.3%
Black & Decker Corp. 18,600 1,616,154
Cummins, Inc. 23,800 2,501,380
Fortune Brands, Inc. 30,600 2,467,278
General Electric Co. 222,600 7,742,028
Nucor Corp.(c)
29,800 3,122,742
Parker Hannifin Corp.
27,300 2,200,653
Reynold American, Inc.(c) 24,400 2,574,200
-----------
22,224,435
-----------
Medical & Medical Services - 1.1%
Community Health Systems,
Inc.(d)
55,000 1,988,250
Coventry Health Care, Inc.(d) 36,025 1,944,630
-----------
3,932,880
-----------
Metal & Mining - 0.7%
Phelps Dodge Corp. 29,400 2,367,582
-----------
Oil & Gas - 14.4%
AGL Resources, Inc.
68,800 2,480,240
Amerada Hess Corp. 18,400 2,620,160
Chevron Corp. 90,100 5,223,097
ConocoPhillips(c) 140,200 8,853,630
Devon Energy Corp. 50,100 3,064,617
Exxon Mobil Corp.(c) 384,000 23,370,240
Nabors Industries Ltd.(d) 24,600 1,760,868
Valero Energy Corp. 62,300 3,724,294
-----------
51,097,146
-----------
Paper & Forest Products - 1.3%
Louisiana-Pacific Corp. 88,500 2,407,200
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LARGE CAP VALUE EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Paper & Forest Products (Continued)
Temple Inland, Inc. 46,800 $ 2,084,940
------------
4,492,140
------------
Pharmaceuticals - 5.6%
Merck & Co., Inc. 121,900 4,294,537
Pfizer, Inc. 469,400 11,697,448
Wyeth 80,900 3,925,268
------------
19,917,253
------------
Publishing & Printing - 1.0%
The McGraw-Hill Cos., Inc. 61,900 3,566,678
------------
Railroad & Shipping - 1.6%
Burlington Northern Santa Fe
Corp. 67,300 5,608,109
------------
Real Estate - 3.5%
Centex Corp. 20,800 1,289,392
HRPT Properties Trust(REIT) 205,400 2,411,396
Kimco Realty Corp.(REIT)(c) 99,200 4,031,488
Simon Property Group, Inc.(c) 53,900 4,535,146
------------
12,267,422
------------
Restaurants - 1.1%
McDonald's Corp. 114,000 3,917,040
------------
Retail Merchandising - 2.3%
Barnes & Noble, Inc.(c) 37,700 1,743,625
The Home Depot, Inc. 51,200 2,165,760
J.C. Penney Co., Inc. 39,200 2,368,072
The Kroger Co.(d) 96,800 1,970,848
------------
8,248,305
------------
Security Brokers & Dealers - 2.5%
E*TRADE Financial Corp.(d) 147,000 3,966,060
Lehman Brothers Holdings, Inc. 34,400 4,971,832
------------
8,937,892
------------
Semiconductors & Related Devices - 0.6%
Freescale Semiconductor, Inc. -
Class A(d) 49,050 1,364,080
Freescale Semiconductor, Inc. -
Class B(d) 24,950 692,862
------------
2,056,942
------------
Telecommunications - 6.2%
ALLTEL Corp. 35,100 2,272,725
AT&T, Inc.(c) 296,200 8,009,248
Motorola, Inc.(c) 87,200 1,997,752
Sprint Nextel Corp. 136,900 3,537,496
Verizon Communications, Inc.(c) 181,900 6,195,514
------------
22,012,735
------------
Tobacco - 0.8%
Altria Group, Inc. 42,400 3,004,464
------------
TOTAL COMMON STOCKS
(Cost $270,397,095) 352,758,047
------------
SHORT TERM INVESTMENTS - 1.3%
Galileo Money Market Fund
(Cost $4,352,096) 4,352,096 4,352,096
------------
VALUE
---------------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 100.6%
(Cost $274,749,191) $357,110,142
------------
PAR
MATURITY (000)
---------- ---------
SECURITIES LENDING COLLATERAL - 5.7%
Banco Santander, Certificate of
Deposit
4.34%(e) 04/10/06 $2,785 2,785,189
Bank of America, Master Notes
4.08%(e)(f) 04/03/06 9,959 9,958,570
Morgan Stanley, Floating Rate
Notes
4.94%(e)(f) 04/03/06 7,521 7,520,663
----------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $20,264,422) 20,264,422
----------
NUMBER
OF SHARES
------------
INVESTMENT IN AFFILIATE - 11.7%
Institutional Money Market
Trust(e)
(Cost $41,626,334) 41,626,334 41,626,334
----------
TOTAL INVESTMENTS IN SECURITIES - 118.0%
(Cost $336,639,947(a)) 419,000,899
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (17.4)% (61,890,756)
LIABILITIES IN EXCESS OF
OTHER ASSETS - (0.6)% (1,942,025)
------------
TOTAL NET ASSETS - 100% $355,168,118
============
- -------------------
(a) Cost for federal income tax purposes is $338,654,763. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $84,842,172
Gross unrealized depreciation (4,496,037)
-----------
$80,346,135
===========
(b) Securities, or a portion thereof, pledged as collateral with a value of
$680,112 on 10 long S&P 500 futures contracts expiring June 2006. The
notional value of such contracts on March 31, 2006 was $3,258,250, with
an unrealized gain of $7,350 (including commissions of $32).
(c) Total or partial securities on loan.
(d) Non-income producing security.
(e) Securities purchased with the cash proceeds from securities loaned.
(f) Rates shown are the rates as of March 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
49
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LARGE CAP GROWTH EQUITY PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 98.8%
Aerospace - 2.4%
The Boeing Co. 10,100 $ 787,093
Lockheed Martin Corp. 6,600 495,858
----------
1,282,951
----------
Banks - 0.3%
Citigroup, Inc. 3,507 165,671
----------
Beverages & Bottling - 3.1%
Constellation Brands, Inc.(b)(c) 9,600 240,480
Pepsi Bottling Group, Inc. 11,200 340,368
PepsiCo, Inc. 19,100 1,103,789
----------
1,684,637
----------
Business Services - 2.3%
Acxiom Corp. 12,700 328,168
Alliance Data Systems Corp.(b) 12,600 589,302
ARAMARK Corp. - Class B 11,400 336,756
----------
1,254,226
----------
Chemicals - 0.7%
The Dow Chemical Co. 9,800 397,880
----------
Computer & Office Equipment - 7.2%
Apple Computer, Inc.(b) 4,000 250,880
Cisco Systems, Inc.(b) 78,600 1,703,262
Hewlett-Packard Co. 15,800 519,820
International Business Machines
Corp. 17,500 1,443,225
----------
3,917,187
----------
Computer Software & Services - 9.9%
Activision, Inc.(b) 2 27
Advanced Micro Devices, Inc.(b) 9,200 305,072
BMC Software, Inc.(b) 19,100 413,706
Checkfree Corp.(b) 3,900 196,950
Citrix Systems, Inc.(b) 10,300 390,370
Computer Sciences Corp.(b) 5,600 311,080
eBay, Inc.(b) 8,900 347,634
Electronic Data Systems Corp. 9,900 265,617
Google, Inc. - Class A(b)(c) 1,500 585,000
Microsoft Corp. 81,500 2,217,615
Yahoo! Inc.(b) 10,100 325,826
----------
5,358,897
----------
Conglomerates - 0.6%
Time Warner, Inc.(c) 19,400 325,726
----------
Construction - 1.4%
Lennar Corp. 4,600 277,748
Martin Marietta Materials, Inc. 4,600 492,338
----------
770,086
----------
Electronics - 3.5%
AES Corp.(b) 26,300 448,678
Amphenol Corp. 5,300 276,554
Emerson Electric Co. 4,000 334,520
Intel Corp.(c) 13,400 259,290
Jabil Circuit, Inc.(b) 6,700 287,162
L-3 Communications Holdings,
Inc. 3,200 274,528
----------
1,880,732
----------
Energy & Utilities - 0.8%
Airgas, Inc. 11,600 453,444
----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Entertainment & Leisure - 2.5%
Boyd Gaming Corp. 8,800 $ 439,472
Sabre Holdings Corp.(c) 12,900 303,537
The Walt Disney Co.(c)
21,300 594,057
----------
1,337,066
----------
Finance - 2.9%
Affiliated Managers Group,
Inc.(b)(c) 4,200 447,762
American Express Co. 11,800 620,090
Capital One Financial Corp. 3,400 273,768
State Street Corp.(c) 4,200 253,806
----------
1,595,426
----------
Food & Agriculture - 0.6%
Campbell Soup Co.(d) 9,500 307,800
----------
Insurance - 3.0%
American International Group,
Inc. 6,500 429,585
Genworth Financial, Inc.
7,600 254,068
W.R. Berkley Corp.
7,200 418,032
WellPoint, Inc.(b) 6,900 534,267
----------
1,635,952
----------
Machinery & Heavy Equipment - 0.6%
Caterpillar, Inc. 4,800 344,688
----------
Manufacturing - 11.5%
3M Co. 4,100 310,329
Black & Decker Corp.
3,700 321,493
Corning, Inc.(b)
16,300 438,633
Cummins, Inc. 4,500 472,950
Dade Behring Holdings, Inc. 11,800 421,378
General Electric Co. 83,000 2,886,740
Nike, Inc.(c) 6,400 544,640
Nucor Corp.(c) 4,900 513,471
Parker Hannifin Corp. 4,400 354,684
----------
6,264,318
----------
Medical & Medical Services - 6.2%
Amgen, Inc.(b) 5,200 378,300
Baxter International, Inc. 7,600 294,956
Community Health Systems,
Inc.(b) 8,200 296,430
Coventry Health Care, Inc.(b)
9,598 518,100
Express Scripts, Inc.(b)
3,600 316,440
McKesson Corp. 10,100 526,513
Pharmaceutical Product
Development, Inc. 8,600 297,646
STERIS Corp. 13,500 333,180
UnitedHealth Group, Inc. 6,800 379,848
----------
3,341,413
----------
Medical Instruments & Supplies - 4.9%
Beckman Coulter, Inc. 7,900 431,103
Becton, Dickinson & Co. 10,000 615,800
Invitrogen Corp.(b) 5,400 378,702
Johnson & Johnson 15,900 941,598
Waters Corp.(b) 6,300 271,845
----------
2,639,048
----------
Motor Vehicles - 0.5%
Harley-Davidson, Inc.
5,200 269,776
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LARGE CAP GROWTH EQUITY PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Oil & Gas - 3.2%
Devon Energy Corp. 8,500 $ 519,945
Grant Prideco, Inc.(b) 10,800 462,672
Patterson-UTI Energy, Inc. 17,800 568,888
Sunoco, Inc. 2,700 209,439
----------
1,760,944
----------
Pharmaceuticals - 5.9%
Abbott Laboratories 15,500 658,285
Genentech, Inc.(b) 3,000 253,530
Gilead Sciences, Inc.(b) 10,400 647,088
Merck & Co., Inc. 17,900 630,617
Pfizer, Inc. 15,400 383,768
Wyeth 12,600 611,352
----------
3,184,640
----------
Publishing & Printing - 1.1%
The McGraw-Hill Cos., Inc. 10,900 628,058
----------
Railroad & Shipping - 0.7%
Burlington Northern Santa Fe
Corp. 4,600 383,318
----------
Restaurants - 1.0%
Darden Restaurants, Inc. 13,800 566,214
----------
Retail Merchandising - 7.5%
Advance Auto Parts, Inc. 6,400 266,496
Barnes & Noble, Inc.(c) 6,900 319,125
Best Buy Co., Inc. 4,900 274,057
Claire's Stores, Inc. 11,800 428,458
The Home Depot, Inc. 23,400 989,820
J.C. Penney Co., Inc. 7,900 477,239
Nordstrom, Inc. 14,600 572,028
Target Corp. 7,000 364,070
Wal-Mart Stores, Inc. 8,300 392,092
----------
4,083,385
----------
Security Brokers & Dealers - 0.9%
E*TRADE Financial Corp.(b) 17,700 477,546
----------
Semiconductors & Related Devices - 4.3%
Freescale Semiconductor, Inc. -
Class A(b) 7,800 216,918
Freescale Semiconductor, Inc. -
Class B(b) 7,800 216,606
Lam Research Corp.(b) 9,000 387,000
LSI Logic Corp.(b) 33,100 382,636
MEMC Electronic Materials,
Inc.(b) 13,700 505,804
Texas Instruments, Inc. 18,700 607,189
----------
2,316,153
----------
Soaps & Cosmetics - 4.1%
Colgate-Palmolive Co. 5,800 331,180
The Procter & Gamble Co. 32,790 1,889,360
----------
2,220,540
----------
Telecommunications - 1.9%
Motorola, Inc.(c) 33,600 769,776
Sprint Nextel Corp. 10,154 262,379
----------
1,032,155
----------
Tobacco - 0.9%
Altria Group, Inc. 6,600 467,676
----------
Transportation - 1.8%
FedEx Corp. 2,500 282,350
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Transportation (Continued)
Ryder Systems, Inc.(c) 8,100 $ 362,718
Swift Transportation Co., Inc.(b) 16,000 347,680
-----------
992,748
-----------
Waste Management - 0.6%
Waste Management, Inc.
8,700 307,110
-----------
TOTAL COMMON STOCKS
(Cost $40,594,339) 53,647,411
-----------
SHORT TERM INVESTMENTS - 1.2%
Galileo Money Market Fund
(Cost $641,944) 641,944 641,944
-----------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 100.0%
(Cost $41,236,283) 54,289,355
----------
PAR
MATURITY (000)
---------- ------
SECURITIES LENDING COLLATERAL - 2.4%
Banco Santander, Certificate of
Deposit
4.34%(e) 04/10/06 $523 522,694
Morgan Stanley, Floating Rate
Notes
4.94%(e)(f) 04/03/06 785 784,744
---------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $1,307,438) 1,307,438
---------
NUMBER
OF SHARES
-----------
INVESTMENT IN AFFILIATE - 7.5%
Institutional Money Market
Trust(e)
(Cost $4,061,101) 4,061,101 4,061,101
---------
TOTAL INVESTMENTS IN SECURITIES - 109.9%
(Cost $46,604,822(a)) 59,657,894
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (9.9)% (5,368,539)
LIABILITIES IN EXCESS OF
OTHER ASSETS - 0.0% (28,732)
-----------
TOTAL NET ASSETS - 100% $54,260,623
===========
- -------------------
(a) Cost for federal income tax purposes is $46,871,585. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $13,257,589
Gross unrealized depreciation (471,280)
-----------
$12,786,309
===========
(b) Non-income producing security.
(c) Total or partial securities on loan.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
51
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LARGE CAP GROWTH EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
(d) Securities, or a portion thereof, pledged as collateral with a value of
$307,800 on 6 long S&P 500 futures contracts and 1 long NASDAQ 100
futures contract expiring June 2006. The notional value of such
contracts on March 31, 2006 was $562,990, with an unrealized gain of
$4,955 (including commissions of $14).
(e) Securities purchased with the cash proceeds from securities loaned.
(f) Rates shown are the rates as of March 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
52
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
DIVIDEND ACHIEVERSTM PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 99.0%
Aerospace - 2.1%
General Dynamics Corp. 7,600 $ 486,248
United Technologies Corp. 4,000 231,880
----------
718,128
----------
Banks - 17.0%
AmSouth Bancorp 10,800 292,140
Bank of America Corp. 22,900 1,042,866
Bank of Hawaii Corp. 3,950 210,575
Citigroup, Inc. 22,000 1,039,280
City National Corp. 2,700 207,333
J.P. Morgan Chase & Co. 21,000 874,440
Key Corp. 12,350 454,480
National City Corp. 15,400 537,460
SunTrust Banks, Inc. 4,300 312,868
Wachovia Corp.(b) 7,450 417,572
Wells Fargo & Co.(b) 6,500 415,155
----------
5,804,169
----------
Beverages & Bottling - 0.6%
PepsiCo, Inc. 3,350 193,596
----------
Chemicals - 1.2%
PPG Industries, Inc. 2,700 171,045
Rohm and Haas Co. 5,100 249,237
----------
420,282
----------
Computer & Office Equipment - 2.2%
International Business Machines
Corp. 5,400 445,338
Pitney Bowes, Inc. 6,900 296,217
----------
741,555
----------
Computer Software & Services - 1.0%
Automatic Data Processing, Inc. 3,300 150,744
Microsoft Corp.(b) 6,800 185,028
----------
335,772
----------
Construction - 1.3%
Martin Marietta Materials, Inc.(b) 4,050 433,472
----------
Electronics - 0.6%
Emerson Electric Co. 2,400 200,712
----------
Energy & Utilities - 5.6%
Atmos Energy Corp. 8,800 231,704
Consolidated Edison, Inc. 8,450 367,575
FPL Group, Inc. 9,400 377,316
Pinnacle West Capital Corp. 8,600 336,260
Progress Energy, Inc.(b) 7,600 334,248
Vectren Corp. 10,000 263,800
----------
1,910,903
----------
Entertainment & Leisure - 0.9%
The Walt Disney Co.(b) 11,100 309,579
----------
Finance - 7.6%
American Capital Strategies
Ltd.(b) 3,000 105,480
CIT Group, Inc. 6,000 321,120
Franklin Resources, Inc. 3,900 367,536
Freddie Mac 3,100 189,100
Indymac Bancorp, Inc. 3,750 153,488
Merrill Lynch & Co., Inc.(b) 7,000 551,320
Nuveen Investments - Class A 5,400 260,010
Protective Life Corp. 5,000 248,700
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Finance (Continued)
Washington Mutual, Inc.(b) 9,050 $ 385,711
----------
2,582,465
----------
Food & Agriculture - 0.7%
Archer-Daniels-Midland Co. 7,000 235,550
----------
Insurance - 6.1%
The Allstate Corp. 10,400 541,944
American International Group,
Inc.(b) 5,600 370,104
CHUBB Corp. 5,100 486,744
Harleysville Group, Inc. 7,650 227,129
Lincoln National Corp.(b) 5,200 283,868
Old Republic International Corp. 7,275 158,740
----------
2,068,529
----------
Manufacturing - 8.1%
A.O. Smith Corp. 5,500 290,400
Fuller (H.B.) Co.
7,600 390,184
General Electric Co.
22,150 770,377
La-Z-Boy, Inc.(b) 17,700 300,900
Nucor Corp.(b) 4,800 502,992
Parker Hannifin Corp. 3,100 249,891
Reynold American, Inc.(b) 2,300 242,650
----------
2,747,394
----------
Medical & Medical Services - 0.8%
Health Care Property Investors,
Inc. 9,300 264,120
----------
Medical Instruments & Supplies - 0.5%
Becton, Dickinson & Co. 2,600 160,108
----------
Motor Vehicles - 0.5%
Harley-Davidson, Inc.(b)
3,500 181,580
----------
Oil & Gas - 13.8%
Chevron Corp.(c) 20,650 1,197,081
ConocoPhillips(b) 11,500 726,225
Energen Corp.
8,100 283,500
Exxon Mobil Corp.(b)(c)
32,600 1,984,036
Helmerich & Payne, Inc. 7,550 527,141
----------
4,717,983
----------
Paper & Paper Products - 1.2%
Sonoco Products Co. 12,150 411,520
----------
Pharmaceuticals - 6.6%
Bristol-Myers Squibb Co.(b) 6,300 155,043
Eli Lilly & Co.(b) 2,450 135,485
Merck & Co., Inc.(b) 18,350 646,470
Pfizer, Inc. 52,100 1,298,332
----------
2,235,330
----------
Publishing & Printing - 2.2%
The McGraw-Hill Cos., Inc. 6,900 397,578
The New York Times Co. - Class
A 7,100 179,701
R.R. Donnelley & Sons Co.(b) 5,700 186,504
----------
763,783
----------
Real Estate - 4.4%
CBL & Associates Properties, Inc.
(REIT) 5,100 216,495
Colonial Properties Trust (REIT) 3,700 185,481
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
53
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
DIVIDEND ACHIEVERSTM PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS (Continued)
Real Estate (Continued)
HRPT Properties Trust(REIT) 12,800 $ 150,272
Kimco Realty Corp.(REIT)(b) 9,900 402,336
Simon Property Group, Inc.(b) 1,650 138,831
Sun Communities, Inc. (REIT) 3,700 130,795
Tanger Factory Outlet Centers,
Inc. 8,500 292,485
-----------
1,516,695
-----------
Restaurants - 2.0%
McDonald's Corp. 19,850 682,046
-----------
Retail Merchandising - 2.3%
The Home Depot, Inc.(b) 8,200 346,860
Supervalue, Inc.(b) 5,500 169,510
Target Corp. 5,000 260,050
-----------
776,420
-----------
Semiconductors & Related Devices - 0.4%
Linear Technology Corp. 3,800 133,304
-----------
Soaps & Cosmetics - 0.5%
Colgate-Palmolive Co. 3,100 177,010
-----------
Telecommunications - 6.5%
ALLTEL Corp. 2,400 155,400
AT&T, Inc.(b) 39,200 1,059,968
CenturyTel, Inc. 4,300 168,216
Motorola, Inc. 8,500 194,735
Verizon Communications, Inc.(b) 18,400 626,704
-----------
2,205,023
-----------
Tobacco - 2.3%
Altria Group, Inc. 11,000 779,460
-----------
TOTAL COMMON STOCKS
(Cost $30,655,891) 33,706,488
-----------
SHORT TERM INVESTMENTS - 1.0%
Galileo Money Market Fund
(Cost $331,790) 331,790 331,790
-----------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 100.0%
(Cost $30,987,681) 34,038,278
----------
PAR
MATURITY (000) VALUE
---------- ------- ------------
SECURITIES LENDING COLLATERAL - 7.4%
Banco Santander, Certificate of
Deposit
4.34%(d) 04/10/06 $718 $ 718,130
Bank of America, Master Notes
4.08%(d)(e) 04/03/06 855 854,711
Citibank, Master Notes
4.94%(d)(e) 04/03/06 648 647,647
Morgan Stanley, Floating Rate
Notes
4.94%(d)(e) 04/03/06 289 289,059
----------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $2,509,547) 2,509,547
----------
NUMBER
OF SHARES
-----------
INVESTMENT IN AFFILIATE - 23.3%
Institutional Money Market
Trust(d)
(Cost $7,944,659) 7,944,659 7,944,659
---------
TOTAL INVESTMENTS IN SECURITIES - 130.7%
(Cost $41,441,887(a)) 44,492,484
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (30.7)% (10,454,206)
LIABILITIES IN EXCESS OF
OTHER ASSETS - 0.0% (12,859)
------------
TOTAL NET ASSETS - 100% $ 34,025,419
============
- -------------------
(a) Cost for federal income tax purposes is $41,482,416. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $3,392,316
Gross unrealized depreciation (382,248)
----------
$3,010,068
==========
(b) Total or partial securities on loan.
(c) Securities, or a portion thereof, pledged as collateral with a value of
$354,178 on 3 long S&P 500 futures contracts expiring June 2006. The
notional value of such contracts on March 31, 2006 was $195,495, with an
unrealized gain of $908 (including commissions of $8).
(d) Securities purchased with the cash proceeds from securities loaned.
(e) Rates shown are the rates as of March 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LEGACY PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 98.8%
Aerospace - 1.7%
General Dynamics Corp. 74,400 $ 4,760,112
-----------
Beverages & Bottling - 2.6%
PepsiCo, Inc.(b) 126,100 7,287,319
-----------
Computer & Office Equipment - 4.2%
Apple Computer, Inc.(c) 59,800 3,750,656
Hewlett-Packard Co. 235,400 7,744,660
-----------
11,495,316
-----------
Computer Software & Services - 18.5%
Adobe Systems, Inc.(c) 99,600 3,478,032
Cognizant Technology Solutions
Corp.(b)(c) 73,800 4,390,362
eBay, Inc.(b)(c) 150,600 5,882,436
EMC Corp.(c) 667,000 9,091,210
Google, Inc. - Class A(b)(c) 14,069 5,486,910
Microsoft Corp. 511,640 13,921,725
Salesforce.com, Inc.(b)(c) 96,900 3,520,377
Yahoo! Inc.(b)(c) 158,100 5,100,306
-----------
50,871,358
-----------
Finance - 9.7%
American Express Co.(b) 115,050 6,045,878
Chicago Mercantile Exchange
Holdings, Inc. 7,020 3,141,450
Franklin Resources, Inc. 39,176 3,691,946
The Goldman Sachs Group, Inc. 18,700 2,935,152
Legg Mason, Inc. 22,200 2,782,326
Morgan Stanley 44,300 2,782,926
SLM Corp. 104,300 5,417,342
-----------
26,797,020
-----------
Food & Agriculture - 1.7%
Monsanto Co. 54,920 4,654,470
-----------
Insurance - 0.9%
WellPoint, Inc.(c) 32,000 2,477,760
-----------
Manufacturing - 14.1%
Cooper Industries Ltd. - Class A 49,100 4,266,790
Corning, Inc.(c) 231,000 6,216,210
Danaher Corp.(b) 97,200 6,177,060
General Electric Co. 217,972 7,581,066
Honeywell International, Inc. 131,300 5,615,701
Polo Ralph Lauren Corp. 64,300 3,897,223
Textron, Inc.(b) 54,000 5,043,060
-----------
38,797,110
-----------
Medical & Medical Services - 3.0%
Caremark Rx, Inc.(c) 52,200 2,567,196
Medco Health Solutions, Inc.(c) 51,400 2,941,108
MedImmune, Inc.(c) 78,900 2,886,162
-----------
8,394,466
-----------
Medical Instruments & Supplies - 5.9%
Advanced Medical Optics, Inc.(c) 61,900 2,887,016
Johnson & Johnson 89,420 5,295,452
Medtronic, Inc. 39,100 1,984,325
St. Jude Medical, Inc.(c) 147,300 6,039,300
-----------
16,206,093
-----------
Metal & Mining - 2.9%
CONSOL Energy, Inc. 108,900 8,076,024
-----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Oil & Gas - 5.1%
GlobalSantaFe Corp. 108,800 $ 6,609,600
Newfield Exploration Co.(b)(c) 54,900 2,300,310
Schlumberger Ltd.(b) 40,300 5,100,771
------------
14,010,681
------------
Pharmaceuticals - 8.9%
Allergan, Inc.(b)
37,720 4,092,620
Amylin Pharmaceuticals,
Inc.(b)(c)
76,700 3,754,465
Eli Lilly & Co.(b) 49,000 2,709,700
Genzyme Corp.(c) 54,500 3,663,490
Merck & Co., Inc. 174,200 6,137,066
Novartis AG - ADR 50,400 2,794,176
Shire PLC - ADR 28,800 1,338,912
------------
24,490,429
------------
Restaurants - 0.8%
The Cheesecake Factory, Inc.(c) 57,100 2,138,395
------------
Retail Merchandising - 7.2%
Chico's FAS, Inc.(b)(c)
93,700 3,807,968
Coach, Inc.(c) 61,800 2,137,044
CVS Corp. 190,400 5,687,248
Staples, Inc. 107,750 2,749,780
Walgreen Co. 93,000 4,011,090
Whole Foods Market, Inc. 21,500 1,428,460
------------
19,821,590
------------
Semiconductors & Related Devices - 4.5%
Broadcom Corp. - Class A(b)(c)
63,300 2,732,028
Freescale Semiconductor, Inc. -
Class A(c)
172,600 4,800,006
Marvell Technology Group Ltd.(c) 29,700 1,606,770
PMC-Sierra, Inc.(c) 261,000 3,207,690
------------
12,346,494
------------
Soaps & Cosmetics - 3.4%
The Procter & Gamble Co. 161,900 9,328,678
------------
Telecommunications - 3.7%
American Tower Corp. - Class
A(c) 95,300 2,889,496
Harman International Industries,
Inc. 27,600 3,067,188
NII Holdings, Inc.(c) 48,300 2,848,251
Qualcomm, Inc. 29,200 1,477,812
------------
10,282,747
------------
TOTAL COMMON STOCKS
(Cost $220,341,021) 272,236,062
------------
WARRANTS - 0.0%
Lucent Technologies, Inc. (issued
12/10/04, expiring 12/10/07,
strike price $2.75)(d)
(Cost $8,011)
12,138 7,586
------------
SHORT TERM INVESTMENTS - 1.5%
Galileo Money Market Fund
(Cost $4,191,203) 4,191,203 4,191,203
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LEGACY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
VALUE
---------------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 100.3%
(Cost $224,540,235) $276,434,851
------------
PAR
MATURITY (000)
---------- --------
SECURITIES LENDING COLLATERAL - 3.3%
Banco Santander, Certificate of
Deposit
4.34%(e) 04/10/06 $ 758 758,352
Bank of America, Master Notes
4.08%(e)(f) 04/03/06 3,846 3,846,451
Morgan Stanley, Floating Rate
Notes
4.94%(e)(f) 04/03/06 4,538 4,538,488
---------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $9,143,291) 9,143,291
---------
NUMBER OF
SHARES
------------
INVESTMENT IN AFFILIATE - 9.8%
Institutional Money Market
Trust(e)
(Cost $27,124,544) 27,124,544 27,124,544
----------
TOTAL INVESTMENTS IN SECURITIES - 113.4%
(Cost $260,808,070(a)) 312,702,686
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (13.1)% (36,267,835)
LIABILITIES IN EXCESS OF
OTHER ASSETS - (0.3)% (755,308)
------------
TOTAL NET ASSETS - 100% $275,679,543
============
- -------------------
(a) Cost for federal income tax purposes is $261,036,910. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $53,953,229
Gross unrealized depreciation (2,287,453)
-----------
$51,665,776
===========
(b) Total or partial securities on loan.
(c) Non-income producing security.
(d) As of March 31, 2006, the aggregate amount of shares called for by these
warrants is 12,138. These warrants were exercisable as of 12/10/04.
(e) Securities purchased with the cash proceeds from securities loaned.
(f) Rates shown are the rates as of March 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
56
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MID-CAP VALUE EQUITY PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 96.2%
Banks - 7.9%
City National Corp. 143,800 $11,042,402
Compass Bancshares, Inc. 228,800 11,579,568
Hudson City Bancorp, Inc. 941,700 12,515,193
North Fork Bancorp, Inc. 388,150 11,190,364
Sovereign Bancorp, Inc. 372,400 8,159,284
Wintrust Financial Corp. 187,600 10,912,692
-----------
65,399,503
-----------
Beverages & Bottling - 0.6%
Coca-Cola Enterprises, Inc. 246,900 5,021,946
-----------
Broadcasting - 1.1%
Belo Corp. 293,400 5,832,792
Lin TV Corp.(b) 319,520 2,875,680
-----------
8,708,472
-----------
Business Services - 6.0%
Amvescap PLC - ADR 576,400 10,870,904
ARAMARK Corp. - Class B 337,900 9,981,566
The Brink's Co. 313,300 15,903,108
Expedia, Inc.(b) 311,200 6,308,024
W.W. Grainger, Inc.(c) 87,490 6,592,371
-----------
49,655,973
-----------
Chemicals - 2.5%
Ashland, Inc. 214,900 15,275,092
FMC Corp. 91,100 5,646,378
-----------
20,921,470
-----------
Computer & Office Equipment - 2.9%
American Power Conversion
Corp.(c) 381,000 8,804,910
Avery Dennison Corp.(c) 117,600 6,877,248
NCR Corp.(b) 193,500 8,086,365
Phase Metrics, Inc.(b)(d) 108,409 2,168
-----------
23,770,691
-----------
Computer Software & Services - 3.3%
Activision, Inc.(b)(c) 698,333 9,630,012
The BISYS Group, Inc.(b) 713,400 9,616,632
Unisys Corp.(b) 1,155,800 7,963,462
-----------
27,210,106
-----------
Containers - 3.2%
Owens-Illinois, Inc.(b) 536,700 9,322,479
Pactiv Corp.(b) 212,700 5,219,658
Smurfit-Stone Container Corp.(b) 895,500 12,151,935
-----------
26,694,072
-----------
Energy & Utilities - 9.4%
Constellation Energy Group 150,300 8,222,913
Equitable Resources, Inc. 355,700 12,986,607
NRG Energy, Inc.(b)(c) 222,200 10,047,884
PPL Corp.(c) 362,500 10,657,500
Public Service Enterprise Group,
Inc.(c) 193,900 12,417,356
Questar Corp. 161,400 11,306,070
Sempra Energy 255,000 11,847,300
-----------
77,485,630
-----------
Entertainment & Leisure - 0.5%
Hilton Hotels Corp. 171,600 4,368,936
-----------
Finance - 6.7%
AllianceBernstein Holding LP 85,500 5,664,375
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Finance (Continued)
Ambac Financial Group, Inc. 118,050 $ 9,396,780
Capital One Financial Corp. 109,200 8,792,784
CIT Group, Inc. 181,100 9,692,472
Freedom Pay, Inc.(d) 43,051 431
H&R Block, Inc. 485,600 10,513,240
Mellon Financial Corp. 310,800 11,064,480
-----------
55,124,562
-----------
Food & Agriculture - 3.3%
Dean Foods Co.(b) 130,200 5,055,666
Del Monte Foods Co. 877,500 10,407,150
The J. M. Smucker Co. 290,300 11,524,910
-----------
26,987,726
-----------
Insurance - 7.9%
Aspen Insurance Holdings Ltd. 398,200 9,819,612
Axis Capital Holdings Ltd. 270,600 8,090,940
Cigna Corp. 61,700 8,059,254
Endurance Specialty Holdings,
Ltd. 603,900 19,656,945
The Hanover Insurance Group,
Inc. 47,600 2,495,192
Max Re Capital Ltd. 183,300 4,362,540
XL Capital Ltd.(c)
189,300 12,136,023
-----------
64,620,506
-----------
Manufacturing - 4.3%
Jones Apparel Group, Inc. 244,400 8,644,428
Newell Rubbermaid, Inc.(c)
187,700 4,728,163
Snap-On, Inc.
154,400 5,885,728
The Stanley Works(c) 207,900 10,532,214
Textron, Inc. 56,100 5,239,179
-----------
35,029,712
-----------
Medical & Medical Services - 2.1%
Triad Hospitals, Inc.(b)(c)
244,000 10,223,600
Universal Health Services, Inc.(c)
134,600 6,836,334
-----------
17,059,934
-----------
Medical Instruments & Supplies - 1.1%
Hillenbrand Industries, Inc. 170,500 9,375,795
-----------
Metal & Mining - 4.2%
Century Aluminum Co.(b)(c)
110,700 4,699,215
CONSOL Energy, Inc. 186,100 13,801,176
Massey Energy Co.(b) 340,108 12,267,696
United States Steel Corp. 68,700 4,168,716
-----------
34,936,803
-----------
Oil & Gas - 5.6%
AGL Resources, Inc. 344,700 12,426,435
Diamond Offshore Drilling, Inc. 107,000 9,576,500
EOG Resources, Inc.(c) 138,700 9,986,400
Newfield Exploration Co.(b) 209,000 8,757,100
Pioneer Natural Resources Co. 112,700 4,986,975
-----------
45,733,410
-----------
Paper & Forest Products - 0.9%
Bowater, Inc.(c)
245,600 7,264,848
-----------
Pharmaceuticals - 0.8%
Andrx Corp.(b) 286,500 6,801,510
-----------
Publishing & Printing - 2.5%
Dow Jones & Co., Inc.(c) 122,500 4,814,250
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
57
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MID-CAP VALUE EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Publishing & Printing (Continued)
Marvel Entertainment, Inc.(b) 155,300 $ 3,124,636
R.R. Donnelley & Sons Co. 384,500 12,580,840
------------
20,519,726
------------
Railroad & Shipping - 0.9%
CSX Corp.(c) 116,100 6,942,780
------------
Real Estate - 3.2%
Boston Properties, Inc.(REIT) 136,900 12,765,925
Cendant Corp. 188,100 3,263,535
Reckson Associates Realty Corp.
(REIT)(c) 229,900 10,534,018
------------
26,563,478
------------
Restaurants - 0.8%
CKE Restaurants, Inc.(c) 385,000 6,699,000
------------
Retail Merchandising - 10.3%
Federated Department Stores,
Inc. 138,700 10,125,100
The Gap, Inc.(c) 377,900 7,059,172
The Kroger Co.(b)(c) 395,800 8,058,488
Officemax, Inc. 409,500 12,354,615
Pier 1 Imports, Inc.(c) 452,900 5,258,169
Regis Corp. 258,500 8,913,080
Rite Aid Corp.(b)(c) 2,006,900 8,027,600
Saks, Inc.(b) 322,100 6,216,530
The Talbots, Inc. 351,800 9,452,866
TJX Cos., Inc.(c) 385,500 9,568,110
------------
85,033,730
------------
Telecommunications - 1.4%
Amdocs Ltd.(b) 322,200 11,618,532
------------
Tires & Rubber - 1.0%
Cooper Tire & Rubber Co. 567,126 8,132,587
------------
Tobacco - 0.9%
Loews Corp. - Carolina Group 152,200 7,194,494
------------
Transportation - 0.9%
American Commercial Lines,
Inc.(b) 159,800 7,542,560
------------
TOTAL COMMON STOCKS
(Cost $676,251,758) 792,418,492
------------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 3.4%
U.S. Treasury Bills
4.38%(e) 04/06/06 $17,900 17,889,434
Galileo Money Market Fund 10,000 10,000,000
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $27,889,434) 27,889,434
----------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 99.6%
(Cost $704,141,192) 820,307,926
-----------
PAR
MATURITY (000) VALUE
---------- --------- -------------
SECURITIES LENDING COLLATERAL - 1.0%
Banco Santander, Certificate of
Deposit
4.34%(f) 04/10/06 $1,278 $1,277,523
Bank of America, Master Notes
4.08%(f)(g) 04/03/06 4,754 4,754,207
Morgan Stanley, Floating Rate
Notes
4.94%(f)(g) 04/03/06 2,338 2,338,337
----------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $8,370,067) 8,370,067
----------
NUMBER
OF SHARES
------------
INVESTMENT IN AFFILIATE - 11.5%
Institutional Money Market
Trust(f)
(Cost $94,298,696) 94,298,696 94,298,696
----------
TOTAL INVESTMENTS IN SECURITIES - 112.1%
(Cost $806,809,955(a)) 922,976,689
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (12.5)% (102,668,763)
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.4% 3,120,662
-------------
TOTAL NET ASSETS - 100% $ 823,428,588
=============
- -------------------
(a) Cost for federal income tax purposes is $811,989,184. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $125,196,775
Gross unrealized depreciation (14,209,270)
------------
$110,987,505
============
(b) Non-income producing security.
(c) Total or partial securities on loan.
(d) Security valued at fair value as determined in good faith by or under the
direction of the Trustees. As of March 31, 2006, these securities had a
total market value of $2,599 which represents less than 0.1% of net
assets.
(e) The rate shown is the effective yield on the discount notes at the time of
purchase.
(f) Securities purchased with the cash proceeds from securities loaned.
(g) Rates shown are the rates as of March 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
58
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MID-CAP GROWTH EQUITY PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 98.5%
Advertising - 0.3%
Getty Images, Inc.(b)(c) 21,100 $ 1,579,968
-----------
Aerospace - 1.0%
Goodrich Corp. 107,800 4,701,158
-----------
Broadcasting - 2.3%
CKX, Inc.(b) 323,000 4,221,610
Univision Communications, Inc. -
Class A(b)(c) 182,200 6,280,434
-----------
10,502,044
-----------
Business Services - 5.2%
Akamai Technologies, Inc.(b) 155,300 5,107,817
Alliance Data Systems Corp.(b) 122,100 5,710,617
ChoicePoint, Inc.(b) 127,800 5,719,050
The Corporate Executive Board
Co. 73,100 7,375,790
-----------
23,913,274
-----------
Chemicals - 1.1%
Air Products & Chemicals, Inc. 74,600 5,012,374
-----------
Computer Software & Services - 8.6%
Adobe Systems, Inc.(b) 162,100 5,660,532
CACI International, Inc.(b) 80,200 5,273,150
Ceridian Corp.(b) 354,700 9,027,115
Checkfree Corp.(b) 51,700 2,610,850
Foundry Networks, Inc.(b) 251,100 4,559,976
Ingram Micro, Inc. - Class A(b) 248,400 4,968,000
NAVTEQ Corp.(b)(c) 72,500 3,672,125
VeriFone Holdings, Inc.(b) 142,100 4,304,209
-----------
40,075,957
-----------
Electronics - 4.1%
Ametek, Inc. 52,900 2,378,384
Amphenol Corp. 133,500 6,966,030
Cogent, Inc.(b)(c) 238,900 4,381,426
FLIR Systems, Inc.(b) 182,000 5,170,620
-----------
18,896,460
-----------
Energy & Utilities - 1.7%
Airgas, Inc. 198,700 7,767,183
-----------
Entertainment & Leisure - 3.7%
Kerzner International Ltd.(b) 51,500 4,007,730
Orient-Express Hotels Ltd. -
Class A 166,400 6,527,872
Scientific Games Corp. - Class
A(b)(c) 181,200 6,365,556
-----------
16,901,158
-----------
Finance - 3.8%
Chicago Mercantile Exchange
Holdings, Inc. 10,700 4,788,250
Legg Mason, Inc. 36,500 4,574,545
Nuveen Investments - Class A 49,400 2,378,610
T. Rowe Price Group, Inc. 74,200 5,803,182
-----------
17,544,587
-----------
Insurance - 3.1%
Axis Capital Holdings Ltd. 149,200 4,461,080
Endurance Specialty Holdings
Ltd. 167,700 5,458,635
WellPoint, Inc.(b) 59,700 4,622,571
-----------
14,542,286
-----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Machinery & Heavy Equipment - 1.0%
Lennox International, Inc. 155,800 $ 4,652,188
-----------
Manufacturing - 2.8%
Fortune Brands, Inc. 59,200 4,773,296
IDEX Corp. 104,000 5,425,680
The Warnaco Group, Inc.(b) 114,600 2,750,400
-----------
12,949,376
-----------
Medical & Medical Services - 7.5%
Caremark Rx, Inc.(b) 131,400 6,462,252
Community Health Systems,
Inc.(b) 154,300 5,577,945
Coventry Health Care, Inc.(b) 100,350 5,416,893
Medco Health Solutions, Inc.(b) 112,300 6,425,806
Omnicare, Inc. 117,600 6,466,824
Triad Hospitals, Inc.(b)(c)
107,575 4,507,393
-----------
34,857,113
-----------
Medical Instruments & Supplies - 8.0%
Advanced Medical Optics, Inc.(b) 143,900 6,711,496
Cytyc Corp.(b)(c) 159,100 4,483,438
Fisher Scientific International,
Inc.(b) 103,600 7,049,980
Kinetic Concepts, Inc.(b) 109,100 4,491,647
Martek Biosciences Corp.(b)(c) 177,500 5,827,325
Varian Medical Systems,
Inc.(b)(c) 151,300 8,497,008
-----------
37,060,894
-----------
Metal & Mining - 5.6%
CONSOL Energy, Inc.
172,000 12,755,520
Massey Energy Co.(b)
236,000 8,512,520
MSC Industrial Direct Co., Inc.(c) 87,700 4,737,554
-----------
26,005,594
-----------
Oil & Gas - 6.9%
Amerada Hess Corp.(c) 24,800 3,531,520
ENSCO International, Inc.
167,100 8,597,295
EOG Resources, Inc.(c)
119,100 8,575,200
Grant Prideco, Inc.(b) 90,600 3,881,304
Newfield Exploration Co.(b)(c) 105,805 4,433,230
Stolt Offshore SA - ADR 190,800 2,955,492
-----------
31,974,041
-----------
Personal Services - 1.0%
Laureate Education, Inc.(b)
89,600 4,782,848
-----------
Pharmaceuticals - 3.7%
Endo Pharmaceuticals Holdings,
Inc.(b) 195,200 6,404,512
Shire PLC - ADR 234,256 10,890,561
-----------
17,295,073
-----------
Restaurants - 1.6%
Ruby Tuesday, Inc.(c)
222,300 7,131,384
Tim Hortons, Inc.(b)(c)
7,600 201,780
-----------
7,333,164
-----------
Retail Merchandising - 6.6%
Abercrombie & Fitch Co. - Class
A 41,000 2,390,300
Chico's FAS, Inc.(b)(c)
80,000 3,251,200
Coach, Inc.(b)
113,300 3,917,914
Staples, Inc. 199,972 5,103,285
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
59
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MID-CAP GROWTH EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Retail Merchandising (Continued)
TJX Cos., Inc.(c) 292,700 $ 7,264,814
Williams-Sonoma, Inc.(b)(c) 205,000 8,692,000
------------
30,619,513
------------
Semiconductors & Related Devices - 6.7%
Analog Devices, Inc. 180,100 6,896,029
Freescale Semiconductor, Inc. -
Class B(b) 307,700 8,544,829
Lam Research Corp.(b) 160,000 6,880,000
Linear Technology Corp. 115,100 4,037,708
PMC-Sierra, Inc.(b) 399,500 4,909,855
------------
31,268,421
------------
Telecommunications - 10.0%
Amdocs Ltd.(b) 301,100 10,857,666
American Tower Corp. - Class
A(b) 295,300 8,953,496
Avid Technology, Inc.(b)(c) 146,800 6,379,928
Comverse Technology, Inc.(b) 165,400 3,891,862
Harris Corp. 161,500 7,637,335
Polycom, Inc.(b)(c) 345,100 7,481,768
Syniverse Holdings, Inc.(b) 71,000 1,121,800
------------
46,323,855
------------
Transportation - 1.1%
Landstar System, Inc. 115,300 5,087,036
------------
Waste Management - 1.1%
Stericycle, Inc.(b) 75,700 5,118,834
------------
TOTAL COMMON STOCKS
(Cost $347,019,659) 456,764,399
------------
SHORT TERM INVESTMENTS - 1.4%
Galileo Money Market Fund
(Cost $6,462,987) 6,462,987 6,462,987
------------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 99.9%
(Cost $353,482,646) 463,227,386
-----------
PAR
MATURITY (000) VALUE
---------- --------- -------------
SECURITIES LENDING COLLATERAL - 1.1%
Banco Santander, Certificate of
Deposit
4.34%(d) 04/10/06 $2,849 $2,848,835
Bank of America, Master Notes
4.08%(d)(e) 04/03/06 58 57,683
Morgan Stanley, Floating Rate
Notes
4.94%(d)(e) 04/03/06 2,154 2,154,072
----------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $5,060,590) 5,060,590
----------
NUMBER
OF SHARES
------------
INVESTMENT IN AFFILIATE - 14.1%
Institutional Money Market
Trust(d)
(Cost $65,198,095) 65,198,095 65,198,095
----------
TOTAL INVESTMENTS IN SECURITIES - 115.1%
(Cost $423,741,331(a)) 533,486,071
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (15.2)% (70,258,685)
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.1% 286,890
------------
TOTAL NET ASSETS - 100% $463,514,276
============
- -------------------
(a) Cost for federal income tax purposes is $424,491,042. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $114,335,123
Gross unrealized depreciation (5,340,094)
------------
$108,995,029
============
(b) Non-income producing security.
(c) Total or partial securities on loan.
(d) Securities purchased with the cash proceeds from securities loaned.
(e) Rates shown are the rates as of March 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
AURORA PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 98.0%
Aerospace - 2.1%
AAR Corp.(b) 266,492 $ 7,589,692
Goodrich Corp.(c) 772,600 33,693,086
Triumph Group, Inc.(b) 232,900 10,308,154
------------
51,590,932
------------
Banks - 7.8%
City National Corp. 543,600 41,743,044
Colonial BancGroup, Inc. 487,700 12,192,500
Compass Bancshares, Inc.(c) 836,600 42,340,326
Cullen/Frost Bankers, Inc. 466,200 25,058,250
Mercantile Bankshares Corp. 765,741 29,442,742
Sterling Bancshares, Inc. 1,190,941 21,496,485
Webster Financial Corp. 329,400 15,962,724
------------
188,236,071
------------
Business Services - 5.1%
Amvescap PLC - ADR(c) 1,309,800 24,702,828
The Brink's Co. 1,411,800 71,662,968
National Financial Partners Corp. 502,900 28,423,908
------------
124,789,704
------------
Computer & Office Equipment - 2.2%
Electronics for Imaging, Inc.(b) 875,300 24,482,141
NCR Corp.(b) 671,100 28,045,269
------------
52,527,410
------------
Computer Software & Services - 4.6%
The BISYS Group, Inc.(b) 888,600 11,978,328
CACI International, Inc.(b)(c) 236,900 15,576,175
Hyperion Solutions Corp.(b)(c) 319,400 10,412,440
Ingram Micro, Inc. - Class A(b) 2,509,400 50,188,000
MRO Software, Inc.(b) 526,100 8,396,556
Sybase, Inc.(b) 660,900 13,958,208
------------
110,509,707
------------
Construction - 2.7%
Apogee Enterprises, Inc. 816,196 13,777,388
Champion Enterprises, Inc.(b)(c) 780,900 11,682,264
ElkCorp 420,200 14,181,750
Martin Marietta Materials, Inc.(c) 247,200 26,457,816
------------
66,099,218
------------
Containers - 2.8%
Owens-Illinois, Inc.(b) 1,543,500 26,810,595
Packaging Corp. of America 880,900 19,767,396
Smurfit-Stone Container Corp.(b) 1,551,000 21,047,070
------------
67,625,061
------------
Electronics - 1.2%
Amphenol Corp.(c) 562,200 29,335,596
Tektronix, Inc. 25,000 892,750
------------
30,228,346
------------
Energy & Utilities - 5.9%
CMS Energy Corp.(b)(c) 1,440,000 18,648,000
DPL, Inc.(c) 780,900 21,084,300
Equitable Resources, Inc.(c) 622,300 22,720,173
MDU Resources Group, Inc.(c) 469,300 15,698,085
NRG Energy, Inc.(b)(c) 460,700 20,832,854
Questar Corp. 305,600 21,407,280
UGI Corp. 584,800 12,321,736
Wisconsin Energy Corp. 241,900 9,673,581
------------
142,386,009
------------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Entertainment & Leisure - 5.7%
Boyd Gaming Corp. 435,400 $ 21,743,876
Gaylord Entertainment Co.(b) 832,200 37,765,236
Kerzner International Ltd.(b)(c) 361,900 28,163,058
Orient-Express Hotels Ltd. -
Class A
355,000 13,926,650
Penn National Gaming, Inc.(b)
491,500 20,731,470
Pinnacle Entertainment, Inc.(b) 111,600 3,143,772
Steiner Leisure Ltd.(b) 324,100 13,126,050
------------
138,600,112
------------
Finance - 4.1%
Affiliated Managers Group,
Inc.(b)(c) 560,100 59,712,261
AllianceBernstein Holding LP 164,500 10,898,125
CapitalSource, Inc. 1,142,216 28,418,334
------------
99,028,720
------------
Food & Agriculture - 2.4%
Dean Foods Co.(b) 628,500 24,404,655
Hain Celestial Group, Inc.(b) 1,332,419 34,896,054
------------
59,300,709
------------
Furniture - 2.2%
Walter Industries, Inc.(c) 807,400 53,788,988
------------
Insurance - 7.5%
AmerUs Group Co. 244,400 14,722,656
Endurance Specialty Holdings
Ltd.
585,300 19,051,515
The Hanover Insurance Group,
Inc.
1,167,300 61,189,866
Hub International Ltd. 182,900 5,124,858
Platinum Underwriters Holdings
Ltd. 787,100 22,904,610
United America Indemnity Ltd.(b) 881,700 20,190,930
UnumProvident Corp.(c) 1,198,200 24,539,136
Zenith National Insurance Corp. 300,000 14,439,000
------------
182,162,571
------------
Machinery & Heavy Equipment - 2.4%
Lennox International, Inc.
470,800 14,058,088
The Manitowoc Co., Inc. 208,200 18,977,430
Wabtec Corp. 748,337 24,395,786
------------
57,431,304
------------
Manufacturing - 6.0%
Herley Microwave Systems,
Inc.(b)
929,000 19,397,520
Jones Apparel Group, Inc.
785,600 27,786,672
K2, Inc.(b) 592,600 7,437,130
Phillips-Van Heusen Corp. 342,200 13,075,462
Polo Ralph Lauren Corp. 257,000 15,576,770
Roper Industries, Inc. 273,800 13,314,894
Snap-On, Inc.
375,500 14,314,060
The Stanley Works(c)
425,100 21,535,566
V.F. Corp. 215,600 12,267,640
------------
144,705,714
------------
Medical & Medical Services - 1.9%
Davita, Inc.(b)
441,200 26,564,652
STERIS Corp. 761,500 18,793,820
------------
45,358,472
------------
Medical Instruments & Supplies - 4.0%
DENTSPLY International, Inc. 573,700 33,360,655
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
61
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
AURORA PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Medical Instruments & Supplies (Continued)
Fisher Scientific International,
Inc.(b)(c) 370,700 $ 25,226,135
Sybron Dental Specialties, Inc.(b) 630,900 26,018,316
Viasys Healthcare, Inc.(b) 433,856 13,050,389
-------------
97,655,495
-------------
Metal & Mining - 2.3%
Massey Energy Co.(b) 1,004,421 36,229,465
United States Steel Corp.(c) 328,900 19,957,652
-------------
56,187,117
-------------
Motor Vehicles - 0.8%
Oshkosh Truck Corp. 322,200 20,053,728
-------------
Oil & Gas - 1.2%
CNX Gas Corp. (acquired
08/01/05 through 09/28/05,
cost $11,080,235)(b)(d)(e) 591,100 15,368,600
Pioneer Natural Resources Co. 283,200 12,531,600
-------------
27,900,200
-------------
Paper & Forest Products - 1.7%
Kadant, Inc.(b) 1,214,600 27,571,420
Rayonier, Inc.(c) 291,549 13,291,719
-------------
40,863,139
-------------
Personal Services - 0.5%
Laureate Education, Inc.(b)(c) 233,800 12,480,244
-------------
Pharmaceuticals - 0.9%
Andrx Corp.(b) 602,300 14,298,602
Valeant Pharmaceuticals
International 500,100 7,926,585
-------------
22,225,187
-------------
Real Estate - 0.3%
Highland Hospitality Corp. 594,600 7,557,366
-------------
Restaurants - 3.4%
CKE Restaurants, Inc.(c) 982,900 17,102,460
Landry's Restaurants, Inc.(c) 365,100 12,898,983
Outback Steakhouse, Inc.(c) 272,500 11,990,000
Ruby Tuesday, Inc.(c) 604,700 19,398,776
Tim Hortons, Inc.(b)(c) 780,200 20,714,310
-------------
82,104,529
-------------
Retail Merchandising - 9.2%
BJ's Wholesale Club, Inc.(b)(c) 893,500 28,154,185
Central Garden & Pet Co.(b) 235,700 12,525,098
Foot Locker, Inc. 723,800 17,284,344
Jarden Corp.(b)(c) 1,070,800 35,175,780
New York & Co., Inc.(b) 642,900 9,604,926
Officemax, Inc. 1,074,400 32,414,648
Pacific Sunwear of California,
Inc.(b) 431,200 9,555,392
Regis Corp. 613,800 21,163,824
Saks, Inc.(b) 485,200 9,364,360
Stage Stores, Inc. 336,600 10,013,850
Supervalue, Inc.(c) 745,600 22,979,392
The Talbots, Inc.(c) 557,600 14,982,712
-------------
223,218,511
-------------
Security Brokers & Dealers - 0.7%
A.G. Edwards, Inc. 90,600 4,517,316
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Security Brokers & Dealers (Continued)
Piper Jaffray Cos., Inc.(b) 231,200 $ 12,716,000
--------------
17,233,316
--------------
Semiconductors & Related Devices - 1.9%
Agere Systems, Inc. - ADR(b)
2,170,400 32,642,816
PMC-Sierra, Inc.(b)(c) 1,099,500 13,512,855
--------------
46,155,671
--------------
Telecommunications - 2.3%
Amdocs Ltd.(b)
1,343,500 48,446,610
Anaren, Inc.(b) 387,770 7,549,882
--------------
55,996,492
--------------
Tires & Rubber - 0.5%
Cooper Tire & Rubber Co.(c) 881,135 12,635,476
--------------
Transportation - 1.6%
American Commercial Lines,
Inc.(b)
553,200 26,111,040
Kirby Corp.(b) 189,800 12,927,278
--------------
39,038,318
--------------
TOTAL COMMON STOCKS
(Cost $1,980,764,544) 2,375,673,837
--------------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 2.6%
Federal Home Loan Bank,
Discount Notes
4.55%(f) 04/03/06 $52,500 52,486,729
Galileo Money Market Fund 10,000 10,000,000
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $62,486,729) 62,486,729
----------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 100.6%
(Cost $2,043,251,273) 2,438,160,566
-------------
SECURITIES LENDING COLLATERAL - 1.9%
Banco Santander, Certificate of
Deposit
4.34%(g) 04/10/06 16,012 16,011,903
Greenwich Capital Holdings,
Floating Rate Comercial Paper
4.79%(g)(h) 04/03/06 25,000 25,000,000
Morgan Stanley, Floating Rate
Notes
4.94%(g)(h) 04/03/06 5,761 5,760,834
----------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $46,772,737) 46,772,737
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
62
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
AURORA PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------- ---------------
INVESTMENT IN AFFILIATE - 16.8%
Institutional Money Market
Trust(g)
(Cost $407,786,236) 407,786,236 $407,786,236
------------
TOTAL INVESTMENTS IN SECURITIES - 119.3%
(Cost $2,497,810,246(a)) 2,892,719,539
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (18.7)% (454,558,973)
--------------
LIABILITIES IN EXCESS OF
OTHER ASSETS - (0.6)% (14,074,732)
--------------
TOTAL NET ASSETS - 100% $2,424,085,834
==============
- -------------------
(a) Cost for federal income tax purposes is $2,499,545,941. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $422,309,364
Gross unrealized depreciation (29,135,766)
------------
$393,173,598
============
(b) Non-income producing security.
(c) Total or partial securities on loan.
(d) Security restricted as to public resale. These securities are ineligible
for resale into the public market until such time that either (I) a
resale Registration Statement has been filed with the Securities and
Exchange Commission ("SEC") and declared effective or (II) resale is
permitted under Rule 144A without the need for an effective registration
statement. As of March 31, 2006, the Portfolio held 0.6% of its net
assets, with a current market value of $15,368,600 and a current cost of
$11,080,235 in these securities.
(e) Security valued at fair value as determined in good faith by or under the
direction of the Trustees. As of March 31, 2006, this security had a
total market value of $15,368,600, which represents 0.6% of net assets.
(f) The rate shown is the effective yield on the discount notes at the time
of purchase.
(g) Securities purchased with the cash proceeds from securities loaned.
(h) Rates shown are the rates as of March 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
63
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SMALL/MID-CAP GROWTH PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
--------------------- ------------------
COMMON STOCKS - 97.4%
Aerospace - 2.1%
BE Aerospace, Inc.(b) 128,700 $ 3,232,944
Goodrich Corp.(c) 72,200 3,148,642
-----------
6,381,586
-----------
Broadcasting - 1.6%
CKX, Inc.(b) 379,100 4,954,837
-----------
Business Services - 8.9%
Advisory Board Co.(b) 61,500 3,429,855
Amvescap PLC - ADR(c) 124,300 2,344,298
ChoicePoint, Inc.(b) 82,800 3,705,300
The Corporate Executive
Board Co.(c) 48,600 4,903,740
Digitas, Inc.(b) 213,100 3,068,640
eFunds, Corp.(b) 6,500 167,960
Gartner, Inc. - Class A(b) 243,400 3,395,430
Global Payments, Inc.(c) 43,400 2,300,634
Net 1 UEPS Technologies,
Inc.(b) 142,700 4,038,410
-----------
27,354,267
-----------
Chemicals - 0.6%
Agrium, Inc.(c) 78,200 1,975,332
-----------
Computer Software & Services - 14.4%
Autobytel, Inc.(b)(d) 73,042 352,062
Blackboard, Inc.(b) 130,000 3,693,300
CACI International, Inc.(b)(c) 43,400 2,853,550
Ceridian Corp.(b) 178,100 4,532,645
Checkfree Corp.(b) 28,800 1,454,400
Foundry Networks, Inc.(b) 346,300 6,288,808
Hyperion Solutions Corp.(b)(c) 79,200 2,581,920
IHS, Inc.(b) 159,100 4,351,385
Ingram Micro, Inc. - Class A(b) 157,100 3,142,000
SonicWALL, Inc.(b) 762,500 5,406,125
Transaction Systems
Architects, Inc.(b) 148,500 4,634,685
VeriFone Holdings, Inc.(b) 161,200 4,882,748
-----------
44,173,628
-----------
Electronics - 1.8%
Ametek, Inc. 51,800 2,328,928
FLIR Systems, Inc.(b) 115,700 3,287,037
-----------
5,615,965
-----------
Energy & Utilities - 1.8%
Airgas, Inc. 142,800 5,582,052
-----------
Entertainment & Leisure - 3.9%
Orient-Express Hotels Ltd. -
Class A 83,900 3,291,397
Scientific Games Corp. - Class
A(b)(c) 89,200 3,133,596
Station Casinos, Inc. 69,300 5,500,341
-----------
11,925,334
-----------
Finance - 3.3%
Affiliated Managers Group,
Inc.(b)(c) 28,000 2,985,080
Nuveen Investments - Class A 53,500 2,576,025
Wright Express Corp.(b) 158,000 4,431,900
-----------
9,993,005
-----------
Machinery & Heavy Equipment - 1.4%
Bucyrus International, Inc. -
Class A 36,408 1,754,501
NUMBER
OF SHARES VALUE
--------------------- ------------------
COMMON STOCKS (Continued)
Machinery & Heavy Equipment (Continued)
Lennox International, Inc. 82,700 $ 2,469,422
-----------
4,223,923
-----------
Manufacturing - 4.4%
Actuant Corp. - Class A 70,400 4,309,888
Gardner Denver, Inc.(b) 74,500 4,857,400
The Warnaco Group, Inc.(b) 179,300 4,303,200
-----------
13,470,488
-----------
Medical & Medical Services - 9.2%
Community Health Systems,
Inc.(b) 78,500 2,837,775
Coventry Health Care, Inc.(b) 61,300 3,308,974
Digene Corp.(b) 145,700 5,696,870
Noven Pharmaceuticals,
Inc.(b) 200,900 3,618,209
Omnicare, Inc. 62,800 3,453,372
Pediatrix Medical Group,
Inc.(b) 38,900 3,992,696
Symbion, Inc.(b) 79,900 1,809,735
Triad Hospitals, Inc.(b) 81,800 3,427,420
-----------
28,145,051
-----------
Medical Instruments & Supplies - 7.9%
Advanced Medical Optics,
Inc.(b)(c) 84,200 3,927,088
Charles River Laboratories
International, Inc.(b) 43,000 2,107,860
Hologic, Inc.(b) 74,100 4,101,435
Kyphon, Inc.(b)(c) 80,100 2,979,720
Martek Biosciences Corp.(b)(c) 105,100 3,450,433
Varian Medical Systems,
Inc.(b)(c) 76,900 4,318,704
Wright Medical Group, Inc.(b) 177,205 3,499,799
-----------
24,385,039
-----------
Metal & Mining - 2.0%
CONSOL Energy, Inc. 39,300 2,914,488
Massey Energy Co.(b) 87,900 3,170,553
-----------
6,085,041
-----------
Motor Vehicles - 0.6%
Wabash National Corp. 96,100 1,897,975
-----------
Oil & Gas - 5.3%
Comstock Resources, Inc.(b) 86,800 2,577,092
Diamond Offshore Drilling,
Inc.(c) 38,300 3,427,850
ENSCO International, Inc. 76,800 3,951,360
National-Oilwell, Inc.(b) 44,300 2,840,516
Pride International, Inc.(b) 115,600 3,604,408
-----------
16,401,226
-----------
Personal Services - 2.3%
Laureate Education, Inc.(b)(c) 129,800 6,928,724
-----------
Pharmaceuticals - 2.7%
Endo Pharmaceuticals
Holdings, Inc.(b) 160,600 5,269,286
Shire PLC - ADR 63,600 2,956,764
-----------
8,226,050
-----------
Real Estate - 0.6%
Homestore, Inc.(b) 274,400 1,800,064
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SMALL/MID-CAP GROWTH PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Restaurants - 1.7%
Ruth's Chris Steak House,
Inc.(b) 127,900 $ 3,045,299
Texas Roadhouse, Inc.(b) 124,400 2,125,996
Tim Hortons, Inc.(b) 5,000 132,750
------------
5,304,045
------------
Retail Merchandising - 6.1%
Central Garden & Pet Co.(b) 70,800 3,762,312
The Children's Place Retail
Stores, Inc.(b) 57,300 3,317,670
Coldwater Creek, Inc.(b)(c) 76,850 2,136,430
Dick's Sporting Goods, Inc.(b) 85,815 3,404,281
Jos. A. Bank Clothiers,
Inc.(b)(c) 79,625 3,818,019
Williams-Sonoma, Inc.(b)(c) 55,100 2,336,240
------------
18,774,952
------------
Semiconductors & Related Devices - 5.0%
Analog Devices, Inc. 72,900 2,791,341
Freescale Semiconductor, Inc.
- Class A(b) 83,400 2,319,354
Microsemi Corp.(b)(c) 171,100 4,980,721
MKS Instruments, Inc.(b) 32,600 763,818
O2Micro International Ltd. -
ADR(b) 107,703 1,144,883
Standard Microsystems
Corp.(b) 131,700 3,421,566
------------
15,421,683
------------
Telecommunications - 8.1%
Amdocs Ltd.(b) 153,400 5,531,604
American Tower Corp. - Class
A(b)(c) 143,900 4,363,048
Avid Technology, Inc.(b)(c) 48,900 2,125,194
Comverse Technology, Inc.(b) 112,000 2,635,360
Harris Corp. 44,100 2,085,489
Polycom, Inc.(b)(c) 292,900 6,350,072
Syniverse Holdings, Inc.(b) 106,100 1,676,380
------------
24,767,147
------------
Transportation - 0.8%
Landstar System, Inc. 57,900 2,554,548
------------
Waste Management - 0.9%
Stericycle, Inc.(b) 40,600 2,745,372
------------
TOTAL COMMON STOCKS
(Cost $231,646,980) 299,087,334
------------
SHORT TERM INVESTMENTS - 3.1%
Galileo Money Market Fund
(Cost $9,528,661) 9,528,661 9,528,661
---------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 100.5%
(Cost $241,175,641) 308,615,995
-----------
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- -------------
SECURITIES LENDING COLLATERAL - 1.2%
Bank of America, Master Notes
4.08%(e)(f) 04/03/06 $1,628 $1,628,355
Morgan Stanley, Floating Rate
Notes
4.94%(e)(f) 04/03/06 2,042 2,041,973
----------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $3,670,328) 3,670,328
----------
NUMBER
OF SHARES
------------
INVESTMENT IN AFFILIATE - 14.8%
Institutional Money Market
Trust(f)
(Cost $45,395,881) 45,395,881 45,395,881
----------
TOTAL INVESTMENTS IN SECURITIES - 116.5%
(Cost $290,241,850(a)) 357,682,204
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (16.0)% (49,066,209)
------------
LIABILITIES IN EXCESS OF
OTHER ASSETS - (0.5)% (1,676,566)
------------
TOTAL NET ASSETS - 100% $306,939,429
============
- -------------------
(a) Cost for federal income tax purposes is $290,926,345. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $71,857,684
Gross unrealized depreciation (5,101,825)
-----------
$66,755,859
===========
(b) Non-income producing security.
(c) Total or partial securities on loan.
(d) Security valued at fair value as determined in good faith by or under the
direction of the Trustees. As of March 31, 2006, this security had a
total market value of $352,062 which represents 0.1% of net assets.
(e) Rates shown are the rates as of March 31, 2006.
(f) Securities purchased with the cash proceeds from securities loaned.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
65
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SMALL CAP VALUE EQUITY PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 96.0%
Aerospace - 1.3%
K&F Industries Holdings, Inc.(b) 42,400 $ 703,840
Orbital Sciences Corp.(b) 56,500 893,830
-----------
1,597,670
-----------
Banks - 11.5%
Boston Private Financial
Holdings, Inc. 36,600 1,236,714
Cathay General Bancorp 31,500 1,185,660
Central Pacific Financial Corp. 33,800 1,241,136
First Midwest Bancorp, Inc. 40,500 1,481,085
Sterling Financial Corp. 71,025 2,059,725
Taylor Capital Group, Inc. 32,100 1,257,999
Trustmark Corp. 36,900 1,167,516
Umpqua Holdings Corp. 43,900 1,251,150
Westamerica Bancorp. 16,100 835,912
Wintrust Financial Corp. 32,600 1,896,342
WSFS Financial Corp. 6,500 408,395
-----------
14,021,634
-----------
Business Services - 7.6%
The Brink's Co. 79,300 4,025,268
H&E Equipment Services, Inc.(b) 57,500 1,674,400
National Financial Partners Corp. 39,300 2,221,236
Watson Wyatt Worldwide, Inc. 39,100 1,273,878
-----------
9,194,782
-----------
Chemicals - 0.8%
Tronox, Inc. - Class A 54,800 929,408
-----------
Computer & Office Equipment - 1.9%
Electronics for Imaging, Inc.(b) 22,400 626,528
Imation Corp. 39,400 1,690,654
-----------
2,317,182
-----------
Computer Software & Services - 3.0%
The BISYS Group, Inc.(b) 45,400 611,992
CACI International, Inc.(b)(c) 13,200 867,900
FileNET Corp.(b) 31,900 861,938
Hyperion Solutions Corp.(b) 14,100 459,660
Progress Software Corp.(b) 27,000 785,430
-----------
3,586,920
-----------
Construction - 2.3%
Washington Group International,
Inc. 48,100 2,760,459
-----------
Energy & Utilities - 6.7%
Black Hills Corp. 33,600 1,142,400
El Paso Electric Co.(b) 56,000 1,066,240
ITC Holdings Corp. 41,600 1,092,000
Northwestern Corp. 30,600 952,884
PNM Resources, Inc. 57,500 1,403,000
Thomas & Betts Corp.(b) 48,100 2,471,378
-----------
8,127,902
-----------
Entertainment & Leisure - 4.7%
Gaylord Entertainment Co.(b) 53,900 2,445,982
Kerzner International Ltd.(b)(c) 11,200 871,584
Orient-Express Hotels Ltd. -
Class A 22,300 874,829
Regal Entertainment Group -
Class A 26,600 500,346
Vail Resorts, Inc.(b) 25,600 978,432
-----------
5,671,173
-----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Food & Agriculture - 1.4%
Hain Celestial Group, Inc.(b) 67,100 $1,757,349
----------
Furniture - 2.8%
Walter Industries, Inc.(c)
50,200 3,344,324
----------
Insurance - 5.0%
Aspen Insurance Holdings Ltd. 66,100 1,630,026
The Hanover Insurance Group,
Inc. 44,700 2,343,174
Platinum Underwriters Holdings
Ltd. 44,300 1,289,130
Zenith National Insurance Corp. 17,000 818,210
----------
6,080,540
----------
Machinery & Heavy Equipment - 1.7%
Lennox International, Inc. 46,100 1,376,546
Lone Star Technologies, Inc.(b) 11,700 648,297
----------
2,024,843
----------
Manufacturing - 5.6%
Actuant Corp. - Class A
14,200 869,324
American Railcar Industries, Inc.
52,700 1,848,189
Aptargroup, Inc. 22,300 1,232,075
Hexel Corp.(b) 26,760 587,917
K2, Inc.(b) 28,500 357,675
Mikohn Gaming Corp. 65,500 626,835
Phillips-Van Heusen Corp. 34,300 1,310,603
----------
6,832,618
----------
Medical & Medical Services - 1.5%
Per-Se Technologies, Inc.(b) 70,300 1,874,198
----------
Medical Instruments & Supplies - 4.9%
DJ Orthopedics, Inc.(b) 52,400 2,083,424
Polymedica Corp. 39,100 1,656,276
Sybron Dental Specialties, Inc.(b)
53,200 2,193,968
----------
5,933,668
----------
Metal & Mining - 0.7%
Century Aluminum Co.(b)(c) 20,900 887,205
----------
Motor Vehicles - 0.5%
Tenneco Automotive, Inc.(b) 28,900 626,841
----------
Oil & Gas - 3.2%
Comstock Resources, Inc.(b)
43,900 1,303,391
Goodrich Petroleum Corp.(b)(c)
23,618 637,686
The Houston Exploration Co.(b) 22,300 1,175,210
Whiting Petroleum Corp.(b)(c) 18,700 766,513
----------
3,882,800
----------
Pharmaceuticals - 1.0%
Andrx Corp.(b) 33,400 792,916
Valeant Pharmaceuticals
International(c) 23,900 378,815
----------
1,171,731
----------
Publishing & Printing - 1.7%
Banta Corp.
22,100 1,148,758
Marvel Entertainment, Inc.(b) 47,400 953,688
----------
2,102,446
----------
Real Estate - 1.6%
HomeBanc Corp. 127,500 1,120,725
Trustreet Properties, Inc. 51,700 785,323
----------
1,906,048
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
66
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SMALL CAP VALUE EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Restaurants - 5.3%
CBRL Group, Inc. 39,200 $ 1,721,272
Landry's Restaurants, Inc.(c) 59,300 2,095,069
Lone Star Steakhouse & Saloon,
Inc. 45,400 1,290,268
Ryan's Restaurant Group, Inc.(b) 59,400 861,300
Triarc Cos. - Class A 26,200 477,626
------------
6,445,535
------------
Retail Merchandising - 10.6%
BJ's Wholesale Club, Inc.(b)(c) 42,900 1,351,779
The Children's Place Retail
Stores, Inc.(b) 19,200 1,111,680
Copart, Inc.(b) 37,600 1,032,120
Cost Plus, Inc.(b) 18,900 323,190
The Finish Line, Inc. - Class A 47,600 783,020
Jarden Corp.(b)(c) 70,300 2,309,355
Officemax, Inc. 64,200 1,936,914
RC2 Corp.(b) 33,400 1,329,654
Regis Corp. 30,500 1,051,640
Saks, Inc.(b) 24,100 465,130
Stage Stores, Inc. 39,600 1,178,100
------------
12,872,582
------------
Security Brokers & Dealers - 3.0%
Piper Jaffray Cos., Inc.(b) 67,300 3,701,500
------------
Semiconductors & Related Devices - 1.4%
PMC-Sierra, Inc.(b) 78,100 959,849
Rudolph Technologies, Inc.(b) 42,000 716,100
------------
1,675,949
------------
Telecommunications - 1.0%
Polycom, Inc.(b)(c) 54,700 1,185,896
------------
Transportation - 2.3%
American Commercial Lines,
Inc.(b) 59,500 2,808,400
------------
Waste Management - 1.0%
Waste Connections, Inc.(b) 30,600 1,218,186
------------
TOTAL COMMON STOCKS
(Cost $96,463,619) 116,539,789
------------
SHORT TERM INVESTMENTS - 3.9%
Galileo Money Market Fund
(Cost $4,762,582) 4,762,582 4,762,582
---------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 99.9%
(Cost $101,226,201) 121,302,371
-----------
PAR
MATURITY (000) VALUE
---------- ------- -----------
SECURITIES LENDING COLLATERAL - 0.1%
Banco Santander, Certificate
of
Deposit
4.34%(d)
(Cost $77,509) 04/10/06 $78 $ 77,509
--------
NUMBER
OF SHARES
------------
INVESTMENT IN AFFILIATE - 10.9%
Institutional Money Market
Trust(d)
(Cost $13,281,813) 13,281,813 13,281,813
----------
TOTAL INVESTMENTS IN SECURITIES - 110.9%
(Cost $114,585,523(a)) 134,661,693
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (11.0)% (13,359,322)
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.1% 77,323
------------
TOTAL NET ASSETS - 100% $121,379,694
============
- -------------------
(a) Cost for federal income tax purposes is $114,687,112. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $21,327,916
Gross unrealized depreciation (1,353,335)
-----------
$19,974,581
===========
(b) Non-income producing security.
(c) Total or partial securities on loan.
(d) Securities purchased with the cash proceeds from securities loaned.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
67
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SMALL CAP CORE EQUITY PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 97.6%
Aerospace - 4.0%
AAR Corp.(b)(c) 14,500 $ 412,960
Aviall, Inc.(b) 50,850 1,936,368
Orbital Sciences Corp.(b) 56,850 899,367
----------
3,248,695
----------
Banks - 7.4%
Boston Private Financial
Holdings, Inc. 26,200 885,298
Cathay General Bancorp 23,100 869,484
Central Pacific Financial Corp. 28,450 1,044,684
Umpqua Holdings Corp. 42,000 1,197,000
Wintrust Financial Corp. 20,800 1,209,936
WSFS Financial Corp. 12,900 810,507
----------
6,016,909
----------
Broadcasting - 0.6%
Alliance Atlantis Communications,
Inc.(b) 15,500 472,750
----------
Business Services - 10.3%
The Brink's Co. 22,450 1,139,562
Forrester Research, Inc.(b) 35,600 794,592
H&E Equipment Services, Inc.(b) 37,100 1,080,352
Healthcare Services Group, Inc. 40,200 858,672
HMS Holdings Corp.(b) 118,000 1,032,500
National Financial Partners Corp. 22,400 1,266,048
Net 1 UEPS Technologies, Inc.(b) 36,700 1,038,610
Watson Wyatt Worldwide, Inc. 37,200 1,211,976
----------
8,422,312
----------
Computer & Office Equipment - 1.7%
Electronics for Imaging, Inc.(b) 50,400 1,409,688
----------
Computer Software & Services - 8.0%
Aladdin Knowledge Systems(b) 58,300 1,308,835
Blackboard, Inc.(b) 28,000 795,480
CACI International, Inc.(b)(c) 12,600 828,450
Foundry Networks, Inc.(b) 48,400 878,944
Progress Software Corp.(b) 20,000 581,800
SkillSoft PLC - ADR(b) 258,700 1,355,588
TIBCO Software, Inc.(b) 97,950 818,862
----------
6,567,959
----------
Construction - 0.5%
Dycom Industries, Inc.(b) 18,400 391,000
----------
Dental Equipment & Supplies - 1.0%
Align Technology, Inc.(b) 89,300 818,881
----------
Electronics - 1.9%
Directed Electronics, Inc.(b) 28,100 470,675
FLIR Systems, Inc.(b)(c) 38,900 1,105,149
----------
1,575,824
----------
Energy & Utilities - 1.5%
El Paso Electric Co.(b) 31,400 597,856
ITC Holdings Corp. 24,750 649,688
----------
1,247,544
----------
Entertainment & Leisure - 3.0%
Gaylord Entertainment Co.(b) 22,400 1,016,512
Orient-Express Hotels Ltd. -
Class A 19,900 780,677
Pinnacle Entertainment, Inc.(b) 23,250 654,952
----------
2,452,141
----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Food & Agriculture - 0.5%
Lance, Inc. 17,950 $ 403,875
----------
Insurance - 3.1%
The Hanover Insurance Group,
Inc. 21,650 1,134,893
Platinum Underwriters Holdings
Ltd.
35,800 1,041,780
Universal American Financial
Corp.(b)
25,650 395,010
----------
2,571,683
----------
Machinery & Heavy Equipment - 1.0%
Lennox International, Inc. 26,200 782,332
----------
Manufacturing - 7.5%
Actuant Corp. - Class A 4,850 296,917
American Railcar Industries, Inc. 32,800 1,150,296
Applied Films Corp.(b)
15,200 295,336
Aptargroup, Inc.
15,450 853,612
Hexel Corp.(b)(c) 37,100 815,087
K2, Inc.(b) 88,800 1,114,440
Paxar Corp.(b) 36,300 710,391
Trex Company, Inc.(b)(c) 28,000 887,600
----------
6,123,679
----------
Medical & Medical Services - 7.8%
Emergency Medical Services LP -
Class A(b) 33,500 435,500
Pediatrix Medical Group, Inc.(b) 17,150 1,760,276
Per-Se Technologies, Inc.(b) 52,250 1,392,985
Radiation Therapy Services,
Inc.(b) 25,400 647,954
Symbion, Inc.(b)
33,646 762,082
Vital Images, Inc.(b)
39,950 1,361,496
----------
6,360,293
----------
Medical Instruments & Supplies - 10.3%
DJ Orthopedics, Inc.(b) 49,600 1,972,096
Ev3, Inc.(b) 43,500 770,385
Hologic, Inc.(b) 21,700 1,201,095
Immucor, Inc.(b) 21,050 603,924
IntraLase Corp.(b) 43,100 999,920
MWI Veterinary Supply, Inc.(b) 29,750 978,775
Polymedica Corp. 27,400 1,160,664
Symmetry Medical, Inc.(b)
36,400 772,044
----------
8,458,903
----------
Metal & Mining - 1.4%
Century Aluminum Co.(b)(c) 18,600 789,570
Foundation Coal Holdings, Inc. 8,100 333,234
----------
1,122,804
----------
Motor Vehicles - 0.8%
Tenneco Automotive, Inc.(b)
29,100 631,179
----------
Oil & Gas - 4.7%
Carbo Ceramics, Inc. 12,200 694,302
Goodrich Petroleum Corp.(b)(c) 26,400 712,800
Hercules Offshore, Inc.(b)(c) 24,850 845,149
KCS Energy, Inc.(b)
28,000 728,000
Superior Energy Services, Inc.(b)
33,750 904,162
----------
3,884,413
----------
Personal Services - 1.6%
Laureate Education, Inc.(b)(c) 25,150 1,342,507
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SMALL CAP CORE EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS (Continued)
Pharmaceuticals - 1.9%
Andrx Corp.(b) 38,200 $ 906,868
Valeant Pharmaceuticals
International(c) 41,150 652,228
-----------
1,559,096
-----------
Publishing & Printing - 1.3%
Banta Corp. 20,800 1,081,184
-----------
Real Estate - 2.4%
LaSalle Hotel Properties (REIT) 28,700 1,176,700
Trustreet Properties, Inc. (REIT) 50,450 766,336
-----------
1,943,036
-----------
Restaurants - 1.8%
Denny's Corp.(b) 160,600 764,456
Red Robin Gourmet Burgers,
Inc.(b)(c) 14,400 679,680
-----------
1,444,136
-----------
Retail Merchandising - 5.4%
The Children's Place Retail
Stores, Inc.(b) 8,250 477,675
Core-Mark Holding Co., Inc.(b) 22,100 845,546
Cost Plus, Inc.(b) 19,000 324,900
Jarden Corp.(b)(c) 34,325 1,127,576
Officemax, Inc. 32,500 980,525
Tractor Supply Co.(b) 9,500 630,230
-----------
4,386,452
-----------
Security Brokers & Dealers - 1.0%
Piper Jaffray Cos., Inc.(b) 15,300 841,500
-----------
Semiconductors & Related Devices - 2.5%
Kulicke & Soffa Industries, Inc.(b) 53,200 507,528
O2Micro International Ltd. -
ADR(b) 35,650 378,960
Rudolph Technologies, Inc.(b) 69,650 1,187,532
-----------
2,074,020
-----------
Telecommunications - 1.9%
RCN Corp.(b) 23,700 613,830
Ubiquitel, Inc.(b) 91,000 919,100
-----------
1,532,930
-----------
Transportation - 0.8%
Vitran Corp., Inc.(b) 33,800 678,366
-----------
TOTAL COMMON STOCKS
(Cost $69,212,691) 79,846,091
-----------
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- -------------
SHORT TERM INVESTMENTS - 6.6%
U.S. Treasury Bills
4.38%(d) 04/06/06 $1,400 $1,399,174
Galileo Money Market Fund 4,001 4,000,864
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $5,400,038) 5,400,038
----------
TOTAL MARKET VALUE OF SECURITIES
BEFORE INVESTMENT IN AFFILIATE
- 104.2%
(Cost $74,612,729) 85,246,129
----------
NUMBER
OF SHARES
-----------
INVESTMENT IN AFFILIATE - 10.2%
Institutional Money Market
Trust(e)
(Cost $8,352,036) 8,352,036 8,352,036
---------
TOTAL INVESTMENTS IN SECURITIES - 114.4%
(Cost $82,964,765(a)) 93,598,165
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (10.2)% (8,352,036)
LIABILITIES IN EXCESS OF
OTHER ASSETS - (4.2)% (3,449,061)
-----------
TOTAL NET ASSETS - 100% $81,797,068
===========
- -------------------
(a) Cost for federal income tax purposes is $83,096,128. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $11,320,498
Gross unrealized depreciation (818,461)
-----------
$10,502,037
===========
(b) Non-income producing security.
(c) Total or partial securities on loan.
(d) The rate shown is the effective yield on the discount notes at the time of
purchase.
(e) Securities purchased with the cash proceeds from securities loaned.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
69
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SMALL CAP GROWTH EQUITY PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 95.7%
Aerospace - 1.3%
BE Aerospace, Inc.(b) 288,800 $ 7,254,656
LMI Aerospace, Inc.(b) 80,000 1,451,200
------------
8,705,856
------------
Broadcasting - 2.2%
CKX, Inc.(b) 857,615 11,209,028
Outdoor Channel Holdings,
Inc.(b) 383,700 3,909,903
------------
15,118,931
------------
Business Services - 9.8%
Advisory Board Co.(b) 137,300 7,657,221
DiamondCluster International,
Inc.(b) 1,069,600 11,444,720
Digitas, Inc.(b) 478,010 6,883,344
eFunds, Corp.(b) 14,500 374,680
Forrester Research, Inc.(b) 399,700 8,921,304
Gartner, Inc. - Class A(b) 451,800 6,302,610
Global Payments, Inc.(c) 99,200 5,258,592
Healthcare Services Group, Inc. 332,200 7,095,792
Watson Wyatt Worldwide, Inc. 415,200 13,527,216
------------
67,465,479
------------
Chemicals - 0.9%
Agrium, Inc. 175,300 4,428,078
OM Group, Inc.(b) 76,700 1,764,100
------------
6,192,178
------------
Computer Software & Services - 17.3%
Aladdin Knowledge Systems(b) 350,300 7,864,235
The BISYS Group, Inc.(b) 251,898 3,395,585
Blackboard, Inc.(b) 289,000 8,210,490
CACI International, Inc.(b) 105,400 6,930,050
Foundry Networks, Inc.(b) 752,300 13,661,768
IHS, Inc.(b) 355,100 9,711,985
Interwoven, Inc.(b) 934,000 8,396,660
Progress Software Corp.(b) 258,600 7,522,674
SkillSoft PLC - ADR(b) 2,799,730 14,670,585
SonicWALL, Inc.(b) 1,854,800 13,150,532
Transaction Systems Architects,
Inc.(b) 343,900 10,733,119
VeriFone Holdings, Inc.(b) 367,200 11,122,488
Website Pros, Inc.(b) 251,650 3,535,683
------------
118,905,854
------------
Dental Equipment & Supplies - 1.1%
Align Technology, Inc.(b) 816,100 7,483,637
------------
Electronics - 1.8%
EMS Technologies, Inc.(b) 283,500 5,111,505
FLIR Systems, Inc.(b) 267,100 7,588,311
------------
12,699,816
------------
Energy & Utilities - 1.7%
Airgas, Inc. 302,900 11,840,361
------------
Entertainment & Leisure - 5.0%
Orient-Express Hotels Ltd. -
Class A 211,800 8,308,914
Scientific Games Corp. - Class
A(b) 200,800 7,054,104
Vail Resorts, Inc.(b) 320,900 12,264,798
World Wrestling Entertainment,
Inc. 407,600 6,888,440
------------
34,516,256
------------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Finance - 3.8%
Affiliated Managers Group,
Inc.(b)(c) 55,000 $ 5,863,550
Clayton Holdings, Inc.(b) 33,200 699,856
Net 1 UEPS Technologies, Inc.(b)
329,600 9,327,680
Wright Express Corp.(b)
355,900 9,982,995
-----------
25,874,081
-----------
Machinery & Heavy Equipment - 1.4%
Bucyrus International, Inc. - Class
A
81,493 3,927,148
Lennox International, Inc.
202,100 6,034,706
-----------
9,961,854
-----------
Manufacturing - 5.2%
Actuant Corp. - Class A 157,300 9,629,906
Crocs, Inc.(b)(c) 181,300 4,559,695
Gardner Denver, Inc.(b) 181,000 11,801,200
The Warnaco Group, Inc.(b) 402,000 9,648,000
-----------
35,638,801
-----------
Medical & Medical Services - 7.2%
Digene Corp.(b)
325,700 12,734,870
Digirad Corp.(b)
405,600 1,735,968
Noven Pharmaceuticals, Inc.(b) 665,500 11,985,655
Pediatrix Medical Group, Inc.(b) 132,200 13,569,008
Symbion, Inc.(b) 427,400 9,680,610
-----------
49,706,111
-----------
Medical Instruments & Supplies - 9.6%
Advanced Medical Optics, Inc.(b) 187,300 8,735,672
Bruker BioSciences Corp.(b) 463,100 2,500,740
Charles River Laboratories
International, Inc.(b) 155,088 7,602,414
Hologic, Inc.(b) 280,950 15,550,582
IntraLase Corp.(b) 384,000 8,908,800
Kyphon, Inc.(b)(c) 179,800 6,688,560
Martek Biosciences Corp.(b)(c) 241,900 7,941,577
Wright Medical Group, Inc.(b) 400,081 7,901,600
-----------
65,829,945
-----------
Metal & Mining - 1.2%
Massey Energy Co.(b) 234,200 8,447,594
-----------
Motor Vehicles - 0.7%
Wabash National Corp.
242,000 4,779,500
-----------
Oil & Gas - 5.3%
Atwood Oceanics, Inc.(b) 90,800 9,171,708
Comstock Resources, Inc.(b) 197,800 5,872,682
Hercules Offshore, Inc.(b) 51,900 1,765,119
Oceaneering International, Inc.(b) 115,000 6,589,500
Superior Energy Serivces, Inc.(b) 262,800 7,040,412
Trico Marine Services, Inc.(b)
197,500 6,379,250
-----------
36,818,671
-----------
Personal Services - 2.0%
Laureate Education, Inc.(b)(c) 261,800 13,974,884
-----------
Publishing & Printing - 0.6%
Playboy Enterprises, Inc. - Class
B(b) 295,303 4,193,302
-----------
Real Estate - 0.6%
Homestore, Inc.(b) 613,600 4,025,216
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SMALL CAP GROWTH EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Restaurants - 3.7%
Red Robin Gourmet Burgers,
Inc.(b)(c) 264,400 $ 12,479,680
Ruth's Chris Steak House, Inc.(b) 340,300 8,102,543
Texas Roadhouse, Inc.(b) 287,400 4,911,666
------------
25,493,889
------------
Retail Merchandising - 5.6%
Central Garden & Pet Co.(b) 169,000 8,980,660
The Children's Place Retail
Stores, Inc.(b) 127,900 7,405,410
Coldwater Creek, Inc.(b) 170,250 4,732,950
Dick's Sporting Goods, Inc.(b) 194,121 7,700,780
Jos. A. Bank Clothiers, Inc.(b)(c) 201,100 9,642,745
------------
38,462,545
------------
Semiconductors & Related Devices - 4.8%
Eagle Test Systems, Inc.(b) 162,900 2,508,660
Kulicke & Soffa Industries, Inc.(b) 513,400 4,897,836
Micrel, Inc.(b) 199,200 2,952,144
Microsemi Corp.(b) 343,500 9,999,285
MKS Instruments, Inc.(b) 119,700 2,804,571
O2Micro International Ltd. -
ADR(b) 238,068 2,530,663
Standard Microsystems Corp.(b) 295,300 7,671,894
------------
33,365,053
------------
Telecommunications - 2.9%
Polycom, Inc.(b)(c) 620,700 13,456,776
Syniverse Holdings, Inc.(b) 195,300 3,085,740
WinderThan Co. Ltd. - ADR(b) 259,800 3,434,556
------------
19,977,072
------------
TOTAL COMMON STOCKS
(Cost $503,757,700) 659,476,886
------------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 4.2%
U.S. Treasury Bills
4.38%(d) 04/06/06 $18,700 18,688,962
Galileo Money Market Fund 10,000 10,000,000
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $28,688,962) 28,688,962
----------
TOTAL MARKET VALUE OF SECURITIES
BEFORE INVESTMENT IN AFFILIATE
- 99.9%
(Cost $532,446,662) 688,165,848
-----------
NUMBER
OF SHARES
------------
INVESTMENT IN AFFILIATE - 8.6%
Institutional Money Market
Trust(e)
(Cost $59,674,945) 59,674,945 59,674,945
----------
VALUE
---------------
TOTAL INVESTMENTS IN SECURITIES - 108.5%
(Cost $592,121,607(a)) $747,840,793
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (8.6)% (59,674,945)
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.1% 846,006
------------
TOTAL NET ASSETS - 100% $689,011,854
============
- -------------------
(a) Cost for federal income tax purposes is $594,262,460. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $162,446,332
Gross unrealized depreciation (8,867,999)
------------
$153,578,333
============
(b) Non-income producing security.
(c) Total or partial securities on loan.
(d) The rate shown is the effective yield on the discount notes at the time of
purchase.
(e) Securities purchased with the cash proceeds from securities loaned.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
71
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 92.9%
Belgium - 1.0%
Telecommunications - 1.0%
Option NV(b) 3,400 $ 342,810
----------
Brazil - 0.6%
Telecommunications - 0.6%
Tim Participacoes SA - ADR(c) 6,000 222,180
----------
Canada - 0.5%
Pharmaceuticals - 0.5%
Cardiome Pharma Corp.(b) 12,682 161,061
----------
Cayman Islands - 0.8%
Semiconductors & Related Devices - 0.8%
ASM Pacific Technology Ltd. 46,000 274,489
----------
Finland - 1.6%
Telecommunications - 1.6%
Nokia Corp. - ADR(c) 25,700 532,504
----------
Germany - 2.1%
Computer Software & Services - 1.3%
SAP AG - ADR 8,000 434,560
----------
Manufacturing - 0.8%
MAN AG 4,000 277,612
----------
Total Germany 712,172
----------
India - 0.6%
Telecommunications - 0.6%
Bharti Tele-Ventures Ltd.(b) 22,000 193,913
----------
Italy - 0.6%
Computer Software & Services - 0.6%
Fastweb SpA(b) 3,800 193,919
----------
Japan - 3.7%
Computer Software & Services - 1.7%
Nippon System Development 7,100 247,324
Otsuka Corp. 2,900 340,263
----------
587,587
----------
Electronics - 0.6%
Matsushita Electric Industrial Co.
Ltd. 9,000 199,958
----------
Machinery & Heavy Equipment - 1.4%
Hitachi Construction Machinery
Co. Ltd. 10,100 266,015
Komatsu Ltd. 5,900 112,536
Nabtesco Corp. 9,200 114,277
----------
492,828
----------
Total Japan 1,280,373
----------
Mexico - 0.9%
Telecommunications - 0.9%
America Movil SA - ADR 8,600 294,636
----------
Netherlands - 0.4%
Business Services - 0.4%
Ordina NV 6,000 136,334
----------
Norway - 0.3%
Computer Software & Services - 0.3%
Fast Search & Transfer ASA(b) 30,000 112,152
----------
Singapore - 0.5%
Electronic Components & Accessories - 0.5%
Stats Chippac Ltd.(b) 220,000 175,635
----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
South Korea - 1.0%
Computer Software & Services - 0.6%
NHN Corp.(b) 700 $ 216,138
----------
Electronics - 0.4%
Samsung Electronics Co. Ltd. 200 129,683
----------
Total South Korea 345,821
----------
Taiwan - 1.7%
Computer & Office Equipment - 0.7%
Lite-On Technology Corp. 173,866 241,045
----------
Electronics - 0.6%
Hon Hai Precision Industry Co.
Ltd. 30,495 188,841
----------
Manufacturing - 0.4%
Wistron Corp.(b) 120,000 143,815
----------
Total Taiwan 573,701
----------
United Kingdom - 2.0%
Aerospace - 0.6%
Meggitt PLC 35,900 217,058
----------
Computer Software & Services - 0.5%
Autonomy Corp. PLC(b) 19,100 161,775
----------
Semiconductors & Related Devices - 0.4%
Wolfson Microelectronics PLC(b) 18,600 142,997
----------
Telephone Communications - 0.5%
Colt Telecom Group PLC(b) 134,600 171,299
----------
Total United Kingdom 693,129
----------
United States - 74.6%
Advertising - 1.7%
Monster Worldwide, Inc.(b) 7,900 393,894
Valueclick, Inc,(b) 10,500 177,660
----------
571,554
----------
Aerospace - 1.5%
Goodrich Corp.(c)
4,000 174,440
Lockheed Martin Corp.
4,300 323,059
----------
497,499
----------
Business Services - 3.4%
Accenture Ltd. 5,400 162,378
Akamai Technologies, Inc.(b)(c) 14,900 490,061
Aquantive, Inc.(b) 11,500 270,710
Huron Consulting Group, Inc.(b)
7,800 236,262
----------
1,159,411
----------
Computer & Office Equipment - 7.1%
Apple Computer, Inc.(b) 4,900 307,328
Cisco Systems, Inc.(b)(c) 31,100 673,937
Hewlett-Packard Co. 20,700 681,030
International Business Machines
Corp. 6,100 503,067
Network Appliance, Inc.(b) 7,700 277,431
----------
2,442,793
----------
Computer Software & Services - 14.7%
Adobe Systems, Inc.(b) 11,100 387,612
Advanced Micro Devices, Inc.(b) 7,000 232,120
Automatic Data Processing, Inc. 4,500 205,560
BEA Systems, Inc.(b) 36,300 476,619
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Computer Software & Services (Continued)
Cadence Design Systems, Inc.(b) 14,300 $ 264,407
Ceridian Corp.(b) 12,400 315,580
Cognos, Inc.(b) 5,000 194,500
Electronic Arts, Inc.(b) 3,200 175,104
EMC Corp.(b) 14,600 198,998
Foundry Networks, Inc.(b) 11,300 205,208
Google, Inc. - Class A(b)(c) 900 351,000
Informatica Corp.(b) 15,500 241,025
Microsoft Corp.(c) 18,700 508,827
Oracle Corp.(b) 37,100 507,899
Sybase, Inc.(b) 7,600 160,512
TIBCO Software, Inc.(b) 21,400 178,904
Unica Corp.(b) 7,400 85,766
Yahoo! Inc.(b)(c) 10,700 345,182
----------
5,034,823
----------
Electronics - 5.9%
Agilent Technologies, Inc.(b) 7,500 281,625
Coherent, Inc.(b) 4,300 150,973
Himax Technologies, Inc.(b) 4,000 35,000
Intersil Corp. - Class A 11,300 326,796
KEMET Corp.(b) 29,100 275,577
Molex, Inc. 7,400 245,680
National Semiconductor Corp. 13,700 381,408
TTM Technologies, Inc.(b) 21,500 311,535
----------
2,008,594
----------
Insurance - 1.5%
Aetna, Inc. 3,000 147,420
Cigna Corp.(c) 1,500 195,930
WellPoint, Inc.(b) 2,000 154,860
----------
498,210
----------
Manufacturing - 1.6%
Corning, Inc.(b) 12,200 328,302
Powerwave Technologies, Inc.(b) 15,300 206,397
----------
534,699
----------
Measuring & Controlling Devices - 1.2%
KLA-Tencor Corp. 8,500 411,060
----------
Medical & Medical Services - 3.8%
Amgen, Inc.(b) 4,800 349,200
Caremark Rx, Inc.(b) 4,100 201,638
Davita, Inc.(b) 4,000 240,840
Medco Health Solutions, Inc.(b) 3,450 197,409
MedImmune, Inc.(b)(c) 8,800 321,904
----------
1,310,991
----------
Medical Instruments & Supplies - 2.1%
C.R. Bard, Inc. 2,400 162,744
Varian Medical Systems,
Inc.(b)(c) 4,500 252,720
Waters Corp.(b) 7,276 313,959
----------
729,423
----------
Pharmaceuticals - 10.8%
Adolor Corp.(b) 2,434 57,929
Advanced Magnetics, Inc,.(b) 2,018 77,189
Alexion Pharmaceuticals,
Inc.(b)(c) 17,000 602,140
Allergan, Inc.(c) 1,900 206,150
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Pharmaceuticals (Continued)
Amylin Pharmaceuticals,
Inc.(b)(c) 8,750 $ 428,312
BioMarin Pharmaceutical,
Inc.(b)(c) 12,700 170,434
Gilead Sciences, Inc.(b) 3,800 236,436
GlaxoSmithKline PLC - ADR 4,450 232,780
ImClone Systems, Inc.(b)(c) 4,497 152,988
Keryx Biopharmaceuticals, Inc.(b) 14,393 275,050
Merck & Co., Inc.(c) 4,300 151,489
Novartis AG - ADR 4,250 235,620
Renovis, Inc.(b)(c) 12,156 259,166
Sanofi-Aventis - ADR(c) 3,547 168,305
Schering-Plough Corp. 8,300 157,617
Shire PLC - ADR 6,400 297,536
-----------
3,709,141
-----------
Retail Merchandising - 0.5%
CVS Corp.
6,300 188,181
-----------
Semiconductors & Related Devices - 11.2%
Agere Systems, Inc. - ADR(b) 11,700 175,968
Analog Devices, Inc. 6,200 237,398
Applied Materials, Inc. 19,300 337,943
ASML Holding N.V.(b) 9,300 189,441
Atheros Communications(b) 23,000 602,370
Broadcom Corp. - Class A(b)(c) 13,350 576,186
Lam Research Corp.(b) 5,500 236,500
Marvell Technology Group Ltd.(b) 5,400 292,140
MEMC Electronic Materials,
Inc.(b)
9,600 354,432
NVIDIA Corp.(b)(c)
11,100 635,586
Semtech Corp.(b) 11,000 196,790
-----------
3,834,754
-----------
Telecommunications - 7.6%
ADC Telecommunications, Inc.(b)
6,400 163,776
Alcatel SA - SP ADR(b)
17,700 272,580
ALLTEL Corp. 3,900 252,525
Amdocs Ltd.(b) 6,800 245,208
Comverse Technology, Inc.(b) 6,700 157,651
Harris Corp.(c)
7,000 331,030
Motorola, Inc.(c)
18,200 416,962
Oplink Communications, Inc.(b) 10,000 173,400
Qualcomm, Inc. 11,900 602,259
-----------
2,615,391
-----------
Total United States 25,546,524
-----------
TOTAL COMMON STOCKS
(Cost $26,213,619) 31,791,353
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
73
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- -------------
SHORT TERM INVESTMENTS - 8.3%
U.S. Treasury Bills
4.38%(d) 04/06/06 $1,200 $1,199,292
Galileo Money Market Fund 1,650 1,650,259
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $2,849,551) 2,849,551
----------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND
INVESTMENT IN AFFILIATE - 101.2%
(Cost $29,063,170) 34,640,904
----------
SECURITIES LENDING COLLATERAL - 3.7%
Bank of America, Master Notes
4.08%(e)(f) 04/03/06 645 644,868
Citibank, Master Notes
4.94%(e)(f) 04/03/06 152 151,765
Morgan Stanley, Floating Rate
Notes
4.94%(e)(f) 04/03/06 483 482,888
---------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $1,279,521) 1,279,521
---------
NUMBER
OF SHARES
-----------
INVESTMENT IN AFFILIATE - 17.3%
Institutional Money Market
Trust(f)
(Cost $5,924,510) 5,924,510 5,924,510
---------
TOTAL INVESTMENTS IN SECURITIES - 122.2%
(Cost $36,267,201(a)) 41,844,935
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (21.0)% (7,204,031)
LIABILITIES IN EXCESS OF
OTHER ASSETS - (1.2)% (409,931)
-----------
TOTAL NET ASSETS - 100% $34,230,973
===========
- -------------------
(a) Cost for federal income tax purposes is $36,320,893. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $5,705,110
Gross unrealized depreciation (181,068)
----------
$5,524,042
==========
(b) Non-income producing security.
(c) Total or partial securities on loan.
(d) The rate shown is the effective yield on the discount notes at the time of
purchase.
(e) Rates shown are the rates as of March 31, 2006.
(f) Securities purchased with the cash proceeds from securities loaned.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
74
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GLOBAL RESOURCES PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 100.2%
Canada - 24.5%
Banks - 0.0%
Quest Capital Corp. 61,000 $ 157,221
-----------
Metal & Mining - 4.6%
AXMIN, Inc.(b) 2,581,000 1,591,232
Bema Gold Corp.(b) 250,000 1,107,500
Crystallex International Corp.
(acquired 01/20/05, cost
$ 1,503,200)(b)(c) 500,000 2,042,214
European Goldfields Ltd.(b) 561,400 1,946,885
Frontier Pacific Mining Corp.(b) 3,024,300 1,553,778
Gateway Gold Corp.(b) 500,000 620,799
Gold Reserve, Inc.(b) 1,000,000 5,910,000
Golden Star Resources Ltd.(b)(d) 789,408 2,494,255
Mag Silver Corp.(b) 2,026,200 7,373,678
Mena Resources, Inc.(b) 20,000 16,269
Minefinders Corp. Ltd.(b) 250,000 1,930,000
Nevsun Resources Ltd. (acquired
8/8/97 through 9/9/04, cost
$ 4,883,732)(b)(c)(d)(e) 1,554,800 4,366,780
NovaGold Resources, Inc.(b)(d) 691,418 10,578,695
Orezone Resources, Inc.(b) 500,000 1,113,157
Polymet Mining Corp.(b) 500,000 1,284,412
Radius Gold, Inc.(b) 569,700 409,768
Romarco Minerals, Inc.(b) 223,000 46,783
Southwestern Resources Corp.(b) 566,900 6,698,823
Stratagold Corp.(b) 1,000,000 941,902
Sunridge Gold Corp.(b) 1,249,577 2,749,851
Triex Minerals Corp. (acquired
12/23/05, cost $671,761)(c)(f) 312,100 649,401
Virginia Gold Mines, Inc.(b) 11,500 148,495
X-Cal Resources Ltd.(b) 1,755,500 526,116
-----------
56,100,793
-----------
Motor Vehicles - 0.1%
Westport Innovations, Inc.
(acquired 12/17/03 through
9/15/04, cost
$ 1,052,339)(b)(c)(e) 959,500 772,299
-----------
Oil & Gas - 19.7%
Accrete Energy, Inc.(b) 13,690 93,779
Alberta Clipper Energy, Inc.(b) 379,215 1,104,021
Baytex Energy Trust 496,948 8,599,837
Bow Valley Energy Ltd.(b) 634,600 3,206,011
C1 Energy Ltd.(b) 647,099 1,163,598
Canadian Superior Energy,
Inc.(b) 1,091,000 2,552,940
Canex Energy, Inc.(b) 403,200 1,173,849
Capitol Energy Resources Ltd.(b) 438,026 1,800,336
Chamaelo Exploration Ltd.(b) 202,180 1,073,354
Cinch Energy Corp.(b) 901,980 1,822,728
Compton Petroleum Corp.(b) 1,171,300 14,933,987
Crew Energy, Inc. (acquired
6/24/98 through 3/10/06, cost
$ 3,002,247)(b)(c) 727,137 10,117,717
Cyries Energy, Inc.(b) 69,096 789,263
Daylight Energy Trust 152,170 1,587,047
Delphi Energy Corp.(b) 831,300 3,637,405
Ember Resources, Inc.(b) 274,224 1,467,568
Endev Energy, Inc.(b) 1,538,300 2,331,456
Equinox Minerals Ltd.(b) 1,552,114 2,046,715
Esprit Energy Trust 533,525 5,450,146
Fairborne Energy Trust 317,020 3,887,251
Fairquest Energy Ltd.(b) 520,567 2,852,788
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Canada (Continued)
Oil & Gas (Continued)
First Calgary Petroleums Ltd.(b) 740,786 $ 5,550,265
Galleon Energy, Inc. - Class A
(acquired 01/20/05 through
03/13/06, cost
$ 9,925,963)(b)(c)(f) 1,166,988 33,974,904
Hawker Resources, Inc.(b) 227,509 876,646
Highpine Oil & Gas Ltd.(b) 39,246 781,329
HSE Integrated Ltd.(b) 28,238 89,464
Innova Exploration Ltd. (acquired
10/31/05, cost $384,983)(c)(f) 155,000 970,202
KICK Energy Ltd.(b) 219,700 1,183,297
Leader Energy Services Ltd.(b) 454,104 1,629,230
Masters Energy, Inc.(b) 27,741 116,157
Midnight Oil Exploration Ltd.
(acquired 01/20/05 through
12/12/05, cost
$ 3,587,330)(b)(c) 1,127,700 3,804,545
Niko Resources Ltd. (acquired
5/2/03 through 11/10/03, cost
$ 689,948)(c) 39,000 1,970,287
Oilexco, Inc.(b) 1,617,675 6,510,316
Open Range Energy Corp.(b) 48,061 187,250
Pacific Rodera Energy, Inc.(b) 990,200 1,093,769
Paramount Resources Ltd. -
Class A(b) 377,100 13,448,829
Penn West Energy Trust 1,439,400 52,616,334
Petrolifera Petroleum Ltd.(b) 199,615 2,093,834
Point North Energy Ltd.(e) 147,124 141,096
Prairie Schooner Petroleum
Ltd.(b) 40,900 695,187
ProEx Energy Ltd.(b) 69,096 867,361
ProspEx Resources Ltd.(b) 1,504,120 5,280,551
Real Resources, Inc.(b) 412,737 8,128,570
Sequoia Oil & Gas Trust 297,320 4,811,704
Tag Oil Ltd. (acquired 09/22/05,
cost $218,247)(c)(f) 198,000 122,070
Technicoil Corp. (acquired
6/15/04, cost $548,935)(b)(c) 753,100 1,895,889
Thunder Energy Trust
568,896 4,924,895
Trilogy Energy Trust
308,900 5,144,586
True Energy Trust 138,434 1,845,625
Tusk Energy Corp. (acquired
03/14/05, cost
$ 1,123,911)(b)(c)(f) 599,192 2,011,245
Vault Energy Trust 130,450 1,119,244
Vero Energy, Inc.(b) 91,643 482,601
West Energy Ltd.(b) 2,735 13,115
Zenas Energy Corp. (acquired
5/18/04 through 3/16/06, cost
$ 2,412,356)(b)(c)(f) 526,585 2,105,709
------------
238,177,902
------------
Transportation - 0.1%
Railpower Technologies Corp.(b) 360,600 1,389,476
------------
Total Canada 296,597,691
------------
China - 0.0%
Oil & Gas - 0.0%
Innova Exploration Ltd.(b) 77,609 485,783
------------
Norway - 0.5%
Transportation - 0.5%
Stolt-Nielsen SA (acquired
01/20/05, cost $2,320,388)(c) 170,000 5,265,808
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
75
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GLOBAL RESOURCES PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United Kingdom - 2.0%
Energy & Utilities - 0.1%
ITM Power PLC(b) 335,200 $ 1,268,131
------------
Finance - 0.2%
Archipelago Holdings, Inc.
(acquired 05/13/05, cost
$ 1,453,189)(c)(f) 2,247,400 1,440,816
------------
Oil & Gas - 1.7%
Expro International Group PLC 563,941 7,260,285
Tullow Oil PLC 1,244,198 7,328,094
Venture Production PLC(b) 514,729 6,108,030
------------
20,696,409
------------
Total United Kingdom 23,405,356
------------
United States - 73.2%
Conglomerates - 1.6%
Stolt-Nielsen SA (acquired
2/18/04 through 9/9/04, cost
$ 8,931,236)(c) 626,100 19,221,270
------------
Energy & Utilities - 1.8%
KFX, Inc.(b)(d) 393,400 7,159,880
Longview Energy Co. (acquired
8/13/04, cost
$ 1,281,000)(c)(e)(f) 85,400 1,579,900
McDermott International, Inc.(b) 245,900 13,389,255
------------
22,129,035
------------
Finance - 0.1%
NGP Capital Resources Co. 64,500 877,200
------------
Manufacturing - 2.0%
Maverick Tube Corp.(b)(d) 314,679 16,674,840
NS Group, Inc.(b) 150,000 6,904,500
OYO Geospace Corp.(b) 3,350 197,617
------------
23,776,957
------------
Metal & Mining - 23.3%
Alpha Natural Resources,
Inc.(b)(d) 27,500 636,350
Arch Coal, Inc.(d) 739,600 56,165,224
CONSOL Energy, Inc. (acquired
8/13/01 through 4/21/04, cost
$ 22,036,964)(c) 1,151,600 85,402,656
Crystallex International Corp.(b) 1,502,400 6,174,864
Massey Energy Co.(b)(d) 1,663,040 59,985,853
Peabody Energy Corp.(d) 1,378,236 69,476,876
Randgold Resources Ltd.(b) 200,000 3,634,000
Viceroy Exploration Ltd.(b) 18,300 132,492
------------
281,608,315
------------
Oil & Gas - 42.7%
Allis-Chalmers Energy, Inc.(b) 96,500 1,315,295
American Oil & Gas, Inc.(b) 89,926 388,480
BJ Services Co. 802,600 27,769,960
Bois d'Arc Energy, Inc.(b) 101,900 1,696,635
Brigham Exploration Co.(b) 81,900 717,444
Callon Petroleum Co.(b) 76,534 1,608,745
CanArgo Energy Corp.(b) 5,024,200 5,476,378
Clayton Williams Energy, Inc.(b) 267,021 10,926,499
Comstock Resources, Inc.(b) 351,300 10,430,097
Cross Timbers Royalty Trust 2,490 115,984
Denbury Resources, Inc.(b) 447,600 14,175,492
Diamond Offshore Drilling, Inc.(d) 558,300 49,967,850
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Oil & Gas (Continued)
The Exploration Co.(b)(d) 179,600 $ 2,018,704
Global Industries, Inc.(b) 189,496 2,745,797
Grant Prideco, Inc.(b) 96,200 4,121,208
Halliburton Co.(d) 258,700 18,890,274
Hercules Offshore, Inc.(b) 68,900 2,343,289
Matador Resources Co. (acquired
10/14/03, cost
$ 978,460)(c)(e)(f) 97,846 1,467,690
Nabors Industries Ltd.(b)(d) 84,500 6,048,510
Newfield Exploration Co.(b)(d)
1,118,110 46,848,809
Newpark Resources, Inc.(b)
500,000 4,100,000
Noble Corp.(d)
240,700 19,520,770
Parallel Petroleum Corp.(b) 163,032 3,007,941
Patterson-UTI Energy, Inc. 297,101 9,495,348
Penn Virginia Corp. 560,000 39,760,000
PetroQuest Energy, Inc.(b) 494,654 4,991,059
Pioneer Natural Resources Co.(d) 379,200 16,779,600
Plains Exploration & Production
Co.(b) 1,087,505 42,021,193
Precision Drilling Trust(d) 152,700 4,938,318
Pride International, Inc.(b)(d) 528,100 16,466,158
Rowan Cos., Inc.(d)
555,900 24,437,364
Schlumberger Ltd.(d)
180,000 22,782,600
Southwestern Energy Co.(b) 573,600 18,464,184
Transocean, Inc.(b) 670,100 53,809,030
Treasure Island Royalty Trust
(acquired 01/20/05, cost
$ 10,149)(b)(c) 507,439 416,100
Weatherford International
Ltd.(b)(d) 577,197 26,406,784
--------------
516,469,589
--------------
Transportation - 1.7%
Hornbeck Offshore Services,
Inc.(b)(d)
142,900 5,154,403
OMI Corp.(d) 863,200 15,554,864
Stealthgas, Inc. 33,000 458,700
--------------
21,167,967
--------------
Waste Management - 0.0%
Republic Resources, Inc.(b) 28,750 1,150
--------------
Total United States 885,251,483
--------------
TOTAL COMMON STOCKS
(Cost $607,908,549)
1,211,006,121
--------------
WARRANTS - 0.0%
Nevsun Resources Ltd. (issued
12/18/03, expiring 12/18/08,
strike price 10.00 CAD)
(acquired 01/20/05, cost
$ 3)(c)(e)(f)(g) 250,000 224,772
Point North Energy Ltd. (issued
07/24/03, expiring 07/23/08,
strike price 5.00 CAD)
(acquired 7/24/03, cost
$ 74)(c)(e)(f)(h) 147,124 201,566
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
76
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GLOBAL RESOURCES PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ------------
WARRANTS (Continued)
Triex Minerals Corp. (issued
12/23/05, expiring 12/23/06,
strike price 3.00 CAD)
(acquired 12/23/05, cost
$ 0)(c)(e)(f)(k) 156,050 $ 46,767
----------
TOTAL WARRANTS
(Cost $76) 473,105
----------
SHORT TERM INVESTMENTS - 0.1%
Galileo Money Market Fund
(Cost $1,096,798) 1,096,798 1,096,798
----------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 100.3%
(Cost $609,005,423) 1,212,576,024
-------------
PAR/SHARES
MATURITY (000)
---------- -----------
SECURITIES LENDING COLLATERAL - 1.9%
Banco Santander, Certificate of
Deposit
4.34%(i) 04/10/06 $6,178 6,177,892
Bank of America, Master Notes
4.08%(i)(j) 04/03/06 10,915 10,915,218
Morgan Stanley, Floating Rate
Notes
4.94%(i)(j) 04/03/06 5,968 5,967,896
----------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $23,061,006) 23,061,006
----------
NUMBER
OF SHARES
-------------
INVESTMENT IN AFFILIATE - 15.8%
Institutional Money Market Trust(i)
(Cost $191,209,858) 191,209,858 191,209,858
--------------
TOTAL INVESTMENT IN SECURITIES - 118.0%
(Cost $823,276,287(a)) 1,426,846,888
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (17.7)% (214,270,864)
LIABILITIES IN EXCESS OF
OTHER ASSETS - (0.3)% (3,148,300)
--------------
TOTAL NET ASSETS - 100% $1,209,427,724
==============
- -------------------
(a) Cost for federal income tax purposes is $823,507,482. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $611,247,093
Gross unrealized depreciation (7,907,687)
------------
$603,339,406
============
(b) Non-income producing security.
(c) Security restricted as to public resale. These securities are ineligible
for resale into the public market until such time that either (I) a
resale Registration Statement has been filed with the SEC and declared
effective or (II) resale is permitted under Rule 144A without the need
for an effective registration statement. As of March 31, 2006, the
Portfolio held 14.9% of its net assets, with a current market value of
$180,070,607 and a current cost of $67,016,415 in these securities.
(d) Total or partial securities on loan.
(e) Security is illiquid. As of March 31, 2006, the Portfolio held 0.7% of
its net assets, with a current market value of $8,800,870 in these
securities.
(f) Security valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, these securities
had a total market value of $44,795,042, which represents 3.7% of net
assets.
(g) As of March 31, 2006, the aggregate amount of shares called for by these
warrants is 250,000. These warrants were exercisable as of 12/18/03.
(h) As of March 31, 2006, the aggregate amount of shares called for by these
warrants is 147,124. These warrants were exercisable as of 7/24/03.
(i) Securities purchased with the cash proceeds from securities loaned.
(j) Rates shown are the rates as of March 31, 2006.
(k) As of March 31, 2006, the aggregate amount of shares called for by these
warrants is 156,050. These warrants were exercisable as of 12/23/05.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
77
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ALL-CAP GLOBAL RESOURCES PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 88.8%
Australia - 0.8%
Metal & Mining - 0.8%
BHP Billiton Ltd. - ADR 115,690 $ 4,610,246
-----------
Austria - 1.9%
Oil & Gas - 1.9%
OMV AG 157,760 10,553,276
-----------
Canada - 12.6%
Metal & Mining - 1.6%
Teck Cominco Ltd. 140,630 9,048,198
-----------
Oil & Gas - 11.0%
Compton Petroleum Corp.(b) 460,580 5,872,360
Galleon Energy, Inc. - Class A
(acquired 02/22/05 through
03/31/06, cost
$ 6,644,560)(b)(c) 402,550 11,719,570
Husky Energy, Inc. 134,080 8,111,275
Nexen, Inc. 81,840 4,505,983
Pason Systems, Inc. 117,770 3,154,382
Penn West Energy Trust 174,050 6,362,285
Petro Canada 122,710 5,818,966
Real Resources, Inc.(b) 158,612 3,123,754
Talisman Energy, Inc. - ADR 260,970 13,878,385
-----------
62,546,960
-----------
Total Canada 71,595,158
-----------
China - 0.5%
Metal & Mining - 0.5%
Eldorado Gold Corp.(b) 538,600 2,601,108
-----------
Denmark - 0.1%
Oil & Gas - 0.1%
A P Moller - Maersk A/S 40 343,629
-----------
France - 0.4%
Oil & Gas - 0.4%
Total SA - ADR(d) 19,490 2,567,418
-----------
Netherlands - 2.3%
Oil & Gas - 2.3%
Core Laboratories NV(b) 172,940 8,223,297
SBM Offshore NV 48,560 4,869,653
-----------
Total Netherlands 13,092,950
-----------
Norway - 3.5%
Oil & Gas - 3.5%
Statoil ASA - ADR(d) 496,980 14,153,990
Stolt Offshores SA(b) 364,340 5,726,169
-----------
Total Norway 19,880,159
-----------
United Kingdom - 4.3%
Oil & Gas - 4.3%
BG Group PLC - ADR 134,080 8,408,157
BP PLC - ADR 57,880 3,990,247
Cairn Energy PLC(b) 325,580 12,020,388
-----------
Total United Kingdom 24,418,792
-----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States - 62.4%
Energy & Utilities - 3.3%
McDermott International, Inc.(b) 197,190 $10,736,995
Questar Corp. 113,860 7,975,893
-----------
18,712,888
-----------
Food & Agriculture - 0.5%
Potash Corp. of Saskatchewan,
Inc.(d) 29,000 2,554,610
-----------
Machinery & Heavy Equipment - 1.2%
FMC Technologies, Inc.(b) 127,400 6,525,428
-----------
Manufacturing - 0.9%
Tenaris SA - ADR 29,728 5,370,958
-----------
Metal & Mining - 14.0%
Arch Coal, Inc.(d) 113,600 8,626,784
CONSOL Energy, Inc.(d) 189,200 14,031,072
Goldcorp, Inc. 480,895 14,066,179
Massey Energy Co.(b)(d) 403,770 14,563,984
Newmont Mining Corp.(d) 82,980 4,305,832
Pan American Silver Corp.(b)(d) 246,330 6,256,782
Peabody Energy Corp.(d)
225,580 11,371,488
Silver Standard Resources,
Inc.(b)(d)
301,990 6,208,914
-----------
79,431,035
-----------
Oil & Gas - 42.5%
Amerada Hess Corp.(d) 77,880 11,090,112
Anadarko Petroleum Corp. 37,687 3,806,764
Bois d'Arc Energy, Inc.(b)(d) 82,250 1,369,462
Canadian Natural Resources Ltd. 266,860 14,781,375
Chesapeake Energy Corp.(d) 246,330 7,737,225
CNX Gas Corp. (acquired
08/01/05, cost
$ 153,600)(b)(c)(e) 9,600 249,600
ConocoPhillips(d) 82,100 5,184,615
Double Eagle Petroleum
Co.(b)(d) 55,391 1,017,533
El Paso Corp. 198,400 2,390,720
EnCana Corp.(d) 206,700 9,659,091
ENSCO International, Inc. 217,430 11,186,773
EOG Resources, Inc.(d) 179,940 12,955,680
Exxon Mobil Corp.(d)
39,040 2,375,974
Forest Oil Corp.(b)
100,242 3,726,998
Global Industries, Inc.(b) 202,380 2,932,486
GlobalSantaFe Corp. 267,090 16,225,718
Goodrich Petroleum Corp.(b)(d) 83,300 2,249,100
Grant Prideco, Inc.(b)(d) 192,040 8,226,994
Hercules Offshore, Inc.(b)(d) 99,000 3,366,990
Hydril(b)
84,360 6,575,862
Kerr-McGee Corp.
104,500 9,977,660
Nabors Industries Ltd.(b)(d) 45,090 3,227,542
National-Oilwell, Inc.(b) 113,289 7,264,091
Newfield Exploration Co.(b)(d) 257,800 10,801,820
Noble Corp.(d) 54,280 4,402,108
Noble Energy, Inc. 241,610 10,611,511
Occidental Petroleum Corp. 65,235 6,044,023
Plains Exploration & Production
Co.(b)
100,100 3,867,864
Range Resources Corp.
111,235 3,037,828
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
78
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ALL-CAP GLOBAL RESOURCES PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
United States (Continued)
Oil & Gas (Continued)
Schlumberger Ltd.(d) 37,050 $ 4,689,418
Southwestern Energy Co.(b) 95,920 3,087,665
Suncor Energy, Inc.(d) 140,630 10,831,323
Transocean, Inc.(b)(d) 219,650 17,637,895
Tronox Inc. - Class B(b) 20,708 351,836
Weatherford International Ltd.(b) 195,380 8,938,635
XTO Energy, Inc. 191,533 8,345,093
------------
240,225,384
------------
Total United States 352,820,303
------------
TOTAL COMMON STOCKS
(Cost $427,834,526) 502,483,039
------------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 8.1%
Federal Home Loan Bank,
Discount Notes
4.55%(f) 04/03/06 $35,700 35,690,976
Galileo Money Market Fund 10,000 10,000,000
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $45,690,976) 45,690,976
----------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 96.9%
(Cost $473,525,502) 548,174,015
-----------
SECURITIES LENDING COLLATERAL - 3.1%
Banco Santander, Certificate of
Deposit
4.34%(g) 04/10/06 4,440 4,440,405
Bank of America, Master Notes
4.08%(g)(h) 04/03/06 11,476 11,475,939
Morgan Stanley, Floating Rate
Notes
4.94%(g)(h) 04/03/06 1,944 1,943,765
----------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $17,860,109) 17,860,109
----------
NUMBER
OF SHARES
------------
INVESTMENT IN AFFILIATE - 14.7%
Institutional Money Market
Trust(g)
(Cost $83,058,826) 83,058,826 83,058,826
----------
TOTAL INVESTMENTS IN SECURITIES - 114.7%
(Cost $574,444,437(a)) 649,092,950
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (17.8)% (100,918,935)
OTHER ASSETS IN EXCESS OF
LIABILITIES - 3.1% 17,519,661
------------
TOTAL NET ASSETS - 100% $565,693,676
============
- -------------------
(a) Cost for federal income tax purposes is $574,829,875. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $79,158,593
Gross unrealized depreciation (4,895,518)
-----------
$74,263,075
===========
(b) Non-income producing security.
(c) Security restricted as to public resale. These securities are ineligible
for resale into the public market until such time that either (I) a
resale Registration Statement has been filed with the SEC and declared
effective or (II) resale is permitted under Rule 144A without the need
for an effective registration statement. As of March 31, 2006, the
Portfolio held 2.1% of its net assets, with a current market value of
$11,969,170 and a current cost of $6,798,160 in these securities.
(d) Total or partial securities on loan.
(e) Securities valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, these securities
had a total market value of $249,600 which represents less than 0.1% of
net assets.
(f) The rate shown is the effective yield on the discount notes at the time
of purchase.
(g) Securities purchased with the cash proceeds from securities loaned.
(h) Rates shown are the rates as of March 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
79
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
HEALTH SCIENCES PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 93.2%
Insurance - 9.2%
Aetna, Inc. 530,000 $ 26,044,200
Cigna Corp.(b) 166,700 21,774,354
WellPoint, Inc.(c) 256,736 19,879,068
------------
67,697,622
------------
Medical & Medical Services - 21.1%
Amgen, Inc.(b)(c) 343,423 24,984,023
Baxter International, Inc. 175,450 6,809,214
Caremark Rx, Inc.(c) 772,270 37,980,239
Community Health Systems,
Inc.(c) 175,130 6,330,950
Davita, Inc.(c) 244,300 14,709,303
Digene Corp.(c) 111,900 4,375,290
Exelixis, Inc.(c) 358,100 4,300,781
Manor Care, Inc. 232,800 10,324,680
Medco Health Solutions, Inc.(c) 482,720 27,621,238
MedImmune, Inc.(b)(c) 457,426 16,732,643
------------
154,168,361
------------
Medical Instruments & Supplies - 13.7%
Advanced Medical Optics, Inc.(c) 127,200 5,932,608
Aspect Medical Systems, Inc.(c) 88,381 2,425,175
Becton, Dickinson & Co. 123,000 7,574,340
C.R. Bard, Inc. 125,300 8,496,593
Cytyc Corp.(b)(c) 119,000 3,353,420
DENTSPLY International, Inc. 146,703 8,530,779
Respironics, Inc.(c) 402,700 15,669,057
Sybron Dental Specialties, Inc.(c) 52,579 2,168,358
Varian Medical Systems,
Inc.(b)(c) 375,300 21,076,848
Waters Corp.(c) 424,600 18,321,490
Wright Medical Group, Inc.(c) 323,398 6,387,111
------------
99,935,779
------------
Pharmaceuticals - 47.8%
Abbott Laboratories 154,600 6,565,862
Adolor Corp.(c) 109,249 2,600,126
Advanced Magnetics, Inc.(c) 144,360 5,521,770
Alexion Pharmaceuticals,
Inc.(b)(c) 857,600 30,376,192
Allergan, Inc.(b) 72,500 7,866,250
Amylin Pharmaceuticals,
Inc.(b)(c) 457,200 22,379,940
Arena Pharmaceuticals, Inc.(b)(c) 392,578 7,109,588
AstraZeneca PLC - ADR(b) 153,330 7,701,766
BioMarin Pharmaceutical,
Inc.(b)(c) 839,273 11,263,044
Bristol-Myers Squibb Co.(b) 304,800 7,501,128
Cardiome Pharma Corp.(c) 1,037,731 13,179,184
Cortex Pharmaceuticals,
Inc.(b)(c) 266,200 1,397,550
Gene Logic, Inc.(c) 468,938 2,152,425
Gilead Sciences, Inc.(c) 184,000 11,448,480
GlaxoSmithKline PLC - ADR 355,700 18,606,667
ImClone Systems, Inc.(b)(c) 110,595 3,762,442
InterMune, Inc.(b)(c) 193,481 3,587,138
Keryx Biopharmaceuticals, Inc.(c) 726,521 13,883,816
Kosan Biosciences, Inc.(c) 285,900 1,683,951
Merck & Co., Inc.(b) 633,900 22,332,297
Novartis AG - ADR 277,700 15,395,688
Pfizer, Inc. 856,359 21,340,466
Regeneron Pharmaceuticals,
Inc.(c) 317,600 5,281,688
Renovis, Inc.(b)(c) 628,535 13,400,366
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Pharmaceuticals (Continued)
Roche Holding AG 241,600 $ 17,941,820
Sanofi-Aventis - ADR(b) 80,889 3,838,183
Schering-Plough Corp. 1,408,400 26,745,516
Shire PLC - ADR
435,300 20,237,097
Speedel Holding AG(c)
6,700 925,095
Wyeth 495,200 24,027,104
------------
350,052,639
------------
Retail Merchandising - 1.4%
CVS Corp. 342,500 10,230,475
------------
TOTAL COMMON STOCKS
(Cost $625,564,917) 682,084,876
------------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 11.3%
Federal Home Loan Bank,
Discount Notes
4.55%(d) 04/03/06 $65,800 65,783,367
U.S. Treasury Bills
4.41% 05/11/06 7,000 6,966,983
Galileo Money Market Fund 9,908 9,907,509
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $82,656,576) 82,657,859
----------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 104.5%
(Cost $708,221,493) 764,742,735
-----------
SECURITIES LENDING COLLATERAL - 1.9%
Banco Santander, Certificate of
Deposit
4.34%(e) 04/10/06 1,507 1,507,113
Citibank, Master Notes
4.94%(e)(f) 04/03/06 12,214 12,213,530
----------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $13,720,643) 13,720,643
----------
NUMBER
OF SHARES
------------
INVESTMENT IN AFFILIATE - 12.7%
Institutional Money Market
Trust(e)
(Cost $93,028,947) 93,028,947 93,028,947
----------
TOTAL INVESTMENTS IN SECURITIES - 119.1%
(Cost $814,971,083(a)) 871,492,325
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
80
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
HEALTH SCIENCES PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
----------- -------------
OPTIONS WRITTEN - 0.0%
Alexion Pharmaceuticals, Inc.,
Strike Price $40, Expires
4/22/06(g) (1,330) $(26,600)
Biomarin Pharmaceutical, Inc.,
Strike Price $12.5, Expires
4/22/06 (1,215) (30,375)
Digene Corp., Strike Price $40,
Expires 4/22/06 (400) (60,000)
Sanofi-Aventis-ADR, Strike Price
$45, Expires 4/22/06 (385) (5,775)
WellPoint, Inc., Strike Price $80,
Expires 4/22/06 (1,190) (59,500)
Wright Medical Group, Inc., Strike
Price $20, Expires 4/22/06 (859) (94,490)
--------
TOTAL OPTIONS WRITTEN
(Premiums received $413,594) (276,740)
--------
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (14.6)% (106,749,590)
LIABILITIES IN EXCESS OF
OTHER ASSETS - (4.5)% (33,066,918)
------------
NET ASSETS - 100% $731,399,077
============
- -------------------
(a) Cost for federal income tax purposes is $817,198,685. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $57,497,623
Gross unrealized depreciation (3,203,983)
-----------
$54,293,640
===========
(b) Total or partial securities on loan.
(c) Non-income producing security.
(d) The rate shown is the effective yield on the discount notes at the time of
purchase.
(e) Securities purchased with the cash proceeds from securities loaned.
(f) Rates shown are the rates as of March 31, 2006.
(g) Security valued at fair value as determined in good faith by or under the
direction of the Trustees. As of March 31, 2006, this security had a
total market value of $(26,600), which represents less than 0.1% of net
assets.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
81
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
U.S. OPPORTUNITIES PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 93.2%
Advertising - 1.5%
Monster Worldwide, Inc.(b) 21,500 $1,071,990
Valueclick, Inc,(b) 39,000 659,880
----------
1,731,870
----------
Aerospace - 1.7%
Curtiss-Wright Corp. 11,000 728,200
Esterline Technologies Corp.(b) 13,500 577,125
Goodrich Corp.(c) 15,000 654,150
----------
1,959,475
----------
Banks - 3.4%
City National Corp. 12,300 944,517
Colonial BancGroup, Inc. 36,300 907,500
Compass Bancshares, Inc.(c) 16,300 824,943
Cullen/Frost Bankers, Inc. 17,500 940,625
Frontier Financial Corp. 11,000 363,440
----------
3,981,025
----------
Business Services - 3.5%
Aquantive, Inc.(b) 39,900 939,246
The Dun & Bradstreet Corp.(b) 11,500 881,820
eFunds Corp.(b) 25,000 646,000
FTI Consulting, Inc.(b) 21,400 610,542
H&E Equipment Services, Inc.(b) 22,700 661,024
Korn/Ferry International(b) 15,600 318,084
----------
4,056,716
----------
Chemicals - 1.5%
Church & Dwight Co., Inc. 14,000 516,880
The Lubrizol Corp. 8,900 381,365
Olin Corp. 38,700 830,889
----------
1,729,134
----------
Computer Software & Services - 3.8%
Advanced Micro Devices, Inc.(b) 20,000 663,200
Aspen Technology, Inc.(b) 80,000 1,012,000
Ceridian Corp.(b) 24,000 610,800
Informatica Corp.(b) 42,900 667,095
Interwoven, Inc.(b) 64,500 579,855
Salesforce.com, Inc.(b)(c) 16,500 599,445
Unica Corp.(b) 28,900 334,951
----------
4,467,346
----------
Construction - 2.1%
EMCOR Group, Inc.(b) 29,000 1,440,140
Washington Group International,
Inc. 17,500 1,004,325
----------
2,444,465
----------
Electronics - 1.4%
Intercontinental Exchange, Inc.(b) 12,600 870,030
KEMET Corp.(b) 85,000 804,950
----------
1,674,980
----------
Energy & Utilities - 3.0%
Atmos Energy Corp. 26,000 684,580
Equitable Resources, Inc.(c) 11,400 416,214
Mirant Corp.(b) 25,000 625,000
PPL Corp.(c) 23,400 687,960
Progress Energy, Inc.(c) 9,000 395,820
Sempra Energy 14,900 692,254
----------
3,501,828
----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Entertainment & Leisure - 6.5%
Gaylord Entertainment Co.(b) 15,000 $ 680,700
Hilton Hotels Corp. 44,200 1,125,332
Kerzner International Ltd.(b)(c)
10,300 801,546
Penn National Gaming, Inc.(b)
27,600 1,164,168
Pinnacle Entertainment, Inc.(b)
22,500 633,825
Sabre Holdings Corp.(c) 24,000 564,720
Scientific Games Corp. - Class
A(b)(c) 24,800 871,224
Station Casinos, Inc. 12,500 992,125
Vail Resorts, Inc.(b)
20,000 764,400
----------
7,598,040
----------
Finance - 1.9%
AllianceBernstein Holding LP 12,000 795,000
Investment Technology Group(b) 14,400 717,120
T. Rowe Price Group, Inc. 9,700 758,637
----------
2,270,757
----------
Food & Agriculture - 0.7%
Corn Products International, Inc.
28,500 842,745
----------
Insurance - 3.0%
ACE Ltd. 8,500 442,085
Assurant, Inc. 17,600 866,800
The PMI Group, Inc.(c) 18,400 844,928
Poe & Brown, Inc. 16,600 551,120
W.R. Berkley Corp. 15,000 870,900
----------
3,575,833
----------
Machinery & Heavy Equipment - 2.8%
Astec Industries, Inc.(b) 15,000 538,500
Deere & Co. 9,500 750,975
Dresser-Rand Group, Inc.(b) 24,500 608,825
Joy Global, Inc.
22,875 1,367,239
----------
3,265,539
----------
Manufacturing - 8.7%
Cooper Industries Ltd. - Class A 10,000 869,000
Gardner Denver, Inc.(b) 18,600 1,212,720
Hexel Corp.(b)(c) 35,500 779,935
Ingersoll-Rand Co. - Class A 19,500 814,905
Mikohn Gaming Corp.(c) 50,000 478,500
Nordson Corp. 17,500 872,550
Paralux Fragrance, Inc.(b)
15,000 483,750
Polo Ralph Lauren Corp.
17,900 1,084,919
Powerwave Technologies,
Inc.(b)(c)
54,200 731,158
Rexam PLC- SP ADR 18,500 896,602
Rockwell Automation, Inc. 15,100 1,085,841
Shuffle Master, Inc.(b)
12,500 446,750
V.F. Corp.
8,000 455,200
----------
10,211,830
----------
Medical & Medical Services - 2.1%
Davita, Inc.(b)
9,100 547,911
Manor Care, Inc.
8,500 376,975
Medco Health Solutions, Inc.(b)
12,000 686,640
MedImmune, Inc.(b) 22,500 823,050
----------
2,434,576
----------
Medical Instruments & Supplies - 2.3%
C.R. Bard, Inc. 8,100 549,261
DENTSPLY International, Inc. 8,500 494,275
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
82
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
U.S. OPPORTUNITIES PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Medical Instruments & Supplies (Continued)
Varian Medical Systems,
Inc.(b)(c) 15,000 $ 842,400
Waters Corp.(b) 19,100 824,165
----------
2,710,101
----------
Metal & Mining - 4.2%
Arch Coal, Inc.(c) 7,500 569,550
CONSOL Energy, Inc.(c) 8,500 630,360
Inco Ltd. 14,000 698,460
Meridian Gold, Inc.(b) 35,000 1,037,750
Oregon Steel Mills, Inc.(b) 23,700 1,212,729
Yamana Gold, Inc.(b) 81,500 754,690
----------
4,903,539
----------
Motor Vehicles - 0.7%
Rush Enterprises, Inc. - Class
A(b) 45,100 792,858
----------
Oil & Gas - 6.3%
AGL Resources, Inc. 19,300 695,765
Chesapeake Energy Corp.(c) 17,000 533,970
Diamond Offshore Drilling, Inc.(c) 13,300 1,190,350
ENSCO International, Inc. 10,700 550,515
Grant Prideco, Inc.(b)(c) 9,400 402,696
Newfield Exploration Co.(b)(c) 14,000 586,600
Newpark Resources, Inc.(b) 57,200 469,040
Noble Energy, Inc. 15,600 685,152
Smith International, Inc. 16,000 623,360
St. Mary Land & Exploration Co. 16,500 673,695
Weatherford International
Ltd.(b)(c) 17,100 782,325
Western Refining, Inc. 10,000 216,200
----------
7,409,668
----------
Personal Services - 1.3%
Life Time Fitness, Inc.(b) 15,000 702,750
Nutri System, Inc.(b)(c) 17,000 807,840
----------
1,510,590
----------
Pharmaceuticals - 6.3%
Advanced Magnetics, Inc.(b) 7,554 288,941
Alexion Pharmaceuticals,
Inc.(b)(c) 37,300 1,321,166
Amylin Pharmaceuticals,
Inc.(b)(c) 19,000 930,050
Arena Pharmaceuticals, Inc.(b)(c) 22,321 404,233
BioMarin Pharmaceutical,
Inc.(b)(c) 63,400 850,828
Cardiome Pharma Corp.(b) 47,843 607,606
Caremark Rx, Inc.(b) 9,400 462,292
ImClone Systems, Inc.(b)(c) 7,290 248,006
Keryx Biopharmaceuticals, Inc.(b) 47,083 899,756
Renovis, Inc.(b)(c) 28,929 616,766
Shire PLC - ADR 17,200 799,628
----------
7,429,272
----------
Photographic Equipment - 0.6%
American Reprographics Co.(b) 19,215 666,568
----------
Real Estate - 5.6%
Archstone-Smith Trust 16,700 814,459
CB Richard Ellis Group, Inc. -
Class A(b) 10,800 871,560
Host Marriott Corp.(c) 52,500 1,123,500
Jones Lang Lasalle Inc.(c) 16,000 1,224,640
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Real Estate (Continued)
Kimco Realty Corp.(REIT)(c) 29,000 $1,178,560
The Macerich Co. 7,000 517,650
Strategic Hotel Capital, Inc.
35,000 814,800
----------
6,545,169
----------
Restaurants - 1.0%
Applebee's International, Inc.(c) 18,000 441,900
Ruth's Chris Steak House, Inc.(b) 33,000 785,730
----------
1,227,630
----------
Retail Merchandising - 4.9%
Abercrombie & Fitch Co. - Class
A
15,100 880,330
American Eagle Outfitters, Inc.
20,000 597,200
BJ's Wholesale Club, Inc.(b)
24,700 778,297
Charming Shoppes, Inc.(b) 76,500 1,137,555
Dick's Sporting Goods, Inc.(b)
8,500 337,195
The Pantry, Inc.(b) 14,104 879,949
Saks, Inc.(b) 21,900 422,670
Tiffany & Co. 11,500 431,710
Urban Outfitters, Inc.(b)(c) 11,400 279,756
----------
5,744,662
----------
Security Brokers & Dealers - 2.4%
E*TRADE Financial Corp.(b)(c) 60,500 1,632,290
Janus Capital Group, Inc. 19,000 440,230
Piper Jaffray Cos., Inc.(b) 13,000 715,000
----------
2,787,520
----------
Semiconductors & Related Devices - 2.8%
Integrated Device Technology,
Inc.(b)
54,000 802,440
Lam Research Corp.(b)
13,600 584,800
MEMC Electronic Materials,
Inc.(b) 25,800 952,536
NVIDIA Corp.(b)(c) 16,500 944,790
----------
3,284,566
----------
Telecommunications - 5.4%
Amdocs Ltd.(b) 24,100 869,046
American Tower Corp. - Class
A(b)(c) 42,300 1,282,536
Cbeyond Communications, Inc.(b) 50,000 882,500
Comverse Technology, Inc.(b) 22,600 531,778
Dobson Communications Corp. -
Class A(b) 109,500 878,190
Hutchison Telecommunications
International Ltd.(b) 22,500 584,325
NII Holdings, Inc.(b)(c) 22,400 1,320,928
----------
6,349,303
----------
Transportation - 1.3%
Pacer International, Inc. 18,000 588,240
Trinity Industries, Inc.
16,600 902,874
----------
1,491,114
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
83
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
U.S. OPPORTUNITIES PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Waste Management - 0.6%
URS Corp.(b) 16,900 $ 680,225
-----------
TOTAL COMMON STOCKS
(Cost $80,954,016) 109,278,944
-----------
WARRANTS - 0.0%
Bioject Medical Technologies, Inc.
(issued 07/19/02, expiring
05/23/06, strike price $.01)
(acquired 02/03/04)(d)(e)
(Cost $0) 15,000 150
-----------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 5.6%
Federal Home Loan Bank,
Discount Notes
4.55%(f) 04/03/06 $1,300 $1,299,671
Galileo Money Market Fund 5,247 5,246,780
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $6,546,451) 6,546,451
----------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 98.8%
(Cost $87,500,467) 115,825,546
-----------
SECURITIES LENDING COLLATERAL - 2.0%
Banco Santander, Certificate of
Deposit
4.34%(g) 04/10/06 617 616,546
Bank of America, Master Notes
4.08%(g)(h) 04/03/06 1,183 1,182,824
Morgan Stanley, Floating Rate
Notes
4.94%(g)(h) 04/03/06 532 532,053
---------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $2,331,423) 2,331,423
---------
NUMBER
OF SHARES
------------
INVESTMENT IN AFFILIATE - 20.6%
Institutional Money Market
Trust(g)
(Cost $24,194,050) 24,194,050 24,194,050
----------
TOTAL INVESTMENTS IN SECURITIES - 121.4%
(Cost $114,025,940(a)) 142,351,018
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (22.6)% (26,525,473)
OTHER ASSETS IN EXCESS OF
LIABILITIES - 1.2% 1,456,379
-----------
TOTAL NET ASSETS - 100% $117,281,924
============
- -------------------
(a) Cost for federal income tax purposes is $114,043,519. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $28,591,634
Gross unrealized depreciation (284,135)
-----------
$28,307,499
===========
(b) Non-income producing security.
(c) Total or partial securities on loan.
(d) As of March 31, 2006, the aggregate amount of shares called for by these
warrants is 15,000. These warrants will become exercisable on 5/23/06.
(e) Security valued at fair value as determined in good faith by or under the
direction of the Trustees. As of March 31, 2006, these securities had a
total market value of $150, which represents less than 0.1% of net
assets.
(f) The rate shown is the effective yield on the discount notes at the time
of purchase.
(g) Securities purchased with the cash proceeds from securities loaned.
(h) Rates shown are the rates as of March 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
84
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GLOBAL OPPORTUNITIES PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 82.9%
Canada - 4.0%
Metal & Mining - 2.4%
Barrick Gold Corp. 3,100 $ 84,332
Inco Ltd. 3,700 184,453
Teck Cominco Ltd. 1,600 102,945
---------
371,730
---------
Railroad & Shipping - 0.8%
Canadian National Railway Co. 2,600 117,816
---------
Telecommunications - 0.8%
Telus Corp. 3,300 129,474
---------
Total Canada 619,020
---------
Denmark - 0.4%
Aerospace - 0.4%
MTU Aero Engines Holding AG(b) 1,800 61,078
---------
Finland - 0.7%
Manufacturing - 0.7%
Wartsila Corp. - B Shares 3,100 114,957
---------
France - 3.0%
Banks - 0.7%
Societe Generale 700 105,274
---------
Beverages & Bottling - 0.5%
LVMH Moet Hennessy Louis
Vuitton SA 800 78,431
---------
Chemicals - 1.0%
Rhodia SA(b) 62,600 161,587
---------
Oil & Gas - 0.8%
Technip SA 1,800 121,828
---------
Total France 467,120
---------
Germany - 7.7%
Air Transportation - 0.8%
Deutsche Lufthansa AG 7,300 130,664
---------
Banks - 3.3%
Commerzbank AG 4,200 167,352
Deutsche Bank AG 1,300 148,483
ThyssenKrupp AG 6,700 193,486
---------
509,321
---------
Computer Software & Services - 0.8%
SAP AG - ADR 2,300 124,936
---------
Energy & Utilities - 0.6%
E.ON AG 800 88,039
---------
Machinery - 0.6%
Heidelberger Druckmaschinen AG 2,000 88,223
---------
Manufacturing - 1.6%
Continental AG 800 88,078
MAN AG 2,300 159,627
---------
247,705
---------
Total Germany 1,188,888
---------
Greece - 0.7%
Banks - 0.7%
Alpha Bank AE 3,100 114,506
---------
Hong Kong - 2.9%
Energy & Utilities - 0.9%
Guangdong Investment Ltd. 312,000 139,732
---------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Hong Kong (Continued)
Oil & Gas - 0.7%
CNOOC Ltd. 141,000 $ 109,032
---------
Telecommunications - 1.3%
China Mobile Ltd. 37,500 196,945
---------
Total Hong Kong
445,709
---------
Italy - 0.9%
Banks - 0.9%
UniCredito Italiano SpA 20,400 146,601
---------
Japan - 18.7%
Banks - 4.2%
Mitsubishi Tokyo Financial Group,
Inc. 18 275,276
Mizuho Financial Group, Inc. 12 98,182
The Sumitomo Trust and Banking
Co. Ltd. 24,000 277,723
---------
651,181
---------
Chemicals - 0.7%
Nissan Chemical Industries Ltd. 6,700 113,735
---------
Computer & Office Equipment - 0.4%
Brother Industries Ltd. 5,800 63,519
---------
Computer Software & Services - 0.7%
Otsuka Corp. 900 105,599
---------
Construction - 2.4%
Commuture Corp. 9,000 86,865
Daito Trust Construction Co. Ltd. 2,500 130,416
Obayashi Corp. 19,000 154,648
---------
371,929
---------
Electronics - 1.6%
Sony Corp. 3,700 171,326
Taiyo Yuden Co. Ltd. 5,000 79,439
---------
250,765
---------
Finance - 0.6%
Orix Corp. 300 93,415
---------
Insurance - 2.2%
Millea Holdings, Inc.
7 138,573
Nisshin Fire & Marine Insurance
Co.
18,000 85,641
T&D Holdings, Inc. 1,600 125,064
---------
349,278
---------
Machinery & Heavy Equipment - 2.4%
Kubota Corp. 23,000 248,173
OSG Corp. 5,600 119,185
---------
367,358
---------
Metal & Mining - 1.1%
Nippon Steel Corp.(b)
43,000 166,593
---------
Motor Vehicles - 0.9%
Nissan Motor Co. Ltd.
12,400 147,283
---------
Real Estate - 0.7%
Daikyo, Inc. 18,000 103,687
---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
85
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GLOBAL OPPORTUNITIES PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Japan (Continued)
Security Brokers & Dealers - 0.8%
Matsui Securities Co. Ltd.(b) 8,700 $ 120,632
---------
Total Japan 2,904,974
---------
Mexico - 0.5%
Metal & Mining - 0.5%
Grupo Mexico SA - Series B 28,400 80,776
---------
Netherlands - 2.5%
Banks - 1.2%
ABN AMRO Holding NV 6,400 191,880
---------
Insurance - 0.8%
Aegon N.V. 6,500 120,283
---------
Oil & Gas - 0.5%
SBM Offshore NV 700 70,197
---------
Total Netherlands 382,360
---------
Norway - 2.0%
Food & Agriculture - 0.8%
Pan Fish ASA 149,400 133,360
---------
Oil & Gas - 1.2%
Fred Olsen Energy ASA(b) 1,800 73,471
Norsk Hydro ASA 800 110,840
---------
184,311
---------
Total Norway 317,671
---------
South Africa - 1.7%
Banks - 1.0%
African Bank Investments Ltd. 31,500 153,885
---------
Retail Merchandising - 0.7%
Truworths International Ltd. 23,000 106,131
---------
Total South Africa 260,016
---------
South Korea - 1.2%
Banks - 0.6%
Industrial Bank of Korea 5,600 103,746
---------
Security Brokers & Dealers - 0.6%
Korea Investment Holdings Co.
Ltd.(b) 2,500 89,543
---------
Total South Korea 193,289
---------
Spain - 1.4%
Banks - 0.7%
Banco Pastor SA 1,800 104,639
---------
Retail Merchandising - 0.7%
Industria de Diseno Textil 3,100 119,653
---------
Total Spain 224,292
---------
Sweden - 4.0%
Banks - 1.2%
Nordea Bank AB 14,500 179,191
---------
Conglomerates - 0.8%
Atlas Copco AB - A Shares 4,200 118,097
---------
Construction - 0.8%
Skanska AB 8,000 130,962
---------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Sweden (Continued)
Finance - 1.2%
D. Carnegie & Co. AB 9,000 $ 189,510
---------
Total Sweden 617,760
---------
Switzerland - 0.9%
Retail Merchandising - 0.9%
Compagnie Financiere Richemont
AG 3,000 143,827
---------
Thailand - 0.7%
Banks - 0.7%
Siam Commercial Bank Public
Co. Ltd.(c) 61,800 102,536
---------
United Kingdom - 8.6%
Aerospace - 1.1%
Smiths Group PLC 10,000 170,787
---------
Banks - 0.5%
HSBC Finance Corp.
5,000 83,830
---------
Beverages & Bottling - 1.1%
SABMiller PLC 8,600 169,738
---------
Energy & Utilities - 1.3%
International Power PLC(b) 40,300 198,150
---------
Motor Vehicles - 1.1%
GKN PLC 29,000 167,530
---------
Oil & Gas - 1.4%
BP PLC
19,300 221,646
---------
Semiconductors & Related Devices - 0.9%
Wolfson Microelectronics PLC(b)
18,900 145,304
---------
Telephone Communications - 0.5%
Colt Telecom Group PLC(b) 55,100 70,123
---------
Transportation - 0.7%
Arriva PLC 10,800 115,492
---------
Total United Kingdom 1,342,600
---------
United States - 20.4%
Computer & Office Equipment - 1.0%
Hewlett-Packard Co. 4,800 157,920
---------
Energy & Utilities - 0.9%
Companhia de Saneamento
Basico Do Estado de Sao
Paulo - ADR 6,200 136,462
---------
Finance - 0.8%
AllianceBernstein Holding LP 1,800 119,250
---------
Food & Agriculture - 1.0%
Archer-Daniels-Midland Co. 4,700 158,155
---------
Insurance - 0.5%
WellPoint, Inc.(b) 1,100 85,173
---------
Machinery & Heavy Equipment - 0.8%
Deere & Co. 1,600 126,831
---------
Manufacturing - 2.3%
Hexel Corp.(b)
3,100 68,107
Ingersoll-Rand Co. - Class A 2,300 96,117
Reynold American, Inc. 1,100 116,050
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
86
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GLOBAL OPPORTUNITIES PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS (Continued)
United States (Continued)
Manufacturing (Continued)
Tenaris SA - ADR 410 $ 74,075
----------
354,349
----------
Medical & Medical Services - 1.3%
Amgen, Inc.(b) 1,100 80,025
Caremark Rx, Inc.(b) 1,300 63,934
Medco Health Solutions, Inc.(b) 1,100 62,942
----------
206,901
----------
Medical Instruments & Supplies - 0.4%
Waters Corp.(b) 1,489 64,250
----------
Metal & Mining - 1.0%
Coeur d'Alene Mines Corp. 22,600 148,256
----------
Oil & Gas - 2.5%
Diamond Offshore Drilling, Inc. 2,200 196,900
ENSCO International, Inc. 3,700 190,365
----------
387,265
----------
Pharmaceuticals - 2.4%
Adolor Corp.(b) 1,043 24,823
Alexion Pharmaceuticals, Inc.(b) 3,100 109,802
Allergan, Inc. 230 24,955
Keryx Biopharmaceuticals, Inc.(b) 4,200 80,262
Renovis, Inc.(b) 3,100 66,092
Shire PLC - ADR 1,300 60,437
----------
366,371
----------
Railroad & Shipping - 1.2%
Norfolk Southern Corp. 3,500 189,245
----------
Retail Merchandising - 1.6%
Abercrombie & Fitch Co. - Class
A 1,100 64,130
Charming Shoppes, Inc.(b) 6,000 89,220
Sears Holdings Corp. 700 92,568
----------
245,918
----------
Security Brokers & Dealers - 1.3%
E*TRADE Financial Corp.(b) 4,200 113,316
Piper Jaffray Cos., Inc.(b) 1,500 82,500
----------
195,816
----------
Semiconductors & Related Devices - 0.6%
ASML Holding N.V.(b) 4,700 95,739
----------
Telecommunications - 0.8%
ALLTEL Corp. 2,000 129,500
----------
Total United States 3,167,401
----------
TOTAL COMMON STOCKS
(Cost $12,416,750) 12,895,381
----------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 20.6%
Federal Home Loan Bank,
Discount Notes
4.55%(d) 04/03/06 $2,700 2,699,318
Galileo Money Market Fund 494 494,070
---------
TOTAL SHORT TERM INVESTMENTS
(Cost $3,193,388) 3,193,388
------------
VALUE
--------------
TOTAL INVESTMENTS IN SECURITIES - 103.5%
(Cost $15,610,138(a)) $16,088,769
LIABILITIES IN EXCESS OF
OTHER ASSETS - (3.5)% (540,371)
-----------
NET ASSETS - 100% $15,548,398
===========
- -------------------
(a) Cost for federal income tax purposes is $15,630,251. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $550,466
Gross unrealized depreciation (91,948)
--------
$458,518
========
(b) Non-income producing security.
(c) Security valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, this security had
a total market value of $102,536 which represents 0.7% of net assets.
(d) The rate shown is the effective yield on the discount notes at the time of
purchase.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
87
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL OPPORTUNITIES PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 98.3%
Australia - 2.2%
Metal & Mining - 1.4%
Newcrest Mining Ltd. 347,500 $ 5,816,373
Zinifex Ltd. 1,686,300 11,516,916
-----------
17,333,289
-----------
Security Brokers & Dealers - 0.8%
Babcock & Brown Ltd. 684,100 9,060,336
-----------
Total Australia 26,393,625
-----------
Austria - 0.7%
Telecommunications - 0.7%
Telekom Austria AG 344,300 8,115,363
-----------
Belgium - 1.0%
Metal & Mining - 1.0%
Umicore 82,816 11,471,277
-----------
Brazil - 0.9%
Steel -
Arcelor Brasil SA 1 10
-----------
Telecommunications - 0.9%
Tim Participacoes SA - ADR(b) 297,100 11,001,613
-----------
Total Brazil 11,001,623
-----------
Canada - 3.7%
Metal & Mining - 2.7%
Aur Resources, Inc. 295,300 3,749,881
Gammon Lake Resources, Inc.(c) 220,200 3,944,500
Inco Ltd. 219,900 10,962,519
Inmet Mining Corp. 214,900 6,399,985
Yamana Gold, Inc.(c) 854,300 7,863,788
-----------
32,920,673
-----------
Transportation - 1.0%
Canadian Pacific Railway Ltd. 235,400 11,743,292
-----------
Total Canada 44,663,965
-----------
Denmark - 0.8%
Aerospace - 0.8%
MTU Aero Engines Holding AG(c) 265,000 8,991,977
-----------
Finland - 2.3%
Banks - 0.4%
OKO Bank - Class A 296,200 4,802,778
-----------
Machinery & Heavy Equipment - 1.3%
Kone Oyj - B Shares 168,800 6,948,952
Metso Oyj 225,900 8,719,206
-----------
15,668,158
-----------
Retail Merchandising - 0.6%
Kesko Oyj - Class B 226,100 7,055,521
-----------
Total Finland 27,526,457
-----------
France - 3.6%
Advertising - 0.6%
Publicis Groupe 176,200 6,875,639
-----------
Chemicals - 0.9%
Rhodia SA(c) 3,914,400 10,104,064
-----------
Computer & Office Equipment - 0.5%
Neopost SA 58,700 6,380,899
-----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
France (Continued)
Computer Software & Services - 0.4%
Atos Origin SA(c) 66,200 $ 4,905,754
-----------
Entertainment & Leisure - 0.6%
Accor SA
121,800 7,021,530
-----------
Oil & Gas - 0.6%
Technip SA 113,400 7,675,162
-----------
Total France
42,963,048
-----------
Germany - 8.4%
Air Transportation - 0.8%
Deutsche Lufthansa AG 554,300 9,921,485
-----------
Chemicals - 0.7%
SGL Carbon AG(c) 458,501 8,379,014
-----------
Construction - 1.3%
Bilfinger Berger AG 236,300 15,492,172
-----------
Durable Goods - 0.4%
Gerry Weber International AG 257,700 5,358,991
-----------
Electronics - 0.6%
Techem AG 153,719 6,754,709
-----------
Machinery - 0.4%
Heidelberger Druckmaschinen AG
112,000 4,940,498
-----------
Machinery & Heavy Equipment - 1.0%
Rheinmetall AG 147,300 11,424,417
-----------
Manufacturing - 1.9%
MAN AG 260,000 18,044,790
Solon AG Fuer Solartechnik(c) 82,800 4,113,008
-----------
22,157,798
-----------
Real Estate - 1.3%
IVG Immobilien AG
523,300 15,733,625
-----------
Total Germany 100,162,709
-----------
Greece - 1.2%
Banks - 1.2%
Piraeus Bank SA(c) 479,300 14,521,074
-----------
Hong Kong - 1.8%
Entertainment & Leisure - 0.1%
Hongkong & Shanghai Hotels
Ltd. 1,328,616 1,515,405
-----------
Real Estate - 1.7%
New World Development Co. Ltd. 6,650,100 11,656,091
Shun Tak Holdings Ltd. 2,672,000 3,822,480
Wheelock & Co. Ltd. 2,632,000 4,715,053
-----------
20,193,624
-----------
Total Hong Kong
21,709,029
-----------
India - 1.0%
Telecommunications - 1.0%
Bharti Tele-Ventures Ltd.(c)
1,303,557 11,973,811
-----------
Italy - 2.9%
Computer Software & Services - 0.8%
Fastweb SpA(c) 192,300 9,813,317
-----------
Construction - 1.3%
Buzzi Unicem SpA 639,100 15,234,369
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
88
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL OPPORTUNITIES PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Italy (Continued)
Oil & Gas - 0.8%
Saipem SpA 425,300 $ 9,839,038
-----------
Total Italy 34,886,724
-----------
Japan - 27.4%
Banks - 2.4%
Bank of Kyoto Ltd. 743,300 8,967,595
The Chiba Bank Ltd. 981,000 8,726,483
The Iyo Bank Ltd. 677,600 7,288,374
The Musashino Bank Ltd. 66,200 3,841,512
-----------
28,823,964
-----------
Chemicals - 0.4%
Nissan Chemical Industries Ltd. 289,600 4,916,065
-----------
Computer & Office Equipment - 0.2%
Brother Industries Ltd. 230,400 2,523,242
-----------
Construction - 0.6%
Taisei Corp. 1,523,000 7,297,978
-----------
Electronics - 0.8%
Daido Steel Co. Ltd. 896,800 9,105,149
-----------
Finance - 3.0%
Mitsui Trust Holdings, Inc. 916,400 13,399,527
Orix Corp. 40,000 12,455,395
Pacific Management Corp. 3,700 10,185,217
-----------
36,040,139
-----------
Food & Agriculture - 1.5%
The Nisshin Oillio Group Ltd. 1,416,000 10,947,833
Toyo Suisan Kaisha Ltd. 451,100 6,887,228
-----------
17,835,061
-----------
Industrial - 0.8%
Taiyo Nippon Sanso Corp. 1,310,500 9,686,788
-----------
Leasing - 0.5%
Diamond Lease Co. Ltd. 130,000 6,085,811
-----------
Machinery & Heavy Equipment - 5.0%
Hitachi Construction Machinery
Co. Ltd. 393,900 10,374,596
Juki Corp. 1,269,200 7,850,277
Komatsu Ltd. 514,600 9,815,437
Miura Co. Ltd 325,800 8,331,844
Nabtesco Corp. 609,500 7,570,850
OSG Corp. 490,400 10,437,145
Takeuchi Manufacturing Co. Ltd. 128,400 5,618,182
-----------
59,998,331
-----------
Manufacturing - 1.6%
Asahi Diamond Industry Co. Ltd. 747,600 7,133,006
Koyo Seiko Co. Ltd. 588,400 11,748,003
-----------
18,881,009
-----------
Medical Instruments & Supplies - 0.7%
Nihon Kohden Corp. 445,000 7,788,445
-----------
Metal & Mining - 0.6%
Maruichi Steel Tube Ltd. 276,200 6,887,400
-----------
Motor Vehicles - 1.7%
Futaba Industrial Co. Ltd. 257,100 6,290,977
Keihin Corp. 220,300 6,026,899
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Japan (Continued)
Motor Vehicles (Continued)
SHOWA Corp. 436,800 $ 7,552,150
-----------
19,870,026
-----------
Real Estate - 2.0%
Japan General Estate Co. Ltd. 508,400 10,496,279
Joint Corp. 295,700 9,446,321
Tosei Corp. 3,400 4,073,067
-----------
24,015,667
-----------
Residential Construction - 0.4%
Mitsui Home Co. Ltd.
548,000 4,376,551
-----------
Retail Merchandising - 2.6%
Belluna Co. Ltd. 214,900 4,783,670
FamilyMart Co. Ltd. 178,700 5,602,404
Shimachu Co. Ltd. 205,100 6,447,494
Takashimaya Co. Ltd. 400,100 6,098,381
Xebio Co. Ltd. 251,400 8,671,912
-----------
31,603,861
-----------
Security Brokers & Dealers - 1.3%
Ichiyoshi Securities Co. Ltd. 443,300 8,549,626
Matsui Securities Co. Ltd.(c) 502,700 6,970,318
-----------
15,519,944
-----------
Tires & Rubber - 0.7%
Zeon Corp. 691,100 8,913,252
-----------
Transportation - 0.6%
Keihin Electric Express Railway
Co. Ltd. 908,200 7,446,160
-----------
Total Japan
327,614,843
-----------
Malaysia - 0.9%
Entertainment & Leisure - 0.3%
Genting Berhad 546,200 3,529,516
-----------
Telecommunications - 0.6%
Digi.com Berhad(c) 2,903,800 6,662,081
-----------
Total Malaysia 10,191,597
-----------
Mexico - 0.9%
Metal & Mining - 0.9%
Grupo Mexico SA - Series B 3,803,100 10,816,821
-----------
Netherlands - 3.1%
Business Services - 1.4%
Ordina NV
261,700 5,946,430
Vedior NV
510,700 10,007,536
-----------
15,953,966
-----------
Oil & Gas - 1.0%
SBM Offshore NV
117,700 11,803,092
-----------
Personal Services - 0.7%
USG People NV 119,400 8,645,568
-----------
Total Netherlands 36,402,626
-----------
Norway - 5.6%
Banks - 0.6%
Sparebanken Midt-Norge 223,300 2,683,239
Sparebanken Nord-Norge 85,520 1,810,593
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
89
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL OPPORTUNITIES PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Norway (Continued)
Banks (Continued)
Sparebanken Rogaland 72,600 $2,248,810
----------
6,742,642
----------
Food & Agriculture - 2.2%
Fjord Seafood ASA(c) 9,120,800 11,119,872
Pan Fish ASA 17,511,300 15,631,272
----------
26,751,144
----------
Manufacturing - 0.8%
Orkla ASA 195,800 9,709,930
----------
Oil & Gas - 2.0%
Fred Olsen Energy ASA(c) 283,300 11,563,530
Prosafe ASA 227,600 11,894,684
----------
23,458,214
----------
Total Norway 66,661,930
----------
Portugal - 0.4%
Telecommunications - 0.4%
PT Multimedia - Servicos de
Telecomunicacoes e
Multimedia, SGPS, SA 407,400 4,986,476
----------
Singapore - 1.7%
Oil & Gas - 0.6%
Singapore Petroleum Co. Ltd. 2,104,500 6,772,535
----------
Real Estate - 1.1%
CapitaLand Ltd. 4,603,900 13,790,188
----------
Total Singapore 20,562,723
----------
South Africa - 0.7%
Retail Merchandising - 0.7%
Foschini Ltd. 420,000 3,968,729
Truworths International Ltd. 950,000 4,383,667
----------
8,352,396
----------
Total South Africa 8,352,396
----------
South Korea - 4.2%
Computer Software & Services - 0.6%
NHN Corp.(c) 23,500 7,256,073
----------
Construction - 1.1%
Hanjin Heavy Industries Co. Ltd. 448,800 12,887,526
----------
Finance - 0.6%
Daewoo Securities Co. Ltd.(c) 460,500 7,275,293
----------
Machinery & Heavy Equipment - 0.5%
Doosan Infracore Co. Ltd. 342,200 6,357,256
----------
Retail Merchandising - 0.6%
Hyundai Department Store Co.
Ltd. 72,300 6,756,731
----------
Security Brokers & Dealers - 0.8%
Korea Investment Holdings Co.
Ltd.(c) 277,000 9,921,367
----------
Total South Korea 50,454,246
----------
Spain - 1.1%
Banks - 0.6%
Banco Pastor SA 136,500 7,935,123
----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Spain (Continued)
Telecommunications - 0.5%
Gestevis Telecinco SA 222,400 $5,554,745
----------
Total Spain
13,489,868
----------
Sweden - 4.1%
Construction - 0.9%
Skanska AB 677,300 11,087,597
----------
Manufacturing - 1.5%
Assa Abloy AB - Class B
520,800 9,662,400
SSAB Svenskt Stal AB - Series A 179,740 8,607,950
----------
18,270,350
----------
Motor Vehicles - 0.4%
Scania AB 100,600 4,365,770
----------
Retail Merchandising - 1.3%
KappAhl Holding AB
461,100 3,670,566
Lindex AB(c)
787,300 11,624,767
----------
15,295,333
----------
Total Sweden 49,019,050
----------
Switzerland - 1.5%
Food Distribution - 0.9%
Barry Callebaut AG(c) 27,942 11,531,313
----------
Industrial - 0.6%
SGS Societe Generale de
Surveillance Holding SA 7,300 6,764,392
----------
Total Switzerland 18,295,705
----------
Taiwan - 1.1%
Chemicals - 0.6%
Taiwan Fertilizer Co. Ltd. 6,306,000 7,576,875
----------
Manufacturing - 0.5%
Wistron Corp.(c)
4,754,000 5,697,448
----------
Total Taiwan
13,274,323
----------
Thailand - 1.2%
Banks - 0.9%
Krung Thai Bank Public Co. Ltd. 6,586,300 1,846,705
Siam Commercial Bank Public
Co. Ltd.(d) 5,789,200 9,371,787
----------
11,218,492
----------
Telecommunications - 0.3%
Advanced Info Service Public Co.
Ltd.(d) 1,400,300 3,278,677
----------
Total Thailand 14,497,169
----------
United Kingdom - 12.0%
Aerospace - 0.6%
Meggitt PLC 1,206,165 7,292,690
----------
Business Services - 0.8%
Aegis Group PLC
3,811,400 9,055,526
----------
Construction - 0.7%
Carillion PLC 1,444,500 8,827,820
----------
Energy & Utilities - 1.6%
International Power PLC(c) 1,688,300 8,301,142
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
90
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL OPPORTUNITIES PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ----------------
COMMON STOCKS (Continued)
United Kingdom (Continued)
Energy & Utilities (Continued)
Viridian Group PLC 605,930 $ 10,337,982
-------------
18,639,124
-------------
Entertainment & Leisure - 1.8%
IG Group Holdings PLC 2,463,700 9,374,190
Intercontinental Hotels Group
PLC 405,522 6,633,411
Whitbread PLC 261,314 5,384,553
-------------
21,392,154
-------------
Finance - 0.7%
Close Brothers Group PLC 433,900 8,039,931
-------------
Food & Agriculture - 0.4%
Wolverhampton & Dudley
Breweries PLC 201,897 4,486,444
-------------
Insurance - 0.3%
Homeserve PLC 155,605 3,920,066
-------------
Manufacturing - 1.5%
IMI PLC 683,700 6,723,321
Rexam PLC 1,161,400 11,249,378
-------------
17,972,699
-------------
Measuring & Controlling Devices - 0.7%
Rotork PLC 738,512 8,917,522
-------------
Oil & Gas - 0.9%
Tullow Oil PLC 1,835,700 10,811,930
-------------
Semiconductors & Related Devices - 0.6%
Wolfson Microelectronics PLC(c) 998,200 7,674,192
-------------
Transportation - 0.8%
Arriva PLC 895,400 9,575,180
-------------
Waste Management - 0.6%
Kelda Group PLC 517,000 7,082,622
-------------
Total United Kingdom 143,687,900
-------------
United States - 1.9%
Banks - 0.7%
Unibanco SA - ADR 112,400 8,307,484
-------------
Broadcasting - 0.4%
Central European Media
Enterprises Ltd. - A Shares(c) 61,981 4,252,516
-------------
Business Services - 0.3%
Ctrip.com International Ltd.(c) 39,400 3,258,380
-------------
Telecommunications - 0.5%
NII Holdings, Inc.(b)(c) 107,000 6,309,790
-------------
Total United States 22,128,170
-------------
TOTAL COMMON STOCKS
(Cost $916,116,004) 1,174,816,525
-------------
WARRANTS - 0.0%
Playmates Holdings Ltd. (issued
05/24/05, expiring 05/23/06,
strike price $2.03) (acquired
04/20/05)(e)
(Cost $1,017) 1,250,300 1,611
-------------
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- ----------------
SHORT TERM INVESTMENTS - 1.5%
U.S. Treasury Bills
4.38%(f) 04/06/06 $14,900 $ 14,891,205
Galileo Money Market Fund 3,096 3,096,187
-------------
TOTAL SHORT TERM INVESTMENTS
(Cost $17,987,392) 17,987,392
-------------
TOTAL MARKET VALUE OF SECURITIES
BEFORE INVESTMENT IN AFFILIATE
- 99.8%
(Cost $934,104,413) 1,192,805,529
-------------
NUMBER
OF SHARES
-----------
INVESTMENT IN AFFILIATE - 0.8%
Institutional Money Market
Trust(g)
(Cost $9,726,000) 9,726,000 9,726,000
---------
TOTAL INVESTMENTS IN SECURITIES - 100.6%
(Cost $943,830,413(a)) 1,202,531,529
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (0.8)% (9,726,000)
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.2% 1,882,471
-------------
TOTAL NET ASSETS - 100% $1,194,688,000
==============
- -------------------
(a) Cost for federal income tax purposes is $946,124,137. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $261,013,216
Gross unrealized depreciation (4,605,824)
------------
$256,407,392
============
(b) Total or partial securities on loan.
(c) Non-income producing security.
(d) Securities valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, these securities
had a total market value of $12,650,464, which represents 1.1% of net
assets.
(e) As of March 31, 2006, the aggregate amount of shares called for by these
warrants is 1,170,300. These warrants were exercisable as of 5/24/05.
(f) The rate shown is the effective yield on the discount notes at the time
of purchase.
(g) Securities purchased with the cash proceeds from securities loaned.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
91
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS - 68.3%
Australia - 0.5%
Metal & Mining - 0.0%
Newcrest Mining Ltd. 8,400 $ 140,597
Zinifex Ltd. 42,200 288,213
---------
428,810
---------
Pharmaceuticals - 0.2%
CSL Ltd. 36,773 1,440,023
---------
Retail Merchandising - 0.3%
Woolworths Ltd. 155,106 2,090,893
---------
Security Brokers & Dealers - 0.0%
Babcock & Brown Ltd. 17,000 225,151
---------
Total Australia 4,184,877
---------
Austria - 0.2%
Banks - 0.2%
Raiffeisen International Bank
Holdings(b) 12,116 1,033,673
---------
Telecommunications - 0.0%
Telekom Austria AG 8,400 197,993
---------
Total Austria 1,231,666
---------
Belgium - 0.3%
Beverages & Bottling - 0.3%
Inbev NV 42,003 1,969,893
---------
Metal & Mining - 0.0%
Umicore 2,000 277,030
---------
Total Belgium 2,246,923
---------
Brazil - 0.2%
Finance - 0.1%
Itausa Inv Itau SA 245,768 1,050,533
---------
Telecommunications - 0.1%
Tim Participacoes SA - ADR 7,300 270,319
---------
Total Brazil 1,320,852
---------
Canada - 1.6%
Metal & Mining - 0.5%
Aur Resources, Inc. 7,300 92,699
Bema Gold Corp.(b) 50,000 221,500
European Goldfields Ltd.(b) 12,100 41,962
Fording Canadian Coal Trust 7 266
Frontier Pacific Mining Corp.(b) 79,200 40,690
Gammon Lake Resources, Inc.(b) 5,600 100,314
Gateway Gold Corp.(b) 100,000 124,160
Gold Reserve, Inc.(b) 100,000 591,000
Inco Ltd. 5,000 249,261
Inmet Mining Corp. 5,200 154,862
Minefinders Corp. Ltd.(b) 40,000 308,800
NovaGold Resources, Inc.(b)(c) 66,700 1,020,510
Southwestern Resources Corp.(b) 47,300 558,925
Stratagold Corp.(b) 200,000 188,380
Sunridge Gold Corp.(b) 109,999 242,067
Triex Minerals Corp. (acquired
12/23/05, cost $14,206)(d)(e) 6,600 13,733
Yamana Gold, Inc.(b) 21,500 88,552
---------
4,037,681
---------
Motor Vehicles - 0.0%
Westport Innovations, Inc.
(acquired 12/17/03 through
9/15/04, cost $75,001)(b)(e)(f) 70,500 56,745
---------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Canada (Continued)
Oil & Gas - 0.9%
Accrete Energy, Inc.(b) 4,960 $ 33,977
Alberta Clipper Energy, Inc.(b) 20,126 58,594
C1 Energy Ltd.(b)
85,733 154,163
Canadian Superior Energy,
Inc.(b)
22,000 51,480
Canex Energy, Inc.(b) 7,800 22,709
Capitol Energy Resources Ltd.(b) 10,195 41,902
Chamaelo Exploration Ltd.(b) 5,440 28,881
Cinch Energy Corp.(b) 40,320 81,479
Compton Petroleum Corp.(b) 66,500 847,870
Crew Energy, Inc. (acquired
5/12/04, cost $36,232)(b)(e) 9,400 130,796
Daylight Energy Trust 6,255 65,239
Delphi Energy Corp.(b) 24,700 108,076
Ember Resources, Inc.(b) 12,136 64,951
Endev Energy, Inc.(b) 231,700 351,166
Esprit Energy Trust 36,375 371,584
Fairquest Energy Ltd.(b) 13,900 76,174
First Calgary Petroleums Ltd.(b) 14,554 109,044
Galleon Energy, Inc. - Class A
(acquired 01/31/05 through
03/13/06, cost
$ 415,355)(b)(d)(e) 53,678 1,562,745
Hawker Resources, Inc.(b) 7,921 30,522
Highpine Oil & Gas Ltd.(b) 1,481 29,485
HSE Integrated Ltd.(b) 561 1,777
Innova Exploration Ltd. (acquired
10/31/05, cost $22,297)(d)(e) 3,200 20,030
KICK Energy Ltd.(b) 9,100 49,012
Leader Energy Services Ltd.(b) 15,957 57,250
Midnight Oil Exploration Ltd.
(acquired 03/17/05, cost
$ 165,755)(b)(e) 81,200 273,946
Niko Resources Ltd. (acquired
6/20/03 through 11/10/03, cost
$ 40,606)(e) 2,000 101,040
Oilexco, Inc.(b) 72,025 289,864
Open Range Energy Corp.(b) 1,976 7,697
Pacific Rodera Energy, Inc.(b) 37,300 41,201
Paramount Resources Ltd. -
Class A(b) 14,700 524,258
Petrolifera Petroleum Ltd.(b) 4,150 43,531
Point North Energy Ltd. 13,755 13,191
Prairie Schooner Petroleum
Ltd.(b) 3,824 64,993
ProspEx Resources Ltd.(b) 43,140 151,453
Real Resources, Inc.(b) 6,185 121,809
Sequoia Oil & Gas Trust 11,220 181,576
Tag Oil Ltd. (acquired 09/22/05,
cost $4,409)(d)(e) 4,000 2,466
Technicoil Corp. (acquired
6/15/04, cost $24,418)(b)(e) 33,500 84,335
Thunder Energy Trust 30,194 261,383
True Energy Trust 6,718 89,559
Tusk Energy Corp. (acquired
03/14/05, cost
$ 39,439)(b)(d)(e) 17,959 60,281
Vault Energy Trust 5,850 50,192
Vero Energy, Inc.(b) 4,447 23,418
West Energy Ltd.(b) 143 686
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
92
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Canada (Continued)
Oil & Gas (Continued)
Zenas Energy Corp. (acquired
05/18/04 through 03/16/06,
cost $57,396)(d)(e) 13,522 $ 54,072
----------
6,789,857
----------
Transportation - 0.2%
Canadian Pacific Railway Ltd. 37,341 1,862,813
Railpower Technologies Corp.(b) 17,600 67,817
----------
1,930,630
----------
Total Canada 12,814,913
----------
China - 0.0%
Oil & Gas - 0.0%
Innova Exploration Ltd.(b) 1,660 10,391
----------
Denmark - 0.0%
Aerospace - 0.0%
MTU Aero Engines Holding AG(b) 6,500 220,558
----------
Finland - 0.3%
Banks - 0.0%
OKO Bank - Class A 7,300 118,367
----------
Finance - 0.2%
Sampo Oyj 86,831 1,827,789
----------
Machinery & Heavy Equipment - 0.1%
Kone Oyj - B Shares 4,200 172,900
Metso Oyj 5,600 216,147
----------
389,047
----------
Retail Merchandising - 0.0%
Kesko Oyj - Class B 5,500 171,629
----------
Total Finland 2,506,832
----------
France - 1.7%
Advertising - 0.0%
Publicis Groupe SA 4,400 171,696
----------
Banks - 0.3%
Credit Agricole SA 64,058 2,492,671
----------
Beverages & Bottling - 0.3%
LVMH Moet Hennessy Louis
Vuitton SA 22,969 2,251,863
----------
Chemicals - 0.0%
Rhodia SA(b) 97,800 252,447
----------
Computer & Office Equipment - 0.0%
Neopost SA 1,400 152,185
----------
Computer Software & Services - 0.0%
Atos Origin SA(b) 1,600 118,568
----------
Energy - 0.3%
Schneider Electric SA 17,533 1,893,151
----------
Entertainment & Leisure - 0.2%
Accor SA 21,014 1,211,416
----------
Machinery & Heavy Equipment - 0.2%
Alstom(b) 18,382 1,541,523
----------
Medical Instruments & Supplies - 0.2%
Essilor International SA 19,182 1,710,894
----------
Oil & Gas - 0.2%
Technip SA 27,391 1,853,883
----------
Total France 13,650,297
----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Germany - 1.2%
Air Transportation - 0.0%
Deutsche Lufthansa AG 13,800 $ 247,008
----------
Chemicals - 0.3%
Bayer AG
44,430 1,780,043
SGL Carbon AG(b) 11,144 203,654
----------
1,983,697
----------
Construction - 0.0%
Bilfinger Berger AG
5,300 347,476
----------
Durable Goods - 0.0%
Gerry Weber International AG 6,300 131,012
----------
Electronics - 0.0%
Techem AG 3,800 166,979
----------
Finance - 0.3%
Hypo Real Estate Holding AG 30,454 2,087,766
----------
Insurance - 0.3%
Allianz AG 13,566 2,265,110
----------
Machinery & Heavy Equipment - 0.1%
Heidelberger Druckmaschinen AG 2,700 119,101
Rheinmetall AG 3,600 279,212
----------
398,313
----------
Manufacturing - 0.1%
MAN AG 5,900 409,478
Solon AG Fuer Solartechnik(b)
2,100 104,315
----------
513,793
----------
Real Estate - 0.0%
IVG Immobilien AG 11,700 351,774
----------
Retail Merchandising - 0.1%
Metro AG 14,893 763,619
----------
Total Germany 9,256,547
----------
Greece - 0.2%
Banks - 0.0%
Piraeus Bank SA(b) 11,800 357,498
----------
Telecommunications - 0.2%
Hellenic Telecommunications
Organization SA(b) 63,277 1,410,961
----------
Total Greece 1,768,459
----------
Hong Kong - 0.2%
Entertainment & Leisure - 0.0%
Hongkong & Shanghai Hotels
Ltd. 32,284 36,823
----------
Machinery & Heavy Equipment - 0.1%
Techtronics Industries Co. Ltd. 367,500 660,720
----------
Real Estate - 0.1%
New World Development Co. Ltd. 166,000 290,960
Shun Tak Holdings Ltd. 65,200 93,273
Wheelock & Co. Ltd. 65,000 116,443
----------
500,676
----------
Total Hong Kong 1,198,219
----------
Italy - 0.3%
Computer Software & Services - 0.0%
Fastweb SpA(b) 4,700 239,847
----------
Construction - 0.1%
Buzzi Unicem SpA 15,900 379,012
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
93
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Italy (Continued)
Insurance - 0.2%
Assicurazioni Generali 44,360 $1,670,798
----------
Oil & Gas - 0.0%
Saipem SpA 10,500 242,910
----------
Total Italy 2,532,567
----------
Japan - 4.1%
Banks - 0.4%
The Bank of Kyoto Ltd. 18,000 217,162
The Chiba Bank Ltd. 24,000 213,492
The Iyo Bank Ltd. 18,000 193,611
Mizuho Financial Group, Inc. 328 2,683,637
The Musashino Bank Ltd. 1,600 92,846
----------
3,400,748
----------
Chemicals - 0.2%
Daicel Chemical Industries Ltd. 131,000 1,102,982
Nissan Chemical Industries Ltd. 7,200 122,223
----------
1,225,205
----------
Computer & Office Equipment - 0.0%
Brother Industries Ltd. 5,800 63,519
----------
Conglomerates - 0.1%
Mitsui & Co. Ltd. 68,000 983,313
----------
Construction - 0.4%
Daiwa House Industry Co. Ltd. 74,000 1,282,583
Mitsui Home Co. Ltd. 13,000 103,823
Obayashi Corp. 176,000 1,432,524
Taisei Corp. 38,000 182,090
----------
3,001,020
----------
Electronics - 0.5%
Daido Steel Co. Ltd. 24,000 243,670
Denso Corp. 57,300 2,263,764
Sony Corp. 37,000 1,713,254
----------
4,220,688
----------
Finance - 0.1%
Mitsui Trust Holdings, Inc. 22,000 321,682
Orix Corp. 900 280,247
Pacific Management Corp. 100 275,276
----------
877,205
----------
Food & Agriculture - 0.1%
The Nisshin Oillio Group Ltd. 35,000 270,603
Toyo Suisan Kaisha Ltd. 10,200 155,730
----------
426,333
----------
Industrial - 0.0%
Taiyo Nippon Sanso Corp. 32,000 236,534
----------
Leasing - 0.0%
Diamond Lease Co. Ltd. 3,400 159,167
----------
Machinery & Heavy Equipment - 0.5%
Hitachi Construction Machinery
Co. Ltd. 9,800 258,114
Juki Corp. 34,000 210,297
Komatsu Ltd. 122,000 2,327,018
Miura Co. Ltd. 8,000 204,588
Nabtesco Corp. 15,000 186,321
OSG Corp. 12,200 259,652
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Japan (Continued)
Machinery & Heavy Equipment (Continued)
Takeuchi Manufacturing Co. Ltd. 3,000 $ 131,266
----------
3,577,256
----------
Manufacturing - 0.3%
Asahi Diamond Industry Co. Ltd. 18,000 171,742
Koyo Seiko Co. Ltd. 93,780 1,872,413
----------
2,044,155
----------
Medical Instruments & Supplies - 0.0%
Nihon Kohden Corp. 12,000 210,025
----------
Metal & Mining - 0.2%
Marubeni Corp.
258,000 1,350,280
Maruichi Steel Tube Ltd.
7,400 184,529
----------
1,534,809
----------
Motor Vehicles - 0.1%
Futaba Industrial Co. Ltd.
6,300 154,155
Keihin Corp.
5,900 161,410
SHOWA Corp. 10,900 188,458
----------
504,023
----------
Pharmaceuticals - 0.2%
Astellas Pharma, Inc. 34,200 1,298,845
----------
Real Estate - 0.5%
Japan General Estate Co. Ltd. 12,600 260,136
Joint Corp. 7,900 252,370
Tokyo Tatemono Co. Ltd. 191,000 2,083,636
Tosei Corp.
100 119,796
Urban Corp.
96,000 1,531,759
----------
4,247,697
----------
Retail Merchandising - 0.3%
Aeon Co. Ltd. 68,000 1,649,448
Belluna Co. Ltd.
5,200 115,752
FamilyMart Co. Ltd.
4,400 137,944
Shimachu Co. Ltd. 5,000 157,179
Takashimaya Co. Ltd. 9,800 149,373
Xebio Co. Ltd. 6,150 212,141
----------
2,421,837
----------
Security Brokers & Dealers - 0.0%
Ichiyoshi Securities Co. Ltd. 11,900 229,507
Matsui Securities Co. Ltd.(b) 12,500 173,322
----------
402,829
----------
Textiles - 0.2%
Mitsubishi Rayon Co. Ltd. 163,000 1,335,021
----------
Tires & Rubber - 0.0%
Zeon Corp. 17,000 219,252
----------
Transportation - 0.0%
Keihin Electric Express Railway
Co. Ltd. 22,000 180,374
----------
Total Japan 32,569,855
----------
Luxembourg - 0.2%
Telecommunications - 0.2%
SES Global 100,209 1,593,727
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
94
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Malaysia - 0.0%
Entertainment & Leisure - 0.0%
Genting Berhad 13,300 $ 85,944
---------
Telecommunications - 0.0%
Digi.com Berhad(b) 71,600 164,269
---------
Total Malaysia 250,213
---------
Mexico - 0.0%
Metal & Mining - 0.0%
Grupo Mexico SA - Series B 103,500 294,376
---------
Netherlands - 0.5%
Business Services - 0.1%
Ordina NV 6,400 145,423
Vedior NV 12,500 244,946
---------
390,369
---------
Oil & Gas - 0.0%
SBM Offshore NV 2,900 290,815
---------
Personal Services - 0.0%
USG People NV 2,900 209,985
---------
Telecommunications - 0.2%
Koninklijke KPN NV 132,948 1,498,360
---------
Transportation - 0.2%
TNT N.V. 38,112 1,319,542
---------
Total Netherlands 3,709,071
---------
Norway - 0.6%
Banks - 0.0%
Sparebanken Midt-Norge 5,500 66,090
Sparebanken Nord-Norge 2,000 42,343
Sparebanken Rogaland 1,700 52,658
---------
161,091
---------
Food & Agriculture - 0.1%
Fjord Seafood ASA(b) 204,700 249,566
Pan Fish ASA 426,400 380,621
---------
630,187
---------
Manufacturing - 0.0%
Orkla ASA 4,800 238,037
---------
Oil & Gas - 0.4%
Fred Olsen Energy ASA(b) 7,000 285,721
Prosafe ASA 5,600 292,664
Statoil ASA 87,400 2,520,538
---------
3,098,923
---------
Transportation - 0.1%
Stolt-Nielsen SA (acquired
01/31/05, cost $177,441)(e) 13,000 402,679
---------
Total Norway 4,530,917
---------
Portugal - 0.0%
Telecommunications - 0.0%
PT Multimedia - Servicos de
Telecomunicacoes e
Multimedia, SGPS, SA 11,000 134,637
---------
Singapore - 0.2%
Conglomerates - 0.2%
Keppel Corp. Ltd. 155,000 1,323,762
---------
Oil & Gas - 0.0%
Singapore Petroleum Co. Ltd. 52,000 167,342
---------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Singapore (Continued)
Real Estate - 0.0%
CapitaLand Ltd. 125,000 $ 374,416
---------
Total Singapore 1,865,520
---------
South Africa - 0.2%
Banks - 0.2%
ABSA Group Ltd. 66,364 1,248,597
---------
Retail Merchandising - 0.0%
Foschini Ltd. 10,200 96,383
Truworths International Ltd. 23,000 106,131
---------
202,514
---------
Total South Africa 1,451,111
---------
South Korea - 0.2%
Computer Software & Services - 0.0%
NHN Corp.(b) 500 154,384
---------
Construction - 0.1%
Hanjin Heavy Industries Co. Ltd. 11,200 321,614
---------
Finance - 0.0%
Daewoo Securities Co. Ltd.(b) 11,400 180,105
---------
Machinery & Heavy Equipment - 0.0%
Doosan Infracore Co. Ltd. 9,200 170,914
---------
Retail Merchandising - 0.0%
Hyundai Department Store Co.
Ltd. 1,700 158,872
---------
Security Brokers & Dealers - 0.1%
Korea Investment Holdings Co.
Ltd.(b) 6,900 247,139
---------
Total South Korea 1,233,028
---------
Spain - 0.4%
Banks - 0.4%
Banco Bilbao Vizcaya Argentaria
SA
127,496 2,660,609
Banco Pastor SA
3,300 191,838
---------
2,852,447
---------
Telecommunications - 0.0%
Gestevis Telecinco SA
5,400 134,872
---------
Total Spain
2,987,319
---------
Sweden - 0.4%
Construction - 0.0%
Skanska AB 16,900 276,658
---------
Manufacturing - 0.1%
Assa Abloy AB - Class B 12,700 235,623
SSAB Svenskt Stal AB - Series A 4,800 229,877
---------
465,500
---------
Motor Vehicles - 0.0%
Scania AB 2,600 112,833
---------
Retail Merchandising - 0.0%
KappAhl Holding AB 11,200 89,157
Lindex AB(b) 19,600 289,401
---------
378,558
---------
Telecommunications - 0.3%
Telefonaktiebolaget LM Ericsson 529,790 2,013,454
---------
Total Sweden 3,247,003
---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
95
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
Switzerland - 1.0%
Food & Agriculture - 0.4%
Barry Callebaut AG(b) 600 $ 247,613
Nestle SA 8,653 2,568,719
----------
2,816,332
----------
Industrial - 0.0%
SGS Societe Generale de
Surveillance Holding SA 100 92,663
----------
Pharmaceuticals - 0.6%
Novartis AG 51,704 2,875,419
Roche Holding AG 14,868 2,213,691
----------
5,089,110
----------
Total Switzerland 7,998,105
----------
Taiwan - 0.0%
Chemicals - 0.0%
Taiwan Fertilizer Co. Ltd. 149,700 179,870
----------
Manufacturing - 0.0%
Wistron Corp.(b) 124,200 148,848
----------
Total Taiwan 328,718
----------
Thailand - 0.2%
Banks - 0.2%
Kasikornbank Public Co. Ltd. 572,400 996,827
Krung Thai Bank Public Co. Ltd. 219,500 61,545
Siam Commercial Bank Public
Co. Ltd.(d) 146,600 240,386
----------
1,298,758
----------
Telecommunications - 0.0%
Advanced Info Service Public Co.
Ltd.(d) 38,100 89,676
----------
Total Thailand 1,388,434
----------
United Kingdom - 2.6%
Aerospace - 0.0%
Meggitt PLC 29,400 177,758
----------
Air Transportation - 0.2%
BAA PLC 117,658 1,694,641
----------
Business Services - 0.0%
Aegis Group PLC 95,300 226,424
----------
Construction - 0.0%
Carillion PLC 34,700 212,063
----------
Energy & Utilities - 0.3%
International Power PLC(b) 42,200 207,492
ITM Power PLC(b) 6,900 26,104
Scottish Power PLC 183,521 1,855,712
Viridian Group PLC 15,100 257,626
----------
2,346,934
----------
Entertainment & Leisure - 0.1%
IG Group Holdings PLC 61,600 234,383
Intercontinental Hotels Group
PLC 10,100 165,213
Whitbread PLC 6,400 131,876
----------
531,472
----------
Finance - 0.0%
Archipelago Holdings, Inc.
(acquired 05/13/05, cost
$ 51,017)(d)(e) 78,900 50,583
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United Kingdom (Continued)
Finance (Continued)
Close Brothers Group PLC 9,800 $ 181,589
----------
232,172
----------
Food & Agriculture - 0.0%
Wolverhampton & Dudley
Breweries PLC 4,900 108,885
----------
Insurance - 0.4%
Homeserve PLC 3,900 98,250
Prudential PLC 222,953 2,585,630
----------
2,683,880
----------
Manufacturing - 0.1%
IMI PLC 17,000 167,174
Rexam PLC 28,800 278,958
----------
446,132
----------
Measuring & Controlling Devices - 0.0%
Rotork PLC 18,000 217,350
----------
Metal & Mining - 0.2%
Anglo American PLC 39,500 1,522,160
----------
Oil & Gas - 0.8%
BG Group PLC 170,688 2,133,711
BP PLC 233,818 2,685,228
Expro International Group PLC 22,880 294,562
Tullow Oil PLC
143,535 845,394
Venture Production PLC(b)
20,752 246,254
----------
6,205,149
----------
Pharmaceuticals - 0.4%
GlaxoSmithKline PLC 124,695 3,260,524
----------
Semiconductors & Related Devices - 0.0%
Wolfson Microelectronics PLC(b) 24,300 186,819
----------
Transportation - 0.1%
Arriva PLC 21,900 234,193
----------
Waste Management - 0.0%
Kelda Group PLC 12,800 175,353
----------
Total United Kingdom 20,461,909
----------
United States - 51.0%
Advertising - 0.0%
Getty Images, Inc.(b) 2,100 157,248
----------
Aerospace - 0.5%
AAR Corp.(b)(c) 4,400 125,312
Aviall, Inc.(b) 14,600 555,968
BE Aerospace, Inc.(b)
1,400 35,168
General Dynamics Corp.
20,400 1,305,192
Goodrich Corp.(c) 10,500 457,905
LMI Aerospace, Inc.(b) 400 7,256
Lockheed Martin Corp. 4,900 368,137
Orbital Sciences Corp.(b) 10,000 158,200
Raytheon Co.
21,700 994,728
----------
4,007,866
----------
Air Transportation - 0.1%
Ryanair Holdings PLC -
ADR(b)(c) 18,537 1,013,974
SkyWest, Inc. 1,375 40,246
----------
1,054,220
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
96
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Banks - 3.3%
Bank of America Corp. 58,300 $2,654,982
Bank of Hawaii Corp. 1,100 58,641
Boston Private Financial
Holdings, Inc. 7,400 250,046
Cathay General Bancorp 7,000 263,480
Central Pacific Financial Corp. 8,150 299,268
Citigroup, Inc. 78,010 3,685,192
City National Corp. 22,270 1,710,113
Colonial BancGroup, Inc. 24,400 610,000
Compass Bancshares, Inc. 13,700 693,357
Flagstar Bancorp, Inc. 2,200 33,220
Hudson City Bancorp, Inc. 57,005 757,596
J.P. Morgan Chase & Co. 96,200 4,005,768
Key Corp. 47,400 1,744,320
North Fork Bancorp, Inc. 23,265 670,730
Sovereign Bancorp, Inc. 22,360 489,908
SunTrust Banks, Inc. 8,800 640,288
U.S. Bancorp. 62,900 1,918,450
Umpqua Holdings Corp. 11,900 339,150
Unibanco SA - ADR 2,700 199,557
Wachovia Corp.(c) 51,300 2,875,365
Whitney Holdings Corp. 1,550 54,963
Wilmington Trust Corp. 1,400 60,690
Wintrust Financial Corp. 17,800 1,035,426
WSFS Financial Corp. 3,800 238,754
Zions Bancorp. 7,987 660,765
----------
25,950,029
----------
Beverages & Bottling - 0.6%
Coca-Cola Enterprises, Inc. 14,710 299,201
Constellation Brands, Inc.(b)(c) 10,800 270,540
Pepsi Bottling Group, Inc. 29,300 890,427
PepsiCo, Inc. 50,500 2,918,395
----------
4,378,563
----------
Broadcasting - 0.3%
Alliance Atlantis Communications,
Inc.(b) 8,400 256,200
Belo Corp. 17,820 354,262
Central European Media
Enterprises Ltd. - A Shares(b) 1,499 102,846
CKX, Inc.(b) 38,300 500,581
Lin TV Corp.(b) 19,145 172,305
Outdoor Channel Holdings,
Inc.(b) 1,900 19,361
Univision Communications, Inc. -
Class A(b)(c) 19,300 665,271
----------
2,070,826
----------
Business Services - 1.0%
ACXiom Corp. 2,175 56,202
Advisory Board Co.(b) 600 33,462
Akamai Technologies, Inc.(b)(c) 15,200 499,928
Alliance Data Systems Corp.(b) 13,500 631,395
Amvescap PLC - ADR(c) 34,250 645,955
ARAMARK Corp. - Class B 20,300 599,662
The Brink's Co. 22,190 1,126,364
ChoicePoint, Inc.(b) 12,600 563,850
The Corporate Executive Board
Co.(c) 6,700 676,030
Ctrip.com International Ltd.(b) 1,000 82,700
DiamondCluster International,
Inc.(b) 5,100 54,570
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Business Services (Continued)
Digitas, Inc.(b) 2,300 $ 33,120
eFunds, Corp.(b) 100 2,584
Expedia, Inc.(b) 18,500 374,995
Fair, Isaac & Co., Inc. 1,450 57,449
Forrester Research, Inc.(b) 12,700 283,464
Gartner, Inc. - Class A(b) 2,300 32,085
Global Payments, Inc.(c) 500 26,505
H&E Equipment Services, Inc.(b) 11,600 337,792
Healthcare Services Group, Inc. 6,800 145,248
HMS Holdings Corp.(b) 36,900 322,875
National Financial Partners Corp. 7,000 395,640
Net 1 UEPS Technologies, Inc.(b) 12,000 339,600
Sotheby Holdings - Class A(b) 2,000 58,080
W.W. Grainger, Inc.(c) 5,276 397,547
Watson Wyatt Worldwide, Inc. 13,600 443,088
----------
8,220,190
----------
Chemicals - 0.5%
Agrium, Inc.(c) 800 20,208
Air Products & Chemicals, Inc. 7,100 477,049
Ashland, Inc. 12,890 916,221
The Dow Chemical Co. 27,600 1,120,560
FMC Corp. 6,625 410,618
The Lubrizol Corp. 18,900 809,865
Lyondell Chemical Co. 2,200 43,780
OM Group, Inc.(b)
400 9,200
Rohm and Haas Co.
9,100 444,717
----------
4,252,218
----------
Computer & Office Equipment - 1.4%
American Power Conversion
Corp.(c) 22,720 525,059
Apple Computer, Inc.(b) 16,200 1,016,064
Avery Dennison Corp.(c)
7,065 413,161
Cisco Systems, Inc.(b)
70,500 1,527,735
Electronics for Imaging, Inc.(b) 15,750 440,528
Hewlett-Packard Co. 114,200 3,757,180
International Business Machines
Corp. 28,300 2,333,901
NCR Corp.(b) 12,280 513,181
Phase Metrics, Inc.(b) 50,574 1,012
Western Digital Corp.(b)(c) 19,600 380,828
----------
10,908,649
----------
Computer Software & Services - 3.5%
Activision, Inc.(b)(c)
41,792 576,312
Adobe Systems, Inc.(b) 44,300 1,546,956
Advanced Micro Devices, Inc.(b) 10,800 358,128
Aladdin Knowledge Systems(b)(c) 17,200 386,140
The BISYS Group, Inc.(b) 43,600 587,728
Blackboard, Inc.(b) 9,500 269,895
CACI International, Inc.(b)(c) 11,900 782,425
Cadence Design Systems, Inc.(b) 3,600 66,564
Ceridian Corp.(b) 36,950 940,377
Checkfree Corp.(b) 16,200 818,100
Cognizant Technology Solutions
Corp.(b)(c) 20,300 1,207,647
Computer Sciences Corp.(b) 16,000 888,800
eBay, Inc.(b)(c) 49,000 1,913,940
EMC Corp.(b) 184,600 2,516,098
Emulex Corp.(b) 2,500 42,725
Foundry Networks, Inc.(b) 43,300 786,328
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
97
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Computer Software & Services (Continued)
Google, Inc. - Class A(b)(c) 4,638 $1,808,820
IHS, Inc.(b) 1,800 49,230
Ingram Micro, Inc. - Class A(b) 27,100 542,000
Interwoven, Inc.(b) 5,100 45,849
Microsoft Corp.(c) 245,870 6,690,123
NAVTEQ Corp.(b)(c) 7,100 359,615
Oracle Corp.(b) 29,900 409,331
Progress Software Corp.(b) 7,550 219,630
Salesforce.com, Inc.(b)(c) 27,200 988,176
Sandisk Corp.(b)(c) 475 27,322
SkillSoft PLC - ADR(b) 95,900 502,516
SonicWALL, Inc.(b) 9,400 66,646
Sybase, Inc.(b) 1,800 38,016
TIBCO Software, Inc.(b) 21,200 177,232
Transaction Systems Architects,
Inc.(b) 1,800 56,178
Unisys Corp.(b) 69,760 480,646
VeriFone Holdings, Inc.(b) 15,300 463,437
Website Pros, Inc.(b) 1,200 16,860
Yahoo! Inc.(b)(c) 43,900 1,416,214
----------
28,046,004
----------
Conglomerates - 0.3%
Time Warner, Inc.(c) 127,800 2,145,762
----------
Construction - 0.0%
D.R. Horton, Inc. 1,125 37,373
Dycom Industries, Inc.(b) 5,400 114,750
Lennar Corp. 875 52,832
Martin Marietta Materials, Inc. 700 74,921
----------
279,876
----------
Containers - 0.2%
Owens-Illinois, Inc.(b) 32,060 556,882
Pactiv Corp.(b) 12,630 309,940
Smurfit-Stone Container Corp.(b) 53,740 729,252
Tupperware Corp. 1,700 35,003
----------
1,631,077
----------
Credit Institutions - 0.0%
CSG Systems, Inc.(b) 2,650 61,639
----------
Dental Equipment & Supplies - 0.0%
Align Technology, Inc.(b) 20,900 191,653
----------
Electronics - 0.7%
Ametek, Inc. 5,200 233,792
Amphenol Corp.(c) 15,125 789,222
Arrow Electronics, Inc.(b) 2,450 79,062
Cogent, Inc.(b)(c) 23,300 427,322
Directed Electronics, Inc.(b) 8,300 139,025
Emerson Electric Co. 7,300 610,499
EMS Technologies, Inc.(b) 1,300 23,439
FLIR Systems, Inc.(b)(c) 30,600 869,346
Intersil Corp. - Class A 2,300 66,516
Jabil Circuit, Inc.(b) 20,200 865,772
L-3 Communications Holdings,
Inc. 13,475 1,156,020
----------
5,260,015
----------
Energy & Utilities - 1.7%
Airgas, Inc. 22,700 887,343
Alliant Energy Corp. 2,000 62,940
Atmos Energy Corp. 2,100 55,293
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Energy & Utilities (Continued)
CenterPoint Energy, Inc. 45,300 $ 540,429
CMS Energy Corp.(b)(c) 36,600 473,970
Constellation Energy Group 8,900 486,919
El Paso Electric Co.(b) 10,100 192,304
Equitable Resources, Inc.(c) 21,270 776,568
FirstEnergy Corp.(c) 19,900 973,110
ITC Holdings Corp. 7,750 203,438
KFX, Inc.(b)(c) 11,500 209,300
Longview Energy Co. (acquired
8/13/04, cost $48,000)(d)(e)(f) 3,200 59,200
McDermott International, Inc.(b) 5,200 283,140
NRG Energy, Inc.(b)(c) 13,300 601,426
NSTAR 2,100 60,081
PG&E Corp.(c) 41,100 1,598,790
Pinnacle West Capital Corp. 975 38,122
PPL Corp.(c) 86,800 2,551,920
Public Service Enterprise Group,
Inc.(c) 11,680 747,987
Questar Corp. 9,700 679,485
SCANA Corp. 1,600 62,784
Sempra Energy 36,270 1,685,104
TXU Corp.
8,000 358,080
Wisconsin Energy Corp.
1,200 47,988
----------
13,635,721
----------
Entertainment & Leisure - 0.8%
Boyd Gaming Corp. 800 39,952
Gaylord Entertainment Co.(b) 7,500 340,350
GTECH Holdings Corp. 1,625 55,331
Hilton Hotels Corp. 10,150 258,419
Kerzner International Ltd.(b)
5,000 389,100
Orient-Express Hotels Ltd. -
Class A
23,100 906,213
Pinnacle Entertainment, Inc.(b) 7,100 200,007
Sabre Holdings Corp.(c) 38,800 912,964
Scientific Games Corp. - Class
A(b)(c) 18,600 653,418
Vail Resorts, Inc.(b) 1,600 61,152
The Walt Disney Co.(c) 85,200 2,376,228
World Wrestling Entertainment,
Inc.
1,900 32,110
----------
6,225,244
----------
Finance - 3.0%
Affiliated Managers Group,
Inc.(b)(c) 11,100 1,183,371
AllianceBernstein Holding LP 5,000 331,250
Ambac Financial Group, Inc. 7,085 563,966
American Express Co.(c) 49,190 2,584,934
The Bear Stearns Cos., Inc. 11,400 1,581,180
Capital One Financial Corp. 11,735 944,902
Chicago Mercantile Exchange
Holdings, Inc. 3,029 1,355,477
CIT Group, Inc. 30,930 1,655,374
Clayton Holdings, Inc.(b) 200 4,216
Countrywide Financial Corp.(c) 25,100 921,170
Fannie Mae 11,300 580,820
Franklin Resources, Inc. 10,770 1,014,965
Golden West Financial Corp.(c) 16,700 1,133,930
The Goldman Sachs Group, Inc. 5,200 816,192
H&R Block, Inc.
28,800 623,520
Indymac Bancorp, Inc.
1,075 44,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
98
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Finance (Continued)
Legg Mason, Inc. 10,400 $1,303,432
Mellon Financial Corp. 18,740 667,144
Morgan Stanley(c)(g) 12,400 778,968
NGP Capital Resources Co. 2,700 36,720
Nuveen Investments - Class A 4,800 231,120
Protective Life Corp. 950 47,253
SLM Corp. 28,700 1,490,678
State Street Corp.(c) 19,600 1,184,428
Sumitomo Mitsui Financial Group,
Inc. 226 2,496,177
T. Rowe Price Group, Inc. 5,900 461,439
Wright Express Corp.(b) 1,700 47,685
----------
24,084,311
----------
Food & Agriculture - 0.7%
Archer-Daniels-Midland Co. 38,000 1,278,700
Corn Products International, Inc. 1,450 42,876
Dean Foods Co.(b) 7,815 303,456
Del Monte Foods Co. 52,750 625,615
Flowers Foods, Inc. 1,275 37,868
General Mills, Inc.(c) 18,500 937,580
The J. M. Smucker Co. 17,400 690,780
Lance, Inc. 5,600 126,000
Monsanto Co. 15,218 1,289,726
----------
5,332,601
----------
Furniture - 0.0%
Herman Miller, Inc. 1,200 38,892
----------
Insurance - 2.1%
ACE Ltd. 7,000 364,070
Aetna, Inc. 15,800 776,412
The Allstate Corp. 19,000 990,090
American Financial Group, Inc. 1,475 61,375
American International Group,
Inc. 30,000 1,982,700
Aspen Insurance Holdings Ltd. 23,800 586,908
Axis Capital Holdings Ltd. 30,590 914,641
CHUBB Corp. 12,200 1,164,368
Cigna Corp.(c) 3,700 483,294
Endurance Specialty Holdings
Ltd. 52,160 1,697,808
Everest Re Group Ltd. 425 39,682
Genworth Financial, Inc. 25,700 859,151
The Hanover Insurance Group,
Inc. 8,515 446,356
Hartford Financial Services Group 15,200 1,224,360
Max Re Capital Ltd. 10,980 261,324
MetLife, Inc. 8,300 401,471
Nationwide Financial Services,
Inc. 8,900 382,878
Ohio Casualty Corp. 1,800 57,060
Platinum Underwriters Holdings
Ltd. 10,200 296,820
Prudential Financial, Inc.(c) 7,300 553,413
W.R. Berkley Corp. 17,650 1,024,759
WellPoint, Inc.(b) 14,600 1,130,478
XL Capital Ltd.(c) 11,300 724,443
----------
16,423,861
----------
Machinery & Heavy Equipment - 0.2%
Bucyrus International, Inc. - Class
A 404 19,469
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Machinery & Heavy Equipment (Continued)
Caterpillar, Inc. 8,700 $ 624,747
Kennametal, Inc. 1,050 64,197
Lennox International, Inc. 23,000 686,780
Terex Corp.(b) 750 59,430
----------
1,454,623
----------
Manufacturing - 3.6%
Actuant Corp. - Class A 2,100 128,562
American Railcar Industries, Inc. 10,000 350,700
Applied Films Corp.(b) 5,400 104,922
Aptargroup, Inc. 4,950 273,487
Black & Decker Corp.
8,725 758,115
Cooper Industries Ltd. - Class A
14,000 1,216,600
Corning, Inc.(b) 60,850 1,637,474
Crane Co. 1,600 65,616
Crocs, Inc.(b)(c) 800 20,120
Cummins, Inc. 5,350 562,285
Dade Behring Holdings, Inc. 10,000 357,100
Danaher Corp.(c) 26,050 1,655,478
Fortune Brands, Inc. 19,700 1,588,411
Gardner Denver, Inc.(b) 800 52,160
General Electric Co. 202,701 7,049,941
Harsco Corp. 875 72,292
Hexel Corp.(b)(c)
11,750 258,148
Honeywell International, Inc.
36,200 1,548,274
IDEX Corp. 9,900 516,483
Ingersoll-Rand Co. - Class A 12,000 501,480
Jones Apparel Group, Inc. 14,640 517,817
K2, Inc.(b) 25,200 316,260
Newell Rubbermaid, Inc.(c) 26,925 678,241
Nike, Inc.(c) 4,500 382,950
Nucor Corp.(c) 14,100 1,477,539
OYO Geospace Corp(b) 72 4,247
Parker Hannifin Corp. 5,300 427,233
Paxar Corp.(b) 11,400 223,098
Polo Ralph Lauren Corp. 17,450 1,057,644
Precision Castparts Corp. 725 43,065
Reynold American, Inc.(c) 10,700 1,128,850
Snap-On, Inc. 9,170 349,560
The Stanley Works(c) 12,340 625,144
Textron, Inc.(c) 23,140 2,161,045
Trex Co., Inc.(b)(c) 7,900 250,430
The Warnaco Group, Inc.(b) 13,200 316,800
----------
28,677,571
----------
Medical & Medical Services - 1.5%
Caremark Rx, Inc.(b) 26,750 1,315,565
Community Health Systems,
Inc.(b) 28,000 1,012,200
Covance, Inc.(b)(c) 975 57,281
Coventry Health Care, Inc.(b) 28,795 1,554,354
Davita, Inc.(b) 600 36,126
Digene Corp.(b)
1,600 62,560
Digirad Corp.(b)
2,100 8,988
Emergency Medical Services LP -
Class A(b) 9,500 123,500
HCA, Inc. 9,000 412,110
McKesson Corp. 9,300 484,809
Medco Health Solutions, Inc.(b) 25,400 1,453,388
MedImmune, Inc.(b) 21,700 793,786
Noven Pharmaceuticals, Inc.(b) 3,500 63,035
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
99
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Medical & Medical Services (Continued)
Omnicare, Inc. 11,400 $ 626,886
Pediatrix Medical Group, Inc.(b) 5,750 590,180
Per-Se Technologies, Inc.(b) 15,100 402,566
Pharmaceutical Product
Development, Inc. 1,000 34,610
Radiation Therapy Services,
Inc.(b) 7,200 183,672
Sierra Health Services, Inc.(b) 825 33,578
Symbion, Inc.(b) 12,000 271,800
Triad Hospitals, Inc.(b)(c) 27,500 1,152,250
Universal Health Services, Inc.(c) 8,005 406,574
Vital Images, Inc.(b) 11,950 407,256
----------
11,487,074
----------
Medical Instruments & Supplies - 1.8%
Advanced Medical Optics,
Inc.(b)(c) 32,000 1,492,480
Bausch & Lomb, Inc. 600 38,220
Beckman Coulter, Inc. 11,550 630,283
Becton, Dickinson & Co. 9,500 585,010
Biosite, Inc.(b)(c) 550 28,562
Bruker BioSciences Corp.(b) 2,400 12,960
Charles River Laboratories
International, Inc.(b) 700 34,314
Cytyc Corp.(b)(c) 15,700 442,426
DENTSPLY International, Inc. 900 52,335
DJ Orthopedics, Inc.(b) 15,700 624,232
Edwards Lifesciences Corp.(b) 925 40,238
Ev3, Inc.(b)(c) 13,400 237,314
Fisher Scientific International,
Inc.(b)(c) 10,200 694,110
Hillenbrand Industries, Inc. 10,205 561,173
Hologic, Inc.(b) 8,100 448,335
Immucor, Inc.(b) 6,200 177,878
IntraLase Corp.(b) 15,150 351,480
Invitrogen Corp.(b) 7,200 504,936
Johnson & Johnson 31,690 1,876,682
Kinetic Concepts, Inc.(b) 10,200 419,934
Kyphon, Inc.(b)(c) 700 26,040
Martek Biosciences Corp.(b)(c) 19,100 627,053
Medtronic, Inc. 10,800 548,100
MWI Veterinary Supply, Inc.(b) 9,000 296,100
Polymedica Corp. 8,400 355,824
St. Jude Medical, Inc.(b) 39,350 1,613,350
Symmetry Medical, Inc.(b) 11,200 237,552
Varian Medical Systems,
Inc.(b)(c) 14,800 831,168
Waters Corp.(b) 10,500 453,075
Wright Medical Group, Inc.(b) 1,955 38,611
----------
14,279,775
----------
Metal & Mining - 1.7%
Alpha Natural Resources,
Inc.(b)(c) 1,000 23,140
Arch Coal, Inc. 15,400 1,169,476
Century Aluminum Co.(b)(c) 12,100 513,645
CONSOL Energy, Inc. (acquired
6/11/03 through 8/30/05, cost
$ 1,882,214)(c)(e) 83,570 6,197,551
Foundation Coal Holdings, Inc. 2,600 106,964
Massey Energy Co.(b)(c) 80,028 2,886,610
MSC Industrial Direct Co., Inc. 8,600 464,572
Peabody Energy Corp.(c) 30,298 1,527,322
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Metal & Mining (Continued)
Phelps Dodge Corp. 5,800 $ 467,074
United States Steel Corp.(c) 4,100 248,788
----------
13,605,142
----------
Motor Vehicles - 0.2%
Harley-Davidson, Inc.(c) 9,500 492,860
PACCAR, Inc. 8,100 570,888
Tenneco Automotive, Inc.(b) 9,400 203,886
Wabash National Corp. 1,000 19,750
----------
1,287,384
----------
Oil & Gas - 5.4%
AGL Resources, Inc. 34,360 1,238,678
Allis-Chalmers Energy, Inc.(b) 1,800 24,534
Amerada Hess Corp.(c) 6,100 868,640
American Oil & Gas, Inc.(b) 2,388 10,316
Atwood Oceanics, Inc.(b) 400 40,404
Bois d'Arc Energy, Inc.(b)(c) 2,400 39,960
Cabot Oil & Gas Corp. 700 33,551
Callon Petroleum Co.(b) 2,075 43,617
CanArgo Energy Corp.(b) 191,100 208,299
Carbo Ceramics, Inc. 3,500 199,185
Chesapeake Energy Corp. 1,375 43,189
Chevron Corp. 18,500 1,072,445
Clayton Williams Energy, Inc.(b) 20,823 852,077
Comstock Resources, Inc.(b) 5,700 169,233
ConocoPhillips(c) 52,400 3,309,060
Devon Energy Corp. 21,802 1,333,628
Diamond Offshore Drilling, Inc.(c) 32,950 2,949,025
Energen Corp. 1,650 57,750
ENSCO International, Inc. 16,100 828,345
EOG Resources, Inc.(c) 20,160 1,451,520
The Exploration Co.(b)(c) 8,700 97,788
Exxon Mobil Corp.(c) 130,800 7,960,488
GlobalSantaFe Corp.(c) 30,100 1,828,575
Goodrich Petroleum Corp.(b)(c) 8,800 237,600
Grant Prideco, Inc.(b)(c) 12,350 529,074
Halliburton Co. 15,000 1,095,300
Helix Energy Solutions Group,
Inc.(b) 1,350 51,165
Helmerich & Payne, Inc. 1,075 75,056
Hercules Offshore, Inc.(b)(c) 9,500 323,095
KCS Energy, Inc.(b) 9,200 239,200
Marathon Oil Corp. 7,400 563,658
Matador Resources Co. (acquired
10/14/03, cost $8,950)(d)(e)(f)
895 13,425
Nabors Industries Ltd.(b)(c)
15,000 1,073,700
Newfield Exploration Co.(b)(c) 45,885 1,922,582
Noble Corp. 5,200 421,720
Noble Energy, Inc. 2,150 94,428
Oceaneering International, Inc.(b) 500 28,650
Parallel Petroleum Corp.(b) 6,379 117,693
Patterson-UTI Energy, Inc. 32,020 1,023,359
Petroquest Energy, Inc.(b) 10,336 104,290
Pioneer Natural Resources Co. 6,700 296,475
Plains Exploration & Production
Co.(b) 27,700 1,070,328
Precision Drilling Trust(c) 3,300 106,722
Pride International, Inc.(b)(c) 13,800 430,284
Rowan Cos., Inc.(c) 10,800 474,768
Schlumberger Ltd.(c) 29,300 3,708,501
Southwestern Energy Co.(b) 12,300 395,937
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
100
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Oil & Gas (Continued)
St. Mary Land & Exploration Co. 900 $ 36,747
Stolt Offshore SA - ADR
(acquired 8/10/05 through
8/16/05, cost $212,229)(e) 28,300 438,367
Superior Energy Serivces, Inc.(b) 12,150 325,498
Transocean, Inc.(b)(c) 17,700 1,421,310
Treasure Island Royalty Trust
(acquired 01/31/05, cost
$ 96,000)(b)(e) 300,000 246,000
Trico Marine Services, Inc.(b) 900 29,070
Unit Corp.(b) 1,050 58,538
Valero Energy Corp. 21,500 1,285,270
Weatherford International
Ltd.(b)(c) 659 30,142
----------
42,928,259
----------
Paper & Forest Products - 0.3%
Bowater, Inc.(c) 14,705 434,974
Louisiana-Pacific Corp. 42,400 1,153,280
Temple Inland, Inc. 9,300 414,315
----------
2,002,569
----------
Personal Services - 0.1%
Education Management Corp.(b) 1,575 65,520
Laureate Education, Inc.(b)(c) 17,300 923,474
----------
988,994
----------
Pharmaceuticals - 2.4%
Abbott Laboratories 14,200 603,074
Allergan, Inc. 10,581 1,148,039
Alpharma, Inc. - Class A 1,000 26,820
Amylin Pharmaceuticals,
Inc.(b)(c) 21,350 1,045,083
Andrx Corp.(b) 29,510 700,567
Cephalon, Inc.(b)(c) 575 34,644
Eli Lilly & Co.(c) 13,500 746,550
Endo Pharmaceuticals Holdings,
Inc.(b) 18,400 603,704
Genzyme Corp.(b) 14,750 991,495
Gilead Sciences, Inc.(b) 8,100 503,982
ImClone Systems, Inc.(b)(c) 1,100 37,422
Merck & Co., Inc.(c) 104,000 3,663,920
Novartis AG - ADR 13,930 772,279
Pfizer, Inc. 172,700 4,303,684
Shire PLC - ADR 29,600 1,376,104
Valeant Pharmaceuticals
International(c) 11,850 187,822
Vertex Pharmaceuticals, Inc.(b) 1,425 52,141
Wyeth 42,500 2,062,100
----------
18,859,430
----------
Publishing & Printing - 0.4%
Banta Corp. 6,500 337,870
Dow Jones & Co., Inc.(c) 7,295 286,694
Marvel Entertainment, Inc.(b) 9,200 185,104
The McGraw-Hill Cos., Inc. 26,600 1,532,692
Playboy Enterprises, Inc. - Class
B(b) 1,400 19,880
R.R. Donnelley & Sons Co. 24,545 803,112
----------
3,165,352
----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Railroad & Shipping - 0.3%
Burlington Northern Santa Fe
Corp. 24,100 $2,008,253
CSX Corp.(c) 7,065 422,487
----------
2,430,740
----------
Real Estate - 0.7%
AMB Property Corp. 1,200 65,124
Boston Properties, Inc.(REIT) 8,140 759,055
CB Richard Ellis Group, Inc. -
Class A(b) 7,100 572,970
Cendant Corp. 11,310 196,229
Centex Corp.
4,500 278,955
Highwoods Property
1,600 53,968
Homestore, Inc.(b) 2,900 19,024
Hospitality Properties Trust 1,400 61,138
HRPT Properties Trust(REIT) 40,600 476,644
Kimco Realty Corp.(REIT)(c) 19,500 792,480
LaSalle Hotel Properties
9,300 381,300
New Plan Excel Realty Trust
1,550 40,207
Reckson Associates Realty Corp.
(REIT)(c) 13,765 630,712
Simon Property Group, Inc.(c) 16,500 1,388,310
Trustreet Properties, Inc. 6,900 104,811
----------
5,820,927
----------
Restaurants - 0.5%
The Cheesecake Factory, Inc.(b) 15,800 591,710
CKE Restaurants, Inc.(c) 23,000 400,200
Darden Restaurants, Inc. 1,475 60,519
Denny's Corp.(b) 48,400 230,384
Jack in the Box, Inc.(b) 1,150 50,025
McDonald's Corp. 43,100 1,480,916
Red Robin Gourmet Burgers,
Inc.(b)(c) 5,400 254,880
Ruby Tuesday, Inc.(c) 23,300 747,464
Ruth's Chris Steak House, Inc.(b) 1,800 42,858
Texas Roadhouse, Inc.(b) 1,300 22,217
Tim Hortons, Inc.(b) 700 18,585
----------
3,899,758
----------
Retail Merchandising - 2.7%
Abercrombie & Fitch Co. - Class
A 5,350 311,905
American Eagle Outfitters, Inc. 2,800 83,608
AutoNation, Inc.(b) 57 1,228
Barnes & Noble, Inc.(c) 18,475 854,469
Best Buy Co., Inc.
12,300 687,939
Central Garden & Pet Co.(b)
700 37,198
Chico's FAS, Inc.(b)(c) 33,550 1,363,472
The Children's Place Retail
Stores, Inc.(b) 3,100 179,490
Claire's Stores, Inc. 2,300 83,513
Coach, Inc.(b) 27,470 949,913
Coldwater Creek, Inc.(b)(c) 850 23,630
Core-Mark Holding Co., Inc.(b) 6,500 248,690
Cost Plus, Inc.(b) 5,700 97,470
CVS Corp.
53,100 1,586,097
Dick's Sporting Goods, Inc.(b)
938 37,210
Dillard's, Inc. - Class A 1,800 46,872
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
101
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Retail Merchandising (Continued)
Federated Department Stores,
Inc. 8,325 $ 607,725
The Gap, Inc.(c) 22,600 422,168
The Home Depot, Inc. 38,900 1,645,470
J.C. Penney Co., Inc. 17,700 1,069,257
Jarden Corp.(b)(c) 11,200 367,920
Jos. A. Bank Clothiers, Inc.(b)(c) 875 41,956
The Kroger Co.(b)(c) 61,530 1,252,751
Longs Drug Stores Corp. 1,600 74,048
Nordstrom, Inc. 19,300 756,174
Office Depot, Inc.(b) 1,100 40,964
Officemax, Inc. 28,820 869,499
Payless ShoeSource, Inc.(b) 3,250 74,393
Pier 1 Imports, Inc.(c) 27,100 314,631
Regis Corp. 15,500 534,440
Rite Aid Corp.(b)(c) 120,100 480,400
Saks, Inc.(b) 19,310 372,683
Staples, Inc. 47,950 1,223,684
The Talbots, Inc. 21,000 564,270
TJX Cos., Inc.(c) 51,990 1,290,392
Tractor Supply Co.(b) 3,100 205,654
Walgreen Co. 25,650 1,106,284
Whole Foods Market, Inc. 6,000 398,640
Williams-Sonoma, Inc.(b)(c) 20,300 860,720
-----------
21,166,827
-----------
Security Brokers & Dealers - 3.9%
E*TRADE Financial Corp.(b)(c) 32,350 872,803
iShares Russell 2000 Growth
Index Fund 128,118 10,202,036
iShares Russell 2000 Value Index
Fund 164,463 12,277,163
iShares Russell Midcap Growth
Index Fund 48,500 4,903,350
Lehman Brothers Holdings, Inc. 14,200 2,052,326
Piper Jaffray Cos., Inc.(b) 4,600 253,000
-----------
30,560,678
-----------
Semiconductors & Related Devices - 1.2%
Analog Devices, Inc. 18,500 708,365
Broadcom Corp. - Class A(b)(c) 17,475 754,221
Eagle Test Systems, Inc.(b) 800 12,320
Freescale Semiconductor, Inc. -
Class A(b) 69,850 1,942,528
Freescale Semiconductor, Inc. -
Class B(b) 48,000 1,332,960
Kulicke & Soffa Industries, Inc.(b) 19,100 182,214
Lam Research Corp.(b) 25,050 1,077,150
Linear Technology Corp. 12,300 431,484
LSI Logic Corp.(b)(c) 41,100 475,116
Marvell Technology Group Ltd.(b) 8,200 443,620
MEMC Electronic Materials,
Inc.(b) 14,850 548,262
Micrel, Inc.(b) 900 13,338
Microsemi Corp.(b) 1,300 37,843
MKS Instruments, Inc.(b) 500 11,715
O2Micro International Ltd. -
ADR(b) 11,285 119,960
PMC-Sierra, Inc.(b)(c) 111,000 1,364,190
Rudolph Technologies, Inc.(b) 18,500 315,425
Standard Microsystems Corp.(b) 1,400 36,372
-----------
9,807,083
-----------
NUMBER
OF SHARES VALUE
------------------- -------------------
COMMON STOCKS (Continued)
United States (Continued)
Soaps & Cosmetics - 0.5%
The Procter & Gamble Co. 62,780 $ 3,617,384
-----------
Telecommunications - 2.2%
ADTRAN, Inc. 1,500 39,270
ALLTEL Corp. 6,500 420,875
Amdocs Ltd.(b) 48,870 1,762,252
American Tower Corp. - Class
A(b)(c) 55,900 1,694,888
Anixter International, Inc. 900 43,002
AT&T, Inc.(c) 99,300 2,685,072
Avid Technology, Inc.(b)(c) 14,400 625,824
CenturyTel, Inc. 925 36,186
Comverse Technology, Inc.(b) 15,900 374,127
Harman International Industries,
Inc.(c) 7,650 850,145
Harris Corp.(c) 17,250 815,752
Motorola, Inc. 64,200 1,470,822
NII Holdings, Inc.(b) 15,891 937,092
Polycom, Inc.(b)(c) 37,300 808,664
Qualcomm, Inc. 8,050 407,410
RCN Corp.(b) 7,400 191,660
Sprint Nextel Corp. 52,883 1,366,497
Syniverse Holdings, Inc.(b) 7,100 112,180
Ubiquitel, Inc.(b) 28,900 291,890
Verizon Communications, Inc.(c) 62,844 2,140,467
West Corp.(b) 800 35,728
WinderThan Co. Ltd. - ADR(b)
1,200 15,864
-----------
17,125,667
-----------
Tires & Rubber - 0.1%
Cooper Tire & Rubber Co.(c) 33,848 485,380
-----------
Tobacco - 0.2%
Altria Group, Inc. 16,900 1,197,534
Loews Corp. - Carolina Group 9,050 427,794
-----------
1,625,328
-----------
Transportation - 0.3%
American Commercial Lines,
Inc.(b) 9,530 449,816
C.H. Robinson Worldwide, Inc. 1,750 85,908
FedEx Corp. 4,850 547,759
Hornbeck Offshore Services,
Inc.(b) 2,900 104,603
Landstar System, Inc. 11,600 511,792
OMI Corp.(c) 17,500 315,350
Ryder Systems, Inc.(c) 11,275 504,894
Stealthgas, Inc. 700 9,730
Vitran Corp., Inc.(b) 9,600 192,672
Yellow Roadway Corp. 800 30,448
-----------
2,752,972
-----------
Waste Management - 0.1%
Republic Services, Inc. 1,700 72,267
Stericycle, Inc.(b) 7,100 480,102
-----------
552,369
-----------
Total United States 402,937,751
-----------
TOTAL COMMON STOCKS
(Cost $433,371,671)
539,924,795
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
102
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ----------
WARRANTS - 0.0%
Point North Energy Ltd. (issued
07/24/03, expiring 07/23/08,
strike price 5.00 CAD)
(acquired 07/24/03, cost
$ 0)(d)(e)(f)(h) 13,755 $18,844
Triex Minerals Corp. (issued
12/23/05, expiring 12/23/06,
strike price 3.00 CAD)
(acquired 12/23/05, cost
$ 0)(d)(e)(f)(i) 3,300 989
-------
TOTAL WARRANTS
(Cost $0) 19,833
-------
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 2.0%
Federal Home Loan Bank,
Unsecured Bonds
2.25%(j) 01/09/07 $ 3,250 $3,180,018
Federal Home Loan Mortgage
Corp., Unsecured Notes
3.25%(j) 11/02/07 4,350 4,221,179
4.62% 05/28/13 150 142,024
Federal National Mortgage
Association, Unsecured Notes
1.75% 06/16/06 90 89,405
4.00%(j) 10/16/06 2,450 2,434,991
2.35% 04/05/07 440 428,118
5.00% 08/02/12 325 317,271
Resolution Funding Corp., Strip
Bonds
6.29% 07/15/18 150 79,557
6.30% 10/15/18 150 78,537
Small Business Administration
Participation Certificates,
Series 97-20F, Class 1
7.20% 06/01/17 730 757,728
Small Business Investment Cos.
Pass - Through, Series
97-P10C, Class 1
6.85% 08/01/07 194 197,586
U.S. Treasury Notes
4.38% 01/31/08 3,850 3,817,968
----------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $15,841,490) 15,744,382
----------
MORTGAGE PASS-THROUGHS - 10.0%
Federal Home Loan Mortgage
Corp.
5.00% 08/20-04/21 3,443 3,354,606
Federal Home Loan Mortgage
Corp. Gold
8.00% 08/08-08/27 34 36,178
8.50%(k) 07/01/09 0 6
4.00% 05/10-05/19 208 198,194
6.00% 04/13-06/16 170 172,130
4.50% 05/18-04/21 3,047 2,911,001
5.00%(l) 06/20-09/35 11,996 11,655,347
9.50% 12/01/22 343 374,045
7.50%(k) 09/01/27 0 418
6.50% 01/29-08/32 77 78,912
5.50% 07/33-08/33 1,021 1,000,149
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
MORTGAGE PASS-THROUGHS (Continued)
Federal National Mortgage
Association
8.00% 04/08-02/33 $ 255 $ 270,372
7.00% 08/08-10/32 491 505,046
8.50% 02/01/09 15 15,314
6.50% 01/11-07/32 934 956,502
6.00% 09/11-02/34 1,904 1,909,931
5.50% 04/17-04/36 37,690 36,972,116
5.00% 01/18-04/36 12,281 11,838,240
4.50% 10/18-04/36 2,885 2,696,216
7.50% 07/29-01/31 682 713,165
Government National Mortgage
Association
6.50% 02/09-11/28 496 511,486
7.50% 11/10-12/29 54 55,998
6.00% 10/23-02/24 312 315,812
7.00% 01/25-05/32 259 270,005
5.50% 04/33-12/34 878 870,159
5.00% 10/20/33 1,440 1,391,386
Government National Mortgage
Association 1 Year CMT
3.75%(m) 05/20/34 225 219,058
----------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $80,309,937) 79,291,792
----------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 0.0%
Structured Asset Securities Corp.,
Series 96-CFL, Class X1 (IO)
2.05%(n)
(Cost $108,851) 02/25/28 877 39,569
----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 2.7%
Banc of America Alternative Loan
Trust, Series 04-6, Class 4A1
5.00% 07/25/19 76 73,350
Countrywide Home Loans, Series
03-27, Class M
3.93%(m) 06/25/33 734 708,572
Countrywide Home Loans, Series
03-58, Class B1
4.51%(m) 02/19/34 244 235,205
Fannie Mae Grantor Trust, Series
03-T1, Class R (IO)
0.53%(n) 11/25/12 6,677 196,898
Federal Home Loan Mortgage
Corp., Series 235 , Class IO
5.50%(n) 02/01/36 1,987 537,237
Federal Home Loan Mortgage
Corp., Series 2529, Class MB
5.00% 11/15/17 100 96,787
Federal Home Loan Mortgage
Corp., Series 2574, Class HP
5.00% 02/15/18 1,420 1,371,241
Federal Home Loan Mortgage
Corp., Series 2668, Class AD
4.00% 01/15/15 211 205,042
Federal Home Loan Mortgage
Corp., Series 2707, Class PW
4.00% 07/15/14 362 356,092
Federal Home Loan Mortgage
Corp., Series 2730, Class PA
3.75% 03/15/11 291 289,625
Federal Home Loan Mortgage
Corp., Series 2748, Class LJ
4.00% 03/15/10 102 101,444
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
103
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (Continued)
Federal Home Loan Mortgage
Corp., Series 2864, Class NA
5.50% 01/15/31 $ 179 $ 177,888
Federal Home Loan Mortgage
Corp., Series 2996, Class MK
5.50% 06/15/35 911 902,269
Federal National Mortgage
Association, Series 03-16,
Class BC
5.00% 03/25/18 50 47,882
Federal National Mortgage
Association, Series 03-84,
Class GA
4.50% 04/25/09 222 221,232
Federal National Mortgage
Association, Series 04-31,
Class PK
3.50% 06/25/10 398 393,714
Federal National Mortgage
Association, Series 04-88,
Class HA
6.50% 07/25/34 83 84,281
Federal National Mortgage
Association, Series 04-99,
Class AO
5.50% 01/25/34 144 142,360
Federal National Mortgage
Association, Series 05-3, Class
AP
5.50% 02/25/35 128 127,078
Federal National Mortgage
Association, Series 05-48,
Class AR
5.50% 02/25/35 2,100 2,081,937
Federal National Mortgage
Association, Series 05-51,
Class TA
5.50% 05/01/35 2,193 2,161,723
Federal National Mortgage
Association, Series 05-80,
Class PB
5.50% 04/25/30 1,314 1,311,765
Federal National Mortgage
Association, Series 363, Class
2 (IO)
5.50%(n) 11/01/35 2,340 622,942
Harborview Mortgage Loan Trust,
Series 05-10, Class 2A1A
5.09%(m) 11/19/35 1,509 1,510,014
Indymac Index Mortgage Loan
Trust, Series 05-AR18, Class
2A1B
5.60%(m) 10/25/36 2,010 2,045,272
Master Alternative Loans Trust,
Series 04-4, Class 1A1
5.50% 05/25/34 144 140,821
Salomon Brothers Mortgage
Securities VI, Series 87-1 (IO)
11.00%(n) 02/17/17 49 11,491
Salomon Brothers Mortgage
Securities VI, Series 87-1 (PO)
11.50%(o) 02/17/17 55 51,096
Salomon Brothers Mortgage
Securities VI, Series 87-2 (IO)
11.00%(n) 03/06/17 32 8,088
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (Continued)
Salomon Brothers Mortgage
Securities VI, Series 87-2 (PO)
11.50%(o) 03/06/17 $ 32 $ 28,811
Structured Asset Securities Corp.,
Series 01-21A, Class B2
6.04%(m) 01/25/32 33 33,173
Structured Asset Securities Corp.,
Series 03-2A, Class B2II
5.43%(m) 02/25/33 194 189,288
Washington Mutual Mortgage
Loan Trust, Series 03-AR8,
Class B1
4.19%(m) 08/25/33 390 382,008
Washington Mutual Mortgage
Securities Corp., Series
03-AR3, Class A5
3.93%(m) 04/25/33 263 255,837
Washington Mutual Mortgage
Securities Corp., Series
03-AR3, Class B2
4.73%(m) 04/25/33 197 193,358
Washington Mutual Mortgage
Securities Corp., Series
03-AR4, Class A6
3.42%(m) 05/25/33 782 759,991
Washington Mutual Mortgage
Securities Corp., Series
03-AR5, Class A6
3.70%(m) 06/25/33 850 816,459
Washington Mutual Mortgage
Securities Corp., Series
03-AR5, Class B2
4.50%(m) 06/25/33 416 410,095
Washington Mutual Mortgage
Securities Corp., Series
04-AR1, Class B1
4.50%(m) 03/25/34 1,244 1,191,261
Washington Mutual Mortgage
Securities Corp., Series
04-AR3, Class B1
4.18%(m) 06/25/34 224 215,919
Wells Fargo Mortgage Backed
Securities, Series 04-K, Class
1A2
4.48%(m) 07/25/34 460 450,568
----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $21,607,299) 21,140,114
----------
COMMERCIAL MORTGAGE BACKED SECURITIES - 3.7%
Banc of America Commercial
Mortgage, Inc., Series 02-PB2,
Class A4
6.19% 06/11/35 1,490 1,541,008
Bank of America-First Union
Commercial Mortgage, Series
01-3, Class A2
5.46% 04/11/37 1,375 1,376,438
Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 99-WF2, Class A2
7.08% 07/15/31 250 261,126
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
104
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 00-WF2, Class A2
7.32% 10/15/32 $ 475 $ 507,021
Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 02-TOP6, Class A1
5.92% 10/15/36 802 812,436
Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 04-PWR4, Class A1
4.36% 06/11/41 830 810,795
CDC Commercial Mortgage Trust,
Series 02-FX1, Class A1
5.25% 05/15/19 1,591 1,588,761
Commercial Mortgage
Acceptance Corp., Series
98-C2, Class C
5.92%(m) 09/15/30 275 281,206
Credit Suisse First Boston
Mortgage Securities Corp.
Series 02-CKN2, Class A3
6.13% 03/15/12 1,000 1,031,883
Credit Suisse First Boston
Mortgage Securities Corp.,
Series 01-CP4, Class D
6.61% 12/15/35 1,450 1,520,287
Credit Suisse First Boston
Mortgage Securities Corp.,
Series 02-CP5, Class A2
4.94% 12/15/35 1,010 978,207
Donaldson, Lufkin and Jenrette,
Inc., Commerical Mortgage
Corp., Series 99-CG1, Class
A1B
6.46% 03/10/32 150 154,207
Donaldson, Lufkin and Jenrette,
Inc., Commerical Mortgage
Corp., Series 00-CKP1, Class
A1B
7.18% 11/10/33 1,180 1,256,245
First Union National Bank
Commercial Mortgage, Series
01-C4, Class A2
6.22% 11/12/11 1,140 1,181,681
First Union-Lehman
Brothers-Bank of America
Commercial Mortgage Trust,
Series 98-C2, Class C3
6.56% 11/18/08 156 159,153
General Motors Acceptance Corp.
Commercial Mortgage
Securities, Inc., Series 99-C3,
Class A2
7.18% 08/15/36 156 163,391
GGP Mall Properties Trust,
Series 01-C1A, Class C2
5.56%(p) 11/15/11 485 485,911
GGP Mall Properties Trust,
Series 01-C1A, Class C3
6.05%(m)(p) 02/15/14 40 40,345
Goldman Sachs Mortgage
Securities Corp. II, Series
06-GG6, Class A4
5.55% 04/10/38 425 424,153
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Impac Commercial Mortgage
Backed Trust, Series 03-5,
Class M1
5.71%(m) 08/25/33 $ 52 $ 52,065
Impac Commercial Mortgage
Backed Trust, Series 03-7,
Class M
6.47%(m) 08/25/33 25 25,406
Impac Commercial Mortgage
Backed Trust, Series 04-1,
Class M4
6.02%(m) 03/25/34 75 74,976
Impac Commercial Mortgage
Backed Trust, Series 04-5,
Class 1A1
5.18%(m) 10/25/34 247 246,910
Impac Commercial Mortgage
Backed Trust, Series 04-7,
Class 1A1
5.19%(m) 11/25/34 581 582,464
Impac Commercial Mortgage
Backed Trust, Series 04-7,
Class M4
6.02%(m) 11/25/34 274 274,523
J.P. Morgan Chase Commercial
Mortgage Securities Corp.,
Series 05-LDP3, Class A4A
4.94% 08/15/42 1,275 1,215,432
J.P. Morgan Commercial
Mortgage Finance Corp.,
Series 97-C5, Class C
7.24% 09/15/29 1,600 1,665,333
J.P. Morgan Commercial
Mortgage Finance Corp.,
Series 99-C7, Class A2
6.51% 10/15/35 540 551,753
J.P. Morgan Commercial
Mortgage Finance Corp.,
Series 99-PLSI, Class D
6.69%(m) 02/15/32 650 680,480
Lehman Brothers Commercial
Conduit Mortgage Trust, Series
98-C4, Class A1B
6.21% 10/15/35 460 468,180
Lehman Brothers Commercial
Conduit Mortgage Trust, Series
99-C2, Class A2
7.32% 10/15/32 250 263,450
Lehman Brothers Commercial
Conduit Mortgage Trust, Series
99-C2, Class E
7.47% 10/15/32 125 132,636
Lehman Brothers-UBS
Commercial Mortgage Trust,
Series 01-C7, Class A4
5.93% 12/15/25 825 839,890
Lehman Brothers-UBS
Commercial Mortgage Trust,
Series 01-WM, Class A1
6.16%(p) 07/14/16 717 733,679
Lehman Brothers-UBS
Commercial Mortgage Trust,
Series 03-C8, Class A1
3.64% 11/15/27 457 443,605
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
105
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Lehman Brothers-UBS
Commercial Mortgage Trust,
Series 04-C2, Class A1
2.95% 03/15/29 $ 319 $ 303,115
Lehman Brothers-UBS
Commercial Mortgage Trust,
Series 04-C6, Class A1
3.88% 08/15/29 241 233,324
Morgan Stanley Capital I, Series
97-WF1, Class A2
7.22%(p) 07/15/29 200 201,902
Morgan Stanley Capital I, Series
99-WF1, Class A2
6.21% 11/15/31 450 457,243
Morgan Stanley Capital I, Series
04-XLF, Class G
5.80%(m)(p) 04/15/16 300 302,537
Morgan Stanley Dean Witter
Capital I, Series 02-TOP7,
Class A1
5.38% 01/15/39 521 521,467
Mortgage Capital Funding, Inc.,
Series 98-MC2, Class B
6.55% 06/18/30 295 301,528
Nationslink Funding Corp., Series
98-2, Class A2
6.48% 08/20/30 196 199,501
Nationslink Funding Corp., Series
98-2, Class B
6.80% 08/20/30 525 540,574
Nationslink Funding Corp., Series
99-2, Class D
7.32%(m) 06/20/31 175 183,512
Salomon Brothers Mortgage
Securities VII, Series 00-C1,
Class A2
7.52% 12/18/09 460 482,637
Salomon Brothers Mortgage
Securities VII, Series 00-C3,
Class A2
6.59% 10/18/10 1,325 1,377,964
Salomon Brothers Mortgage
Securities VII, Series 01-MMA,
Class A2
6.13%(p) 02/18/34 103 103,247
Washington Mutual Asset
Securities Corp., Series
05-C1A, Class A1
4.24%(p) 05/25/36 899 879,044
----------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $29,730,595) 28,912,631
----------
ASSET BACKED SECURITIES - 3.1%
Ameriquest Mortgage Securities,
Inc., Series 02-3, Class M2
6.07%(m)(q) 08/25/32 425 428,779
Amortizing Residential Collateral
Trust, Series 02-BC1, Class B
6.87%(m) 01/25/32 77 76,639
Amortizing Residential Collateral
Trust, Series 02-BC3, Class
M2
5.92%(m) 06/25/32 176 177,482
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
ASSET BACKED SECURITIES (Continued)
Amortizing Residential Collateral
Trust, Series 02-BC5, Class
M2
6.02%(m) 07/25/32 $ 250 $ 251,180
Asset Backed Funding Corp. Net
Interest Margin Trust, Series
04-OPT4, Class N1
4.45% 05/26/34 7 6,995
Capital Auto Receivables Asset
Trust, Series 05-1, Class A4
4.05% 07/15/09 1,800 1,773,000
Caterpillar Financial Asset Trust,
Series 04-A, Class A3
3.13% 01/26/09 361 355,429
Centex Home Equity Loan Trust,
Series 03-B, Class M3
7.92%(m) 06/25/33 475 484,086
Centex Home Equity, Series
02-A, Class MF2
6.54% 01/25/32 299 298,268
Chase Funding Mortgage Loan
Certificates, Series 03-2, Class
1A4
3.99% 08/25/29 203 200,920
Chase Manhattan Auto Owner
Trust, Series 03-B, Class CTFS
2.43% 02/16/10 804 787,809
Citibank Credit Card Issuance
Trust, Series 01-C3, Class C3
6.65% 05/15/08 575 575,829
Citibank Credit Card Issuance
Trust, Series 03-A6, Class A6
2.90% 05/17/10 250 238,633
Citibank Credit Card Issuance
Trust, Series 04, Class A1
2.55% 01/20/09 450 440,978
Countrywide Certificates, Series
02-2, Class M2
5.97%(m) 12/25/31 15 14,764
Countrywide Certificates, Series
03-2, Class M2
6.47%(m) 03/26/33 1,075 1,082,011
Countrywide Certificates, Series
03-3, Class B
8.08%(m) 11/25/31 250 251,585
Countrywide Certificates, Series
03-3, Class M6
7.48%(m) 07/25/32 1,500 1,522,061
Countrywide Certificates, Series
03-BCI, Class M2
6.82%(m) 09/25/32 300 301,844
Countrywide Certificates, Series
04-13, Class AV4
5.11%(m) 06/25/35 102 102,576
Credit-Based Asset Servicing and
Securitization, Series 04-CB4,
Class M1
5.74%(m) 05/25/35 275 272,562
Ford Credit Auto Owner Trust,
Series 03-A, Class B2
5.16%(m) 08/15/07 325 325,278
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
106
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
ASSET BACKED SECURITIES (Continued)
Ford Credit Auto Owner Trust,
Series 03-B, Class C
4.18% 01/15/08 $ 75 $ 74,774
General Electric Business Loan
Trust, Series 03-1, Class A
5.18%(m)(p) 04/15/31 249 251,068
General Electric Business Loan
Trust, Series 03-1, Class B
6.05%(m)(p) 04/15/31 166 170,116
General Electric Business Loan
Trust, Series 03-2A, Class B
5.75%(m)(p) 11/15/31 1,008 1,045,595
General Electric Business Loan
Trust, Series 04-1, Class B
5.45%(m)(p) 05/15/32 234 233,620
Granite Mortgages PLC, Series
04-2, Class 1C
5.63%(m) 06/20/44 74 73,574
Green Tree Financial Corp.,
Series 96-6, Class A6
7.95% 09/15/27 673 693,447
Green Tree Financial Corp.,
Series 96-7, Class A6
7.65% 10/15/27 353 365,168
Hedged Mutual Fund Fee Trust,
Series 03-1A, Class 2
5.22%(p) 11/30/10 1,094 1,088,666
HFG Healthco-4 LLC, Series
02-1A, Class A
5.67%(m)(p) 06/05/07 200 199,966
HFG Healthco-4 LLC, Series
02-1A, Class B
5.87%(m) 06/05/07 125 124,692
Knollwood CDO Ltd., Series
04-1A, Class C
7.75%(m)(p) 01/10/39 185 181,915
Long Beach Mortgage Loan
Trust, Series 03-4, Class M5A
8.58%(m) 08/25/33 200 204,341
Long Beach Mortgage Loan
Trust, Series 04-1, Class M5
5.92%(m) 02/25/34 475 478,841
Lothian Mortgages PLC, Series
3A, Class A1
4.76%(m)(p) 07/24/19 247 247,360
Massachusetts RRB Special
Purpose Trust, Series 01-1,
Class A
6.53% 06/01/15 1,048 1,093,189
MBNA Credit Card Master Notes
Trust, Series 01-C3, Class C3
6.55% 12/15/08 575 577,053
MBNA Credit Card Master Notes
Trust, Series 04-A4, Class A4
2.70% 09/15/09 350 341,414
MBNA Credit Card Master Notes
Trust, Series 06-A1, Class A1
4.90% 07/15/11 1,725 1,712,062
Option One Mortgage Loan Trust,
Series 02-6, Class M1
5.57%(m) 11/25/32 150 150,481
Option One Mortgage Loan Trust,
Series 02-6, Class M2
6.52%(m) 11/25/32 293 294,185
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
ASSET BACKED SECURITIES (Continued)
Option One Mortgage Loan Trust,
Series 03-4, Class A4
5.14%(m) 07/25/33 $ 130 $ 130,532
Option One Mortgage Loan Trust,
Series 03-4, Class M5A
8.57%(m) 07/25/33 275 276,748
Option One Mortgage Loan Trust,
Series 03-5, Class M4
7.72%(m) 08/25/33 125 127,398
PSE&G Transition Funding LLC,
Series 01-1, Class A3
5.98% 06/15/08 113 112,897
Residential Asset Mortgage
Products, Inc., Series 03-RZ2,
Class B
5.50%(m) 04/25/33 963 955,848
Residential Asset Securities
Corp., Series 02-KS4, Class
AIIB
5.07%(m) 07/25/32 53 53,270
Residential Asset Securities
Corp., Series 03-KS10, Class
MII2
6.17%(m) 12/25/33 1,000 1,017,298
Residential Asset Securities
Corp., Series 04-KS3, Class
MII3
6.62%(m) 04/25/34 400 399,995
Structured Asset Investment Loan
Trust, Series 03-BC2, Class
M2
6.77%(m) 04/25/33 350 352,075
Structured Asset Investment Loan
Trust, Series 03-BC3, Class
M2
6.77%(m) 04/25/33 250 251,257
Structured Asset Receivables
Trust, Series 03-2
4.91%(f)(m)(p) 01/21/09 824 823,844
Sutter CBO Ltd., Series 01-1A,
Class A3L
6.41%(m)(p) 05/15/07 425 425,734
----------
TOTAL ASSET BACKED SECURITIES
(Cost $24,475,201) 24,497,131
----------
CORPORATE BONDS - 5.1%
Aerospace - 0.1%
Lockheed Martin Tactical
Systems, Inc., Senior
Debentures
7.00% 09/15/23 150 165,906
Northrop Grumman Corp., Senior
Unsecured Notes
4.08% 11/16/06 280 278,018
----------
443,924
----------
Banks - 1.0%
Bank of America Corp., Capital
Securities
8.07%(p) 12/31/26 225 237,563
Bank of America Corp., Senior
Unsecured Notes
4.50% 08/01/10 460 446,113
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
107
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ------------------ -------------------
CORPORATE BONDS (Continued)
Banks (Continued)
Bank of America Corp.,
Subordinated Notes
7.40% 01/15/11 $ 325 $ 351,268
Citigroup Capital ll, Capital
Securities
7.75% 12/01/36 225 235,269
Citigroup, Inc., Subordinated
Notes
5.00% 09/15/14 500 478,550
Citigroup, Inc., Unsecured Notes
4.12% 02/22/10 1,425 1,365,022
Crestar Capital Trust I, Capital
Securities
8.16% 12/15/26 175 184,535
Depfa ACS Bank, Senior Notes
3.62% 10/29/08 150 144,628
First Union Capital l, Capital
Securities
7.94% 01/15/27 325 342,757
HSBC Bank USA, Subordinated
Notes
3.87% 06/07/07 1,000 984,345
J.P. Morgan Chase & Co.,
Subordinated Notes
6.75% 02/01/11 550 578,743
Swedish Export Credit Corp.,
Unsecured Notes
2.88% 01/26/07 75 73,603
Turanalem Finance BV,
Unsecured Notes
8.50% 02/10/15 260 269,750
U.S. Bank N.A., Senior Bank
Notes
4.40% 08/15/08 575 564,489
UBS Preferred Funding Trust,
Inc., Capital Securities
8.62%(m) 10/29/49 35 39,050
Wells Fargo & Co., Senior
Unsecured Notes
4.20% 01/15/10 1,200 1,153,320
---------
7,449,005
---------
Broadcasting - 0.2%
Cablevision Systems Corp.,
Senior Unsecured Notes
8.72% 04/01/09 325 340,844
Charter Communications
Holdings LLC, Senior
Unsecured Notes
8.00%(p) 04/30/12 300 300,000
DirecTV Holdings LLC, Senior
Unsecured Notes
6.38% 06/15/15 60 59,250
Echostar DBS Corp., Senior
Unsecured Notes
7.12%(p) 02/01/16 50 49,187
News America, Inc., Senior
Debentures
7.75% 01/20/24 25 27,021
7.28% 06/30/28 35 36,283
News America, Inc., Senior
Unsecured Notes
6.20% 12/15/34 525 491,670
---------
1,304,255
---------
PAR
MATURITY (000) VALUE
-------------- ------------------ -------------------
CORPORATE BONDS (Continued)
Chemicals - 0.0%
BCP Crystal U.S. Holdings Corp.,
Senior Subordinated Notes
9.62% 06/15/14 $ 153 $ 169,447
Equistar Chemicals LP, Senior
Unsecured Notes
10.12% 09/01/08 50 53,125
---------
222,572
---------
Computer Software & Services - 0.1%
Oracle Corp., Unsecured Notes
5.25%(p) 01/15/16 900 863,364
Sungard Data Systems, Inc.,
Senior Unsecured Notes
9.12%(p) 08/15/13 5 5,287
9.43%(m)(p) 08/15/13 20 21,100
---------
889,751
---------
Electronics - 0.0%
L-3 Communications Corp.,
Senior Subordinated Notes
6.38% 10/15/15 35 34,475
---------
Energy & Utilities - 0.4%
AES Eastern Energy LP,
Pass-Through Certificates
9.00% 01/02/17 230 259,633
Centerpoint Energy, Inc., Senior
Unsecured Notes
7.25% 09/01/10 355 374,508
Dominion Resources, Inc., Senior
Unsecured Notes
7.20% 09/15/14 450 484,520
DTE Energy Co., Senior
Unsecured Notes
6.45% 06/01/06 350 350,714
Florida Power & Light Co., First
Mortgage Bonds
5.62% 04/01/34 150 142,962
Georgia Power Co., Senior
Unsecured Notes
4.88% 07/15/07 525 522,262
Indiana Michigan Power, Senior
Unsecured Notes
6.12% 12/15/06 325 326,452
Mirant N.A. LLC, Senior
Unsecured Notes
7.38%(p) 12/31/13 35 35,700
Northwestern Corp., Notes
5.88% 11/01/14 45 44,323
NRG Energy, Inc., Senior
Unsecured Notes
7.25% 02/01/14 20 20,325
7.38% 02/01/16 80 81,700
Reliant Energy, Inc., Senior
Secured Notes
9.25% 07/15/10 50 50,125
6.75% 12/15/14 75 66,750
---------
2,759,974
---------
Entertainment & Leisure - 0.3%
Comcast Cable Holdings LLC,
Senior Debentures
7.88% 08/13-02/26 7 7,676
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
108
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
CORPORATE BONDS (Continued)
Entertainment & Leisure (Continued)
Comcast Cable Holdings LLC,
Senior Notes
7.12% 02/15/28 $ 35 $ 35,477
Comcast Corp., Senior
Unsecured Notes
7.05% 03/15/33 265 272,720
Comcast Corp., Unsecured Notes
6.45% 03/15/37 555 534,022
CSC Holdings, Inc., Senior
Unsecured Notes
8.12% 07/15/09 600 620,250
Greektown Holdings LLC, Senior
Notes
10.75%(p) 12/01/13 125 128,750
MGM Mirage, Inc., Senior Notes
6.00% 10/01/09 150 147,750
Riddell Bell Holdings, Inc., Senior
Subordinated Notes
8.38% 10/01/12 110 109,450
Seneca Gaming Corp., Senior
Unsecured Notes
7.25% 05/01/12 125 126,250
Time Warner Cos., Inc., Senior
Debentures
7.57% 02/01/24 30 32,290
7.62% 04/15/31 375 408,504
----------
2,423,139
----------
Finance - 1.3%
Berkshire Hathaway Finance
Corp., Senior Unsecured Notes
4.75% 05/15/12 355 342,053
Berkshire Hathaway, Inc., Senior
Unsecured Notes
4.61%(m) 01/11/08 60 60,056
Credit Suisse First Boston USA,
Inc., Senior Unsecured Notes
4.12% 01/15/10 350 334,056
General Electric Capital Corp.,
Senior Unsecured Notes
6.75% 03/15/32 50 55,671
General Electric Capital Corp.,
Unsecured Notes
3.45%(m) 01/15/08 400 398,420
4.76%(m) 07/28/08 150 150,261
4.12% 09/01/09 1,070 1,030,980
5.00% 11/15/11 3,445 3,376,844
The Goldman Sachs Group, Inc.,
Unsecured Notes
5.35% 01/15/16 250 241,465
J.P. Morgan Capital Trust I,
Capital Securities
7.54% 01/15/27 175 183,440
Kinder Morgan Finance
5.70% 01/05/16 135 131,524
Lehman Brothers Holdings,
Senior Unsecured Notes
3.95% 11/10/09 375 356,835
Morgan Stanley, Senior Notes
4.91%(m) 03/07/08 2,190 2,189,350
Morgan Stanley, Unsecured
Notes
5.05% 01/21/11 1,175 1,151,813
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
CORPORATE BONDS (Continued)
Finance (Continued)
Nationwide Building Society,
Senior Unsecured Notes
3.50%(p) 07/31/07 $ 75 $ 73,373
UnitedHealth Group, Inc.,
Unsecured Notes
5.80% 03/15/36 175 166,647
----------
10,242,788
----------
Insurance - 0.1%
Allstate Financial Global Funding
LLC, Unsecured Notes
2.50%(p)(q) 06/20/08 325 306,291
WellPoint, Inc., Unsecured Notes
5.95% 12/15/34 300 288,803
----------
595,094
----------
Leasing - 0.0%
United Rentals N.A., Inc., Senior
Subordinated Notes
7.75%(c) 11/15/13 200 200,000
United Rentals N.A., Inc., Senior
Unsecured Notes
6.50% 02/15/12 30 29,400
----------
229,400
----------
Manufacturing - 0.0%
Delco Remy International, Inc.,
Senior Subordinated Notes
9.38%(f)(p) 04/15/12 50 24,000
Goodman Global Holdings, Inc.,
Senior Unsecured Notes
7.49%(m) 06/15/12 200 202,500
----------
226,500
----------
Medical & Medical Services - 0.0%
Omnicare, Inc., Senior
Subordinated Notes
6.88% 12/15/15 70 69,825
----------
Metal & Mining - 0.1%
Ipsco, Inc., Senior Notes
8.75% 06/01/13 450 490,500
Massey Energy Co., Senior
Unsecured Notes
6.88%(p) 12/15/13 180 176,400
TRIMAS Corp., Senior
Subordinated Notes
9.88% 06/15/12 165 145,613
----------
812,513
----------
Motor Vehicles - 0.0%
DaimlerChrysler AG, Senior
Debentures
7.45% 03/01/27 15 15,768
----------
Oil & Gas - 0.1%
Amerada Hess Corp., Senior
Unsecured Notes
7.12% 03/15/33 180 196,864
ANR Pipeline Co., Senior
Debentures
9.62% 11/01/21 60 73,650
7.38% 02/15/24 15 15,486
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
109
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ------------------ -------------------
CORPORATE BONDS (Continued)
Oil & Gas (Continued)
Chesapeake Energy Corp.,
Senior Unsecured Notes
6.50% 08/15/17 $ 80 $ 79,000
Colorado Interstate Gas Co.,
Senior Unsecured Notes
6.80%(p) 11/15/15 35 35,609
Consolidated Natural Gas, Inc.,
Senior Debentures
5.00% 03/01/14 20 18,810
Dynegy Holdings, Inc., Secured
Notes
10.12%(p) 07/15/13 130 148,941
El Paso Natural Gas Co., Senior
Unsecured Notes
8.38% 06/15/32 15 16,950
Kern River Funding Corp., Senior
Unsecured Notes
4.89%(p) 04/30/18 29 27,936
Newfield Exploration Co., Senior
Subordinated Notes
6.62% 09/01/14 250 250,625
Northwest Pipeline Corp., Senior
Unsecured Notes
8.12% 03/01/10 120 126,600
Targa Resources, Inc., Senior
Unsecured Notes
8.50%(p) 11/01/13 10 10,400
---------
1,000,871
---------
Paper & Forest Products - 0.0%
Catalyst Paper Corp., Senior
Unsecured Notes
8.62% 06/15/11 50 50,250
---------
Pharmaceuticals - 0.1%
Bristol-Myers Squibb Co., Senior
Debentures
6.88% 08/01/47 25 26,234
Merck & Co., Inc., Senior
Unsecured Notes
4.38%(c) 02/15/13 410 381,526
Wyeth, Unsecured Notes
5.50% 02/15/16 250 245,510
6.00% 02/15/36 275 268,633
---------
921,903
---------
Real Estate - 0.1%
ERP Operating LP, Senior Notes
6.58% 04/13/15 170 178,746
The Rouse Co., Unsecured Notes
3.62% 03/15/09 400 371,857
---------
550,603
---------
Retail Merchandising - 0.0%
May Department Stores Co.,
Debentures
7.88% 03/01/30 125 141,560
May Department Stores Co.,
Senior Debentures
8.12% 08/15/35 200 214,069
---------
355,629
---------
PAR
MATURITY (000) VALUE
-------------- ------------------ -------------------
CORPORATE BONDS (Continued)
Semiconductors & Related Devices - 0.0%
Magnachip Semiconductor,
Secured Notes
8.16%(m) 12/15/11 $ 30 $ 30,375
---------
Telecommunications - 0.6%
American Tower Corp., Senior
Unsecured Notes
7.50%(c) 05/01/12 800 838,000
Cincinnati Bell, Inc., Senior
Unsecured Notes
7.25% 07/15/13 520 536,900
Qwest Corp., Senior Unsecured
Notes
7.88% 09/01/11 100 106,625
Qwest Corp., Unsecured Notes
8.16%(m) 06/15/13 75 82,125
Rogers Wireless, Inc., Senior
Secured Notes
9.62% 05/01/11 550 631,813
7.50% 03/15/15 550 589,875
SBC Communications, Inc.,
Unsecured Notes
4.39%(p) 06/05/06 1,125 1,123,391
6.45% 06/15/34 15 14,804
6.15% 09/15/34 5 4,748
Superior Essex Communications
& Essex Group, Senior Notes
9.00% 04/15/12 500 502,500
Verizon Global Funding Corp.,
Senior Unsecured Notes
7.75% 12/01/30 365 403,233
Verizon Maryland, Inc.,
Debentures
5.12% 06/15/33 10 7,882
Wind Acquistion Finance SA,
Senior Unsecured Notes
10.75%(p) 12/01/15 115 124,200
---------
4,966,096
---------
Yankee - 0.6%
AID-Israel, Unsecured Notes
5.50%(r) 04/24-09/33 185 189,199
Ainsworth Lumber Co. Ltd.
(Canada), Senior Unsecured
Notes
8.71%(m)(r) 10/01/10 400 400,000
America Movil SA de CV
(Mexico), Unsecured Notes
6.38%(r) 03/01/35 75 70,517
Banque Centrale de Tunisie
(Tunisia), Senior Unsecured
Notes
7.38%(r) 04/25/12 425 457,406
Corp Andina de Fomento (Spain),
Senior Unsecured Notes
6.88%(r) 03/15/12 125 132,300
Deutsche Telekom International
Finance BV (Netherlands),
Senior Unsecured Notes
8.75%(r) 06/15/30 265 317,001
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
110
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
CORPORATE BONDS (Continued)
Yankee (Continued)
Eircom Funding (Ireland), Senior
Subordinated Notes
8.25%(r) 08/15/13 $ 350 $ 376,688
Eksportfinans ASA (Norway),
Unsecured Notes
3.38%(r) 01/15/08 155 150,367
Gazprom Capital (Luxembourg),
Unsecured Notes
9.62%(p) 03/01/13 200 236,500
5.88%(p) 06/01/15 250 318,506
Ispat Inland ULC (Canada),
Senior Secured Notes
9.75%(r) 04/01/14 10 11,313
Kazkommerts International BV
(Netherlands), Senior
Unsecured Notes
7.88%(p) 04/07/14 310 318,835
Nationwide Building Society
(United Kingdom), Unsecured
Notes
2.62%(p)(r) 01/30/07 550 538,665
Omi Corp. (Mali), Senior Notes
7.62%(r) 12/01/13 155 158,100
Petro-Canada (Canada), Senior
Unsecured Notes
5.95%(r) 05/15/35 130 125,718
The Royal Bank of Scotland
Capital Trust, Unsecured Notes
4.71%(m)(r) 12/29/49 90 83,340
Suncor Energy, Inc. (Canada)
5.95%(r) 12/01/34 20 20,050
Teck Cominco Ltd. (Canada),
Senior Unsecured Notes
6.12%(r) 10/01/35 175 164,647
Tyco International Group SA
(Luxembourg), Unsecured
Notes
6.00%(r) 11/15/13 360 361,635
Vodafone Group PLC (United
Kingdom), Senior Unsecured
Notes
7.75%(r) 02/15/10 125 133,953
Vodafone Group PLC (United
Kingdom), Unsecured Notes
5.75% 03/15/16 350 343,196
----------
4,907,936
----------
TOTAL CORPORATE BONDS
(Cost $41,063,699) 40,502,646
----------
FOREIGN BONDS - 0.9%
Brazilian Government
International Bonds
11.00% 08/17/40 300 384,900
Bundesrepublic Deutschland
(Germany) (EUR)
4.75% 07/04/34 1,400 1,907,487
Mexican Fixed Rate Bonds
(MXP)
12/19/13-
8.00% 12/07/23 4,115 365,580
Republic of Argentina
4.89%(m) 08/03/12 600 491,400
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
FOREIGN BONDS (Continued)
Republic of Brazil
10.00% 08/07/11 $ 70 $ 82,075
8.00% 01/15/18 330 357,555
10.12% 05/15/27 45 58,343
Republic of Colombia, Senior
Unsecured Notes
8.05%(m) 03/17/13 130 144,950
8.25% 12/22/14 300 337,500
8.12% 05/21/24 200 224,000
Republic of Ecuador
9.00%(m) 08/15/30 150 151,125
Republic of Panama
9.38% 07/23/12 200 232,000
7.12% 01/29/26 170 173,400
Republic of Peru
8.75% 11/21/33 45 50,175
Republic of Philippines
8.88% 03/17/15 200 225,750
7.75% 01/14/31 500 503,750
Republic of Turkey, Unsecured
Notes
7.25% 03/15/15 125 130,156
8.00% 02/14/34 100 110,000
Republic of Venezuela
8.50% 10/08/14 160 179,200
Russia Federation, Unsecured
Notes
12.75%(p) 06/24/28 120 214,200
United Mexican States (Mexico),
Senior Unsecured Notes
8.00% 09/24/22 700 818,300
8.30%(r) 08/15/31 25 30,212
----------
TOTAL FOREIGN BONDS
(Cost $7,358,978)
7,172,058
----------
TAXABLE MUNICIPAL BONDS - 0.1%
Atlantic Marine Corp.
Communities, Notes
(Delaware)
5.34%(p) 12/01/45 600 555,108
Ohana Military Communities LLC,
Military Housing Revenue
Bonds (Navy Housing
Privatization Project), Series
04-A, Class 1 (Hawaii)
6.19% 04/01/49 25 25,701
----------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $625,000) 580,809
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
111
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- -------------
SHORT TERM INVESTMENTS - 8.5%
Federal Home Loan Bank
4.60% 04/03/06 $1,000 $ 999,744
Federal Home Loan Bank,
Discount Notes
4.63%(s) 04/03/06 1,000 999,743
U.S. Treasury Bills
4.38%(s) 04/06/06 500 499,705
4.40% 04/13/06 55,000 54,919,333
Galileo Money Market Fund 10,000 10,000,000
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $67,418,525) 67,418,525
----------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND INVESTMENT IN
AFFILIATE - 104.4%
(Cost $721,911,246) 825,244,286
-----------
SECURITIES LENDING COLLATERAL - 3.7%
Banco Santander, Certificate of
Deposit
4.34%(g) 04/10/06 5,636 5,636,033
Bank of America, Master Notes
4.08%(g)(m) 04/03/06 13,604 13,603,677
Citibank, Master Notes
4.94%(g)(m) 04/03/06 1,987 1,987,059
Morgan Stanley, Floating Rate
Notes
4.94%(g)(m) 04/03/06 8,231 8,231,156
----------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $29,457,925) 29,457,925
----------
NUMBER OF
SHARES
------------
INVESTMENT IN AFFILIATE - 10.1%
Institutional Money Market
Trust(g)
(Cost $79,877,637) 79,877,637 79,877,637
----------
TOTAL INVESTMENTS IN SECURITIES -
118.2%
934,579,847
-----------
(C
$831 6,808(a))
PAR
(000)
----
TBA SALE COMMITMENTS - (6.0)%
Federal Home Loan Mortgage
Corp.
5.00% (9,500) (9,256,562)
Federal Home Loan Mortgage
Corp. Gold
4.50% 04/01/21 (1,700) (1,622,438)
5.00% 04/01/36 (1,000) (951,250)
5.50% 04/01/36 (1,000) (976,250)
Federal National Mortgage
Association
5.00% 04/21-05/34 (9,000) (8,680,940)
5.50% 04/15/34 (27,000) (26,350,326)
-----------
TOTAL TBA SALE COMMITMENTS
(Proceeds $(48,001,320)) (47,837,766)
-----------
NUMBER OF
CONTRACTS VALUE
--------------- ------------
CALL OPTIONS WRITTEN - 0.0%
June 10 year U.S. Treasury Note
futures, Strike Price $111,
Expires 05/26/06 (23) $ (359)
September 10 year U.S. Treasury
Note futures, Strike Price $110,
Expires 08/25/06 (16) (2,750)
--------
TOTAL CALL OPTIONS WRITTEN
(Premiums received $19,016) (3,109)
--------
CALL SWAPTIONS PURCHASED - 0.0%
Merrill Lynch, Strike Price $5.26,
Expires 03/02/16 260(t) 95,680
Merrill Lynch, Strike Price $5.50,
Expires 12/14/15 330(t) 196,020
--------
TOTAL CALL SWAPTIONS PURCHASED
(Cost $335,200) 291,700
--------
CALL SWAPTIONS WRITTEN - 0.0%
Barclays Capital, Strike Price
$5.14, Expires 04/21/08 (320)(t) (77,760)
Citibank, Strike Price $5.67,
Expires 01/04/10 (50)(t) (23,825)
Deutsche Bank, Strike Price
$5.02, Expires 01/29/07 (35)(t) (3,486)
Union Bank, Strike Price $4.73,
Expires 06/13/07 (790)(t) (66,755)
--------
TOTAL CALL SWAPTIONS WRITTEN
(Premiums received $485,825) (171,826)
--------
PUT OPTIONS WRITTEN - 0.0%
June 10 year U.S. Treasury
Notes futures, Strike Price
$107, Expires 05/26/06 (23) (24,438)
September 10 year U.S. Treasury
Notes futures, Strike Price
$106, Expires 08/25/06 (16) (16,000)
--------
TOTAL PUT OPTIONS WRITTEN
(Premiums received $19,578) (40,438)
--------
PUT SWAPTIONS PURCHASED - 0.0%
Merrill Lynch, Strike Price $5.26,
Expires 03/02/16 260(t) 141,180
Merrill Lynch, Strike Price $5.50,
Expires 12/14/15 330(t) 218,790
--------
TOTAL PUT SWAPTIONS PURCHASED
(Cost $335,200) 359,970
--------
PUT SWAPTIONS WRITTEN - (0.1)%
Barclays Capital, Strike Price
$5.14, Expires 04/21/08 (320)(t) (152,288)
Citibank, Strike Price $5.67,
Expires 01/04/10 (50)(t) (19,830)
Deutsche Bank, Strike Price
$5.02, Expires 01/29/07 (35)(t) (13,958)
Union Bank, Strike Price $4.73,
Expires 06/13/07 (790)(t) (471,867)
--------
TOTAL PUT SWAPTIONS WRITTEN
(Premiums received $485,825) (657,943)
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
112
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
VALUE
------------------
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (13.8)% $(109,335,562)
OTHER ASSETS IN EXCESS OF
LIABILITIES - 1.7% 13,621,785
-------------
TOTAL NET ASSETS - 100% $ 790,806,658
=============
- -------------------
(a) Cost for federal income tax purposes is $785,734,486. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $109,730,755
Gross unrealized depreciation (8,723,160)
------------
$101,007,595
============
(b) Non-income producing security.
(c) Total or partial securities on loan.
(d) Securities valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, these securities
had a total market value of $2,186,430 which represents 0.3% of net
assets.
(e) Security restricted as to public resale. These securities are ineligible
for resale into the public market until such time that either (I) a
resale Registration Statement has been filed with the SEC and declared
effective or (II) resale is permitted under Rule 144A without the need
for an effective registration statement. As of March 31, 2006, the
Portfolio held 1.0% of its net assets, with a current market value of
$7,135,531 and a current cost of $2,385,046 in these securities.
(f) Security is illiquid. As of March 31, 2006, the Portfolio held less than
0.1% of its net assets, with a current market value of $997,048 in these
securities.
(g) Securities purchased with the cash proceeds from securities loaned.
(h) As of March 31, 2006, the aggregate amount of shares called for by these
warrants is 68,773. These warrants were exercisable as of 7/24/03.
(i) As of March 31, 2006, the aggregate amount of shares called for by these
warrants is 16,500. These warrants were exercisable as of 12/23/05.
(j) Securities, or a portion thereof, subject to financing transactions.
(k) Par held at end of period is less than 1,000.
(l) Securities, or a portion thereof, with a market value of $682,422 have
been pledged as collateral for swap and swaption contracts. (m) Variable rate
security. Rates shown are the rates as of March 31, 2006.
(n) Rates shown are the effective yields as of March 31, 2006.
(o) Interest rate of underlying collateral.
(p) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 1.7% of its net assets, with a current market value
of $13,287,854 in securities restricted as to resale.
(q) Securities, or a portion thereof, pledged as collateral with a value of
$735,070 on 355 long U.S. Treasury Note futures contracts, 179 short
U.S. Treasury Note futures contracts and 54 short Euro Bobl futures
contracts expiring June 2006. The notional value of such contracts on
March 31, 2006 was $64,162,516, with an unrealized loss of $594,344
(including commissions of $1,290).
(r) Security is a foreign domiciled issuer which is registered with the
Securities and Exchange Commission.
(s) The rate shown is the effective yield on the discount notes at the time
of purchase.
(t) Each swaption contract is equivalent to $10,000 notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
113
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INDEX EQUITY PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
VALUE
-----------------
Investment in The U.S. Large Company Series of
The DFA Investment Trust Company - 100.2%
(Cost $872,325,651) $1,239,110,011
LIABILITIES IN EXCESS OF OTHER
ASSETS - (0.2)% (1,902,514)
--------------
NET ASSETS - 100% $1,237,207,497
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS AND ACCOMPANYING FINANCIAL
STATEMENTS AND RELATED NOTES FOR THE DFA INVESTMENT TRUST COMPANY.
114
BLACKROCK FUNDS
INVESTMENT ABBREVIATIONS
ADR American Depository Receipts
CMT Constant Maturity Treasury
IO Interest Only
NVDR Non Voting Depository Receipts
PLC Public Limited Company
PO Principal Only
REIT Real Estate Investment Trust
SP Sponsored
TBA To Be Announced
115
STATEMENTS OF ASSETS AND LIABILITIES
AS OF MARCH 31, 2006 (UNAUDITED)
INVESTMENT LARGE CAP LARGE CAP
TRUST VALUE EQUITY GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
------------------ ---------------- -----------------
ASSETS
Investments at value1,2 .......................... $ 1,272,801,930 $ 357,110,142 $ 54,289,355
116
Collateral received from securities
loaned-unaffiliated3 ............................ 36,097,664 20,264,422 1,307,438
Collateral received from securities
loaned-affiliated4 .............................. 124,481,024 41,626,334 4,061,101
Cash ............................................. - - -
Dividends and reclaims receivable ................ 1,750,928 495,146 53,370
Interest receivable .............................. 47,972 31,130 4,122
Investments sold receivable ...................... 36,953,332 4,226,325 2,119,554
Receivable from adviser .......................... 2,327 - -
Capital shares sold receivable ................... 98,845 256,553 24,210
Prepaid expenses ................................. 43,541 32,952 26,454
Futures margin receivable ........................ 145 2,154 27
--------------- ------------- --------------
TOTAL ASSETS ................................... 1,472,277,708 424,045,158 61,885,631
--------------- ------------- --------------
LIABILITIES
Payable upon return of securities loaned ......... 160,578,688 61,890,756 5,368,539
Investments purchased payable .................... 34,567,044 3,803,187 2,056,457
Capital shares redeemed payable .................. 4,459,991 2,664,095 91,480
Foreign taxes payable ............................ - - -
Futures margin payable ........................... 24,150 10,425 1,760
Advisory fees payable ............................ 587,870 169,749 31,379
Administration fees payable ...................... 84,045 29,103 5,024
Transfer agent fees payable ...................... 559,396 108,271 28,734
Custodian fees payable ........................... 32,219 4,779 8,278
Distribution fees payable ........................ 158,225 33,288 7,713
Other accrued expenses payable ................... 434,461 163,387 25,644
--------------- ------------- --------------
TOTAL LIABILITIES .............................. 201,486,089 68,877,040 7,625,008
--------------- ------------- --------------
NET ASSETS ........................................ $ 1,270,791,619 $ 355,168,118 $ 54,260,623
=============== ============= ==============
1Cost of investments ............................. $ 1,013,808,283 $ 274,749,190 $ 41,236,283
2Market value of securities loaned ............... 150,281,232 59,665,955 5,163,318
3Cost of collateral received from securities
loaned .......................................... 36,097,664 20,264,422 1,307,438
4Cost of investment in affiliate ................. 124,481,024 41,626,334 4,061,101
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital paid in .................................. $ 1,181,241,477 $ 284,819,972 $ 418,323,771
Undistributed (distributions in excess of) net
investment income (loss) ........................ 5,138,225 101,497 7,581
Accumulated net realized gain (loss) ............. (174,659,427) (12,121,689) (377,128,770)
Net unrealized appreciation (depreciation) ....... 259,071,344 82,368,338 13,058,041
--------------- ------------- --------------
$ 1,270,791,619 $ 355,168,118 $ 54,260,623
=============== ============= ==============
STATEMENTS OF ASSETS AND LIABILITIES
AS OF MARCH 31, 2006 (UNAUDITED)
DIVIDEND MID-CAP MID-CAP
ACHVIEVERSTM LEGACY VALUE EQUITY GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ---------------- ---------------- ----------------
ASSETS
Investments at value1,2 .......................... $ 34,038,278 $ 276,434,851 $ 820,307,926 $ 463,227,386
116
Collateral received from securities
loaned-unaffiliated3 ............................ 2,509,547 9,143,291 8,370,067 5,060,590
Collateral received from securities
loaned-affiliated4 .............................. 7,944,659 27,124,544 94,298,696 65,198,095
Cash ............................................. - - 378,709 -
Dividends and reclaims receivable ................ 46,075 327,516 846,064 195,712
Interest receivable .............................. 3,723 26,980 51,042 35,943
Investments sold receivable ...................... - 2,688,970 6,468,792 1,345,251
Receivable from adviser .......................... 182 4 54,265 1,098
Capital shares sold receivable ................... 177,466 262,390 2,878,085 320,639
Prepaid expenses ................................. 12,766 18,356 44,171 37,824
Futures margin receivable ........................ 16 - - -
------------ ------------- ------------- --------------
TOTAL ASSETS ................................... 44,732,712 316,026,902 933,697,817 535,422,538
------------ ------------- ------------- --------------
LIABILITIES
Payable upon return of securities loaned ......... 10,454,206 36,267,835 102,668,763 70,258,685
Investments purchased payable .................... - 3,242,989 4,410,247 -
Capital shares redeemed payable .................. 168,914 340,326 1,871,432 790,306
Foreign taxes payable ............................ - 6,616 - -
Futures margin payable ........................... 630 - - -
Advisory fees payable ............................ 15,313 166,759 545,107 310,217
Administration fees payable ...................... 2,717 10,766 50,187 43,438
Transfer agent fees payable ...................... 7,919 129,223 273,612 282,784
Custodian fees payable ........................... 5,804 926 12,824 8,416
Distribution fees payable ........................ 11,001 71,012 161,803 50,548
Other accrued expenses payable ................... 40,789 110,907 275,254 163,868
------------ ------------- ------------- --------------
TOTAL LIABILITIES .............................. 10,707,293 40,347,359 110,269,229 71,908,262
------------ ------------- ------------- --------------
NET ASSETS ........................................ $ 34,025,419 $ 275,679,543 $ 823,428,588 $ 463,514,276
============ ============= ============= ==============
1Cost of investments ............................. $ 30,987,681 $ 224,540,235 $ 704,141,192 $ 353,482,646
2Market value of securities loaned ............... 10,084,208 35,147,205 98,411,650 67,464,954
3Cost of collateral received from securities
loaned .......................................... 2,509,547 9,143,291 8,370,067 5,060,590
4Cost of investment in affiliate ................. 7,944,659 27,124,544 94,298,696 65,198,095
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital paid in .................................. $ 31,674,017 $ 320,854,350 $ 659,857,474 $ 601,130,281
Undistributed (distributions in excess of) net
investment income (loss) ........................ 11,785 (970,732) 591,600 (2,634,015)
Accumulated net realized gain (loss) ............. (711,895) (96,098,690) 46,812,780 (244,726,727)
Net unrealized appreciation (depreciation) ....... 3,051,512 51,894,615 116,166,734 109,744,737
------------ ------------- ------------- --------------
$ 34,025,419 $ 275,679,543 $ 823,428,588 $ 463,514,276
============ ============= ============= ==============
BLACKROCK FUNDS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
INVESTMENT LARGE CAP LARGE CAP
TRUST VALUE EQUITY GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------------- ---------------
Institutional Shares:
Net Assets ...................................... $ 510,532,171 $ 122,672,981 $ 19,672,401
117
Shares outstanding (unlimited authorization)..... 37,604,180 7,938,542 1,855,722
Net Asset Value, offering and redemption
price per share ................................ $ 13.58 $ 15.45 $ 10.60
Service Shares:
Net Assets ...................................... $ 1,118,906 $ 24,087,940 $ 5,735,379
Shares outstanding (unlimited authorization)..... 82,150 1,554,719 552,421
Net Asset Value, offering and redemption
price per share ................................ $ 13.62 $ 15.49 $ 10.38
Investor A Shares:
Net Assets ...................................... $ 515,100,408 $ 157,010,440 $ 16,907,074
Shares outstanding (unlimited authorization)..... 38,432,979 10,161,581 1,658,503
Net Asset Value ................................. $ 13.40 $ 15.45 $ 10.19
Maximum Sales Charge ............................ 5.75% 5.75% 5.75%
Maximum offering price per share ................ $ 14.22 $ 16.39 $ 10.81
Investor B Shares:
Net Assets ...................................... $ 222,844,550 $ 40,887,055 $ 9,276,745
Shares outstanding (unlimited authorization)..... 17,415,449 2,696,944 993,874
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 4.50%) ................ $ 12.80 $ 15.16 $ 9.33
Investor C Shares:
Net Assets ...................................... $ 21,195,584 $ 10,509,702 $ 2,669,024
Shares outstanding (unlimited authorization)..... 1,654,783 692,585 286,368
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 1.00%) ................ $ 12.81 $ 15.17 $ 9.32
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
DIVIDEND MID-CAP MID-CAP
ACHVIEVERSTM LEGACY VALUE EQUITY GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------------ ---------------- ----------------
Institutional Shares:
Net Assets ...................................... $ 1,550,033 $ 50,786,775 $ 75,555,272 $ 83,685,872
117
Shares outstanding (unlimited authorization)..... 137,808 3,329,639 5,657,725 7,294,854
Net Asset Value, offering and redemption
price per share ................................ $ 11.25 $ 15.25 $ 13.35 $ 11.47
Service Shares:
Net Assets ...................................... $ 365,236 $ 114(a) $ 2,895,848 $ 879,011
Shares outstanding (unlimited authorization)..... 32,548 8(a) 219,402 79,671
Net Asset Value, offering and redemption
price per share ................................ $ 11.22 $ 14.82 $ 13.20 $ 11.03
Investor A Shares:
Net Assets ...................................... $14,501,692 $122,399,851 $485,915,347 $298,881,827
Shares outstanding (unlimited authorization)..... 1,288,410 8,257,037 37,136,137 27,800,961
Net Asset Value ................................. $ 11.26 $ 14.82 $ 13.08 $ 10.75
Maximum Sales Charge ............................ 5.75% 5.75% 5.75% 5.75%
Maximum offering price per share ................ $ 11.95 $ 15.72 $ 13.88 $ 11.41
Investor B Shares:
Net Assets ...................................... $ 4,584,971 $ 82,113,637 $133,157,353 $ 58,839,379
Shares outstanding (unlimited authorization)..... 407,959 5,884,445 10,879,968 6,000,555
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 4.50%) ................ $ 11.24 $ 13.95 $ 12.24 $ 9.81
Investor C Shares:
Net Assets ...................................... $13,023,487 $ 20,379,166 $125,904,768 $ 21,228,187
Shares outstanding (unlimited authorization)..... 1,159,467 1,459,799 10,287,566 2,164,607
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 1.00%) ................ $ 11.23 $ 13.96 $ 12.24 $ 9.81
(a) Exact net assets and shares outstanding at March 31, 2006 were $114.38 and
7.717, respectively.
BLACKROCK FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
SMALL/MID-CAP SMALL CAP
AURORA GROWTH VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
------------------ ----------------- ----------------
ASSETS
118
Investments at value1,2 .......................... $ 2,438,160,566 $ 308,615,995 $ 121,302,371
Collateral received from securities
loaned-unaffiliated3 ............................ 46,772,737 3,670,328 77,509
Collateral received from securities
loaned-affiliated4 .............................. 407,786,236 45,395,881 13,281,813
Cash denominated in foreign currencies5 .......... - - -
Cash ............................................. 125,072 - -
Dividends and reclaims receivable ................ 1,669,693 63,482 65,539
Interest receivable .............................. 104,786 46,208 8,048
Investments sold receivable ...................... 30,266,755 1,199,534 2,642,676
Receivable from adviser .......................... 6 25,330 -
Capital shares sold receivable ................... 3,044,617 843,642 15,867
Prepaid expenses ................................. 88,316 21,819 35,892
Unrealized appreciation on forward foreign
currency contracts .............................. - - -
--------------- ------------- -------------
TOTAL ASSETS ................................... 2,928,018,784 359,882,219 137,429,715
--------------- ------------- -------------
LIABILITIES
Payable upon return of securities loaned ......... 454,558,973 49,066,209 13,359,322
Investments purchased payable .................... 31,559,052 2,695,043 2,280,301
Capital shares redeemed payable .................. 13,292,081 617,943 257,326
Foreign taxes payable ............................ - - -
Unrealized depreciation on forward foreign
currency contracts .............................. - - -
Advisory fees payable ............................ 1,657,897 191,448 55,916
Administration fees payable ...................... 179,339 19,637 10,348
Transfer agent fees payable ...................... 1,054,206 182,789 28,493
Custodian fees payable ........................... 37,078 12,641 2,995
Distribution fees payable ........................ 527,420 32,600 10,486
Other accrued expenses payable ................... 1,066,904 124,480 44,834
--------------- ------------- -------------
TOTAL LIABILITIES .............................. 503,932,950 52,942,790 16,050,021
--------------- ------------- -------------
NET ASSETS ........................................ $ 2,424,085,834 $ 306,939,429 $ 121,379,694
=============== ============= =============
1Cost of investments ............................. $ 2,043,251,273 $ 241,175,641 $ 101,226,201
2Market value of securities loaned ............... 439,057,934 47,908,332 13,043,235
3Cost of collateral received from securities
loaned .......................................... 46,772,737 3,670,328 77,509
4Cost of investment in affiliate ................. 407,786,236 45,395,881 13,281,813
5Cost of investments - foreign currencies ........ - - -
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital paid in .................................. $ 1,562,964,114 $ 232,743,734 $ 95,292,127
Undistributed (distributions in excess of) net
investment income (loss) ........................ (4,076,772) (1,565,948) (1,638,488)
Accumulated net realized gain (loss) ............. 470,289,199 8,321,290 7,649,884
Net unrealized appreciation (depreciation) ....... 394,909,293 67,440,353 20,076,171
--------------- ------------- -------------
$ 2,424,085,834 $ 306,939,429 $ 121,379,694
=============== ============= =============
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
GLOBAL SCIENCE
SMALL CAP SMALL CAP & TECHNOLOGY GLOBAL
CORE EQUITY GROWTH EQUITY OPPORTUNITIES RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------------ ----------------- ------------------
ASSETS
118
Investments at value1,2 .......................... $ 85,246,129 $ 688,165,848 $ 34,640,904 $ 1,212,576,024
Collateral received from securities
loaned-unaffiliated3 ............................ - - 1,279,521 23,061,006
Collateral received from securities
loaned-affiliated4 .............................. 8,352,036 59,674,945 5,924,510 191,209,858
Cash denominated in foreign currencies5 .......... - - 9,643 217,920
Cash ............................................. - 9,474 - -
Dividends and reclaims receivable ................ 26,538 180,705 35,810 985,655
Interest receivable .............................. 14,336 67,186 3,950 66,224
Investments sold receivable ...................... 375,975 7,684,029 719,086 3,446,585
Receivable from adviser .......................... 1,220 1,535 - -
Capital shares sold receivable ................... 1,720,255 1,403,825 189,341 1,276,818
Prepaid expenses ................................. 32,712 44,886 34,426 33,594
Unrealized appreciation on forward foreign
currency contracts .............................. - - - 34
------------ --------------- ------------- ---------------
TOTAL ASSETS ................................... 95,769,201 757,232,433 42,837,191 1,432,873,718
------------ --------------- ------------- ---------------
LIABILITIES
Payable upon return of securities loaned ......... 8,352,036 59,674,945 7,204,031 214,270,864
Investments purchased payable .................... 4,452,333 6,932,391 1,251,495 1,045,907
Capital shares redeemed payable .................. 1,039,657 932,388 55,708 6,512,007
Foreign taxes payable ............................ - - 5,941 5,339
Unrealized depreciation on forward foreign
currency contracts .............................. - - 612 -
Advisory fees payable ............................ 65,564 311,011 30,159 735,645
Administration fees payable ...................... 5,652 54,695 3,371 87,464
Transfer agent fees payable ...................... 13,130 128,474 25,535 227,956
Custodian fees payable ........................... 4,001 19,358 2,599 -
Distribution fees payable ........................ 21,151 19,417 11,197 194,419
Other accrued expenses payable ................... 18,609 147,900 15,570 366,393
------------ --------------- ------------- ---------------
TOTAL LIABILITIES .............................. 13,972,133 68,220,579 8,606,218 223,445,994
------------ --------------- ------------- ---------------
NET ASSETS ........................................ $ 81,797,068 $ 689,011,854 $ 34,230,973 $ 1,209,427,724
============ =============== ============= ===============
1Cost of investments ............................. $ 74,612,729 $ 532,446,662 $ 29,063,170 $ 609,005,423
2Market value of securities loaned ............... 8,046,762 57,860,021 6,957,665 189,898,839
3Cost of collateral received from securities
loaned .......................................... - - 1,279,521 23,061,006
4Cost of investment in affiliate ................. 8,352,036 59,674,945 5,924,510 191,209,858
5Cost of investments - foreign currencies ........ - - 9,604 217,399
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital paid in .................................. $ 71,234,521 $ 1,152,021,193 $ 104,584,056 $ 501,533,329
Undistributed (distributions in excess of) net
investment income (loss) ........................ (374,401) (2,101,070) (208,509) (7,571,647)
Accumulated net realized gain (loss) ............. 303,548 (616,627,455) (75,721,470) 111,892,803
Net unrealized appreciation (depreciation) ....... 10,633,400 155,719,186 5,576,896 603,573,239
------------ --------------- ------------- ---------------
$ 81,797,068 $ 689,011,854 $ 34,230,973 $ 1,209,427,724
============ =============== ============= ===============
BLACKROCK FUNDS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
SMALL/MID-CAP SMALL CAP
AURORA GROWTH VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------- ------------------- ----------------
BlackRock Shares:
119
Net Assets .................................... $ - $ - $ 5,348,114
Shares outstanding (unlimited authorization)... - - 393,350
Net Asset Value, offering and redemption
price per share .............................. $ - $ - $ 13.60
Institutional Shares:
Net Assets .................................... $ 167,311,225 $ 23,925,302 $ 66,001,846
Shares outstanding (unlimited authorization)... 4,338,416 1,447,355 4,848,972
Net Asset Value, offering and redemption
price per share .............................. $ 38.57 $ 16.53 $ 13.61
Service Shares:
Net Assets .................................... $ 171(a) $ 128(b) $ 3,906,928
Shares outstanding (unlimited authorization)... 5(a) 8(b) 292,650
Net Asset Value, offering and redemption
price per share .............................. $ 36.83 $ 15.73 $ 13.35
Investor A Shares:
Net Assets .................................... $1,494,820,058 $235,168,905 $ 29,879,983
Shares outstanding (unlimited authorization)... 40,584,227 14,951,120 2,254,059
Net Asset Value ............................... $ 36.83 $ 15.73 $ 13.26
Maximum Sales Charge .......................... 5.75% 5.75% 5.75%
Maximum offering price per share .............. $ 39.08 $ 16.69 $ 14.07
Investor B Shares:
Net Assets .................................... $ 403,804,679 $ 27,338,086 $ 10,331,329
Shares outstanding (unlimited authorization)... 12,280,923 1,947,503 900,475
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 4.50%) .............. $ 32.88 $ 14.04 $ 11.47
Investor C Shares:
Net Assets .................................... $ 358,149,701 $ 20,507,008 $ 5,911,494
Shares outstanding (unlimited authorization)... 10,893,859 1,457,922 514,918
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 1.00%) .............. $ 32.88 $ 14.07 $ 11.48
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
GLOBAL SCIENCE
SMALL CAP SMALL CAP & TECHNOLOGY GLOBAL
CORE EQUITY GROWTH EQUITY OPPORTUNITIES RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ------------------ ---------------- -----------------
BlackRock Shares:
119
Net Assets .................................... $ - $ - $ - $ -
Shares outstanding (unlimited authorization)... - - - -
Net Asset Value, offering and redemption
price per share .............................. $ - $ - $ - $ -
Institutional Shares:
Net Assets .................................... $ 23,598,508 $ 450,760,742 $ 2,175,408 $ 43,506,602
Shares outstanding (unlimited authorization)... 1,224,713 22,889,692 288,155 564,980
Net Asset Value, offering and redemption
price per share .............................. $ 19.27 $ 19.69 $ 7.55 $ 77.01
Service Shares:
Net Assets .................................... $ 2,081,820 $ 26,646,924 $ 206,424 $ -
Shares outstanding (unlimited authorization)... 108,404 1,416,277 27,786 -
Net Asset Value, offering and redemption
price per share .............................. $ 19.20 $ 18.81 $ 7.43 $ -
Investor A Shares:
Net Assets .................................... $ 20,180,776 $ 180,778,895 $ 13,890,571 $ 863,756,025
Shares outstanding (unlimited authorization)... 1,057,727 9,861,528 1,889,498 11,831,650
Net Asset Value ............................... $ 19.08 $ 18.33 $ 7.35 $ 73.00
Maximum Sales Charge .......................... 5.75% 5.75% 5.75% 5.75%
Maximum offering price per share .............. $ 20.24 $ 19.45 $ 7.80 $ 77.45
Investor B Shares:
Net Assets .................................... $ 9,341,806 $ 13,895,128 $ 11,822,631 $ 110,881,456
Shares outstanding (unlimited authorization)... 498,761 839,814 1,682,007 1,687,658
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 4.50%) .............. $ 18.73 $ 16.55 $ 7.03 $ 65.70
Investor C Shares:
Net Assets .................................... $ 26,594,158 $ 16,930,165 $ 6,135,939 $ 191,283,641
Shares outstanding (unlimited authorization)... 1,420,036 1,022,506 872,411 2,914,294
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 1.00%) .............. $ 18.73 $ 16.56 $ 7.03 $ 65.64
(a) Exact net assets and shares outstanding at March 31, 2006 were $170.72 and
4.635, respectively.
(b) Exact net assets and shares outstanding at March 31, 2006 were $128.23 and
8.151, respectively.
BLACKROCK FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
ALL-CAP GLOBAL HEALTH
RESOURCES SCIENCES U.S. OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ---------------- --------------------
ASSETS
Investments at value1,2 ....................... $ 548,174,015 $ 764,742,735 $ 115,825,546
120
Collateral received from securities
loaned-unaffiliated3 ......................... 17,860,109 13,720,643 2,331,423
Collateral received from securities
loaned-affiliated4 ........................... 83,058,826 93,028,947 24,194,050
Cash denominated in foreign currencies5 ....... - - -
Swaptions purchased, at fair value6 ........... - - -
Cash .......................................... 4,367 - -
Collateral received for swap contracts ........ - - -
Dividends and reclaims receivable ............. 285,395 863,464 59,104
Interest receivable ........................... 53,064 46,689 22,174
Investments sold receivable ................... 240,077 7,696,416 2,286,210
Receivable from adviser ....................... - - 7,116
Capital shares sold receivable ................ 29,854,371 10,858,864 2,143,019
Prepaid expenses .............................. 81,211 86,814 36,304
Unrealized appreciation on forward foreign
currency contracts ........................... - - -
Unrealized appreciation on interest rate
swaps ........................................ - - -
Futures margin receivable ..................... - - -
------------- ------------- -------------
TOTAL ASSETS ................................ 679,611,435 891,044,572 146,904,946
------------- ------------- -------------
LIABILITIES
Payable upon termination of swap contracts..... - - -
Payable upon return of securities loaned ...... 100,918,935 106,749,590 26,525,473
Investments purchased payable ................. 11,701,295 50,339,537 2,470,351
Capital shares redeemed payable ............... 724,176 1,270,730 358,825
Options written, at fair value7 ............... - 276,740 -
Swaptions written, at fair value8 ............. - - -
TBA sale commitments, at value9 ............... - - -
Payable for financing transactions ............ - - -
Payable to custodian .......................... 13,096 - -
Foreign taxes payable ......................... 2,494 75,640 -
Futures margin payable ........................ - - -
Unrealized depreciation on forward foreign
currency contracts ........................... - - -
Unrealized depreciation on interest rate
swaps ........................................ - - -
Advisory fees payable ......................... 312,721 445,148 116,515
Administration fees payable ................... 40,451 57,503 7,089
Transfer agent fees payable ................... 31,192 96,165 55,093
Custodian fees payable ........................ 6,412 6,580 3,339
Distribution fees payable ..................... 81,913 168,728 40,540
Other accrued expenses payable ................ 85,074 159,134 45,797
------------- ------------- -------------
TOTAL LIABILITIES ........................... 113,917,759 159,645,495 29,623,022
------------- ------------- -------------
NET ASSETS ..................................... $ 565,693,676 $ 731,399,077 $ 117,281,924
============= ============= =============
STATEMENTS OF ASSETS AND LIABILITIES (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
GLOBAL INTERNATIONAL ASSET INDEX
OPPORTUNITIES OPPORTUNITIES ALLOCATION EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------------ ---------------- ---------------------
ASSETS
Investments at value1,2 ....................... $ 16,088,769 $ 1,192,805,529 $ 825,244,286 $ 1,239,110,011*
120
Collateral received from securities
loaned-unaffiliated3 ......................... - - 29,457,925 -
Collateral received from securities
loaned-affiliated4 ........................... - 9,726,000 79,877,637 -
Cash denominated in foreign currencies5 ....... 6,768 7,057,315 3,513,065 -
Swaptions purchased, at fair value6 ........... - - 651,670 -
Cash .......................................... - - 249,305 -
Collateral received for swap contracts ........ - - 696,397 -
Dividends and reclaims receivable ............. 23,401 4,515,310 858,344 -
Interest receivable ........................... 1,290 14,090 1,530,853 -
Investments sold receivable ................... 125,882 7,796,651 56,655,650 4,407,219
Receivable from adviser ....................... 8,175 - - 6,838
Capital shares sold receivable ................ 634,362 2,043,092 1,316,943 962,324
Prepaid expenses .............................. 68,112 53,253 11,713 41,123
Unrealized appreciation on forward foreign
currency contracts ........................... 4 437,312 90,298 -
Unrealized appreciation on interest rate
swaps ........................................ - - 834,576 -
Futures margin receivable ..................... - - 2,580 -
------------ --------------- -------------- -----------------
TOTAL ASSETS ................................ 16,956,763 1,224,448,552 1,000,991,242 1,244,527,515
------------ --------------- -------------- -----------------
LIABILITIES
Payable upon termination of swap contracts..... - - 696,397 -
Payable upon return of securities loaned ...... - 9,726,000 109,335,562 -
Investments purchased payable ................. 1,391,608 15,427,347 35,670,814 -
Capital shares redeemed payable ............... 196 2,109,114 3,692,016 6,526,951
Options written, at fair value7 ............... - - 43,547 -
Swaptions written, at fair value8 ............. - - 829,769 -
TBA sale commitments, at value9 ............... - - 47,837,766 -
Payable for financing transactions ............ - - 9,985,618 -
Payable to custodian .......................... - - - -
Foreign taxes payable ......................... - - 2,146 -
Futures margin payable ........................ - - 2,812 -
Unrealized depreciation on forward foreign
currency contracts ........................... - 859,609 25,317 -
Unrealized depreciation on interest rate
swaps ........................................ - - 819,882 -
Advisory fees payable ......................... - 968,657 367,466 -
Administration fees payable ................... 942 89,572 64,338 62,259
Transfer agent fees payable ................... 5,566 175,454 272,479 258,813
Custodian fees payable ........................ - - 77,226 -
Distribution fees payable ..................... 1,310 189,758 172,490 -
Other accrued expenses payable ................ 8,743 215,041 288,939 471,995
------------ --------------- -------------- -----------------
TOTAL LIABILITIES ........................... 1,408,365 29,760,552 210,184,584 7,320,018
------------ --------------- -------------- -----------------
NET ASSETS ..................................... $ 15,548,398 $ 1,194,688,000 $ 790,806,658 $ 1,237,207,497
============ =============== ============== =================
BLACKROCK FUNDS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
ALL-CAP GLOBAL HEALTH
RESOURCES SCIENCES U.S. OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ---------------- --------------------
1Cost of investments ............................. $ 473,525,502 $601,471,903 $ 60,974,994
2Market value of securities loaned ............... 96,563,130 102,456,973 25,619,030
121
3Cost of collateral received from securities
loaned .......................................... 17,860,109 13,720,643 2,331,423
4Cost of investment in affiliate ................. 83,058,826 93,028,947 24,194,050
5Cost of investments - foreign currencies ........ (13,121) - -
6Premiums paid - purchased swaptions ............. - - -
7Premiums received - options written ............. - 413,594 -
8Premiums received - swaptions written ........... - - -
9Proceeds - TBA sale commitments ................. - - -
*Represents an investment in affiliate. ..........
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital paid in .................................. $ 489,342,906 $651,993,971 $ 179,735,343
Undistributed (distributions in excess of) net
investment income (loss) ........................ (733,183) (1,412,223) (528,214)
Accumulated net realized gain (loss) ............. 2,434,681 24,167,684 (90,250,283)
Net unrealized appreciation (depreciation) ....... 74,649,272 56,649,645 28,325,078
------------- ------------ -------------
$ 565,693,676 $731,399,077 $ 117,281,924
============= ============ =============
Institutional Shares:
Net Assets ....................................... $ 228,711,301 $ 81,588,647 $ 7,522,388
Shares outstanding (unlimited authorization)...... 15,490,911 3,139,639 248,385
Net Asset Value, offering and redemption
price per share ................................. $ 14.76 $ 25.99 $ 30.29
Service Shares:
Net Assets ....................................... $ 1,103,592 $ 1,006,194 $ 859,627
Shares outstanding (unlimited authorization)...... 75,070 39,263 29,113
Net Asset Value, offering and redemption
price per share ................................. $ 14.70 $ 25.63 $ 29.53
Investor A Shares:
Net Assets ....................................... $ 190,011,609 $362,291,272 $ 41,917,157
Shares outstanding (unlimited authorization)...... 12,923,707 14,163,869 1,431,680
Net Asset Value .................................. $ 14.70 $ 25.58 $ 29.28
Maximum Sales Charge ............................. 5.75% 5.75% 5.75%
Maximum offering price per share ................. $ 15.60 $ 27.14 $ 31.07
Investor B Shares:
Net Assets ....................................... $ 36,314,021 $ 71,769,776 $ 40,155,147
Shares outstanding (unlimited authorization)...... 2,490,361 2,915,513 1,453,459
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 4.50%) ................. $ 14.58 $ 24.62 $ 27.63
Investor C Shares:
Net Assets ....................................... $ 109,553,153 $214,743,188 $ 26,827,605
Shares outstanding (unlimited authorization)...... 7,503,728 8,740,227 971,942
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 1.00%) ................. $ 14.60 $ 24.57 $ 27.60
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
GLOBAL INTERNATIONAL ASSET INDEX
OPPORTUNITIES OPPORTUNITIES ALLOCATION EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------------ ---------------- -----------------
1Cost of investments ............................. $15,610,138 $ 934,104,413 $612,575,683 $ 872,325,651
2Market value of securities loaned ............... - 9,531,400 105,235,631 -
121
3Cost of collateral received from securities
loaned .......................................... - - 29,457,925 -
4Cost of investment in affiliate ................. - 9,726,000 79,877,637 -
5Cost of investments - foreign currencies ........ 6,768 7,064,182 3,515,166 -
6Premiums paid - purchased swaptions ............. - - 670,400 -
7Premiums received - options written ............. - - 38,594 -
8Premiums received - swaptions written ........... - - 971,650 -
9Proceeds - TBA sale commitments ................. - - 48,001,320 -
*Represents an investment in affiliate. ..........
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital paid in .................................. $15,148,394 $ 842,757,601 $695,901,299 $ 992,822,156
Undistributed (distributions in excess of) net
investment income (loss) ........................ 41,311 (1,622,119) 18,268 252,631
Accumulated net realized gain (loss) ............. (123,831) 95,248,798 (8,388,840) (307,499,591)
Net unrealized appreciation (depreciation) ....... 482,524 258,303,720 103,275,931 551,632,301
----------- -------------- ------------ --------------
$15,548,398 $1,194,688,000 $790,806,658 $1,237,207,497
=========== ============== ============ ==============
Institutional Shares:
Net Assets ....................................... $ 5,470,717 $ 336,776,208 $ 33,045,126 $ 545,284,247
Shares outstanding (unlimited authorization)...... 534,321 8,137,919 2,114,745 21,902,442
Net Asset Value, offering and redemption
price per share ................................. $ 10.24 $ 41.38 $ 15.63 $ 24.90
Service Shares:
Net Assets ....................................... $ 10,334 $ 128,173,034 $ 2,199,414 $ 78,373,672
Shares outstanding (unlimited authorization)...... 1,010 3,175,706 140,978 3,168,399
Net Asset Value, offering and redemption
price per share ................................. $ 10.23 $ 40.36 $ 15.60 $ 24.74
Investor A Shares:
Net Assets ....................................... $ 6,843,339 $ 416,510,626 $494,561,215 $ 294,317,838
Shares outstanding (unlimited authorization)...... 668,823 10,377,165 31,720,894 11,907,595
Net Asset Value .................................. $ 10.23 $ 40.14 $ 15.59 $ 24.72
Maximum Sales Charge ............................. 5.75% 5.00% 5.75% 3.00%
Maximum offering price per share ................. $ 10.85 $ 42.25 $ 16.54 $ 25.48
Investor B Shares:
Net Assets ....................................... $ 842,477 $ 100,190,075 $185,966,635 $ 116,444,557
Shares outstanding (unlimited authorization)...... 82,426 2,614,715 12,043,866 4,791,427
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 4.50%) ................. $ 10.22 $ 38.32 $ 15.44 $ 24.30
Investor C Shares:
Net Assets ....................................... $ 2,381,531 $ 213,038,057 $ 75,034,268 $ 202,787,183
Shares outstanding (unlimited authorization)...... 232,965 5,566,209 4,862,265 8,350,031
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 1.00%) ................. $ 10.22 $ 38.27 $ 15.43 $ 24.29
BLACKROCK FUNDS
BLACKROCK FUNDS
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2006 (UNAUDITED)
LARGE CAP
INVESTMENT VALUE
TRUST EQUITY
PORTFOLIO PORTFOLIO
---------------- ----------------
Investment income:
Interest ...................................... $ 172,696 $ 92,194
Securities lending income (Note C) ............ 89,221 31,615
Dividends and reclaims ........................ 12,379,440 4,394,063
Foreign taxes withheld ........................ - -
------------ ------------
Total investment income ..................... 12,641,357 4,517,872
------------ ------------
Expenses:
Investment advisery fee ....................... 3,493,757 977,762
Administration fee ............................ 475,890 145,317
Administration fee - class specific ........... 690,938 188,344
Custodian fee ................................. 77,126 30,228
Transfer agent fee ............................ 971,607 123,382
Transfer agent fee - class specific ........... 610,070 114,808
Shareholder servicing fees - class specific ... 979,713 287,569
Distribution fees - class specific ............ 1,218,031 273,151
Legal and audit fee ........................... 106,267 34,916
Printing fee .................................. 181,272 52,780
Registration fees and expenses ................ 34,658 27,499
Trustees' fees ................................ 24,174 6,430
Licensing fees ................................ - -
Other ......................................... 31,582 4,404
------------ ------------
Total expenses .............................. 8,895,085 2,266,590
------------ ------------
Less investment advisory fees waived........ (487,306) (82,340)
Less administration fees waived - class
specific .................................. (401,205) (72,227)
Less distribution fees waived - class
specific .................................. (265,142) (77,012)
Less custodian fees waived ................. (4,415) (1,659)
Less transfer agent fees waived ............ (117,516) (14,308)
Less transfer agent fees waived - class
specific .................................. (60,770) (754)
Less transfer agent fees reimbursed -
class specific ............................ (59,503) -
------------ ------------
Net expenses ................................ 7,499,228 2,018,290
------------ ------------
Net investment income (loss) .................. 5,142,129 2,499,582
------------ ------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions ...................... 63,447,369 17,325,863
Futures contracts ............................ 1,010,178 167,198
------------ ------------
64,457,547 17,493,061
------------ ------------
Change in unrealized appreciation
(depreciation) from:
Investments .................................. (9,796,858) 2,940,041
Futures contracts ............................ 27,209 (9,850)
------------ ------------
(9,769,649) 2,930,191
------------ ------------
Net gain on investments and foreign currency
transactions .................................. 54,687,898 20,423,252
------------ ------------
Net increase in net assets resulting from
operations .................................... $ 59,830,027 $ 22,922,834
============ ============
LARGE CAP
GROWTH DIVIDEND
EQUITY ACHIEVERSTM LEGACY
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- ------------------
Investment income:
Interest ...................................... $ 16,571 $ 7,687 $ 71,698
Securities lending income (Note C) ............ 3,618 9,678 31,639
Dividends and reclaims ........................ 313,862 518,391 1,107,873
Foreign taxes withheld ........................ - - (7,830)
------------ ----------- -----------
Total investment income ..................... 334,051 535,756 1,203,380
------------ ----------- -----------
Expenses:
Investment advisery fee ....................... 149,976 91,640 900,496
Administration fee ............................ 22,301 13,613 113,299
Administration fee - class specific ........... 29,040 17,568 147,560
Custodian fee ................................. 12,272 9,567 13,220
Transfer agent fee ............................ 5,550 11,033 184,036
Transfer agent fee - class specific ........... 30,060 8,557 128,069
Shareholder servicing fees - class specific ... 42,856 38,733 282,683
Distribution fees - class specific ............ 53,370 67,844 455,653
Legal and audit fee ........................... 11,965 10,826 28,651
Printing fee .................................. 14,742 4,368 39,858
Registration fees and expenses ................ 24,823 41,374 85,111
Trustees' fees ................................ 1,092 561 4,974
Licensing fees ................................ - 16,662 -
Other ......................................... 4,248 2,185 7,117
------------ ----------- -----------
Total expenses .............................. 402,295 334,531 2,390,727
------------ ----------- -----------
Less investment advisory fees waived........ (49,278) (52,305) -
Less administration fees waived - class
specific .................................. (12,393) (1,767) (135,800)
Less distribution fees waived - class
specific .................................. (8,172) (7,201) (60,485)
Less custodian fees waived ................. (711) (475) (1,224)
Less transfer agent fees waived ............ (1,926) (1,314) (19,098)
Less transfer agent fees waived - class
specific .................................. (354) (64) -
Less transfer agent fees reimbursed -
class specific ............................ (3,081) (346) (8)
------------ ----------- -----------
Net expenses ................................ 326,380 271,059 2,174,112
------------ ----------- -----------
Net investment income (loss) .................. 7,671 264,697 (970,732)
------------ ----------- -----------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions ...................... 5,341,178 (400,074) 20,082,375
Futures contracts ............................ (9,722) 42,734 -
------------ ----------- -----------
5,331,456 (357,340) 20,082,375
------------ ----------- -----------
Change in unrealized appreciation
(depreciation) from:
Investments .................................. (2,257,425) 1,895,765 157,504
Futures contracts ............................ 6,391 (2,045) -
------------ ----------- -----------
(2,251,034) 1,893,720 157,504
------------ ----------- -----------
Net gain on investments and foreign currency
transactions .................................. 3,080,422 1,536,380 20,239,879
------------ ----------- -----------
Net increase in net assets resulting from
operations .................................... $ 3,088,093 $ 1,801,077 $19,269,147
============ =========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
122
BLACKROCK FUNDS
MID-CAP MID-CAP
VALUE GROWTH SMALL/MID-CAP SMALL CAP SMALL CAP SMALL CAP
EQUITY EQUITY AURORA GROWTH VALUE EQUITY CORE EQUITY GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------- --------------- ----------------- --------------- ---------------- --------------- ----------------
$ 448,968 $ 89,479 $ 1,527,523 $ 133,186 $ 46,198 $ 46,192 $ 411,911
56,759 57,595 482,278 48,709 21,569 11,879 73,742
6,646,769 846,800 14,541,190 330,372 604,984 163,173 504,485
- - (12,498) (645) - - (6,563)
------------ ------------ -------------- ------------ ------------ ----------- ------------
7,152,496 993,874 16,538,493 511,622 672,751 221,244 983,575
------------ ------------ -------------- ------------ ------------ ----------- ------------
3,084,713 1,785,684 10,096,704 1,078,513 330,971 311,153 1,671,403
301,282 182,342 845,834 117,408 49,217 25,241 242,212
405,016 235,208 1,259,525 150,783 62,306 30,483 313,020
42,464 26,414 98,956 24,206 15,098 13,048 42,832
322,239 424,751 836,144 140,920 13,399 20,960 77,095
310,330 279,151 1,085,828 195,504 31,402 15,305 148,940
879,854 461,359 2,897,413 321,299 70,123 55,013 270,699
1,134,517 440,772 3,715,057 280,806 79,880 113,325 192,837
65,230 40,393 202,089 28,349 17,125 11,462 50,767
124,124 78,806 450,086 46,228 21,294 6,006 111,020
41,723 26,017 24,620 69,949 33,044 28,920 37,496
14,286 8,098 48,564 5,156 2,351 788 10,402
- - - - - - -
18,082 11,705 58,675 7,706 5,326 2,987 14,746
------------ ------------ -------------- ------------ ------------ ----------- ------------
6,743,860 4,000,700 21,619,495 2,466,827 731,536 634,691 3,183,469
------------ ------------ -------------- ------------ ------------ ----------- ------------
(274,417) (70,119) - (47,061) (8,022) (18,129) -
(395,552) (94,769) (130,503) (141,007) (8,777) (8,850) (564)
(232,022) (145,087) (773,108) (109,738) (14,844) (7,548) (80,901)
(2,986) (1,807) (6,891) (1,399) (971) (756) (2,670)
(36,680) (46,418) (93,653) (14,777) (2,127) (2,366) (10,575)
(28,396) (5,390) (64) (11,270) - (177) (649)
(135,502) (9,221) (11) (64,005) - (1,220) (3,465)
------------ ------------ -------------- ------------ ------------ ----------- ------------
5,638,305 3,627,889 20,615,265 2,077,570 696,795 595,645 3,084,645
------------ ------------ -------------- ------------ ------------ ----------- ------------
1,514,191 (2,634,015) (4,076,772) (1,565,948) (24,044) (374,401) (2,101,070)
------------ ------------ -------------- ------------ ------------ ----------- ------------
51,068,480 36,118,088 475,974,096 12,086,466 8,131,218 918,390 30,369,080
- - - - - - -
------------ ------------ -------------- ------------ ------------ ----------- ------------
51,068,480 36,118,088 475,974,096 12,086,466 8,131,218 918,390 30,369,080
------------ ------------ -------------- ------------ ------------ ----------- ------------
6,797,248 12,846,487 (308,990,154) 26,249,615 3,889,190 6,737,237 54,363,578
- - - - - - -
------------ ------------ -------------- ------------ ------------ ----------- ------------
6,797,248 12,846,487 (308,990,154) 26,249,615 3,889,190 6,737,237 54,363,578
------------ ------------ -------------- ------------ ------------ ----------- ------------
57,865,728 48,964,575 166,983,942 38,336,081 12,020,408 7,655,627 84,732,658
------------ ------------ -------------- ------------ ------------ ----------- ------------
$ 59,379,919 $ 46,330,560 $ 162,907,170 $ 36,770,133 $ 11,996,364 $ 7,281,226 $ 82,631,588
============ ============ ============== ============ ============ =========== ============
123
BLACKROCK FUNDS
STATEMENTS OF OPERATIONS (CONCLUDED)
FOR THE SIX MONTHS ENDED MARCH 31, 2006 (UNAUDITED)
GLOBAL SCIENCE
& TECHNOLOGY GLOBAL
OPPORTUNITIES RESOURCES
PORTFOLIO PORTFOLIO
---------------- ---------------
Investment income:
Interest ...................................... $ 27,331 $ 347,035
Securities lending income (Note C) ............ 3,050 186,379
Dividends and reclaims ........................ 72,673 13,013,556
Foreign taxes withheld ........................ (2,690) (811,102)
Net investment income from Master (Note A)..... - -
----------- -------------
Total investment income ..................... 100,364 12,735,868
----------- -------------
Expenses:
Investment advisery fee ....................... 123,899 4,310,224
Administration fee ............................ 11,181 432,684
Administration fee - class specific ........... 13,691 595,329
Custodian fee ................................. 9,310 164,205
Transfer agent fee ............................ 12,612 212,596
Transfer agent fee - class specific ........... 25,531 271,277
Shareholder servicing fees - class specific ... 32,875 1,399,286
Distribution fees - class specific ............ 63,672 1,510,507
Legal and audit fees .......................... 11,869 92,403
Printing fees ................................. 10,738 129,402
Registration fees and expenses ................ 24,510 82,675
Trustees' fees ................................ 379 21,093
Other ......................................... 3,843 30,451
----------- -------------
Total expenses .............................. 344,110 9,252,132
----------- -------------
Less investment advisory waived ............ (36,236) -
Less administration fees waived ............ - -
Less administration fees waived - class
specific .................................. (442) (178,366)
Less distribution fees waived - class
specific .................................. (5,333) (413,902)
Less custodian fees waived ................. (599) (15,558)
Less transfer agent fees waived ............ (1,926) (25,741)
Less transfer agent fees waived - class
specific .................................. - -
Less transfer agent fees reimbursed -
class specific ............................ - -
----------- -------------
Net expenses ................................ 299,574 8,618,565
----------- -------------
Net investment income (loss) .................. (199,210) 4,117,303
----------- -------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions ...................... 3,062,642 147,046,920
Options and swaptions contracts .............. - -
Futures and swaps contracts .................. - -
Foreign currency related transactions ........ (9,299) (38,146)
Master (See Note A) .......................... - -
----------- -------------
3,053,343 147,008,774
----------- -------------
Change in unrealized appreciation
(depreciation) from:
Investments .................................. 579,696 (59,647,183)
Options and swaptions contracts .............. - -
Futures and swaps contracts .................. - -
Foreign currency related transactions ........ 10,390 (117,101)
Master (See Note A) .......................... - -
----------- -------------
590,086 (59,764,284)
----------- -------------
Net gain on investments and foreign currency
transactions .................................. 3,643,429 87,244,490
----------- -------------
Net increase in net assets resulting from
operations .................................... $ 3,444,219 $ 91,361,793
=========== =============
ALL-CAP
GLOBAL HEALTH
RESOURCES SCIENCES U.S. OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO
---------------- --------------- -------------------
Investment income:
Interest ...................................... $ 445,541 $ 730,976 $ 77,780
Securities lending income (Note C) ............ 74,745 61,878 21,538
Dividends and reclaims ........................ 1,310,941 1,950,508 486,423
Foreign taxes withheld ........................ (81,959) (75,640) (427)
Net investment income from Master (Note A)..... - - -
------------ ------------ ------------
Total investment income ..................... 1,749,268 2,667,722 585,314
------------ ------------ ------------
Expenses:
Investment advisery fee ....................... 1,335,370 1,928,136 546,525
Administration fee ............................ 143,646 204,888 40,485
Administration fee - class specific ........... 164,549 241,183 51,141
Custodian fee ................................. 80,645 36,931 10,022
Transfer agent fee ............................ 72,507 158,531 36,334
Transfer agent fee - class specific ........... 48,490 115,179 59,690
Shareholder servicing fees - class specific ... 274,849 566,994 115,753
Distribution fees - class specific ............ 419,404 856,530 237,669
Legal and audit fees .......................... 24,082 31,964 15,802
Printing fees ................................. 11,284 30,212 28,756
Registration fees and expenses ................ 61,017 50,712 22,507
Trustees' fees ................................ 4,060 6,167 1,668
Other ......................................... 5,871 7,647 5,121
------------ ------------ ------------
Total expenses .............................. 2,645,774 4,235,074 1,171,473
------------ ------------ ------------
Less investment advisory waived ............ - - (7,348)
Less administration fees waived ............ - - -
Less administration fees waived - class
specific .................................. (81,252) - (7,193)
Less distribution fees waived - class
specific .................................. (63,147) (132,096) (16,691)
Less custodian fees waived ................. (5,057) (2,938) (716)
Less transfer agent fees waived ............ (10,451) (20,095) (6,028)
Less transfer agent fees waived - class
specific .................................. - - (4,130)
Less transfer agent fees reimbursed -
class specific ............................ - - (15,839)
------------ ------------ ------------
Net expenses ................................ 2,485,867 4,079,945 1,113,528
------------ ------------ ------------
Net investment income (loss) .................. (736,599) (1,412,223) (528,214)
------------ ------------ ------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions ...................... 2,512,451 23,180,295 11,308,719
Options and swaptions contracts .............. - 1,988,582 -
Futures and swaps contracts .................. - - -
Foreign currency related transactions ........ 3,416 - -
Master (See Note A) .......................... - - -
------------ ------------ ------------
2,515,867 25,168,877 11,308,719
------------ ------------ ------------
Change in unrealized appreciation
(depreciation) from:
Investments .................................. 34,236,353 19,755,253 6,109,544
Options and swaptions contracts .............. - 10,960 -
Futures and swaps contracts .................. - - -
Foreign currency related transactions ........ 9,787 (8,505) -
Master (See Note A) .......................... - - -
------------ ------------ ------------
34,246,140 19,757,708 6,109,544
------------ ------------ ------------
Net gain on investments and foreign currency
transactions .................................. 36,762,007 44,926,585 17,418,263
------------ ------------ ------------
Net increase in net assets resulting from
operations .................................... $ 36,025,408 $ 43,514,362 $ 16,890,049
============ ============ ============
- ---------
1 Commencement of operations on January 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
124
BLACKROCK FUNDS
INTERNATIONAL ASSET INDEX
GLOBAL OPPORTUNITIES OPPORTUNITIES ALLOCATION EQUITY
PORTFOLIO1 PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------- ----------------- ---------------- ---------------
$ 13,794 $ 771,069 $ 6,308,256 $ -
- 1,686 64,067 -
43,646 8,506,050 3,810,952 -
(3,906) (598,206) (63,748) -
- - - 12,523,736
---------- ------------- ------------ ------------
53,534 8,680,599 10,119,527 12,523,736
---------- ------------- ------------ ------------
13,991 4,657,316 2,118,356 -
1,166 354,428 301,116 470,078
369 455,054 406,454 681,366
2,250 208,968 190,976 2,184
- 221,258 370,975 131,219
5,899 205,551 277,947 217,070
1,595 833,059 921,836 548,820
2,245 1,109,902 1,180,902 1,427,762
4,077 63,258 81,068 103,740
186 103,558 111,384 192,556
5,704 59,707 40,467 43,273
62 13,004 13,982 23,842
4,607 26,763 40,763 28,311
---------- ------------- ------------ ------------
42,151 8,311,826 6,056,226 3,870,221
---------- ------------- ------------ ------------
(12,779) - (170,557) -
- - - (256,538)
(160) - (15,534) (312,348)
(455) (163,693) (243,498) (143,234)
- (10,250) (9,466) (170)
- (27,276) (42,698) (16,873)
(333) - - (3,789)
(4,789) - - (13,004)
---------- ------------- ------------ ------------
23,635 8,110,607 5,574,473 3,124,265
---------- ------------- ------------ ------------
29,899 569,992 4,545,054 9,399,471
---------- ------------- ------------ ------------
(123,831) 98,347,921 28,389,189 -
- - (377,660) -
- - (734,095) -
11,412 1,342,953 (53,491) -
- - - (3,157,358)
---------- ------------- ------------ ------------
(112,419) 99,690,874 27,223,943 (3,157,358)
---------- ------------- ------------ ------------
478,631 109,796,985 12,152,932 -
- - 1,555 -
- - 189,908 -
3,893 (252,688) 64,726 -
- - - 69,803,106
---------- ------------- ------------ ------------
482,524 109,544,297 12,409,121 69,803,106
---------- ------------- ------------ ------------
370,105 209,235,171 39,633,064 66,645,748
---------- ------------- ------------ ------------
$ 400,004 $ 209,805,163 $ 44,178,118 $ 76,045,219
========== ============= ============ ============
125
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
INVESTMENT
TRUST
PORTFOLIO
--------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05
------------------ -------------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) ................................... $ 5,142,129 $ 6,946,435
Net increase from payment by affiliate (Note D) ................ - -
Net realized gain (loss) on investments and futures ............ 64,457,547 161,332,624
Net unrealized gain (loss) on investments and futures .......... (9,769,649) 243,745,996
--------------- ---------------
Net increase in net assets resulting from operations ........... 59,830,027 412,025,055
--------------- ---------------
Distributions to shareholders from:
Net investment income:
Institutional Class ............................................ (4,070,114) (399,790)
Service Class .................................................. (6,953) (8,995)
Investor A Class ............................................... (2,873,035) (55,462)
Investor B Class ............................................... - -
Investor C Class ............................................... - -
--------------- ---------------
Total distributions from net investment income ................. (6,950,102) (464,247)
--------------- ---------------
Net realized gains:
Institutional Class ............................................ (13,017,298) -
Service Class .................................................. (39,545) -
Investor A Class ............................................... (13,600,742) -
Investor B Class ............................................... (6,237,009) -
Investor C Class ............................................... (605,658) -
--------------- ---------------
Total distributions from net realized gains .................... (33,500,252) -
--------------- ---------------
Total distributions to shareholders ............................ (40,450,354) (464,247)
--------------- ---------------
Capital share transactions ....................................... (93,009,121) 839,029,123
--------------- ---------------
Redemption fees .................................................. 5,257 25,621
--------------- ---------------
Total increase (decrease) in net assets ........................ (73,624,191) 1,250,615,552
Net assets:
Beginning of period ............................................ 1,344,415,810 93,800,258
--------------- ---------------
End of period .................................................. $ 1,270,791,619 $ 1,344,415,810
=============== ===============
End of period undistributed (distributions in excess of) net
investment income (loss) ...................................... $ 5,138,225 $ 6,946,198
LARGE CAP
VALUE EQUITY
PORTFOLIO
------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05
------------------ -----------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) ................................... $ 2,499,582 $ 4,185,216
Net increase from payment by affiliate (Note D) ................ - -
Net realized gain (loss) on investments and futures ............ 17,493,061 47,053,845
Net unrealized gain (loss) on investments and futures .......... 2,930,191 21,725,033
------------- -------------
Net increase in net assets resulting from operations ........... 22,922,834 72,964,094
------------- -------------
Distributions to shareholders from:
Net investment income:
Institutional Class ............................................ (1,101,637) (2,034,319)
Service Class .................................................. (172,212) (344,743)
Investor A Class ............................................... (1,056,964) (1,525,700)
Investor B Class ............................................... (123,069) (178,881)
Investor C Class ............................................... (33,185) (54,665)
------------- -------------
Total distributions from net investment income ................. (2,487,067) (4,138,308)
------------- -------------
Net realized gains:
Institutional Class ............................................ - -
Service Class .................................................. - -
Investor A Class ............................................... - -
Investor B Class ............................................... - -
Investor C Class ............................................... - -
------------- -------------
Total distributions from net realized gains .................... - -
------------- -------------
Total distributions to shareholders ............................ (2,487,067) (4,138,308)
------------- -------------
Capital share transactions ....................................... (26,417,591) 52,250,770
------------- -------------
Redemption fees .................................................. 7,270 19,462
------------- -------------
Total increase (decrease) in net assets ........................ (5,974,554) 121,096,018
Net assets:
Beginning of period ............................................ 361,142,672 240,046,654
------------- -------------
End of period .................................................. $ 355,168,118 $ 361,142,672
============= =============
End of period undistributed (distributions in excess of) net
investment income (loss) ...................................... $ 101,497 $ 88,982
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
126
BLACKROCK FUNDS
DIVIDEND
LARGE CAP ACHIEVERSTM LEGACY
GROWTH EQUITY PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------- ----------------------------------- ------------------------------------------------------
FOR THE FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE FOR THE
3/31/06 YEAR ENDED 3/31/06 YEAR ENDED 3/31/06 PERIOD 11/01/04 YEAR ENDED
(UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05 (UNAUDITED) THROUGH 9/30/05 10/31/04
- ------------------ --------------- ------------------ ---------------- ------------------ ----------------- -----------------
$ 7,671 $ 274,749 $ 264,697 $ 323,629 $ (970,732) $ (98,020) $ (2,689,754)
- - - - - 294,363 15,707
5,331,456 15,328,087 (357,340) (338,319) 20,082,375 10,863,747 49,361,911
(2,251,034) (6,631,274) 1,893,720 1,164,972 157,504 19,015,361 (32,508,263)
------------ ------------- ------------ ------------ ------------- ------------- -------------
3,088,093 8,971,562 1,801,077 1,150,282 19,269,147 30,075,451 14,179,601
------------ ------------- ------------ ------------ ------------- ------------- -------------
(173,420) - (22,985) (82,607) - - -
(16,984) - (3,610) (4,273) - - -
(84,435) - (130,641) (154,885) - - -
- - (26,189) (19,034) - - -
- - (71,448) (62,561) - - -
------------ ------------- ------------ ------------ ------------- ------------- -------------
(274,839) - (254,873) (323,360) - - -
------------ ------------- ------------ ------------ ------------- ------------- -------------
- - - (4,624) - - -
- - - (100) - - -
- - - (5,999) - - -
- - - (348) - - -
- - - (2,127) - - -
------------ ------------- ------------ ------------ ------------- ------------- -------------
- - - (13,198) - - -
------------ ------------- ------------ ------------ ------------- ------------- -------------
(274,839) - (254,873) (336,558) - - -
------------ ------------- ------------ ------------ ------------- ------------- -------------
(4,617,832) (48,061,594) (629,242) 30,277,478 (22,153,548) (60,152,321) (55,470,941)
------------ ------------- ------------ ------------ ------------- ------------- -------------
5,799 6,781 10,001 15,280 4,048 5,452 -
------------ ------------- ------------ ------------ ------------- ------------- -------------
(1,798,779) (39,083,251) 926,963 31,106,482 (2,880,353) (30,071,418) (41,291,340)
56,059,402 95,142,653 33,098,456 1,991,974 278,559,896 308,631,314 349,922,654
------------ ------------- ------------ ------------ ------------- ------------- -------------
$ 54,260,623 $ 56,059,402 $ 34,025,419 $ 33,098,456 $ 275,679,543 $ 278,559,896 $ 308,631,314
============ ============= ============ ============ ============= ============= =============
$ 7,581 $ 274,749 $ 11,785 $ 1,961 $ (970,732) $ - $ -
127
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MID-CAP
VALUE EQUITY
PORTFOLIO
-----------------------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
3/31/06 PERIOD ENDED FOR THE PERIOD
(UNAUDITED) 3/1/05-9/30/05 7/1/04-2/28/05
------------------ ---------------- -----------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) .................................. $ 1,514,191 $ 141,476 $ 3,237,587
Net increase from payment by affiliate (Note D) ............... - - 554,230
Net realized gain on investments and futures .................. 51,068,480 52,648,354 55,516,938
Net unrealized gain (loss) on investments and futures ......... 6,797,248 1,969,402 25,454,000
------------- ------------- -------------
Net increase in net assets resulting from operations .......... 59,379,919 54,759,232 84,762,755
------------- ------------- -------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ............................................... - - -
Institutional Class ........................................... (195,309) - (383,894)
Service Class ................................................. (7,194) - -
Investor A Class .............................................. (921,868) - (4,857,110)
Investor B Class .............................................. - - (80,308)
Investor C Class .............................................. - - (80,956)
------------- ------------- -------------
Total distributions from net investment income ................ (1,124,371) - (5,402,268)
------------- ------------- -------------
Net realized gains:
BlackRock Class ............................................... - - -
Institutional Class ........................................... (5,884,247) - (2,033,124)
Service Class ................................................. (107,064) - -
Investor A Class .............................................. (45,347,430) - (29,684,283)
Investor B Class .............................................. (13,986,415) - (7,665,103)
Investor C Class .............................................. (11,728,910) - (6,254,749)
------------- ------------- -------------
Total distributions from net realized gains ................... (77,054,066) - (45,637,259)
------------- ------------- -------------
Total distributions to shareholders ........................... (78,178,437) - (51,039,527)
------------- ------------- -------------
Capital share transactions ...................................... 52,692,379 14,437,796 45,632,219
------------- ------------- -------------
Redemption fees ................................................. 60,524 58,561 610
------------- ------------- -------------
Total increase (decrease) in net assets ....................... 33,954,385 69,255,589 79,356,057
Net assets:
Beginning of period ........................................... 789,474,203 720,218,614 640,862,557
------------- ------------- -------------
End of period ................................................. $ 823,428,588 $ 789,474,203 $ 720,218,614
============= ============= =============
End of period undistributed (distributions in excess of) net
investment income (loss) ..................................... $ 591,600 $ 201,780 $ (163,219)
MID-CAP
GROWTH EQUITY
PORTFOLIO
------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05
------------------ -----------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) .................................. $ (2,634,015) $ (4,142,073)
Net increase from payment by affiliate (Note D) ............... - -
Net realized gain on investments and futures .................. 36,118,088 50,869,792
Net unrealized gain (loss) on investments and futures ......... 12,846,487 66,962,559
------------- -------------
Net increase in net assets resulting from operations .......... 46,330,560 113,690,278
------------- -------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ............................................... - -
Institutional Class ........................................... - -
Service Class ................................................. - -
Investor A Class .............................................. - -
Investor B Class .............................................. - -
Investor C Class .............................................. - -
------------- -------------
Total distributions from net investment income ................ - -
------------- -------------
Net realized gains:
BlackRock Class ............................................... - -
Institutional Class ........................................... (921,396) -
Service Class ................................................. (14,346) -
Investor A Class .............................................. (3,790,441) -
Investor B Class .............................................. (838,891) -
Investor C Class .............................................. (293,573) -
------------- -------------
Total distributions from net realized gains ................... (5,858,647) -
------------- -------------
Total distributions to shareholders ........................... (5,858,647) -
------------- -------------
Capital share transactions ...................................... (23,641,105) 210,823,335
------------- -------------
Redemption fees ................................................. 8,211 7,782
------------- -------------
Total increase (decrease) in net assets ....................... 16,839,019 324,521,395
Net assets:
Beginning of period ........................................... 446,675,257 122,153,862
------------- -------------
End of period ................................................. $ 463,514,276 $ 446,675,257
============= =============
End of period undistributed (distributions in excess of) net
investment income (loss) ..................................... $ (2,634,015) $ -
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
128
BLACKROCK FUNDS
SMALL/MID-CAP
AURORA GROWTH
PORTFOLIO PORTFOLIO
- -------------------------------------- -------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
3/31/06 YEAR ENDED 3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05
- ------------------- ------------------ ------------------- -----------------
$ (4,076,772) $ (17,597,476) $ (1,565,948) $ (3,240,011)
- 203,165 - -
475,974,096 469,614,985 12,086,466 43,816,536
(308,990,154) 30,943,367 26,249,615 25,247,218
--------------- --------------- ------------ --------------
162,907,170 483,164,041 36,770,133 65,823,743
--------------- --------------- ------------ --------------
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
--------------- --------------- ------------ --------------
- - - -
--------------- --------------- ------------ --------------
- - - -
(28,658,928) (16,052,024) (939,125) -
(28) - (5) -
(283,531,756) (223,189,239) (9,326,970) -
(81,734,827) (47,894,772) (1,175,000) -
(75,908,932) (50,120,639) (976,287) -
--------------- --------------- ------------ --------------
(469,834,471) (337,256,674) (12,417,387) -
--------------- --------------- ------------ --------------
(469,834,471) (337,256,674) (12,417,387) -
--------------- --------------- ------------ --------------
32,032,703 (966,776,906) 939,272 (217,664,309)
--------------- --------------- ------------ --------------
51,180 64,455 4,514 17,328
--------------- --------------- ------------ --------------
(274,843,418) (820,805,084) 25,296,532 (151,823,238)
2,698,929,252 3,519,734,336 281,642,897 433,466,135
--------------- --------------- ------------ --------------
$ 2,424,085,834 $ 2,698,929,252 $306,939,429 $ 281,642,897
=============== =============== ============ ==============
$ (4,076,772) $ - $ (1,565,948) $ -
SMALL CAP VALUE SMALL CAP CORE
EQUITY PORTFOLIO EQUITY PORTFOLIO
- ------------------------------------ ------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
3/31/06 YEAR ENDED 3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05
- ------------------ ----------------- ------------------ -----------------
$ (24,044) $ 11,801 $ (374,401) $ (323,999)
- - - -
8,131,218 24,313,119 918,390 832,757
3,889,190 927,970 6,737,237 3,352,781
------------- ------------- ------------ -----------
11,996,364 25,252,890 7,281,226 3,861,539
------------- ------------- ------------ -----------
(67,528) - - -
(854,889) - - -
(67,932) - - -
(394,454) - - -
(160,437) - - -
(81,005) - - -
------------- ------------- ------------ -----------
(1,626,245) - - -
------------- ------------- ------------ -----------
(873,689) (1,130,480) - -
(11,235,231) (12,364,497) (307,016) (23,123)
(613,345) (436,328) (6,306) (1)
(5,676,463) (6,644,284) (244,721) (29,098)
(2,444,123) (3,267,502) (129,108) (12,855)
(1,219,049) (1,382,122) (329,511) (38,775)
------------- ------------- ------------ -----------
(22,061,900) (25,225,213) (1,016,662) (103,852)
------------- ------------- ------------ -----------
(23,688,145) (25,225,213) (1,016,662) (103,852)
------------- ------------- ------------ -----------
4,469,863 (3,500,476) 27,228,823 35,071,402
------------- ------------- ------------ -----------
2,946 6,303 2,765 6,903
------------- ------------- ------------ -----------
(7,218,972) (3,466,496) 33,496,152 38,835,992
128,598,666 132,065,162 48,300,916 9,464,924
------------- ------------- ------------ -----------
$ 121,379,694 $ 128,598,666 $ 81,797,068 $48,300,916
============= ============= ============ ===========
$ (1,638,488) $ 11,801 $ (374,401) $ -
129
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SMALL CAP
GROWTH EQUITY
PORTFOLIO
------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05
------------------ -----------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) .................................. $ (2,101,070) $ (2,948,503)
Net increase from payment by affiliate (Note D) ............... - -
Net realized gain (loss) on investments, futures, options and
foreign currency related transactions ........................ 30,369,080 45,796,132
Net unrealized gain (loss) on investments, futures, options and
foreign currency related transactions ........................ 54,363,578 48,085,897
------------- -------------
Net increase in net assets resulting from operations .......... 82,631,588 90,933,526
------------- -------------
Distributions to shareholders from:
Net investment income:
Institutional Class ........................................... - -
Investor A Class .............................................. - -
Investor B Class .............................................. - -
Investor C Class .............................................. - -
------------- -------------
Total distributions from net investment income ................ - -
------------- -------------
Net realized gains:
Institutional Class ........................................... - -
Service Class ................................................. - -
Investor A Class .............................................. - -
Investor B Class .............................................. - -
Investor C Class .............................................. - -
------------- -------------
Total distributions from net realized gains ................... - -
------------- -------------
Total distributions to shareholders ........................... - -
------------- -------------
Capital share transactions ...................................... 32,698,954 10,896,279
------------- -------------
Redemption fees ................................................. 10,144 181,665
------------- -------------
Total increase (decrease) in net assets ....................... 115,340,686 102,011,470
Net assets:
Beginning of period ........................................... 573,671,168 471,659,698
------------- -------------
End of period ................................................. $ 689,011,854 $ 573,671,168
============= =============
End of period undistributed (distributions in excess of) net
investment income (loss) ..................................... $ (2,101,070) $ -
GLOBAL SCIENCE
& TECHNOLOGY
OPPORTUNITIES
PORTFOLIO
----------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05
------------------ ---------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) .................................. $ (199,210) $ (396,555)
Net increase from payment by affiliate (Note D) ............... - -
Net realized gain (loss) on investments, futures, options and
foreign currency related transactions ........................ 3,053,343 1,490,284
Net unrealized gain (loss) on investments, futures, options and
foreign currency related transactions ........................ 590,086 3,724,645
------------ ------------
Net increase in net assets resulting from operations .......... 3,444,219 4,818,374
------------ ------------
Distributions to shareholders from:
Net investment income:
Institutional Class ........................................... - -
Investor A Class .............................................. - -
Investor B Class .............................................. - -
Investor C Class .............................................. - -
------------ ------------
Total distributions from net investment income ................ - -
------------ ------------
Net realized gains:
Institutional Class ........................................... - -
Service Class ................................................. - -
Investor A Class .............................................. - -
Investor B Class .............................................. - -
Investor C Class .............................................. - -
------------ ------------
Total distributions from net realized gains ................... - -
------------ ------------
Total distributions to shareholders ........................... - -
------------ ------------
Capital share transactions ...................................... 6,318,867 (7,543,976)
------------ ------------
Redemption fees ................................................. 24,389 2,297
------------ ------------
Total increase (decrease) in net assets ....................... 9,787,475 (2,723,305)
Net assets:
Beginning of period ........................................... 24,443,498 27,166,803
------------ ------------
End of period ................................................. $ 34,230,973 $ 24,443,498
============ ============
End of period undistributed (distributions in excess of) net
investment income (loss) ..................................... $ (208,509) $ -
- ---------
1 Commencement of operations.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
130
BLACKROCK FUNDS
ALL-CAP
GLOBAL GLOBAL
RESOURCES RESOURCES
PORTFOLIO PORTFOLIO
- --------------------------------------------------------- -------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE FOR THE SIX MONTHS ENDED FOR THE
3/31/06 PERIOD ENDED PERIOD ENDED 3/31/06 PERIOD ENDED
(UNAUDITED) 3/1/05-9/30/05 7/1/04-2/28/05 (UNAUDITED) 2/16/051-9/30/05
- ------------------- ------------------- ----------------- ------------------ ------------------
$ 4,117,303 $ (443,749) $ (3,468,242) $ (736,599) $ (28,043)
- - 12,780 - -
147,008,774 54,208,005 79,429,401 2,515,867 (141,037)
(59,764,284) 263,666,690 226,282,268 34,246,140 40,403,132
--------------- --------------- ------------- ------------- -------------
91,361,793 317,430,946 302,256,207 36,025,408 40,234,052
--------------- --------------- ------------- ------------- -------------
(307,204) - (181,199) - -
(5,966,984) - (3,733,634) - -
(663,366) - (448,727) - -
(1,146,191) - (740,345) - -
--------------- --------------- ------------- ------------- -------------
(8,083,745) - (5,103,905) - -
--------------- --------------- ------------- ------------- -------------
(4,512,903) - (820,327) - -
- - - - -
(94,937,633) - (17,122,033) - -
(13,508,171) - (2,773,442) - -
(23,448,838) - (4,875,287) - -
--------------- --------------- ------------- ------------- -------------
(136,407,545) - (25,591,089) - -
--------------- --------------- ------------- ------------- -------------
(144,491,290) - (30,694,994) - -
--------------- --------------- ------------- ------------- -------------
25,332,565 (50,140,775) 42,478,605 285,149,284 204,128,207
--------------- --------------- ------------- ------------- -------------
88,754 46,530 323 117,760 38,965
--------------- --------------- ------------- ------------- -------------
(27,708,178) 267,336,701 314,040,141 321,292,452 244,401,224
1,237,135,902 969,799,201 655,759,060 244,401,224 -
--------------- --------------- ------------- ------------- -------------
$ 1,209,427,724 $ 1,237,135,902 $ 969,799,201 $ 565,693,676 $ 244,401,224
=============== =============== ============= ============= =============
$ (7,571,647) $ (3,567,059) $ (5,178,168) $ (733,183) $ -
HEALTH
SCIENCES
PORTFOLIO
- -----------------------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE FOR THE
3/31/06 PERIOD ENDED YEAR ENDED
(UNAUDITED) 3/1/05-9/30/05 2/28/05
- ------------------ ---------------- -----------------
$ (1,412,223) $ (1,078,198) $ (1,374,367)
- - -
25,168,877 13,057,283 2,631,862
19,757,708 20,207,065 833,330
------------- ------------- -------------
43,514,362 32,186,150 2,090,825
------------- ------------- -------------
- - -
- - -
- - -
- - -
------------- ------------- -------------
- - -
------------- ------------- -------------
(1,084,099) (2,568) (271,998)
(3,101) - -
(5,912,450) (41,146) (3,693,722)
(1,377,483) (15,739) (1,432,836)
(3,056,378) (15,894) (970,853)
------------- ------------- -------------
(11,433,511) (75,347) (6,369,409)
------------- ------------- -------------
(11,433,511) (75,347) (6,369,409)
------------- ------------- -------------
351,885,104 179,642,409 42,894,626
------------- ------------- -------------
88,827 36,207 306
------------- ------------- -------------
384,054,782 211,789,419 38,616,348
347,344,295 135,554,876 96,938,528
------------- ------------- -------------
$ 731,399,077 $ 347,344,295 $ 135,554,876
============= ============= =============
$ (1,412,223) $ - $ -
131
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
U.S. OPPORTUNITIES
PORTFOLIO
------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05
------------------ -----------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) .................................... $ (528,214) $ (1,397,619)
Net increase from payment by affiliate (Note D) ................. - -
Net realized gain (loss) on investments, futures, options, swap
and swaption contracts and foreign currency related
transactions ................................................... 11,308,719 15,197,435
Net unrealized gain (loss) on investments, futures, options, swap
and swaption contracts and foreign currency related
transactions ................................................... 6,109,544 7,564,012
------------- -------------
Net increase in net assets resulting from operations ............ 16,890,049 21,363,828
------------- -------------
Distributions to shareholders from:
Net investment income:
Institutional Class ............................................. - -
Service Class ................................................... - -
Investor A Class ................................................ - -
Investor B Class ................................................ - -
Investor C Class ................................................ - -
------------- -------------
Total distributions from net investment income .................. - -
------------- -------------
Net realized gains:
Institutional Class ............................................. - -
Service Class ................................................... - -
Investor A Class ................................................ - -
Investor B Class ................................................ - -
Investor C Class ................................................ - -
------------- -------------
Total distributions from net realized gains ..................... - -
------------- -------------
Total distributions to shareholders ............................. - -
------------- -------------
Capital share transactions ........................................ 4,342,103 (26,240,680)
------------- -------------
Redemption fees ................................................... 4,530 7,627
------------- -------------
Total increase (decrease) in net assets ......................... 21,236,682 (4,869,225)
Net assets:
Beginning of period ............................................. 96,045,242 100,914,467
------------- -------------
End of period ................................................... $ 117,281,924 $ 96,045,242
============= =============
End of period undistributed (distributions in excess of) net
investment income (loss) ....................................... $ (528,214) $ -
GLOBAL OPPORTUNITIES
PORTFOLIO
-------------------------
FOR THE
PERIOD
1/31/061 THROUGH 3/31/06
(UNAUDITED)
-------------------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) .................................... $ 29,899
Net increase from payment by affiliate (Note D) ................. -
Net realized gain (loss) on investments, futures, options, swap
and swaption contracts and foreign currency related
transactions ................................................... (112,419)
Net unrealized gain (loss) on investments, futures, options, swap
and swaption contracts and foreign currency related
transactions ................................................... 482,524
------------
Net increase in net assets resulting from operations ............ 400,004
------------
Distributions to shareholders from:
Net investment income:
Institutional Class ............................................. -
Service Class ................................................... -
Investor A Class ................................................ -
Investor B Class ................................................ -
Investor C Class ................................................ -
------------
Total distributions from net investment income .................. -
------------
Net realized gains:
Institutional Class ............................................. -
Service Class ................................................... -
Investor A Class ................................................ -
Investor B Class ................................................ -
Investor C Class ................................................ -
------------
Total distributions from net realized gains ..................... -
------------
Total distributions to shareholders ............................. -
------------
Capital share transactions ........................................ 15,148,322
------------
Redemption fees ................................................... 72
------------
Total increase (decrease) in net assets ......................... 15,548,398
Net assets:
Beginning of period ............................................. -
------------
End of period ................................................... $ 15,548,398
============
End of period undistributed (distributions in excess of) net
investment income (loss) ....................................... $ 41,311
- ---------
1 Commencement of operations.
2 Prior period presentation reclassified to conform with current period
presentation.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
132
BLACKROCK FUNDS
INTERNATIONAL ASSET
OPPORTUNITIES ALLOCATION
PORTFOLIO PORTFOLIO
- ------------------------------------- -----------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
3/31/06 YEAR ENDED 3/31/06 PERIOD ENDED FOR THE PERIOD
(UNAUDITED) 9/30/05 (UNAUDITED) 3/1/05-9/30/05 4/1/04-2/28/05
- ------------------- ----------------- ------------------ ---------------- -----------------
$ 569,992 $ 6,868,238 $ 4,545,054 $ 5,815,784 $ 8,458,060
- - - 92,6902 90,574
99,690,874 49,584,098 27,223,943 29,870,872 32,890,808
109,544,297 114,351,248 12,409,121 (4,643,873) 7,489,575
--------------- ------------- ------------- ------------- -------------
209,805,163 170,803,584 44,178,118 31,135,473 48,929,017
--------------- ------------- ------------- ------------- -------------
(2,535,083) (1,442,124) (321,609) (337,855) (549,136)
(924,596) (249,027) (18,943) (19,977) -
(3,085,154) (1,244,655) (4,119,099) (4,253,377) (13,021,288)
(709,980) (134,589) (863,410) (633,349) (2,669,527)
(1,417,977) (279,752) (360,303) (240,743) (1,074,297)
--------------- ------------- ------------- ------------- -------------
(8,672,790) (3,350,147) (5,683,364) (5,485,301) (17,314,248)
--------------- ------------- ------------- ------------- -------------
(4,966,335) - (1,248,807) - (669,622)
(1,817,729) - (90,782) - -
(6,379,387) - (20,421,460) - (17,005,778)
(1,796,484) - (7,602,194) - (5,240,921)
(3,424,897) - (2,902,370) - (2,030,016)
--------------- ------------- ------------- ------------- -------------
(18,384,832) - (32,265,613) - (24,946,337)
--------------- ------------- ------------- ------------- -------------
(27,057,622) (3,350,147) (37,948,977) (5,485,301) (42,260,585)
--------------- ------------- ------------- ------------- -------------
293,645,451 234,875,667 12,116,411 (66,734,439) 147,427,659
--------------- ------------- ------------- ------------- -------------
122,630 201,642 26,492 44,269 4,202
--------------- ------------- ------------- ------------- -------------
476,515,622 402,530,746 18,372,044 (41,039,998) 154,100,293
718,172,378 315,641,632 772,434,614 813,474,612 659,374,319
--------------- ------------- ------------- ------------- -------------
$ 1,194,688,000 $ 718,172,378 $ 790,806,658 $ 772,434,614 $ 813,474,612
=============== ============= ============= ============= =============
$ (1,622,119) $ 5,137,726 $ 18,268 $ 1,210,069 $ (4,173,594)
INDEX
EQUITY
PORTFOLIO
- --------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05
- ------------------ -------------------
$ 9,399,471 $ 20,792,561
- -
(3,157,358) (3,338,645)
69,803,106 135,530,934
--------------- ---------------
76,045,219 152,984,850
--------------- ---------------
(5,272,266) (11,360,943)
(622,338) (1,107,048)
(2,259,002) (5,058,819)
(479,719) (1,445,481)
(837,739) (2,325,818)
--------------- ---------------
(9,471,064) (21,298,109)
--------------- ---------------
- -
- -
- -
- -
- -
--------------- ---------------
- -
--------------- ---------------
(9,471,064) (21,298,109)
--------------- ---------------
(154,489,459) (197,754,594)
--------------- ---------------
16,357 96,968
--------------- ---------------
(87,898,947) (65,970,885)
1,325,106,444 1,391,077,329
--------------- ---------------
$ 1,237,207,497 $ 1,325,106,444
=============== ===============
$ 252,631 $ 324,224
133
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS,
ASSET FOREIGN CURRENCY
VALUE NET AND OPTIONS
BEGINNING INVESTMENT (BOTH REALIZED
OF PERIOD INCOME (LOSS) AND UNREALIZED)
----------- --------------- ------------------
--------
Investment Trust
--------
Institutional Class
10/1/05 through 3/31/0631 $ 13.37 $ 0.085 $ 0.57
9/30/05 11.95 0.145 1.38
9/30/04 10.32 0.095 1.67
9/30/0327 8.50 0.10 1.83
9/30/0227 11.25 0.11 ( 2.86)
9/30/0127 20.77 0.06 ( 6.46)
Service Class
10/1/05 through 3/31/0631 $ 13.39 $ 0.065 $ 0.57
9/30/05 11.97 0.135 1.35
9/30/04 10.33 0.065 1.67
9/30/0327 8.44 0.10 1.79
9/30/0227 11.21 0.01 ( 2.78)
9/30/0127 20.73 0.01 ( 6.43)
Investor A Class
10/1/05 through 3/31/0631 $ 13.20 $ 0.055 $ 0.56
9/30/05 11.79 0.095 1.70
9/30/04 10.18 0.045 1.64
9/30/0327 8.41 0.06 1.79
9/30/0227 11.17 ( 0.01) ( 2.75)
9/30/0127 20.69 ( 0.02) ( 6.42)
Investor B Class
10/1/05 through 3/31/0631 $ 12.59 $ -5,33 $ 0.55
9/30/05 11.30 -5,33 1.29
9/30/04 9.78 ( 0.04)5 1.57
9/30/0327 8.06 ( 0.02) 1.74
9/30/0227 10.79 ( 0.10) ( 2.63)
9/30/0127 20.21 ( 0.13) ( 6.22)
Investor C Class
10/1/05 through 3/31/0631 $ 12.61 $ -5,33 $ 0.54
9/30/05 11.31 -5,33 1.30
9/30/04 9.77 ( 0.04)5 1.58
9/30/0327 8.06 ( 0.02)5 1.73
9/30/0227 10.79 ( 0.11) ( 2.62)
9/30/0127 20.20 ( 0.15) ( 6.19)
------------
Large Cap Value Equity
------------
Institutional Class
10/1/05 through 3/31/0631 $ 14.59 $ 0.135 $ 0.86
9/30/05 12.70 0.235 1.89
9/30/04 10.77 0.185 1.93
9/30/0327 8.82 0.16 1.94
9/30/0227 12.60 0.10 ( 3.42)
9/30/0127 15.13 0.14 ( 1.28)
Service Class
10/1/05 through 3/31/0631 $ 14.63 $ 0.115 $ 0.86
9/30/05 12.73 0.195 1.88
9/30/04 10.79 0.145 1.94
9/30/0327 8.83 0.12 1.96
9/30/0227 12.61 0.06 ( 3.42)
9/30/0127 15.13 0.10 ( 1.27)
DISTRIBUTIONS
DISTRIBUTIONS FROM NET NET
FROM NET DISTRIBUTIONS REALIZED ASSET VALUE
INVESTMENT FROM CAPITAL END OF
INCOME CAPITAL GAINS PERIOD
--------------- --------------- -------------- ------------
--------
Investment Trust
--------
Institutional Class
10/1/05 through 3/31/0631 $ (0.10) $ - $ (0.34) $ 13.58
9/30/05 (0.10) - - 13.37
9/30/04 (0.13) - - 11.95
9/30/0327 (0.11) - - 10.32
9/30/0227 - - - 8.50
9/30/0127 (0.05) (0.02) ( 3.05) 11.25
Service Class
10/1/05 through 3/31/0631 $ (0.06) $ - $ (0.34) $ 13.62
9/30/05 (0.06) - - 13.39
9/30/04 (0.09) - - 11.97
9/30/0327 - - - 10.33
9/30/0227 - - - 8.44
9/30/0127 (0.03) (0.02) ( 3.05) 11.21
Investor A Class
10/1/05 through 3/31/0631 $ (0.07) $ - $ (0.34) $ 13.40
9/30/05 (0.38) - - 13.20
9/30/04 (0.07) - - 11.79
9/30/0327 (0.08) - - 10.18
9/30/0227 - - - 8.41
9/30/0127 (0.01) (0.02) ( 3.05) 11.17
Investor B Class
10/1/05 through 3/31/0631 $ - $ - $ (0.34) $ 12.80
9/30/05 - - - 12.59
9/30/04 (0.01) - - 11.30
9/30/0327 - - - 9.78
9/30/0227 - - - 8.06
9/30/0127 - (0.02) ( 3.05) 10.79
Investor C Class
10/1/05 through 3/31/0631 $ - $ - $ (0.34) $ 12.81
9/30/05 - - - 12.61
9/30/04 - - - 11.31
9/30/0327 - - - 9.77
9/30/0227 - - - 8.06
9/30/0127 (0.02) - ( 3.05) 10.79
------------
Large Cap Value Equity
------------
Institutional Class
10/1/05 through 3/31/0631 $ (0.13) $ - $ - $ 15.45
9/30/05 (0.23) - - 14.59
9/30/04 (0.18) - - 12.70
9/30/0327 (0.15) - - 10.77
9/30/0227 (0.09) - ( 0.37) 8.82
9/30/0127 (0.14) - ( 1.25) 12.60
Service Class
10/1/05 through 3/31/0631 $ (0.11) $ - $ - $ 15.49
9/30/05 (0.17) - - 14.63
9/30/04 (0.14) - - 12.73
9/30/0327 (0.12) - - 10.79
9/30/0227 (0.05) - ( 0.37) 8.83
9/30/0127 (0.10) - ( 1.25) 12.61
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
134
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ----------------------------------- --------------- --------------
4.98%12,30 $ 510,532 0.78%2
12.7212 523,607 0.81
17.11 51,593 0.81
22.80 60,886 0.81
(24.44) 134,859 0.81
(35.29) 755,701 0.81
4.75%12,30 $ 1,119 1.06%2
12.4112 1,566 1.11
16.83 1,714 1.07
22.39 1,988 1.11
(24.71) 3,797 1.11
(35.49) 143,283 1.11
4.70%3,12,30 $ 515,100 1.16%2
12.303,12 552,118 1.16
16.603 17,632 1.26
22.093 19,408 1.28
(24.71)3 24,816 1.28
(35.65)3 37,267 1.28
4.43%4,12,30 $ 222,845 1.91%2
11.424,12 243,232 1.91
15.704 20,448 2.01
21.344 21,182 2.03
(25.30)4 22,119 2.03
(36.11)4 40,403 2.03
4.34%4,12,30 $ 21,196 1.90%2
11.494,12 23,893 1.91
15.784 2,413 2.03
21.224 1,829 2.03
(25.30)4 1,923 2.03
(36.07)4 3,955 2.03
6.82%12,30 $ 122,673 0.77%2
16.7912 128,501 0.79
19.6712 114,374 0.79
23.93 151,602 0.79
(27.41) 369,792 0.79
(8.22) 1,345,903 0.79
6.64%12,30 $ 24,088 1.09%2
16.3612 24,542 1.09
19.3512 46,353 1.09
23.60 62,080 1.09
(27.66) 133,903 1.09
(8.44) 254,166 1.09
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------ --------------- ------------------- ----------
0.97%2 1.17%2 0.98%2 38%
1.09 1.09 0.81 105
0.99 0.81 0.63 72
0.96 0.93 0.79 98
0.87 0.36 0.30 124
0.82 0.38 0.37 114
1.23%2 0.88%2 0.71%2 38%
1.32 1.02 0.81 105
1.23 0.56 0.40 72
1.26 0.64 0.49 98
1.16 0.06 0.02 124
1.12 0.07 0.06 114
1.41%2 0.79%2 0.54%2 38%
1.43 0.71 0.44 105
1.47 0.37 0.16 72
1.43 0.45 0.30 98
1.36 (0.04) (0.11) 124
1.30 (0.09) (0.10) 114
2.10%2 0.04%2 (0.15)%2 38%
2.08 (0.02) (0.19) 105
2.13 (0.39) (0.50) 72
2.18 (0.30) (0.45) 98
2.11 (0.78) (0.86) 124
2.05 (0.84) (0.85) 114
2.02%2 0.05%2 (0.07)%2 38%
2.07 (0.01) (0.17) 105
2.14 (0.39) (0.50) 72
2.18 (0.25) (0.40) 98
2.11 (0.80) (0.87) 124
2.04 (0.09) (0.09) 114
0.92%2 1.78%2 1.63%2 26%
0.99 1.66 1.46 93
0.91 1.45 1.33 75
0.91 1.27 1.15 150
0.84 0.72 0.68 128
0.80 1.00 0.99 114
1.22%2 1.45%2 1.32%2 26%
1.23 1.37 1.23 93
1.22 1.15 1.03 75
1.21 0.98 0.87 150
1.15 0.45 0.40 128
1.10 0.69 0.69 114
135
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS, DISTRIBUTIONS
ASSET FOREIGN CURRENCY FROM NET NET
VALUE NET AND OPTIONS DISTRIBUTIONS REALIZED ASSET VALUE
BEGINNING INVESTMENT (BOTH REALIZED FROM NET INVESTMENT CAPITAL END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME GAINS PERIOD
----------- --------------- ------------------ --------------------- -------------- ------------
------------------
Large Cap Value Equity (Continued)
------------------
Investor A Class
10/1/05 through 3/31/0631 $ 14.59 $ 0.105 $ 0.86 $ (0.10) $ - $ 15.45
9/30/05 12.71 0.175 1.89 (0.18) - 14.59
9/30/04 10.78 0.135 1.93 (0.13) - 12.71
9/30/0327 8.83 0.09 1.96 (0.10) - 10.78
9/30/0227 12.59 0.02 (3.39) (0.02) (0.37) 8.83
9/30/0127 15.11 0.07 (1.27) (0.07) (1.25) 12.59
Investor B Class
10/1/05 through 3/31/0631 $ 14.32 $ 0.045 $ 0.84 $ (0.04) $ - $ 15.16
9/30/05 12.48 0.075 1.85 (0.08) - 14.32
9/30/04 10.58 0.035 1.91 (0.04) - 12.48
9/30/0327 8.66 0.01 1.93 (0.02) - 10.58
9/30/0227 12.43 (0.07) (3.33) - (0.37) 8.66
9/30/0127 14.97 (0.03) (1.26) - (1.25) 12.43
Investor C Class
10/1/05 through 3/31/0631 $ 14.33 $ 0.055 $ 0.84 $ (0.05) $ - $ 15.17
9/30/05 12.48 0.075 1.86 (0.08) - 14.33
9/30/04 10.59 0.035 1.90 (0.04) - 12.48
9/30/0327 8.67 0.01 1.93 (0.02) - 10.59
9/30/0227 12.44 (0.07) (3.33) - (0.37) 8.67
9/30/0127 14.97 (0.03) (1.25) - (1.25) 12.44
-------------
Large Cap Growth Equity
-------------
Institutional Class
10/1/05 through 3/31/0631 $ 10.09 $ 0.025 $ 0.58 $ (0.09) $ - $ 10.60
9/30/05 8.92 0.075 1.10 - - 10.09
9/30/04 8.18 0.025 0.72 - - 8.92
9/30/0327 6.71 0.03 1.44 - - 8.18
9/30/0227 9.10 (0.01) (2.38) - - 6.71
9/30/0127 23.72 (0.02) (11.82) - (2.78) 9.10
Service Class
10/1/05 through 3/31/0631 $ 9.84 $ 0.015 $ 0.56 $ (0.03) $ - $ 10.38
9/30/05 8.72 0.055 1.07 - - 9.84
9/30/04 8.03 (0.01)5 0.70 - - 8.72
9/30/0327 6.60 (0.01) 1.44 - - 8.03
9/30/0227 8.99 (0.02) (2.37) - - 6.60
9/30/0127 23.52 (0.05) (11.70) - (2.78) 8.99
Investor A Class
10/1/05 through 3/31/0631 $ 9.68 $ -5,33 $ 0.56 $ (0.05) $ - $ 10.19
9/30/05 8.60 0.045 1.04 - - 9.68
9/30/04 7.92 (0.02)5 0.70 - - 8.60
9/30/0327 6.53 (0.02) 1.41 - - 7.92
9/30/0227 8.90 (0.05) (2.32) - - 6.53
9/30/0127 23.36 (0.09) (11.59) - (2.78) 8.90
Investor B Class
10/1/05 through 3/31/0631 $ 8.86 $ (0.03)5 $ 0.50 $ - $ - $ 9.33
9/30/05 7.92 (0.03)5 0.97 - - 8.86
9/30/04 7.35 (0.08)5 0.65 - - 7.92
9/30/0327 6.11 (0.07) 1.31 - - 7.35
9/30/0227 8.39 (0.12) (2.16) - - 6.11
9/30/0127 22.34 (0.19) (10.98) - (2.78) 8.39
Investor C Class
10/1/05 through 3/31/0631 $ 8.84 $ (0.03)5 $ 0.51 $ - $ - $ 9.32
9/30/05 7.91 (0.03)5 0.96 - - 8.84
9/30/04 7.34 (0.08)5 0.65 - - 7.91
9/30/0327 6.10 (0.07) 1.31 - - 7.34
9/30/0227 8.37 (0.13) (2.14) - - 6.10
9/30/0127 22.31 (0.19) (10.97) - (2.78) 8.37
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
136
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ----------------------------------- --------------- --------------
6.62%3,12,30 $ 157,010 1.17%2
16.273,12 154,337 1.18
19.193,12 54,311 1.19
23.323 63,733 1.26
(27.70)3 76,044 1.27
(8.64)3 57,672 1.27
6.18%4,12,30 $ 40,887 1.96%2
15.384,12 43,219 1.96
18.344,12 18,203 1.99
22.424 17,634 2.01
(28.32)4 17,312 2.01
(9.36)4 29,178 2.01
6.20%4,12,30 $ 10,510 1.92%2
15.464,12 10,543 1.93
18.274,12 6,805 1.99
22.404 5,141 2.01
(28.29)4 5,868 2.01
(9.29)4 9,738 2.01
6.00%12,30 $ 19,672 0.74%2
13.1212 21,841 0.82
9.0512 27,725 0.82
21.9112 36,686 0.82
(26.26) 100,521 0.82
(55.58) 557,928 0.82
5.79%12,30 $ 5,735 1.10%2
12.8412 5,972 1.12
8.5912 33,182 1.12
21.6712 43,625 1.12
(26.59) 130,932 1.12
(55.68) 158,367 1.12
5.81%3,12,30 $ 16,907 1.21%2
12.563,12 16,002 1.22
8.593,12 18,985 1.27
21.293,12 27,739 1.29
(26.63)3 34,513 1.29
(55.78)3 35,609 1.29
5.31%4,12,30 $ 9,277 1.99%2
11.874,12 10,008 1.97
7.764,12 12,693 2.03
20.304,12 14,358 2.04
(27.18)4 14,332 2.04
(56.08)4 25,986 2.04
5.43%4,12,30 $ 2,669 1.95%2
11.764,12 2,236 1.97
7.774,12 2,558 2.03
20.334,12 2,579 2.04
(27.12)4 2,424 2.04
(56.11)4 4,711 2.04
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------- --------------- ------------------- ----------
1.32%2 1.37%2 1.22%2 26%
1.35 1.25 1.08 93
1.36 1.05 0.88 75
1.38 0.83 0.71 150
1.32 0.22 0.17 128
1.27 0.53 0.52 114
2.02%2 0.58%2 0.52%2 26%
2.02 0.48 0.42 93
2.08 0.25 0.16 75
2.13 0.09 (0.03) 150
2.07 (0.51) (0.56) 128
2.02 (0.23) (0.24) 114
1.98%2 0.60%2 0.54%2 26%
1.99 0.51 0.45 93
2.05 0.26 0.20 75
2.13 0.09 (0.03) 150
2.06 (0.50) (0.55) 128
2.02 (0.24) (0.25) 114
1.04%2 0.48%2 0.18%2 40%
1.15 0.77 0.44 63
1.01 0.20 0.01 70
0.93 0.19 0.08 90
0.87 (0.05) (0.09) 130
0.83 (0.11) (0.12) 164
1.36%2 0.12%2 (0.14)%2 40%
1.40 0.55 0.27 63
1.30 (0.10) (0.27) 70
1.22 (0.11) (0.22) 90
1.17 (0.30) (0.34) 130
1.13 (0.41) (0.42) 164
1.50%2 0.01%2 (0.28)%2 40%
1.50 0.38 0.10 63
1.50 (0.26) (0.49) 70
1.40 (0.27) (0.38) 90
1.34 (0.48) (0.52) 130
1.30 (0.59) (0.60) 164
2.26%2 (0.77)%2 (1.04)%2 40%
2.15 (0.37) (0.55) 63
2.16 (1.01) (1.14) 70
2.15 (1.01) (1.12) 90
2.09 (1.23) (1.28) 130
2.05 (1.33) (1.34) 164
2.13%2 (0.72)%2 (0.90)%2 40%
2.15 (0.40) (0.58) 63
2.18 (1.01) (1.16) 70
2.15 (1.01) (1.12) 90
2.09 (1.23) (1.28) 130
2.05 (1.33) (1.34) 164
137
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS,
ASSET FOREIGN CURRENCY
VALUE NET AND OPTIONS
BEGINNING INVESTMENT (BOTH REALIZED
OF PERIOD INCOME (LOSS) AND UNREALIZED)
----------- ---------------- ------------------
---------
Dividend Achievers(TM)
---------
Institutional Class
10/1/05 through 3/31/0631 $ 10.75 $ 0.135 $ 0.50
9/30/05 9.96 0.225 0.71
9/08/041 through 9/30/04 10.00 0.015 (0.05)
Service Class
10/1/05 through 3/31/0631 $ 10.72 $ 0.115 $ 0.51
9/30/05 9.95 0.185 0.75
9/08/041 through 9/30/04 10.00 -5,33 (0.05)
Investor A Class
10/1/05 through 3/31/0631 $ 10.75 $ 0.105 $ 0.52
9/30/05 9.96 0.175 0.77
9/08/041 through 9/30/04 10.00 0.015 (0.05)
Investor B Class
10/1/05 through 3/31/0631 $ 10.74 $ 0.065 $ 0.51
9/30/05 9.96 0.095 0.79
9/08/041 through 9/30/04 10.00 0.015 (0.05)
Investor C Class
10/1/05 through 3/31/0631 $ 10.73 $ 0.065 $ 0.51
9/30/05 9.96 0.105 0.77
9/08/041 through 9/30/04 10.00 0.015 (0.05)
---
Legacy
---
Institutional Class
10/1/05 through 3/31/0631 $ 14.19 $ (0.01)5 $ 1.07
11/01/04 through 9/30/05 12.78 0.055 1.36
10/31/04 12.17 (0.04) 0.65
10/31/03 10.14 (0.02) 2.05
10/31/0227 11.74 -33 (1.60)
10/31/0127 16.61 (0.01) (4.86)
Service Class
10/1/05 through 3/31/0631 $ 13.81 $ (0.04)5 $ 1.05
1/28/051 through 9/30/05 12.96 (0.05)5 0.90
Investor A Class
10/1/05 through 3/31/0631 $ 13.82 $ (0.03)5 $ 1.03
11/01/04 through 9/30/05 12.47 0.025 1.33
10/31/04 11.91 (0.08) 0.64
10/31/03 9.96 (0.05) 2.00
10/31/0227 11.56 (0.03) (1.57)
10/31/0127 16.39 (0.05) (4.78)
Investor B Class
10/1/05 through 3/31/0631 $ 13.06 $ (0.08)5 $ 0.97
11/01/04 through 9/30/05 11.86 (0.06)5 1.26
10/31/04 11.41 (0.15) 0.60
10/31/03 9.61 (0.12) 1.92
10/31/0227 11.23 (0.11) (1.51)
10/31/0127 16.05 (0.15) (4.67)
Investor C Class
10/1/05 through 3/31/0631 $ 13.06 $ (0.08)5 $ 0.98
11/01/04 through 9/30/05 11.86 (0.06)5 1.26
10/31/04 11.41 (0.15) 0.60
10/31/03 9.61 (0.11) 1.91
10/31/0227 11.23 (0.11) (1.51)
10/31/0127 16.05 (0.15) (4.67)
DISTRIBUTIONS
FROM NET REDEMPTION NET
DISTRIBUTIONS REALIZED FEES ADDED ASSET VALUE
FROM NET INVESTMENT CAPITAL TO PAID-IN END OF
INCOME GAINS CAPITAL PERIOD
--------------------- -------------- ------------ ------------
---------
Dividend Achievers(TM)
---------
Institutional Class
10/1/05 through 3/31/0631 $ (0.12) $ (0.01) $ - $ 11.25
9/30/05 (0.14) (0.01) 0.01 10.75
9/08/041 through 9/30/04 - - - 9.96
Service Class
10/1/05 through 3/31/0631 $ (0.11) $ (0.01) $ - $ 11.22
9/30/05 (0.15) (0.01) 0.01 10.72
9/08/041 through 9/30/04 - - - 9.95
Investor A Class
10/1/05 through 3/31/0631 $ (0.10) $ (0.01) $ - $ 11.26
9/30/05 (0.14) (0.01) 0.01 10.75
9/08/041 through 9/30/04 - - - 9.96
Investor B Class
10/1/05 through 3/31/0631 $ (0.06) $ (0.01) $ - $ 11.24
9/30/05 (0.09) (0.01) 0.01 10.74
9/08/041 through 9/30/04 - - - 9.96
Investor C Class
10/1/05 through 3/31/0631 $ (0.06) $ (0.01) $ - $ 11.23
9/30/05 (0.09) (0.01) 0.01 10.73
9/08/041 through 9/30/04 - - - 9.96
---
Legacy
---
Institutional Class
10/1/05 through 3/31/0631 $ - $ - $ - $ 15.25
11/01/04 through 9/30/05 - - - 14.19
10/31/04 - - - 12.78
10/31/03 - - - 12.17
10/31/0227 - - - 10.14
10/31/0127 - - - 11.74
Service Class
10/1/05 through 3/31/0631 $ - $ - $ - $ 14.82
1/28/051 through 9/30/05 - - - 13.81
Investor A Class
10/1/05 through 3/31/0631 $ - $ - $ - $ 14.82
11/01/04 through 9/30/05 - - - 13.82
10/31/04 - - - 12.47
10/31/03 - - - 11.91
10/31/0227 - - - 9.96
10/31/0127 - - - 11.56
Investor B Class
10/1/05 through 3/31/0631 $ - $ - $ - $ 13.95
11/01/04 through 9/30/05 - - - 13.06
10/31/04 - - - 11.86
10/31/03 - - - 11.41
10/31/0227 - - - 9.61
10/31/0127 - - - 11.23
Investor C Class
10/1/05 through 3/31/0631 $ - $ - $ - $ 13.96
11/01/04 through 9/30/05 - - - 13.06
10/31/04 - - - 11.86
10/31/03 - - - 11.41
10/31/0227 - - - 9.61
10/31/0127 - - - 11.23
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
138
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ---------------------------------------------------- --------------- --------------
5.82%12,30 $ 1,550 0.90%2
9.8321 3,379 0.90
(0.40)30 1,992 0.902
5.68%12,30 $ 365 1.20%2
9.4321 376 1.20
(0.50)30 -26 1.202
5.71%3,12,30 $ 14,502 1.30%2
9.503,21 14,637 1.29
(0.40)3,30 -26 1.302
5.28%4,12,30 $ 4,585 2.04%2
8.874,21 3,523 2.03
(0.40)4,30 -26 2.052
5.26%4,12,30 $ 13,023 2.03%2
8.724,21 11,183 2.02
(0.40)4,30 -26 2.052
7.47%12,30 $ 50,787 1.01%2
11.0312,22,28,30 52,154 1.052
5.01 52,399 1.14
20.02 60,878 1.08
(13.63) 41,161 1.08
(29.32) 5,077 1.03
7.31%12,30 $ -26 1.33%2
6.5612,22,28,30 -26 1.582
7.24%3,12,30 $ 122,400 1.35%2
10.833,12,22,28,30 120,371 1.312
4.703 99,435 1.44
19.583 103,247 1.38
(13.84)3 76,798 1.38
(29.47)3 103,774 1.33
6.82%4,12,30 $ 82,114 2.10%2
10.124,12,23,29,30 85,465 2.052
3.944 97,938 2.14
18.734 108,125 2.08
(14.43)4 90,564 2.08
(29.99)4 129,464 2.03
6.89%4,12,30 $ 20,379 2.06%2
10.124,12,23,29,30 20,570 2.052
3.944 23,854 2.14
18.734 30,516 2.08
(14.43)4 31,274 2.08
(30.03)4 46,809 2.03
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------ --------------- ------------------- ----------
1.41%2 2.36%2 1.85%2 37%
1.86 2.03 1.07 68
1.682 1.412 0.632 9
1.61%2 2.01%2 1.60%2 37%
1.81 1.68 1.07 68
1.982 1.112 0.332 9
1.72%2 1.92%2 1.50%2 37%
1.93 1.64 1.00 68
2.082 1.012 0.232 9
2.36%2 1.16%2 0.84%2 37%
2.53 0.88 0.38 68
2.582 0.512 0.272 9
2.35%2 1.17%2 0.85%2 37%
2.55 0.91 0.38 68
2.582 0.512 0.272 9
1.12%2 (0.15)%2 (0.26)%2 42%
1.152 0.432 0.332 70
1.14 (0.31) (0.31) 91
1.08 (0.19) (0.19) 113
1.09 0.03 0.02 31
1.05 (0.09) (0.11) 22
15.74%2 (0.39)%2 (14.80)%2 42%
1.832 (0.55)2 ( 0.80)2 70
1.56%2 (0.48)%2 (0.69)%2 42%
1.482 0.212 0.042 70
1.44 (0.62) (0.62) 91
1.38 (0.47) (0.47) 113
1.39 (0.28) (0.29) 31
1.35 (0.39) (0.41) 22
2.22%2 (1.23)%2 (1.35)%2 42%
2.152 (0.53)2 (0.63)2 70
2.14 (1.31) (1.31) 91
2.08 (1.17) (1.17) 113
2.09 (0.98) (0.99) 31
2.05 (1.09) (1.11) 22
2.17%2 (1.19)%2 (1.30)%2 42%
2.152 (0.51)2 (0.61)2 70
2.14 (1.30) (1.30) 91
2.08 (1.15) (1.15) 113
2.09 (0.99) (1.00) 31
2.05 (1.08) (1.10) 22
139
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS, DISTRIBUTIONS
ASSET FOREIGN CURRENCY FROM NET NET
VALUE NET AND OPTIONS DISTRIBUTIONS REALIZED ASSET VALUE
BEGINNING INVESTMENT (BOTH REALIZED FROM NET INVESTMENT CAPITAL END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME GAINS PERIOD
----------- ---------------- ------------------ --------------------- -------------- ------------
------------
Mid-Cap Value Equity*
------------
Institutional Class
10/1/05 through 3/31/0631 $ 13.74 $ 0.065 $ 0.97 $ (0.04) $ (1.38) $ 13.35
3/01/05 through 9/30/05 12.73 0.045 0.97 - - 13.74
7/01/04 through 2/28/05 12.14 0.11 1.44 (0.15) (0.81) 12.73
6/30/04 9.07 0.08 3.08 (0.09) - 12.14
6/30/03 10.66 0.08 (1.21) - (0.46) 9.07
6/30/0227 11.85 0.04 0.30 - (1.53) 10.66
6/30/0127 8.74 0.10 3.59 (0.15) (0.43) 11.85
Service Class
10/1/05 through 3/31/0631 $ 13.61 $ 0.045 $ 0.96 $ (0.03) $ (1.38) $ 13.20
3/01/05 through 9/30/05 12.63 0.025 0.96 - - 13.61
1/28/051 through 2/28/05 12.04 (0.01) 0.60 - - 12.63
Investor A Class
10/1/05 through 3/31/0631 $ 13.49 $ 0.045 $ 0.95 $ (0.02) $ (1.38) $ 13.08
3/01/05 through 9/30/05 12.53 0.025 0.94 - - 13.49
7/01/04 through 2/28/05 11.92 0.07 1.45 (0.11) (0.80) 12.53
6/30/04 8.91 0.05 3.02 (0.06) - 11.92
6/30/03 10.53 0.06 (1.22) - (0.46) 8.91
6/30/0227 11.73 0.02 0.29 - (1.51) 10.53
6/30/0127 8.66 0.06 3.56 (0.13) (0.42) 11.73
Investor B Class
10/1/05 through 3/31/0631 $ 12.73 $ (0.01)5 $ 0.90 $ - $ (1.38) $ 12.24
3/01/05 through 9/30/05 11.87 (0.04)5 0.90 - - 12.73
7/01/04 through 2/28/05 11.28 (0.03) 1.41 (0.01) (0.78) 11.87
6/30/04 8.45 (0.02) 2.85 - - 11.28
6/30/03 10.05 (0.01) (1.15) - (0.44) 8.45
6/30/0227 11.30 (0.06) 0.28 - (1.47) 10.05
6/30/0127 8.36 (0.02) 3.45 (0.08) (0.41) 11.30
Investor C Class
10/1/05 through 3/31/0631 $ 12.73 $ (0.01)5 $ 0.90 $ - $ (1.38) $ 12.24
3/01/05 through 9/30/05 11.87 (0.04)5 0.90 - - 12.73
7/01/04 through 2/28/05 11.28 (0.03) 1.40 (0.01) (0.77) 11.87
6/30/04 8.45 (0.02) 2.85 - - 11.28
6/30/03 10.04 (0.01) (1.14) - (0.44) 8.45
6/30/0227 11.28 (0.05) 0.28 - (1.47) 10.04
6/30/0127 8.35 (0.01) 3.42 (0.07) (0.41) 11.28
------------
Mid-Cap Growth Equity
------------
Institutional Class
10/1/05 through 3/31/0631 $ 10.44 $ (0.04)5 $ 1.20 $ - $ (0.13) $ 11.47
9/30/05 8.76 (0.07)5 1.75 - - 10.44
9/30/04 7.57 (0.06)5 1.25 - - 8.76
9/30/0327 6.06 (0.05) 1.56 - - 7.57
9/30/0227 7.49 (0.06)5 (1.37) - - 6.06
9/30/0127 26.58 0.01 (11.62) - (7.48) 7.49
Service Class
10/1/05 through 3/31/0631 $ 10.07 $ (0.06)5 $ 1.15 $ - $ (0.13) $ 11.03
9/30/05 8.46 (0.07)5 1.68 - - 10.07
9/30/04 7.33 (0.08)5 1.21 - - 8.46
9/30/0327 5.89 (0.07) 1.51 - - 7.33
9/30/0227 7.31 (0.11) (1.31) - - 5.89
9/30/0127 26.19 (0.03) (11.37) - (7.48) 7.31
*The performance prior to January 31, 2005 set forth in this table is the financial
data of the State Street Research Mid-Cap Value Fund,
a
series of a predecessor trust, the State Street Research Equity Trust. BlackRock
Funds acquired all of the assets and certain stated liabilities
of
the State Street Research Mid-Cap Value Equity Fund on January 28, 2005. The net
asset values and other per share information listed
have
been restated to reflect the conversion ratios of 1.56483770, 1.57950264, 1.62345461
and 1.63087248 for Institutional, Class A, Class B
and
Class C shares, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
140
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ----------------------------------- --------------- --------------
8.18%12,30 $ 75,555 0.99%2
7.9412,30 53,111 1.002
13.0730 50,383 0.992
34.83 30,181 0.98
(10.21) 26,099 0.99
3.20 35,116 0.95
43.89 34,577 0.95
8.08%12,30 $ 2,896 1.25%2
7.7612,30 889 1.252
4.8930 1,374 1.252
8.08%3,12,30 $ 485,915 1.25%2
7.663,12,30 500,479 1.252
12.983,30 448,237 1.242
34.513 363,188 1.28
(10.61)3 194,034 1.29
2.963 242,113 1.25
43.493 107,448 1.25
7.70%4,12,30 $ 133,157 2.00%2
7.254,12,30 131,651 2.002
12.394,30 128,568 1.992
33.534 109,815 1.98
(11.13)4 79,536 1.99
2.204 91,416 1.95
42.514 25,957 1.95
7.70%4,12,30 $ 125,905 2.00%2
7.254,12,30 103,344 2.002
12.404,30 91,657 1.992
33.534 82,758 1.98
(11.09)4 58,499 1.99
2.254 62,505 1.95
42.484 14,062 1.95
11.21%12,30 $ 83,686 1.13%2
19.1812 75,407 1.23
15.7212 40,337 1.23
24.9212 46,970 1.21
(19.09) 77,693 1.14
(56.71) 301,779 1.13
10.93%12,30 $ 879 1.53%2
19.0312 1,136 1.53
15.4212 10,871 1.53
24.4512 14,115 1.51
(19.43) 24,082 1.45
(56.78) 37,691 1.44
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------- --------------- ------------------- ----------
1.16%2 0.88%2 0.71%2 63%
1.302 0.492 0.192 60
1.092 1.182 1.082 53
1.03 0.76 0.71 86
1.18 0.93 0.75 66
1.15 0.42 0.23 69
1.25 0.90 0.62 116
1.50%2 0.61%2 0.36%2 63%
1.542 0.202 (0.09)2 60
1.492 0.392 0.142 53
1.59%2 0.60%2 0.26%2 63%
1.642 0.242 (0.15)2 60
1.382 0.922 0.782 53
1.33 0.47 0.42 86
1.48 0.65 0.47 66
1.41 0.16 0.01 69
1.55 0.59 0.31 116
2.25%2 (0.15)%2 (0.40)%2 63%
2.292 (0.52)2 (0.81)2 60
2.092 0.202 0.102 53
2.03 (0.24) (0.29) 86
2.18 (0.05) (0.23) 66
2.10 (0.52) (0.66) 69
2.25 (0.18) (0.46) 116
2.20%2 (0.13)%2 (0.33)%2 63%
2.292 (0.50)2 (0.79)2 60
2.092 0.192 0.092 53
2.03 (0.24) (0.29) 86
2.19 (0.04) (0.23) 66
2.09 (0.51) (0.64) 69
2.25 (0.09) (0.37) 116
1.28%2 (0.68)%2 (0.83)%2 35%
1.41 (0.72) (0.90) 85
1.28 (0.65) (0.69) 29
1.23 (0.52) (0.54) 168
1.14 (0.76) (0.76) 279
1.13 0.06 0.06 584
1.83%2 (1.09)%2 (1.39)%2 35%
1.60 (0.77) (0.84) 85
1.56 (0.97) (0.99) 29
1.53 (0.80) (0.83) 168
1.45 (1.07) (1.07) 279
1.44 (0.28) (0.28) 584
141
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS, DISTRIBUTIONS
ASSET FOREIGN CURRENCY FROM NET NET
VALUE NET AND OPTIONS DISTRIBUTIONS REALIZED ASSET VALUE
BEGINNING INVESTMENT (BOTH REALIZED FROM NET INVESTMENT CAPITAL END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME GAINS PERIOD
----------- --------------- ------------------ --------------------- -------------- ------------
-------------------
Mid-Cap Growth Equity (Continued)
-------------------
Investor A Class
10/1/05 through 3/31/0631 $ 9.82 $ (0.06)5 $ 1.12 $ - $ (0.13) $ 10.75
9/30/05 8.26 (0.11)5 1.67 - - 9.82
9/30/04 7.17 (0.09)5 1.18 - - 8.26
9/30/0327 5.77 (0.07) 1.47 - - 7.17
9/30/0227 7.17 (0.11) (1.29) - - 5.77
9/30/0127 25.92 (0.04) (11.23) - (7.48) 7.17
Investor B Class
10/1/05 through 3/31/0631 $ 9.00 $ (0.09)5 $ 1.03 $ - $ (0.13) $ 9.81
9/30/05 7.63 (0.15)5 1.52 - - 9.00
9/30/04 6.67 (0.14)5 1.10 - - 7.63
9/30/0327 5.41 (0.11) 1.37 - - 6.67
9/30/0227 6.77 (0.16) (1.20) - - 5.41
9/30/0127 25.12 (0.12) (10.75) - (7.48) 6.77
Investor C Class
10/1/05 through 3/31/0631 $ 9.00 $ (0.09)5 $ 1.03 $ - $ (0.13) $ 9.81
9/30/05 7.63 (0.15)5 1.52 - - 9.00
9/30/04 6.67 (0.14)5 1.10 - - 7.63
9/30/0327 5.41 (0.11) 1.37 - - 6.67
9/30/0227 6.77 (0.18) (1.18) - - 5.41
9/30/0127 25.10 (0.13) (10.72) - (7.48) 6.77
---
Aurora
---
Institutional Class
10/1/05 through 3/31/0631 $ 43.43 $ 0.045 $ 2.59 $ - $ (7.49) $ 38.57
9/30/05 40.71 (0.04)5 6.60 - (3.84) 43.43
9/30/04 33.18 (0.11) 7.66 - (0.02) 40.71
9/30/03 25.05 (0.11) 8.39 - (0.15) 33.18
9/30/0227 27.06 (0.14) (1.87) - - 25.05
9/30/0127 29.66 0.13 (0.39) (0.03) (2.31) 27.06
Service Class
10/1/05 through 3/31/0631 $ 41.88 $ (0.01)5 $ 2.45 $ - $ (7.49) $ 36.83
1/28/051 through 9/30/05 38.18 (0.06)5 3.76 - - 41.88
Investor A Class
10/1/05 through 3/31/0631 $ 41.88 $ (0.02)5 $ 2.46 $ - $ (7.49) $ 36.83
9/30/05 39.49 (0.16)5 6.39 - (3.84) 41.88
9/30/04 32.28 (0.22) 7.45 - (0.02) 39.49
9/30/03 24.43 (0.19) 8.19 - (0.15) 32.28
9/30/0227 26.51 (0.23) (1.85) - - 24.43
9/30/0127 29.17 0.02 (0.37) - (2.31) 26.51
Investor B Class
10/1/05 through 3/31/0631 $ 38.32 $ (0.14)5 $ 2.19 $ - $ (7.49) $ 32.88
9/30/05 36.67 (0.40)5 5.89 - (3.84) 38.32
9/30/04 30.19 (0.45) 6.95 - (0.02) 36.67
9/30/03 23.02 (0.36) 7.68 - (0.15) 30.19
9/30/0227 25.16 (0.42) (1.72) - - 23.02
9/30/0127 27.99 (0.18) (0.34) - (2.31) 25.16
Investor C Class
10/1/05 through 3/31/0631 $ 38.32 $ (0.14)5 $ 2.19 $ - $ (7.49) $ 32.88
9/30/05 36.67 (0.42)5 5.91 - (3.84) 38.32
9/30/04 30.18 (0.45) 6.96 - (0.02) 36.67
9/30/03 23.01 (0.35) 7.67 - (0.15) 30.18
9/30/0227 25.16 (0.42) (1.73) - - 23.01
9/30/0127 27.99 (0.18) (0.34) - (2.31) 25.16
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
142
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ---------------------------------- --------------- --------------
10.90%3,12,30 $ 298,882 1.57%2
18.893,12 290,285 1.58
15.203,12 27,777 1.67
24.263,12 25,960 1.68
(19.53)3 26,242 1.62
(56.91)3 38,225 1.60
10.56%4,12,30 $ 58,839 2.33%2
17.964,12 59,100 2.33
14.394,12 31,900 2.44
23.294,12 33,982 2.43
(20.09)4 33,822 2.37
(57.24)4 51,186 2.35
10.56%4,12,30 $ 21,228 2.31%2
17.964,12 20,748 2.33
14.394,12 11,269 2.44
23.294,12 12,212 2.43
(20.09)4 12,092 2.37
(57.19)4 21,144 2.35
7.32%12,30 $ 167,311 1.12%2
16.6212 165,837 1.14
22.75 197,475 1.10
33.21 142,460 1.25
(7.43) 92,789 1.17
(0.64) 76,711 1.13
7.15%12,30 $ -26 1.44%2
9.6912,30 -26 0.782
7.14%3,12,30 $ 1,494,820 1.44%2
16.283,12 1,690,497 1.40
22.393 2,169,836 1.40
32.903 1,682,504 1.55
(7.85)3 1,449,869 1.47
(0.98)3 1,334,548 1.43
6.73%4,12,30 $ 403,805 2.19%2
15.444,12 436,642 2.14
21.534 470,430 2.10
31.964 401,016 2.25
(8.51)4 340,529 2.17
(1.67)4 299,062 2.13
6.74%4,12,30 $ 358,150 2.19%2
15.454,12 405,952 2.14
21.574 493,980 2.10
31.974 409,076 2.25
(8.55)4 402,010 2.17
(1.67)4 378,733 2.13
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------- --------------- ------------------- ----------
1.75%2 (1.12)%2 (1.30)%2 35%
1.78 (1.14) (1.34) 85
1.77 (1.09) (1.19) 29
1.71 (0.96) (0.98) 168
1.62 (1.24) (1.24) 279
1.60 (0.38) (0.38) 584
2.47%2 (1.89)%2 (2.03)%2 35%
2.41 (1.82) (1.90) 85
2.45 (1.86) (1.87) 29
2.45 (1.69) (1.71) 168
2.37 (1.98) (1.98) 279
2.35 (1.12) (1.12) 584
2.39%2 (1.86)%2 (1.94)%2 35%
2.41 (1.83) (1.91) 85
2.45 (1.86) (1.87) 29
2.45 (1.69) (1.71) 168
2.37 (1.98) (1.98) 279
2.35 (1.10) (1.10) 584
1.14%2 0.21%2 0.19%2 72%
1.14 (0.09) (0.09) 73
1.10 (0.27) (0.27) 33
1.25 (0.38) (0.38) 48
1.18 (0.43) (0.44) 42
1.14 0.36 0.35 26
17.28%2 (0.05)%2 (15.89)%2 72%
0.812 0.322 0.292 73
1.55%2 (0.11)%2 (0.22)%2 72%
1.47 (0.36) (0.43) 73
1.40 (0.57) (0.57) 33
1.55 (0.69) (0.69) 48
1.48 (0.73) (0.74) 42
1.44 0.08 0.07 26
2.22%2 (0.86)%2 (0.89)%2 72%
2.15 (1.10) (1.11) 73
2.10 (1.27) (1.27) 33
2.25 (1.39) (1.39) 48
2.18 (1.43) (1.44) 42
2.14 (0.63) (0.64) 26
2.21%2 (0.86)%2 (0.88)%2 72%
2.15 (1.10) (1.11) 73
2.10 (1.27) (1.27) 33
2.25 (1.39) (1.39) 48
2.18 (1.43) (1.44) 42
2.14 (0.62) (0.63) 26
143
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS, DISTRIBUTIONS
ASSET FOREIGN CURRENCY DISTRIBUTIONS FROM NET NET
VALUE NET AND OPTIONS FROM NET REALIZED ASSET VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT CAPITAL END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME GAINS PERIOD
----------- --------------- ------------------ --------------- -------------- ------------
------------
Small/Mid-Cap Growth
------------
Institutional Class
10/1/05 through 3/31/0631 $ 15.16 $ (0.05)5 $ 2.06 $ - $ (0.64) $ 16.53
9/30/05 12.49 (0.17)5 2.84 - - 15.16
9/30/04 12.11 (0.10) 0.48 - - 12.49
9/30/03 9.06 (0.08) 3.13 - - 12.11
9/30/0227 9.62 (0.06) (0.50) - - 9.06
9/30/0127 16.48 (0.04) 4.54 - (2.28) 9.62
Service Class
10/1/05 through 3/31/0631 $ 14.47 $ (0.06)5 $ 1.96 $ - $ (0.64) $ 15.73
1/28/051 through 9/30/05 12.81 (0.06)5 1.72 - - 14.47
Investor A Class
10/1/05 through 3/31/0631 $ 14.48 $ (0.07)5 $ 1.96 $ - $ (0.64) $ 15.73
9/30/05 11.96 (0.13)5 2.65 - - 14.48
9/30/04 11.63 (0.14) 0.47 - - 11.96
9/30/03 8.73 (0.11) 3.01 - - 11.63
9/30/0227 9.27 (0.09) (0.45) - - 8.73
9/30/0127 16.08 (0.08) (4.45) - (2.28) 9.27
Investor B Class
10/1/05 through 3/31/0631 $ 13.03 $ (0.11)5 $ 1.76 $ - $ (0.64) $ 14.04
9/30/05 10.84 (0.19)5 2.38 - - 13.03
9/30/04 10.62 (0.21) 0.43 - - 10.84
9/30/03 8.03 (0.16) 2.75 - - 10.62
9/30/0227 8.60 (0.15) (0.42) - - 8.03
9/30/0127 15.17 (0.15) (4.14) - (2.28) 8.60
Investor C Class
10/1/05 through 3/31/0631 $ 13.06 $ (0.12)5 $ 1.77 $ - $ (0.64) $ 14.07
9/30/05 10.87 (0.20)5 2.39 - - 13.06
9/30/04 10.64 (0.21) 0.44 - - 10.87
9/30/03 8.05 (0.16) 2.75 - - 10.64
9/30/0227 8.61 (0.15) (0.41) - - 8.05
9/30/0127 15.17 (0.15) (4.13) - (2.28) 8.61
------------
Small Cap Value Equity
------------
BlackRock
10/1/05 through 3/31/0631 $ 15.16 $ -5,33 $ 1.35 $ (0.17) $ (2.74) $ 13.60
9/30/05 15.23 0.025 2.90 - (2.99) 15.16
4/12/041 through 9/30/04 16.02 -5,33 (0.79) - - 15.23
Institutional Class
10/1/05 through 3/31/0631 $ 15.17 $ 0.025 $ 1.34 $ (0.18) $ (2.74) $ 13.61
9/30/05 15.22 0.045 2.90 - (2.99) 15.17
9/30/04 14.17 (0.02)5 2.86 - (1.79) 15.22
9/30/0327 12.81 0.01 3.31 - (1.96) 14.17
9/30/0227 16.18 -33 (1.02) (0.02) (2.33) 12.81
9/30/0127 17.12 0.16 (0.11) (0.15) (0.84) 16.18
Service Class
10/1/05 through 3/31/0631 $ 14.95 $ (0.01)5 $ 1.32 $ (0.17) $ (2.74) $ 13.35
9/30/05 15.07 -5,33 2.87 - (2.99) 14.95
9/30/04 14.09 (0.07)5 2.84 - (1.79) 15.07
9/30/0327 12.77 (0.03) 3.31 - (1.96) 14.09
9/30/0227 16.18 (0.04) (1.04) - (2.33) 12.77
9/30/0127 17.10 0.10 (0.08) (0.10) (0.84) 16.18
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
144
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ----------------------------------- --------------- --------------
13.64%12,30 $ 23,925 1.04%2
21.3812 20,133 1.10
3.14 87,520 1.09
33.66 7,809 1.10
(5.82) 6,054 1.10
29.73 5,810 1.10
13.53%12,30 $ -26 1.34%2
12.9612,30 -26 1.412
13.45%3,12,30 $ 235,169 1.35%2
21.073,12 215,622 1.37*
2.843 268,065 1.39
33.223 117,571 1.40
(5.93)3 41,474 1.40
(30.22)3 39,522 1.40
13.09%4,12,30 $ 27,338 2.10%2
20.204,12 24,925 2.10
2.174 24,880 2.09
32.254 19,797 2.10
(6.63)4 13,288 2.10
(30.48)4 12,749 2.10
13.06%4,12,30 $ 20,507 2.10%2
20.154,12 20,963 2.10
2.164 29,627 2.09
32.174 13,530 2.10
(6.50)4 5,794 2.10
(30.40)4 5,332 2.10
10.75%12,30 $ 5,348 1.06%2
20.6012 5,162 1.07
(4.93)12,30 4,787 1.102
10.78%12,30 $ 66,002 0.89%2
20.7712 68,880 0.97
20.8712 66,083 0.95
29.9612 69,641 0.91
(8.25) 122,732 0.88
0.47 367,167 0.87
10.61%12,30 $ 3,907 1.23%2
20.4612 3,405 1.24
20.4512 3,288 1.25
29.7012 4,139 1.21
(8.64) 7,242 1.18
0.28 47,095 1.17
*For the period October 1, 2004 through January 28, 2005, the
expense ratio reflects the expenses of the State Street Research
Emerging
Growth Fund prior to its reorganization with the Small/Mid-Cap
Growth Portfolio on January 28, 2005. The expense ratio for the
period
October 1, 2004 through January 28, 2005 was 1.41%. The expense
ratio of the Portfolio for the period January 29, 2005 through
September
30, 2005 was 1.35%.
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------- --------------- ------------------- ----------
1.18%2 (0.69)%2 (0.83)%2 31%
1.28 (0.72) (0.90) 122
1.28 (0.80) (0.99) 208
1.55 (0.78) (1.23) 167
1.69 (0.60) (1.19) 168
1.77 (0.39) (1.06) 282
17.49%2 (0.85)%2 (17.00)%2 31%
1.482 (0.70)2 (0.77)2 122
1.65%2 (0.99)%2 (1.29)%2 31%
1.64 (0.87) (1.14) 122
1.56 (1.09) (1.26) 208
1.78 (1.10) (1.48) 167
1.98 (0.90) (1.48) 168
2.07 (0.69) (1.36) 282
2.34%2 (1.74)%2 (1.98)%2 31%
2.30 (1.58) (1.78) 122
2.25 (1.79) (1.95) 208
2.54 (1.78) (2.22) 167
2.68 (1.60) (2.18) 168
2.77 (1.39) (2.06) 282
2.27%2 (1.75)%2 (1.92)%2 31%
2.32 (1.60) (1.82) 122
2.26 (1.79) (1.96) 208
2.51 (1.79) (2.20) 167
2.68 (1.60) (2.18) 168
2.77 (1.39) (2.06) 282
1.10%2 0.06%2 0.02%2 59%
1.08 0.16 0.15 133
1.332 (0.17)2 (0.40)2 154
0.93%2 0.23%2 0.19%2 59%
1.00 0.26 0.23 133
0.98 (0.15) (0.18) 154
0.94 0.09 0.06 240
0.89 - (0.01) 260
0.87 0.87 0.87 184
1.25%2 (0.12)%2 (0.14)%2 59%
1.25 (0.03) (0.04) 133
1.29 (0.45) (0.48) 154
1.24 (0.19) (0.22) 240
1.19 (0.24) (0.25) 260
1.17 0.56 0.56 184
*For the period October 1, 2004 through January 28, 2005, the expense ratio reflects the expenses of
the State Street Research Emerging
Growth Fund prior to its reorganization with the Small/Mid-Cap Growth Portfolio on January 28, 2005.
The expense ratio for the period
October 1, 2004 through January 28, 2005 was 1.41%. The expense ratio of the Portfolio for the period
January 29, 2005 through September
30, 2005 was 1.35%.
145
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS,
ASSET FOREIGN CURRENCY
VALUE NET AND OPTIONS
BEGINNING INVESTMENT (BOTH REALIZED
OF PERIOD INCOME (LOSS) AND UNREALIZED)
----------- --------------- ------------------
------------------
Small Cap Value Equity (Continued)
------------------
Investor A Class
10/1/05 through 3/31/0631 $ 14.86 $ (0.01)5 $ 1.32
9/30/05 15.00 -5 2.85
9/30/04 14.04 (0.09)5 2.84
9/30/0327 12.76 (0.05) 3.29
9/30/0227 16.18 (0.10) (0.99)
9/30/0127 17.10 0.06 (0.07)
Investor B Class
10/1/05 through 3/31/0631 $ 13.28 $ (0.05)5 $ 1.13
9/30/05 13.77 (0.10)5 2.60
9/30/04 13.11 (0.19)5 2.64
9/30/0327 12.11 (0.13) 3.09
9/30/0227 15.58 (0.20) (0.94)
9/30/0127 16.56 (0.06) (0.07)
Investor C Class
10/1/05 through 3/31/0631 $ 13.28 $ (0.05)5 $ 1.14
9/30/05 13.78 (0.10)5 2.59
9/30/04 13.11 (0.19)5 2.65
9/30/0327 12.12 (0.14) 3.09
9/30/0227 15.59 (0.20) (0.94)
9/30/0127 16.57 (0.05) (0.08)
------------
Small Cap Core Equity
------------
Institutional Class
10/1/05 through 3/31/0631 $ 17.62 $ (0.05)5 $ 2.00
9/30/05 14.77 (0.10)5 3.06
9/30/04 11.99 (0.13)5 3.01
9/30/0327 8.35 (0.06) 3.70
1/02/021,27 through 9/30/02 10.00 (0.04) (1.61)
Service Class
10/1/05 through 3/31/0631 $ 17.59 $ (0.07)5 $ 1.98
9/30/05 14.73 (0.13)5 3.10
9/30/04 11.99 (0.20)5 3.04
9/30/0327 8.35 - 3.64
1/02/021,27 through 9/30/02 10.00 - (1.65)
Investor A Class
10/1/05 through 3/31/0631 $ 17.49 $ (0.09)5 $ 1.98
9/30/05 14.71 (0.17)5 3.06
9/30/04 11.99 (0.24)5 3.04
9/30/0327 8.35 - 3.64
1/02/021,27 through 9/30/02 10.00 - (1.65)
Investor B Class
10/1/05 through 3/31/0631 $ 17.24 $ (0.15)5 $ 1.94
9/30/05 14.61 (0.28)5 3.02
9/30/04 11.99 (0.37)5 3.07
9/30/0327 8.35 - 3.64
1/02/021,27 through 9/30/02 10.00 - (1.65)
Investor C Class
10/1/05 through 3/31/0631 $ 17.23 $ (0.15)5 $ 1.95
9/30/05 14.60 (0.28)5 3.02
9/30/04 11.99 (0.28)5 2.99
9/30/0327 8.35 - 3.64
1/02/021,27 through 9/30/02 10.00 - (1.65)
DISTRIBUTIONS
DISTRIBUTIONS FROM NET REDEMPTION NET
FROM NET REALIZED FEES ADDED ASSET VALUE
INVESTMENT CAPITAL TO PAID-IN END OF
INCOME GAINS CAPITAL PERIOD
--------------- -------------- ------------ ------------
------------------
Small Cap Value Equity
(Continued)
------------------
Investor A Class
10/1/05 through 3/31/0631 $ (0.17) $ (2.74) $ - $ 13.26
9/30/05 - (2.99) - 14.86
9/30/04 - (1.79) - 15.00
9/30/0327 - (1.96) - 14.04
9/30/0227 - (2.33) - 12.76
9/30/0127 (0.07) (0.84) - 16.18
Investor B Class
10/1/05 through 3/31/0631 $ (0.15) $ (2.74) $ - $ 11.47
9/30/05 - (2.99) - 13.28
9/30/04 - (1.79) - 13.77
9/30/0327 - (1.96) - 13.11
9/30/0227 - (2.33) - 12.11
9/30/0127 (0.01) (0.84) - 15.58
Investor C Class
10/1/05 through 3/31/0631 $ (0.15) $ (2.74) $ - $ 11.48
9/30/05 - (2.99) - 13.28
9/30/04 - (1.79) - 13.78
9/30/0327 - (1.96) - 13.11
9/30/0227 - (2.33) - 12.12
9/30/0127 (0.01) (0.84) - 15.59
------------
Small Cap Core Equity
------------
Institutional Class
10/1/05 through 3/31/0631 $ - $ (0.30) $ - $ 19.27
9/30/05 - (0.11) - 17.62
9/30/04 - (0.15) 0.05 14.77
9/30/0327 - - - 11.99
1/02/021,27 through 9/30/02 - - - 8.35
Service Class
10/1/05 through 3/31/0631 $ - $ (0.30) $ - $ 19.20
9/30/05 - (0.11) - 17.59
9/30/04 - (0.15) 0.05 14.73
9/30/0327 - - - 11.99
1/02/021,27 through 9/30/02 - - - 8.35
Investor A Class
10/1/05 through 3/31/0631 $ - $ (0.30) $ - $ 19.08
9/30/05 - (0.11) - 17.49
9/30/04 - (0.15) 0.07 14.71
9/30/0327 - - - 11.99
1/02/021,27 through 9/30/02 - - - 8.35
Investor B Class
10/1/05 through 3/31/0631 $ - $ (0.30) $ - $ 18.73
9/30/05 - (0.11) - 17.24
9/30/04 - (0.15) 0.07 14.61
9/30/0327 - - - 11.99
1/02/021,27 through 9/30/02 - - - 8.35
Investor C Class
10/1/05 through 3/31/0631 $ - $ (0.30) $ - $ 18.73
9/30/05 - (0.11) - 17.23
9/30/04 - (0.15) 0.05 14.60
9/30/0327 - - - 11.99
1/02/021,27 through 9/30/02 - - - 8.35
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
146
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ---------------------------------- --------------- --------------
10.65%3,12,30 $ 29,880 1.23%2
20.433,12 31,889 1.24
20.383,12 35,240 1.35
29.373,12 38,052 1.38
(8.71)3 43,884 1.35
0.093 28,195 1.34
10.09%4,12,30 $ 10,331 2.06%2
19.584,12 12,848 2.00
19.454,12 15,952 2.07
28.524,12 15,019 2.13
(9.46)4 14,402 2.10
(0.66)4 16,599 2.09
10.19%4,12,30 $ 5,911 2.01%2
19.494,12 6,414 2.00
19.534,12 6,715 2.09
28.424,12 5,839 2.13
(9.45)4 6,113 2.10
(0.65)4 7,051 2.09
11.26%12,30 $ 23,599 1.30%2
20.1012 12,641 1.30
24.5124 1,802 1.30
43.59 1,238 1.30
(16.50)30 835 1.302
11.04%12,30 $ 2,082 1.58%2
20.2212 94 1.60
24.1724 -26 1.60
43.59 -26 1.60
(16.50)30 -26 1.602
10.99%3,12,30 $ 20,181 1.69%2
19.713,12 11,997 1.71
24.013,25 3,154 1.74
43.593 7 1.77
(16.50)3,30 -26 1.772
10.57%4,12,30 $ 9,342 2.45%2
18.814,12 6,303 2.44
23.174,25 1,157 2.49
43.594 -26 2.52
(16.50)4,30 -26 2.522
10.63%4,12,30 $ 26,594 2.42%2
18.824,12 17,266 2.44
23.084,24 3,352 2.47
43.594 -26 2.52
(16.50)4,30 -26 2.522
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------- --------------- ------------------- ----------
1.35%2 (0.11)%2 (0.23)%2 59%
1.35 (0.01) (0.12) 133
1.47 (0.55) (0.67) 154
1.41 (0.37) (0.40) 240
1.37 (0.62) (0.64) 260
1.34 0.38 0.38 184
2.08%2 (0.94)%2 (0.96)%2 59%
2.00 (0.76) (0.76) 133
2.09 (1.28) (1.30) 154
2.16 (1.12) (1.15) 240
2.12 (1.32) (1.34) 260
2.09 (0.37) (0.37) 184
2.03%2 (0.89)%2 (0.91)%2 59%
2.00 (0.76) (0.76) 133
2.11 (1.30) (1.32) 154
2.16 (1.13) (1.15) 240
2.12 (1.32) (1.33) 260
2.09 (0.37) (0.37) 184
1.48%2 (0.59)%2 (0.77)%2 56%
1.81 (0.59) (1.10) 118
2.37 (0.89) (1.96) 78
2.96 (0.62) (2.28) 218
2.532 (0.60)2 (1.83)2 233
1.64%2 (0.82)%2 (0.88)%2 56%
2.01 (0.80) (1.21) 118
2.67 (1.19) 2.26 78
3.26 (0.92) (2.58) 218
2.832 (0.90)2 (2.13)2 233
1.86%2 (0.98)%2 (1.15)%2 56%
2.17 (1.01) (1.47) 118
2.89 (1.32) (2.48) 78
3.43 (1.09) (2.75) 218
3.002 (1.07)2 (2.30)2 233
2.52%2 (1.74)%2 (1.81)%2 56%
2.81 (1.74) (2.11) 118
3.56 (2.07) (3.15) 78
4.18 (1.84) (3.50) 218
3.752 (1.82)2 (3.05)2 233
2.49%2 (1.71)%2 (1.78)%2 56%
2.80 (1.74) (2.10) 118
3.56 (2.03) (3.11) 78
4.18 (1.84) (3.50) 218
3.752 (1.82)2 (3.05)2 233
147
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS,
ASSET FOREIGN CURRENCY
VALUE NET AND OPTIONS
BEGINNING INVESTMENT (BOTH REALIZED
OF PERIOD INCOME (LOSS) AND UNREALIZED)
----------- --------------- ------------------
-------------
Small Cap Growth Equity
-------------
Institutional Class
10/1/05 through 3/31/0631 $ 17.29 $ (0.05)5 $ 2.45
9/30/05 14.52 (0.06)5 2.82
9/30/04 12.26 (0.11)5 2.37
9/30/0327 9.00 (0.09) 3.35
9/30/0227 11.74 (0.17) (2.57)
9/30/0127 35.76 0.09 (15.38)
Service Class
10/1/05 through 3/31/0631 $ 16.54 $ (0.07)5 $ 2.34
9/30/05 13.92 (0.11)5 2.72
9/30/04 11.79 (0.15)5 2.28
9/30/0327 8.67 (0.12) 3.24
9/30/0227 11.36 (0.19) (2.50)
9/30/0127 34.91 0.03 (14.89)
Investor A Class
10/1/05 through 3/31/0631 $ 16.12 $ (0.07)5 $ 2.28
9/30/05 13.57 (0.10)5 2.64
9/30/04 11.51 (0.16)5 2.22
9/30/0327 8.48 (0.13) 3.16
9/30/0227 11.12 (0.14) (2.50)
9/30/0127 34.47 (0.01) (14.65)
Investor B Class
10/1/05 through 3/31/0631 $ 14.61 $ (0.13)5 $ 2.07
9/30/05 12.39 (0.20)5 2.41
9/30/04 10.59 (0.24)5 2.03
9/30/0327 7.86 (0.19) 2.92
9/30/0227 10.39 (0.23) (2.30)
9/30/0127 33.05 (0.12) (13.85)
Investor C Class
10/1/05 through 3/31/0631 $ 14.62 $ (0.12)5 $ 2.06
9/30/05 12.40 (0.19)5 2.40
9/30/04 10.60 (0.25)5 2.04
9/30/0327 7.86 (0.18) 2.92
9/30/0227 10.39 (0.23) (2.30)
9/30/0127 33.05 (0.12) (13.85)
----------------------
Global Science & Technology Opportunities
----------------------
Institutional Class
10/1/05 through 3/31/0631 $ 6.61 $ (0.02)5 $ 0.95
9/30/05 5.42 (0.04)5 1.23
9/30/04 5.46 (0.07)5 0.03
9/30/0327 3.59 (0.05) 1.92
9/30/0227 4.41 (0.06)5 (0.76)
9/30/0127 12.49 0.01 (8.09)
Service Class
10/1/05 through 3/31/0631 $ 6.51 $ (0.03)5 $ 0.94
9/30/05 5.35 (0.06)5 1.22
9/30/04 5.41 (0.08)5 0.02
9/30/0327 3.57 (0.06)5 1.90
9/30/0227 4.39 (0.06)5 (0.76)
9/30/0127 12.47 - (8.08)
Investor A Class
10/1/05 through 3/31/0631 $ 6.45 $ (0.04)5 $ 0.93
9/30/05 5.31 (0.07)5 1.21
9/30/04 5.38 (0.09)5 0.02
9/30/0327 3.55 (0.07) 1.90
9/30/0227 4.38 (0.09) (0.74)
9/30/0127 12.47 (0.03) (8.06)
DISTRIBUTIONS NET
DISTRIBUTIONS FROM NET REDEMPTION ASSET
FROM NET DISTRIBUTIONS REALIZED FEES ADDED VALUE
INVESTMENT FROM CAPITAL TO PAID-IN END OF
INCOME CAPITAL GAINS CAPITAL PERIOD
--------------- --------------- --------------- ------------ ------------
-------------
Small Cap Growth Equity
-------------
Institutional Class
10/1/05 through 3/31/0631 $ - $ - $ - $ - $ 19.69
9/30/05 - - - 0.01 17.29
9/30/04 - - - - 14.52
9/30/0327 - - - - 12.26
9/30/0227 - - - - 9.00
9/30/0127 (0.12) (0.10) (8.51) - 11.74
Service Class
10/1/05 through 3/31/0631 $ - $ - $ - $ - $ 18.81
9/30/05 - - - 0.01 16.54
9/30/04 - - - - 13.92
9/30/0327 - - - - 11.79
9/30/0227 - - - - 8.67
9/30/0127 (0.08) (0.10) (8.51) - 11.36
Investor A Class
10/1/05 through 3/31/0631 $ - $ - $ - $ - $ 18.33
9/30/05 - - - 0.01 16.12
9/30/04 - - - - 13.57
9/30/0327 - - - - 11.51
9/30/0227 - - - - 8.48
9/30/0127 (0.08) (0.10) (8.51) - 11.12
Investor B Class
10/1/05 through 3/31/0631 $ - $ - $ - $ - $ 16.55
9/30/05 - - - 0.01 14.61
9/30/04 - - - 0.01 12.39
9/30/0327 - - - - 10.59
9/30/0227 - - - - 7.86
9/30/0127 (0.08) (0.10) (8.51) - 10.39
Investor C Class
10/1/05 through 3/31/0631 $ - $ - $ - $ - $ 16.56
9/30/05 - - - 0.01 14.62
9/30/04 - - - 0.01 12.40
9/30/0327 - - - - 10.60
9/30/0227 - - - - 7.86
9/30/0127 (0.08) (0.10) (8.51) - 10.39
----------------------
Global Science & Technology
Opportunities
----------------------
Institutional Class
10/1/05 through 3/31/0631 $ - $ - $ - $ 0.01 $ 7.55
9/30/05 - - - - 6.61
9/30/04 - - - - 5.42
9/30/0327 - - - - 5.46
9/30/0227 - - - - 3.59
9/30/0127 - - - - 4.41
Service Class
10/1/05 through 3/31/0631 $ - $ - $ - $ 0.01 $ 7.43
9/30/05 - - - - 6.51
9/30/04 - - - - 5.35
9/30/0327 - - - - 5.41
9/30/0227 - - - - 3.57
9/30/0127 - - - - 4.39
Investor A Class
10/1/05 through 3/31/0631 $ - $ - $ - $ 0.01 $ 7.35
9/30/05 - - - - 6.45
9/30/04 - - - - 5.31
9/30/0327 - - - - 5.38
9/30/0227 - - - - 3.55
9/30/0127 - - - - 4.38
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
148
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ----------------------------------- --------------- --------------
13.88%12,30 $ 450,761 0.87%2
19.0818 357,857 0.94
18.4312 272,324 0.92
36.2212 164,856 0.89
(23.34) 176,858 0.85
(53.73) 843,359 0.82
13.72%12,30 $ 26,647 1.13%2
18.8218 24,491 1.19
18.0712 29,569 1.20
35.9912 23,466 1.19
(23.68) 29,023 1.15
(53.76) 141,001 1.11
13.71%3,12,30 $ 180,779 1.16%2
18.793,18 160,374 1.19
17.903,12 131,795 1.30
35.733,12 102,642 1.37
(23.74)3 95,620 1.33
(53.90)3 85,211 1.29
13.28%4,12,30 $ 13,895 2.03%2
17.924,19 15,516 1.94
17.004,20 23,983 2.07
34.734,12 24,167 2.11
(24.35)4 21,958 2.07
(54.22)4 37,351 2.03
13.27%4,12,30 $ 16,930 1.97%2
17.904,19 15,434 1.94
16.984,19 13,989 2.08
34.864,12 11,396 2.11
(24.35)4 9,665 2.07
(54.21)4 18,170 2.03
14.22%22,30 $ 2,175 1.28%2
21.9612 847 1.43
(0.73)12 1,592 1.43
52.09 2,821 1.35
(18.59) 2,385 1.20
(64.69) 7,189 1.20
14.13%22,30 $ 206 1.65%2
21.6812 116 1.73
(1.11)12 86 1.73
51.54 108 1.67
(18.68) 30 1.50
(64.80) 19 1.50
13.95%3,22,30 $ 13,891 1.76%2
21.473,12 9,688 1.84
(1.30)3,12 9,929 1.89
51.553 11,406 1.83
(18.95)3 9,104 1.67
(64.88)3 14,551 1.67
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------- --------------- ------------------- ----------
0.88%2 (0.55)%2 (0.56)%2 46%
0.95 (0.40) (0.41) 91
0.93 (0.73) (0.74) 81
0.92 (0.75) (0.78) 167
0.87 (0.67) (0.69) 238
0.82 0.52 0.52 363
1.13%2 (0.81)%2 (0.81)%2 46%
1.19 (0.70) (0.70) 91
1.20 (1.02) (1.02) 81
1.22 (1.05) (1.08) 167
1.17 (0.97) (0.99) 238
1.11 0.20 0.20 363
1.26%2 (0.84)%2 (0.94)%2 46%
1.29 (0.66) (0.76) 91
1.40 (1.12) (1.22) 81
1.40 (1.22) (1.25) 167
1.36 (1.14) (1.17) 238
1.29 0.02 0.02 363
2.10%2 (1.72)%2 (1.79)%2 46%
1.94 (1.45) (1.45) 91
2.07 (1.89) (1.89) 81
2.14 (1.97) (2.00) 167
2.10 (1.89) (1.92) 238
2.03 (0.69) (0.69) 363
1.98%2 (1.65)%2 (1.66)%2 46%
1.94 (1.41) (1.41) 91
2.08 (1.90) (1.90) 81
2.14 (1.97) (2.00) 167
2.10 (1.89) (1.92) 238
2.03 (0.67) (0.67) 363
1.56%2 (0.47)%2 (0.75)%2 68%
1.98 (0.73) (1.28) 113
1.63 (1.12) (1.32) 115
1.63 (1.06) (1.34) 226
1.31 (1.00) (1.11) 587
1.45 0.14 (0.11) 748
1.98%2 (0.89)%2 (1.22)%2 68%
2.27 (1.04) (1.58) 113
1.94 (1.41) (1.61) 115
1.88 (1.38) (1.59) 226
1.63 (1.30) (1.43) 587
1.73 - (0.24) 748
2.13%2 (1.03)%2 (1.40)%2 68%
2.35 (1.16) (1.67) 113
2.14 (1.56) (1.81) 115
2.10 (1.53) (1.81) 226
1.79 (1.47) (1.59) 587
1.91 (0.36) (0.60) 748
149
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS,
ASSET FOREIGN CURRENCY
VALUE NET AND OPTIONS
BEGINNING INVESTMENT (BOTH REALIZED
OF PERIOD INCOME (LOSS) AND UNREALIZED)
----------- --------------- ------------------
-----------------------------
Global Science & Technology Opportunities (Continued)
-----------------------------
Investor B Class
10/1/05 through 3/31/0631 $ 6.19 $ (0.06)5 $ 0.89
9/30/05 5.13 (0.11)5 1.17
9/30/04 5.24 (0.13)5 0.02
9/30/0327 3.49 (0.10) 1.85
9/30/0227 4.33 (0.14) ( 0.70)
9/30/0127 12.44 (0.09) ( 8.02)
Investor C Class
10/1/05 through 3/31/0631 $ 6.19 $ (0.06)5 $ 0.89
9/30/05 5.14 (0.11)5 1.16
9/30/04 5.24 (0.13)5 0.03
9/30/0327 3.49 (0.10) 1.85
9/30/0227 4.33 (0.15) ( 0.69)
9/30/0127 12.44 (0.10) ( 8.01)
---------
Global Resources
---------
Institutional Class
10/1/05 through 3/31/0631 $ 79.62 $ 0.445 $ 6.07
3/01/05 through 9/30/05 58.80 0.155 20.67
7/01/04 through 2/28/05 41.25 (0.08) 19.52
6/30/04 26.85 0.27 14.78
6/30/03 23.51 (0.04) 3.38
6/30/0227 22.13 (0.09) 1.47
6/30/0127 17.21 (0.18) 5.10
Investor A Class
10/1/05 through 3/31/0631 $ 76.01 $ 0.315 $ 5.75
3/01/05 through 9/30/05 56.23 0.035 19.75
7/01/04 through 2/28/05 39.58 (0.15) 18.69
6/30/04 25.81 0.21 14.15
6/30/03 22.74 (0.10) 3.17
6/30/0227 21.50 (0.15) 1.39
6/30/0127 16.79 (0.22) 4.93
Investor B Class
10/1/05 through 3/31/0631 $ 69.43 $ 0.055 $ 5.19
3/01/05 through 9/30/05 51.58 (0.19)5 18.04
7/01/04 through 2/28/05 36.52 (0.32) 17.18
6/30/04 23.89 (0.06) 13.14
6/30/03 21.20 (0.23) 2.92
6/30/0227 20.16 (0.27) 1.31
6/30/0127 15.85 (0.33) 4.64
Investor C Class
10/1/05 through 3/31/0631 $ 69.37 $ 0.065 $ 5.18
3/01/05 through 9/30/05 51.53 (0.19)5 18.03
7/01/04 through 2/28/05 36.48 (0.30) 17.14
6/30/04 23.88 (0.03) 13.10
6/30/03 21.18 (0.23) 2.93
6/30/0227 20.14 (0.28) 1.32
6/30/0127 15.84 (0.34) 4.64
-------------
All-Cap Global Resources
-------------
Institutional Class
10/1/05 through 3/31/0631 $ 13.56 $ -5 $ 1.20
2/16/051 through 9/30/05 10.00 0.025 3.54
Service Class
10/1/05 through 3/31/0631 $ 13.52 $ (0.02)5 $ 1.20
2/16/051 through 9/30/05 10.00 0.035 3.49
REDEMPTION NET
DISTRIBUTIONS DISTRIBUTIONS FEES ADDED ASSET VALUE
FROM NET INVESTMENT FROM TO PAID-IN END OF
INCOME CAPITAL CAPITAL PERIOD
--------------------- --------------- ------------ ------------
---------------------------
Global Science & Technology
Opportunities (Continued)
---------------------------
Investor B Class
10/1/05 through 3/31/0631 $ - $ - $ 0.01 $ 7.03
9/30/05 - - - 6.19
9/30/04 - - - 5.13
9/30/0327 - - - 5.24
9/30/0227 - - - 3.49
9/30/0127 - - - 4.33
Investor C Class
10/1/05 through 3/31/0631 $ - $ - $ 0.01 $ 7.03
9/30/05 - - - 6.19
9/30/04 - - - 5.14
9/30/0327 - - - 5.24
9/30/0227 - - - 3.49
9/30/0127 - - - 4.33
---------
Global Resources
---------
Institutional Class
10/1/05 through 3/31/0631 $ (0.53) $ (8.60) $ 0.01 $ 77.01
3/01/05 through 9/30/05 - - - 79.62
7/01/04 through 2/28/05 (0.34) (1.55) - 58.80
6/30/04 (0.65) - - 41.25
6/30/03 - - - 26.85
6/30/0227 - - - 23.51
6/30/0127 - - - 22.13
Investor A Class
10/1/05 through 3/31/0631 $ (0.48) $ (8.60) $ 0.01 $ 73.00
3/01/05 through 9/30/05 - - - 76.01
7/01/04 through 2/28/05 (0.34) (1.55) - 56.23
6/30/04 (0.59) - - 39.58
6/30/03 - - - 25.81
6/30/0227 - - - 22.74
6/30/0127 - - - 21.50
Investor B Class
10/1/05 through 3/31/0631 $ (0.38) $ (8.60) $ 0.01 $ 65.70
3/01/05 through 9/30/05 - - - 69.43
7/01/04 through 2/28/05 (0.25) (1.55) - 51.58
6/30/04 (0.45) - - 36.52
6/30/03 - - - 23.89
6/30/0227 - - - 21.20
6/30/0127 - - - 20.16
Investor C Class
10/1/05 through 3/31/0631 $ (0.38) $ (8.60) $ 0.01 $ 65.64
3/01/05 through 9/30/05 - - - 69.37
7/01/04 through 2/28/05 (0.24) (1.55) - 51.53
6/30/04 (0.47) - - 36.48
6/30/03 - - - 23.88
6/30/0227 - - - 21.18
6/30/0127 - - - 20.14
-------------
All-Cap Global Resources
-------------
Institutional Class
10/1/05 through 3/31/0631 $ - $ - $ - $ 14.76
2/16/051 through 9/30/05 - - - 13.56
Service Class
10/1/05 through 3/31/0631 $ - $ - $ - $ 14.70
2/16/051 through 9/30/05 - - - 13.52
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
150
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ---------------------------------- --------------- --------------
13.57%4,23,30 $ 11,823 2.58%2
20.664,12 10,998 2.59
(2.10)4,12 12,315 2.65
50.144 16,646 2.57
(19.40)4 12,944 2.38
(65.19)4 22,062 2.42
13.57%4,23,30 $ 6,136 2.43%2
20.434,12 2,794 2.59
(1.91)4,12 3,244 2.65
50.144 4,024 2.57
(19.40)4 3,010 2.59
(65.19)4 5,708 2.42
9.06%4,15,30 $ 43,507 1.01%2
35.4112,30 40,906 1.042
47.9530 29,188 1.012
56.49 20,044 1.04
14.21 10,144 1.30
6.24 7,995 1.43
28.59 6,935 1.31
8.88%3,14,30 $ 863,756 1.32%2
35.183,12,30 877,120 1.342
47.693,30 676,234 1.362
56.063 406,209 1.34
13.503 103,987 1.60
5.773 89,883 1.73
28.053 81,880 1.61
8.49%4,14,30 $ 110,881 2.04%2
34.604,12,30 117,845 2.042
47.094,30 94,506 2.012
55.074 66,704 2.04
12.694 29,782 2.30
5.164 25,626 2.43
27.194 19,237 2.31
8.50%4,13,30 $ 191,284 2.02%2
34.624,12,30 201,265 2.042
47.014,30 169,871 2.012
55.054 122,088 2.04
12.754 37,601 2.30
5.164 31,853 2.43
27.154 30,214 2.31
8.85%12,30 $ 228,711 1.01%2
35.6012,30 92,147 1.042
8.73%12,30 $ 1,104 1.27%2
35.2012,30 -26 1.342
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------- --------------- ------------------- ----------
2.88%2 (1.87)%2 (2.17)%2 68%
3.00 (1.91) (2.32) 113
2.82 (2.33) (2.50) 115
2.85 (2.28) (2.55) 226
2.50 (2.18) (2.29) 587
2.65 (1.12) (1.35) 748
2.69%2 (1.68)%2 (1.94)%2 68%
3.00 (1.91) (2.32) 113
2.80 (2.33) (2.48) 115
2.85 (2.28) (2.55) 226
2.72 (2.37) (2.50) 587
2.65 (1.09) (1.32) 748
1.07%2 1.20%2 1.14%2 18%
1.182 0.422 0.282 9
1.022 (0.16)2 (0.17)2 22
1.04 0.79 0.79 27
1.31 (0.20) (0.20) 33
1.44 (0.42) (0.42) 38
1.33 (0.89) (0.89) 38
1.44%2 0.88%2 0.76%2 18%
1.522 0.102 (0.08)2 9
1.382 (0.52)2 (0.54)2 22
1.34 0.64 0.64 27
1.61 (0.47) (0.47) 33
1.74 (0.73) (0.73) 38
1.63 (1.11) (1.11) 38
2.11%2 0.16%2 0.09%2 18%
2.182 (0.60)2 (0.74)2 9
2.022 (1.17)2 (1.18)2 22
2.04 (0.20) (0.20) 27
2.31 (1.17) (1.17) 33
2.44 (1.41) (1.41) 38
2.33 (1.78) (1.78) 38
2.09%2 0.18%2 0.11%2 18%
2.172 (0.61)2 (0.74)2 9
2.022 (1.17)2 (1.18)2 22
2.04 (0.10) (0.10) 27
2.31 (1.18) (1.18) 33
2.44 (1.43) (1.43) 38
2.33 (1.83) (1.83) 38
1.08%2 (0.04)%2 (0.11)%2 17%
1.542 0.252 (0.25)2 12
1.28%2 (0.25)%2 (0.26)%2 17%
1.772 0.012 (0.42)2 12
151
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS,
ASSET FOREIGN CURRENCY NET
VALUE NET AND OPTIONS DISTRIBUTIONS DISTRIBUTIONS ASSET VALUE
BEGINNING INVESTMENT (BOTH REALIZED FROM NET INVESTMENT FROM END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME CAPITAL PERIOD
----------- --------------- ------------------ --------------------- --------------- ------------
-------------------
All-Cap Global Resources (Continued)
-------------------
Investor A Class
10/1/05 through 3/31/0631 $ 13.50 $ (0.02)5 $ 1.22 $- $ - $ 14.70
2/16/051 through 9/30/05 10.00 -5 3.50 - - 13.50
Investor B Class
10/1/05 through 3/31/0631 $ 13.44 $ (0.07)5 $ 1.21 $- $ - $ 14.58
2/16/051 through 9/30/05 10.00 (0.05)5 3.49 - - 13.44
Investor C Class
10/1/05 through 3/31/0631 $ 13.46 $ (0.07)5 $ 1.21 $- $ - $ 14.60
2/16/051 through 9/30/05 10.00 (0.05)5 3.51 - - 13.46
--------
Health Sciences
--------
Institutional Class
10/1/05 through 3/31/0631 $ 24.45 $ -5 $ 2.16 $- $ (0.62) $ 25.99
3/01/05 through 9/30/05 20.50 (0.06)5 4.02 - ( 0.01) 24.45
2/28/05 21.15 (0.15) 0.57 - ( 1.07) 20.50
2/29/04 11.64 (0.06) 10.21 - ( 0.64) 21.15
2/28/0327 14.48 (0.09) (2.71) - ( 0.04) 11.64
2/28/0227 14.14 (0.08) 0.47 - ( 0.05) 14.48
2/28/0127 15.50 0.01 (0.68) - ( 0.69) 14.14
Service Class
10/1/05 through 3/31/0631 $ 24.15 $ (0.02)5 $ 2.12 $- $ (0.62) $ 25.63
3/01/05 through 9/30/05 20.24 (0.12)5 4.04 - ( 0.01) 24.15
1/28/051 through 2/28/05 20.30 (0.01) (0.05) - - 20.24
Investor A Class
10/1/05 through 3/31/0631 $ 24.11 $ (0.04)5 $ 2.13 $- $ (0.62) $ 25.58
3/01/05 through 9/30/05 20.24 (0.09)5 3.97 - ( 0.01) 24.11
2/28/05 20.96 (0.17) 0.52 - ( 1.07) 20.24
2/29/04 11.57 (0.12) 10.15 - ( 0.64) 20.96
2/28/0327 14.43 (0.12) (2.70) - ( 0.04) 11.57
2/28/0227 14.14 (0.13) 0.47 - ( 0.05) 14.43
2/28/0127 13.33 (0.06) 1.88 - ( 1.01) 14.14
Investor B Class
10/1/05 through 3/31/0631 $ 23.31 $ (0.13)5 $ 2.06 $- $ (0.62) $ 24.62
3/01/05 through 9/30/05 19.65 (0.17)5 3.84 - ( 0.01) 23.31
2/28/05 20.52 (0.28) 0.48 - ( 1.07) 19.65
2/29/04 11.41 (0.24) 9.99 - ( 0.64) 20.52
2/28/0327 14.34 (0.21) (2.68) - ( 0.04) 11.41
2/28/0227 14.14 (0.23) 0.48 - ( 0.05) 14.34
2/28/0127 15.50 (0.04) (0.63) - ( 0.69) 14.14
Investor C Class
10/1/05 through 3/31/0631 $ 23.26 $ (0.12)5 $ 2.05 $- $ (0.62) $ 24.57
3/01/05 through 9/30/05 19.61 (0.18)5 3.84 - ( 0.01) 23.26
2/28/05 20.47 (0.22) 0.43 - ( 1.07) 19.61
2/29/04 11.39 (0.23) 9.95 - ( 0.64) 20.47
2/28/0327 14.31 (0.21) (2.67) - ( 0.04) 11.39
2/28/0227 14.11 (0.23) 0.48 - ( 0.05) 14.31
2/28/0127 15.50 (0.04) (0.66) - ( 0.69) 14.11
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
152
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ----------------------------------- --------------- --------------
8.89%3,12,30 $ 190,012 1.31%2
35.003,12,30 87,949 1.342
8.48%4,12,30 $ 36,314 2.04%2
34.404,12,30 16,019 2.042
8.47%4,12,30 $ 109,553 2.03%2
34.604,12,30 48,288 2.042
8.97%12,30 $ 81,589 1.06%2
19.3212,30 31,229 1.252
1.84 4,262 1.25
87.73 5,067 1.25
(19.42) 988 1.25
2.76 1,109 1.25
(4.48) 946 1.25
8.83%12,30 $ 1,006 1.27%2
19.3712,30 66 1.552
(0.30)30 -26 0.822
8.81%3,12,30 $ 362,291 1.34%2
19.173,12,30 186,545 1.552
1.523 76,550 1.58
87.133 54,638 1.55
(19.63)3 9,250 1.55
2.413 13,069 1.55
14.313 6,863 1.54
8.41%4,12,30 $ 71,770 2.12%2
18.684,12,30 45,073 2.252
0.804 29,495 2.25
85.894 22,825 2.25
(20.24)4 9,290 2.25
1.774 11,399 2.25
(4.47)4 4,645 2.25
8.43%4,12,30 $ 214,743 2.05%2
18.674,12,30 84,431 2.252
0.864 25,248 2.25
85.874 11,017 2.25
(20.21)4 1,291 2.25
1.774 1,314 2.25
(4.67)4 645 2.25
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------- --------------- ------------------- ----------
1.45%2 (0.33)%2 (0.47)%2 17%
1.872 0.012 (0.52)2 12
2.11%2 (1.06)%2 (1.13)%2 17%
2.492 (0.64)2 (1.09)2 12
2.08%2 (1.04)%2 (1.09)%2 17%
2.482 (0.70)2 (1.14)2 12
1.06%2 -%2 -%2 71%
1.372 (0.47)2 (0.59)2 77
1.37 (0.59) (0.71) 173
1.84 (0.38) (0.97) 106
2.75 (0.69) (2.18) 157
3.25 (0.56) (2.53) 75
6.86 0.18 (5.40) 139
1.29%2 (0.20)%2 (0.22)%2 71%
1.642 (0.90)2 (0.99)2 77
0.822 (0.70)2 (0.70)2 173
1.45%2 (0.31)%2 (0.42)%2 71%
1.692 (0.68)2 (0.82)2 77
1.73 (0.90) (1.05) 173
2.11 (0.71) (1.27) 106
3.04 (0.99) (2.47) 157
3.41 (0.88) (2.71) 75
8.44 (0.48) (7.35) 139
2.13%2 (1.11)%2 (1.12)%2 71%
2.332 (1.35)2 (1.43)2 77
2.39 (1.58) (1.71) 173
2.91 (1.44) (2.10) 106
3.74 (1.69) (3.17) 157
3.99 (1.59) (3.30) 75
8.54 (0.81) (7.07) 139
2.06%2 (0.99)%2 (1.00)%2 71%
2.322 (1.41)2 (1.48)2 77
2.41 (1.56) (1.71) 173
2.77 (1.38) (1.90) 106
3.74 (1.69) (3.18) 157
3.99 (1.58) (3.29) 75
8.15 (0.83) (6.70) 139
153
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS, DISTRIBUTIONS
ASSET FOREIGN CURRENCY FROM NET NET
VALUE NET AND OPTIONS DISTRIBUTIONS REALIZED ASSET VALUE
BEGINNING INVESTMENT (BOTH REALIZED FROM NET INVESTMENT CAPITAL END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME GAINS PERIOD
----------- --------------- ------------------ --------------------- -------------- ------------
---------
U. S. Opportunities
---------
Institutional Class
10/1/05 through 3/31/0631 $ 25.56 $ (0.03)5 $ 4.76 $ - $ - $ 30.29
9/30/05 20.34 (0.15)5 5.37 - - 25.56
9/30/04 16.56 (0.17)5 3.95 - - 20.34
9/30/0327 13.06 (0.16) 3.66 - - 16.56
9/30/0227 17.76 (0.23)5 (4.06) (0.41) - 13.06
9/30/0127 45.41 0.04 (17.61) - (10.08) 17.76
Service Class
10/1/05 through 3/31/0631 $ 24.96 $ (0.08)5 $ 4.65 $ - $ - $ 29.53
9/30/05 19.93 (0.21)5 5.24 - - 24.96
9/30/04 16.27 (0.22)5 3.88 - - 19.93
9/30/0327 12.88 (0.19) 3.58 - - 16.27
9/30/0227 17.51 (0.51) (3.79) (0.33) - 12.88
9/30/0127 45.08 (0.05) (17.44) - (10.08) 17.51
Investor A Class
10/1/05 through 3/31/0631 $ 24.76 $ (0.09)5 $ 4.61 $ - $ - $ 29.28
9/30/05 19.78 (0.22)5 5.20 - - 24.76
9/30/04 16.17 (0.26)5 3.87 - - 19.78
9/30/0327 12.81 (0.21) 3.57 - - 16.17
9/30/0227 17.41 (0.42) (3.89) (0.29) - 12.81
9/30/0127 44.93 (0.09) (17.35) - (10.08) 17.41
Investor B Class
10/1/05 through 3/31/0631 $ 23.45 $ (0.17)5 $ 4.35 $ - $ - $ 27.63
9/30/05 18.87 (0.37)5 4.95 - - 23.45
9/30/04 15.55 (0.39)5 3.71 - - 18.87
9/30/0327 12.41 (0.32) 3.46 - - 15.55
9/30/0227 16.86 (0.54) ( 3.78) (0.13) - 12.41
9/30/0127 44.15 (0.28) (16.93) - (10.08) 16.86
Investor C Class
10/1/05 through 3/31/0631 $ 23.43 $ (0.17)5 $ 4.34 $ - $ - $ 27.60
9/30/05 18.85 (0.37)5 4.95 - - 23.43
9/30/04 15.53 (0.38)5 3.70 - - 18.85
9/30/0327 12.40 (0.32) 3.45 - - 15.53
9/30/0227 16.85 (0.55) (3.77) (0.13) - 12.40
9/30/0127 44.14 (0.29) (16.92) - (10.08) 16.85
-----------
Global Opportunities
-----------
Institutional Class
1/31/061 through 3/31/0631 $ 10.00 $ 0.045 $ 0.20 $ - $ - $ 10.24
Service Class
1/31/061 through 3/31/0631 $ 10.00 $ 0.035 $ 0.20 $ - $ - $ 10.23
Investor A
1/31/061 through 3/31/0631 $ 10.00 $ 0.055 $ 0.18 $ - $ - $ 10.23
Investor B
1/31/061 through 3/31/0631 $ 10.00 $ 0.025 $ 0.20 $ - $ - $ 10.22
Investor C
1/31/061 through 3/31/0631 $ 10.00 $ 0.025 $ 0.20 $ - $ - $ 10.22
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
154
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ----------------------------------- --------------- --------------
18.51%12,30 $ 7,522 1.42%2
25.6612 6,390 1.60
22.8312 6,074 1.60
26.80 7,235 1.52
(25.04) 10,867 1.45
(46.34) 35,869 1.45
18.31%12,30 $ 860 1.78%2
25.2412 472 1.90
22.5012 2,303 1.90
26.32 421 1.83
(25.26) 483 1.75
(46.55) 1,059 1.75
18.26%3,12,30 $ 41,917 1.84%2
25.183,12 31,277 1.97
22.333,12 31,282 2.04
26.233 29,258 2.00
(25.39)3 28,733 1.92
(46.61)3 51,232 1.93
17.83%4,12,30 $ 40,155 2.57%2
24.274,12 37,132 2.72
21.354,12 40,994 2.80
25.304 41,259 2.74
(25.92)4 43,883 2.67
(47.01)4 79,401 2.67
17.80%4,12,30 $ 26,828 2.56%2
24.304,12 20,774 2.72
21.384,12 20,261 2.81
25.244 20,761 2.74
(25.93)4 22,020 2.67
(47.02)4 42,007 2.67
2.40%12,30 $ 5,471 1.17%2
2.30%12,30 $ 10 1.65%2
2.30%3,12,30 $ 6,843 1.65%2
2.20%4,12,30 $ 842 2.40%2
2.20%4,12,30 $ 2,382 2.40%2
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------- --------------- ------------------- ----------
1.58%2 (0.24)%2 (0.40)%2 58%
1.73 (0.65) (0.78) 94
1.65 (0.92) (0.97) 106
1.59 (0.87) (0.94) 248
1.49 (1.23) (1.27) 361
1.47 0.15 0.14 402
1.85%2 (0.60)%2 (0.67)%2 58%
1.97 (0.96) (1.03) 94
1.97 (1.15) (1.22) 106
1.89 (1.17) (1.24) 248
1.79 (1.51) (1.56) 361
1.77 (0.19) (0.21) 402
1.99%2 (0.66)%2 (0.81)%2 58%
2.08 (1.02) (1.13) 94
2.15 (1.36) (1.46) 106
2.06 (1.34) (1.40) 248
1.97 (1.68) (1.73) 361
1.94 (0.30) (0.32) 402
2.66%2 (1.39)%2 (1.48)%2 58%
2.73 (1.77) (1.78) 94
2.81 (2.12) (2.13) 106
2.81 (2.09) (2.15) 248
2.72 (2.43) (2.47) 361
2.69 (1.06) (1.08) 402
2.64%2 (1.38)%2 (1.46)%2 58%
2.73 (1.77) (1.78) 94
2.83 (2.13) (2.15) 106
2.81 (2.09) (2.15) 248
2.72 (2.43) (2.48) 361
2.69 (1.02) (1.04) 402
2.00%2 1.89%2 1.06%2 28%
4.11%2 1.39%2 (1.07)%2 28%
3.09%2 0.77%2 (0.67)%2 28%
6.69%2 0.39%2 (3.90)%2 28%
3.43%2 1.29%2 0.26%2 28%
155
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS,
ASSET FOREIGN CURRENCY
VALUE NET AND OPTIONS
BEGINNING INVESTMENT (BOTH REALIZED
OF PERIOD INCOME (LOSS) AND UNREALIZED)
----------- ---------------- ------------------
--------------
International Opportunities
--------------
Institutional Class
10/1/05 through 3/31/0631 $ 34.34 $ 0.095 $ 8.08
9/30/05 24.44 0.535 9.68
9/30/04 19.96 0.085 4.41
9/30/0327 15.22 - 4.73
9/30/0227 14.86 0.05 0.27
9/30/0127 22.54 0.30 (7.93)
Service Class
10/1/05 through 3/31/0631 $ 33.55 $ 0.075 $ 7.85
9/30/05 23.93 0.445 9.45
9/30/04 19.59 0.065 4.30
9/30/0327 14.98 0.05 4.55
9/30/0227 14.66 (0.02) 0.30
9/30/0127 22.36 0.29 (7.94)
Investor A Class
10/1/05 through 3/31/0631 $ 33.36 $ 0.045 $ 7.85
9/30/05 23.78 0.445 9.38
9/30/04 19.49 (0.02)5 4.32
9/30/0327 14.94 0.01 4.53
9/30/0227 14.65 (0.03) 0.28
9/30/0127 22.34 0.13 (7.77)
Investor B Class
10/1/05 through 3/31/0631 $ 31.97 $ (0.10)5 $ 7.50
9/30/05 22.80 0.185 9.05
9/30/04 18.83 (0.21)5 4.19
9/30/0327 14.54 (0.12) 4.40
9/30/0227 14.37 (0.16) 0.29
9/30/0127 22.06 0.01 (7.65)
Investor C Class
10/1/05 through 3/31/0631 $ 31.93 $ (0.09)5 $ 7.48
9/30/05 22.80 0.215 9.01
9/30/04 18.84 (0.21)5 4.18
9/30/0327 14.54 (0.11)5 4.40
9/30/0227 14.36 (0.15) 0.29
9/30/0127 22.06 0.01 (7.66)
DISTRIBUTIONS
FROM NET REDEMPTION NET
DISTRIBUTIONS REALIZED FEES ADDED ASSET VALUE
FROM NET INVESTMENT CAPITAL TO PAID-IN END OF
INCOME GAINS CAPITAL PERIOD
--------------------- -------------- ------------ ------------
--------------
International Opportunities
--------------
Institutional Class
10/1/05 through 3/31/0631 $ (0.37) $ (0.76) $ - $ 41.38
9/30/05 (0.32) - 0.01 34.34
9/30/04 (0.02) - 0.01 24.44
9/30/0327 - - 0.01 19.96
9/30/0227 - - 0.04 15.22
9/30/0127 - (0.05) - 14.86
Service Class
10/1/05 through 3/31/0631 $ (0.35) $ (0.76) $ - $ 40.36
9/30/05 (0.28) - 0.01 33.55
9/30/04 (0.02) - - 23.93
9/30/0327 - - 0.01 19.59
9/30/0227 - - 0.04 14.98
9/30/0127 - (0.05) - 14.66
Investor A Class
10/1/05 through 3/31/0631 $ (0.35) $ (0.76) $ - $ 40.14
9/30/05 (0.25) - 0.01 33.36
9/30/04 (0.02) - 0.01 23.78
9/30/0327 - - 0.01 19.49
9/30/0227 - - 0.04 14.94
9/30/0127 - (0.05) - 14.65
Investor B Class
10/1/05 through 3/31/0631 $ (0.29) $ (0.76) $ - $ 38.32
9/30/05 (0.07) - 0.01 31.97
9/30/04 (0.02) - 0.01 22.80
9/30/0327 - - 0.01 18.83
9/30/0227 - - 0.04 14.54
9/30/0127 - (0.05) - 14.37
Investor C Class
10/1/05 through 3/31/0631 $ (0.29) $ (0.76) $ - $ 38.27
9/30/05 (0.10) - 0.01 31.93
9/30/04 (0.02) - 0.01 22.80
9/30/0327 - - 0.01 18.84
9/30/0227 - - 0.04 14.54
9/30/0127 - (0.05) - 14.36
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
156
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ----------------------------------- --------------- --------------
24.30%12,30 $ 336,776 1.34%2
42.1315 216,070 1.45
22.5416 96,535 1.45
31.1417 57,950 1.41
2.42 54,164 1.33
(33.93) 60,531 1.33
24.15%12,30 $ 128,173 1.58%2
41.6515 44,308 1.74
22.2512 19,167 1.75
30.7818 1,573 1.72
2.18 670 1.60
(34.29) 500 1.63
24.17%3,12,30 $ 416,511 1.61%2
41.603,16 253,710 1.75
22.113,17 99,879 1.89
30.453,17 37,934 1.89
1.983,12 25,969 1.80
(34.27)3 28,781 1.80
23.66%4,12,30 $ 100,190 2.39%2
40.584,15 73,946 2.50
21.184,16 45,167 2.65
29.514,16 31,454 2.63
1.184,12 25,917 2.54
(34.71)4 27,895 2.55
23.68%4,12,30 $ 213,038 2.35%2
40.604,16 130,138 2.50
21.124,16 54,894 2.65
29.574,16 26,912 2.63
1.254,12 18,599 2.55
(34.71)4 21,019 2.55
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------- --------------- ------------------- ----------
1.35%2 0.51%2 0.50%2 51%
1.51 1.81 1.75 86
1.58 0.31 0.17 98
1.51 0.42 0.32 72
1.43 0.27 0.17 104
1.40 1.36 1.30 207
1.58%2 0.39%2 0.39%2 51%
1.76 1.52 1.50 86
1.91 0.21 0.05 98
1.80 0.30 0.22 72
1.70 (0.17) (0.27) 104
1.84 1.50 1.29 207
1.72%2 0.24%2 0.13%2 51%
1.86 1.53 1.42 86
2.06 (0.06) (0.24) 98
1.98 0.05 (0.04) 72
1.91 (0.17) (0.27) 104
1.89 0.80 0.72 207
2.40%2 (0.60)%2 (0.61)%2 51%
2.51 0.68 0.67 86
2.72 (0.94) (1.00) 98
2.72 (0.74) (0.83) 72
2.64 (0.93) (1.03) 104
2.64 0.06 (0.03) 207
2.36%2 (0.50)%2 (0.51)%2 51%
2.51 0.75 0.74 86
2.72 (0.86) (0.93) 98
2.72 (0.71) (0.80) 72
2.66 (0.95) (1.05) 104
2.66 0.07 (0.03) 207
157
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS, DISTRIBUTIONS
ASSET FOREIGN CURRENCY FROM NET NET
VALUE NET AND OPTIONS DISTRIBUTIONS REALIZED ASSET VALUE
BEGINNING INVESTMENT (BOTH REALIZED FROM NET INVESTMENT CAPITAL END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME GAINS PERIOD
----------- --------------- ------------------ --------------------- -------------- ------------
--------
Asset Allocation*
--------
Institutional Class
10/1/05 through 3/31/0631 $ 15.51 $ 0.145 $ 0.79 $ (0.16) $ (0.65) $ 15.63
3/01/05 through 9/30/05 14.99 0.175 0.52 (0.17) - 15.51
4/01/04 through 2/28/05 14.91 0.20 0.82 (0.40) (0.54) 14.99
3/31/04 11.38 0.24 3.54 (0.25) - 14.91
3/31/0327 14.17 0.28 (2.68) (0.33) (0.06) 11.38
3/31/0227 14.05 0.32 0.83 (0.35) (0.68) 14.17
3/31/0127 16.26 0.42 (0.41) (0.33) (1.89) 14.05
Service Class
10/1/05 through 3/31/0631 $ 15.49 $ 0.125 $ 0.78 $ (0.14) $ (0.65) $ 15.60
3/01/05 through 9/30/05 14.97 0.145 0.52 (0.14) - 15.49
1/28/051 through 2/28/05 14.63 0.01 0.33 - - 14.97
Investor A Class
10/1/05 through 3/31/0631 $ 15.48 $ 0.115 $ 0.78 $ (0.13) $ (0.65) $ 15.59
3/01/05 through 9/30/05 14.95 0.135 0.53 (0.13) - 15.48
4/01/04 through 2/28/05 14.89 0.18 0.80 (0.38) (0.54) 14.95
3/31/04 11.36 0.19 3.55 (0.21) - 14.89
3/31/0327 14.15 0.24 (2.68) (0.29) (0.06) 11.36
3/31/0227 14.03 0.28 0.83 (0.31) (0.68) 14.15
3/31/0127 16.24 0.39 (0.40) (0.31) (1.89) 14.03
Investor B Class
10/1/05 through 3/31/0631 $ 15.34 $ 0.055 $ 0.77 $ (0.07) $ (0.65) $ 15.44
3/01/05 through 9/30/05 14.81 0.075 0.51 (0.05) - 15.34
4/01/04 through 2/28/05 14.74 0.08 0.81 (0.28) (0.54) 14.81
3/31/04 11.26 0.10 3.49 (0.11) - 14.74
3/31/0327 14.01 0.15 (2.63) (0.21) (0.06) 11.26
3/31/0227 13.90 0.17 0.83 (0.21) (0.68) 14.01
3/31/0127 16.08 0.26 (0.37) (0.19) (1.88) 13.90
Investor C Class
10/1/05 through 3/31/0631 $ 15.33 $ 0.055 $ 0.78 $ (0.08) $ (0.65) $ 15.43
3/01/05 through 9/30/05 14.81 0.065 0.52 (0.06) - 15.33
4/01/04 through 2/28/05 14.74 0.08 0.81 (0.28) (0.54) 14.81
3/31/04 11.25 0.10 3.50 (0.11) - 14.74
3/31/0327 14.01 0.15 (2.65) (0.21) (0.05) 11.25
3/31/0227 13.89 0.18 0.80 (0.19) (0.67) 14.01
3/31/0127 16.05 0.27 (0.38) (0.18) (1.87) 13.89
*The performance prior to January 31, 2005 set forth in this table is the financial data of the State Street Research Asset
Allocation Fund,
series of a predecessor trust, the State Street Research Income Trust. BlackRock Funds acquired all of the assets and certain
stated liabilities
of a State Street Research Asset Allocation Fund on January 28, 2005. The net asset values and other per share information
listed have been
restated to reflect the conversion ratios of 0.71889936, 0.71991517, 0.72321182 and 0.72727901 for Institutional, Class A,
Class B and Class
C shares, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
158
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ----------------------------------- --------------- --------------
6.24%12,30 $ 33,045 0.82%2
4.6612,30 29,752 0.862
7.1730 31,328 1.032
33.46 21,989 1.15
(17.12) 17,992 1.12
8.47 26,821 1.10
0.56 26,917 1.17
6.03%12,30 $ 2,199 1.12%2
4.4412,30 2,171 1.162
2.3230 2,171 1.162
5.98%3,12,30 $ 494,561 1.22%2
4.443,12,30 491,557 1.252
6.783,30 526,929 1.242
32.943 357,100 1.45
(17.37)3 252,069 1.42
8.153 320,614 1.40
0.293 272,813 1.44
5.58%4,12,30 $ 185,967 1.98%2
3.944,12,30 181,583 2.012
6.204,30 187,689 2.042
32.034 133,083 2.15
(17.91)4 75,963 2.12
7.304 81,440 2.10
(0.35)4 56,543 2.17
5.62%4,12,30 $ 75,034 1.93%2
3.904,12,30 67,371 2.002
6.204,30 65,357 2.042
32.144 42,262 2.15
(17.96)4 19,079 2.12
7.314 13,226 2.10
(0.35)4 12,687 2.17
159
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------- --------------- ------------------- ----------
0.97%2 1.81%2 1.66%2 65%
1.112 1.902 1.652 90
1.052 1.712 1.702 101
1.15 1.74 1.74 216
1.13 2.21 2.21 181
1.11 2.27 2.27 186
1.19 2.85 2.85 181
1.24%2 1.51%2 1.39%2 65%
1.362 1.602 1.402 90
1.262 (0.17)2 (0.27)2 101
1.38%2 1.41%2 1.25%2 65%
1.462 1.512 1.302 90
1.322 1.552 1.472 101
1.45 1.43 1.43 216
1.43 1.92 1.92 181
1.41 1.95 1.95 186
1.46 2.61 2.61 181
2.04%2 0.65%2 0.59%2 65%
2.112 0.752 0.652 90
2.042 0.732 0.732 101
2.15 0.72 0.72 216
2.13 1.22 1.22 181
2.11 1.25 1.25 186
2.19 1.86 1.86 181
1.99%2 0.70%2 0.64%2 65%
2.112 0.752 0.642 90
2.042 0.762 0.762 101
2.15 0.72 0.72 216
2.13 1.21 1.21 181
2.11 1.26 1.26 186
2.19 1.89 1.89 181
159
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONCLUDED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GAIN (LOSS)
NET ON INVESTMENTS, DISTRIBUTIONS
ASSET FOREIGN CURRENCY FROM NET NET
VALUE NET AND OPTIONS DISTRIBUTIONS REALIZED ASSET VALUE
BEGINNING INVESTMENT (BOTH REALIZED FROM NET INVESTMENT CAPITAL END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME GAINS PERIOD
----------- --------------- ------------------ --------------------- -------------- ------------
------
Index Equity
------
Institutional Class
10/1/05 through 3/31/0631 $ 23.63 $ 0.225 $ 1.27 $ (0.22) $- $ 24.90
9/30/05 21.49 0.455 2.15 (0.46) - 23.63
9/30/04 19.19 0.345 2.29 (0.33) - 21.49
9/30/0327 15.69 0.30 3.48 (0.28) - 19.19
9/30/0227 20.03 0.25 (4.34) (0.25) - 15.69
9/30/0127 27.59 0.26 (7.63) (0.19) - 20.03
Service Class
10/1/05 through 3/31/0631 $ 23.48 $ 0.195 $ 1.26 $ (0.19) $- $ 24.74
9/30/05 21.35 0.375 2.13 (0.37) - 23.48
9/30/04 19.08 0.255 2.27 (0.25) - 21.35
9/30/0327 15.62 0.21 3.47 (0.22) - 19.08
9/30/0227 19.97 0.25 (4.41) (0.19) - 15.62
9/30/0127 27.54 0.16 (7.61) (0.12) - 19.97
Investor A Class
10/1/05 through 3/31/0631 $ 23.46 $ 0.195 $ 1.26 $ (0.19) $- $ 24.72
9/30/05 21.34 0.365 3.47 (1.71) - 23.46
9/30/04 19.07 0.225 2.28 (0.23) - 21.34
9/30/0327 15.62 0.18 3.46 (0.19) - 19.07
9/30/0227 19.95 0.13 (4.31) (0.15) - 15.62
9/30/0127 27.51 0.12 (7.60) (0.08) - 19.95
Investor B Class
10/1/05 through 3/31/0631 $ 23.06 $ 0.095 $ 1.24 $ (0.09) $- $ 24.30
9/30/05 20.98 0.205 1.88 - - 23.06
9/30/04 18.75 0.065 2.24 (0.07) - 20.98
9/30/0327 15.35 0.04 3.42 (0.06) - 18.75
9/30/0227 19.61 (0.01) (4.25) - - 15.35
9/30/0127 27.15 (0.06) (7.48) - - 19.61
Investor C Class
10/1/05 through 3/31/0631 $ 23.05 $ 0.095 $ 1.25 $ (0.10) $- $ 24.29
9/30/05 20.97 0.195 2.09 (0.20) - 23.05
9/30/04 18.74 0.065 2.24 (0.07) - 20.97
9/30/0327 15.35 0.04 3.41 (0.06) - 18.74
9/30/0227 19.61 (0.01) (4.25) - - 15.35
9/30/0127 27.15 (0.06) (7.48) - - 19.61
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 Calculated using the average shares outstanding method.
6 For period 12/1/00 through 9/30/01.
7 For period 12/1/01 through 9/30/02.
8 For period 12/1/02 through 9/30/03.
9 For period 12/1/03 through 9/30/04.
10 For period 12/1/04 through 9/30/05.
11 For period 12/1/05 through 3/31/06.
12 Redemption fee of 2.00% received by the Portfolios is reflected in total
return calculations. There was no impact to the return.
13 Redemption fee of 2.00% received by the Portfolios is reflected in total
return calculations. The impact to the return, for redemption fees
received during the period, is 2 basis points.
14 Redemption fee of 2.00% received by the Portfolios is reflected in total
return calculations. The impact to the return, for redemption fees
received during the period, is 3 basis points.
15 Redemption fee of 2.00% received by the Portfolios is reflected in total
return calculations. The impact to the return, for redemption fees
received during the period, is 4 basis points.
16 Redemption fee of 2.00% received by the Portfolios is reflected in total
return calculations. The impact to the return, for redemption fees
received during the period, is 5 basis points.
17 Redemption fee of 2.00% received by the Portfolios is reflected in total
return calculations. The impact to the return, for redemption fees
received during the period, is 6 basis points.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
160
BLACKROCK FUNDS
RATIO OF NET
NET ASSETS EXPENSES TO
TOTAL END OF PERIOD AVERAGE NET
RETURN (000) ASSETS
- ----------------------------------- --------------- --------------------
6.34%12,30 $ 545,284 0.17%2,++
12.1712 595,050 0.18++
13.7112 546,947 0.18++
24.20 618,249 0.18++
( 20.65) 741,161 0.18++
( 26.78) 557,845 0.18++
6.20%12,30 $ 78,374 0.45%2,++
11.7812 68,637 0.55++
13.2012 74,641 0.56++
23.68 72,505 0.61++
( 21.02) 63,468 0.61++
( 27.10) 292,389 0.61++
6.19%3,12,30 $ 294,318 0.45%2,++
11.753,12 296,266 0.55++
13.103,12 312,606 0.70++
23.413 281,505 0.79++
( 21.09)3 222,736 0.79++
( 27.23)3 76,363 0.79++
5.79%4,12,30 $ 116,445 1.23%2,++
10.894,12 136,878 1.31++
12.254,12 177,754 1.46++
22.594 192,614 1.54++
(21.72)4 175,100 1.53++
(27.77)4 262,027 1.53++
5.80%4,12,30 $ 202,787 1.22%2,++
10.904,12 228,276 1.31++
12.264,12 279,130 1.46++
22.524 297,835 1.54++
( 21.72)4 270,958 1.53++
( 27.77)4 382,356 1.53++
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
EXPENSES TO INVESTMENT INCOME (LOSS)
AVERAGE NET INCOME (LOSS) TO AVERAGE NET PORTFOLIO
ASSETS (EXCLUDING TO AVERAGE ASSETS (EXCLUDING TURNOVER
WAIVERS) NET ASSETS WAIVERS) RATE32
- ------------------- --------------- ------------------- ----------
0.32%2,++ 1.83%2 1.68%2 2%11
0.37++ 1.95 1.76 710
0.36++ 1.56 1.38 29
0.37++ 1.63 1.44 108
0.33++ 1.35 1.20 67
0.33++ 1.11 0.96 86
0.49%2,++ 1.55%2 1.51%2 2%11
0.60++ 1.62 1.57 710
0.67++ 1.17 1.06 29
0.67++ 1.19 1.13 108
0.67++ 0.87 0.81 67
0.63++ 0.68 0.66 86
0.59%2,++ 1.55%2 1.41%2 2%11
0.70++ 1.59 1.44 710
0.84++ 1.04 0.90 29
0.85++ 1.01 0.96 108
0.78++ 0.72 0.72 67
0.81++ 0.50 0.48 86
1.28%2,++ 0.78%2 0.73%2 2%11
1.35++ 0.86 0.82 710
1.50++ 0.28 0.24 29
1.59++ 0.27 0.21 108
1.55++ (0.04) (0.05) 67
1.55++ (0.25) (0.26) 86
1.27%2,++ 0.78%2 0.73%2 2%11
1.35++ 0.86 0.82 710
1.50++ 0.28 0.24 29
1.59++ 0.27 0.21 108
1.55++ (0.04) (0.05) 67
1.55++ (0.25) (0.26) 86
18 Redemption fee of 2.00% received by the Portfolios is reflected in total
return calculations. The impact to the return, for redemption fees
received during the period, is 7 basis points.
19 Redemption fee of 2.00% received by the Portfolios is reflected in total
return calculations. The impact to the return, for redemption fees
received during the period, is 8 basis points.
20 Redemption fee of 2.00% received by the Portfolios is reflected in total
return calculations. The impact to the return, for redemption fees
received during the period, is 9 basis points.
21 Redemption fee of 2.00% received by the Portfolios is reflected in total
returns calculations. The impact to the return, for redemption fees
received during the period, is 10 basis points.
22 Redemption fee of 2.00% received by the Portfolios is reflected in total
return calculations. The impact to the return, for redemption fees
received during the period, is 15 basis points.
23 Redemption fee of 2.00% received by the Portfolios is reflected in total
return calculations. The impact to the return, for redemption fees
received during the period, is 16 basis points.
24 Redemption fee of 2.00% received by the Portfolios is reflected in total
return calculations. The impact to the return, for redemption fees
received during the period, is 42 basis points.
25 Redemption fee of 2.00% received by the Portfolios is reflected in total
return calculations. The impact to the return, for redemption fees
received during the period, is 59 basis points.
26 Net assets end of period are less than $1,000.
27 Audited by other auditors.
28 The total return includes an impact of 8 basis points related to
payments made by SSRM prior to January 31, 2005.
29 The total return includes an impact of 9 basis points related to
payments made by SSRM prior to January 31, 2005.
30 Not Annualized.
31 Unaudited
32 The Index Equity Portfolio invests fully in The U.S. Large Company
Series of The DFA Investment Trust Company (the "Master"). The
Portfolio turnover rate is that of the Master.
33 Net investment income is less than $0.01 per share.
++ Including expenses allocated from The U.S. Large Company Series of The
DFA Investment Trust Company of 0.05% for the years ended September
30, 2001 to September 30, 2005 and the six months ended through March
31, 2006.
161
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(A) Organization
BlackRock FundsSM (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 51 portfolios, 21 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: BlackRock, Institutional,
Service, Hilliard Lyons, Investor A, Investor B, and Investor C. 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, mostly due to differences in
distribution and service fees. As of March 31, 2006, there were no shares
outstanding for Hillard Lyons.
The Index Equity Portfolio accrues its respective share of income net of
expenses daily on its investment in The U.S. Large Company Series of The DFA
Investment Trust Company (the "Master"), which is treated as a partnership for
federal income tax purposes. All of the net investment income and realized and
unrealized gains and losses from the security transactions of the Master are
allocated pro rata at the time of such determination. The Master allocated
$12,806,952 in gross investment income and $283,216 in expenses to the Index
Equity Portfolio during the six months ended March 31, 2006. These amounts are
presented on the Statement of Operations as net investment income from the
Master in the amount of $12,523,736.
Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of the
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts with its vendors and others that provide for general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund.
However, based on experience, the Fund considers the risk of loss from such
claims to be remote.
(B) Fund Reorganizations
BlackRock, Inc., the parent of BlackRock Advisors, Inc. ("BlackRock"),
acquired SSRM Holdings, Inc., the parent of State Street Research & Management
Co. ("SSRM"), the investment adviser of the former State Street Research mutual
funds.
The Boards of Trustees (the "Board") and shareholders of the State Street
Research Funds approved a reorganization with similarly-managed BlackRock
Portfolios (the "Reorganization"), as indicated below. In connection with the
Reorganization, five State Street Research Funds reorganized with newly
established BlackRock Portfolios, as indicated below. The Reorganization was a
tax-free event and took place after the close of business on January 28, 2005.
STATE STREET RESEARCH FUNDS BLACKROCK PORTFOLIOS
- ----------------------------- ------------------------
Investment Trust Investment Trust1,2
Large-Cap Analyst Investment Trust1,2
Large-Cap Value Large Cap Value Equity2
Mid-Cap Growth Mid-Cap Growth Equity2
Mid-Cap Value2 Mid-Cap Value Equity
Asset Allocation2 Asset Allocation3
Legacy2 Legacy4
Aurora2 Aurora4
Emerging Growth2 Small/Mid-Cap Growth4
Global Resources2 Global Resources4
Health Sciences2 Health Sciences4
1 Effective January 31, 2005, the BlackRock Select Equity Portfolio changed its
name to the BlackRock Investment Trust Portfolio.
2 Denotes the surviving or continuing portfolio for purposes of maintaining the
financial statements and performance history in the post-Reorganization
funds.
3 Effective January 31, 2005, the BlackRock Balanced Portfolio changed its name
to the BlackRock Asset Allocation Portfolio.
4 New BlackRock Portfolios.
163
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Under the Agreements and Plans of Reorganizations with respect to the
Reorganization, the State Street Research Class A, Class B and Class R Shares
were exchanged for BlackRock Investor A Class Shares, State Street Research
Class B(1) Shares were exchanged for BlackRock Investor B Class Shares, State
Street Research Class C Shares were exchanged for BlackRock Investor C Class
Shares and State Street Research Class S Shares were exchanged for BlackRock
Institutional Class Shares. The conversion ratios for each Share Class
mentioned above were as follows:
STATE STREET RESEARCH FUNDS CLASS A CLASS B(1) CLASS B CLASS C CLASS R CLASS S
- ----------------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Investment Trust ............ 0.77806224 0.77277277 0.75918073 0.77475000 - 0.78011714
Large-Cap Analyst ........... 0.89751180 0.89305973 0.87054964 0.89425000 - 0.89987336
Large-Cap Value ............. 1.24981582 1.21431253 1.20156181 1.21745329 - 1.24909774
Mid-Cap Growth .............. 0.73009098 0.67146166 0.63731327 0.67353407 - 0.73322751
Mid-Cap Value ............... 1.57950264 1.62345461 1.56116554 1.63087248 1.57489743 1.56483770
Asset Allocation ............ 0.71991517 0.72321182 0.71704180 0.72727901 - 0.71889936
Legacy ...................... 1.00000000 1.00000000 0.98101559 1.00000000 0.99614138 1.00000000
Aurora ...................... 1.00000000 1.00000000 0.95337751 1.00000000 - 1.00000000
Emerging Growth ............. 1.00000000 1.00000000 0.91664065 1.00000000 0.99539494 1.00000000
Global Resources ............ 1.00000000 1.00000000 0.92094612 1.00000000 0.99768147 1.00000000
Health Sciences ............. 1.00000000 1.00000000 0.96497882 1.00000000 - 1.00000000
The net assets before and after the Reorganization and shares issued and
redeemed in the Reorganization were as follows:
STATE STREET
EXISTING COMBINED NET ASSETS PRIOR NET ASSETS BLACKROCK PORTFOLIOS' RESEARCH FUNDS'
BLACKROCK PORTFOLIOS AS OF JANUARY 28, 2005 AS OF JANUARY 28, 2005 SHARES ISSUED SHARES REDEEMED
- --------------------------------- ------------------------ ------------------------ ----------------------- ----------------
Investment Trust ............... $1,498,152,592 $ 94,173,891 112,830,577 144,941,372
Large-Cap Value Equity ......... 375,958,467 220,398,231 11,510,360 9,304,166
Mid-Cap Growth Equity .......... 469,599,671 112,602,647 40,325,986 56,565,182
Mid-Cap Value Equity ........... 700,767,573 31,360,120 56,941,640 35,763,533
Asset Allocation ............... 808,215,456 118,597,457 47,307,662 65,619,686
STATE STREET
NEW COMBINED NET ASSETS PRIOR NET ASSETS BLACKROCK PORTFOLIOS' RESEARCH FUND'S
BLACKROCK PORTFOLIOS AS OF JANUARY 28, 2005 AS OF JANUARY 28, 2005 SHARES ISSUED SHARES REDEEMED
- ------------------------------- ------------------------ ------------------------ ----------------------- ----------------
Legacy ....................... $ 303,167,930 N/A 23,774,854 23,821,894
Aurora ....................... 3,307,156,075 N/A 88,632,067 88,854,760
Small/Mid-Cap Growth ......... 352,288,988 N/A 27,815,846 27,932,833
Global Resources ............. 825,347,266 N/A 17,184,504 17,250,833
Health Sciences .............. 138,374,397 N/A 6,894,017 6,898,634
164
BLACKROCK FUNDS
Included in the net assets from the State Street Research Funds were the
following components:
NET
UNDISTRIBUTED ACCUMULATED UNREALIZED
PAID IN NET INVESTMENT REALIZED APPRECIATION/ NET
STATE STREET RESEARCH FUND CAPITAL INCOME (LOSS) GAIN (LOSS) (DEPRECIATION) ASSETS
- ---------------------------- ----------------- ---------------- ------------------ ---------------- -----------------
Investment Trust ........... $1,347,362,021 $ 884,681 $ (310,301,295) $325,455,127 $1,363,400,534
Large-Cap Analyst .......... 40,605,783 (20,664) (3,696,837) 3,689,885 40,578,167
Large-Cap Value ............ 140,661,636 (51,872) (11,642,475) 26,592,947 155,560,236
Mid-Cap Growth ............. 578,507,467 (1,354,506) (280,110,666) 59,954,730 356,997,025
Legacy ..................... 385,380,697 1,305,278 (123,774,086) 40,256,041 303,167,930
Mid-Cap Value .............. 578,833,036 289,106 (794,901) 91,080,212 669,407,453
Aurora ..................... 2,419,708,570 (9,149,900) 259,837,698 636,759,707 3,307,156,075
Emerging Growth ............ 341,584,995 (1,676,121) (34,054,396) 46,434,510 352,288,988
Global Resources ........... 501,649,873 (4,726,637) 46,159,901 282,264,129 825,347,266
Health Sciences ............ 124,221,974 (1,286,711) 118,458 15,320,676 138,374,397
Asset Allocation ........... 628,277,636 (4,066,275) 2,317,491 63,089,147 689,617,999
In April of 2005, BlackRock determined that in violation of the investment
policy the BlackRock Asset Allocation Portfolio held high yield bonds as a
result of the Reorganization. The Portfolio sold the bonds and BlackRock
reimbursed the Portfolio for the realized losses incurred from the date of the
Reorganization through April 18, 2005. The amount of the reimbursement for the
realized losses was $92,690 (See Note (D)).
(C) 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.
Investment Valuation - Valuation of investments held by each Portfolio is
as follows: investments traded on a national securities exchange or on the
NASDAQ National Market System are valued at the last reported sale price that
day or the NASDAQ official closing price, if applicable; investments traded on
a national securities exchange for which there were no sales on that day and
investments traded on other over-the-counter markets for which market
quotations are readily available are valued at the mean of the bid and asked
prices; and an option or futures contract is valued at the last sales price
prior to 4:00 p.m. (Eastern time), as quoted on the principal exchange or board
of trade on which such option or contract is traded, or in the absence of a
sale, the mean between the last bid and asked prices prior to 4:00 p.m.
(Eastern time). The amortized cost method of valuation will be used with
respect to debt obligations with sixty days or less remaining to maturity
unless the investment adviser and/or sub-adviser under the supervision of the
Board determines such method does not represent fair value. Any assets which
are denominated in a non-U.S. currency are translated into U.S. dollars at the
prevailing market rates. In the event that application of these methods of
valuation results in a price for an investment which is deemed not to be
representative of the market value of such investment, the investment will be
valued by, under the direction of or in accordance with a method approved by
the Board as reflecting fair value ("Fair Value Assets"). The investment
adviser and/or sub-adviser will submit its recommendations regarding the
valuation and/or valuation methodologies for Fair Value Assets to a valuation
committee. Such valuation committee may accept, modify or reject any
recommendations. The pricing of all Fair Value Assets shall be subsequently
reported to the Board.
When determining the price for a Fair Value Asset, the investment adviser
and/or sub-adviser shall seek to determine the price that the Portfolio might
reasonably expect to receive from the current sale of that asset in an
arms-length transaction. Fair value determinations shall be based upon all
available factors that the adviser and/or sub-adviser deems relevant.
The Fund is not obligated for costs associated with the registration of
restricted securities.
Securities denominated in currencies other than U.S. dollars are subject
to changes in value due to fluctuations in exchange rates.
The Index Equity Portfolio's investment reflects its proportionate
interest in the net assets of the Master.
165
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Dividends to Shareholders - Dividends from net investment income, which
are recorded on the ex-dividend date, are declared and paid quarterly or
annually for the Portfolios. Net realized capital gains, if any, are
distributed at least annually.
Foreign Currency Translation - The books and records of the Portfolios are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The Portfolios do not isolate that portion of gains and losses on
investment securities which is due to changes in the foreign exchange rates
from that which is due to changes in the market prices of such securities. The
Portfolios report forward foreign currency related transactions as components
of realized gains for financial reporting purposes, whereas such components are
treated as ordinary income for federal income tax purposes.
Forward Foreign Currency Contracts - Certain Portfolios may enter into
forward foreign currency contracts as a hedge against either specific
transactions or Portfolio positions. These contracts are adjusted by the daily
forward exchange rate of the underlying currency and any gains or losses are
recorded as unrealized until the contract settle-ment date. Such contracts,
which protect the value of the Portfolios' investment securities against a
decline in the value of currency, do not eliminate fluctuations in the
underlying prices of the securities. They simply establish an exchange rate at
a future date. Also, although such contracts tend to minimize the risk of loss
due to a decline in the value of a hedged currency, at the same time they tend
to limit any potential gain that might be realized should the value of such
foreign currency increase. Risks may arise upon entering into these contracts
from the potential inability of counterparts to meet the terms of their
contracts and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
The aggregate principal amounts of the contracts are not recorded as the
Portfolios intend to settle the contracts prior to delivery. Under the terms of
foreign currency contracts open at March 31, 2006, the Portfolios are obligated
to deliver or receive currency in exchange for U.S. dollars as indicated below:
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT BOUGHT AMOUNT 2006 LOSS
- ------------ ---------------- --------------------------- --------------- ------------ -------------
Global Science & Technology Opportunities
04/03/06 18,365,669 Japanese Yen .............. $ 156,650 $ 156,038 $ (612)
========= ========= ===========
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT SOLD AMOUNT 2006 GAIN
-------- ---------- ---------------------------- --------- --------- -----------
Global Resources
04/04/06 70,577 Canadian Dollar ........... $ 60,474 $ 60,440 $ 34
========= ========= ===========
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT SOLD AMOUNT 2006 LOSS
-------- ---------- ---------------------------- --------- --------- -----------
Global Opportunities
04/04/06 567,803 Hong Kong Dollar .......... $ 73,173 $ 73,179 $ (6)
========= ========= ===========
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT BOUGHT AMOUNT 2006 GAIN(LOSS)
-------- ---------- ---------------------------- --------- --------- -----------
Global Opportunities
04/03/06 31,058,919 Japanese Yen .............. $ 264,917 $ 263,882 $ (1,035)
04/03/06 395,988 Swedish Krona ............. 51,093 50,843 (250)
04/04/06 740,246 Norwegian Krone ........... 112,770 112,952 182
04/04/06 55,701,645 Japanese Yen .............. 472,168 473,251 1,083
166
BLACKROCK FUNDS
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT BOUGHT AMOUNT 2006 LOSS
- ------------ ---------- -------------------------- ------------- ------------- -----------
04/04/06 24,024 British Pound ............ $ 41,645 $ 41,739 $ 94
04/04/06 110,761 Canadian Dollar .......... 94,906 94,842 (64)
---------- ---------- -----
$1,037,499 $1,037,509 $ 10
========== ========== =====
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT SOLD AMOUNT 2006 GAIN(LOSS)
- ------------ ----------------- ---------------------------- ---------------- --------------- -------------
International Opportunities
04/03/06 1,646,199 Norwegian Krone ............ $ 250,720 $ 251,191 $ (471)
04/03/06 2,661,620 Swedish Krona .............. 343,422 341,737 1,685
04/03/06 1,919,022 Euro ....................... 2,330,652 2,325,580 5,072
04/03/06 472,238 British Pound .............. 824,196 820,469 3,727
04/04/06 3,885,614 Swedish Krona .............. 498,347 498,891 (544)
04/04/06 939,990 British Pound .............. 1,629,473 1,633,146 (3,673)
06/15/06 7,500,000,000 Japanese Yen ............... 64,655,172 64,394,081 261,091
------------ ----------- -----------
$ 70,531,982 $ 70,265,095 $ 266,887
============ ============== ===========
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT BOUGHT AMOUNT 2006 GAIN(LOSS)
-------- ------------ - ----------------------------- ------------ -------------- -----------
International Opportunities
04/03/06 996,947,941 Japanese Yen ............... $ 8,503,480 $ 8,470,246 $ (33,234)
04/03/06 1,131,807 Hong Kong Dollar ........... 145,855 145,867 12
04/04/06 408,542,535 Japanese Yen ............... 3,463,105 3,471,050 7,945
06/15/06 35,000,000 Canadian Dollar ............ 30,335,861 30,034,302 (301,559)
06/15/06 25,000,000 Australian Dollar .......... 18,395,750 17,875,622 (520,128)
06/15/06 18,000,000 Euro ....................... 21,757,860 21,915,640 157,780
------------ ------------ -----------
$ 82,601,911 $ 81,912,727 $ (689,184)
============ ============ ===========
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT SOLD AMOUNT 2006 GAIN(LOSS)
-------- ------------ - ----------------------------- ------------ -------------- -----------
Asset Allocation
04/03/06 35,983 Norwegian Krone ............ $ 5,480 $ 5,490 $ (10)
04/03/06 62,312 Swedish Krona .............. 8,040 8,001 39
04/03/06 16,844 Euro ....................... 20,458 20,413 45
04/03/06 22,135 British Pound .............. 38,633 38,458 175
04/04/06 92,551 Swedish Krona .............. 11,870 11,883 (13)
04/04/06 23,311 British Pound .............. 40,410 40,501 (91)
04/06/06 2,626,449 Euro ....................... 3,191,425 3,184,026 7,399
04/12/06 25,361,500 Mexican Peso ............... 2,400,222 2,328,488 71,734
06/15/06 200,000,000 Japanese Yen ............... 1,724,138 1,717,175 6,963
------------ ------------ -----------
$ 7,440,676 $ 7,354,435 $ 86,241
============ ============ ===========
167
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT BOUGHT AMOUNT 2006 GAIN(LOSS)
- -------- -------- ---------------------------- -------- ---------- -------
Asset Allocation
04/03/06 24,553,518 Japanese Yen ............... $ 208,792 $ 208,611 $ (181)
04/03/06 27,989 Hong Kong Dollar ........... 3,607 3,607 -
04/04/06 31,426,349 Japanese Yen ............... 266,393 267,004 611
04/06/06 1,625,000 Euro ....................... 1,975,537 1,969,976 (5,561)
04/12/06 13,817,145 Mexican Peso ............... 1,269,317 1,268,579 (738)
06/15/06 500,000 Euro ....................... 604,385 608,768 4,383
06/15/06 500,000 Australian Dollar .......... 367,915 357,512 (10,403)
06/15/06 1,000,000 Canadian Dollar ............ 866,739 858,123 (8,616)
---------- ----------- ----------
$5,562,685 $5,542,180 $ (20,505)
========== =========== ==========
Swap Agreements - The Portfolios may invest in swap agreements for the
purpose of hedging against changes in interest rates or foreign currencies.
Swap agreements involve the exchange by the Portfolio with another party of
their respective commitments to pay or receive interest or a specified amount
of a currency (e.g., an exchange of floating rate payments for fixed rate
payments) with respect to a notional amount of principal. Swaps are marked to
market daily based upon quotations from market makers and the change, if any,
is recorded as an unrealized gain or loss in the Statements of Operations. Net
payments of interest are recorded as realized gain or loss. Entering into these
agreements involves, to varying degrees, elements of credit and market risk in
excess of the amounts recognized on the Statements of Assets and Liabilities.
Such risks involve the possibility that there will be no liquid market for
these agreements, that the counterparty to the agreement may default on its
obligation to perform and that there may be unfavorable changes in the
fluctuation of interest and/or exchange rates.
At March 31, 2006, the Asset Allocation Portfolio had the following swap
agreements outstanding:
Unrealized
Termination Interest Interest Notional Amount Appreciation
Portfolio Counter-party Date Receivable Rate Payable Rate (U.S. Dollars) (Depreciation)
Asset Allocation Morgan Stanley 06/14/2006 3.22% 4.90%1 $ 2,145,000 $ 7,550
Deutsche Bank 08/02/2007 4.39% 4.68%1 10,500,000 (123,375)
Deutsche Bank 09/02/2007 4.21% 4.82%1 12,000,000 (182,040)
Morgan Stanley 06/17/2010 4.31% 4.92%1 600,000 (15,870)
Morgan Stanley 07/01/2010 4.17% 4.53%1 11,300,000 (359,679)
Morgan Stanley 07/01/2010 4.53%1 4.39% 6,300,000 383,166
Union Bank of Switzerland 09/27/2010 4.51% 4.96%1 100,000 (3,120)
Deutsche Bank 11/07/2010 5.00% 4.71%1 3,100,000 3,317
Merrill Lynch 07/22/2014 4.60%1 4.93% 600,000 16,789
Goldman Sachs 10/01/2014 4.53%1 4.51% 600,000 28,084
Union Bank of Switzerland 03/23/2015 4.94%1 4.96% 5,000,000 149,150
JP Morgan Chase 05/26/2015 4.78%1 4.50% 1,700,000 88,349
Morgan Stanley 08/02/2015 4.73%1 4.68% 600,000 (28,650)
Citibank 12/23/2015 6.65% 7.37%2 2,400,000 56,099
Merrill Lynch 10/27/2019 4.78% 4.64%1 100,000 (5,076)
1 Rate shown is based on the 3 month LIBOR as of the most recent payment date.
2 Rate shown is based on the 3 month NZD LIBOR as of the most recent payment
date.
Investment Transactions and Investment Income - Investment transactions
are accounted for on the trade date. The cost of investments sold and the
related gain or loss thereon is determined by use of the specific
identification method, generally high cost, for both financial reporting and
federal income tax purposes. Interest income is recorded on the accrual basis.
Discounts and premiums on debt securities are accreted or amortized,
respectively, for book and tax purposes using the effective yield-to-maturity
method over the term of the instrument. Dividends are recorded on the
ex-dividend date. Paydown gains and losses on mortgage and asset-backed
securities are presented as an adjustment to interest income.
168
BLACKROCK FUNDS
Some countries in which the Portfolios invest require governmental
approval for the repatriation of investment income, capital or the proceeds of
sales of securities by foreign investors. In addition, if there is a
deterioration in a country's balance of payments or for other reasons, a
country may impose temporary restrictions on foreign capital remittances
abroad.
Repurchase Agreements - Money market instruments may be purchased from
banks and non-bank dealers subject to the seller's agreement to repurchase them
at an agreed upon date and price. Collateral for repurchase agreements may have
longer maturities than the maximum permissible remaining maturity of portfolio
investments. The seller is required on a daily basis to maintain the value of
the securities subject to the agreement at not less than the repurchase price.
The agreements are conditioned upon the collateral being deposited under the
Federal Reserve book-entry system or held in a separate account by the
Portfolio's custodian or an authorized securities depository.
Reverse Repurchase Agreements - The Portfolios may enter into reverse
repurchase agreements with qualified third party broker-dealers as determined
by and under the direction of the Board. Interest on the value of the reverse
repurchase agreements issued and outstanding is based upon competitive market
rates at the time of issuance and is included within the related liability on
the Statements of Assets and Liabilities. At the time the Portfolio enters into
a reverse repurchase agreement, it identifies for segregation certain liquid
securities having a value not less than the repurchase price, including accrued
interest, of the reverse repurchase agreement.
Futures Transactions - The Portfolios may invest in financial futures
contracts for the purposes of hedging their existing portfolio securities, or
securities that the Portfolios intend to purchase, against fluctuations in
value caused by changes in prevailing market interest rates. The Portfolios may
also invest in futures contracts and options on futures contracts to commit
funds awaiting investments in stocks or to maintain cash liquidity or, except
with respect to the Index Equity Portfolio, for other hedging purposes. Certain
Portfolios may also invest in these instruments to increase returns. These
Portfolios' futures contracts obligate a Portfolio, at maturity, to take or
make delivery of securities, the cash value of a securities index or a stated
quantity of a foreign currency. Upon entering into a futures contract, the
Portfolio is required to deposit cash or pledge securities as 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 cumulative 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 market, resulting in
an inability to liquidate 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.
Stripped Mortgage Backed Securities - The Asset Allocation Portfolio may
invest in stripped mortgage-backed securities issued by the U.S. Government,
its agencies and instrumentalities. Stripped mortgage-backed securities are
usually structured with two classes that receive different proportions of the
interest and principal distributions on a pool of mortgage assets. In certain
cases, one class will receive all of the interest (the interest-only or "IO"
class), while the other class will receive all of the principal (the
principal-only or "PO" class). The yield to maturity on IO's is sensitive to
the rate of principal repayments (including prepayments) on the related
underlying mortgage assets, and principal payments may have a material effect
on yield to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Portfolio may not fully recoup its
initial investment in IO's. Such securities will be considered liquid only if
so determined in accordance with guidelines approved by the Board. The
Portfolio also may invest in stripped mortgage-backed securities that are
privately issued. These securities will be considered illiquid for purposes of
the Portfolio's limit on illiquid securities.
Investing in Government Sponsored Enterprises - The Asset Allocation
Portfolio invests in securities issued by the Federal Home Loan Mortgage
Corporation ("Freddie Mac") and similar United States Government sponsored
entities such as Federal National Mortgage Association ("Fannie Mae") and the
Federal Home Loan Banks ("FHLB's"). Freddie Mac, Fannie Mae and FHLB's,
although chartered and sponsored by Congress, are not funded by Congressional
appropriations and the debt and mortgage-backed securities issued by Freddie
Mac, Fannie Mae and FHLB's are neither guaranteed nor insured by the U.S.
Government.
169
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Option Writing/Purchasing - The Portfolios may write or purchase financial
options contracts for the purpose of hedging or earning additional income,
which may be deemed speculative. When a Portfolio writes or purchases an
option, an amount equal to the premium received or paid by the Portfolio 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
Portfolio 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 Portfolio has realized a gain or loss on investment
transactions. The Portfolio, 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.
Swaptions Writing - The Portfolios may write swaption contracts to manage
exposure to fluctuations in interest rates and to enhance portfolio yield.
Swaption contracts written by the Portfolios represent an option that gives the
purchaser the right, but not the obligation, to enter into a previously agreed
upon swap contract on a future date. If a written call swaption is exercised,
the writer will enter a swap and is obligated to pay the fixed rate and receive
a floating rate in exchange. If a written put swaption is exercised, the writer
will enter a swap and is obligated to pay the floating rate and receive a fixed
rated in exchange. Swaptions are marked to market daily based upon quotations
from market makers.
When a portfolio writes a swaption, the premium received is recorded as a
liability and is subsequently adjusted to the current market values of the
swaption. Changes in the values of the swaption are reported as unrealized
gains or losses in the Statements of Assets and Liabilities or Schedule of
Investments. Gain or loss is recognized when the swaption contract expires or
is closed. Premiums received from writing swaptions that expire or are
exercised are treated by the Portfolio as realized gains from investments. The
difference between the premium and the amount paid on effecting a closing
purchase transaction is also treated as a realized gain, or if the premium is
less than the amount paid for the closing purchase, as a realized loss.
Entering into a swaption contract involves, to varying degrees, the
elements of credit, market and interest rate risk associated with both option
contracts and swap contracts. To reduce credit risk from potential counterparty
default, the Portfolios enter into swaption contracts with counterparties whose
creditworthiness has been evaluated by BlackRock. The Portfolios bear the
market risk arising from any change in index values or interest rates.
Written option and swaption transactions entered into during the six
months ended March 31, 2006, are summarized as follows:
HEALTH SCIENCES ASSET ALLOCATION
-------------------------- --------------------------
NUMBER OF NUMBER OF
CONTRACTS PREMIUM CONTRACTS PREMIUM
----------- -------------- ----------- --------------
Balance at 09/30/05 ................ (4,890) $ (632,059) (3,130) $ 1,337,580
Purchased .......................... 2,139 31,679 2,074 (1,061,602)
Written ............................ (37,649) (3,948,884) (122) 62,424
Expired ............................ 14,643 1,766,990 (894) 391,202
Closed ............................. 20,378 2,368,680 784 (389,760)
------- ------------ ------ ------------
Balance at 03/31/06 ................ (5,379) $ (413,594) (1,288) $ 339,844
======= ============ ====== ============
TBA Purchase Commitments - The Portfolios except Index Equity may enter
into to be announced ("TBA") purchase commitments to purchase or sell
securities for a fixed price at a future date. TBA commitments are considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased or sold declines or increases prior to settlement
date, which is in addition to the risk of decline in the value of the
Portfolio's other assets. Unsettled TBA commitments are valued at the current
market value of the underlying securities, according to the procedures
described under "Security Valuation".
Mortgage Dollar Rolls - The Asset Allocation Portfolio may enter into
mortgage dollar rolls (principally using TBA commitments) in which the
Portfolio sells mortgage securities for delivery in the current month and
simultaneously contracts to repurchase similar, but not identical, securities
at an agreed-upon price on a fixed date. The Portfolio accounts for such dollar
rolls as purchases and sales and receives compensation, in either "fee" or
"drop", as consideration for entering into the commitment to repurchase. The
Portfolio must maintain liquid securities having a
170
BLACKROCK FUNDS
value not less than the repurchase price (including accrued interest) for such
dollar rolls. The market value of the securities that the Portfolio is required
to purchase may decline below the agreed upon repurchase price of those
securities.
In a "fee" roll, the compensation received is recorded as deferred income
and amortized to income over the roll period. In a "drop" roll, the
compensation is paid via a lower price for the security upon its repurchase.
The counterparty receives all principal and interest payments, including
prepayments, made in respect of a security subject to such a contract while it
is the holder. Mortgage dollar rolls may be renewed with a new purchase and
repurchase price and a cash settlement made on settlement date without physical
delivery of the securities subject to the contract. A Portfolio engages in
dollar rolls for the purpose of enhancing its yield, principally by earning a
negotiated fee.
Financing Transactions - The Portfolios may enter into financial
transactions consisting of sales by a Portfolio of securities together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, the Portfolio's right to repurchase the security may be
restricted. The value of the security may change over the term of the financing
transaction.
Inflation-indexed Bonds - Inflation-indexed bonds are fixed income
securities whose principal value is periodically adjusted according to the rate
of inflation. If the index measuring inflation falls, the principal value of
inflation-indexed bonds will be adjusted downward, and consequently the
interest payable on these securities (calculated with respect to a smaller
principal amount) will be reduced. Repayment of the original bond principal
upon maturity (as adjusted for inflation) is guaranteed in the case of U.S.
Treasury inflation-indexed bonds. For bonds that do not provide a similar
guarantee, the adjusted principal value of the bond repaid at maturity may be
less than the original principal.
Securities Lending - Through an agreement with PFPC Trust Company, (the
"lending agent") the Portfolios may lend portfolio securities to certain
brokers, dealers or other financial institutions that pay the Portfolios a
negotiated fee. Prior to the close of each business day, loans of U.S.
securities are secured by collateral equal to at least 102% of the market value
of the securities on loan. Loans of foreign securities are secured by
collateral equal to at least 105% of the market value of securities on loan.
However, due to market fluctuations, the value of the securities lent may
exceed the value of the collateral. On the next business day, the collateral is
adjusted based on the prior day's market fluctuations and the current day's
lending activity. Cash collateral received in connection with the securities
lending is invested in short-term investments by the lending agent. The lending
agent has hired BlackRock Capital Management, Inc. ("BCM"), a wholly-owned
subsidiary of BlackRock, Inc., and pays BCM to provide advisory services with
respect to the collateral of all of the clients of its securities lending
program. The lending agent may invest such collateral in short-term
investments, including the Institutional Money Market Trust (the "Trust"), an
affiliate of the Fund, a portfolio of money market securities, or high-quality,
short-term instruments with a maturity date not to exceed 397 days. The
securities lending income included in the accompanying Statements of Operations
is principally derived from investments in the Trust and accordingly represents
income earned from an affiliate. BCM serves as investment adviser to the Trust
but receives no fees from the Trust for these services. Administrative and
accounting services are provided by PFPC Inc. ("PFPC"), an indirect
wholly-owned subsidiary of The PNC Financial Services Group, Inc. PFPC is paid
a fee from the Trust at an annual rate not to exceed 0.10% of the Trust's
average daily net assets. At March 31, 2006, the market value of securities on
loan, cash collateral invested in the Trust and total value of collateral held
in connection with securities lending is summarized as follows:
MARKET VALUE MARKET VALUE OF TOTAL MARKET
OF SECURITIES CASH COLLATERAL VALUE OF
ON LOAN INVESTED IN THE TRUST COLLATERAL RECEIVED
--------------- ----------------------- --------------------
Investment Trust ................ $150,281,232 $124,481,024 $160,578,688
Large Cap Value Equity .......... 59,665,955 41,626,334 61,890,756
Large Cap Growth Equity ......... 5,163,318 4,061,101 5,368,539
Dividend AchieversTM ............ 10,084,208 7,944,659 10,454,206
Legacy .......................... 35,147,205 27,124,544 36,267,835
Mid-Cap Value Equity ............ 98,411,650 94,298,696 102,668,763
Mid-Cap Growth Equity ........... 67,464,954 65,198,095 70,258,685
Aurora .......................... 439,057,934 407,786,236 454,558,973
Small/Mid-Cap Growth ............ 47,908,332 45,395,881 49,066,209
171
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARKET VALUE MARKET VALUE OF TOTAL MARKET
OF SECURITIES CASH COLLATERAL VALUE OF
ON LOAN INVESTED IN THE TRUST COLLATERAL RECEIVED
--------------- ----------------------- --------------------
Small Cap Value Equity ............................. $ 13,043,235 $ 13,281,813 $ 13,359,322
Small Cap Core Equity .............................. 8,046,762 8,352,036 8,352,036
Small Cap Growth Equity ............................ 57,860,021 59,674,945 59,674,945
Global Sciences & Technology Opportunities ......... 6,957,665 5,924,510 7,204,031
Global Resources ................................... 189,898,839 191,209,858 214,270,864
All-Cap Global Resources ........................... 96,563,130 83,058,826 100,918,935
Health Sciences .................................... 102,456,973 93,028,947 106,749,590
U.S. Opportunities ................................. 25,619,030 24,194,050 26,525,473
International Opportunities ........................ 9,531,400 9,726,000 9,726,000
Asset Allocation ................................... 105,235,631 79,877,637 109,335,562
In the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings.
Prior to January 31, 2005, State Street Bank and Trust Company served as
the securities lending agent for State Street Research Legacy Fund, State
Street Research Mid-Cap Value Fund, State Street Research Aurora Fund, State
Street Research Emerging Growth Fund, State Street Research Global Resources
Fund, State Street Research Health Sciences Fund and State Street Research
Asset Allocation Fund. These Funds received cash or securities as collateral in
an amount equal to at least 100% of the market value of any loaned securities
plus accrued interest. Cash collateral was invested in State Street Navigator
Securities Lending Prime Portfolio.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("generally accepted accounting principles") requires the use of management
estimates. Actual results could differ from these estimates and such
differences should be immaterial.
Other - Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses are prorated to
the Portfolios on the basis of relative net assets. Class-specific expenses are
borne by that class. Differences in net expense ratios between classes of a
Portfolio are due to class-specific expenses and waivers. Income, other
expenses and realized and unrealized gains and losses of a Portfolio are
allocated to the respective class on the basis of the relative net assets each
day.
The Index Equity Portfolio invests solely in The U.S. Large Company Series
(the "Series") of The DFA Investment Trust Company (the "DFA Trust"),
collectively, the Master. Advisory fees are accrued daily and paid monthly to
Dimensional Fund Advisors Inc. at the Series level as described within the DFA
Trust financial statements which are included elsewhere in the report and
should be read in conjunction with the financial statements of the Index Equity
Portfolio.
(D) Agreements and Other Transactions with Affiliates and Related Parties
Pursuant to an Investment Advisory Agreement, BlackRock serves as
investment adviser for each of the Fund's Equity Portfolios, except for the
Index Equity Portfolio. BlackRock Financial Management, Inc. ("BFM"), a
wholly-owned subsidiary of BlackRock, Inc., serves as the sub-adviser for the
Asset Allocation Portfolio and for a portion of the assets of the Global
Opportunities Portfolio. BlackRock International, Ltd. ("BIL"), an indirect
wholly-owned subsidiary of BlackRock, Inc., serves as the subadviser for the
International Opportunities Portfolio. BlackRock, Inc. is an indirect
majority-owned subsidiary of The PNC Financial Services Group, Inc.
172
BLACKROCK FUNDS
For its advisory services, BlackRock is entitled to receive fees at the
following annual rates, computed daily and payable monthly, based on each
Portfolio's average daily net assets:
INVESTMENT TRUST, LARGE CAP VALUE EQUITY,
LARGE CAP GROWTH EQUITY, DIVIDEND ACHIEVERSTM,
SMALL CAP VALUE EQUITY, SMALL CAP GROWTH EQUITY
AND ASSET ALLOCATION
------------------------------------------------
INVESTMENT
AVERAGE DAILY NET ASSETS ADVISORY FEE
- ----------------------------- ------------------------------------------------
first $1 billion 0.55%
$1 billion - $2 billion 0.50
$2 billion - $3 billion 0.475
greater than $3 billion 0.45
GLOBAL SCIENCE
& TECHNOLOGY
OPPORTUNITIES
MID-CAP VALUE EQUITY AND U.S. AND GLOBAL
MID-CAP GROWTH EQUITY OPPORTUNITIES OPPORTUNITIES
-------------------------- --------------- ---------------
INVESTMENT INVESTMENT INVESTMENT
AVERAGE DAILY NET ASSETS ADVISORY FEE ADVISORY FEE ADVISORY FEE
- --------------------------- -------------------------- --------------- ---------------
first $1 billion 0.80% 1.10% 0.90%
$1 billion - $2 billion 0.70 1.05 0.85
$2 billion - $3 billion 0.675 1.025 0.80
greater than $3 billion 0.625 1.00 0.75
SMALL/MID-CAP GROWTH,
GLOBAL RESOURCES,
ALL-CAP GLOBAL RESOURCES, INTERNATIONAL
AND HEALTH SCIENCES, LEGACY AURORA OPPORTUNITIES
--------------------------- -------------- -------------- --------------
INVESTMENT INVESTMENT INVESTMENT INVESTMENT
AVERAGE DAILY NET ASSETS ADVISORY FEE ADVISORY FEE ADVISORY FEE ADVISORY FEE
- ------------------------------- --------------------------- -------------- -------------- --------------
first $1 billion 0.75% 0.65% 0.85% 1.00%
$1 billion-$2 billion 0.70 0.60 0.80 0.95
$2 billion-$3 billion 0.675 0.575 0.75 0.90
greater than $3 billion 0.65 0.55 0.70 0.85
Small Cap Core Equity pays an advisory fee at a an annual rate of 1.00% of
average net assets.
The Index Equity Portfolio pays no advisory fee but bears its
proportionate cost of the fee paid by the Master. For the six months ended
March 31, 2006, the fund's proportionate cost of the fee paid was $106,550.
Prior to January 31, 2005, the following Funds had entered into an
agreement with State Street Research & Management Co. to provide advisory,
statistical and research facilities and services. Fees were earned monthly at
the following annual rates:
State Street Research Legacy Fund - 0.65% of net assets
State Street Research Mid-Cap Value Equity Fund - 0.65% of net assets
State Street Research Aurora Fund - 0.85% of net assets
State Street Research Emerging Growth Fund - 0.75% of net assets
State Street Research Global Resources Fund - 0.75% of net assets
State Street Research Health Sciences Fund - 0.75% of net assets
State Street Research Asset Allocation Fund - 0.75% of the first $500
million in net assets annually, 0.70% of the next $500 million, and 0.65%
of any amount over $1 billion.
BlackRock pays BIL and BFM fees for their sub-advisery services.
PFPC Trust Company, an indirect subsidiary of The PNC Financial Services
Group, Inc., serves as custodian for each of the Fund's Portfolios. PFPC Inc.,
("PFPC"), an indirect wholly-owned subsidiary of The PNC Financial Services
173
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Group, Inc., serves as transfer and dividend disbursing agent. The custodian
and the transfer agent have voluntarily waived a portion of their fees during
the period. Prior to January 31, 2005, State Street Bank and Trust Co. served
as the State Street Research Funds' custodian and record keeper for the State
Street Research Legacy Fund, State Street Research Mid-Cap Value Fund, State
Street Research Aurora Fund, State Street Research Emerging Growth Fund, State
Street Research Global Resources Fund, State Street Research Health Sciences
Fund and State Street Research Asset Allocation Fund.
Shares of each class of each Portfolio of the Fund bear their pro rata
portion of all operating expenses paid by the Portfolio, except transfer agency
fees, certain administrative/servicing fees and amounts payable under the
Fund's Amended and Restated Distribution and Service Plan.
Prior to February 1, 2006, the BlackRock Shares bore a transfer agent fee
at an annual rate not to exceed 0.005% of the average daily net assets plus per
account fees and disbursements. Institutional, Service, Investor A, Investor B
and Investor C Share classes each bore a transfer agent fee at an annual rate
not to exceed .018% of the annual average net assets of such respective classes
plus per account fees and disbursements. Certain other transfer agency fees
were allocated on relative net assets of each class of each Portfolio.
Effective February 1, 2006, each class of each Portfolio bears the costs
of transfer agent fees associated with such respective classes. Transfer agency
fees borne by each class of each Portfolio are comprised of those fees charged
by the transfer agent for issuing and redeeming shares of each class of each
Portfolio, all shareholder communications including shareholder reports,
dividend and distribution notices, proxy materials for its meetings to
shareholders and maintenance of shareholder accounts; networking and
recordkeeping/Shareholder services fees; and reimbursements to BlackRock for
costs related to the Fund's investor service center.
PFPC 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. Prior to February 1, 2006, the fee was paid at the
following annual rates: 0.085% of the first $500 million, 0.075% of the next
$500 million and 0.065% of assets in excess of $1 billion. In addition, each of
the share classes, except for the BlackRock Class, was charged an
administration fee based on the following percentage of average daily net
assets of each respective class: 0.145% of the first $500 million, 0.135% of
the next $500 million and 0.125% of assets in excess of $1 billion. The
BlackRock Class was charged an administration fee of 0.035% of the first $500
million, 0.025% of the next $500 million and 0.015% of assets in excess of $1
billion. Effective February 1, 2006, the combined administration fee is payable
at the following annual rates: 0.075% of the first $500 million, 0.065% of the
next $500 million and 0.055% of assets in excess of $1 billion. In addition,
each of the share classes is charged an administration fee based on the
following percentage of average daily net assets of each respective class:
0.025% of the first $500 million, 0.015% of the next $500 million and 0.005% of
assets in excess of $1 billion. In addition, PFPC and BlackRock may have, at
their discretion, voluntarily waived all or any portion of their administration
fees for any portfolio or share class.
Prior to January 31, 2005, State Street Research Legacy Fund, State Street
Research Mid-Cap Value Fund, State Street Research Aurora Fund, State Street
Research Emerging Growth Fund, State Street Research Global Resources Fund,
State Street Research Health Sciences Fund and State Street Research Asset
Allocation Fund paid SSRM for certain administrative costs incurred in
providing other assistance and services to each Fund. The fee was based on
actual costs allocated equally among the State Street Research Funds.
174
BLACKROCK FUNDS
For the six months ended March 31, 2006, the following shows the various
types of class-specific expenses borne directly by each class of each portfolio
and any associated waivers of those expenses.
SHARE CLASSES
ADMINISTRATION FEES -----------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- --------------- ---------- ------------ ------------ ------------
Investment Trust .................... $ - $ 272,088 $ 813 $ 281,959 $ 124,053 $ 12,025
Large Cap Value Equity .............. - 66,853 12,716 80,995 22,247 5,533
Large Cap Growth Equity ............. - 10,889 3,153 8,614 5,106 1,278
Dividend AchieversTM ................ - 1,358 198 7,642 2,128 6,242
Legacy .............................. - 27,139 - 64,159 45,249 11,013
Mid-Cap Value Equity ................ - 32,479 875 245,943 68,529 57,190
Mid-Cap Growth Equity ............... - 39,766 551 153,156 30,903 10,832
Aurora .............................. - 87,350 - 751,590 218,771 201,814
Small/Mid-Cap Growth ................ - 11,892 - 114,950 13,120 10,821
Small Cap Value Equity .............. 787 34,152 2,063 15,927 6,227 3,150
Small Cap Core Equity ............... - 8,768 241 7,408 3,828 10,238
Small Cap Growth Equity ............. - 200,817 12,991 83,475 7,572 8,165
Global Science & Technology
Opportunities ...................... - 480 56 5,261 5,816 2,078
Global Resources .................... - 21,294 - 419,388 56,808 97,839
All-Cap Global Resources ............ - 61,416 172 58,553 11,215 33,193
Health Sciences ..................... - 24,392 78 125,501 28,119 63,093
U.S. Opportunities .................. - 3,389 256 16,963 19,331 11,202
Global Opportunites1 ................ - 209 1 99 17 43
International Opportunities ......... - 129,478 41,235 159,502 42,849 81,990
Asset Allocation .................... - 16,197 1,137 257,551 95,293 36,276
Index Equity ........................ - 303,258 38,502 155,439 68,787 115,380
ADMINISTRATION FEES
TOTAL
------------
Investment Trust .................... $ 690,938
Large Cap Value Equity .............. 188,344
Large Cap Growth Equity ............. 29,040
Dividend AchieversTM ................ 17,568
Legacy .............................. 147,560
Mid-Cap Value Equity ................ 405,016
Mid-Cap Growth Equity ............... 235,208
Aurora .............................. 1,259,525
Small/Mid-Cap Growth ................ 150,783
Small Cap Value Equity .............. 62,306
Small Cap Core Equity ............... 30,483
Small Cap Growth Equity ............. 313,020
Global Science & Technology
Opportunities ...................... 13,691
Global Resources .................... 595,329
All-Cap Global Resources ............ 164,549
Health Sciences ..................... 241,183
U.S. Opportunities .................. 51,141
Global Opportunites1 ................ 369
International Opportunities ......... 455,054
Asset Allocation .................... 406,454
Index Equity ........................ 681,366
1 Commencement of operations on January 31, 2006.
SHARE CLASSES
ADMINISTRATION FEES WAIVED ----------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
----------- --------------- --------- ------------ ------------ ------------ ------------
Investment Trust ................. $ - $ 251,686 $ 501 $ 99,960 $ 45,834 $ 3,224 $ 401,205
Large Cap Value Equity ........... - 61,858 8,684 - 1,685 - 72,227
Large Cap Growth Equity .......... - 10,092 1,917 - 384 - 12,393
Dividend AchieversTM ............. - 1,358 134 144 131 - 1,767
Legacy ........................... - 24,416 - 57,532 43,829 10,023 135,800
Mid-Cap Value Equity ............. - 29,324 866 241,272 68,529 55,561 395,552
Mid-Cap Growth Equity ............ - 36,490 370 43,154 11,552 3,203 94,769
Aurora ........................... - 11,145 - 41,561 46,833 30,964 130,503
Small/Mid-Cap Growth ............. - 10,719 - 106,557 12,911 10,820 141,007
Small Cap Value Equity ........... 578 8,199 - - - - 8,777
Small Cap Core Equity ............ - 8,768 82 - - - 8,850
Small Cap Growth Equity .......... - - - - 564 - 564
Global Science & Technology
Opportunities ................... - 407 35 - - - 442
Global Resources ................. - 11,261 - 81,889 32,513 52,703 178,366
All-Cap Global Resources ......... - 38,983 11 17,799 7,212 17,247 81,252
U.S. Opportunities ............... - 3,024 125 1,502 1,568 974 7,193
Global Opportunities1 ............ - - 1 99 17 43 160
Asset Allocation ................. - 14,848 686 - - - 15,534
Index Equity ..................... - 301,806 - - 4,892 5,650 312,3482
1 Commencement of operations on January 31, 2006.
2 Portfolio also had a portfolio level administration waiver of $256,538.
175
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SHARE CLASSES
TRANSFER AGENT FEES -----------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- --------------- ---------- ------------ ------------ ------------
Investment Trust .................... $ - $85,004 $ 177 $329,792 $185,682 $ 9,415
Large Cap Value Equity .............. - 14,498 8,993 61,052 26,094 4,171
Large Cap Growth Equity ............. - 1,923 2,773 11,909 11,720 1,735
Dividend AchieversTM ................ - 555 68 3,965 1,304 2,665
Legacy .............................. - 6,166 8 66,332 48,549 7,014
Mid-Cap Value Equity ................ - 6,078 1,459 204,906 65,361 32,526
Mid-Cap Growth Equity ............... - 8,086 1,446 197,670 59,049 12,900
Aurora .............................. - 18,338 13 707,174 198,104 162,199
Small/Mid-Cap Growth ................ - 2,367 9 159,807 22,923 10,398
Small Cap Value Equity .............. 177 5,587 1,869 11,976 8,736 3,057
Small Cap Core Equity ............... - 2,897 71 4,969 2,588 4,780
Small Cap Growth Equity ............. - 66,085 3,955 52,000 17,009 9,891
Global Science & Technology
Opportunities ...................... - 724 82 9,502 12,023 3,200
Global Resources .................... - 4,484 - 202,458 30,018 34,317
All-Cap Global Resources ............ - 8,371 30 22,537 6,312 11,240
Health Sciences ..................... - 5,259 40 64,523 23,371 21,986
U.S. Opportunities .................. - 1,681 249 20,892 23,604 13,264
Global Opportunities1 ............... - 303 31 2,262 2,572 731
International Opportunities ......... - 36,864 13,451 81,424 32,292 41,520
Asset Allocation .................... - 3,659 351 182,475 76,174 15,288
Index Equity ........................ - 42,578 14,328 37,643 56,489 66,032
TRANSFER AGENT FEES
TOTAL
------------
Investment Trust .................... $ 610,070
Large Cap Value Equity .............. 114,808
Large Cap Growth Equity ............. 30,060
Dividend AchieversTM ................ 8,557
Legacy .............................. 128,069
Mid-Cap Value Equity ................ 310,330
Mid-Cap Growth Equity ............... 279,151
Aurora .............................. 1,085,828
Small/Mid-Cap Growth ................ 195,504
Small Cap Value Equity .............. 31,402
Small Cap Core Equity ............... 15,305
Small Cap Growth Equity ............. 148,940
Global Science & Technology
Opportunities ...................... 25,531
Global Resources .................... 271,277
All-Cap Global Resources ............ 48,490
Health Sciences ..................... 115,179
U.S. Opportunities .................. 59,690
Global Opportunities1 ............... 5,899
International Opportunities ......... 205,551
Asset Allocation .................... 277,947
Index Equity ........................ 217,070
1 Commencement of operations on January 31, 2006.
SHARE CLASSES
TRANSFER AGENT FEES WAIVED ------------------------------------------------------------------------
INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
--------------- --------- ------------ ------------ ------------ -----------
Investment Trust ................ $ - $ - $38,527 $22,243 $ - $ 60,770
Large Cap Value Equity .......... - 278 - 476 - 754
Large Cap Growth Equity ......... - - - 354 - 354
Dividend AchieversTM ............ 59 5 - - - 64
Mid-Cap Value Equity ............ - 17 17,523 7,375 3,481 28,396
Mid-Cap Growth Equity ........... - 21 - 5,369 - 5,390
Aurora .......................... - 2 - 62 - 64
Small/Mid-Cap Growth ............ - 1 8,142 2,301 826 11,270
Small Cap Core Equity ........... 177 - - - - 177
Small Cap Growth Equity ......... - - - 649 - 649
U.S. Opportunities .............. 118 - 1,593 1,593 826 4,130
Global Opportunities1 ........... - 2 142 126 63 333
Index Equity .................... 367 - - 3,422 - 3,789
1 Commencement of operations on January 31, 2006.
176
BLACKROCK FUNDS
SHARE CLASSES
TRANSFER AGENT FEES REIMBURSED ----------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
----------- --------------- --------- ------------ ------------ ------------ -----------
Investment Trust ................ $- $ - $ - $15,476 $44,027 $ - $ 59,503
Large Cap Growth Equity ......... - - - - 3,081 - 3,081
Dividend AchieversTM ............ - 336 10 - - - 346
Legacy .......................... - - 8 - - - 8
Mid-Cap Value Equity ............ - - 972 95,828 32,859 5,843 135,502
Mid-Cap Growth Equity ........... - - 813 - 8,408 - 9,221
Aurora .......................... - - 11 - - - 11
Small/Mid-Cap Growth ............ - - 8 53,211 9,691 1,095 64,005
Small Cap Core Equity ........... - 1,220 - - - - 1,220
Small Cap Growth Equity ......... - - - - 3,465 - 3,465
U.S. Opportunities .............. - 1,178 - 972 9,426 4,263 15,839
Global Opportunities1 ........... - - 24 2,120 2,359 286 4,789
Index Equity .................... - 23 - - 12,981 - 13,004
1 Commencement of operations on January 31, 2006.
SHARE CLASSES
SHAREHOLDER SERVICE FEES -------------------------------------------------------------
BLACKROCK SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
----------- ---------- ------------ ------------ ------------ ------------
Investment Trust ................ $ - $ 1,804 $ 661,189 $289,370 $ 27,350 $ 979,713
Large Cap Value Equity .......... - 30,028 192,226 52,261 13,054 287,569
Large Cap Growth Equity ......... - 7,353 20,437 11,976 3,090 42,856
Dividend AchieversTM ............ - 467 18,037 5,188 15,041 38,733
Legacy .......................... - - 151,034 105,722 25,927 282,683
Mid-Cap Value Equity ............ - 2,447 576,684 162,108 138,615 879,854
Mid-Cap Growth Equity ........... - 1,239 361,722 72,859 25,539 461,359
Aurora .......................... - - 1,917,373 511,609 468,431 2,897,413
Small/Mid-Cap Growth ............ - - 264,327 31,399 25,573 321,299
Small Cap Value Equity .......... 6,220 5,046 37,178 14,309 7,370 76,343
Small Cap Core Equity ........... - 1,022 18,732 9,483 25,776 55,013
Small Cap Growth Equity ......... - 31,042 202,344 17,720 19,593 270,699
Global Science & Technology
Opportunities .................. - 143 13,286 13,940 5,506 32,875
Global Resources ................ - - 1,034,418 134,142 230,726 1,399,286
All-Cap Global Resources ........ - 672 155,437 29,968 88,772 274,849
Health Sciences ................. - 295 325,441 70,739 170,519 566,994
U.S. Opportunities .............. - 644 41,578 46,298 27,233 115,753
Global Opportunities1 ........... - 4 994 171 426 1,595
International Opportunities ..... - 110,624 407,099 106,203 209,133 833,059
Asset Allocation ................ - 2,685 607,429 225,628 86,094 921,836
Index Equity .................... - 55,675 237,505 95,445 160,195 548,820
1 Commencement of operations on January 31, 2006.
177
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SHARE CLASSES
DISTRIBUTION FEES --------------------------------------
INVESTOR A INVESTOR B INVESTOR C TOTAL
------------ ------------ ------------ -------------
Investment Trust .................................. $265,142 $ 869,309 $ 83,580 $1,218,031
Large Cap Value Equity ............................ 77,012 156,903 39,236 273,151
Large Cap Growth Equity ........................... 8,172 35,927 9,271 53,370
Dividend AchieversTM .............................. 7,201 15,586 45,057 67,844
Legacy ............................................ 60,485 317,389 77,779 455,653
Mid-Cap Value Equity .............................. 232,022 486,645 415,850 1,134,517
Mid-Cap Growth Equity ............................. 145,087 218,783 76,902 440,772
Aurora ............................................ 773,108 1,536,223 1,405,726 3,715,057
Small/Mid-Cap Growth .............................. 109,738 94,350 76,718 280,806
Small Cap Value Equity ............................ 14,844 42,926 22,110 79,880
Small Cap Core Equity ............................. 7,548 28,449 77,328 113,325
Small Cap Growth Equity ........................... 80,901 53,159 58,777 192,837
Global Science & Technology Opportunities ......... 5,333 41,819 16,520 63,672
Global Resources .................................. 413,902 402,846 693,759 1,510,507
All-Cap Global Resources .......................... 63,147 89,937 266,320 419,404
Health Sciences ................................... 132,096 212,411 512,023 856,530
U.S. Opportunities ................................ 16,691 138,914 82,064 237,669
Global Opportunities1 ............................. 455 514 1,276 2,245
International Opportunities ....................... 163,693 318,618 627,591 1,109,902
Asset Allocation .................................. 243,498 677,435 259,969 1,180,902
Index Equity ...................................... 146,467 477,250 804,045 1,427,762
1 Commencement of operations on January 31, 2006.
SHARE CLASSES
DISTRIBUTION FEES WAIVED --------------
INVESTOR A
--------------
Investment Trust .................................. $ 265,142
Large Cap Value Equity ............................ 77,012
Large Cap Growth Equity ........................... 8,172
Dividend AchieversTM .............................. 7,201
Legacy ............................................ 60,485
Mid-Cap Value Equity .............................. 232,022
Mid-Cap Growth Equity ............................. 145,087
Aurora ............................................ 773,108
Small/Mid-Cap Growth .............................. 109,738
Small Cap Value Equity ............................ 14,844
Small Cap Core Equity ............................. 7,548
Small Cap Growth Equity ........................... 80,901
Global Science & Technology Opportunities ......... 5,333
Global Resources .................................. 413,902
All-Cap Global Resources .......................... 63,147
Health Sciences ................................... 132,096
U.S. Opportunities ................................ 16,691
Global Opportunities1 ............................. 455
International Opportunities ....................... 163,693
Asset Allocation .................................. 243,498
Index Equity ...................................... 143,234
1 Commencement of operations on January 31, 2006.
178
BLACKROCK FUNDS
In the interest of limiting the expenses of the Portfolios, BlackRock and
the Fund have entered into a series of annual expense limitation agreements.
The agreements set a limit on certain operating expenses of each Portfolio for
the next year and require BlackRock and the Fund to waive or reimburse fees or
expenses if these operating expenses exceed that limit. These expense limits
apply to the aggregate expenses incurred on a share class (excluding: interest,
taxes, brokerage commissions and other extraordinary expenses).
At March 31, 2006, the amounts receivable from BlackRock in those
Portfolios with reimbursements was as follows:
Investment Trust ................ $ 2,327
Dividend AchieversTM ............ 182
Legacy .......................... 4
Mid-Cap Value Equity ............ 54,265
Mid-Cap Growth Equity ........... 1,098
Aurora .......................... 6
Small/Mid-Cap Growth ............ 25,330
Small Cap Core Equity ........... 1,220
Small Cap Growth Equity ......... 1,535
U.S. Opportunities .............. 7,116
Global Opportunities ............ 8,175
Index Equity .................... 6,838
BlackRock and the Fund contractually agreed to waive or reimburse fees or
expenses until February 1, 2007, in order to limit expenses as follows. This
agreement is reviewed annually by the Fund's Board.
SHARE CLASSES
-------------------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- --------------- --------- ------------ ------------ -----------
Investment Trust .................... NA 0.81% 1.11% 1.16% 1.91% 1.91%
Large Cap Value Equity .............. NA 0.79% 1.09% 1.25% 2.00% 2.00%
Large Cap Growth Equity ............. NA 0.82% 1.12% 1.29% 2.04% 2.04%
Dividend AchieversTM ................ NA 0.90% 1.20% 1.30% 2.05% 2.05%
Legacy .............................. NA 1.10% 1.35% 1.35% 2.10% 2.10%
Mid-Cap Value Equity ................ NA 1.00% 1.25% 1.25% 2.00% 2.00%
Mid-Cap Growth Equity ............... NA 1.23% 1.53% 1.58% 2.33% 2.33%
Aurora .............................. NA 1.19% 1.44% 1.44% 2.19% 2.19%
Small/Mid-Cap Growth ................ NA 1.10% 1.35% 1.35% 2.10% 2.10%
Small Cap Value Equity .............. 1.10% 0.97% 1.27% 1.44% 2.19% 2.19%
Small Cap Core Equity ............... NA 1.30% 1.60% 1.77% 2.52% 2.52%
Small Cap Growth Equity ............. NA 0.99% 1.29% 1.46% 2.21% 2.21%
Global Sciences & Technology
Opportunities ...................... NA 1.35% 1.73% 1.75% 2.65% 2.65%
Global Resources .................... NA 1.04% 1.34% 1.34% 2.04% 2.04%
All-Cap Global Resources ............ NA 1.04% 1.34% 1.34% 2.04% 2.04%
Health Sciences ..................... NA 1.25% 1.55% 1.55% 2.25% 2.25%
U.S. Opportunities .................. NA 1.09% 1.60% 1.60% 2.25% 2.25%
Global Opportunities ................ NA 1.35% 1.65% 1.65% 2.40% 2.40%
International Opportunities ......... NA 1.45% 1.75% 1.92% 2.67% 2.67%
Asset Allocation .................... NA 0.86% 1.16% 1.33% 2.08% 2.08%
Index Equity ........................ NA 0.18% 0.615% 0.785% 1.24% 1.24%
Prior to January 31, 2005, the State Street Research Mid-Cap Value,
Emerging Growth and Health Sciences Funds limited expenses to 1.25% (plus 12b-1
fees), 1.10% (plus 12b-1 fees) and 1.00% (plus 12b-1 fees), respectively.
If in the following two years the operating expenses of a share class that
previously received a waiver or reimbursement from BlackRock and the Fund are
less than the expense limit for that share class, the share class is required
to repay BlackRock and the Fund up to the amount of fees waived or expenses
reimbursed under the agreement if: (1) the Portfolio of which the share class
is a part has more than $50 million in assets, (2) BlackRock
179
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
continues to be the Portfolio's investment adviser and (3) the Board of
Trustees of the Fund has approved the payments to BlackRock at the previous
quarterly meeting.
Under terms of the Agreement and Plan of Reorganization of State Street
Research Investment Trust, State Street Research Large-Cap Analyst Fund, State
Street Research Large-Cap Value Fund, State Street Research Legacy Fund, State
Street Research Mid-Cap Value Fund, State Street Research Mid-Cap Growth Fund,
State Street Research Aurora Fund, State Street Research Emerging Growth Fund,
State Street Research Global Resources Fund, State Street Research Health
Sciences Fund and State Street Research Asset Allocation Fund, fees waived by
BlackRock through February 1, 2007, on the Institutional, Investor A, Investor
B and Investor C Share classes of the Investment Trust, Large Cap Value Equity,
Legacy, Mid-Cap Value Equity, Mid-Cap Growth Equity, Aurora, Small/Mid-Cap
Growth, Global Resources, Health Sciences and Asset Allocation are not subject
to future recoupment by BlackRock.
At March 31, 2006, the amounts subject to possible future reimbursement
under the expense limitation agreement are as follows:
TOTAL WAIVERS
EXPIRING EXPIRING EXPIRING SUBJECT TO
JANUARY 31, 2007 JANUARY 31, 2008 JANUARY 31, 2009 REIMBURSEMENT
------------------ ------------------ ------------------ --------------
Large Cap Growth Equity ........................... $ 166,424 $ 156,241 $ 3,818 $ 326,483
Dividend AchieversTM .............................. 99,618 146,543 1,677 247,838
Small Cap Value Equity ............................ 25,127 24,977 - 50,104
Small Cap Core Equity ............................. 52,283 73,554 2,276 128,113
Small Cap Growth Equity ........................... 6,742 - 4,677 11,419
U.S. Opportunities ................................ 15,890 8,580 31,648 56,118
Global Science & Technology Opportunities ......... 71,419 95,323 - 166,742
All Cap Global Resources .......................... - 303,884 1,104 304,988
Global Opportunities .............................. - - 16,584 16,584
International Opportunities ....................... 185,626 81,759 - 267,385
Index Equity ...................................... 1,333,005 1,120,125 47,370 2,500,500
The following waivers previously incurred on the portfolios which were
subject to recoupment by BlackRock expired on January 31, 2006:
Large Cap Growth Equity ........................... $ 154,813
Small Cap Core Equity ............................. 12,634
Global Science & Technology Opportunities ......... 23,534
International Opportunities ....................... 41,722
As of March 31, 2006 there is $6,742 in prior period waivers on Small Cap
Growth Equity eligible for recoupment by BlackRock upon approval from the
Board.
Pursuant to the Fund's Amended and Restated Distribution and Service Plan
(the "Plan"), the Fund may pay BlackRock Distributors, Inc. (the "Distributor")
and/or BlackRock or any other affiliate of The PNC Financial Services Group,
Inc. fees for distribution and sales support services. Currently, only Investor
A Shares, Investor B Shares and Investor C Shares bear the expense of
distribution fees under the Plan. In addition, the Fund may pay brokers,
dealers, financial institutions and industry professionals (including The PNC
Financial Services Group, Inc. and its affiliates) ("service organizations")
fees for the provision of personal services to shareholders. BlackRock may
receive some of the service fees paid by the Fund in return for providing
services to shareholders. Prior to January 31, 2005, State Street Research
Service Center, a division of State Street Research Investment Services, Inc.,
provided certain shareholder services to the State Street Research Funds, such
as responding to inquiries and instructions from investors with respect to the
purchase and redemption of shares of the Funds. For the period October 1, 2004
through January 31, 2005, the State Street Research Funds paid $115,357,
$324,764, $1,712,817, $543,616, $290,168, $51,797 and $226,546, for State
Street Research Legacy, Mid-Cap Value, Aurora, Emerging Growth, Global
Resources, Health Sciences and Asset Allocation Funds, respectively.
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.
180
BLACKROCK FUNDS
Class Specific Fee Arrangement
Portfolio Share Classes
BlackRock Institutional Service
Contractual Actual Contractual Actual Contractual Actual
Period Fees (1) Fees (5) Fees Fees (5) Fees (1) Fees (5)
Investment Trust 10/1/05-3/31/06 N/A N/A None None 0.25% 0.25%
Large Cap Value Equity 10/1/05-3/31/06 N/A N/A None None 0.25% 0.25%
Large Cap Growth 10/1/05-3/31/06 N/A N/A None None 0.25% 0.25%
Equity
Dividend AchieversTM 10/1/05-3/31/06 N/A N/A None None 0.25% 0.25%
Legacy Pre-1/31/05 N/A N/A None None N/A N/A
Post-1/31/05 N/A N/A None None 0.25% 0.25%
Mid-Cap Value Equity Pre-1/31/05 N/A N/A None None N/A N/A
Post-1/31/05 N/A N/A None None 0.25% 0.25%
Mid-Cap Growth Equity 10/1/05-3/31/06 N/A N/A None None 0.25% 0.25%
Aurora Pre-1/31/05 N/A N/A None None N/A N/A
Post-1/31/05 N/A N/A None None 0.25% 0.25%
Small/Mid-Cap Growth Pre-1/31/05 N/A N/A None None N/A N/A
Post-1/31/05 N/A N/A None None 0.25% 0.25%
Small Cap Value Equity 10/1/05-3/31/06 0.25% 0.25% None None 0.25% 0.25%
Small Cap Core Equity 10/1/05-3/31/06 N/A N/A None None 0.25% 0.25%
Small Cap Growth 10/1/05-3/31/06 N/A N/A None None 0.25% 0.25%
Equity
Global Science & 10/1/05-3/31/06 N/A N/A None None 0.25% 0.25%
Technology
Opportunities
Global Resources Pre-1/31/05 N/A N/A None None N/A N/A
Post-1/31/05 N/A N/A None None N/A N/A
All-Cap Global 10/1/05-3/31/06 N/A N/A None None 0.25% 0.25%
Resources
Health Sciences Pre-1/31/05 N/A N/A None None N/A N/A
Post-1/31/05 N/A N/A None None 0.25% 0.25%
U.S. Opportunities 10/1/05-3/31/06 N/A N/A None None 0.25% 0.25%
Global Opportunities 10/1/05-3/31/06 N/A N/A None None 0.25% 0.25%
International 10/1/05-3/31/06 N/A N/A None None 0.25% 0.25%
Opportunities
Asset Allocation Pre-1/31/05 N/A N/A None None N/A N/A
Post-1/31/05 N/A N/A None None 0.25% 0.25%
Index Equity 10/1/05-3/31/06 N/A N/A None None 0.15% 0.15%
Portfolio Share Classes
Investor A Investor B Investor C
Contractual Actual Contractual Actual Contractual Actual
Fees Fees (5) Fees (4) Fees (5) Fees (4) Fees (5)
Investment Trust 0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Large Cap Value Equity 0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Large Cap Growth 0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Equity
Dividend AchieversTM 0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Legacy 0.30%2 0.30% 1.00% 1.00% 1.00% 1.00%
0.35%3 0.35% 1.00% 1.00% 1.00% 1.00%
Mid-Cap Value Equity 0.30%2 0.30% 1.00% 1.00% 1.00% 1.00%
0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Mid-Cap Growth Equity 0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Aurora 0.30%2 0.30% 1.00% 1.00% 1.00% 1.00%
0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Small/Mid-Cap Growth 0.30%2 0.30% 1.00% 1.00% 1.00% 1.00%
0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Small Cap Value Equity 0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Small Cap Core Equity 0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Small Cap Growth 0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Equity
Global Science & 0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Technology
Opportunities
Global Resources 0.30%2 0.30% 1.00% 1.00% 1.00% 1.00%
0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
All-Cap Global 0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Resources
Health Sciences 0.30%2 0.30% 1.00% 1.00% 1.00% 1.00%
0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
U.S. Opportunities 0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Global Opportunities 0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
International 0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Opportunities
Asset Allocation 0.30%2 0.30% 1.00% 1.00% 1.00% 1.00%
0.35%3 0.25% 1.00% 1.00% 1.00% 1.00%
Index Equity 0.25%3 0.15% 0.90% 0.90% 0.90% 0.90%
(1) - the maximum annual contractual fees are comprised of a 0.25% service fee,
with exception of Index Equity which has a service fee of 0.15%.
(2) - the maximum annual contractual fees are comprised of a 0.05% distribution
fee and a 0.25% service fee.
(3) - the maximum annual contractual fees are comprised of a 0.10% distribution
fee and a 0.25% service fee, with exception of Index Equity which
contractual fees are comprised of a 0.10% distribution fee and a 0.15%
service fee.
(4) - the maximum annual contractual fees are comprised of a 0.75% distribution
fee and a 0.25% service fee, with the exception of Index Equity which
contractual fees are comprised of a 0.75% distribution fee and a 0.15%
service fee.
(5) - the actual fees are for the six months ended March 31, 2006 for
Post-January 31, 2005 and are as of January 31, 2005 for Pre-January 31,
2005.
181
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
BlackRock maintains a call center, which is responsible for providing
certain shareholder services to the Fund, such as responding to shareholder
inquiries and processing transactions based upon instructions from shareholders
with respect to the subscription and redemption of Fund shares. During the six
months ended March 31, 2006, the following amounts have been accrued by each
portfolio to reimburse BlackRock for costs incurred running the call center,
which are a component of the transfer agent fees in the accompanying Statements
of Operations.
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
----------- --------------- --------- ------------ ------------ ------------ ------------
Investment Trust ................. $ - $ 45,407 $ 130 $ 77,809 $ 39,401 $ 2,715 $ 165,462
Large Cap Value Equity ........... - 6,938 2,023 13,157 4,572 815 27,505
Large Cap Growth Equity .......... - 1,089 458 1,295 808 231 3,881
Dividend Achievers(TM) ........... - 188 24 1,201 383 953 2,749
Legacy ........................... - 4,023 - 15,469 11,725 2,042 33,259
Mid-Cap Value Equity ............. - 354 17 17,523 7,375 3,481 28,750
Mid-Cap Growth Equity ............ - 7,012 107 48,317 10,393 2,812 68,641
Aurora ........................... - 10,049 2 130,263 44,981 35,035 220,330
Small/Mid-Cap Growth ............. - 1,554 1 21,363 3,806 2,067 28,791
Small Cap Value Equity ........... 207 2,814 199 1,823 874 408 6,325
Small Cap Core Equity ............ - 820 21 1,126 572 1,155 3,694
Small Cap Growth Equity .......... - 14,431 1,089 9,520 1,152 1,361 27,553
Global Science & Technology
Opportunities .................. - 116 15 1,185 1,198 514 3,028
Global Resources ................. - 1,848 - 44,373 7,236 10,119 63,576
All-Cap Global Resources ......... - 3,069 8 5,252 1,327 2,775 12,431
Health & Sciences ................ - 1,924 20 14,894 4,635 6,260 27,733
U.S. Opportunities ............... - 518 57 3,597 3,865 2,147 10,184
International Opportunities ...... - 11,648 3,315 19,171 5,413 8,870 48,417
Asset Allocation ................. - 2,144 187 49,381 18,914 5,761 76,387
Index Equity ..................... - 22,019 2,867 13,048 7,920 11,185 57,039
As of March 31, 2006, affiliated payables were as follows:
PNC BANK
PFPC(1) BLACKROCK(2) AFFILIATES(3)
------------ -------------- --------------
Investment Trust .................................. $ 489,771 $ 733,803 $ 320,199
Large Cap Value Equity ............................ 76,355 210,835 83,236
Large Cap Growth Equity ........................... 11,562 34,928 15,043
Dividend AchieversTM .............................. 8,227 19,523 18,050
Legacy ............................................ 96,123 200,509 113,883
Mid Cap Value Equity .............................. 192,452 609,333 316,289
Mid Cap Growth Equity ............................. 216,975 400,997 130,267
Aurora ............................................ 451,519 1,981,604 958,024
Small/Mid Cap Growth .............................. 77,092 217,598 89,158
Small Cap Value Equity ............................ 15,859 68,039 22,004
Small Cap Core Equity ............................. 16,931 71,323 33,215
Small Cap Growth Equity ........................... 68,276 368,515 69,142
Global Science & Technology Opportunities ......... 18,370 29,480 17,810
Global Resources .................................. 143,327 836,766 424,975
All Cap Global Resources .......................... 93,687 343,644 149,773
Health Sciences ................................... 135,729 501,103 302,090
U.S. Opportunities ................................ 30,734 125,881 62,710
Global Opportunities .............................. 13,153 - 2,710
International Opportunities ....................... 283,399 1,063,101 368,406
Asset Allocation .................................. 267,918 475,461 324,195
Index Equity ...................................... 75,740 46,955 296,060
182
BLACKROCK FUNDS
(1) - payables to PFPC are for Accounting, Administration, Custody and Transfer
Agent services provided.
(2) - payables to BlackRock are for Advisory, Administration and Call Center
services provided, and for amounts due BlackRock for costs incurred related
to the BlackRock Funds Call Center.
(3) - payables to PNC Bank affiliates are for distribution and sales support
services as described under the Plan. The total payable on behalf of the
Fund, was $5,632,572, a portion of which is paid to service organizations,
including other PNC Bank affiliates.
State Street Research Investment Services, Inc., from time to time and in
varying amounts, voluntarily assumed some portion of fees or expenses relating
to the State Street Research Funds. During the period ended January 31, 2005,
the amount of such expenses assumed by State Street Research Investment
Services, Inc. were $271,500, $355,506 and $162,313 for the State Street
Research Mid-Cap Value, Emerging Growth and Health Sciences Funds,
respectively.
Prior to January 31, 2005, State Street Research Investment Services, Inc.
reimbursed a total of $91,069 and $294,508 to State Street Research Mid-Cap
Value and Asset Allocation Funds, respectively, reflecting the estimated excess
of payments received over costs incurred under the plans of distribution
pursuant to Rule 12b-1 under the Investment Company Act of 1940.
Prior to January 31, 2005, SSRM conducted an internal review regarding the
use of fund brokerage commissions in consideration of the distribution of
shares. In connection with this review, SSRM determined to reimburse the Funds
the entire amount of any such identified brokerage commissions, and reviewed
this matter with the Board of the State Street Research Funds. The amount of
reimbursement in the State Street Research Legacy, Mid-Cap Value, Aurora,
Global Resources and Asset Allocation Funds amounted to $294,363, $144,758,
$203,165, $12,780 and $41,520, respectively, and are shown as "Net increase
from payment by affiliate" on the Statements of Operations.
Prior to January 31, 2005, SSRM reimbursed State Street Research Mid-Cap
Value and Asset Allocation $409,472 and $49,054, respectively, as a result of a
corporate action processing error. This amount is included in the total amount
of "Net increase from payment by affiliate" on the Statements of Operations.
On February 19, 2004, State Street Research Investment Services, Inc.,
entered into an agreement with the NASD resolving all outstanding issues
relating to an investigation by the NASD of the Distributor's email retention
practices and supervision of trading activity in shares of the State Street
Research Legacy Fund. State Street Research Investment Services, Inc., without
admitting or denying the allegations or the findings set forth in the
agreement, and solely for the purposes of the settlement, agreed to the entry
of certain findings by the NASD relating to compliance with document retention
requirements and supervision of enforcement of shareholder exchange limitations
set forth in the Fund's prospectuses. The agreement contains no allegations or
findings of fraudulent conduct by State Street Research Investment Services,
Inc. As part of this agreement the State Street Research Investments Trust,
Inc. made a payment to the State Street Research Legacy Fund to compensate the
Fund for losses relating to the exchange of Fund shares beyond the annual limit
set forth in the Fund's prospectus. The payment was allocated among the Fund's
share classes as follows: $4,676 to Class A; $4,979 to Class B(1); $1,991 to
Class B; $1,298 to Class C and $2,763 to Class S. These amounts are shown in
the total amount of $15,707 as "Net increase from payment by affiliate" in the
Statements of Changes in Net Assets.
183
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(E) Purchases and Sales of Securities
For the six months ended March 31, 2006, purchases and sales of
securities, other than short-term investments, dollar rolls and U.S. government
securities, were as follows:
PURCHASES SALES
---------------- ----------------
Investment Trust .................................. $ 485,933,914 $ 611,572,840
Large Cap Value Equity ............................ 89,877,444 108,946,631
Large Cap Growth Equity ........................... 21,696,209 27,014,137
Dividend AchieversTM .............................. 12,070,976 12,232,360
Legacy ............................................ 116,117,935 141,727,427
Mid-Cap Value Equity .............................. 477,782,858 503,741,000
Mid-Cap Growth Equity ............................. 153,012,907 183,089,402
Aurora ............................................ 1,779,407,690 2,274,727,749
Small/Mid-Cap Growth .............................. 86,987,434 103,657,984
Small Cap Value Equity ............................ 71,026,338 88,397,844
Small Cap Core Equity ............................. 60,038,261 33,999,850
Small Cap Growth Equity ........................... 284,592,149 272,226,759
Global Science & Technology Opportunities ......... 22,527,082 18,400,267
Global Resources .................................. 206,140,996 304,140,504
All-Cap Global Resources .......................... 296,723,390 59,313,474
Health Sciences ................................... 773,645,010 451,611,605
U.S. Opportunities ................................ 56,043,358 56,038,596
Global Opportunities .............................. 15,327,925 2,787,654
International Opportunities ....................... 735,253,891 470,101,960
Asset Allocation .................................. 389,833,923 413,948,188
For the six months ended March 31, 2006, purchases and sales of U.S.
government securities were as follows:
PURCHASES SALES
--------------- --------------
Investment Trust .................... $ 20,997,433 $ -
Mid Cap Value Equity ................ 36,192,350 -
Aurora .............................. 6,999,144 12,407,760
Small Cap Growth Equity ............. 54,382,103 499,820
Global Resources .................... 28,074,525 6,983,043
All-Cap Global Resources ............ 35,786,840 -
Health Sciences ..................... 103,900,228 16,258,311
Global Opportunities ................ 8,182,652 4,188,844
International Opportunities ......... 190,564,238 32,507,654
Asset Allocation .................... 543,791,599 219,731,818
184
BLACKROCK FUNDS
(F) Capital Shares
Transactions in capital shares for each period were as follows:
INVESTMENT TRUST
-----------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
---------- ----------
SHARES VALUE SHARES VALUE
---------- ------- ---------- -------
Shares issued from the reorgani-
zation:(1)
Institutional Class ............ - $ - 40,828,647 $ 46,463,113
Investor A Class ............... - - 48,798,086 639,980,511
Investor B Class ............... - - 21,137,337 357,050,314
Investor C Class ............... - - 2,066,507 31,339,748
Shares sold:
Institutional Class ............ 2,046,510 27,657,522 2,716,252 34,941,259
Service Class .................. 3,590 48,044 5,636 72,739
Investor A Class ............... 514,301 6,785,385 936,331 11,972,355
Investor B Class ............... 265,007 3,332,187 554,461 6,784,563
Investor C Class ............... 32,925 411,895 78,252 948,732
Shares issued in reinvestment of
dividends:
Institutional Class ............ 747,230 9,909,146 7,404 94,993
Service Class .................. 3,037 40,344 587 7,556
Investor A Class ............... 1,198,546 15,685,212 3,914 49,674
Investor B Class ............... 472,359 5,886,428 - -
Investor C Class ............... 33,100 413,090 - -
Shares redeemed:
Institutional Class ............ (4,349,467) (58,047,295) (8,708,215) (112,424,984)
Service Class .................. (41,464) (556,665) (32,367) (422,901)
Investor A Class ............... (5,117,190) (67,535,916) (9,396,717) (120,682,165)
Investor B Class ............... (2,634,829) (33,183,515) (4,188,219) (51,463,775)
Investor C Class ............... (306,608) (3,854,983) (462,731) (5,682,609)
---------- -------------- ------------- --------------
Net increase (decrease) ......... (7,132,953) $ (93,009,121) 94,345,165 $ 839,029,123
========== ============== ============= ==============
(1) See Note (B).
185
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
LARGE CAP VALUE EQUITY
-------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
------------------------------------ ----------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ --------------- ----------------
Share issued from the
reorganization:(1)
Institutional Class ............ - $ - 1,149,957 $ 6,180,742
Investor A Class ............... - - 7,681,441 91,431,755
Investor B Class ............... - - 2,233,885 26,120,761
Investor C Class ............... - - 445,078 5,234,452
Shares sold:
Institutional Class ............ 610,270 8,864,963 1,340,339 19,027,258
Service Class .................. 10,929 163,156 65,078 900,102
Investor A Class ............... 709,981 10,588,730 1,331,671 18,650,102
Investor B Class ............... 69,355 1,015,886 206,511 2,822,575
Investor C Class ............... 29,981 428,759 147,844 1,984,287
Shares issued in reinvestment of
dividends:
Institutional Class ............ 24,943 376,219 38,244 536,503
Service Class .................. 10,961 165,807 23,723 331,668
Investor A Class ............... 62,503 943,140 94,311 1,322,164
Investor B Class ............... 6,870 100,931 10,352 141,418
Investor C Class ............... 1,021 15,039 1,992 27,134
Shares redeemed:
Institutional Class ............ (1,501,901) (22,286,558) (2,726,129) (37,957,095)
Service Class .................. (144,461) (2,153,363) (2,054,144) (27,545,118)
Investor A Class ............... (1,187,479) (17,729,858) (2,804,802) (39,168,278)
Investor B Class ............... (397,421) (5,828,515) (891,730) (12,222,080)
Investor C Class ............... (73,997) (1,081,927) (404,422) (5,567,580)
---------- -------------- ---------- -------------
Net increase (decrease) ......... (1,768,445) $ (26,417,591) 5,889,199 $ 52,250,770
========== ============== ========== =============
(1) See Note (B).
186
BLACKROCK FUNDS
LARGE CAP GROWTH EQUITY
------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
--------------------------------- ------------------------------------
SHARES VALUE SHARES VALUE
------------- ----------------- --------------- ------------------
Shares sold:
Institutional Class ........... 113,879 $ 1,168,764 128,319 $ 1,231,659
Service Class ................. 23,906 240,160 90,689 810,121
Investor A Class .............. 201,550 2,012,782 342,912 3,177,738
Investor B Class .............. 70,022 645,387 124,782 1,071,723
Investor C Class .............. 62,434 564,917 64,250 547,106
Shares issued in reinvestment of
dividends:
Institutional Class ........... 5,154 53,341 - -
Service Class ................. 1,610 16,339 - -
Investor A Class .............. 7,955 79,312 - -
Shares redeemed:
Institutional Class ........... (428,560) (4,442,256) (1,071,602) (10,289,833)
Service Class ................. (80,223) (809,457) (3,287,254) (30,028,357)
Investor A Class .............. (203,302) (2,016,337) (898,658) (8,356,933)
Investor B Class .............. (206,110) (1,868,960) (597,102) (5,081,808)
Investor C Class .............. (28,943) (261,824) (134,801) (1,143,010)
-------- ------------- ---------- --------------
Net decrease ................... (460,628) $ (4,617,832) (5,238,465) $ (48,061,594)
======== ============= ========== ==============
DIVIDEND ACHIEVERSTM
-----------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
------------------------------- -------------------------------
SHARES VALUE SHARES VALUE
------------- --------------- ------------ ----------------
Shares sold:
Institutional Class ............ 45,596 $ 499,120 520,745 $ 5,509,967
Service Class .................. 3 20 36,472 383,000
Investor A Class ............... 136,097 1,478,273 1,566,635 16,480,346
Investor B Class ............... 116,075 1,241,203 346,872 3,664,700
Investor C Class ............... 206,057 2,214,966 1,077,229 11,334,145
Shares issued in reinvestment of
dividends:
Institutional Class ............ 1,644 17,907 6,612 69,595
Service Class .................. 329 3,610 243 2,564
Investor A Class ............... 8,327 91,588 10,075 106,355
Investor B Class ............... 1,773 19,422 1,299 13,721
Investor C Class ............... 3,262 35,756 3,121 32,928
Shares redeemed:
Institutional Class ............ (223,905) (2,419,799) (412,894) (4,405,581)
Service Class .................. (2,897) (32,174) (1,612) (17,339)
Investor A Class ............... (217,208) (2,369,092) (215,526) (2,280,818)
Investor B Class ............... (37,855) (415,888) (20,215) (215,881)
Investor C Class ............... (91,696) (994,154) (38,516) (400,224)
-------- ------------ --------- ------------
Net increase (decrease) ......... (54,398) $ (629,242) 2,880,540 $ 30,277,478
======== ============ ========= ============
187
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
LEGACY
---------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE PERIOD
3/31/06 11/1/04 THROUGH 9/30/05
---------------------------------- ----------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ --------------- ------------------
Net change in shares from reorgani-
zation:(1)
State Street Research Fund:
Investor A Class (Formerly Class
A, Class B and Class R) .......... - $ - (47,039) $ -
Shares sold:
Institutional Class (Formerly Class
S) ............................... 89,270 1,335,518 173,928 2,330,227
Service Class ..................... - - 8 100
Investor A Class (Formerly Class
A, Class B and Class R) .......... 789,672 11,546,961 898,902 11,847,252
Investor B Class (Formerly Class
B(1)) ............................ 186,909 2,547,680 270,843 3,387,849
Investor C Class (Formerly Class
C) ............................... 102,579 1,412,369 137,658 1,730,474
Shares redeemed:
Institutional Class (Formerly Class
S) ............................... (433,800) (6,433,756) (601,280) (8,146,542)
Service Class ..................... - - - -
Investor A Class (Formerly Class
A, Class B and Class R) .......... (1,243,898) (17,977,976) (2,980,221) (39,260,058)
Investor B Class (Formerly Class
B(1)) ............................ (848,221) (11,607,894) (1,984,310) (24,844,468)
Investor C Class (Formerly Class
C) ............................... (217,912) (2,976,450) (573,661) (7,197,155)
---------- -------------- ---------- --------------
Net decrease ......................... (1,575,401) $ (22,153,548) (4,705,172) $ (60,152,321)
========== ============== ========== ==============
LEGACY
----------------------------------
FOR THE YEAR
ENDED 10/31/04
----------------------------------
SHARES VALUE
--------------- ------------------
Net change in shares from reorgani-
zation:(1)
State Street Research Fund:
Investor A Class (Formerly Class
A, Class B and Class R) .......... - $ -
Shares sold:
Institutional Class (Formerly Class
S) ............................... 28,583 361,227
Service Class ..................... - -
Investor A Class (Formerly Class
A, Class B and Class R) .......... 3,342,153 41,469,311
Investor B Class (Formerly Class
B(1)) ............................ 475,624 5,595,734
Investor C Class (Formerly Class
C) ............................... 277,077 3,269,502
Shares redeemed:
Institutional Class (Formerly Class
S) ............................... (928,675) (11,749,962)
Service Class ..................... - -
Investor A Class (Formerly Class
A, Class B and Class R) .......... (5,218,348) (63,485,226)
Investor B Class (Formerly Class
B(1)) ............................ (1,692,058) (19,854,531)
Investor C Class (Formerly Class
C) ............................... (939,768) (11,076,996)
---------- --------------
Net decrease ......................... (4,655,412) $ (55,470,941)
========== ==============
(1) See Note (B).
188
BLACKROCK FUNDS
MID-CAP VALUE EQUITY
------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE
ENDED PERIOD
3/31/06 3/1/05 THROUGH 9/30/05
--------------------------------- --------------------------------
SHARES VALUE SHARES VALUE
--------------- ----------------- --------------- ----------------
Net change in shares from reorgani-
zation:(1)
State Street Research Fund:
Institutional Class (Formerly Class S)..... - $ - - $ -
Investor A Class (Formerly Class A,
Class B and Class R) ..................... - - - -
Investor B Class (Formerly Class
B(1)) .................................... - - - -
Investor C Class (Formerly Class C) ....... - - - -
BlackRock Fund:
Institutional Class (Formerly Class S)..... - - - -
Service Class ............................. - - - -
Investor A Class (Formerly Class A,
Class B and Class R) ..................... - - - -
Investor B Class (Formerly Class
B(1)) .................................... - - - -
Investor C Class (Formerly Class C) ....... - - - -
Shares sold:
Institutional Class (Formerly Class S)..... 2,129,314 27,550,005 732,026 9,690,025
Service Class ............................. 160,731 2,012,252 13,705 178,478
Investor A Class (Formerly Class A,
Class B and Class R) ..................... 6,322,980 80,971,927 7,206,377 93,027,146
Investor B Class (Formerly Class
B(1)) .................................... 629,815 7,507,021 601,835 7,368,349
Investor C Class (Formerly Class C) ....... 2,586,287 30,896,777 1,460,280 17,909,975
Shares issued in reinvestment of
dividends:
Institutional Class (Formerly Class S)..... 354,706 4,434,320 16,311 199,976
Service Class .............................. 8,444 104,415 - -
Investor A Class (Formerly Class A,
Class B and Class R) ..................... 3,346,832 41,004,862 208,098 2,507,385
Investor B Class (Formerly Class
B(1)) .................................... 1,027,447 11,775,067 58,105 662,980
Investor C Class (Formerly Class C) ....... 566,928 6,496,802 29,827 340,332
Shares redeemed:
Institutional Class (Formerly Class S)..... (692,139) (9,069,310) (839,167) (10,927,942)
Service Class ............................. (15,131) (196,275) (57,141) (720,163)
Investor A Class (Formerly Class A,
Class B and Class R) ..................... (9,621,392) (125,542,457) (6,109,543) (78,603,990)
Investor B Class (Formerly Class
B(1)) .................................... (1,117,649) (13,461,528) (1,151,006) (13,982,367)
Investor C Class (Formerly Class C) ....... (982,870) (11,791,499) (1,094,870) (13,212,388)
---------- --------------- ---------- --------------
Net increase ................................ 4,704,303 $ 52,692,379 1,074,837 $ 14,437,796
========== =============== ========== ==============
MID-CAP VALUE EQUITY
---------------------------------
FOR THE
PERIOD
7/1/04 THROUGH 2/28/05
---------------------------------
SHARES VALUE
--------------- -----------------
Net change in shares from reorgani-
zation:(1)
State Street Research Fund:
Institutional Class (Formerly Class S)..... 923,822 $ -
Investor A Class (Formerly Class A,
Class B and Class R) ..................... 13,319,536 -
Investor B Class (Formerly Class
B(1)) .................................... 3,942,678 -
Investor C Class (Formerly Class C) ....... 2,992,071 -
BlackRock Fund:
Institutional Class (Formerly Class S)..... 1,247,151 15,137,406
Service Class ............................. 109,386 1,317,419
Investor A Class (Formerly Class A,
Class B and Class R) ..................... 385,111 4,599,212
Investor B Class (Formerly Class
B(1)) .................................... 665,825 7,539,866
Investor C Class (Formerly Class C) ....... 244,284 2,766,217
Shares sold:
Institutional Class (Formerly Class S)..... 1,344,505 18,173,943
Service Class ............................. 1,813 22,497
Investor A Class (Formerly Class A,
Class B and Class R) ..................... 7,009,420 126,713,520
Investor B Class (Formerly Class
B(1)) .................................... 732,609 12,944,207
Investor C Class (Formerly Class C) ....... 1,411,687 25,304,297
Shares issued in reinvestment of
dividends:
Institutional Class (Formerly Class S)..... 112,046 2,202,945
Service Class .............................. - -
Investor A Class (Formerly Class A,
Class B and Class R) ..................... 1,419,250 27,659,321
Investor B Class (Formerly Class
B(1)) .................................... 313,255 5,942,189
Investor C Class (Formerly Class C) ....... 190,603 3,632,426
Shares redeemed:
Institutional Class (Formerly Class S)..... (1,260,543) (17,700,748)
Service Class ............................. (2,405) (30,059)
Investor A Class (Formerly Class A,
Class B and Class R) ..................... (8,538,739) (149,448,063)
Investor B Class (Formerly Class
B(1)) .................................... (816,608) (13,838,156)
Investor C Class (Formerly Class C) ....... (1,614,114) (27,306,220)
---------- ---------------
Net increase ................................ 24,132,643 $ 45,632,219
========== ===============
(1) See Note (B).
189
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MID-CAP GROWTH EQUITY
-----------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
---------- ----------
SHARES VALUE SHARES VALUE
---------- ------- ---------- -------
Shares issued from the
reorganization:(1)
Institutional Class ............ - $ - 3,275,088 $ 13,802,408
Investor A Class ............... - - 31,578,913 253,476,463
Investor B Class ............... - - 3,522,140 37,124,253
Investor C Class ............... - - 1,428,274 (7,360,832)
Shares sold:
Institutional Class ............ 1,301,947 14,315,690 2,345,154 22,965,023
Service Class .................. 3,440 35,089 17,450 155,138
Investor A Class ............... 668,209 6,829,624 1,021,818 9,334,452
Investor B Class ............... 198,822 1,858,244 830,004 2,614,913
Investor C Class ............... 96,983 911,302 72,047 602,344
Shares issued in reinvestment of
dividends:
Institutional Class ............ 77,713 837,748 - -
Service Class .................. 1,355 14,062 - -
Investor A Class ............... 346,654 3,508,100 - -
Investor B Class ............... 77,929 720,822 - -
Investor C Class ............... 18,559 171,675 - -
Shares redeemed:
Institutional Class ............ (1,304,403) (14,047,646) (3,006,643) (29,368,498)
Service Class .................. (37,876) (390,434) (1,189,627) (10,999,181)
Investor A Class ............... (2,782,502) (28,208,365) (6,394,733) (59,275,292)
Investor B Class ............... (843,464) (7,829,194) (1,966,081) (16,599,730)
Investor C Class ............... (256,406) (2,367,822) (671,908) (5,648,126)
----------- -------------- ------------- -------------
Net increase (decrease) ......... (2,433,040) $ (23,641,105) 30,861,896 $ 210,823,335
=========== ============== ============= =============
(1) See Note (B).
190
BLACKROCK FUNDS
AURORA
----------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
---------------------------------- ---------------------------------------
SHARES VALUE SHARES VALUE
--------------- ---------------- ----------------- -------------------
Net change in shares from reorgani-
zation:(1)
State Street Research Fund:
Investor A Class (Formerly Class
A and Class B) ................... - $ - (222,692) $ -
Shares sold:
Institutional Class (Formerly Class
S) ............................... 1,087,838 42,061,741 2,229,078 94,092,286
Service Class ..................... - - 9 350
Investor A Class (Formerly Class
A and Class B) ................... 5,340,615 193,318,881 12,247,171 490,698,212
Investor B Class (Formerly Class
B(1)) ............................ 649,942 20,507,060 777,325 28,668,813
Investor C Class (Formerly Class
C) ............................... 1,223,770 38,498,177 1,472,276 54,374,605
Shares issued in reinvestment of
dividends:
Institutional Class (Formerly Class
S) ............................... 549,596 19,714,526 387,865 15,999,438
Service Class ..................... 1 28 - -
Investor A Class (Formerly Class
A and Class B) ................... 6,173,714 211,819,766 3,880,515 154,053,052
Investor B Class (Formerly Class
B(1)) ............................ 2,040,811 62,652,768 975,164 35,778,753
Investor C Class (Formerly Class
C) ............................... 1,420,357 43,590,697 771,557 28,301,088
Shares redeemed:
Institutional Class (Formerly Class
S) ............................... (1,117,850) (43,438,852) (3,648,419) (150,381,329)
Service Class ..................... - - (5) (205)
Investor A Class (Formerly Class
A and Class B) ................... (11,293,117) (419,206,306) (35,468,838) (1,413,550,841)
Investor B Class (Formerly Class
B(1)) ............................ (1,804,296) (60,168,202) (3,185,878) (117,157,977)
Investor C Class (Formerly Class
C) ............................... (2,344,790) (77,317,581) (5,120,173) (187,653,151)
----------- -------------- ----------- ----------------
Net increase (decrease) .............. 1,926,591 $ 32,032,703 (24,905,045) $ (966,776,906)
=========== ============== =========== ================
(1) See Note (B).
191
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SMALL/MID-CAP GROWTH
-------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
--------------------------------- -------------------------------------
SHARES VALUE SHARES VALUE
--------------- --------------- --------------- -------------------
Net change in shares from reorgani-
zation:(1)
State Street Research Fund:
Investor A Class (Formerly Class
A, Class B and Class R) .......... - $ - (116,987) $ -
Shares sold:
Institutional Class (Formerly Class
S) ............................... 443,818 6,775,345 2,652,708 36,366,909
Service Class ..................... - - 8 100
Investor A Class (Formerly Class
A, Class B and Class R) .......... 2,167,438 32,132,034 8,248,677 107,248,880
Investor B Class (Formerly Class
B(1)) ............................ 175,636 2,355,565 199,160 2,380,035
Investor C Class (Formerly Class
C) ............................... 126,170 1,669,293 293,979 3,483,481
Shares issued in reinvestment of
dividends:
Institutional Class (Formerly Class
S) ............................... 26,107 393,687 - -
Service Class ..................... - 5 - -
Investor A Class (Formerly Class
A, Class B and Class R) .......... 518,710 7,453,855 - -
Investor B Class (Formerly Class
B(1)) ............................ 71,552 919,668 - -
Investor C Class (Formerly Class
C) ............................... 47,164 607,472 - -
Shares redeemed:
Institutional Class (Formerly Class
S) ............................... (350,351) (5,477,217) (8,333,821) (113,230,665)
Service Class ..................... - - - -
Investor A Class (Formerly Class
A, Class B and Class R) .......... (2,627,866) (38,848,875) (17,739,321) (230,036,170)
Investor B Class (Formerly Class
B(1)) ............................ (211,902) (2,792,581) (581,269) (6,919,663)
Investor C Class (Formerly Class
C) ............................... (320,532) (4,248,979) (1,415,023) (16,957,216)
---------- ------------- ----------- ---------------
Net increase (decrease) .............. 65,944 $ 939,272 (16,791,889) $ (217,664,309)
========== ============= =========== ===============
(1) See Note (B).
192
BLACKROCK FUNDS
SMALL CAP VALUE EQUITY
--------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
------------------------------- ----------------------------------
SHARES VALUE SHARES VALUE
------------ ---------------- --------------- ----------------
Shares sold:
BlackRock Class ................ 119 $ 1,606 79,167 $ 1,205,944
Institutional Class ............ 440,484 5,928,647 428,835 6,107,825
Service Class .................. 136,803 1,693,470 103,969 1,476,011
Investor A Class ............... 249,645 3,274,632 444,645 6,474,828
Investor B Class ............... 85,253 951,333 234,368 2,988,553
Investor C Class ............... 65,107 696,804 123,921 1,581,212
Shares issued in reinvestment of
dividends:
BlackRock Class ................ 74,714 941,217 80,062 1,130,480
Institutional Class ............ 737,112 9,296,761 704,737 9,943,832
Service Class .................. 54,708 676,907 30,692 427,853
Investor A Class ............... 449,180 5,519,823 426,767 5,910,720
Investor B Class ............... 171,281 1,826,243 172,345 2,145,694
Investor C Class ............... 53,824 574,307 52,129 649,004
Shares redeemed:
BlackRock Class ................ (21,944) (328,867) (133,119) (2,051,600)
Institutional Class ............ (869,246) (12,535,702) (935,092) (13,949,995)
Service Class .................. (126,613) (1,639,620) (125,052) (1,907,104)
Investor A Class ............... (590,614) (7,644,820) (1,075,029) (15,452,737)
Investor B Class ............... (323,713) (3,736,099) (597,314) (7,804,238)
Investor C Class ............... (86,919) (1,026,779) (180,539) (2,376,758)
-------- ------------- ---------- -------------
Net increase (decrease) ......... 499,181 $ 4,469,863 (164,508) $ (3,500,476)
======== ============= ========== =============
193
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SMALL CAP CORE EQUITY
----------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
------------------------------- ------------------------------
SHARES VALUE SHARES VALUE
------------- --------------- ------------ ---------------
Shares sold:
Institutional Class ........... 657,327 $ 11,789,292 662,746 $ 11,041,559
Service Class ................. 102,916 1,871,515 5,339 89,712
Investor A Class .............. 435,943 7,818,614 570,418 9,435,861
Investor B Class .............. 150,564 2,617,519 299,990 4,881,715
Investor C Class .............. 524,147 9,183,944 810,068 13,179,089
Shares issued in reinvestment of
dividends:
Institutional Class ........... 10,784 189,309 679 11,014
Service Class ................. 139 2,445 - 1
Investor A Class .............. 11,798 206,356 1,508 24,368
Investor B Class .............. 5,310 91,384 680 10,886
Investor C Class .............. 8,261 142,086 835 13,381
Shares redeemed:
Institutional Class ........... (160,700) (2,947,415) (68,139) (1,141,664)
Service Class ................. - - - -
Investor A Class .............. (76,082) (1,365,443) (100,221) (1,615,518)
Investor B Class .............. (22,774) (396,617) (14,220) (228,327)
Investor C Class .............. (114,379) (1,974,166) (38,423) (630,675)
-------- ------------ -------- ------------
Net increase ................... 1,533,254 $ 27,228,823 2,131,260 $ 35,071,402
========= ============ ========= ============
SMALL CAP GROWTH EQUITY
----------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
--------------------------------- ----------------------------------
SHARES VALUE SHARES VALUE
--------------- --------------- --------------- ----------------
Shares sold:
Institutional Class ......... 4,574,604 $ 80,566,015 6,461,991 $ 102,625,766
Service Class ............... 99,959 1,684,190 397,592 6,027,945
Investor A Class ............ 1,373,006 23,339,543 3,017,395 44,828,546
Investor B Class ............ 26,843 408,826 68,983 930,996
Investor C Class ............ 106,396 1,606,392 243,155 3,303,443
Shares redeemed:
Institutional Class ......... (2,382,310) (41,983,273) (4,517,880) (72,480,383)
Service Class ............... (164,413) (2,818,746) (1,040,419) (15,772,098)
Investor A Class ............ (1,461,834) (24,269,874) (2,780,729) (41,526,849)
Investor B Class ............ (249,008) (3,720,266) (941,889) (12,749,638)
Investor C Class ............ (139,818) (2,113,853) (315,541) (4,291,449)
---------- ------------- ---------- -------------
Net increase ................. 1,783,425 $ 32,698,954 592,658 $ 10,896,279
========== ============= ========== =============
194
BLACKROCK FUNDS
GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES
-------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
----------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
------------ -------------- --------------- -----------------
Shares sold:
Institutional Class ............ 223,775 $ 1,615,456 13,205 $ 76,233
Service Class .................. 12,922 95,000 3,407 20,000
Investor A Class ............... 797,212 5,707,297 199,850 1,176,923
Investor B Class ............... 152,111 1,027,531 76,275 430,583
Investor C Class ............... 461,445 3,036,843 51,620 296,457
Shares redeemed:
Institutional Class ............ (63,744) (456,948) (179,040) (1,056,338)
Service Class .................. (2,982) (18,704) (1,581) (9,264)
Investor A Class ............... (410,054) (2,814,636) (568,551) (3,296,666)
Investor B Class ............... (246,572) (1,609,873) (698,308) (3,892,430)
Investor C Class ............... (40,251) (263,099) (232,187) (1,289,474)
-------- ------------ -------- -------------
Net increase (decrease) ......... 883,862 $ 6,318,867 (1,335,310) $ (7,543,976)
======== ============ ========== =============
195
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
GLOBAL RESOURCES
-------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE
ENDED PERIOD
3/31/06 3/1/05 THROUGH 9/30/05
--------------------------------- ---------------------------------
SHARES VALUE SHARES VALUE
--------------- ----------------- --------------- -----------------
Net change in shares from
reorganization:(1)
State Street Research Fund:
Investor A Class (Formerly
Class A, Class B and Class
R) ............................. - $ - - $ -
Shares sold: - - - -
Institutional Class (Formerly
Class S) ....................... 66,493 4,865,679 136,773 8,270,801
Investor A Class (Formerly
Class A, Class B and Class
R) ............................. 1,509,075 106,450,726 2,342,330 141,107,678
Investor B Class (Formerly
Class B(1)) .................... 108,459 6,773,111 98,635 5,511,235
Investor C Class (Formerly
Class C) ....................... 193,721 12,105,139 155,994 8,467,932
Shares issued in reinvestment of
dividends:
Institutional Class (Formerly
Class S) ....................... 58,783 4,235,528 - -
Investor A Class (Formerly
Class A, Class B and Class
R) ............................. 1,271,988 86,952,414 - -
Investor B Class (Formerly
Class B(1)) .................... 166,020 10,231,609 - -
Investor C Class (Formerly
Class C) ....................... 254,651 15,678,954 - -
Shares redeemed:
Institutional Class (Formerly
Class S) ....................... (74,050) (5,428,410) (119,441) (7,316,366)
Investor A Class (Formerly
Class A, Class B and Class
R) ............................. (2,488,448) (171,336,761) (2,829,239) (164,820,925)
Investor B Class (Formerly
Class B(1)) .................... (284,137) (17,880,282) (233,615) (12,682,219)
Investor C Class (Formerly
Class C) ....................... (435,518) (27,315,142) (551,406) (28,678,911)
---------- --------------- ---------- --------------
Net increase (decrease) ............ 347,037 $ 25,332,565 (999,969) $ (50,140,775)
========== =============== ========== ==============
GLOBAL RESOURCES
---------------------------------
FOR THE
PERIOD
7/1/04 THROUGH 2/28/05
---------------------------------
SHARES VALUE
--------------- -----------------
Net change in shares from
reorganization:(1)
State Street Research Fund:
Investor A Class (Formerly
Class A, Class B and Class
R) ............................. (66,329) $ -
Shares sold:
Institutional Class (Formerly
Class S) ....................... 148,500 6,997,371
Investor A Class (Formerly
Class A, Class B and Class
R) ............................. 3,470,009 159,385,219
Investor B Class (Formerly
Class B(1)) .................... 274,083 11,326,726
Investor C Class (Formerly
Class C) ....................... 551,493 23,517,245
Shares issued in reinvestment of
dividends:
Institutional Class (Formerly
Class S) ....................... 17,826 888,813
Investor A Class (Formerly
Class A, Class B and Class
R) ............................. 367,069 17,395,794
Investor B Class (Formerly
Class B(1)) .................... 51,725 2,266,714
Investor C Class (Formerly
Class C) ....................... 78,414 3,432,162
Shares redeemed:
Institutional Class (Formerly
Class S) ....................... (155,837) (7,836,183)
Investor A Class (Formerly
Class A, Class B and Class
R) ............................. (3,112,124) (133,160,606)
Investor B Class (Formerly
Class B(1)) .................... (320,242) (13,400,554)
Investor C Class (Formerly
Class C) ....................... (679,776) (28,334,096)
---------- ---------------
Net increase (decrease) ............ 624,811 $ 42,478,605
========== ===============
(1) See Note (B).
196
BLACKROCK FUNDS
ALL-CAP GLOBAL RESOURCES
------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE PERIOD
3/31/06 2/16/051 THROUGH 9/30/05
---------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
--------------- ---------------- --------------- -----------------
Shares sold:
Institutional Class ......... 9,363,224 $ 132,851,337 8,151,696 $ 90,216,705
Service Class ............... 134,014 1,813,396 10 100
Investor A Class ............ 7,766,539 107,065,808 6,907,625 79,348,642
Investor B Class ............ 1,395,551 19,027,255 1,292,692 14,456,440
Investor C Class ............ 4,296,608 58,807,479 3,651,295 42,360,158
Shares redeemed:
Institutional Class ......... (670,175) (8,846,247) (1,353,834) (15,756,025)
Service Class ............... (58,954) (767,561) - -
Investor A Class ............ (1,357,336) (18,380,268) (393,121) (4,570,710)
Investor B Class ............ (97,281) (1,316,549) (100,601) (1,238,157)
Investor C Class ............ (381,474) (5,105,366) (62,701) (688,946)
---------- ------------- ---------- -------------
Net increase ................. 20,390,716 $ 285,149,284 18,093,061 $ 204,128,207
========== ============= ========== =============
1 Commencement of operations.
197
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
HEALTH SCIENCES
--------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE
ENDED PERIOD
3/31/06 3/1/05 THROUGH 9/30/05
------------------------------ -------------------------------
SHARES VALUE SHARES VALUE
-------------- --------------- --------------- ---------------
Net change in shares from reorgani-
zation:(1)
State Street Research Fund:
Investor A Class (Formerly Class A,
Class B and Class R) ................... - $ - - $ -
Shares sold:
Institutional Class (Formerly Class S)... 2,011,352 50,506,619 1,145,468 27,119,489
Service Class ........................... 36,960 941,553 2,715 63,300
Investor A Class (Formerly Class A,
Class B and Class R) ................... 7,047,265 174,420,938 4,956,440 113,905,634
Investor B Class (Formerly Class
B(1)) .................................. 1,070,773 25,511,419 544,629 11,879,605
Investor C Class (Formerly Class C) ..... 5,272,007 125,819,257 2,533,859 56,543,316
Shares issued in reinvestment of
dividends:
Institutional Class (Formerly Class S)... 8,163 199,825 78 1,746
Service Class ........................... 128 3,100 - -
Investor A Class (Formerly Class A,
Class B and Class R) ................... 181,751 4,383,836 1,563 34,234
Investor B Class (Formerly Class
B(1)) .................................. 48,340 1,126,824 642 13,639
Investor C Class (Formerly Class C) ..... 58,955 1,367,112 407 8,632
Shares redeemed:
Institutional Class (Formerly Class S)... (157,140) (3,946,118) (76,215) (1,692,023)
Service Class ........................... (545) (13,882) - -
Investor A Class (Formerly Class A,
Class B and Class R) ................... (803,970) (19,938,626) (1,001,580) (21,722,738)
Investor B Class (Formerly Class
B(1)) .................................. (137,276) (3,256,622) (112,555) (2,376,890)
Investor C Class (Formerly Class C) ..... (220,559) (5,240,131) (192,002) (4,135,535)
--------- ------------- ---------- -------------
Net increase .............................. 14,416,204 $ 351,885,104 7,803,449 $ 179,642,409
========== ============= ========== =============
HEALTH SCIENCES
-------------------------------
FOR THE
YEAR ENDED
2/28/05
-------------------------------
SHARES VALUE
--------------- ---------------
Net change in shares from reorgani-
zation:(1)
State Street Research Fund:
Investor A Class (Formerly Class A,
Class B and Class R) ................... (4,617) $ -
Shares sold:
Institutional Class (Formerly Class S)... 128,213 2,671,247
Service Class ........................... 5 100
Investor A Class (Formerly Class A,
Class B and Class R) ................... 2,836,559 57,282,345
Investor B Class (Formerly Class
B(1)) .................................. 558,845 10,973,167
Investor C Class (Formerly Class C) ..... 961,093 18,966,442
Shares issued in reinvestment of
dividends:
Institutional Class (Formerly Class S)... 12,094 257,622
Service Class ........................... - -
Investor A Class (Formerly Class A,
Class B and Class R) ................... 148,553 3,118,081
Investor B Class (Formerly Class
B(1)) .................................. 64,065 1,311,510
Investor C Class (Formerly Class C) ..... 25,134 512,969
Shares redeemed:
Institutional Class (Formerly Class S)... (171,969) (3,493,427)
Service Class ........................... - -
Investor A Class (Formerly Class A,
Class B and Class R) ................... (1,971,584) (39,527,347)
Investor B Class (Formerly Class
B(1)) .................................. (234,528) (4,562,237)
Investor C Class (Formerly Class C) ..... (236,874) (4,615,846)
---------- -------------
Net increase .............................. 2,114,989 $ 42,894,626
========== =============
(1) See Note (B).
198
BLACKROCK FUNDS
U.S. OPPORTUNITIES
-----------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
-------- ----------
SHARES VALUE SHARES VALUE
-------- ------- ---------- -------
Shares sold:
Institutional Class ............ 47,518 $ 1,369,943 41,040 $ 921,837
Service Class .................. 11,543 332,148 3,497 70,610
Investor A Class ............... 320,390 8,817,193 112,410 2,505,614
Investor B Class ............... 92,304 2,373,779 36,960 800,145
Investor C Class ............... 184,894 4,820,015 107,652 2,400,105
Shares redeemed:
Institutional Class ............ (49,115) (1,369,101) (89,659) (2,021,552)
Service Class .................. (1,332) (35,529) (100,170) (2,152,175)
Investor A Class ............... (151,891) (3,978,706) (430,990) (9,474,413)
Investor B Class ............... (222,364) (5,498,889) (625,873) (13,112,443)
Investor C Class ............... (99,716) (2,488,750) (295,588) (6,178,408)
--------- ------------ ------------- --------------
Net increase (decrease) ......... 132,231 $ 4,342,103 (1,240,721) $ (26,240,680)
========= ============ ============= ==============
GLOBAL OPPORTUNITIES
--------------------------------
FOR THE PERIOD
1/31/061 THROUGH 3/31/06
--------------------------------
SHARES VALUE
------------- ----------------
Shares sold:
Institutional Class ......... 534,321 $ 5,450,316
Service Class ............... 1,010 10,100
Investor A Class ............ 669,137 6,550,307
Investor B Class ............ 82,527 819,399
Investor C Class ............ 232,986 2,322,563
Shares redeemed:
Investor A Class ............ (314) (3,124)
Investor B Class ............ (101) (1,022)
Investor C Class ............ (21) (216)
------- ------------
Net increase ................. 1,519,545 $ 15,148,322
========= ============
1 Commencement of operations.
199
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
INTERNATIONAL OPPORTUNITIES
-----------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
--------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
------------- ----------------- --------------- -----------------
Shares sold:
Institutional Class ........... 2,370,278 $ 88,805,400 3,124,637 $ 90,893,095
Service Class ................. 2,148,455 75,908,812 832,415 23,659,396
Investor A Class .............. 3,406,974 122,040,895 4,521,618 128,498,832
Investor B Class .............. 504,722 17,244,759 695,853 18,889,974
Investor C Class .............. 1,674,330 57,116,825 2,137,054 58,642,481
Shares issued in reinvestment of
dividends:
Institutional Class ........... 139,451 4,988,078 29,812 827,590
Service Class ................. 73,716 2,577,086 8,721 237,123
Investor A Class .............. 211,755 7,357,758 34,965 945,460
Investor B Class .............. 53,647 1,779,259 3,472 90,492
Investor C Class .............. 87,882 2,912,242 5,986 155,815
Shares redeemed:
Institutional Class ........... (664,088) (24,569,034) (811,565) (23,267,346)
Service Class ................. (367,231) (13,790,460) (321,418) (9,020,020)
Investor A Class .............. (846,160) (30,543,350) (1,152,328) (32,651,828)
Investor B Class .............. (256,938) (8,785,995) (367,450) (10,037,117)
Investor C Class .............. (271,747) (9,396,824) (474,830) (12,988,280)
--------- ------------- ---------- -------------
Net increase ................... 8,265,046 $ 293,645,451 8,266,942 $ 234,875,667
========= ============= ========== =============
200
BLACKROCK FUNDS
ASSET ALLOCATION
------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE
ENDED PERIOD
3/31/06 3/1/05 THROUGH 9/30/05
-------------------------------- ---------------------------------
SHARES VALUE SHARES VALUE
--------------- ---------------- --------------- -----------------
Net change in shares from reorgani-
zation:(1)
State Street Research Fund:
Institutional Class (Formerly Class S)..... - $ - - $ -
Investor A Class (Formerly Class A,
Class B and Class R) ..................... - - - -
Investor B Class (Formerly Class
B(1)) .................................... - - - -
Investor C Class (Formerly Class C) ....... - - - -
BlackRock Fund:
Institutional Class (Formerly Class S)..... - - - -
Service Class ............................. - - - -
Investor A Class (Formerly Class A,
Class B and Class R) ..................... - - - -
Investor B Class (Formerly Class
B(1)) .................................... - - - -
Investor C Class (Formerly Class C) ....... - - - -
Shares sold:
Institutional Class (Formerly Class S)..... 485,882 7,424,000 286,450 4,309,548
Service Class ............................. 1,207 18,589 14,692 219,083
Investor A Class (Formerly Class A,
Class B and Class R) ..................... 1,993,069 30,412,777 1,686,903 25,359,821
Investor B Class (Formerly Class
B(1)) .................................... 949,883 14,594,938 804,846 11,974,666
Investor C Class (Formerly Class C) ....... 842,700 12,751,612 641,305 9,566,052
Shares issued in reinvestment of
dividends:
Institutional Class (Formerly Class S)..... 83,997 1,270,716 16,029 240,227
Service Class ............................. 6,310 95,181 1,144 17,133
Investor A Class (Formerly Class A,
Class B and Class R) ..................... 1,534,399 23,134,908 263,316 3,938,180
Investor B Class (Formerly Class
B(1)) .................................... 490,211 7,303,581 36,219 536,310
Investor C Class (Formerly Class C) ....... 113,416 1,689,331 8,022 118,805
Shares redeemed:
Institutional Class (Formerly Class S)..... (373,349) (5,733,205) (474,289) (7,052,006)
Service Class ............................. (6,719) (102,354) (20,740) (312,598)
Investor A Class (Formerly Class A,
Class B and Class R) ..................... (3,564,673) (54,593,438) (5,426,561) (80,927,628)
Investor B Class (Formerly Class
B(1)) .................................... (1,234,700) (18,744,425) (1,675,868) (24,814,424)
Investor C Class (Formerly Class C) ....... (488,095) (7,405,800) (669,175) (9,907,608)
---------- -------------- ---------- -------------
Net increase (decrease) ..................... 833,538 $ 12,116,411 (4,507,707) $ (66,734,439)
========== ============== ========== =============
ASSET ALLOCATION
---------------------------------
FOR THE
PERIOD
4/1/04 THROUGH 2/28/05
---------------------------------
SHARES VALUE
---------------- ----------------
Net change in shares from reorgani-
zation:(1)
State Street Research Fund:
Institutional Class (Formerly Class S)..... (431,759) $ -
Investor A Class (Formerly Class A,
Class B and Class R) ..................... (12,435,419) -
Investor B Class (Formerly Class
B(1)) .................................... (3,883,624) -
Investor C Class (Formerly Class C) ....... (1,561,222) -
BlackRock Fund:
Institutional Class (Formerly Class S)..... 756,058 11,073,022
Service Class ............................. 159,024 2,325,985
Investor A Class (Formerly Class A,
Class B and Class R) ..................... 4,260,378 62,273,644
Investor B Class (Formerly Class
B(1)) .................................... 2,633,550 38,144,193
Investor C Class (Formerly Class C) ....... 330,149 4,780,614
Shares sold:
Institutional Class (Formerly Class S)..... 843,355 11,040,921
Service Class ............................. 6,047 90,163
Investor A Class (Formerly Class A,
Class B and Class R) ..................... 9,147,740 97,457,497
Investor B Class (Formerly Class
B(1)) .................................... 2,760,767 29,631,133
Investor C Class (Formerly Class C) ....... 2,286,784 24,055,515
Shares issued in reinvestment of
dividends:
Institutional Class (Formerly Class S)..... 115,141 1,215,396
Service Class ............................. - -
Investor A Class (Formerly Class A,
Class B and Class R) ..................... 2,609,782 27,513,302
Investor B Class (Formerly Class
B(1)) .................................... 666,138 6,990,057
Investor C Class (Formerly Class C) ....... 149,839 1,581,290
Shares redeemed:
Institutional Class (Formerly Class S)..... (1,243,828) (14,502,160)
Service Class ............................. (19,987) (296,380)
Investor A Class (Formerly Class A,
Class B and Class R) ..................... (11,410,029) (125,727,173)
Investor B Class (Formerly Class
B(1)) .................................... (1,985,558) (22,062,236)
Investor C Class (Formerly Class C) ....... (733,924) (8,157,124)
----------- --------------
Net increase (decrease) ..................... (6,980,598) $ 147,427,659
=========== ==============
(1) See Note (B).
201
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
INDEX EQUITY
-----------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
------------------------------------- -------------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------- --------------- -------------------
Shares sold:
Institutional Class ........... 551,779 $ 13,133,349 2,794,314 $ 63,688,843
Service Class ................. 729,155 17,577,709 1,019,854 23,215,326
Investor A Class .............. 1,073,430 25,924,058 2,301,502 52,312,632
Investor B Class .............. 65,274 1,564,426 78,863 1,755,296
Investor C Class .............. 17,274 429,067 61,824 1,383,869
Shares issued in reinvestment of
dividends:
Institutional Class ........... 98,429 2,415,673 229,903 5,278,647
Service Class ................. 25,255 616,439 48,096 1,096,662
Investor A Class .............. 87,335 2,131,726 210,258 4,791,418
Investor B Class .............. 12,437 297,471 38,721 867,668
Investor C Class .............. 14,449 345,727 41,397 927,186
Shares redeemed:
Institutional Class ........... (3,931,663) (95,065,381) (3,295,354) (74,676,043)
Service Class ................. (509,135) (12,294,279) (1,640,323) (37,319,806)
Investor A Class .............. (1,881,359) (45,351,286) (4,534,077) (103,153,784)
Investor B Class .............. (1,220,916) (28,895,508) (2,657,216) (59,452,086)
Investor C Class .............. (1,583,962) (37,318,650) (3,512,901) (78,470,422)
---------- --------------- ---------- ---------------
Net decrease ................... (6,452,218) $ (154,489,459) (8,815,139) $ (197,754,594)
========== =============== ========== ===============
There is a 2% redemption fee on shares of the Portfolios redeemed or
exchanged which have been held 90 days or less. The redemption fees are
collected and retained by the Fund for the benefit of the remaining
shareholders. The redemption fees are recorded as a credit to paid in capital.
On March 31, 2006, three shareholders held approximately 36% of the
outstanding shares of the Large Cap Value Equity Portfolio, four shareholders
held approximately 58% of Large Cap Growth Equity Portfolio, two shareholders
held approximately 20% of the Dividend AchieversTM Portfolio, two shareholders
held approximately 15% of the Mid-Cap Value Equity Portfolio, two shareholders
held approximately 19% of the Aurora Portfolio, two shareholders held
approximately 19% of the Small/Mid-Cap Growth Portfolio, three shareholders
held approximately 55% of the Small Cap Value Equity Portfolio, two
shareholders held 28% of the Small Cap Core Equity Portfolio, three
shareholders held approximately 47% of the Small Cap Growth Equity Portfolio,
five shareholders held approximately 34% of the U.S. Opportunities Portfolio,
three shareholders held approximately 31% of the Global Science & Technology
Opportunities Portfolio, three shareholders held approximately 32% of the
Global Resources Portfolio, two shareholders held approximately 16% of the
All-Cap Global Resources Portfolio, three shareholders held approximately 33%
of the Health Sciences Portfolio, one shareholder held approximately 34% of the
Global Opportunities Portfolio, three shareholders held approximately 19% of
the International Opportunities Portfolio, and four shareholders held
approximately 62% of the Index Equity Portfolio. Some of the shareholders are
comprised of omnibus accounts, which are held on behalf of several individual
shareholders.
202
BLACKROCK FUNDS
(G) Federal Tax Information
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. Short-term capital gain and foreign currency distributions that
are reported in the Statement of Changes in Net Assets are reported as ordinary
income for federal tax purposes.
Dividends from net investment income and distributions from net realized
capital gains are determined in accordance with U.S. federal income tax
regulations, which may differ from those amounts determined under generally
accepted accounting principles.
The tax character of distributions paid during the year ended September
30, 2005 was as follows:
ORDINARY LONG-TERM TOTAL
INCOME CAPITAL GAIN DISTRIBUTIONS
------------- -------------- --------------
Investment Trust
9/30/05 ........................ $ 464,247 $ - $ 464,247
Large Cap Value
9/30/05 ........................ 4,138,309 - 4,138,309
Dividend AcheiversTM
9/30/05 ........................ 327,123 9,435 336,558
Mid-Cap Value
9/30/05 ........................ 5,355,456 1,906,200 7,261,656
Aurora
9/30/05 ........................ 51,296,874 285,959,800 337,256,674
Small Cap Value Equity
9/30/05 ........................ 17,073,528 8,151,685 25,225,213
Small Cap Core Equity
9/30/05 ........................ - 103,852 103,852
Health Sciences
3/1/04 through 2/28/05 ......... - 75,346 75,346
International Opportunities
9/30/05 ........................ 3,350,147 - 3,350,147
Asset Allocation
9/30/05 ........................ 6,400,932 7,557 6,408,489
203
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
At September 30, 2005, the Portfolios had capital loss carryforwards
available to offset future realized capital gains through the indicated
expiration dates:
EXPIRING SEPTEMBER 30
---------------------------------------------------------------------------
2009 2010 2011 2013 TOTAL
------------- ------------ ------------ ------ ------ -
Investment Trust .............. $ 199,128,674 $ 21,399,511 $ 15,933,441 $ - $ 236,461,626
Large Cap Value Equity ........ - 23,567,552 3,792,259 - 27,359,811
Large Cap Growth Equity ....... - 376,597,358 5,639,584 - 382,236,942
Legacy ........................ 21,280,418 76,300,059 18,377,786 - 115,958,263
Mid-Cap Growth Equity ......... 157,179,901 106,543,783 16,297,623 - 280,021,307
Small Cap Growth Equity ....... - 539,605,482 104,987,092 - 644,592,574
Global Science & Technology
Opportunities ................ 6,619,658 72,072,910 - - 78,692,568
All-Cap Global Resources ...... - - - 36,351 36,351
U.S. Opportunities ............ - 85,044,662 16,513,511 - 101,558,173
Asset Allocation .............. 8,409,633 24,829,943 - - 33,239,576
EXPIRING NOVEMBER 30
---------------------------------------------------
2009 2010 2011 TOTAL
----------- ------------ ------------- ------------
Index Equity ......... 5,288,740 79,252,195 117,169,455 201,710,390
(H) Market Risk
The securities exchanges of certain foreign markets are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. Consequently, acquisition and disposition of securities by the
Portfolios may be inhibited. In addition, a significant proportion of the
aggregate market value of equity securities listed on the major securities
exchanges in emerging markets are held by a smaller number of investors. This
may limit the number of shares available for acquisition or disposition by the
Portfolios.
204
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED)
(A) Board of Trustees' Consideration of the Advisory Agreements. The Board of
Trustees (the "Board") of BlackRock Funds (the "Fund"), including a
majority of the non-interested Trustees of the Fund (the "Independent
Trustees"), unanimously approved the renewal of the investment advisory and
sub-advisory agreements (the "Advisory Agreements") with respect to the
Equity Portfolios of the Fund (each, a "Portfolio"), at an in-person
meeting of the Board held on February 28, 2006. In connection with its
consideration of the Advisory Agreements, the Board met with personnel from
the investment adviser and, if applicable, sub-advisers to the Portfolios,
including BlackRock Advisors, Inc., BlackRock Financial Management, Inc.
and BlackRock International, Ltd. (collectively, "BlackRock"), at an
in-person meeting of the Board held on February 7, 2006. The Board reviewed
materials that it received in advance of that meeting, including (i) fee
information and expense ratios for retail and institutional share classes
of each Portfolio in comparison to fee information and expense ratios for
peer funds of such Portfolio, (ii) information about the investment
performance of each Portfolio in comparison to the investment performance
for peer funds of such Portfolio; (iii) BlackRock's economic outlook for
the Portfolios and its general investment outlook for the markets; (iv)
information on the profitability of BlackRock and its affiliates with
respect to each Portfolio, including details regarding the methodology used
to calculate such profitability; (v) information regarding fees paid to
service providers that are BlackRock affiliates; and (vi) information
regarding compliance records and regulatory matters relating to BlackRock
and the Fund. In approving the Advisory Agreements, the Board, including
all of the Independent Trustees, considered each of the matters discussed
below in executive sessions held at the February 7 and February 28
meetings, during which counsel to the Independent Trustees was present.
Nature, Extent and Quality of Services. The Board received and considered
various information and data regarding the nature, extent and quality of
services provided by BlackRock to each of the Portfolios under the Advisory
Agreements during the past year. The Board reviewed BlackRock's investment
philosophy and process used to manage each of the Portfolios, as well as a
description of its capabilities, personnel and services. The Board
considered the scope of services provided by BlackRock to each of the
Portfolios under the Advisory Agreements relative to services typically
provided by third parties to comparable mutual funds, and considered
BlackRock's in-house research capabilities as well as other resources
available to its personnel. The Board noted that the standard of care
applicable under the Advisory Agreements was comparable to that generally
found in investment advisory agreements of their nature. The Board
considered the legal and compliance programs of each of the Fund and
BlackRock, as well as the integrity of the systems in place to ensure
implementation of such programs and the records of each of the Fund and
BlackRock with regard to these matters. The Board also considered
information relating to the qualifications, backgrounds and
responsibilities of BlackRock's investment professionals and other
personnel who provide services to each Portfolio under the applicable
Advisory Agreement, and took into account the time and attention devoted by
BlackRock senior management to each of the Portfolios. The Board also
considered BlackRock's general business reputation and overall financial
resources and concluded that BlackRock would be able to meet any reasonably
foreseeable obligation under the Advisory Agreements.
Following consideration of this information, the Board, including all of
the Independent Trustees, concluded that the nature, extent and quality of
the services provided by BlackRock to each Portfolio under the applicable
Advisory Agreement were consistent with the Portfolio's operational
requirements and reasonable in terms of approving the renewal of such
Advisory Agreement.
205
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
Advisory Fees. The Board received and considered statistical information
regarding the fees and expense ratios of retail and institutional share
classes of each Portfolio. The Board compared the advisory fees, both
before (contractual) and after (actual) any fee waivers and expense
reimbursements, and total expenses of each Portfolio, against the fees and
total expenses of the Portfolio's peers selected by Lipper, Inc.
("Lipper"), an independent provider of investment company data. The Board
was provided with a description of the methodology used by Lipper to
determine the peers for each Portfolio. For each Portfolio, the Investor A
Class and Institutional Class were used to represent such Portfolio's share
classes for purposes of the Lipper survey, as Lipper differentiated between
retail and institutional funds in selecting peers.
In considering the fee and expense data provided by Lipper, the Board
noted that:
o except for each of the All-Cap Global Resources, Aurora, Global
Resources, Global Science & Technology Opportunities, International
Opportunities, Mid-Cap Growth Equity, Mid-Cap Value Equity, Small Cap
Core Equity and U.S. Opportunities Portfolios, each Portfolio had
contractual advisory fees and expenses that were equal to or lower
than the median for its peers; and
o except for each of the All-Cap Global Resources (Institutional Class
only), Asset Allocation, Aurora, Global Resources, Global Science &
Technology Opportunities, International Opportunities, Mid-Cap Growth
Equity, Mid-Cap Value Equity and U.S. Opportunities Portfolios, each
Portfolio had actual advisory fees and expenses that were equal to or
lower than the median for its peers.
However, the Board took into consideration the fact that:
o with respect to the Mid-Cap Growth Equity Portfolio and the Investor
A Class of the All-Cap Global Resources, Global Science & Technology
Opportunities and International Opportunities Portfolios, the
difference by which such Portfolios' contractual advisory fees were
higher than the median for their respective peers was not
significant;
o with respect to the Small Cap Core Equity Portfolio, although the
contractual advisory fee of such Portfolio was higher than the median
for its peers, after taking into account fee waivers, the actual
advisory fee of such Portfolio was equal to or lower than the median
for its peers;
o with respect to the Institutional Class of the Aurora Portfolio and
the Investor A Class of the Mid-Cap Value Equity Portfolio, although
the contractual advisory fee of each such Portfolio was higher than
the median for its peers, its actual total expenses were equal to or
lower than the median;
o with respect to the Global Resources and U.S. Opportunities
Portfolios and the Institutional Class of the Global Science &
Technology Opportunities, International Opportunities and Mid-Cap
Value Equity Portfolios, although the contractual advisory fee of
each such Portfolio was higher than its peer group median, each
Portfolio had investment performance during at least two of the
one-year, three-year and five-year periods that were at least equal
to or above the performance median for the Portfolio's peers; and
o with respect to the Investor A Class of the Aurora Portfolio,
although the contractual advisory fee of such Portfolio was higher
than the median for its peers, after taking into account fee waivers,
the actual management (advisory plus administration) fee of such
Portfolio was equal to or lower than the median for its peers.
206
BLACKROCK FUNDS
In addition to Lipper data, the Board also took into account the complexity
of the investment management of each Portfolio relative to its peers. The
Board was also provided with comparative information about services
rendered and fee rates offered to other similar clients advised by
BlackRock, including closed-end investment companies and separate accounts.
Following consideration of this information, the Board, including all of
the Independent Trustees, concluded that the contractual fees to be paid to
BlackRock pursuant to the Advisory Agreements are fair and reasonable in
light of the services being provided.
Fund Performance. The Board received and considered information about each
Portfolio's one-, three- and five-year (as applicable) investment
performance for the period ended November 30, 2005, in comparison to the
performance peers selected by Lipper. The Board was provided with a
description of the methodology used by Lipper to select the peers. In
addition, the Board reviewed BlackRock's market outlook and discussed other
factors relevant to the performance of the Portfolios.
In considering the performance data provided by Lipper, the Board noted
that for each Portfolio that had existed for more than five years, except
for each of the Aurora, Investment Trust, Index Equity (Investor A Class
only), Large Cap Growth Equity, Large Cap Value Equity, Mid-Cap Growth
Equity and Small Cap Growth Equity Portfolios, each Portfolio had
investment performance during at least two of the one-year, three-year and
five-year periods that were at least equal to or above the median for the
Portfolio's peers. The Board discussed the performance issues of these
Portfolios with BlackRock, and was satisfied that appropriate measures were
being taken to address them.
Profitability. The Board considered the level of BlackRock's and its
affiliates' profits in respect of their relationship with each of the
Portfolios. This consideration included a broad review of BlackRock's
methodology in allocating its costs to the management of each Portfolio.
The Board considered the profits realized by BlackRock and its affiliates
in connection with the operation of each Portfolio and whether the amount
of profit is a fair profit relative to their relationship with the
Portfolio. The Board also considered BlackRock's profit margins in
comparison with available industry data. The Board, including all of the
Independent Trustees, concluded that BlackRock's profitability with respect
to the Portfolios is reasonable relative to the services provided.
Economies of Scale. The Board considered whether there have been economies
of scale in respect of the management of each Portfolio, whether each
Portfolio has appropriately benefited from any economies of scale, and
whether there is potential for realization of any further economies of
scale. The Board noted that economies of scale were passed on to the
shareholders in the form of breakpoints to the advisory fee rate of certain
of the Portfolios. The Board also considered the fee waivers and expense
reimbursement arrangements by BlackRock for each of the Portfolios. The
Board, including all of the Independent Trustees, determined that the
advisory fee structure was reasonable and that no changes were currently
necessary to realize any economies of scale.
Other Benefits to BlackRock. The Board also took into account other
ancillary benefits that BlackRock may derive from its relationship with
each of the Portfolios, such as BlackRock's ability to leverage its
investment professionals that manage other portfolios, an increase in
BlackRock's profile in the broker-dealer community, and the engagement of
BlackRock's affiliates as service providers to the Portfolios, including
for administrative, transfer agency, distribution and custodial services.
The Board also noted that BlackRock may use third party research obtained
by soft dollars generated by transactions in certain Portfolios to assist
itself in managing all or a number of its other client accounts. The Board,
including all of the Independent Trustees, concluded that these ancillary
benefits that BlackRock and its affiliates could
207
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED) (CONCLUDED)
receive with regard to providing investment advisory and other services to
the Portfolios were consistent with those generally available to other
mutual fund sponsors.
No single factor was considered in isolation or to be determinative in the
Board's decision to approve the renewal of the Advisory Agreements. Rather,
the Board concluded, in light of a weighing and balancing of all factors
considered, that it was in the best interests of each Portfolio to approve
the continuation of the Advisory Agreements, including the fees to be
charged for services thereunder.
(B) The Fund's Audit Committee approved engaging Deloitte & Touche LLP as the
independent auditor to audit the Fund's financial statements for fiscal
year 2006. On November 29, 2005, a majority of the Fund's Board of
Trustees, including a majority of the independent Trustees, approved the
appointment of Deloitte & Touche LLP as the Fund's independent auditor for
the Fund's fiscal 2006 audit subject to the right of the Fund, by a
majority vote of the shareholders at any meeting called for that purpose,
to terminate the appointment without penalty.
(C) As previously disclosed, BlackRock has received subpoenas from various
federal and state governmental and regulatory authorities and various
information requests from the Securities and Exchange Commission in
connection with ongoing industry-wide investigations of mutual fund
matters.
(D) BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill Lynch") announced
on February 15, 2006 that they had reached an agreement to combine Merrill
Lynch's investment management business, Merrill Lynch Investment Managers,
with BlackRock, Inc. to create a new independent company. Merrill Lynch
will have a 49.8% economic interest and a 45% voting interest in the
combined company and The PNC Financial Services Group, Inc. ("PNC"), which
currently holds a majority interest in BlackRock, Inc., will have
approximately a 34% economic and voting interest. The new company will
operate under the BlackRock name and be governed by a board of directors
with a majority of independent members. Each of Merrill Lynch and PNC has
agreed that it will vote all of its shares on all matters in accordance
with the recommendation of BlackRock's board in order to assure its
independence. Completion of the transaction is subject to various
regulatory approvals, client consents, approval by BlackRock, Inc.
shareholders and customary conditions.
(E) The amounts paid by the Fund to the Chief Compliance Officer (CCO) and
certain of his staff for the six months ended March 31, 2006, were
$255,572.
208
THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES
TABLE OF CONTENTS THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES
This report is submitted for the information of the Fund’s shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective Prospectus.
DEFINITIONS OF ABBREVIATIONS AND FOOTNOTES THE DFA INVESTMENT TRUST COMPANY
Schedule of Investments/Summary Schedule of Portfolio Holdings
| FHLB | Federal Home Loan Bank |
| FHLMC | Federal Home Loan Mortgage Corporation |
| † | See Note B to Financial Statements. |
| * | Non-Income Producing Securities. |
| ** | Calculated as a percentage of total net assets. Percentages shown parenthetically next to the category headings have been calculated as a percentage of total investments. “Other Securities” are those securities that are not among the top 50 holdings of the Fund or do not individually represent more than 1.0% of the net assets of the Fund. Some of the individual securities in this category may be Non-Income Producing Securities. |
| # | Total or Partial Securities on Loan. |
| ## | Some of the individual securities in this category include Total or Partial Securities on Loan. |
| (B) | The rate shown is the effective yield. |
| ¨ | Security purchased with cash proceeds from securities on loan. |
All Statements and Schedules
| SEC | U.S. Securities and Exchange Commission |
211
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series
| | | | | | |
| | | March 31, 2006
| |
| | | (Unaudited) | |
| | | Shares
| | Value(A)
| |
| | | | | | | |
COMMON STOCKS — (86.0%) | | | | | | |
Financials — (17.4%) | | | | | | |
Ace, Ltd. | | 121,800 | | $ | 6,334,818 | |
AFLAC, Inc. | | 188,200 | | | 8,493,466 | |
Allstate Corp. | | 243,700 | | | 12,699,207 | |
AMBAC Financial Group, Inc. | | 39,900 | | | 3,176,040 | # |
American Express Co. | | 467,600 | | | 24,572,380 | |
American International Group, Inc. | | 980,600 | | | 64,807,854 | # |
Ameriprise Financial, Inc. | | 94,700 | | | 4,267,182 | |
AmSouth Bancorporation | | 130,600 | | | 3,532,730 | |
AON Corp. | | 121,600 | | | 5,047,616 | # |
Bank of America Corp. | | 1,754,800 | | | 79,913,592 | |
Bank of New York Co., Inc. | | 291,400 | | | 10,502,056 | |
BB&T Corp. | | 202,300 | | | 7,930,160 | |
Bear Stearns Companies, Inc. | | 45,100 | | | 6,255,370 | # |
Capital One Financial Corp. | | 113,800 | | | 9,163,176 | # |
Chubb Corp. | | 75,500 | | | 7,205,720 | # |
Cincinnati Financial Corp. | | 65,800 | | | 2,768,206 | |
CIT Group, Inc. | | 75,500 | | | 4,040,760 | # |
Citigroup, Inc. | | 1,885,700 | | | 89,080,468 | # |
Comerica, Inc. | | 61,500 | | | 3,565,155 | |
Compass Bancshares, Inc. | | 46,700 | | | 2,363,487 | # |
Countrywide Financial Corp. | | 227,800 | | | 8,360,260 | # |
E*TRADE Financial Corp. | | 157,900 | | | 4,260,142 | *# |
Fannie Mae | | 365,700 | | | 18,796,980 | |
Federated Investors, Inc. | | 31,800 | | | 1,241,790 | |
Fifth Third Bancorp | | 209,900 | | | 8,261,664 | # |
First Horizon National Corp. | | 47,600 | | | 1,982,540 | |
Franklin Resources, Inc. | | 57,700 | | | 5,437,648 | # |
Freddie Mac | | 261,100 | | | 15,927,100 | |
Genworth Financial, Inc. | | 142,300 | | | 4,757,089 | |
Golden West Financial Corp. | | 96,700 | | | 6,565,930 | |
Hartford Financial Services Group, Inc. | | 114,300 | | | 9,206,865 | |
Huntington Bancshares, Inc. | | 94,000 | | | 2,268,220 | # |
Janus Capital Group, Inc. | | 81,100 | | | 1,879,087 | # |
Jefferson-Pilot Corp. | | 51,000 | | | 2,852,940 | |
JPMorgan Chase & Co. | | 1,316,900 | | | 54,835,716 | |
KeyCorp | | 153,100 | | | 5,634,080 | |
Lehman Brothers Holdings, Inc. | | 102,200 | | | 14,770,966 | |
Lincoln National Corp. | | 65,500 | | | 3,575,645 | # |
Loews Corp. | | 51,300 | | | 5,191,560 | |
M&T Bank Corp. | | 30,000 | | | 3,424,200 | |
Marsh & McLennan Companies, Inc. | | 206,700 | | | 6,068,712 | |
Marshall & Ilsley Corp. | | 79,300 | | | 3,455,894 | |
MBIA, Inc. | | 50,600 | | | 3,042,578 | # |
Mellon Financial Corp. | | 156,500 | | | 5,571,400 | |
Merrill Lynch & Co., Inc. | | 346,900 | | | 27,321,844 | # |
MetLife, Inc. | | 286,400 | | | 13,853,168 | # |
MGIC Investment Corp. | | 33,100 | | | 2,205,453 | # |
Moody’s Corp. | | 91,900 | | | 6,567,174 | # |
Morgan Stanley | | 405,700 | | | 25,486,074 | # |
National City Corp. | | 206,800 | | | 7,217,320 | |
North Fork Bancorporation, Inc. | | 179,700 | | | 5,180,751 | |
Northern Trust Corp. | | 70,000 | | | 3,675,000 | |
Plum Creek Timber Co., Inc. | | 69,600 | | | 2,570,328 | |
PNC Financial Services Group | | 110,400 | | | 7,431,024 | # |
Principal Financial Group, Inc. | | 105,600 | | | 5,153,280 | |
Progressive Corp. | | 74,300 | | | 7,746,518 | |
Prudential Financial, Inc. | | 187,000 | | | 14,176,470 | |
Regions Financial Corp. | | 172,400 | | | 6,063,308 | |
SAFECO Corp. | | 46,600 | | | 2,339,786 | |
Schwab (Charles) Corp. | | 389,800 | | | 6,708,458 | |
SLM Corp. | | 157,700 | | | 8,190,938 | # |
Sovereign Bancorp, Inc. | | 134,900 | | | 2,955,659 | |
| | | | | | |
| | | March 31, 2006
| |
| | | (Unaudited) | |
| | | Shares
| | Value(A)
| |
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State Street Corp. | | 125,800 | | $ | 7,602,094 | |
SunTrust Banks, Inc. | | 140,100 | | | 10,193,676 | # |
Synovus Financial Corp. | | 118,300 | | | 3,204,747 | |
T. Rowe Price Group, Inc. | | 49,900 | | | 3,902,679 | |
The Goldman Sachs Group, Inc. | | 164,700 | | | 25,851,312 | |
The St. Paul Travelers Companies, Inc. | | 262,900 | | | 10,986,591 | |
Torchmark Corp. | | 39,100 | | | 2,232,610 | |
U.S. Bancorp | | 680,400 | | | 20,752,200 | |
UnumProvident Corp. | | 112,800 | | | 2,310,144 | # |
Wachovia Corp. | | 613,000 | | | 34,358,650 | |
Washington Mutual, Inc. | | 374,600 | | | 15,965,452 | # |
Wells Fargo & Co. | | 633,200 | | | 40,442,484 | |
XL Capital, Ltd. | | 65,900 | | | 4,224,849 | |
Zions Bancorporation | | 39,400 | | | 3,259,562 | |
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Total Financials | | | | | 893,218,052 | |
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Information Technology — (13.3%) | | | | | | |
ADC Telecommunications, Inc. | | 44,200 | | | 1,131,078 | * |
Adobe Systems, Inc. | | 226,600 | | | 7,912,872 | * |
Advanced Micro Devices, Inc. | | 181,700 | | | 6,025,172 | * |
Affiliated Computer Services, Inc.
Class A | | 47,200 | | | 2,815,952 | * |
Agilent Technologies, Inc. | | 162,000 | | | 6,083,100 | * |
Altera Corp. | | 135,700 | | | 2,800,848 | * |
Analog Devices, Inc. | | 138,300 | | | 5,295,507 | |
Andrew Corp. | | 60,200 | | | 739,256 | * |
Apple Computer, Inc. | | 321,800 | | | 20,183,296 | * |
Applied Materials, Inc. | | 599,400 | | | 10,495,494 | # |
Applied Micro Circuits Corp. | | 111,200 | | | 452,584 | * |
Autodesk, Inc. | | 87,200 | | | 3,358,944 | * |
Automatic Data Processing, Inc. | | 219,000 | | | 10,003,920 | |
Avaya, Inc. | | 157,600 | | | 1,780,880 | * |
BMC Software, Inc. | | 80,400 | | | 1,741,464 | * |
Broadcom Corp. | | 166,400 | | | 7,181,824 | * |
CA, Inc. | | 172,400 | | | 4,691,004 | |
Ciena Corp. | | 220,000 | | | 1,146,200 | * |
Cisco Systems, Inc. | | 2,323,700 | | | 50,354,579 | * |
Citrix Systems, Inc. | | 67,400 | | | 2,554,460 | * |
Computer Sciences Corp. | | 70,500 | | | 3,916,275 | * |
Compuware Corp. | | 144,600 | | | 1,132,218 | * |
Comverse Technology, Inc. | | 76,300 | | | 1,795,339 | * |
Convergys Corp. | | 52,800 | | | 961,488 | * |
Corning, Inc. | | 584,100 | | | 15,718,131 | * |
Dell, Inc. | | 889,200 | | | 26,462,592 | *# |
eBay, Inc. | | 435,800 | | | 17,022,348 | *# |
Electronic Arts, Inc. | | 114,800 | | | 6,281,856 | *# |
Electronic Data Systems Corp. | | 194,400 | | | 5,215,752 | # |
EMC Corp. | | 898,000 | | | 12,239,740 | * |
First Data Corp. | | 289,800 | | | 13,568,436 | |
Fiserv, Inc. | | 69,700 | | | 2,965,735 | * |
Freescale Semiconductor, Inc. Class B | | 155,000 | | | 4,304,350 | * |
Gateway, Inc. | | 99,800 | | | 218,562 | * |
Hewlett-Packard Co. | | 1,068,600 | | | 35,156,940 | |
Intel Corp. | | 2,222,600 | | | 43,007,310 | |
International Business Machines Corp. | | 592,100 | | | 48,830,487 | |
Intuit, Inc. | | 66,900 | | | 3,558,411 | * |
Jabil Circuit, Inc. | | 66,000 | | | 2,828,760 | * |
JDS Uniphase Corp. | | 633,300 | | | 2,640,861 | * |
KLA-Tencor Corp. | | 75,400 | | | 3,646,344 | |
Lexmark International, Inc. | | 40,900 | | | 1,856,042 | * |
Linear Technology Corp. | | 115,500 | | | 4,051,740 | # |
LSI Logic Corp. | | 148,000 | | | 1,710,880 | *# |
Lucent Technologies, Inc. | | 1,688,500 | | | 5,149,925 | *# |
Maxim Integrated Products, Inc. | | 121,100 | | | 4,498,865 | |
212
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Continued)
| | | | | | |
| | | March 31, 2006
| |
| | | (Unaudited) | |
| | | Shares
| | Value(A)
| |
| | | | | | | |
Micron Technology, Inc. | | 233,800 | | $ | 3,441,536 | * |
Microsoft Corp. | | 3,357,400 | | | 91,354,854 | |
Molex, Inc. | | 53,800 | | | 1,786,160 | |
Motorola, Inc. | | 944,400 | | | 21,636,204 | # |
National Semiconductor Corp. | | 127,500 | | | 3,549,600 | |
NCR Corp. | | 68,800 | | | 2,875,152 | * |
Network Appliance, Inc. | | 141,400 | | | 5,094,642 | * |
Novell, Inc. | | 147,100 | | | 1,129,728 | * |
Novellus Systems, Inc. | | 50,400 | | | 1,209,600 | * |
Nvidia Corp. | | 64,700 | | | 3,704,722 | *# |
Oracle Corp. | | 1,423,700 | | | 19,490,453 | * |
Parametric Technology Corp. | | 42,000 | | | 685,860 | * |
Paychex, Inc. | | 126,200 | | | 5,257,492 | # |
PMC-Sierra, Inc. | | 70,200 | | | 862,758 | *# |
QLogic Corp. | | 61,000 | | | 1,180,350 | * |
Qualcomm, Inc. | | 625,800 | | | 31,671,738 | |
Sabre Holdings Corp. | | 49,800 | | | 1,171,794 | |
Sanmina-SCI Corp. | | 201,100 | | | 824,510 | * |
Solectron Corp. | | 345,500 | | | 1,382,000 | * |
Sun Microsystems, Inc. | | 1,307,600 | | | 6,707,988 | * |
Symantec Corp. | | 394,200 | | | 6,634,386 | * |
Symbol Technologies, Inc. | | 95,600 | | | 1,011,448 | |
Tektronix, Inc. | | 30,800 | | | 1,099,868 | |
Tellabs, Inc. | | 170,200 | | | 2,706,180 | * |
Teradyne, Inc. | | 74,800 | | | 1,160,148 | * |
Texas Instruments, Inc. | | 604,600 | | | 19,631,362 | # |
Unisys Corp. | | 129,200 | | | 890,188 | * |
VeriSign, Inc. | | 92,400 | | | 2,216,676 | * |
Xerox Corp. | | 351,900 | | | 5,348,880 | * |
Xilinx, Inc. | | 130,300 | | | 3,317,438 | |
Yahoo!, Inc. | | 476,700 | | | 15,378,342 | * |
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Total Information Technology | | | | | 679,899,878 | |
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Health Care — (11.1%) | | | | | | |
Abbott Laboratories | | 581,300 | | | 24,687,811 | # |
Aetna, Inc. | | 214,300 | | | 10,530,702 | |
Allergan, Inc. | | 57,300 | | | 6,217,050 | |
AmerisourceBergen Corp. | | 79,000 | | | 3,813,330 | |
Amgen, Inc. | | 441,500 | | | 32,119,125 | *# |
Applera Corp. — Applied Biosystems Group | | 69,200 | | | 1,878,088 | |
Bard (C.R.), Inc. | | 39,300 | | | 2,664,933 | |
Barr Laboratories, Inc. | | 5,200 | | | 327,496 | * |
Bausch & Lomb, Inc. | | 20,300 | | | 1,293,110 | |
Baxter International, Inc. | | 245,000 | | | 9,508,450 | |
Becton Dickinson & Co. | | 93,400 | | | 5,751,572 | |
Biogen Idec, Inc. | | 130,000 | | | 6,123,000 | * |
Biomet, Inc. | | 93,500 | | | 3,321,120 | # |
Boston Scientific Corp. | | 223,500 | | | 5,151,675 | *# |
Bristol-Myers Squibb Co. | | 740,100 | | | 18,213,861 | # |
Cardinal Health, Inc. | | 159,400 | | | 11,878,488 | # |
Caremark Rx, Inc. | | 169,500 | | | 8,336,010 | *# |
Chiron Corp. | | 41,300 | | | 1,891,953 | * |
Cigna Corp. | | 45,700 | | | 5,969,334 | |
Coventry Health Care, Inc. | | 60,600 | | | 3,271,188 | * |
Eli Lilly & Co. | | 426,900 | | | 23,607,570 | # |
Express Scripts, Inc. | | 55,300 | | | 4,860,870 | *# |
Fisher Scientific International, Inc. | | 46,600 | | | 3,171,130 | * |
Forest Laboratories, Inc. | | 123,100 | | | 5,493,953 | * |
Genzyme Corp. | | 98,200 | | | 6,601,004 | * |
Gilead Sciences, Inc. | | 174,700 | | | 10,869,834 | *# |
Guidant Corp. | | 128,000 | | | 9,991,680 | |
HCA, Inc. | | 154,100 | | | 7,056,239 | # |
Health Management Associates, Inc. | | 90,900 | | | 1,960,713 | |
| | | | | | |
| | | March 31, 2006
| |
| | | (Unaudited) | |
| | | Shares
| | Value(A)
| |
| | | | | | | |
Hospira, Inc. | | 60,800 | | $ | 2,399,168 | * |
Humana, Inc. | | 61,800 | | | 3,253,770 | * |
IMS Health, Inc. | | 75,300 | | | 1,940,481 | |
Johnson & Johnson | | 1,124,400 | | | 66,586,968 | # |
King Pharmaceuticals, Inc. | | 91,500 | | | 1,578,375 | * |
Laboratory Corp. of America Holdings | | 47,300 | | | 2,766,104 | *# |
Manor Care, Inc. | | 29,900 | | | 1,326,065 | |
McKesson Corp. | | 115,700 | | | 6,031,441 | |
Medco Health Solutions, Inc. | | 115,000 | | | 6,580,300 | * |
Medimmune, Inc. | | 96,500 | | | 3,529,970 | *# |
Medtronic, Inc. | | 456,000 | | | 23,142,000 | |
Merck & Co., Inc. | | 826,300 | | | 29,110,549 | # |
Millipore Corp. | | 19,700 | | | 1,439,282 | * |
Mylan Laboratories, Inc. | | 82,600 | | | 1,932,840 | |
Patterson Companies, Inc. | | 52,400 | | | 1,844,480 | *# |
PerkinElmer, Inc. | | 49,400 | | | 1,159,418 | |
Pfizer, Inc. | | 2,779,900 | | | 69,275,108 | |
Quest Diagnostics, Inc. | | 61,500 | | | 3,154,950 | |
Schering-Plough Corp. | | 559,000 | | | 10,615,410 | |
St. Jude Medical, Inc. | | 138,500 | | | 5,678,500 | * |
Stryker Corp. | | 110,400 | | | 4,895,136 | |
Tenet Healthcare Corp. | | 177,700 | | | 1,311,426 | *# |
Thermo Electron Corp. | | 61,300 | | | 2,273,617 | * |
UnitedHealth Group, Inc. | | 512,400 | | | 28,622,664 | |
Waters Corp. | | 39,500 | | | 1,704,425 | * |
Watson Pharmaceuticals, Inc. | | 38,400 | | | 1,103,616 | * |
WellPoint, Inc. | | 249,400 | | | 19,311,042 | * |
Wyeth | | 507,800 | | | 24,638,456 | |
Zimmer Holdings, Inc. | | 93,600 | | | 6,327,360 | * |
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Total Health Care | | | | | 570,094,210 | |
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Industrials — (10.0%) | | | | | | |
3M Co. | | 285,200 | | | 21,586,788 | |
Allied Waste Industries, Inc. | | 82,800 | | | 1,013,472 | *# |
American Power Conversion Corp. | | 64,900 | | | 1,499,839 | # |
American Standard Companies, Inc. | | 67,300 | | | 2,884,478 | |
Avery Dennison Corp. | | 41,700 | | | 2,438,616 | # |
Boeing Co. | | 302,400 | | | 23,566,032 | # |
Burlington Northern Santa Fe Corp. | | 140,900 | | | 11,741,197 | |
Caterpillar, Inc. | | 253,500 | | | 18,203,835 | |
Cendant Corp. | | 380,900 | | | 6,608,615 | |
Cintas Corp. | | 52,100 | | | 2,220,502 | |
Cooper Industries, Ltd. | | 34,700 | | | 3,015,430 | |
CSX Corp. | | 82,900 | | | 4,957,420 | # |
Cummins, Inc. | | 17,600 | | | 1,849,760 | |
Danaher Corp. | | 89,600 | | | 5,694,080 | |
Deere & Co. | | 89,500 | | | 7,074,975 | # |
Donnelley (R.R.) & Sons Co. | | 81,600 | | | 2,669,952 | |
Dover Corp. | | 76,800 | | | 3,729,408 | |
Eaton Corp. | | 56,300 | | | 4,108,211 | |
Emerson Electric Co. | | 155,400 | | | 12,996,102 | |
Equifax, Inc. | | 48,900 | | | 1,821,036 | |
FedEx Corp. | | 114,800 | | | 12,965,512 | |
Fluor Corp. | | 32,800 | | | 2,814,240 | # |
General Dynamics Corp. | | 151,200 | | | 9,673,776 | |
General Electric Co. | | 3,938,000 | | | 136,963,640 | |
Goodrich (B.F.) Co. | | 46,600 | | | 2,032,226 | |
Honeywell International, Inc. | | 313,800 | | | 13,421,226 | |
Illinois Tool Works, Inc. | | 77,500 | | | 7,464,025 | |
Ingersoll-Rand Co., Ltd. Class A | | 123,700 | | | 5,169,423 | |
ITT Industries, Inc. | | 69,800 | | | 3,924,156 | |
L-3 Communications Holdings, Inc. | | 45,800 | | | 3,929,182 | |
Lockheed Martin Corp. | | 135,400 | | | 10,172,602 | |
Masco Corp. | | 157,300 | | | 5,110,677 | # |
213
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Continued)
| | | | | | |
| | | March 31, 2006
| |
| | | (Unaudited) | |
| | | Shares
| | Value(A)
| |
| | | | | | | |
Monster Worldwide, Inc. | | 47,800 | | $ | 2,383,308 | * |
Navistar International Corp. | | 23,300 | | | 642,614 | * |
Norfolk Southern Corp. | | 155,700 | | | 8,418,699 | |
Northrop Grumman Corp. | | 132,500 | | | 9,048,425 | |
Paccar, Inc. | | 64,000 | | | 4,510,720 | |
Pall Corp. | | 47,200 | | | 1,472,168 | # |
Parker Hannifin Corp. | | 45,200 | | | 3,643,572 | |
Pitney Bowes, Inc. | | 85,800 | | | 3,683,394 | # |
Raytheon Co. | | 168,500 | | | 7,724,040 | |
Robert Half International, Inc. | | 64,800 | | | 2,501,928 | |
Rockwell Automation, Inc. | | 67,000 | | | 4,817,970 | |
Rockwell Collins, Inc. | | 65,100 | | | 3,668,385 | |
Ryder System, Inc. | | 24,300 | | | 1,088,154 | # |
Southwest Airlines Co. | | 267,500 | | | 4,812,325 | |
Textron, Inc. | | 50,000 | | | 4,669,500 | |
Tyco International, Ltd. | | 761,400 | | | 20,466,432 | |
Union Pacific Corp. | | 100,100 | | | 9,344,335 | |
United Parcel Service, Inc. | | 412,600 | | | 32,752,188 | |
United Technologies Corp. | | 383,600 | | | 22,237,292 | # |
W.W. Grainger, Inc. | | 28,900 | | | 2,177,615 | # |
Waste Management, Inc. | | 208,700 | | | 7,367,110 | |
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Total Industrials | | | | | 510,750,607 | |
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Consumer Discretionary — (8.8%) | | | | | | |
Amazon.com, Inc. | | 116,600 | | | 4,257,066 | *# |
Apollo Group, Inc. Class A | | 53,100 | | | 2,788,281 | *# |
AutoNation, Inc. | | 68,400 | | | 1,474,020 | *# |
Autozone, Inc. | | 20,900 | | | 2,083,521 | * |
Bed Bath and Beyond, Inc. | | 106,000 | | | 4,070,400 | * |
Best Buy Co., Inc. | | 153,600 | | | 8,590,848 | |
Big Lots, Inc. | | 43,000 | | | 600,280 | *# |
Black & Decker Corp. | | 29,200 | | | 2,537,188 | |
Brunswick Corp. | | 35,900 | | | 1,395,074 | |
Carnival Corp. | | 164,000 | | | 7,768,680 | |
CBS Corp. Class B | | 291,900 | | | 6,999,762 | |
Centex Corp. | | 46,400 | | | 2,876,336 | # |
Circuit City Stores, Inc. | | 57,500 | | | 1,407,600 | # |
Clear Channel Communications, Inc. | | 195,300 | | | 5,665,653 | |
Coach, Inc. | | 144,800 | | | 5,007,184 | * |
Comcast Corp. Class A | | 808,000 | | | 21,137,280 | *# |
Cooper Tire & Rubber Co. | | 23,200 | | | 332,688 | # |
Darden Restaurants, Inc. | | 49,700 | | | 2,039,191 | |
Dillards, Inc. Class A | | 23,300 | | | 606,732 | |
Disney (Walt) Co. | | 727,600 | | | 20,292,764 | |
Dollar General Corp. | | 119,600 | | | 2,113,332 | |
Dow Jones & Co., Inc. | | 22,300 | | | 876,390 | # |
Eastman Kodak Co. | | 108,500 | | | 3,085,740 | # |
Family Dollar Stores, Inc. | | 58,700 | | | 1,561,420 | |
Federated Department Stores, Inc. | | 102,800 | | | 7,504,400 | |
Ford Motor Co. | | 704,300 | | | 5,606,228 | # |
Fortune Brands, Inc. | | 55,300 | | | 4,458,839 | # |
Gannett Co., Inc. | | 89,900 | | | 5,386,808 | # |
Gap, Inc. | | 216,800 | | | 4,049,824 | |
General Motors Corp. | | 213,700 | | | 4,545,399 | # |
Genuine Parts Co. | | 65,300 | | | 2,862,099 | |
Goodyear Tire & Rubber Co. | | 66,900 | | | 968,712 | *# |
H&R Block, Inc. | | 123,800 | | | 2,680,270 | |
Harley-Davidson, Inc. | | 103,000 | | | 5,343,640 | |
Harman International Industries, Inc. | | 24,800 | | | 2,756,024 | # |
Harrah’s Entertainment, Inc. | | 69,600 | | | 5,426,016 | |
Hasbro, Inc. | | 67,200 | | | 1,417,920 | |
Hilton Hotels Corp. | | 124,500 | | | 3,169,770 | |
Home Depot, Inc. | | 802,600 | �� | | 33,949,980 | # |
Horton (D.R.), Inc. | | 102,700 | | | 3,411,694 | |
| | | | | | |
| | | March 31, 2006
| |
| | | (Unaudited) | |
| | | Shares
| | Value(A)
| |
| | | | | | | |
International Game Technology | | 127,400 | | $ | 4,487,028 | |
Interpublic Group of Companies, Inc. | | 162,700 | | | 1,555,412 | * |
Johnson Controls, Inc. | | 73,400 | | | 5,573,262 | # |
Jones Apparel Group, Inc. | | 43,100 | | | 1,524,447 | |
KB Home | | 29,000 | | | 1,884,420 | |
Knight-Ridder, Inc. | | 25,300 | | | 1,599,213 | |
Kohl’s Corp. | | 130,200 | | | 6,901,902 | *# |
Leggett & Platt, Inc. | | 68,900 | | | 1,679,093 | |
Lennar Corp. Class A | | 51,800 | | | 3,127,684 | # |
Limited Brands, Inc. | | 131,600 | | | 3,218,936 | |
Liz Claiborne, Inc. | | 39,700 | | | 1,626,906 | # |
Lowe’s Companies, Inc. | | 295,400 | | | 19,035,576 | |
Marriott International, Inc. Class A | | 61,300 | | | 4,205,180 | |
Mattel, Inc. | | 146,900 | | | 2,663,297 | |
Maytag Corp. | | 30,400 | | | 648,432 | # |
McDonald’s Corp. | | 474,800 | | | 16,314,128 | |
McGraw-Hill Companies, Inc. | | 138,700 | | | 7,991,894 | |
Meredith Corp. | | 15,800 | | | 881,482 | # |
Newell Rubbermaid, Inc. | | 103,700 | | | 2,612,203 | |
News Corp. Class A | | 906,900 | | | 15,063,609 | |
NIKE, Inc. Class B | | 71,500 | | | 6,084,650 | |
Nordstrom, Inc. | | 82,600 | | | 3,236,268 | |
Office Depot, Inc. | | 111,700 | | | 4,159,708 | * |
OfficeMax, Inc. | | 26,800 | | | 808,556 | |
Omnicom Group, Inc. | | 67,500 | | | 5,619,375 | |
Penney (J.C.) Co., Inc. | | 87,700 | | | 5,297,957 | # |
Pulte Homes, Inc. | | 80,800 | | | 3,104,336 | # |
RadioShack Corp. | | 50,900 | | | 978,807 | |
Scripps (E.W.) Co. | | 32,100 | | | 1,435,191 | |
Sears Holdings Corp. | | 37,700 | | | 4,985,448 | * |
Sherwin-Williams Co. | | 41,900 | | | 2,071,536 | |
Snap-On, Inc. | | 22,000 | | | 838,640 | |
Staples, Inc. | | 275,300 | | | 7,025,656 | |
Starbucks Corp. | | 288,400 | | | 10,855,376 | * |
Starwood Hotels & Resorts Worldwide, Inc. | | 81,500 | | | 5,519,995 | # |
Target Corp. | | 332,200 | | | 17,277,722 | |
The New York Times Co. Class A | | 54,900 | | | 1,389,519 | # |
The Stanley Works | | 27,400 | | | 1,388,084 | |
The TJX Companies, Inc. | | 174,100 | | | 4,321,162 | # |
Tiffany & Co. | | 53,700 | | | 2,015,898 | |
Time Warner, Inc. | | 1,702,100 | | | 28,578,259 | # |
Tribune Co. | | 98,900 | | | 2,712,827 | # |
Univision Communications, Inc. Class A | | 84,500 | | | 2,912,715 | *# |
V.F. Corp. | | 33,300 | | | 1,894,770 | |
Viacom, Inc. Class B | | 292,000 | | | 11,329,600 | * |
Wendy’s International, Inc. | | 43,200 | | | 2,680,992 | # |
Whirlpool Corp. | | 25,700 | | | 2,350,779 | |
Yum! Brands, Inc. | | 104,200 | | | 5,091,212 | |
| | | | |
|
|
|
Total Consumer Discretionary | | | | | 451,664,195 | |
| | | | |
|
|
|
Energy — (8.4%) | | | | | | |
Amerada Hess Corp. | | 30,200 | | | 4,300,480 | |
Anadarko Petroleum Corp. | | 87,100 | | | 8,797,971 | # |
Apache Corp. | | 124,800 | | | 8,175,648 | |
Baker Hughes, Inc. | | 129,300 | | | 8,844,120 | |
BJ Services Co. | | 122,500 | | | 4,238,500 | # |
Burlington Resources, Inc. | | 142,000 | | | 13,051,220 | |
Chesapeake Energy Corp. | | 141,200 | | | 4,435,092 | # |
Chevron Corp. | | 841,100 | | | 48,758,567 | # |
ConocoPhillips | | 520,800 | | | 32,888,520 | # |
Devon Energy Corp. | | 166,900 | | | 10,209,273 | |
El Paso Corp. | | 249,100 | | | 3,001,655 | |
EOG Resources, Inc. | | 91,600 | | | 6,595,200 | |
214
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Continued)
| | | | | | |
| | | March 31, 2006
| |
| | | (Unaudited) | |
| | | Shares
| | Value(A)
| |
| | | | | | | |
Exxon Mobil Corp. | | 2,307,000 | | $ | 140,404,020 | |
Halliburton Co. | | 195,000 | | | 14,238,900 | |
Kerr-McGee Corp. | | 43,800 | | | 4,182,024 | |
Kinder Morgan, Inc. | | 39,800 | | | 3,661,202 | # |
Marathon Oil Corp. | | 138,600 | | | 10,557,162 | |
Murphy Oil Corp. | | 62,400 | | | 3,108,768 | # |
Nabors Industries, Ltd. | | 59,700 | | | 4,273,326 | *# |
National-Oilwell, Inc. | | 66,000 | | | 4,231,920 | * |
Noble Corp. | | 51,800 | | | 4,200,980 | # |
Occidental Petroleum Corp. | | 162,700 | | | 15,074,155 | |
Rowan Companies, Inc. | | 41,300 | | | 1,815,548 | |
Schlumberger, Ltd. | | 223,200 | | | 28,250,424 | # |
Sunoco, Inc. | | 50,300 | | | 3,901,771 | # |
The Williams Companies, Inc. | | 224,700 | | | 4,806,333 | |
Transocean, Inc. | | 123,200 | | | 9,892,960 | *# |
Valero Energy Corp. | | 234,900 | | | 14,042,322 | # |
Weatherford International, Ltd. | | 131,800 | | | 6,029,850 | * |
XTO Energy, Inc. | | 137,200 | | | 5,977,804 | |
| | | | |
|
|
|
Total Energy | | | | | 431,945,715 | |
| | | | |
|
|
|
Consumer Staples — (8.0%) | | | | | | |
Alberto-Culver Co. Class B | | 28,500 | | | 1,260,555 | |
Albertson’s, Inc. | | 139,300 | | | 3,575,831 | |
Altria Group, Inc. | | 788,500 | | | 55,873,110 | |
Anheuser-Busch Companies, Inc. | | 293,300 | | | 12,544,441 | |
Archer-Daniels-Midland Co. | | 247,000 | | | 8,311,550 | |
Avon Products, Inc. | | 170,200 | | | 5,305,134 | |
Brown-Forman Corp. Class B | | 31,400 | | | 2,416,858 | |
Campbell Soup Co. | | 69,600 | | | 2,255,040 | |
Clorox Co. | | 56,700 | | | 3,393,495 | |
Coca-Cola Co. | | 778,300 | | | 32,587,421 | |
Coca-Cola Enterprises, Inc. | | 114,600 | | | 2,330,964 | |
Colgate-Palmolive Co. | | 194,700 | | | 11,117,370 | |
ConAgra, Inc. | | 196,200 | | | 4,210,452 | # |
Constellation Brands, Inc. Class A | | 74,500 | | | 1,866,225 | *# |
Costco Wholesale Corp. | | 178,800 | | | 9,683,808 | |
CVS Corp. | | 308,800 | | | 9,223,856 | |
Estee Lauder Companies, Inc. | | 45,000 | | | 1,673,550 | # |
General Mills, Inc. | | 134,600 | | | 6,821,528 | |
Heinz (H.J.) Co. | | 126,600 | | | 4,800,672 | # |
Kellogg Co. | | 95,000 | | | 4,183,800 | |
Kimberly-Clark Corp. | | 174,100 | | | 10,062,980 | |
McCormick & Co., Inc. | | 50,100 | | | 1,696,386 | |
Molson Coors Brewing Co. | | 21,700 | | | 1,489,054 | |
Pepsi Bottling Group, Inc. | | 51,100 | | | 1,552,929 | |
PepsiCo, Inc. | | 625,900 | | | 36,170,761 | |
Procter & Gamble Co. | | 1,242,600 | | | 71,598,612 | # |
Reynolds American, Inc. | | 32,300 | | | 3,407,650 | |
Safeway, Inc. | | 169,900 | | | 4,267,888 | # |
Sara Lee Corp. | | 287,200 | | | 5,135,136 | |
Supervalu, Inc. | | 51,500 | | | 1,587,230 | # |
Sysco Corp. | | 234,000 | | | 7,499,700 | |
The Hershey Co. | | 67,700 | | | 3,535,971 | |
The Kroger Co. | | 274,100 | | | 5,580,676 | * |
Tyson Foods, Inc. Class A | | 95,200 | | | 1,308,048 | |
UST, Inc. | | 61,800 | | | 2,570,880 | |
Walgreen Co. | | 382,400 | | | 16,492,912 | |
Wal-Mart Stores, Inc. | | 943,800 | | | 44,585,112 | # |
Whole Foods Market, Inc. | | 52,500 | | | 3,488,100 | |
Wrigley (Wm.) Jr. Co. | | 67,000 | | | 4,288,000 | # |
| | | | |
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|
|
Total Consumer Staples | | | | | 409,753,685 | |
| | | | |
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| | | | | | |
| | | March 31, 2006
| |
| | | (Unaudited) | |
| | | Shares
| | Value(A)
| |
| | | | | | | |
Telecommunication Services — (2.9%) | | | | | | |
Alltel Corp. | | 146,600 | | $ | 9,492,350 | |
AT&T, Inc. | | 1,465,800 | | | 39,635,232 | |
BellSouth Corp. | | 679,200 | | | 23,534,280 | # |
CenturyTel, Inc. | | 49,500 | | | 1,936,440 | |
Citizens Communications Co. | | 124,100 | | | 1,646,807 | |
Qwest Communications International, Inc. | | 586,100 | | | 3,985,480 | *# |
Sprint Nextel Corp. | | 1,121,100 | | | 28,969,224 | |
Verizon Communications, Inc. | | 1,105,800 | | | 37,663,548 | # |
| | | | |
|
|
|
Total Telecommunication Services | | | | | 146,863,361 | |
| | | | |
|
|
|
Utilities — (2.7%) | | | | | | |
AES Corp. | | 247,800 | | | 4,227,468 | * |
Allegheny Energy, Inc. | | 61,700 | | | 2,088,545 | * |
Ameren Corp. | | 77,400 | | | 3,856,068 | |
American Electric Power Co., Inc. | | 148,700 | | | 5,058,774 | |
CenterPoint Energy, Inc. | | 117,200 | | | 1,398,196 | |
Cinergy Corp. | | 75,300 | | | 3,419,373 | |
CMS Energy Corp. | | 83,400 | | | 1,080,030 | *# |
Consolidated Edison, Inc. | | 92,700 | | | 4,032,450 | # |
Constellation Energy Group | | 67,400 | | | 3,687,454 | |
Dominion Resources, Inc. | | 131,300 | | | 9,063,639 | |
DTE Energy Co. | | 67,200 | | | 2,694,048 | # |
Duke Energy Corp. | | 350,700 | | | 10,222,905 | # |
Dynegy, Inc. | | 113,800 | | | 546,240 | *# |
Edison International | | 123,100 | | | 5,069,258 | |
Entergy Corp. | | 78,500 | | | 5,411,790 | |
Exelon Corp. | | 252,100 | | | 13,336,090 | |
FirstEnergy Corp. | | 124,600 | | | 6,092,940 | |
FPL Group, Inc. | | 152,500 | | | 6,121,350 | # |
KeySpan Corp. | | 66,000 | | | 2,697,420 | |
Nicor, Inc. | | 16,700 | | | 660,652 | # |
NiSource, Inc. | | 103,000 | | | 2,082,660 | |
Peoples Energy Corp. | | 14,500 | | | 516,780 | # |
PG&E Corp. | | 130,500 | | | 5,076,450 | # |
Pinnacle West Capital Corp. | | 37,500 | | | 1,466,250 | |
PPL Corp. | | 143,700 | | | 4,224,780 | |
Progress Energy, Inc. | | 95,300 | | | 4,191,294 | # |
Public Service Enterprise Group, Inc. | | 94,700 | | | 6,064,588 | |
Sempra Energy | | 97,600 | | | 4,534,496 | |
Southern Co. | | 280,200 | | | 9,182,154 | # |
TECO Energy, Inc. | | 78,700 | | | 1,268,644 | |
TXU Corp. | | 174,800 | | | 7,824,048 | |
Xcel Energy, Inc. | | 152,600 | | | 2,769,690 | |
| | | | |
|
|
|
Total Utilities | | | | | 139,966,524 | |
| | | | |
|
|
|
Materials — (2.7%) | | | | | | |
Air Products & Chemicals, Inc. | | 84,100 | | | 5,650,679 | |
Alcoa, Inc. | | 329,400 | | | 10,066,464 | # |
Allegheny Technologies, Inc. | | 32,700 | | | 2,000,586 | # |
Ashland, Inc. | | 26,900 | | | 1,912,052 | |
Ball Corp. | | 39,400 | | | 1,726,902 | |
Bemis Co., Inc. | | 39,800 | | | 1,256,884 | |
Dow Chemical Co. | | 365,500 | | | 14,839,300 | # |
DuPont (E.I.) de Nemours & Co., Inc. | | 347,600 | | | 14,672,196 | # |
Eastman Chemical Co. | | 30,800 | | | 1,576,344 | |
Ecolab, Inc. | | 68,900 | | | 2,631,980 | |
Engelhard Corp. | | 46,800 | | | 1,853,748 | |
Freeport-McMoRan Copper & Gold, Inc.
Class B | | 69,500 | | | 4,154,015 | |
Hercules, Inc. | | 42,600 | | | 587,880 | * |
International Flavors & Fragrances, Inc. | | 29,800 | | | 1,022,736 | |
International Paper Co. | | 186,100 | | | 6,433,477 | # |
215
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Continued)
| | | | | | |
| | | March 31, 2006
| |
| | | (Unaudited) | |
| | | Shares
| | Value(A)
| |
| | | | | | | |
Louisiana-Pacific Corp. | | 40,100 | | $ | 1,090,720 | |
MeadWestavco Corp. | | 68,600 | | | 1,873,466 | |
Monsanto Co. | | 101,800 | | | 8,627,550 | |
Newmont Mining Corp. | | 168,800 | | | 8,759,032 | |
Nucor Corp. | | 58,700 | | | 6,151,173 | # |
Pactiv Corp. | | 54,100 | | | 1,327,614 | * |
Phelps Dodge Corp. | | 76,900 | | | 6,192,757 | # |
PPG Industries, Inc. | | 62,500 | | | 3,959,375 | |
Praxair, Inc. | | 121,900 | | | 6,722,785 | |
Rohm & Haas Co. | | 54,400 | | | 2,658,528 | |
Sealed Air Corp. | | 30,800 | | | 1,782,396 | |
Sigma-Aldrich Corp. | | 25,300 | | | 1,664,487 | |
Temple-Inland, Inc. | | 41,900 | | | 1,866,645 | # |
Tronox, Inc. Class B | | 8,831 | | | 150,053 | * |
United States Steel Corp. | | 41,100 | | | 2,493,948 | # |
Vulcan Materials Co. | | 37,900 | | | 3,284,035 | |
Weyerhaeuser Co. | | 91,900 | | | 6,656,317 | # |
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Total Materials | | | | | 135,646,124 | |
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|
Real Estate Investment Trusts — (0.7%) | | | | | | |
Apartment Investment & Management Co. Class A | | 36,500 | | | 1,711,850 | # |
Archstone-Smith Trust | | 80,600 | | | 3,930,862 | |
Equity Office Properties Trust | | 153,500 | | | 5,154,530 | |
Equity Residential | | 109,700 | | | 5,132,863 | |
ProLogis | | 92,000 | | | 4,922,000 | |
Public Storage, Inc. | | 31,200 | | | 2,534,376 | # |
Simon Property Group, Inc. | | 69,100 | | | 5,814,074 | |
Vornado Realty Trust | | 44,800 | | | 4,300,800 | # |
| | | | |
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|
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Total Real Estate Investment Trusts | | | | | 33,501,355 | |
| | | | |
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|
TOTAL COMMON STOCKS | | | | | 4,403,303,706 | |
| | | | |
|
|
|
| (A) | Securities held by the Series which are listed on a securities exchange and for which market quotations are readily available are valued at the last quoted sale price of the day. Securities held by the Series that are listed on NASDAQ are valued at the NASDAQ Official Closing Price (“NOCP”). If there is no such reported sale price or NOCP for the day, the Series values securities at the mean between the quoted bid and asked prices. Price information on listed securities is taken from the exchange where the security is primarily traded. Unlisted securities for which market quotations are readily available are valued at the mean between the most recent bid and asked prices. Securities for which quotations are not readily available, or for which market quotations have become unreliable, are valued in good faith using methods determined by the Board of Trustees. |
| †† | The cost for federal income tax purposes is $4,044,659,842. |
| | | | | | |
| | | March 31, 2006
|
| | | (Unaudited) |
| | | Face Amount
(000)
| | Value(A)
|
| | | | | | | |
AGENCY OBLIGATIONS — (3.0%) | | | | | | |
Federal National Mortgage Association Discount Note 4.650%(B), 04/30/06 | | $ | 155,000 | | $ | 154,959,958 |
| | | | | |
|
|
TEMPORARY CASH INVESTMENTS — (11.0%) | | | | | | |
Repurchase Agreement, Merrill Lynch Triparty Repo 4.45%, 04/03/06 (Collateralized by $20,015,000 FHLB 3.25%, 07/21/06, valued at $20,053,273) to be repurchased at $19,475,874¨ | | | 19,469 | | | 19,468,654 |
Repurchase Agreement, Merrill Lynch Triparty Repo 4.80%, 04/03/06 (Collateralized by $480,900,000 FHLB, rates ranging from 3.00% to 5.76%, maturities ranging from 04/17/06 to 07/03/25, valued at $469,454,655) to be repurchased at $455,963,146¨ | | | 455,781 | | | 455,780,834 |
Repurchase Agreement, PNC Capital Markets, Inc. 4.60%, 04/03/06 (Collateralized by $91,200,000 FHLMC Notes 4.00%, 09/22/09, valued at $86,982,000) to be repurchased at $85,728,850 | | | 85,696 | | | 85,696,000 |
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TOTAL TEMPORARY CASH INVESTMENTS | | | | | | 560,945,488 |
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|
|
TOTAL INVESTMENTS — (100.0%) | | | | | | |
(Cost $3,867,538,593)†† | | | | | $ | 5,119,209,152 |
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216
STATEMENT OF ASSETS AND LIABILITIES THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series
(Amounts in thousands)
| | | |
| | | March 31, 2006
|
| | | (Unaudited) |
Assets: | | | |
Investments at Value (including $605,687 of securities on loan) | | $ | 4,558,264 |
Temporary Cash Investments at Value | | | 560,945 |
Cash | | | 4,096 |
Receivables: | | | |
Dividends and Interest | | | 5,108 |
Fund Shares Sold | | | 25 |
Securities Lending Income | | | 62 |
Prepaid Expenses and Other Assets | | | 29 |
| | |
|
|
Total Assets | | | 5,128,529 |
| | |
|
|
| |
Liabilities: | | | |
Payables: | | | |
Upon Return of Securities Loaned | | | 630,209 |
Fund Shares Redeemed | | | 4,495 |
Due to Advisor | | | 93 |
Futures Margin Variation | | | 275 |
Accrued Expenses and Other Liabilities | | | 166 |
| | |
|
|
Total Liabilities | | | 635,238 |
| | |
|
|
NET ASSETS | | $ | 4,493,291 |
| | |
|
|
| |
Investments at Cost | | $ | 3,306,594 |
| | |
|
|
Temporary Cash Investments at Cost | | $ | 560,945 |
| | |
|
|
217
PERFORMANCE CHART
THE DFA INVESTMENT TRUST COMPANY
218
DISCLOSURE OF FUND EXPENSES (Unaudited) THE DFA INVESTMENT TRUST COMPANY
The following Expense Table is shown so that you can understand the impact of fees on your investment. All mutual funds have operating expenses. As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports, among others. Operating expenses, legal and audit services, which are deducted from a fund’s gross income, directly reduce the investment return of the fund. A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing fees, in dollars, of investing in the fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The Expense Table below illustrates your fund’s costs in two ways.
Actual Fund Return
This section helps you to estimate the actual expenses after fee waivers that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, and “Expenses Paid During Period” shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, a $7,500 account value divided by $1,000=7.5), then multiply the result by the number given for your fund under the heading “Expenses Paid During Period.”
Hypothetical Example for Comparison Purposes
This section is intended to help you compare your fund’s costs with those of other mutual funds. The hypothetical ending account value and expenses paid are derived from the fund’s actual expense ratio and an assumed 5% annual return before expenses. In this case, because the return used is not the fund’s actual return, the results do not apply to your investment. The example is useful in making comparisons because the SEC requires all mutual funds to calculate expenses based on a 5% annual return. You can assess your fund’s cost by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect any transactional costs, if applicable. The “Annualized Expense Ratio” represents the actual expenses for the six month period indicated and may be different from the expense ratio in the Financial Highlights for the year ended November 30, 2005.
For the Period June 1, 2005 to November 30, 2005
Expense Table
| | | | | | | | | | | | |
The U.S. Large Company Series
| | Beginning
Account
Value
06/01/05
| | Ending
Account
Value
11/30/05
| | Annualized
Expense
Ratio
| | | Expenses
Paid
During
Period*
|
Actual Fund Return | | $ | 1,000.00 | | $ | 1,059.30 | | 0.05 | % | | $ | 0.26 |
Hypothetical 5% Annual Return | | $ | 1,000.00 | | $ | 1,024.82 | | 0.05 | % | | $ | 0.25 |
| * | Expenses are equal to the fund’s annualized expense ratio for the six-month period, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (183), then divided by the days in the year (365) to reflect the half-year period. |
219
DISCLOSURE OF PORTFOLIO HOLDINGS (Unaudited) THE DFA INVESTMENT TRUST COMPANY
The SEC has adopted the requirement that all Funds file a complete Schedule of Investments with the SEC for their first and third fiscal quarters on Form N-Q for fiscal quarters starting after July 9, 2004. For The DFA Investment Trust Company, this would be for the fiscal quarters ending August 31 and February 28 (February 29 during leap year). The Form N-Q filing must be made within 60 days of the end of the quarter. The DFA Investment Trust Company filed its most recent Form N-Q with the SEC on October 27, 2005. It is available upon request, without charge, by calling collect: (310) 395-8005 or by mailing a request to Dimensional Fund Advisors, Inc., 1299 Ocean Avenue, 11th floor, Santa Monica, California 90401, or by visiting the SEC’s website at http://www.sec.gov, or they may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (call 1-800-732-0330 for information on the operation of the Public Reference Room).
The SEC has also amended certain regulations to permit a fund to include in its reports to shareholders a “Summary Schedule of Portfolio Holdings” in lieu of a full Schedule of Investments. The Summary Schedule of Portfolio Holdings reports the fund’s 50 largest holdings in unaffiliated issuers and any investments that exceed one percent of the fund’s net assets at the end of the reporting period. The amendments also require that the Summary Schedule of Portfolio Holdings identify each category of investments that are held.
The fund is required to file a complete Schedule of Investments with the SEC on Form N-CSR within ten days after mailing the annual report to shareholders. It will be available upon request, without charge, by calling collect: (310) 395-8005 or by mailing a request to Dimensional Fund Advisors Inc., 1299 Ocean Avenue, 11th floor, Santa Monica, California 90401, or by visiting the SEC’s website at http://www.sec.gov, or they may be reviewed and copied at the SEC��s Public Reference Room in Washington, D.C. (call 1-800-732-0330 for information on the operation of the Public Reference Room).
PORTFOLIO HOLDINGS
The SEC adopted a requirement that all Funds present their categories of portfolio holdings in a table, chart or graph format in their annual and semi-annual shareholder reports, whether or not a Schedule of Investments is utilized. The following table, which presents portfolio holdings as a percent of total investments before short-term investments and collateral for loaned securities, is provided in compliance with such requirement. The categories shown below represent broad industry sectors. Each industry sector consists of one or more specific industry classifications.
| | | |
The U.S. Large Company Series — November 30, 2005
| |
Financials | | 20.2 | % |
Information Technology | | 15.6 | |
Health Care | | 12.8 | |
Industrials | | 10.8 | |
Consumer Discretionary | | 10.6 | |
Consumer Staples | | 9.6 | |
Energy | | 8.3 | |
Utilities | | 3.3 | |
Telecommunication Services | | 3.1 | |
Materials | | 3.0 | |
Other | | 1.9 | |
REITS | | 0.8 | |
| | |
|
|
| | | 100.0 | % |
| | |
|
|
220
SUMMARY SCHEDULE OF PORTFOLIO HOLDINGS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series
| | | | | | | | | |
| | | November 30, 2005
| |
| | | Shares
| | Value†
| | | Percentage
of Net
Assets**
| |
| | | | | | | | | | |
COMMON STOCKS — (87.0%) | | | | | | | | | |
Financials — (18.4%) | | | | | | | | | |
American Express Co. | | 456,700 | | $ | 23,483,514 | | | 0.6 | % |
American International Group, Inc. | | 955,100 | | | 64,125,414 | # | | 1.5 | % |
Bank of America Corp. | | 1,478,800 | | | 67,862,132 | # | | 1.6 | % |
Citigroup, Inc. | | 1,902,800 | | | 92,380,940 | | | 2.2 | % |
JPMorgan Chase & Co. | | 1,292,900 | | | 49,453,425 | | | 1.2 | % |
Merrill Lynch & Co., Inc. | | 340,900 | | | 22,642,578 | # | | 0.5 | % |
Morgan Stanley | | 399,700 | | | 22,395,191 | | | 0.5 | % |
The Goldman Sachs Group, Inc. | | 171,100 | | | 22,065,056 | | | 0.5 | % |
U.S. Bancorp | | 672,700 | | | 20,369,356 | | | 0.5 | % |
Wachovia Corp. | | 580,500 | | | 30,998,700 | # | | 0.7 | % |
Wells Fargo & Co. | | 621,300 | | | 39,048,705 | # | | 0.9 | % |
Other Securities | | | | | 425,177,155 | ## | | 10.1 | % |
| | | | |
|
|
| |
|
|
Total Financials | | | | | 880,002,166 | | | 20.8 | % |
| | | | |
|
|
| |
|
|
Information Technology — (13.6%) | | | | | | | |
Apple Computer, Inc. | | 305,400 | | | 20,712,228 | * | | 0.5 | % |
Cisco Systems, Inc. | | 2,352,100 | | | 41,255,834 | * | | 1.0 | % |
Dell, Inc. | | 882,400 | | | 26,613,184 | *# | | 0.6 | % |
Hewlett-Packard Co. | | 1,054,400 | | | 31,284,048 | | | 0.7 | % |
Intel Corp. | | 2,242,500 | | | 59,829,900 | | | 1.4 | % |
International Business Machines Corp. | | 587,300 | | | 52,210,970 | | | 1.2 | % |
Microsoft Corp. | | 3,390,800 | | | 93,959,068 | | | 2.2 | % |
Motorola, Inc. | | 908,700 | | | 21,890,583 | | | 0.5 | % |
Qualcomm, Inc. | | 600,100 | | | 27,286,547 | | | 0.7 | % |
Other Securities | | | | | 272,270,443 | ## | | 6.5 | % |
| | | | |
|
|
| |
|
|
Total Information Technology | | | | | 647,312,805 | | | 15.3 | % |
| | | | |
|
|
| |
|
|
Health Care — (11.1%) | | | | | | | | | |
Abbott Laboratories | | 572,100 | | | 21,573,891 | | | 0.5 | % |
Amgen, Inc. | | 454,100 | | | 36,750,313 | * | | 0.9 | % |
Eli Lilly & Co. | | 417,300 | | | 21,073,650 | # | | 0.5 | % |
Johnson & Johnson | | 1,094,800 | | | 67,603,900 | # | | 1.6 | % |
Medtronic, Inc. | | 445,700 | | | 24,767,549 | | | 0.6 | % |
Merck & Co., Inc. | | 808,100 | | | 23,758,140 | # | | 0.6 | % |
Pfizer, Inc. | | 2,712,700 | | | 57,509,240 | | | 1.4 | % |
UnitedHealth Group, Inc. | | 464,900 | | | 27,828,914 | | | 0.7 | % |
Wyeth | | 493,600 | | | 20,514,016 | | | 0.5 | % |
Other Securities | | | | | 229,724,829 | ## | | 5.2 | % |
| | | | |
|
|
| |
|
|
Total Health Care | | | | | 531,104,442 | | | 12.5 | % |
| | | | |
|
|
| |
|
|
Industrials — (9.9%) | | | | | | | | | |
3M Co. | | 281,600 | | | 22,099,968 | | | 0.5 | % |
Boeing Co. | | 302,000 | | | 20,593,380 | | | 0.5 | % |
General Electric Co. | | 3,901,600 | | | 139,365,152 | | | 3.3 | % |
Tyco International, Ltd. | | 744,900 | | | 21,244,548 | # | | 0.5 | % |
United Parcel Service, Inc. | | 407,500 | | | 31,744,250 | # | | 0.7 | % |
United Technologies Corp. | | 377,200 | | | 20,308,448 | | | 0.5 | % |
Other Securities | | | | | 216,492,746 | ## | | 5.1 | % |
| | | | |
|
|
| |
|
|
Total Industrials | | | | | 471,848,492 | | | 11.1 | % |
| | | | |
|
|
| |
|
|
Consumer Discretionary — (9.4%) | | | | | | | |
Comcast Corp. Class A | | 808,200 | | | 21,336,480 | *# | | 0.5 | % |
Home Depot, Inc. | | 787,700 | | | 32,910,106 | | | 0.8 | % |
Time Warner, Inc. | | 1,727,700 | | | 31,064,046 | | | 0.7 | % |
Other Securities | | | | | 362,683,579 | ## | | 8.6 | % |
| | | | |
|
|
| |
|
|
Total Consumer Discretionary | | | | | 447,994,211 | | | 10.6 | % |
| | | | |
|
|
| |
|
|
Consumer Staples — (8.3%) | | | | | | | | | |
Altria Group, Inc. | | 763,800 | | | 55,597,002 | | | 1.3 | % |
Coca-Cola Co. | | 764,200 | | | 32,623,698 | | | 0.8 | % |
PepsiCo, Inc. | | 614,600 | | | 36,384,320 | | | 0.9 | % |
| | | | | | | | | | |
| | | November 30, 2005
| |
| | | Shares
| | Value†
| | | Percentage
of Net
Assets**
| |
| | | | | | | | | | | |
Procter & Gamble Co. | | | 1,264,327 | | $ | 72,306,861 | # | | 1.7 | % |
Wal-Mart Stores, Inc. | | | 919,200 | | | 44,636,352 | # | | 1.1 | % |
Other Securities | | | | | | 154,928,713 | ## | | 3.5 | % |
| | | | | |
|
|
| |
|
|
Total Consumer Staples | | | | | | 396,476,946 | | | 9.3 | % |
| | | | | |
|
|
| |
|
|
Energy — (8.1%) | | | | | | | | | | |
Chevron Corp. | | | 828,800 | | | 47,498,528 | | | 1.1 | % |
ConocoPhillips | | | 512,300 | | | 30,999,273 | # | | 0.7 | % |
Exxon Mobil Corp. | | | 2,320,600 | | | 134,664,418 | # | | 3.2 | % |
Schlumberger, Ltd. | | | 216,500 | | | 20,725,545 | # | | 0.5 | % |
Other Securities | | | | | | 151,088,459 | ## | | 3.6 | % |
| | | | | |
|
|
| |
|
|
Total Energy | | | | | | 384,976,223 | | | 9.1 | % |
| | | | | |
|
|
| |
|
|
Utilities — (2.9%) | | | | | | | | | | |
Total Utilities | | | | | | 138,115,863 | ## | | 3.3 | % |
| | | | | |
|
|
| |
|
|
Telecommunication Services — (2.7%) | | | | | | | |
AT&T, Inc. | | | 1,446,084 | | | 36,021,952 | *# | | 0.9 | % |
Sprint Nextel Corp. | | | 1,079,500 | | | 27,030,680 | # | | 0.6 | % |
Verizon Communications, Inc. | | | 1,017,700 | | | 32,546,046 | # | | 0.8 | % |
Other Securities | | | | | | 33,945,366 | ## | | 0.8 | % |
| | | | | |
|
|
| |
|
|
Total Telecommunication
Services | | | | | | 129,544,044 | | | 3.1 | % |
| | | | | |
|
|
| |
|
|
Materials — (2.6%) | | | | | | | | | | |
Total Materials | | | | | | 125,149,162 | ## | | 2.9 | % |
| | | | | |
|
|
| |
|
|
TOTAL COMMON STOCKS | | | | | $ | 4,152,524,354 | | | 98.0 | % |
| | | | | |
|
|
| |
|
|
| | | Face Amount
(000)
| | | | | | |
TEMPORARY CASH INVESTMENTS —
(13.0%) | | | | | | | |
Repurchase Agreement, Merrill Lynch Triparty Repo 3.95%, 12/01/05 (Collateralized by $555,340,000 U.S. Treasury Note 4.50%, 11/15/10, valued at $558,763,488) to be repurchased at $547,864,300 ¨ | | $ | 547,804 | | $ | 547,804,194 | | | 12.9 | % |
Repurchase Agreement, PNC Capital Markets, Inc. 3.88%, 12/01/05 (Collateralized by $76,285,000 FHLMC 4.00%, 09/22/09, valued at $74,759,300) to be repurchased at $73,661,938 | | | 73,654 | | | 73,654,000 | | | 1.7 | % |
| | | | | |
|
|
| |
|
|
TOTAL TEMPORARY CASH INVESTMENTS | | | | | | 621,458,194 | | | 14.6 | % |
| | | | | |
|
|
| |
|
|
TOTAL INVESTMENTS — (100.0%) | | | | | | | | | | |
(Cost $3,688,324,717) | | | | | $ | 4,773,982,548 | | | 112.6 | % |
| | | | | |
|
|
| |
|
|
See accompanying Notes to Financial Statements.
221
STATEMENT OF ASSETS AND LIABILITIES THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series
(Amounts in thousands)
| | | |
| | | November 30, 2005
|
Assets: | | | |
Investments at Value (including $527,474 of securities on loan) | | $ | 4,152,524 |
Temporary Cash Investments at Value (Cost $621,459) | | | 621,459 |
Cash | | | 3,440 |
Receivables: | | | |
Dividends and Interest | | | 9,548 |
Fund Shares Sold | | | 1,175 |
Securities Lending Income | | | 40 |
Prepaid Expenses and Other Assets | | | 19 |
| | |
|
|
Total Assets | | $ | 4,788,205 |
| | |
|
|
| |
Liabilities: | | | |
Payables: | | | |
Upon Return of Securities Loaned | | | 547,804 |
Fund Shares Redeemed | | | 865 |
Due to Advisor | | | 87 |
Futures Margin Variation | | | 486 |
Accrued Expenses and Other Liabilities | | | 251 |
| | |
|
|
Total Liabilities | | | 549,493 |
| | |
|
|
Net Assets | | $ | 4,238,712 |
| | |
|
|
| |
Investments at Cost | | $ | 3,066,866 |
| | |
|
|
See accompanying Notes to Financial Statements.
222
STATEMENT OF OPERATIONS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series
(Amounts in thousands)
| | | | |
| | | For the
Year Ended
November 30,
2005
| |
Investment Income | | | | |
Dividends | | $ | 71,794 | |
Interest | | | 2,110 | |
Income from Securities Lending | | | 317 | |
| | |
|
|
|
| |
Total Investment Income | | | 74,221 | |
| | |
|
|
|
| |
Expenses | | | | |
Investment Advisory Services | | | 967 | |
Accounting & Transfer Agent Fees | | | 580 | |
Custodian Fees | | | 135 | |
Legal Fees | | | 14 | |
Audit Fees | | | 38 | |
S&P 500 Fees | | | 80 | |
Shareholders’ Reports | | | 39 | |
Trustees’ Fees and Expenses | | | 22 | |
Other | | | 66 | |
| | |
|
|
|
| |
Total Expenses | | | 1,941 | |
| | |
|
|
|
| |
Net Investment Income (Loss) | | | 72,280 | |
| | |
|
|
|
| |
Realized and Unrealized Gain (Loss) | | | | |
Net Realized Gain (Loss) on Investment Securities Sold | | | (28,767 | ) |
Net Realized Gain (Loss) on Futures | | | 5,427 | |
Change in Unrealized Appreciation (Depreciation) of: | | | | |
Investment Securities | | | 274,881 | |
Futures | | | (507 | ) |
| | |
|
|
|
| |
Net Realized and Unrealized Gain (Loss) | | | 251,034 | |
| | |
|
|
|
| |
Net Increase (Decrease) in Net Assets Resulting from Operations | | $ | 323,314 | |
| | |
|
|
|
See accompanying Notes to Financial Statements.
223
STATEMENTS OF CHANGES IN NET ASSETS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series
(Amounts in thousands)
| | | | | | | | |
| | | Year
Ended
Nov. 30,
2005
| | | Year
Ended
Nov. 30,
2004
| |
Increase (Decrease) in Net Assets | | | | | | | | |
Operations: | | | | | | | | |
Net Investment Income (Loss) | | $ | 72,280 | | | $ | 65,462 | |
Net Realized Gain (Loss) on Investment Securities Sold . | | | (28,767 | ) | | | (2,763 | ) |
Net Realized Gain (Loss) on Futures | | | 5,427 | | | | 9,374 | |
Change in Unrealized Appreciation (Depreciation) of: | | | | | | | | |
Investment Securities | | | 274,881 | | | | 317,965 | |
Futures | | | (507 | ) | | | 714 | |
| | |
|
|
| |
|
|
|
| | |
Net Increase (Decrease) in Net Assets Resulting from Operations . | | | 323,314 | | | | 390,752 | |
| | |
|
|
| |
|
|
|
| | |
Transactions in Interest: | | | | | | | | |
Contributions | | | 841,720 | | | | 571,038 | |
Withdrawals | | | (420,241 | ) | | | (468,868 | ) |
| | |
|
|
| |
|
|
|
| | |
Net Increase (Decrease) From Transactions in Interest | | | 421,479 | | | | 102,170 | |
| | |
|
|
| |
|
|
|
| | |
Total Increase (Decrease) in Net Assets | | | 744,793 | | | | 492,922 | |
| | |
|
|
| |
|
|
|
| | |
Net Assets | | | | | | | | |
Beginning of Period | | | 3,493,919 | | | | 3,000,997 | |
| | |
|
|
| |
|
|
|
| | |
End of Period | | $ | 4,238,712 | | | $ | 3,493,919 | |
| | |
|
|
| |
|
|
|
See accompanying Notes to Financial Statements.
224
FINANCIAL HIGHLIGHTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series
| | | | | | | | | | | | | | | | | | | | |
| | | Year
Ended
Nov. 30,
2005 | | | Year
Ended
Nov. 30,
2004 | | | Year
Ended
Nov. 30,
2003 | | | Year
Ended
Nov. 30,
2002 | | | Year
Ended
Nov. 30,
2001 | |
| | | | | |
Total Return | | | 8.51 | % | | | 12.77 | % | | | 15.05 | % | | | (16.59 | )% | | | (12.30 | )% |
| |
|
|
|
| | | | | |
Net Assets, End of Period (thousands) | | $ | 4,238,712 | | | $ | 3,493,919 | | | $ | 3,000,997 | | | $ | 2,623,557 | | | $ | 2,831,650 | |
Ratio of Expenses to Average Net Assets | | | 0.05 | % | | | 0.05 | % | | | 0.05 | % | | | 0.05 | % | | | 0.05 | % |
Ratio of Net Investment Income to Average
Net Assets | | | 1.87 | % | | | 1.99 | % | | | 1.75 | % | | | 1.53 | % | | | 1.26 | % |
Portfolio Turnover Rate | | | 6 | % | | | 2 | % | | | 8 | % | | | 11 | % | | | 8 | % |
| |
|
|
|
See accompanying Notes to Financial Statements.
225
NOTES TO FINANCIAL STATEMENTS THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES
The DFA Investment Trust Company (the “Trust”) is an open-end management investment company registered under the Investment Company Act of 1940. The Trust consists of twenty-one investment portfolios, of which The U.S. Large Company Series (the “Series”) is presented in this report.
| B. | Significant Accounting Policies: |
The following significant accounting policies are in conformity with accounting principles generally accepted in the United States of America. Such policies are consistently followed by the Trust in preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and those differences could be material.
1. Security Valuation: Securities held by the Series which are listed on a securities exchange and for which market quotations are readily available are valued at the last quoted sale price of the day. Securities held by the Series that are listed on NASDAQ are valued at the NASDAQ Official Closing Price (“NOCP”). If there is no such reported sale price or NOCP for the day, the Series values securities at the mean between the quoted bid and asked prices. Price information on listed securities is taken from the exchange where the security is primarily traded. Unlisted securities for which market quotations are readily available are valued at the mean between the most recent bid and asked prices. Securities for which quotations are not readily available, or for which market quotations have become unreliable, are valued in good faith at fair value using methods determined by the Board of Trustees.
2. Deferred Compensation Plan: Each eligible Trustee of the Trust may elect participation in the Deferred Compensation Plan (the “Plan”). Under the Plan, effective January 1, 2002, such Trustees may defer payment of a percentage of their total fees earned as a Trustee. These deferred amounts may be treated as though such amounts had been invested in shares of the following funds: U.S. Large Cap Value Portfolio, U.S. Micro Cap Portfolio, DFA International Value Portfolio, Emerging Markets Portfolio and/or DFA Two-Year Global Fixed Income Portfolio. Contributions made under the Plan and the change in unrealized appreciation (depreciation) are included in Trustees’ Fees and Expenses. At November 30, 2005, the total liability (in thousands) for deferred compensation to Trustees is included in Accrued Expenses and Other Liabilities in the amount of $68.
Each Trustee has the option to receive their distribution of proceeds in one of the following methods upon one year’s notice: lump sum, annual installments over a period of agreed upon years, or semi-annual installments over a period of agreed upon years. As of November 30, 2005, none of the Trustees have requested distribution of proceeds.
3. Other: Security transactions are accounted for as of the trade date. Costs used in determining realized gains and losses on the sale of investment securities are on the basis of identified cost. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Discount and premium on securities purchased are amortized over the lives of the respective securities utilizing the effective interest method. Expenses directly attributable to a Series are directly charged. Common expenses of the Trust are allocated using methods approved by the Board of Trustees, generally based on average net assets.
Dimensional Fund Advisors Inc. (“Dimensional” or the “Advisor”) provides investment advisory services to the Series. For the year ended November 30, 2005, the Series’ investment advisory services fees were accrued daily and paid monthly to the Advisor based on an effective annual rate of 0.025 of 1% of average daily net assets.
Fees Paid to Officers and Trustees:
Certain Officers and Trustees of the Advisor are also Officers and Trustees of the Trust; however, such Officers and Trustees (with the exception of the Chief Compliance Officer (“CCO”)) receive no compensation from the Trust. For the year ended November 30, 2005, the total related amounts paid by the Trust under this arrangement were $93 (in thousands). The total related amounts paid by the Series are included in Other Expenses on the Statement of Operations.
226
NOTES TO FINANCIAL STATEMENTS (Continued) THE DFA INVESTMENT TRUST COMPANY
D. Purchases and Sales of Securities:
For the year ended November 30, 2005, the Series made the following purchases and sales of investment securities other than short-term securities (amounts in thousands):
| | | |
Purchases | | $ | 685,966 |
Sales | | | 213,592 |
There were no purchases or sales of U.S. Government Securities during the year ended November 30, 2005.
No provision for federal income taxes is required since the Series is treated as a partnership for federal income tax purposes. Any net investment income and realized and unrealized gains or losses have been deemed to have been “passed down” to its partners.
At November 30, 2005, the total cost and aggregate gross unrealized appreciation and (depreciation) of securities for federal income tax purposes were different from amounts reported for financial reporting purposes (amounts in thousands):
| | | | | | | | | | |
Federal
Tax Cost
| | Unrealized
Appreciation
| | Unrealized
(Depreciation)
| | | Net
Unrealized
Appreciation/
(Depreciation)
|
| $3,864,636 | | $ | 1,311,081 | | $ | (401,734 | ) | | $ | 909,347 |
In accordance with the Series’ investment objectives and policies, the Series may invest in certain financial instruments that have off-balance sheet risk in excess of the amounts recognized in the financial statements and concentrations of credit and market risk. These instruments and their significant corresponding risks are described below:
1. Repurchase Agreements: The Series may purchase money market instruments subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Trust’s custodian or a third party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements were entered into on November 30, 2005.
2. Futures Contracts: During the year ended November 30, 2005, the Series entered into futures contracts in accordance with its investment objectives. Upon entering into a futures contract, the Series deposits cash with a broker, equal to the minimum “initial margin” requirements of the exchange on which the contract is traded. Subsequent payments are received from or paid to the broker each day, based on the daily fluctuation in the market value of the contract. These receipts or payments are known as “variation margin” and are recorded daily by the Series as unrealized gains or losses until the contracts are closed. When the contracts are closed, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
At November 30, 2005, the Series had outstanding 243 long futures contracts on the S&P 500 Index, all of which expire on December 16, 2005. The value of such contracts on November 30, 2005 was $76,004,325, which resulted in an unrealized gain of $2,448,625. Approximately $3,440,000 of cash has been segregated as collateral for the open futures contracts and has been accounted for as cash on the Statement of Assets and Liabilities.
Risks arise upon entering into futures contracts from potential imperfect price correlations between the futures contracts and the underlying securities, the possibility of an illiquid secondary market for these instruments and from the possibility that the Series could lose more than the initial margin requirements.
The Trust, together with other Dimensional-advised portfolios, has entered into a $50 million unsecured discretionary line of credit effective June 2005 with its domestic custodian bank. Each portfolio is permitted to borrow, subject to its investment limitations, up to a maximum of $50 million, as long as total borrowings under the line of credit do not exceed $50 million in the aggregate. Borrowings under the line of credit are charged interest at the then current federal funds rate plus 1%. Each portfolio is individually, and not jointly, liable for its particular advances under the line of credit. There is no commitment fee on the unused portion of the line of
227
NOTES TO FINANCIAL STATEMENTS (Continued) THE DFA INVESTMENT TRUST COMPANY
credit. The agreement for the discretionary line of credit may be terminated by either party at any time. The agreement for the line of credit expires on June 27, 2006. There were no borrowings under the line of credit with the domestic custodian bank by the Series during the year ended November 30, 2005.
The Trust, together with other Dimensional-advised portfolios, has also entered into an additional $150 million unsecured line of credit effective April 3, 2005 with its international custodian bank. Each portfolio is permitted to borrow, subject to investment limitations, up to a maximum of $150 million, as long as total borrowings under the line of credit do not exceed $150 million in the aggregate. Each portfolio is individually, and not jointly liable for its particular advances under the line of credit. Borrowings under the line of credit are charged interest at rates agreed to by the parties at the time of borrowing. There is no commitment fee on the unused line of credit. The agreement of the line of credit expires on April 2, 2006. There were no borrowings by the Series under the line of credit with the international custodian bank during the year ended November 30, 2005.
As of November 30, 2005, the Series had securities on loan to broker/dealers, for which the Series held cash collateral. The Series invests the cash collateral, as described below, and records a liability for the return of the collateral, during the period the securities are on loan. Loans of U.S. securities are required at all times to be secured by collateral at least equal to 102% of the market value of the securities on loan. However, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. In the event that the borrower fails to return loaned securities, and cash collateral being maintained by the borrower is insufficient to cover the value of loaned securities and provided such collateral insufficiency is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Series or, at the option of the lending agent, to replace the securities.
The cash collateral received by the Series from securities on loan is invested in repurchase agreements collateralized by U.S. government securities. Securities pledged as collateral for the repurchase agreements are held by a custodian bank until the agreements are repurchased.
| I. | Contractual Obligations: |
In the normal course of business, the Trust enters into contracts that contain a variety of representations and warranties which provide general indemnification. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust and/or its affiliates that have not yet occurred. However, based on experience, the Trust expects the risk of loss to be remote.
228
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE DFA INVESTMENT TRUST COMPANY
To the Shareholders of The U.S. Large Company Series and
Board of Trustees of The DFA Investment Trust Company
In our opinion, the accompanying statements of assets and liabilities, including the summary schedule of portfolio holdings, 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 U.S. Large Company Series (one of the series constituting The DFA Investment Trust Company, hereafter referred to as the “Series”) at November 30, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, 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 Series’ 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 November 30, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 23, 2006
229
FUND MANAGEMENT THE DFA INVESTMENT TRUST COMPANY
Trustees/Directors
Each Board of Trustees/Directors of The DFA Investment Trust Company Inc. (“DFAITC”), DFA Investment Dimensions Group Inc. (“DFAIDG”), Dimensional Investment Group Inc. (“DIG”) and Dimensional Emerging Markets Value Fund Inc. (“DEM”) (each, the “Fund” and collectively, the “Funds”) is responsible for establishing the Funds’ policies and for overseeing the management of the Funds. The Trustees/Directors of the Funds, including all of the disinterested Directors, have adopted written procedures to monitor potential conflicts of interest that might develop between portfolios of the Funds (the “Feeder Portfolios”) that invest in certain series of DFAITC or DEM (the “Master Funds”).
Each Board has two standing committees, an Audit Committee and a Portfolio Performance and Service Review Committee (the “Performance Committee”). The Audit Committee is comprised of George M. Constantinides, Roger G. Ibbotson and Abbie J. Smith. Each member of the Audit Committee is a disinterested Director. The Audit Committee oversees the Fund’s accounting and financial reporting policies and practices, the Fund’s internal controls, the Fund’s financial statements and the independent audits thereof and performs other oversight functions as requested by the Board of Trustees/Directors. The Audit Committee recommends the appointment of each Fund’s independent registered certified public accounting firm and also acts as a liaison between the Fund’s independent registered certified public accounting firm and the full Board. There were five Audit Committee meetings held during the fiscal year ended November 30, 2005.
Each Board’s Performance Committee is comprised of Messrs. Constantinides and Ibbotson, Ms. Smith, John P. Gould, Myron S. Scholes and Robert C. Merton. Each member of the Fund’s Performance Committee is a disinterested Director. The Performance Committee regularly reviews and monitors the investment performance of the Fund’s series and reviews the performance of the Fund’s service providers. There were four Performance Committee meetings held during the fiscal year ended November 30, 2005.
Certain biographical information for each disinterested Trustee/Director and each interested Trustee/Director of the Funds is set forth in the tables below, including a description of each Trustee/Director’s experience as a Trustee/Director of the Funds and as a director or trustee of other funds, as well as other recent professional experience.
The statements of additional information (together, “SAI”) of the Funds include additional information about each Trustee/Director. You may obtain copies of the SAI and prospectus of each Fund advised by Dimensional Fund Advisors Inc. by calling collect (310) 395-8005 or by mailing a request to Dimensional Fund Advisors, Inc. 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401. Prospectuses are also available at www.dfafunds.com.
| | | | | | |
Name, Age, Position
with the Fund
and Address | | Term of Office1 and
Length of Service | | Portfolios within the
DFA Fund Complex2
Overseen | | Principal Occupation(s) During Past 5 Years and
Other Directorships of Public Companies Held |
Disinterested Trustees/Directors |
| | | | |
George M. Constantinides Director of DFAIDG,
DIG and DEM.
Trustee of DFAITC.
1101 E. 58th Street Chicago, IL 60637
Date of Birth: 9/22/47 | | DFAITC — since 1993 DFAIDG — since 1983 DIG — since 1993
DEM — since 1993 | | 79 portfolios in 4 investment companies | | Leo Melamed Professor of Finance, Graduate School of Business, University of Chicago. |
| | | | |
John P. Gould
Director of DFAIDG,
DIG and DEM.
Trustee of DFAITC.
1101 E. 58th Street Chicago, IL 60637
Date of Birth: 1/19/39 | | DFAITC — since 1993 DFAIDG — since 1986 DIG — since 1993
DEM — since 1993 | | 79 portfolios in 4 investment companies | | Steven G. Rothmeier Distinguished Service Professor of Economics, Graduate School of Business, University of Chicago. Senior Vice-President, Lexecon Inc. (economics, law, strategy and finance consulting). Formerly, President, Cardean University (division of UNext.com). Member of the Boards of Milwaukee Mutual Insurance Company and UNext.com. Formerly, Trustee, First Prairie Funds (registered investment company). Trustee, Harbor Fund (registered investment company) (13 Portfolios). |
230
FUND MANAGEMENT (Continued) THE DFA INVESTMENT TRUST COMPANY
| | | | | | |
Name, Age, Position
with the Fund
and Address | | Term of Office1 and
Length of Service | | Portfolios within the
DFA Fund Complex2
Overseen | | Principal Occupation(s) During Past 5 Years and
Other Directorships of Public Companies Held |
| | | | |
Roger G. Ibbotson
Director of DFAIDG,
DIG and DEM.
Trustee of DFAITC.
Yale School of Management
P.O. Box 208200
New Haven, CT
06520-8200
Date of Birth: 5/27/43 | | DFAITC — since 1993 DFAIDG — since 1981 DIG — since 1993
DEM — since 1993 | | 79 portfolios in 4 investment companies | | Professor in Practice of Finance, Yale School of Management, Director, BIRR Portfolio Analysis, Inc. (software products). Chairman, Ibbotson Associates, Inc., Chicago, IL (software, data, publishing and consulting). Partner, Zebra Capital Management, LLC (hedge fund manager). Formerly, Director, Hospital Fund, Inc. (investment management services). |
| | | | |
Robert C. Merton Director of DFAIDG, DIG and DEM.
Trustee of DFAITC. Harvard Business School 397 Morgan Hall
Soldiers Field
Boston, MA 02163
Date of Birth: 7/31/44 | | DFA ITC — since 2003 DFA IDG — since 2003 DFA DIG — since 2003 DEM — since 2003 | | 79 portfolios in 4 investment companies | | John and Natty McArthur University Professor, Graduate School of Business Administration, Harvard University (since 1998). George Fisher Baker Professor of Business Administration, Graduate School of Business Administration, Harvard University (1988-1998), Co-founder, Chief Science Officer, Integrated Finance Limited (since 2002). Director, MF Risk, Inc. (risk management software) (since 2001). Director, Peninsula Banking Group (bank) (since 2003). Director, Community First Financial Group (bank holding company) (since 2003). Formerly, Co-Founder and Principal, Long-Term Capital Management. Director, Vical Incorporated (biopharmaceutical product development). |
| | | | |
Myron S. Scholes Director of DFAIDG, DIG and DEM.
Trustee of DFAITC.
Oak Hill Capital Management, Inc.
2775 Sand Hill Rd
Suite 220
Menlo Park, CA 94025
Date of Birth: 7/01/41 | | DFAITC — since 1993 DFAIDG — since 1981 DIG — since 1993
DEM — since 1993 | | 79 portfolios in 4 investment companies | | Frank E. Buck Professor Emeritus of Finance, Stanford University. Managing Partner, Oak Hill Capital Management (private equity firm). Chairman, Oak Hill Platinum Partners (hedge fund). Director, Chicago Mercantile Exchange, Consultant, Arbor Investors. Formerly, Director, Smith Breeden Family of Funds. Director, American Century Fund Complex (registered investment companies) (38 Portfolios); and Director, Chicago Mercantile Exchange Holdings Inc. |
| | | | |
Abbie J. Smith
Director of DFAIDG, DIG and DEM.
Trustee of DFAITC. Graduate School of Business University of Chicago
1101 East 58th Street, Chicago, IL 60637
Date of Birth: 4/30/53 | | DFAITC — since 2000 DFAIDG — since 2000 DIG — since 2000 DEM — since 2000 | | 79 portfolios in 4 investment companies | | Boris and Irene Stern Professor of Accounting, Graduate School of Business, University of Chicago, Formerly, Marvin Bower Fellow, Harvard Business School (9/01 to 8/02). Director, HON Industries Inc. (office furniture) and Director, Ryder System Inc. (transportation). |
231
FUND MANAGEMENT (Continued) THE DFA INVESTMENT TRUST COMPANY
| | | | | | |
Name, Age, Position
with the Fund
and Address | | Term of Office1 and
Length of Service | | Portfolios within the
DFA Fund Complex2
Overseen | | Principal Occupation(s) During Past 5 Years and
Other Directorships of Public Companies Held |
Interested Trustees/Directors** |
| | | | |
David G. Booth
Chairman, Director, Chief Executive Officer, Chief Investment Officer and President of DFAIDG,
DIG and DEM.
Chairman, Trustee, Chief Executive Officer, Chief Investment Officer and President of DFAITC. 1299 Ocean Avenue Santa Monica, CA 90401 Date of Birth: 12/02/46 | | DFAITC — since 1993 DFAIDG — since 1981 DIG — since 1992 DEM — since 1993 | | 79 portfolios in 4 investment companies | | Chairman, Director, Chief Executive Officer, Chief Investment Officer and President of Dimensional Fund Advisors Inc., DFA Securities Inc., DFAIDG, DIG and DEM. Chairman, Trustee, Chief Executive Officer, Chief Investment Officer and President of DFAITC. Director of Dimensional Fund Advisors Ltd, and formerly Chief Investment Officer. Director, Chief Investment Officer and President of DFA Australia Ltd. Formerly, Director of Dimensional Funds PLC. Chairman, Director, Chief Executive Officer and Chief Investment Officer of Dimensional Fund Advisors Canada Inc. (All Chief Investment Officer positions held starting 1/1/2003 except for Dimensional Fund Advisors Canada Inc., which was from 6/17/2003.) Limited Partner, Oak Hill Partners, Director, University of Chicago Business School. Formerly, Director, SA Funds (registered investment company). Formerly Director, Assante Corporation (investment management) (until 2002). |
| | | | |
Rex A. Sinquefield* Chairman and Director of DFAIDG, DIG and DEM. Trustee and Chairman of DFAITC.
1299 Ocean Avenue Santa Monica, CA 90401 Date of Birth: 9/07/44 | | DFAITC — since 1993 DFAIDG — since 1981 DIG — since 1992 DEM — since 1993 | | 79 portfolios in 4 investment companies | | Chairman and Director (and prior to 1/1/2003, Chief Investment Officer) of Dimensional Fund Advisors Inc., DFA Securities Inc., DFAIDG, DIG and DEM, Chairman, Trustee (and prior to 1/1/2003, Chief Investment Officer) of DFAITC. Director and formerly President of Dimensional Fund Advisors Ltd., Director (and prior to 1/1/2003, Chief Investment Officer) of DFA Australia Ltd. Director of Dimensional Funds PLC and Dimensional Fund Advisors Canada Inc. Trustee, St. Louis University. Life Trustee and Member of Investment Committee, DePaul University. Director, The German St. Vincent Orphan Home. Member of Investment Committee, Archdiocese of St. Louis. Director, St. Louis Art Institute. |
| 1 | Each Trustee/Director holds office for an indefinite term until his or her successor is elected and qualified. |
| 2 | Each Trustee/Director is a director or trustee of each of the four registered investment companies within the DFA Fund Complex, which includes the Funds. |
| * | Rex A. Sinquefield and Jeanne C. Sinquefield are husband and wife. |
| ** | Interested Directors are described as such because they are deemed to be “interested persons,” as that term is defined under the Investment Company Act of 1940, as amended, due to their positions with Dimensional Fund Advisors Inc. |
232
FUND MANAGEMENT (Continued) THE DFA INVESTMENT TRUST COMPANY
Officers
The name, age, information regarding positions with the Funds and the principal occupation for each officer of the Funds are set forth below. Each officer listed below holds the same office (except as otherwise noted) in the following entities: Dimensional Fund Advisors Inc. (��Dimensional”), DFA Securities Inc., DFAIDG, DIG, DFAITC and DEM (collectively, the “DFA Entities”). The address of each officer is: Dimensional Fund Advisors Inc. 1299 Ocean Avenue, Santa Monica, California 90401, unless otherwise indicated.
| | | | |
Name, Age, Position
with the Fund
and Address | | Term of Office1 and
Length of Service | | Principal Occupation(s) During Past 5 Years |
Officers |
| | | |
M. Akbar Ali
Vice President
Date of Birth: 7/1/71 | | Since 2005 | | Vice President of all the DFA Entities. Portfolio Manager of Dimensional (since August 2002). Formerly, Graduate Student at the University of California, Los Angeles (August 2000 to June 2002); Senior Technology Office at JPMorgan Chase & Co. (February 1997 to June 2000). |
| | | |
Darryl Avery
Vice President
Date of Birth: 1/4/66 | | Since 2005 | | Vice President of all the DFA Entities. From June 2002 to January 2005, institutional client service representative of Dimensional. Formerly, institutional client service and marketing representative for Metropolitan West Asset Management (February 2001 to February 2002); institutional client service and marketing representative for Payden & Rygel (June 1990 to January 2001). |
| | | |
Arthur H. Barlow
Vice President
Date of Birth: 11/7/55 | | Since 1993 | | Vice President of all the DFA Entities. Formerly, Vice President of DFA Australia Limited and Dimensional Fund Advisors Ltd. |
| | | |
Valerie A. Brown
Vice President and Assistant Secretary
Date of Birth: 1/24/67 | | Since 2001 | | Vice President and Assistant Secretary of all the DFA Entities, DFA Australia Limited, Dimensional Fund Advisors Ltd., and since June 2003, Dimensional Fund Advisors Canada Inc. Since March 2000, legal counsel for Dimensional. |
| | | |
Stephen A. Clark
Vice President
Date of Birth: 8/20/72 | | Since 2004 | | Vice President of all the DFA Entities, April 2001 to April 2004, Portfolio Manager of Dimensional. Formerly, Graduate Student at the University of Chicago (September 2000 to March 2001); and Associate of US Bancorp Piper Jaffrey (September 1999 to September 2000) and an Analyst and later an Associate of John Nuveen & Co. (August 1997 to September 1999). |
| | | |
Truman A. Clark
Vice President
Date of Birth: 4/8/41 | | Since 1996 | | Vice President of all the DFA Entities, Formerly, Vice President of DFA Australia Limited and Dimensional Fund Advisors Ltd. |
| | | |
Christopher S. Crossan
Vice President
Date of Birth: 12/21/65 | | Since 2004 | | Vice President of all the DFA Entities. Formerly, Senior Compliance Officer, INVESCO Institutional, Inc. and its affiliates (August 2000 to January 2004); Branch Chief, Investment Company and Investment Advisor Inspections, Securities and Exchange Commission (April 1994 to August 2000). |
| | | |
James L. Davis
Vice President
Date of Birth: 11/29/56 | | Since 1999 | | Vice President of all the DFA Entities. Formerly, Vice President of DFA Australia Limited and Dimensional Fund Advisors Ltd, Formerly at Kansas State University. Arthur Andersen & Co., and Phillips Petroleum Co. |
| | | |
Robert T. Deere
Vice President
Date of Birth: 10/8/57 | | Since 1994 | | Vice President of all the DFA Entities and DFA Australia Limited. Formerly, Vice President of Dimensional Fund Advisors Ltd. |
233
FUND MANAGEMENT (Continued) THE DFA INVESTMENT TRUST COMPANY
| | | | |
Name, Age, Position
with the Fund
and Address | | Term of Office1 and
Length of Service | | Principal Occupation(s) During Past 5 Years |
| | | |
Robert W. Dintzner
Vice President
Date of Birth: 3/18/70 | | Since 2001 | | Vice President of all the DFA Entities. Prior to April 2001, marketing supervisor and marketing coordinator for Dimensional. Formerly, Vice President of DFA Australia Limited. |
| | | |
Richard A. Eustice
Vice President and Assistant Secretary
Date of Birth: 8/5/65 | | Since 1998 | | Vice President and Assistant Secretary of all the DFA Entities and DFA Australia Limited. Formerly, Vice President of Dimensional Fund Advisors Ltd. |
| | | |
Eugene F. Fama, Jr.
Vice President
Date of Birth: 1/21/61 | | Since 1993 | | Vice President of all the DFA Entities. Formerly, Vice President of DFA Australia Limited and Dimensional Fund Advisors Ltd. |
| | | |
Gretchen A. Flicker
Vice President
Date of Birth: 6/9/71 | | Since 2004 | | Vice President of all DFA Entities. Prior to April 2004, institutional client service representative of Dimensional. |
| | | |
Glenn S. Freed
Vice President
Date of Birth: 11/24/61 | | Since 2001 | | Vice President of all the DFA Entities, Formerly, Professor and Associate Dean of the Leventhal School of Accounting (September 1998 to August 2001) and Academic Director Master of Business Taxation Program (June 1996 to August 2001) at the University of Southern California Marshall School of Business. |
| | | |
Henry F. Gray
Vice President
Date of Birth: 9/22/67 | | Since 2000 | | Vice President of all the DFA Entities. Prior to July 2000, Portfolio Manager of Dimensional. Formerly, Vice President of DFA Australia Limited. |
| | | |
Kamyab Hashemi-Nejad
Vice President, Controller and Assistant Treasurer
Date of Birth: 1/22/61 | | Since 1997 | | Vice President, Controller and Assistant Treasurer of all the DFA Entities, DFA Australia Limited, and Dimensional Fund Advisors Ltd. Formerly, Assistant Secretary of Dimensional Fund Advisors Ltd. |
| | | |
Kevin Hight
Vice President
Date of Birth: 11/13/67 | | Since 2005 | | Vice President of all the DFA Entities. Formerly, Regional Director of Dimensional (since March 2003 to March 2005). Formerly, Vice President and Portfolio Manager for Payden & Rygel (July 1999 to February 2003). |
| | | |
Christine W. Ho
Vice President
Date of Birth: 11/29/67 | | Since 2004 | | Vice President of all DFA Entities. Prior to April 2004, Assistant Controller of Dimensional. |
| | | |
Jeff J. Jeon
Vice President
Date of Birth: 11/8/73 | | Since 2004 | | Vice President of all DFA Entities. Prior to April 2004, counsel of Dimensional. Formerly, an Associate at Gibson, Dunn & Crutcher LLP (September 1997 to August 2001). |
| | | |
Patrick M. Keating
Vice President
Date of Birth: 12/21/54 | | Since 2003 | | Vice President of all the DFA Entities and Dimensional Fund Advisors Canada Inc. (since June 2003). Formerly, Director, President and Chief Executive Officer, Assante Asset Management, Inc. (October 2000 to December 2002); Director, Assante Capital Management (October 2000 to December 2002); President and Chief Executive Officer, Assante Capital Management (October 2000 to April 2001); Executive Vice President, Assante Corporation (May 2001 to December 2002); Director, Assante Asset Management Ltd. (September 1997 to December 2002); President and Chief Executive Officer, Assante Asset Management Ltd. (September 1998 to May 2001). |
234
FUND MANAGEMENT (Continued) THE DFA INVESTMENT TRUST COMPANY
| | | | |
Name, Age, Position
with the Fund
and Address | | Term of Office1 and
Length of Service | | Principal Occupation(s) During Past 5 Years |
| | | |
Joseph F. Kolerich
Vice President
Date of Birth: 11/7/71 | | Since 2004 | | Vice President of all the DFA Entities. From April 2001 to April 2004, Portfolio Manager for Dimensional, Formerly, a trader at Lincoln Capital Fixed Income Management (formerly Lincoln Capital Management Company). |
| | | |
Michael F. Lane
Vice President
Date of Birth: 7/11/67 | | Since 2004 | | Vice President of all the DFA Entities. Formerly, Vice President of Advisor Services at TIAA-CREF (July 2001 to September 2004); AEGON, President, Advisor Resources (September 1994 to June 2001). |
| | | |
Juliet Lee
Vice President
Date of Birth: 1/12/71 | | Since 2005 | | Vice President of all the DFA Entities. Human Resources Manager of Dimensional (since January 2004). Formerly, Assistant Vice President for Metropolitan West Asset Management LLC (February 2001 to December 2003) and Director of Human Resources for Icebox, LLC (March 2000 to February 2001). |
| | | |
Heather H. Mathews
Vice President
Date of Birth: 12/12/69 | | Since 2004 | | Vice President of all the DFA Entities. Prior to April 2004, Portfolio Manager for Dimensional Fund Advisors Inc. Formerly, Graduate Student at Harvard University (August 1998 to June 2000). |
| | | |
David M. New
Vice President
Date of Birth: 2/9/60 | | Since 2003 | | Vice President of all the DFA Entities. Formerly, Client Service Manager of Dimensional. Formerly, Director of Research, Wurts and Associates
(investment consulting firm) (December 2000 to June 2002). |
| | | |
Catherine L. Newell
Vice President and Secretary Date of Birth: 5/7/64 | | Vice President since 1997 and Secretary since 2000 | | Vice President and Secretary of all the DFA Entities. Vice President and Assistant Secretary of DFA Australia Limited (since February 2002, April 1997 and May 2002, respectively). Vice President and Secretary of Dimensional Fund Advisors Canada Inc. (since June 2003). Director, Dimensional Funds plc (since January 2002). Formerly, Assistant Secretary of all DFA Entities and Dimensional Fund Advisors Ltd. |
| | | |
Sonya K. Park
Vice President
Date of Birth: 6/28/72 | | Since 2005 | | Vice President of all the DFA Entities. From February 2002 to January 2005, institutional client service representative of Dimensional. Formerly, Associate Director at Watson Pharmaceuticals Inc. (January 2001 to February 2002); Graduate student at New York University (February 2000 to December 2000). |
| | | |
David A. Plecha
Vice President
Date of Birth: 10/26/61 | | Since 1993 | | Vice President of all the DFA Entities, DFA Australia Limited and Dimensional Fund Advisors Ltd. |
| | | |
Eduardo A. Repetto
Vice President
Date of Birth: 1/28/67 | | Since 2002 | | Vice President of all the DFA Entities. Formerly, Research Associate for Dimensional (June 2000 to April 2002). Formerly, Research Scientist (August 1998 to June 2000), California Institute of Technology. |
| | | |
L. Jacobo Rodriguez
Vice President
Date of Birth: 5/18/71 | | Since 2005 | | Vice President of all the DFA Entities. From August 2004 to July 2005, institutional client service representative of Dimensional. Formerly, Financial Services Analyst, Cato Institute (September 2001 to June 2004); Book Review Editor, Cato Journal, Cato Institute (May 1996 to June 2004); and Assistant Director, Project on Global Economic Liberty, Cato Institute (January 1996 to August 2001). |
| | | |
Michael T. Scardina
Vice President, Chief Financial Officer and Treasurer
Date of Birth: 10/12/55 | | Since 1993 | | Vice President, Chief Financial Officer and Treasurer of all the DFA Entities, DFA Australia Limited and Dimensional Fund Advisors Ltd., and since June 2003, Dimensional Fund Advisors Canada Inc. Director, Dimensional Fund Advisors Ltd. (since February 2002) and Dimensional Funds, plc (January 2002). |
235
FUND MANAGEMENT (Continued) THE DFA INVESTMENT TRUST COMPANY
| | | | |
Name, Age, Position
with the Fund
and Address | | Term of Office1 and
Length of Service | | Principal Occupation(s) During Past 5 Years |
| | | |
David E. Schneider
Vice President
Date of Birth: 1/26/46 | | Since 2001 | | Vice President of all the DFA Entities. Currently, Director of Institutional Services. Prior to 2001, Regional Director of Dimensional. |
| | | |
Jeanne C. Sinquefield, Ph.D.* Executive Vice President
Date of Birth: 12/2/46 | | Since 1988 | | Executive Vice President of all the DFA Entities and DFA Australia Limited. Vice President (formerly, Executive Vice President) of Dimensional Fund Advisors Ltd. (since January 2003) and Dimensional Fund Advisor Canada Inc. (since June 2003). |
| | | |
Grady M. Smith
Vice President
Date of Birth: 5/26/56 | | Since 2004 | | Vice President of all the DFA Entities. Prior to April 2004, Portfolio Manager of Dimensional. Formerly, Principal of William M. Mercer, Incorporated (July 1995 to June 2001). |
| | | |
Carl G. Snyder
Vice President
Date of Birth: 6/8/63 | | Since 2000 | | Vice President of all the DFA Entities. Prior to July 2000, Portfolio Manager of Dimensional. Formerly, Vice President of DFA Australia Limited. |
| | | |
Lawrence R. Spieth
Vice President
Date of Birth: 11/10/47 | | Since 2004 | | Vice President of all the DFA Entities. Prior to April 2004, institutional client service representative of Dimensional. |
| | | |
Bradley G. Steiman
Vice President
Date of Birth: 3/25/73 | | Since 2004 | | Vice President of all the DFA Entities and Dimensional Fund Advisors Canada Inc. (since June 2003). Prior to April 2002, Regional Director of Dimensional. Formerly, Vice President and General Manager of Assante Global Advisors
(July 2000 to April 2002); Vice President of Assante Asset Management Inc.
(March 2000 to July 2000); and Private Client Manager at Loring Ward Investment Counsel Ltd. (June 1997 to February 2002). |
| | | |
Karen E. Umland
Vice President
Date of Birth: 3/10/66 | | Since 1997 | | Vice President of all the DFA Entities, DFA Australia Limited, Dimensional Fund Advisors Ltd., and since June 2003, Dimensional Fund Advisors Canada Inc. |
| | | |
Carol W. Wardlaw
Vice President
Date of Birth: 8/7/58 | | Since 2004 | | Vice President of all the DFA Entities. Prior to April 2004, institutional client service representative of Dimensional. |
| | | |
Weston J. Wellington
Vice President
Date of Birth: 3/1/51 | | Since 1997 | | Vice President of all the DFA Entities. Formerly, Vice President of DFA Australia Limited. |
| | | |
Daniel M. Wheeler
Vice President
Date of Birth: 3/3/45 | | Since 2001 | | Vice President of all the DFA Entities. Prior to 2001, Director of Financial Advisors Services of Dimensional. Director of Dimensional Fund Advisors Ltd. (since October 2003) and President of Dimensional Fund Advisors Canada Inc. (since June 2003). |
| 1 | Each officer holds office for an indefinite term at the pleasure of the Boards of Trustee/Directors and until his or her successor is elected and qualified. |
| * | Rex A. Sinquefield and Jeanne C. Sinquefield are husband and wife. |
236
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
THE DFA INVESTMENT TRUST COMPANY
A description of the policies and procedures that the Trust uses in voting proxies relating to securities held in the portfolio is available without charge, upon request, by calling collect: (310) 395-8005. Information regarding how the Advisor votes these proxies is available from the EDGAR database on the SEC’s website at http://www.sec.gov and from the Advisor’s website at http://www.dfaus.com and reflects the twelve-month period beginning July 1 and ending June 30.
237
BLACKROCK FUNDS
Investment Adviser
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Sub-Adviser - International Opportunities Portfolio
BlackRock International, Ltd.
Edinburgh, Scotland EH3 8JB
Sub-Adviser - Asset Allocation Portfolio
BlackRock Financial Management, Inc.
New York, NY 10022
Custodian
PFPC Trust Company
Philadelphia, Pennsylvania 19153
Co-Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware 19809
Co-Administrator
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Distributor
BlackRock Distributors, Inc.
King of Prussia, Pennsylvania 19406
Counsel
Simpson Thacher & Bartlett LLP
New York, New York 10017
Independent Registered Public Accountant
Deloitte & Touche LLP
Philadelphia, Pennsylvania 19103
The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it is intended to reduce expenses and
eliminate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be combined
with those for other members of your household, please contact the Fund at
(800) 441-7762.
The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Trustees. A
description of the policies and procedures that BlackRock and its affiliates
use to determine how to vote proxies relating to portfolio securities is
available without charge, upon request, by calling (800)-441-7762, or on the
website of the Securities and Exchange Commission (the "Commission") at
http://www.sec.gov.
Information on how proxies relating to the Fund's voting securities were voted
(if any) by BlackRock during the most recent 12-month period ended June 30th is
available, upon request and without charge, by calling (800) 441-7762 or on the
website of the Commission at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings for the first and
third quarters of its fiscal year with the Commission on Form N-Q. The Fund's
Form N-Q is available on the Commission's website at http://www.sec.gov and may
be reviewed and copied at the Commission's Public Reference Room in Washington,
D.C. Information regarding the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The Fund's Form N-Q may also be obtained
upon request, without charge, by calling (800) 441-7762.
This report is for shareholder information. This is not a prospectus intended
for the purchase or sale of Fund Shares.
BLACKROCK FUNDS
FUND SPECTRUM
BlackRock Funds is a leading mutual fund company that currently has assets of
approximately $27 billion in the following portfolios, which are 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.
STOCK PORTFOLIOS
- --------------------------------------
Investment Trust Small Cap Core Equity
Large Cap Value Equity Small Cap Growth Equity
Large Cap Growth Equity Global Science & Technology Opportunities
Dividend AchieversTM Global Resources
Legacy All-Cap Global Resources
Mid-Cap Value Equity Health Sciences
Mid-Cap Growth Equity U.S. Opportunities
Aurora Global Opportunities
Small/Mid-Cap Growth International Opportunities
Small Cap Value Equity Index Equity
STOCK & BOND PORTFOLIOS
- --------------------------------------
Asset Allocation
BOND PORTFOLIOS
- --------------------------------------
Enhanced Income Government Income
Low Duration Bond Inflation Protected Bond
Intermediate Government Bond GNMA
Intermediate Bond Managed Income
Intermediate PLUS Bond International Bond
Core Bond Total Return High Yield Bond
Core PLUS Total Return
TAX-FREE BOND PORTFOLIOS
- --------------------------------------
UltraShort Municipal Ohio Tax-Free Income
Tax-Free Income Delaware Tax-Free Income
Pennsylvania Tax-Free Income Kentucky Tax-Free Income
New Jersey Tax-Free Income
MONEY MARKET PORTFOLIOS
- --------------------------------------
Money Market North Carolina Municipal Money Market
U.S. Treasury Money Market Ohio Municipal Money Market
Municipal Money Market Pennsylvania Municipal Money Market
New Jersey Municipal Money Market Virginia Municipal Money Market
SHAREHOLDER PRIVILEGES
ACCOUNT INFORMATION
Call us at 1-800-441-7762 to get information about your account balances,
recent transactions and share prices.
You can also reach us on the web at www.blackrock.com.
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 $50 or more from their BlackRock portfolios, as
long as their account is at least $10,000.
RETIREMENT PLANS
Shareholders may make investments in conjunction with Traditional, Rollover,
Roth, Coverdell and Simple IRA's.
ADDITIONAL INFORMATION ABOUT THE BLACKROCK FUNDS
For additional reports or additional information, as well as more current
information about portfolio holdings and characteristics, BlackRock Fund
shareholders and prospective investors may call 1-800-441-7762.
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.
[GRAPHIC OMITTED]
EQ-SEMI 3/06
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED INCOME
LIQUIDITY REAL ESTATE
BlackRock Funds
Exchange Portfolio
Semi-Annual Report
March 31, 2006 (Unaudited)
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BLACKROCK FUNDS
BLACKROCK EXCHANGE PORTFOLIO
TABLE OF CONTENTS
Shareholder Letter..........................................................1
Portfolio Summary.........................................................2-3
Schedule of Investments.....................................................4
Portfolio Financial Statements
Statement of Assets and Liabilities.......................................5
Statement of Operations...................................................6
Statements of Changes in Net Assets.......................................7
Financial Highlights......................................................8
Notes to Financial Statements............................................9-12
Additional Information..................................................14-16
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 generally receive any nonpublic personal information
relating to its shareholders who purchase shares through their broker-dealers.
However, in certain limited circumstances, BlackRock receives a limited amount
of nonpublic personal information from broker-dealers in connection with
monitoring for inappropriate trading activity. 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.
BLACKROCK EXCHANGE PORTFOLIO
March 31, 2006
Dear Shareholder:
You may be aware that on February 15, 2006, we announced that BlackRock
and Merrill Lynch Investment Managers (MLIM) intended to unite to create a new
independent asset management company.
We believe this combination of asset management strength will benefit our
investors. BlackRock is one of the largest publicly traded investment
management firms in the United States, with approximately $463 billion in
assets under management and over 1,800 employees. We manage assets on behalf of
institutional and individual investors worldwide through a variety of equity,
fixed income, cash management and alternative investment products. MLIM is also
a leading investment management organization, with over $576 billion in assets
under management globally and over 2,700 employees in 17 countries. It offers
over 100 investment strategies in vehicles ranging from mutual funds to
institutional portfolios.
At the completion of the transaction, which is expected at the end of the
third quarter of this year, the combined firm will be a top-ten investment
manager worldwide, with more than $1 trillion in assets under management. The
combined company will provide a wider selection of high-quality investment
solutions across a range of asset classes and investment styles. BlackRock and
MLIM possess complementary capabilities that together create a well-rounded
organization, uniting some of the finest money managers in the industry. At the
same time, the firms share similar values and beliefs - focused on delivering
excellence to clients, they both make investment performance their most
important mission. In short, the combination reinforces our commitment to
shareholders.
As a shareholder in one or more BlackRock-advised mutual funds, you will
receive proxy materials in the coming weeks in connection with this
transaction. After you receive this information, do not hesitate to contact
your financial advisor should you have any questions or concerns.
As always, we thank you for entrusting us with your investment assets, and
we look forward to continuing to serve your investment needs with even greater
strength and scale.
Sincerely,
[GRAPHIC OMITTED]
Anne F. Ackerley
Managing Director
BlackRock Advisors, Inc.
Data, including assets under management, are as of March 31, 2006.
1
BLACKROCK EXCHANGE PORTFOLIO
Total Net Assets (3/31/06): $293.4 million
Performance Benchmark:
S&P 500(Reg. TM) Index
Investment Approach:
Seeks to provide long-term growth of capital and consequent long-term
growth of income by investing largely in a diversified and supervised portfolio
of common stocks, or securities convertible into common stocks, believed by
management to have growth potential over the years. In pursuing the Portfolio's
investment objective, the portfolio management team seeks to minimize the
recognition of capital gains.
Recent Portfolio Management Activity:
o The Portfolio underperformed the benchmark for the semi-annual period.
o U.S. equity markets exhibited a strong upswing during the first quarter
of 2006, building on the modest gains experienced in the fourth quarter of
2005. During the semi-annual period, the large-capitalization S&P 500(Reg. TM)
Index returned 6.4%, while smaller-capitalization stocks, as represented by the
Russell 2000(Reg. TM) Index, surged during January and posted their strongest
first quarter performance in fifteen years. Broad-based strength across the
U.S. equity market spectrum during the first quarter was particularly
satisfying after what was considered a lackluster year for stocks in 2005.
o In this environment, cyclical sectors such as industrials and materials
performed particularly well as a result of the rebound in economic activity and
rapid increase in a wide range of commodity prices. In comparison, more
defensive groups such as the consumer staples and utilities sectors
underperformed the broader market.
o Within the Portfolio, both security selection and allocation effects
detracted from the Portfolio's performance versus its benchmark. In particular,
weakness among telecommunication services, financials and consumer staples
overshadowed the positive effects of strong stock selection in the health care
and energy sectors.
o Stock selection in the telecommunication services sector was the
largest detractor from relative returns during the period. Our position in
European wireless telecommunication firm Vodafone Group PLC led to the
significant underperformance. Shares of Vodafone fell after announcing
disappointing earnings results and lower expectations for 2007.
o Within the financials sector, benchmark holdings tended to outperform
Portfolio holdings over the period. In particular, an underweight to both the
capital markets and commercial banking segments hurt performance. Additionally,
poor selections in the consumer finance group detracted from gains.
o Other areas of the Portfolio such as health care and energy added
value. Our position in diversified oil services firm Schlumberger added value
in the energy sector. In the health care segment, the Portfolio benefited from
strength in holdings such as Millipore in health care supplies and Novartis AG
in pharmaceuticals.
o At the end of the semi-annual period, relative to the S&P 500(Reg. TM)
Index, the Portfolio held its largest overweights in the energy, consumer
staples and health care sectors and most significant underweights in the
consumer discretionary, utilities and materials sectors.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE EXCHANGE PORTFOLIO
AND
THE S&P 500(REG. TM) INDEX FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Exchange Portfolio S&P 500(R) Index
- - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 10,000
06/30/1996 10,404 10,449
09/30/1996 10,893 10,772
12/31/1996 11,647 11,670
03/31/1997 12,023 11,983
06/30/1997 14,341 14,074
09/30/1997 15,097 15,129
12/31/1997 15,340 15,563
03/31/1998 17,355 17,734
06/30/1998 18,213 18,320
09/30/1998 16,278 16,497
12/31/1998 19,649 20,010
03/31/1999 21,156 21,008
06/30/1999 22,575 22,488
09/30/1999 21,184 21,084
12/31/1999 23,302 24,222
03/31/2000 23,481 24,777
06/30/2000 22,944 24,119
09/30/2000 22,869 23,885
12/31/2000 22,341 22,016
03/31/2001 19,299 19,406
06/30/2001 20,079 20,542
09/30/2001 17,880 17,527
12/31/2001 20,027 19,400
03/31/2002 20,559 19,453
06/30/2002 17,664 16,847
09/30/2002 15,044 13,936
12/31/2002 16,266 15,112
03/31/2003 15,983 14,637
06/30/2003 17,902 16,890
09/30/2003 18,212 17,337
12/31/2003 19,664 19,448
03/31/2004 20,030 19,777
06/30/2004 20,279 20,117
09/30/2004 19,980 19,741
12/31/2004 21,164 21,563
03/31/2005 20,586 21,100
06/30/2005 20,962 21,389
09/30/2005 21,814 22,160
12/31/2005 22,043 22,623
03/31/2006 23,019 23,575
FOR PERIOD ENDING MARCH 31, 2006
Exchange Portfolio - Average Annual Return
1 Year 3 Year 5 Year 10 Year
- ------------- ----------- ---------- ----------
11.83% 12.94% 3.57% 8.70%
THE INCEPTION DATE OF THE PORTFOLIO WAS 12/17/76.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
2
BLACKROCK EXCHANGE PORTFOLIO
FUND PROFILE
Top Ten Holdings (% of long-term investments)
Exxon Mobil Corp. 6.0%
American Express Co. 5.5
Target Corp. 4.8
The Procter & Gamble Co. 4.8
Schlumberger Ltd. 4.7
First Data Corp. 4.3
SLM Corp. 4.1
General Electric Co. 4.1
Hewlett-Packard Co. 3.9
Berkshire Hathaway, Inc. - Class B 3.8
----
Total 46.0%
====
Top Ten Industries (% of long-term investments)
Oil & Gas 14.4%
Finance 10.5
Pharmaceuticals 9.0
Computer & Office Equipment 8.2
Computer Software & Services 8.0
Retail Merchandising 7.3
Aerospace 5.5
Soaps & Cosmetics 4.8
Manufacturing 4.1
Beverages & Bottling 4.1
----
Total 75.9%
====
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur ongoing costs, including advisory
fees, and other Portfolio expenses. This Example is intended to help you
understand your ongoing costs (in dollars) of investing in the Portfolio and to
compare these costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds.
Hypothetical Expenses
Actual Expenses (5% return before expenses)
----------------- ----------------------------
BlackRock Class BlackRock Class
----------------- ----------------------------
Beginning Account Value (10/01/05) $ 1,000.00 $ 1,000.00
Ending Account Value (3/31/06) 1,055.20 1,021.97
Expenses Incurred During Period (10/01/05 - 3/31/06) 3.07 3.03
For the BlackRock share class of the Portfolio, expenses are equal to the
annualized expense ratio of 0.60%, multiplied by the average account value over
the period, multiplied by 182/365 (to reflect the one-half year period).
3
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BLACKROCK EXCHANGE PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS - 100.0%
Aerospace - 5.5%
The Boeing Co. 131,800 $ 10,271,174
General Dynamics Corp. 93,000 5,950,140
------------
16,221,314
------------
Banks - 1.8%
J.P. Morgan Chase & 124,728 5,193,674
------------
Co., Inc.
Beverages & Bottling - 4.1%
Anheuser-Busch Cos.,
Inc. 192,315 8,225,313
The Coca-Cola Co. 87,735 3,673,464
------------
11,898,777
------------
Computer & Office Equipment - 8.2%
Dell, Inc.(b) 170,500 5,074,080
Hewlett-Packard Co. 349,270 11,490,983
International Business
Machines Corp. 92,371 7,617,836
------------
24,182,899
------------
Computer Software & Services - 8.0%
First Data Corp. 266,480 12,476,594
Microsoft Corp. 399,890 10,881,007
------------
23,357,601
------------
Conglomerates - 3.8%
Berkshire Hathaway, 3,687 11,105,244
------------
Inc. - Class B(b)
Electronics - 1.7%
Agilent Technologies,
Inc.(b) 29,749 1,117,075
Intel Corp. 200,000 3,870,000
------------
4,987,075
------------
Finance - 10.5%
American Express Co. 305,626 16,060,646
Ameriprise Financial,
Inc. 61,125 2,754,293
SLM Corp. 233,200 12,112,408
------------
30,927,347
------------
Food & Agriculture - 0.2%
General Mills, Inc. 8,497 430,628
------------
Insurance - 2.4%
American International 106,800 7,058,412
------------
Group, Inc.
Machinery & Heavy Equipment - 3.0%
Caterpillar, Inc. 124,256 8,922,823
------------
Manufacturing - 4.1%
General Electric Co. 344,970 11,998,057
------------
Medical & Medical Services - 4.0%
Medco Health Solutions,
Inc.(b) 11,124 636,515
Millipore Corp.(b) 150,000 10,959,000
------------
11,595,515
------------
Medical Instruments & Supplies - 3.5%
Johnson & Johnson 124,195 7,354,828
Medtronic, Inc. 60,000 3,045,000
------------
10,399,828
------------
Oil & Gas - 14.4%
BP PLC - ADR 131,321 9,053,270
Exxon Mobil Corp. 288,728 17,571,986
Schlumberger Ltd. 109,238 13,826,254
Transocean, Inc.(b) 21,148 1,698,184
------------
42,149,694
------------
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Pharmaceuticals - 9.0%
AstraZeneca PLC - ADR 76,000 $ 3,817,480
Merck & Co., Inc. 83,999 2,959,285
Novartis AG - ADR 185,384 10,277,689
Pfizer, Inc. 89,719 2,235,797
Wyeth 145,544 7,061,795
------------
26,352,046
------------
Retail Merchandising - 7.3%
Target Corp. 273,222 14,210,276
Wal-Mart Stores, Inc.
154,700 7,308,028
------------
21,518,304
------------
Soaps & Cosmetics - 4.8%
The Procter & Gamble 246,400 14,197,568
------------
Co.
Telecommunications - 1.8%
Vodafone Group PLC - SP ADR
253,147 5,290,772
------------
Tobacco - 1.9%
Altria Group, Inc. 77,000 5,456,220
------------
TOTAL COMMON STOCKS
(Cost $85,811,644)
293,243,798
------------
TOTAL INVESTMENTS IN SECURITIES - 100.0%
(Cost $85,811,644(a)) 293,243,798
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.0% 120,886
------------
NET ASSETS - 100.0% $293,364,684
============
- -------------------
(a) Cost for federal income tax purposes is $80,035,000. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $216,107,164
Gross unrealized depreciation (2,898,366)
------------
$213,208,798
============
(b) Non-income producing security.
KEY TO INVESTMENT ABBREVIATIONS
ADR American Depositary Receipts
PLC Public Limited Co.
SP Sponsored
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
BLACKROCK EXCHANGE PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
ASSETS
Investments at value/1/ .................................................... $ 293,243,798
Dividends receivable ....................................................... 467,259
Interest receivable ........................................................ 2,775
Receivable from adviser .................................................... 1,861
Prepaid expenses ........................................................... 3,033
-------------
TOTAL ASSETS ............................................................ 293,718,726
-------------
LIABILITIES
Payable to custodian ....................................................... 109,810
Capital shares redeemed payable ............................................ 874
Foreign taxes payable ...................................................... 24,472
Advisory fees payable ...................................................... 117,315
Administration fees payable ................................................ 18,834
Custodian fees payable ..................................................... 4,676
Transfer agent fees payable ................................................ 3,541
Other accrued expenses payable ............................................. 74,520
-------------
TOTAL LIABILITIES ....................................................... 354,042
-------------
NET ASSETS .................................................................. $ 293,364,684
=============
/1/Cost of Investments ...................................................... $ 85,811,644
=============
AT MARCH 31, 2006, NET ASSETS CONSISTED OF:
Capital Paid in ............................................................ $ 93,628,389
End of period undistributed net investment income .......................... 225,099
Accumulated net realized gain (loss) on investment transactions and futures (7,920,958)
Net unrealized appreciation on investment transactions ..................... 207,432,154
-------------
$ 293,364,684
=============
BlackRock Shares:
Net Assets ................................................................. $ 293,364,684
Shares outstanding (unlimited authorization) ............................... 524,639
Net Asset Value, offering and redemption price per share ................... $ 559.17
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
BLACKROCK FUNDS
STATEMENT OF OPERATIONS
BLACKROCK EXCHANGE PORTFOLIO
FOR THE SIX MONTHS ENDED MARCH 31, 2006 (UNAUDITED)
Investment income:
Interest .................................................... $ 27,606
Dividends ................................................... 2,430,769
Foreign taxes witheld ....................................... (24,867)
-----------
Total investment income .................................. 2,433,508
-----------
Expenses:
Investment advisory fee ..................................... 723,377
Administration fee .......................................... 164,109
Printing fee ................................................ 38,038
Legal and audit fee ......................................... 29,460
Transfer agent fee .......................................... 16,188
Custodian fee ............................................... 14,757
Trustees' fees .............................................. 5,323
Other ....................................................... 6,738
-----------
Total expenses ............................................ 997,990
-----------
Less investment advisory fees waived ..................... (78,210)
Less administration fees waived .......................... (45,886)
Less transfer agent fee waived ........................... (1,244)
Less transfer agent fee reimbursed ....................... (3,541)
Less custodian fees waived ............................... (1,056)
-----------
Net expenses .............................................. 868,053
-----------
Net investment income ........................................ 1,565,455
-----------
Realized and unrealized gain on investments:
Net realized gain from:
Investment transactions ................................... 35,405
Redemption-in-kind transactions (Note C) .................. 6,794,578
-----------
6,829,983
-----------
Change in unrealized appreciation from:
Investments ............................................... 7,112,277
-----------
Net gain on investments transactions ......................... 13,942,260
-----------
Net increase in net assets resulting from operations ......... $15,507,715
===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
BLACKROCK EXCHANGE PORTFOLIO
FOR THE
SIX MONTHS FOR THE
ENDED NINE MONTHS FOR THE
3/31/06 ENDED YEAR ENDED
(UNAUDITED) 9/30/05 12/31/04
----------------- ----------------- ----------------
Increase (decrease) in net assets:
Operations:
Net investment income .............................................. $ 1,565,455 $ 2,301,991 $ 4,448,556
Net increase from payment by affiliate (Note D) .................... - - 98,840
Net realized gain (loss) on investment transactions ................ 35,405 (2,560,750) 4,097,700
Net realized gain on redemption-in-kind transactions ............... 6,794,578 8,537,884 22,587,741
Change in unrealized appreciation (depreciation) on investments..... 7,112,277 248,812 (9,213,483)
------------- ------------- -------------
Net increase in net assets resulting from operations ............... 15,507,715 8,527,937 22,019,354
------------- ------------- -------------
Distributions to shareholders from:
Net investment income .............................................. (2,031,614) (1,671,755) (4,387,534)
------------- ------------- -------------
Capital share transactions:
Shares issued in reinvestment of dividends ......................... 318,583 335,703 911,070
Shares redeemed .................................................... (12,946,093) (14,027,713) (28,889,729)
------------- ------------- -------------
Net decrease in net assets resulting from capital share
transactions ...................................................... (12,627,510) (13,692,010) (27,978,659)
------------- ------------- -------------
Total increase(decrease) in net assets ............................. 848,591 (6,835,828) (10,346,839)
Net assets:
Beginning of period ................................................ 292,516,093 299,351,921 309,698,760
------------- ------------- -------------
End of period ...................................................... $ 293,364,684 $ 292,516,093 $ 299,351,921
============= ============= =============
End of period undistributed net investment income .................... $ 225,099 $ 691,258 $ 61,022
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE
SIX MONTHS FOR THE
ENDED NINE MONTHS FOR THE
3/31/06 ENDED YEAR ENDED
(UNAUDITED) 9/30/05 12/31/04/1/
-------------- -------------- -------------
Per share operating performance:
Net asset value, beginning of period ................................ $ 533.63 $ 520.73 $ 490.99
--------- --------- ---------
Net investment income .............................................. 2.94/3/ 4.10/3/ 7.61
Net realized and unrealized gain (loss) on investments ............. 26.44 11.80 29.63
Distributions from net investment income ........................... (3.84) (3.00) (7.50)
--------- --------- ---------
Net asset value, end of period ..................................... $ 559.17 $ 533.63 $ 520.73
========= ========= =========
Total Return ........................................................ 5.52%/5/ 3.10%/5/ 7.63%
Ratios/Supplemental data
Net assets, end of period (in thousands) ............................ $ 293,365 $ 292,516 $ 299,352
Ratio of expenses to average net assets ............................. 0.60%/6/ 0.60%/6/ 0.61%
Ratio of expenses to average net assets (excluding waivers) ......... 0.69%/6/ 0.71%/6/ 0.61%
Ratio of net investment income to average net assets ................ 1.08%/6/ 1.06%/6/ 1.47%
Ratio of net investment income to average net assets (excluding
waivers) ........................................................... 0.99%/6/ 0.95%/6/ 1.47%
Portfolio turnover .................................................. - - 4%
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/03/2/ 12/31/02/2/ 12/31/01/2/ 12/31/00/2/
------------- -------------- -------------- ----------------
Per share operating performance:
Net asset value, beginning of period ................................ $ 411.01 $ 511.71 $ 575.76 $ 616.80
--------- --------- --------- ----------
Net investment income .............................................. 5.40 4.74 4.22 4.75
Net realized and unrealized gain (loss) on investments ............. 80.08 (100.64) (64.02) (41.19)/4/
Distributions from net investment income ........................... (5.50) (4.80) (4.25) (4.60)
--------- --------- --------- ----------
Net asset value, end of period ..................................... $ 490.99 $ 411.01 $ 511.71 $ 575.76
========= ========= ========= ==========
Total Return ........................................................ 20.89% (18.78)% (10.35)% (4.13)%
Ratios/Supplemental data
Net assets, end of period (in thousands) ............................ $ 309,699 $ 268,503 $ 367,640 $ 437,804
Ratio of expenses to average net assets ............................. 0.59% 0.60% 0.57% 0.55%
Ratio of expenses to average net assets (excluding waivers) ......... 0.59% 0.60% 0.57% 0.55%
Ratio of net investment income to average net assets ................ 1.20% 1.00% 0.81% 0.78%
Ratio of net investment income to average net assets (excluding
waivers) ........................................................... 1.20% 1.00% 0.81% 0.78%
Portfolio turnover .................................................. 5% 3% 1% 11%
- ---------
/1/ During the year ended December 31, 2004, the Adviser reimbursed the
Portfolio as part of an internal review regarding the use of fund brokerage
commissions. These payments increased net realized and unrealized gain on
investments per share by $0.17, and increased total return by 0.04%.
/2/ Audited by other auditors.
/3/ Calculated using the average shares outstanding method.
/4/ After provision for federal tax on retained capital gains of $11.01.
/5/ Not annualized.
/6/ Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(A) Organization
BlackRock FundsSM (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 51 portfolios, one of which, the BlackRock Exchange Portfolio
(the "Portfolio"), is included in these financial statements. The Portfolio is
authorized to issue an unlimited number of shares with a par value of $0.001.
Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts with its vendors and others that provide for general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund.
However, based on experience, the Fund considers the risk of loss from such
claims to be remote.
(B) Fund Reorganization
On January 31, 2005, BlackRock, Inc., the parent of BlackRock Advisors,
Inc. ("BlackRock"), acquired SSRM Holdings, Inc., the parent of State Street
Research & Management Co. ("SSRM"), the investment adviser to the former State
Street Research mutual funds. In connection with the transaction, the BlackRock
Exchange Portfolio reorganized with the State Street Research Exchange Fund.
On January 31, 2005, the BlackRock Exchange Portfolio acquired all of the
assets and certain stated liabilities of the State Street Research Exchange
Fund. The reorganization was pursuant to an Agreement and Plan of
Reorganization, which was approved by the State Street Research Exchange Fund
shareholders on January 25, 2005. In connection with the reorganization, the
BlackRock Exchange Portfolio inherited the accounting and performance history
of the State Street Research Exchange Fund. Under the Agreement and Plan of
Reorganization, 572,959 shares of the State Street Research Exchange Fund were
exchanged for 572,959 BlackRock Class shares of the BlackRock Exchange
Portfolio. The BlackRock Exchange Portfolio commenced operations on this date
as a result of this tax free reorganization.
Included in the net assets from the State Street Research Exchange Fund
was paid-in-capital of $84,329,708, undistributed net investment income of
$265,841, accumulated realized gain of $14,157,803 and net unrealized
appreciation of $189,448,466. Total net assets as of January 28, 2005 were
$288,201,818.
Accordingly, the information presented in the financial statements and
related notes reflects operations of the predecessor State Street Research fund
prior to January 31, 2005 and represents operations of the reorganized
BlackRock Portfolio following the consummation of the reorganization.
(C) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements.
Investment Valuation - Valuation of investments held by the Portfolio is
as follows: investments traded on a national securities exchange or on the
NASDAQ National Market System are valued at the last reported sale price that
day or the NASDAQ official closing price, if applicable; investments traded on
a national securities exchange for which there were no sales on that day and
investments traded on other over-the-counter markets for which market
quotations are readily available are valued at the mean of the bid and asked
prices. The amortized cost method of valuation will be used with respect to
debt obligations with sixty days or less remaining to maturity unless the
investment adviser under the supervision of the Board of Trustees (the "Board")
determines such method does not represent fair value. Any assets which are
denominated in a non-U.S. currency are translated into U.S. dollars at the
prevailing market rates. In the event that application of these methods of
valuation results in a price for an investment which is deemed not to be
representative of the market value of such investment, the investment will be
valued by, under the direction of or in accordance with a method approved by
the Board as reflecting fair value ("Fair Value Assets"). The investment
adviser will submit its recommendations regarding the valuation and/or
valuation methodologies for Fair Value Assets to a valuation committee. The
valuation committee may accept, modify or reject any recommendations. The
pricing of all Fair Value Assets shall be subsequently reported to the Board.
When determining the price for a Fair Value Asset, the investment adviser
shall seek to determine the price that the Portfolio might reasonably expect to
receive from the current sale of that asset in an arm's-length transaction.
Fair value determinations shall be based upon all available factors that the
adviser deems relevant.
9
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Dividends to Shareholders - Dividends from net investment income, which
are recorded on the ex-dividend date, are declared and paid quarterly for the
Portfolio. Net realized short-term capital gains, if any, are distributed
annually. The Portfolio's current practice is to retain long-term capital
gains and to pay federal taxes thereon at corporate capital gain tax rates on
behalf of the shareholders.
Investment Transactions and Investment Income - Investment transactions
are accounted for on the trade date. The cost of investments sold and the
related gain or loss thereon is determined by use of the specific
identification method, generally high cost, for both financial reporting and
federal income tax purposes. Interest income is recorded on the accrual basis.
Discounts and premiums on debt securities are accreted or amortized,
respectively, for book and tax purposes using the effective yield-to-maturity
method over the term of the instrument. Dividends are recorded on the
ex-dividend date.
Repurchase Agreements - Money market instruments may be purchased from
banks and non-bank dealers subject to the seller's agreement to repurchase them
at an agreed upon date and price. Collateral for repurchase agreements may have
longer maturities than the maximum permissible remaining maturity of portfolio
investments. The seller is required on a daily basis to maintain the value of
the securities subject to the agreement at not less than the repurchase price.
The agreements are conditioned upon the collateral being deposited under the
Federal Reserve book-entry system or held in a separate account by the
Portfolio's custodian or an authorized securities depository.
Redemptions-In-Kind - The Portfolio transferred securities and cash due to
redemptions-in-kind. For purposes of generally accepted accounting principles,
these transactions were treated as a sale of securities and the resulting gains
and losses were recognized based on the market value of the securities on the
date of the transfer. For tax purposes, no gains or losses were recognized.
Gains and losses resulting from such redemptions in-kind are disclosed
separately in the Statement of Operations.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("generally accepted accounting principles") requires the use of management
estimates. Actual results could differ from these estimates and such
differences could be material.
Other - Expenses that are directly related to the Portfolio are charged
directly to the Portfolio. Other operating expenses incurred by the Fund are
prorated to the Portfolio on the basis of relative net assets.
(D) Agreements and Other Transactions with Affiliates and Related Parties
Pursuant to an Investment Advisory Agreement, BlackRock serves as
investment adviser. BlackRock 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 payable monthly at the annual rate
of 0.50% of average daily net assets.
Prior to January 31, 2005, the State Street Research Exchange Fund entered
into an agreement with SSRM to provide management advisory, statistical and
research facilities and services. Fees were earned monthly at the annual rate
of 0.50% of the Portfolio's average net assets.
PFPC Trust Company, an indirect subsidiary of The PNC Financial Services
Group, Inc., serves as custodian for the Portfolio. PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc.,
serves as transfer and dividend disbursing agent. The custodian and transfer
agent have agreed to voluntarily waive a portion of their fees during the
period. Prior to January 31, 2005, State Street Bank and Trust Co. served as
the Portfolio's custodian and record keeper. Prior to January 31, 2005, Boston
Financial Data Services, Inc. served as the State Street Research Funds'
transfer agent. Prior to January 31, 2005, State Street Research Service
Center, a division of State Street Research Investment Services, Inc., the
State Street Research Funds' principal underwriter, provided certain
shareholder services to the State Street Research Funds, such as responding to
inquiries and instructions from investors with respect to the purchase and
redemption of shares of the funds. For the month ended January 31, 2005, the
State Street Research Exchange Fund paid $382 for these services. Subsequent to
January 31, 2005, BlackRock operated an investor service center on behalf of
the Fund.
Prior to February 1, 2006, the Portfolio bore a transfer agent fee at an
annual rate not to exceed 0.005% of the average daily net assets plus per
account fees and disbursements.
Effective February 1, 2006, transfer agency fees are comprised of those
fees charged by the Transfer Agent for issuing and redeeming shares of each
class of each Portfolio, all shareholder communications including shareholder
reports, dividend and distribution notices, proxy materials for its meetings to
shareholders and maintenance of shareholder accounts.
10
BLACKROCK FUNDS
The Portfolio's advisory fees were paid to BlackRock beginning January 31,
2005. Prior to that date the fees were paid to SSRM. See (Note B) above for
more information on the fund reorganization.
PFPC and BlackRock act as co-administrators for the Portfolio. For these
services, the co-administrators receive a combined administration fee computed
daily and payable monthly, based on a percentage of the average daily net
assets of the Portfolio. Prior to February 1, 2006 the fee was paid at the
following annual rates: 0.085% of the first $500 million, 0.075% of the next
$500 million and 0.065% of assets in excess of $1 billion. In addition, the
Portfolio was charged an administration fee of 0.035% of the first $500
million, 0.025% of the next $500 million and 0.015% of assets in excess of $1
billion. Effective February 1, 2006, the administration fee is paid at the
following annual rates: 0.075% of the first $500 million, 0.065% of the next
$500 million and 0.055% of assets in excess of $1 billion. In addition, the
Portfolio is charged an administration fee based on the following percentage of
average daily net assets of each respective class: 0.025% of the first $500
million, 0.015% of the next $500 million and 0.005% of assets in excess of $1
billion.
Prior to January 31, 2005, the Portfolio paid SSRM for certain
administrative costs incurred in providing other assistance and services to the
Portfolio. The fee was based on actual costs allocated equally among the State
Street Research funds.
In the interest of limiting the expenses of the Portfolio, BlackRock and
the Portfolio have entered into an annual expense limitation agreements. The
agreement sets a limit on certain operating expenses of the 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 the
aggregate expenses incurred (excluding: interest, taxes, brokerage commissions
and other extraordinary expenses). At March 31, 2006, the receivable from
BlackRock was $1,861.
BlackRock has contractually agreed to waive or reimburse fees or expenses
until February 1, 2007, in order to limit expenses to 0.60% of average daily
net assets. This agreement is reviewed annually by the Fund's Board.
PFPC and BlackRock may, at their discretion, waive all or any portion of
their administration fees for the Portfolio.
As of the six months ended March 31, 2006, affiliated payables were as
follows:
PFPC/(1)/ ........................ $124,978
BlackRock/(2)/ ................... 126,848
(1) - payables to PFPC are for Accounting, Administration, Custody and Transfer
Agent services provided.
(2) - payables to BlackRock are for Advisory and Administration services
provided.
During the year ended December 31, 2004, SSRM conducted an internal review
regarding the use of fund brokerage commissions in consideration of the
distribution of shares. In connection with this review, SSRM determined to
reimburse the fund the entire amount of any such identified brokerage
commissions, and reviewed this matter with the Board of Trustees of the State
Street Research Fund. This amount is shown in the total amount of $98,840 as
"Net increase from payment by affiliate" on the Statements of Changes in Net
Assets.
(E) Purchases and Sales of Securities
For the six months ended March 31, 2006, purchases and sales of
securities, other than short-term investments and U.S. government securities
were $0 and $10,972,179, including $10,820,791 representing
redemptions-in-kind, respectively. There were no purchases or sales of U.S.
government securities for the six months ended March 31, 2006.
11
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
(F) Capital Shares
Transactions in capital shares for each period were as follows:
FOR THE FOR THE
SIX MONTHS NINE MONTHS FOR THE
ENDED ENDED YEAR ENDED
3/31/06 9/30/05 12/31/04
--------------- --------------- ---------------
Shares issued in reinvestment of dividends ......... 582 653 1,790
Shares redeemed .................................... (24,110)/1/ (27,354)/2/ (57,683)/3/
------- ------- -------
Net decrease ....................................... (23,528) (26,701) (55,893)
======= ======= =======
/1/ Including (21,516) representing redemptions-in-kind.
/2/ Including (20,440) representing redemptions-in-kind.
/3/ Including (55,646) representing redemptions-in-kind.
On March 31, 2006, two shareholders held approximately 14% of the
outstanding shares of the Portfolio.
(G) Federal Tax Information
No provision for federal income taxes is necessary with respect to net
investment income because it is the Portfolio's intention to qualify under
Subchapter M of the Internal Revenue Code of 1986, as amended, and to make the
requisite income distributions to its shareholders which will be sufficient to
relieve it from federal income and excise taxes. The Portfolio currently
retains and designates as undistributable gains all of its taxable net
long-term capital gains and pays federal income taxes thereon on behalf of the
shareholders. The Portfolio has a tax year end of December 31.
Dividends from net investment income are determined in accordance with
U.S. federal income tax regulations, which may differ from those amounts
determined under accounting principles generally accepted in the United States.
These book/tax differences are either temporary or permanent in nature. To the
extent these differences are permanent, they are charged or credited to
paid-in-capital or accumulated net realized gain, as appropriate, in the period
that the differences arise. The following permanent differences as of December
31, 2005, attributable to redemptions-in-kind distributions, which for tax
purposes, are not available to offset future income, were reclassified to the
following accounts:
INCREASE INCREASE (DECREASE)
(DECREASE)IN ACCUMULATED NET
PAID IN-CAPITAL REALIZED GAIN (LOSS)
- ----------------- ---------------------
$ 12,844,992 $ (12,844,992)
The tax character of distributions paid during the years ended December
31, 2005 and 2004 were as follows:
ORDINARY
INCOME
--------------
12/31/05 ......... $ 3,047,801
12/31/04 ......... 4,387,534
As of December 31, 2005, the Portfolio had capital loss carryforwards
available to offset future realized capital gains through the indicated
expiration dates:
EXPIRING DECEMBER 31
- -----------------------------------------------------------------
2009 2010 2013 TOTAL
- -------------- -------------- -------------- --------------
$ 770,500 $ 7,112,583 $ 1,281,140 $ 9,164,223
12
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BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED)
(A) Board of Trustees' Consideration of the Advisory Agreement. The Board of
Trustees (the "Board") of BlackRock Funds (the "Fund"), including a
majority of the non-interested Trustees of the Fund (the "Independent
Trustees"), unanimously approved the renewal of the investment advisory
agreement (the "Advisory Agreement") with respect to the Exchange Portfolio
of the Fund (the "Portfolio"), at an in-person meeting of the Board held on
February 28, 2006. In connection with its consideration of the Advisory
Agreement, the Board met with personnel from the investment adviser,
BlackRock Advisors, Inc. ("BlackRock"), at an in-person meeting of the
Board held on February 7, 2006. The Board reviewed materials that it
received in advance of that meeting, including (i) fee information and
expense ratios for the BlackRock share class of the Portfolio in comparison
to fee information and expense ratios for peer funds of such Portfolio;
(ii) information about the investment performance of the Portfolio in
comparison to the investment performance for peer funds of such Portfolio;
(iii) BlackRock's economic outlook for the Portfolio and its general
investment outlook for the markets; (iv) information on the profitability
of BlackRock and its affiliates with respect to the Portfolio, including
details regarding the methodology used to calculate such profitability; (v)
information regarding fees paid to service providers that are BlackRock
affiliates; and (vi) information regarding compliance records and
regulatory matters relating to BlackRock and the Fund. In approving the
Advisory Agreement, the Board, including all of the Independent Trustees,
considered each of the matters discussed below in executive sessions held
at the February 7 and February 28 meetings, during which counsel to the
Independent Trustees was present.
Nature, Extent and Quality of Services. The Board received and considered
various information and data regarding the nature, extent and quality of
services provided by BlackRock to the Portfolio under the Advisory
Agreement during the past year. The Board reviewed BlackRock's investment
philosophy and process used to manage the Portfolio, as well as a
description of its capabilities, personnel and services. The Board
considered the scope of services provided by BlackRock to the Portfolio
under the Advisory Agreement relative to services typically provided by
third parties to comparable mutual funds, and considered BlackRock's
in-house research capabilities as well as other resources available to its
personnel. The Board noted that the standard of care applicable under the
Advisory Agreement was comparable to that generally found in investment
advisory agreements of their nature. The Board considered the legal and
compliance programs of each of the Fund and BlackRock, as well as the
integrity of the systems in place to ensure implementation of such programs
and the records of each of the Fund and BlackRock with regard to these
matters. The Board also considered information relating to the
qualifications, backgrounds and responsibilities of BlackRock's investment
professionals and other personnel who provide services to the Portfolio
under the Advisory Agreement, and took into account the time and attention
devoted by BlackRock senior management to the Portfolio. The Board also
considered BlackRock's general business reputation and overall financial
resources and concluded that BlackRock would be able to meet any reasonably
foreseeable obligation under the Advisory Agreement.
Following consideration of this information, the Board, including all of
the Independent Trustees, concluded that the nature, extent and quality of
the services provided by BlackRock to the Portfolio under the Advisory
Agreement were consistent with the Portfolio's operational requirements and
reasonable in terms of approving the renewal of such Advisory Agreement.
Advisory Fees. The Board received and considered statistical information
regarding the fees and expense ratios of the BlackRock share class of the
Portfolio. The Board compared the advisory fees, both before (contractual)
and after (actual) any fee waivers and expense reimbursements, and total
expenses of the Portfolio, against the fees and total expenses of the
Portfolio's peers selected by Lipper, Inc. ("Lipper"),
14
BLACKROCK FUNDS
an independent provider of investment company data. The Board was provided
with a description of the methodology used by Lipper to determine the peers
for the Portfolio.
In considering the fee and expense data provided by Lipper, the Board noted
that:
o the Portfolio had contractual advisory fees and expenses that
were equal to or lower than the median for its peers; and
o the Portfolio had actual advisory fees and expenses that were
equal to or lower than the median for its peers.
In addition to Lipper data, the Board also took into account the complexity
of the investment management of the Portfolio relative to its peers. The
Board was also provided with comparative information about services
rendered and fee rates offered to other similar clients advised by
BlackRock, including separate accounts.
Following consideration of this information, the Board, including all of
the Independent Trustees, concluded that the contractual fees to be paid to
BlackRock pursuant to the Advisory Agreement are fair and reasonable in
light of the services being provided.
Fund Performance. The Board received and considered information about the
Portfolio's one-, three- and five-year investment performance for the
period ended November 30, 2005, in comparison to the performance peers
selected by Lipper. The Board was provided with a description of the
methodology used by Lipper to select the peers. In addition, the Board
reviewed BlackRock's market outlook and discussed other factors relevant to
the performance of the Portfolio.
In considering the performance data provided by Lipper, the Board noted
that the Portfolio had investment performance during at least two of the
one-year, three-year and five-year periods that was below the median for
its peers. The Board discussed the performance issues of the Portfolio with
BlackRock, and was satisfied that appropriate measures were being taken to
address them.
Profitability. The Board considered the level of BlackRock's and its
affiliates' profits in respect of their relationship with the Portfolio.
This consideration included a broad review of BlackRock's methodology in
allocating its costs to the management of the Portfolio. The Board
considered the profits realized by BlackRock and its affiliates in
connection with the operation of the Portfolio and whether the amount of
profit is a fair profit relative to their relationship with the Portfolio.
The Board also considered BlackRock's profit margins in comparison with
available industry data. The Board, including all of the Independent
Trustees, concluded that BlackRock's profitability with respect to the
Portfolio is reasonable relative to the services provided.
Economies of Scale. The Board considered whether there have been economies
of scale in respect of the management of the Portfolio, whether the
Portfolio has appropriately benefited from any economies of scale, and
whether there is potential for realization of any further economies of
scale. The Board also considered the fee waivers and expense reimbursement
arrangements by BlackRock for the Portfolio. The Board, including all of
the Independent Trustees, determined that the advisory fee structure was
reasonable and that no changes were currently necessary to realize any
economies of scale.
Other Benefits to BlackRock. The Board also took into account other
ancillary benefits that BlackRock may derive from its relationship with the
Portfolio, such as BlackRock's ability to leverage its investment
professionals that manage other portfolios, an increase in BlackRock's
profile in the broker-dealer community, and the engagement of BlackRock's
affiliates as service providers to the Portfolio, including
15
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED) (CONCLUDED)
for administrative, transfer agency, distribution and custodial services.
The Board also noted that BlackRock may use third party research obtained
by soft dollars generated by transactions in the Portfolio to assist itself
in managing all or a number of its other client accounts. The Board,
including all of the Independent Trustees, concluded that these ancillary
benefits that BlackRock and its affiliates could receive with regard to
providing investment advisory and other services to the Portfolio were
consistent with those generally available to other mutual fund sponsors.
No single factor was considered in isolation or to be determinative in the
Board's decision to approve the renewal of the Advisory Agreement. Rather,
the Board concluded, in light of a weighing and balancing of all factors
considered, that it was in the best interests of the Portfolio to approve
the continuation of the Advisory Agreement, including the fees to be
charged for services thereunder.
(B) The Fund's Audit Committee approved engaging Deloitte & Touche LLP as the
independent registered public accounting firm to audit the Fund's financial
statements for fiscal year 2006. On November 29, 2005, a majority of the
Fund's Board of Trustees, including a majority of the independent Trustees,
approved the appointment of Deloitte & Touche LLP as the Fund's independent
registered public accounting firm for the Fund's fiscal 2006 audit, subject
to the right of the Fund, by a majority vote of the shareholders at any
meeting called for that purpose, to terminate the appointment without
penalty.
(C) As previously disclosed, BlackRock has received subpoenas from various
federal and state governmental and regulatory authorities and various
information requests from the Securities and Exchange Commission in
connection with ongoing industry-wide investigations of mutual fund
matters.
(D) BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill Lynch") announced
on February 15, 2006 that they had reached an agreement to combine Merrill
Lynch's investment management business, Merrill Lynch Investment Managers,
with BlackRock, Inc. to create a new independent company. Merrill Lynch
will have a 49.8% economic interest and a 45% voting interest in the
combined company and The PNC Financial Services Group, Inc. ("PNC"), which
currently holds a majority interest in BlackRock, Inc., will have
approximately a 34% economic and voting interest. The new company will
operate under the BlackRock name and be governed by a board of directors
with a majority of independent members. Each of Merrill Lynch and PNC has
agreed that it will vote all of its shares on all matters in accordance
with the recommendation of BlackRock's board in order to assure its
independence. Completion of the transaction is subject to various
regulatory approvals, client consents, approval by BlackRock, Inc.
shareholders and customary conditions.
(E) The amounts estimated to be paid by the Fund to the Chief Compliance
Officer (CCO) and certain of his staff for the six months ended March 31,
2006, are $255,572.
16
BLACKROCK FUNDS
Investment Adviser
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Custodian
PFPC Trust Company
Philadelphia, Pennsylvania 19153
Co-Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware 19809
Co-Administrator
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Distributor
BlackRock Distributors, Inc.
King of Prussia, Pennsylvania 19406
Counsel
Simpson Thacher & Bartlett LLP
New York, New York 10017
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Philadelphia, Pennsylvania 19103
The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it is intended to reduce expenses and
eliminate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be combined
with those for other members of your household, please contact the Fund at
(800) 441-7762.
The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Trustees. A
description of the policies and procedures that BlackRock and its affiliates
use to determine how to vote proxies relating to portfolio securities is
available without charge, upon request, by calling 1-800-441-7762, or on the
website of the Securities and Exchange Commission (the "Commission") at
http://www.sec.gov.
Information on how proxies relating to the Fund's voting securities were voted
(if any) by BlackRock during the most recent 12-month period ended June 30th is
available, upon request and without charge, by calling (800) 441-7762 or on the
website of the Commission at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings for the first and
third quarters of its fiscal year with the Commission on Form N-Q. The Fund's
Form N-Q is available on the Commission's website at http://www.sec.gov and may
be reviewed and copied at the Commission's Public Reference Room in Washington,
D.C. Information regarding the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The Fund's Form N-Q may also be obtained
upon request, without charge, by calling (800) 441-7762.
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Fund shares.
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.
[GRAPHIC OMITTED]
Exchange-Semi 3/06
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED
INCOME LIQUIDITYREAL ESTATE BlackRock Funds
Money Market Portfolios
Semi-Annual Report
March 31, 2006 (Unaudited)
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BLACKROCK FUNDS
MONEY MARKET PORTFOLIOS
*Money Market
*U.S. Treasury Money Market
*Municipal Money Market
*New Jersey Municipal Money Market
*North Carolina Municipal Money Market
*Ohio Municipal Money Market
*Pennsylvania Municipal Money Market
*Virginia Municipal Money Market
TABLE OF CONTENTS
Shareholder Letter..........................................................1
Fund Profiles/Expense Examples
Money Market..............................................................2
U.S. Treasury Money Market................................................3
Municipal Money Market....................................................4
New Jersey Municipal Money Market.........................................5
North Carolina Municipal Money Market.....................................6
Ohio Municipal Money Market...............................................7
Pennsylvania Municipal Money Market.......................................8
Virginia Municipal Money Market...........................................9
Schedules of Investments..............................................10-40
Key to Investment Abbreviations..........................................41
Portfolio Financial Statements
Statements of Assets and Liabilities..................................42-43
Statements of Operations..............................................44-45
Statements of Changes in Net Assets...................................46-47
Financial Highlights..................................................48-55
Notes to Financial Statements.........................................57-68
Additional Information................................................69-72
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 generally receive any nonpublic personal information
relating to its shareholders who purchase shares through their broker-dealers.
However, in certain limited circumstances, BlackRock receives a limited amount
of nonpublic personal information from broker-dealers in connection with
monitoring for inappropriate trading activity. 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.
BLACKROCK FUNDS
March 31, 2006
Dear Shareholder:
You may be aware that on February 15, 2006, we announced that BlackRock
and Merrill Lynch Investment Managers (MLIM) intended to unite to create a new
independent asset management company.
We believe this combination of asset management strength will benefit our
investors. BlackRock is one of the largest publicly traded investment
management firms in the United States, with approximately $463 billion in
assets under management and over 1,800 employees. We manage assets on behalf of
institutional and individual investors worldwide through a variety of equity,
fixed income, cash management and alternative investment products. MLIM is also
a leading investment management organization, with over $576 billion in assets
under management globally and over 2,700 employees in 17 countries. It offers
over 100 investment strategies in vehicles ranging from mutual funds to
institutional portfolios.
At the completion of the transaction, which is expected at the end of the
third quarter of this year, the combined firm will be a top-ten investment
manager worldwide, with more than $1 trillion in assets under management. The
combined company will provide a wider selection of high-quality investment
solutions across a range of asset classes and investment styles. BlackRock and
MLIM possess complementary capabilities that together create a well-rounded
organization, uniting some of the finest money managers in the industry. At the
same time, the firms share similar values and beliefs - focused on delivering
excellence to clients, they both make investment performance their most
important mission. In short, the combination reinforces our commitment to
shareholders.
As a shareholder in one or more BlackRock-advised mutual funds, you will
receive proxy materials in the coming weeks in connection with this
transaction. After you receive this information, do not hesitate to contact
your financial advisor should you have any questions or concerns.
As always, we thank you for entrusting us with your investment assets, and
we look forward to continuing to serve your investment needs with even greater
strength and scale.
Sincerely,
[GRAPHIC OMITTED]
Anne F. Ackerley
Managing Director
BlackRock Advisors, Inc.
Data, including assets under management, are as of March 31, 2006.
1
MONEY MARKET PORTFOLIO
FUND PROFILE
Portfolio Diversification (% of
portfolio)
Commercial Paper 51.1 %
Variable Rate Obligations 26.1
Certificates of Deposit 18.4
Master Notes 4.4
-----
Total 100.0%
=====
Maturity Information
- ---------------------------------------------
Maturity Par Percentage
- --------------- ------------ ----------
1-7 Days 234,730,000 15.8%
8-14 Days 50,000,000 3.4
15-30 Days 274,994,000 18.6
31-60 Days 558,375,000 37.7
61-90 Days 205,145,000 13.9
121-150 Days 50,000,000 3.4
over 150 Days 106,470,000 7.2
-----
100.0%
=====
Average Weighted Maturity - 52 days
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur ongoing costs, including advisory
fees, distribution (12b-1) and service fees, where applicable; and other
Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds.
Actual Expenses
-----------------------------------------------------------------------------------------------
Hilliard
Institutional Service Lyons Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,019.80 1,018.30 1,018.10 1,018.00 1,015.60 1,015.60
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.11 3.62 3.72 3.92 6.23 6.23
Hypothetical Expenses
(5% return before expenses)
-----------------------------------------------------------------------------------------------
Hilliard
Institutional Service Lyons Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,022.88 1,021.36 1,021.26 1,021.06 1,018.74 1,018.74
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.12 3.64 3.74 3.94 6.26 6.26
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.42%, 0.72%, 0.74%, 0.78%, 1.24%, and 1.24% for the Institutional,
Service, Hilliard Lyons, Investor A, B and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period).
2
U.S. TREASURY MONEY MARKET PORTFOLIO
FUND PROFILE
Portfolio Diversification (% of
portfolio)
Repurchase Agreements 100.0%
-----
Total 100.0%
=====
Maturity Information
- -------------------------------------------
Maturity Par Percentage
- ------------- ------------- -----------
1-7 Days 480,658,000 93.8%
61-90 Days 30,000,000 6.2%
-----
100.0%
=====
Average Weighted Maturity - 7 days
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur ongoing costs, including advisory
fees, distribution (12b-1) and service fees, where applicable; and other
Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds.
Actual Expenses
--------------------------------------------------------
Institutional Class Service Class Investor A Class
--------------------- --------------- ------------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,019.00 1,017.50 1,017.30
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.06 3.52 3.77
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------
Institutional Class Service Class Investor A Class
--------------------- --------------- -----------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,022.93 1,021.47 1,021.21
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.07 3.53 3.79
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.41%, 0.70%, and 0.75% for the Institutional, Service and Investor A
share classes, respectively, multiplied by the average account value over the
period, multiplied by 182/365 (to reflect the one-half year period).
3
MUNICIPAL MONEY MARKET PORTFOLIO
FUND PROFILE
Largest State Concentration
(% of portfolio)
North Carolina 17.0%
Pennsylvania 9.6
Maryland 6.3
Texas 5.4
Colorado 5.2
Virginia 4.8
Illinois 4.1
Florida 3.8
Nevada 3.2
New Jersey 3.1
----
Total 62.5%
====
Maturity Information
- ---------------------------------------------
Maturity Par Percentage
- --------------- ------------- -----------
1-7 Days 249,605,000 81.3%
8-14 Days 1,000,000 0.3
15-30 Days 2,892,000 1.0
31-60 Days 4,000,000 1.3
61-90 Days 2,800,000 0.9
91-120 Days 16,685,000 5.4
121-150 Days 17,195,000 5.6
over 150 Days 13,000,000 4.2
-----
100.0%
=====
Average Weighted Maturity - 28 days
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur ongoing costs, including advisory
fees, distribution (12b-1) and service fees, where applicable; and other
Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds.
Actual Expenses
----------------------------------------------------------------------------
Investor
Institutional Class Service Class Hilliard Lyons Class A Class
--------------------- --------------- ---------------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,013.10 1,011.60 1,012.80 1,011.50
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.11 3.56 2.46 3.75
Hypothetical Expenses
(5% return before expenses)
----------------------------------------------------------------------------
Investor
Institutional Class Service Class Hilliard Lyons Class A Class
--------------------- --------------- ---------------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,022.88 1,021.42 1,022.53 1,021.22
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.12 3.58 2.47 3.78
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.42%, 0.71%, 0.49%, and 0.75% for the Institutional, Service,
Hilliard Lyons and Investor A share classes, respectively, multiplied by the
average account value over the period, multiplied by 182/365 (to reflect the
one-half year period).
4
NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
FUND PROFILE
Portfolio Diversification (% of
portfolio)
Variable Rate Demand Notes 80.2%
Municipal Bonds 14.4
Commercial Paper 3.0
Municipal Put Bonds 2.4
-----
Total 100.0%
=====
Maturity Information
- ---------------------------------------------
Maturity Par Percentage
- --------------- ------------- -----------
1-7 Days 130,475,000 80.3%
31-60 Days 6,028,000 3.7
61-90 Days 4,608,000 2.8
91-120 Days 7,664,050 4.7
121-150 Days 5,152,500 3.2
over 150 Days 8,641,500 5.3
-----
100.0%
=====
Average Weighted Maturity - 32 days
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur ongoing costs, including advisory
fees, distribution (12b-1) and service fees, where applicable; and other
Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds.
Actual Expenses
--------------------------------------------------------
Institutional Class Service Class Investor A Class
--------------------- --------------- ------------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,012.90 1,011.50 1,011.30
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 1.96 3.41 3.56
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------
Institutional Class Service Class Investor A Class
--------------------- --------------- -----------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,023.03 1,021.57 1,021.42
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 1.97 3.43 3.58
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.39%, 0.68%, and 0.71% for the Institutional, Service and Investor A
share classes, respectively, multiplied by the average account value over the
period, multiplied by 182/365 (to reflect the one-half year period).
5
NORTH CAROLINA MUNICIPAL MONEY MARKET PORTFOLIO
FUND PROFILE
Portfolio Diversification (% of
portfolio)
Variable Rate Demand Notes 76.7%
Commercial Paper 18.0
Municipal Bonds 3.2
Municipal Put Bonds 2.1
-----
Total 100.0%
=====
Maturity Information
- --------------------------------------------
Maturity Par Percentage
- --------------- ------------ -----------
1-7 Days 47,400,000 75.1%
15-30 Days 1,300,000 2.0
31-60 Days 7,500,000 11.9
61-90 Days 2,400,000 3.8
91-120 Days 1,000,000 1.6
121-150 Days 2,500,000 4.0
over 150 Days 1,000,000 1.6
-----
100.0%
=====
Average Weighted Maturity - 22 days
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur ongoing costs, including advisory
fees, distribution (12b-1) and service fees, where applicable; and other
Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds.
Actual Expenses
--------------------------------------------------------
Institutional Class Service Class Investor A Class
--------------------- --------------- ------------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,013.60 1,012.10 1,011.80
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 1.51 3.01 3.31
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------
Institutional Class Service Class Investor A Class
--------------------- --------------- -----------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,023.49 1,021.97 1,021.67
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 1.51 3.03 3.33
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.30%, 0.60%, and 0.66% for the Institutional, Service and Investor A
share classes, respectively, multiplied by the average account value over the
period, multiplied by 182/365 (to reflect the one-half year period).
6
OHIO MUNICIPAL MONEY MARKET PORTFOLIO
FUND PROFILE
Portfolio Diversification (% of
portfolio)
Variable Rate Demand Notes 80.7%
Municipal Bonds 17.5
Municipal Put Bonds 1.1
Commercial Paper 0.7
-----
Total 100.0%
=====
Maturity Information
- ---------------------------------------------
Maturity Par Percentage
- --------------- ------------- -----------
1-7 Days 140,001,000 82.4%
31-60 Days 2,475,000 1.5
61-90 Days 896,000 0.5
91-120 Days 4,690,000 2.8
121-150 Days 2,258,000 1.3
over 150 Days 19,595,000 11.5
-----
100.0%
=====
Average Weighted Maturity - 41 days
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur ongoing costs, including advisory
fees, distribution (12b-1) and service fees, where applicable; and other
Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds.
Actual Expenses
--------------------------------------------------------
Institutional Class Service Class Investor A Class
--------------------- --------------- ------------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,013.60 1,012.10 1,012.00
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 1.96 3.41 3.51
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------
Institutional Class Service Class Investor A Class
--------------------- --------------- -----------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,023.03 1,021.57 1,021.47
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 1.97 3.43 3.53
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.39%, 0.68%, and 0.70% for the Institutional, Service and Investor A
share classes, respectively, multiplied by the average account value over the
period, multiplied by 182/365 (to reflect the one-half year period).
7
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
FUND PROFILE
Portfolio Diversification (% of
portfolio)
Variable Rate Demand Notes 91.1%
Commercial Paper 8.9
-----
Total 100.0%
=====
Maturity Information
- ---------------------------------------------
Maturity Par Percentage
- --------------- ------------- -----------
1-7 Days 516,172,000 90.5%
31-60 Days 9,650,000 1.7
61-90 Days 11,000,000 1.9
91-120 Days 7,000,000 1.2
over 150 Days 26,805,000 4.7
-----
100.0%
=====
Average Weighted Maturity - 22 days
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur ongoing costs, including advisory
fees, distribution (12b-1) and service fees, where applicable; and other
Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds.
Actual Expenses
--------------------------------------------------------
Institutional Class Service Class Investor A Class
--------------------- --------------- ------------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,013.20 1,011.70 1,011.60
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.11 3.56 3.71
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------
Institutional Class Service Class Investor A Class
--------------------- --------------- -----------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,022.88 1,021.42 1,021.26
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.12 3.58 3.74
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.42%, 0.71%, and 0.74% for the Institutional, Service and Investor A
share classes, respectively, multiplied by the average account value over the
period, multiplied by 182/365 (to reflect the one-half year period).
8
VIRGINIA MUNICIPAL MONEY MARKET PORTFOLIO
FUND PROFILE
Portfolio Diversification (% of
portfolio)
Variable Rate Demand Notes 88.8%
Municipal Bonds 9.0
Municipal Put Bonds 1.5
Commercial Paper 0.7
-----
Total 100.0%
=====
Maturity Information
- --------------------------------------------
Maturity Par Percentage
- --------------- ------------ -----------
1-7 Days 40,240,000 92.0%
15-30 Days 1,000,000 2.3
31-60 Days 1,345,000 3.1
61-90 Days 915,000 2.1
over 150 Days 250,000 0.5
-----
100.0%
=====
Average Weighted Maturity - 19 days
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur ongoing costs, including advisory
fees, distribution (12b-1) and service fees, where applicable; and other
Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds.
Hypothetical Expenses
Actual Expenses (5% return before expenses)
--------------------- ----------------------------
Institutional Class Institutional Class
--------------------- ----------------------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,013.40 1,023.59
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 1.41 1.41
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.28% for the Institutional class multiplied by the average account
value over the period, multiplied by 182/365 (to reflect the one-half year
period).
9
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
CERTIFICATES OF DEPOSIT - 18.4%
Domestic - 5.5%
Washington Mutual Bank FA (A-1, P-1)
4.80% 05/08/06 $75,000 $75,000,000
Wells Fargo Bank, N.A. (A-1+, P-1)
4.80% 01/16/07 6,500 6,500,999
===========
81,500,999
-----------
Yankee - 12.9%
Banque Nationale de Paribas, New York
(A-1+, P-1)
4.50%(b) 10/19/06 15,000 15,000,000
Credit Suisse Group, New York (A-1, P-1)
4.71%(b) 05/08/06 70,200 70,200,000
Depfa Bank PLC, New York (A-1+, P-1)
4.52%(b) 10/16/06 16,000 16,000,000
Landesbank Baden-Wuerttemberg (A-1, P-1)
4.80%(b) 05/10/06 20,000 20,000,000
Royal Bank of Scotland, New York (A-1+, P-1)
4.52%(b) 10/20/06 9,100 9,100,122
4.81%(b) 01/16/07 15,270 15,270,000
4.87%(b) 02/02/07 29,600 29,600,000
Societe Generale, New York (A-1+, P-1)
4.78%(b) 12/06/06 15,000 15,000,000
===========
190,170,122
-----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $271,671,121) 271,671,121
-----------
COMMERCIAL PAPER - 51.2%
Asset Backed Securities - 37.5%
Atlantis One Funding Corp. (A-1+, P-1)
4.20% 04/20/06 7,500 7,483,375
4.78% 05/10/06 22,600 22,482,970
Atomium Funding Corp. (A-1, P-1)
4.78% 04/27/06 18,500 18,436,134
Beethoven Funding Corp. (A-1, P-1)
4.74% 04/20/06 6,150 6,134,615
Brahms Funding Corp. (A-1, P-1)
4.64% 04/05/06 65,000 64,966,489
Cancara Asset Securitization LLC (A-1+, P-1)
4.76% 05/01/06 47,258 47,070,543
Concord Minutemen Capital Co. (A-1, P-1)
4.78% 04/20/06 15,195 15,156,666
Dakota Notes Program (A-1, P-1)
4.73% 05/04/06 11,640 11,589,531
Emerald Certificates (A-1+, P-1)
4.79% 05/05/06 60,225 59,952,549
Giro U.S. Funding Corp. (A-1, P-1)
4.77% 05/05/06 75,000 74,662,125
Monument Gardens Funding LLC (A-1, P-1)
4.89% 06/21/06 5,895 5,830,140
Park Avenue Receivables (A-1, P-1)
4.77% 04/25/06 49,635 49,477,161
Park Granada LLC (A-1+, P-1)
4.78% 04/24/06 49,300 49,149,443
Park Sienna LLC (A-1+, P-1)
4.79% 04/24/06 30,000 29,908,192
4.79% 04/24/06 7,800 7,776,130
4.79% 05/01/06 25,000 24,900,208
Sedna Finance, Inc. (A-1+, P-1)
4.78% 05/05/06 34,404 34,248,685
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
COMMERCIAL PAPER (Continued)
Asset Backed Securities (Continued)
Ticonderoga Funding LLC (A-1+, P-1)
4.70% 04/04/06 $21,711 $ 21,702,496
Transamerica Securities Liquidity Notes
(A-1+, P-1)
4.78% 04/24/06 2,204 2,197,269
============
553,124,721
------------
Banks - 7.5%
Banco Bilbao Vizcaya Argentina (A-1, P-1)
4.75% 04/03/06 43,277 43,265,580
4.77% 04/18/06 17,350 17,310,919
Natexis Banque Populaires, New York (A-1+, P-1)
4.56% 07/31/06 50,000 49,234,507
============
109,811,006
------------
Finance Services - 2.1%
CIT Group, Inc. (A-1, P-1)
4.67% 05/11/06 31,737 31,572,320
------------
Mortgage Bankers & Correspondents - 4.1%
Countrywide Financial Corp. (A-1, P-2)
4.78% 05/09/06 60,311 60,006,698
------------
TOTAL COMMERCIAL PAPER
(Cost $754,514,745)
754,514,745
------------
MASTER NOTES - 4.4%
Security Brokers & Dealers - 4.4%
Bank of America Securities LLC (A-1+, P-1)
4.96%(c) 04/03/06 15,250 15,250,000
Morgan Stanley Mortgage Capital, Inc.
(A-1, P-1)(d)
5.04%(c) 04/03/06 50,000 50,000,000
TOTAL MASTER NOTES
============
(Cost $65,250,000)
65,250,000
------------
VARIABLE RATE OBLIGATIONS - 26.1%
Asset Backed Securities - 5.9%
Cullinan Finance Corp. (AAA, Aaa)
4.88%(c) 06/15/06 50,000 49,996,601
Racers XL (A-1, P-1)
4.79%(c)(e) 04/24/06 11,360 11,360,000
4.79%(c)(e) 05/22/06 25,000 25,000,000
============
86,356,601
------------
Banks - 6.0%
HBOS Treasury Services PLC (A-1+, P-1)
5.00%(c)(e) 06/26/06 65,000 65,000,000
Westpac Banking Corp. (AA-, Aa3)(d)
4.93%(c) 06/12/06 24,250 24,250,000
============
89,250,000
------------
Life Insurance - 5.1%
MetLife Global Funding I (AA, Aa2)
4.89%(c)(e) 04/28/06 15,000 15,000,000
Transamerica Occidental Life Insurance Co.
(A-1+, P-1)
4.96%(c)(f) 06/01/06 60,000 60,000,000
============
75,000,000
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- --------- --------------
VARIABLE RATE OBLIGATIONS (Continued)
Municipal Bonds - 1.7%
De Kalb County Georgia Development Authority
University RB Series 1995B DN
(A-1+, VMIG-1)
4.85%(c) 04/07/06 $3,685 $ 3,685,000
North Myrtle Beach South Carolina Corp. RB
Series 2005 DN (National Bank of South
Carolina LOC) (A-1, F-1)
4.87%(c) 04/07/06 6,007 6,007,000
South Central Texas IDRB Series 1990 DN (Bank
One N.A. LOC) (A-1, P-1)
4.88%(c) 04/07/06 14,800 14,800,000
===========
24,492,000
-----------
Security Brokers & Dealers - 4.4%
Merrill Lynch & Co., Inc. (A+, Aa3)
4.92%(c) 04/11/06 50,000 50,000,000
Morgan Stanley & Co., Inc. (A-1, P-1)
4.96%(c) 04/03/06 15,000 15,000,000
===========
65,000,000
-----------
Short-Term Business Credit Institutions - 3.0%
General Electric Capital Corp. (AAA, Aaa)
4.85%(c) 04/17/06 45,000 45,000,000
-----------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $385,098,601) 385,098,601
-----------
TOTAL INVESTMENTS IN SECURITIES -
100.1%
(Cost $1,476,534,467(a)) 1,476,534,467
LIABILITIES IN EXCESS OF
OTHER ASSETS - (0.1)% (1,130,286)
-------------
NET ASSETS - 100.0% $1,475,404,181
==============
- -------------------
(a) Aggregate cost for federal income tax purposes.
(b) Security is a foreign domiciled issuer which is registered with the
Securities and Exchange Commission.
(c) Rates shown are the rates as of March 31, 2006 and maturities shown are
the next interest readjustment date.
(d) Ratings reflect those of guarantor.
(e) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional investors. As of March
31, 2006, the Portfolio held 7.9% of its net assets, with a current
market value of $116,360,000, in securities restricted as to resale.
(f) Illiquid Security. As of March 31, 2006, the Portfolio held 4.1% of its
net assets, with a current market value of $60,000,000, in illiquid
securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
U.S. TREASURY MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
REPURCHASE AGREEMENTS - 100.3%
Deutsche Bank Securities, Inc.
4.60% 04/03/06 $95,000 $ 95,000,000
(Agreement dated 03/31/06 to
be repurchased at
$95,038,417, collateralized by
$163,737,000 U.S. Treasury
Bonds, Strip Principals and
Strips 0.00% to 8.75% due
from 11/15/06 to 11/15/24.
The value of the collateral is
$ 98,900,838.)
Goldman Sachs & Co.
4.40% 04/03/06 95,000 95,000,000
(Agreement dated 03/31/06 to
be repurchased at
$95,034,833, collateralized by
$97,589,000 U.S. Treasury
Notes 4.38% due 12/15/10.
The value of the collateral is
$ 96,900,059.)
J.P. Morgan Securities, Inc.
4.42% 04/03/06 95,000 95,000,000
(Agreement dated 03/31/06 to
be repurchased at
$95,034,992, collateralized by
$99,292,000 U.S. Treasury
Notes 4.25% to 4.50% due
from 08/15/15 to 02/15/16.
The value of the collateral is
$ 96,904,760.)
Morgan Stanley & Co., Inc.
4.48% 04/03/06 105,658 105,658,000
(Agreement dated 03/31/06 to
be repurchased at
$105,697,446, collateralized
by $318,841,000 U.S.
Treasury Strip Principals
0.00% due 11/15/27. The
value of the collateral is
$ 107,771,446.)
UBS Securities LLC
4.55% 04/03/06 60,000 60,000,000
(Agreement dated 03/31/06 to
be repurchased at
$60,022,750, collateralized by
$142,275,000 U.S. Treasury
Strip Principals 7.63% due
11/15/22. The value of the
collateral is $61,201,012.)
UBS Securities LLC
4.71% 05/31/06 30,000 30,000,000
(Agreement dated 03/31/06 to
be repurchased at
$30,325,775, collateralized by
$24,090,000 U.S. Treasury
Inflation Index Securities
3.63% due 01/15/08. The
value of the collateral is
$ 30,606,131.)
============
TOTAL REPURCHASE AGREEMENTS
(Cost $480,658,000) 480,658,000
------------
VALUE
---------------
TOTAL INVESTMENTS IN SECURITIES - 100.3%
(Cost $480,658,000(a)) $480,658,000
LIABILITIES IN EXCESS OF
OTHER ASSETS - (0.3)% (1,524,462)
------------
NET ASSETS - 100.0% $479,133,538
============
- -------------------
(a) Aggregate cost for federal income tax purposes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MUNICIPAL MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS - 99.5%
Alabama - 2.4%
Alexander City Industrial Board
IDRB Series 2000 DN
(Southtrust Bank LOC)
(A-1, P-1)
3.28%(b) 04/07/06 $ 940 $ 940,000
Columbia IDRB (Alabama Power
Project) Series 1995D DN
(A-1, VMIG-1)
3.10%(b) 04/03/06 400 400,000
Geneva County Health Care
Authority RB Series 2001 DN
(Southtrust Bank LOC)
3.23%(b) 04/07/06 2,833 2,833,000
Jefferson County GO Warrants
Series 2001B DN (Morgan
Guaranty Trust, Bayerische
Landesbank Girozentrale
SBPA) (A-1+, VMIG-1)
3.14%(b) 04/03/06 3,300 3,300,000
==========
7,473,000
----------
Arizona - 0.9%
Pima County IDA Single Family
Mortgage RB (Draw Down
Project) Series 2003 AMT MB
(Trinity Funding Guaranty)
4.78%(b) 04/25/06 2,892 2,892,000
----------
Arkansas - 0.8%
Little Rock Residential Housing
& Public Facilities Board
Capital Improvement RB (Park
Systems Project) Series 2001
DN (Bank of America N.A.
LOC) (A-1+)
3.27%(b) 04/07/06 2,455 2,455,000
----------
California - 1.6%
California Economic Recovery
RB Series 2004C-10 DN
(Banque Nationale de Paribas
LOC) (A-1+, VMIG-1)
3.17%(b) 04/07/06 400 400,000
California Economic Recovery
RB Series 2004C-21 DN
(XLCA Insurance, Dexia Credit
Local SBPA) (A-1+, VMIG-1)
3.14%(b) 04/07/06 500 500,000
California PCRB Solid Waste
Disposal (Republic Services,
Inc. Project) Series 2003 DN
(BBB+, Baa2)
3.40%(b) 04/07/06 1,000 1,000,000
Coronado Community
Development Agency Tax
Allocation Series 2005
ROC-RR-II-451 DN (Citibank
LOC) (A-1+)
3.20%(b)(c) 04/07/06 600 600,000
Golden State Tobacco
Securitization Corp. RB
(Merrill Lynch P-Float Trust
Receipts) Series 2004
PA-1236 DN (Merrill Lynch &
Co. Guaranty, Merrill Lynch
Capital Services SBPA) (F-1+)
3.23%(b)(c) 04/07/06 1,330 1,330,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
California (Continued)
Pleasant Valley School District of
Ventura County GO (Merrill
Lynch P-Float Trust Receipts)
Series 2005 PT-2783 DN
(MBIA Insurance, Dexia Credit
Local SBPA) (A-1+, AAA)
3.21%(b)(c) 04/07/06 $ 150 $ 150,000
Sacramento Municipal Utility
District RB Series 2000A DN
(AMBAC Insurance, Wachovia
Bank N.A. LOC) (VMIG-1)
3.20%(b)(c) 04/03/06 300 300,000
Southern California Public Power
Authority RB (San Juan Power
Project) Series 2002 DN (FSA
Insurance, Wachovia Bank
N.A. LOC) (VMIG-1)
3.20%(b)(c) 04/07/06 680 680,000
==========
4,960,000
----------
Colorado - 5.2%
Colorado Education Loan
Program RB Series 2005
TRAN (SP-1+, MIG-1)
4.00% 08/07/06 2,500 2,511,212
Colorado Health Facilities
Authority RB (Liberty Heights
Retirement Project) Series
2005 PZ-82 DN (Merrill Lynch
& Co. Guaranty) (A-1+)
3.25%(b)(c) 04/07/06 7,000 7,000,000
Colorado Highway Authority
(E-470 project) Series
2006Z-9 DN (MBIA Insurance,
Goldman Sachs SPL Liquid
Facilities) (AAA, F-1+)
3.24%(b)(c) 04/07/06 2,906 2,906,000
Colorado Housing & Finance
Authority RB (Single Family
Mortgage Project) Series 2005
AMT MB (Trinity Funding
Guaranty) (SP-1+, MIG-1)
2.80% 07/05/06 2,000 2,000,000
Denver Urban Renewal Authority
Tax Increment RB (Merrill
Lynch P-Float Trust Receipts)
Series 2004 PT-999 DN
(Lloyds Bank SBPA)
(A-1, AA-)
3.26%(b)(c) 04/07/06 1,500 1,500,000
==========
15,917,212
----------
Delaware - 2.3%
Delaware Economic
Development Authority RB
(Catholic Diocese of
Wilmington Project) Series
2002 DN (Allied Irish Bank
PLC LOC) (VMIG-1)
3.30%(b) 04/07/06 5,100 5,100,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Delaware (Continued)
Delaware Economic
Development Authority RB (St.
Anne's Episcopal School
Project) Series 2001 DN
(Wilmington Trust Co. LOC)
(A-1)
3.30%(b) 04/07/06 $2,000 $2,000,000
==========
7,100,000
----------
Florida - 3.8%
Florida Housing Finance Corp.
Multi-Family RB (Merrill Lynch
P-Float Trust Receipts) Series
2000 PT-1234 DN (Merrill
Lynch Capital Services SBPA)
(A-1)
3.26%(b)(c) 04/07/06 1,470 1,470,000
Greater Orlando Aviation
Authority RB (Special Purpose
Cessna Aircraft Project) Series
2001 AMT DN (Textron, Inc.
Guaranty) (A-2, P-1)
4.28%(b) 04/07/06 4,000 4,000,000
Lee County IDRB Series 1997
AMT DN (SunTrust Bank
LOC)
3.32%(b) 04/07/06 1,815 1,815,000
Pinellas County Health Facilities
Authority RB (Bay Care Health
Project) Series 2003A-1 MB
(MBIA Insured) (Aaa)
5.00% 04/07/06 500 505,226
Putnam County Development
Authority PCRB (Seminole
Electric Co-op Project) Series
1984H-3 MB (A-1, MIG-1)
3.43% 09/15/06 4,000 4,000,000
==========
11,790,226
----------
Georgia - 0.3%
Albany GO Series 2006 TAN
3.35% 12/29/06 1,000 1,000,000
----------
Illinois - 4.0%
Chicago Board of Education GO
Series 2006Z-11 DN (FGIC
Insurance, Goldman Sachs
SPL Liquidity Facility)
(AAA, F-1)
3.24%(b)(c) 04/07/06 3,275 3,275,000
Illinois Development Finance
Authority IDRB (Royal
Continental Box Co. Project)
Series 1995A AMT DN
(ABN-AMRO Bank N.V. LOC)
(A-1)
3.31%(b) 04/01/06 100 100,000
Metropolitan Pier & Exposition
Authority RB (Bear Stearns
Trust Certificates) Series
2005A-224 DN (MBIA
Insurance, Bear Stearns
Capital Markets Liquidity
Facility) (VMIG-1)
3.30%(b)(c) 04/07/06 600 600,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Illinois (Continued)
Metropolitan Pier & Exposition
Authority RB (Dedicated State
Tax Receipts) Series
2005PZ-44 DN (MBIA
Insurance, Merrill Lynch
Capital Services SBPA) (F-1+)
3.25%(b)(c) 04/07/06 $ 500 $ 500,000
Metropolitan Pier & Exposition
Authority RB (Dedicated State
Tax Receipts) Series 2005Z-5
DN (MBIA Insurance,
Goldman Sachs Liquidity
Facility) (F-1+)
3.24%(b)(c) 04/07/06 1,400 1,400,000
Quad Cities Regional Economic
Development Authority RB
(Whitey's Ice Cream
Manufacturing Project) Series
1995 AMT DN (Bank One N.A.
LOC)
3.65%(b) 04/07/06 730 730,000
Regional Transportation
Authority GO (Wachovia
Merlots Trust Receipts) Series
2001A-86 DN (FGIC
Insurance, Wachovia Bank
N.A. LOC) (VMIG-1)
3.21%(b)(c) 04/07/06 2,370 2,370,000
Rockford RB (Fairhaven
Christian Center Project)
Series 2000 DN (Bank One
N.A. LOC)
3.45%(b) 04/07/06 1,510 1,510,000
Roselle Village IDRB
(Abrasive-Form, Inc. Project)
Series 1995 AMT DN
(ABN-AMRO Bank N.V. LOC)
3.33%(b) 04/07/06 1,000 1,000,000
Will County Community Unit
School District 365 GO Series
2005 DN (FSA Insurance,
Merrill Lynch Capital Services
SBPA) (F-1+)
3.25%(b)(c) 04/07/06 1,000 1,000,000
==========
12,485,000
----------
Indiana - 1.6%
Dekko Foundation Educational
Facilities RB Series 2001 DN
(Bank One N.A. LOC)
3.45%(b) 04/07/06 2,500 2,500,000
Hendricks County Industrial
Redevelopment Commission
Tax Increment RB (Heartland
Crossing Project) Series
2000A DN (Huntington
National Bank LOC)
3.35%(b) 04/07/06 1,100 1,100,000
Indiana Transportation Finance
Authority Highway RB Series
2004B-21 DN (FGIC
Insurance, Wachovia Bank
SBPA) (A-1)
3.21%(b)(c) 04/07/06 100 100,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Indiana (Continued)
Monroe County IDRB (Griner
Engineering, Inc. Project)
Series 1997 AMT DN (Fifth
Third Bank N.A. LOC)
3.40%(b) 04/07/06 $ 577 $ 577,000
South Bend Economic
Development Authority RB
(SGW Realty LLC Project)
Series 1998 AMT DN
(National City Bank N.A. LOC)
3.30%(b) 04/07/06 800 800,000
==========
5,077,000
----------
Iowa - 0.5%
Cedar Rapids Community
School District Tax Anticipation
Warrants Series 2005 MB
3.75% 06/30/06 500 501,139
Urbandale IDRB (Meredith Drive
Assoc. Project) Series 1985
DN (Wells Fargo Bank M.N.
LOC)
3.31%(b) 04/07/06 1,000 1,000,000
==========
1,501,139
----------
Kentucky - 2.1%
Kentucky Assoc. of Counties
Advance Revenue COP
Series 2005 TRAN (SP-1+)
4.00% 06/30/06 3,000 3,008,998
Kentucky Housing Corp. Single
Family Mortgage RB Series
2006 MT-230 AMT DN (Merrill
Lynch & Co. Guaranty)
(VMIG-1)
3.26%(b)(c) 04/07/06 200 200,000
Newport Industrial Building RB
(Newport Holdings Project)
Series 2001A AMT DN
(Huntington National Bank
LOC)
3.49%(b) 04/07/06 1,670 1,670,000
Pulaski County Solid Waste
Disposal RB (National Rural
Utilities for East Kentucky
Power Project) Series 1993B
AMT MB (National Rural
Utilities Guaranty) (MIG-1)
3.42% 08/15/06 1,600 1,600,000
==========
6,478,998
----------
Louisiana - 1.3%
Iberville Parish PCRB (Air
Products & Chemicals Project)
Series 1992 DN (A-1)
3.18%(b) 04/07/06 4,000 4,000,000
----------
Maryland - 6.3%
Baltimore County RB (Odyssey
School Facility Project) Series
2001 DN (M&T Bank Corp.
LOC) (A-1)
3.25%(b) 04/07/06 2,555 2,555,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Maryland (Continued)
Baltimore County RB (St. Paul's
School for Girls Facility
Project) Series 2000 DN (M&T
Bank Corp. LOC) (A-1)
3.22%(b) 04/07/06 $1,825 $1,825,000
Maryland Economic
Development Authority RB
(Assoc. of Catholic Charities
Project) Series 1999A DN
(M&T Bank Corp. LOC) (A-1)
3.20%(b) 04/07/06 2,395 2,395,000
Maryland Economic
Development Authority RB
(Assoc. of Catholic Charities
Project) Series 1999B DN
(M&T Bank Corp. LOC) (A-1)
3.20%(b) 04/07/06 1,425 1,425,000
Maryland Economic
Development Corp. RB
(American Health Assistance
Foundation Facility Project)
Series 2001 DN (M&T Bank
Corp. LOC) (A-1)
3.25%(b) 04/07/06 3,230 3,230,000
Maryland Economic
Development Corp. RB
(Associated Catholic, Inc.
Project) Series 2002 DN (M&T
Bank Corp. LOC) (VMIG-1)
3.20%(b) 04/07/06 2,000 2,000,000
Maryland Health & Higher
Education Facilities Authority
RB (Adventist Healthcare
Project) Series 2003B DN
(M&T Bank Corp. LOC)
(VMIG-1)
3.22%(b) 04/07/06 6,070 6,070,000
==========
19,500,000
----------
Massachusetts - 2.5%
Chicopee GO Series 2005 BAN
(MIG-1)
4.40% 08/15/06 2,500 2,511,216
Commonwealth of
Massachusetts GO (Wachovia
Merlots Trust Receipts) Series
2002A-9 DN (FSA Insurance,
Wachovia Bank N.A. SBPA)
(A-1)
3.20%(b)(c) 04/07/06 1,495 1,495,000
Freetown Lakeville Regional
School District GO Series
2005 BAN (SP-1+)
4.25% 10/20/06 500 503,166
Gill-Montague Regional School
District GO Series 2005 BAN
(SP-1+)
3.62% 07/28/06 2,090 2,095,488
Worcester GO Series 2006 BAN
(SP-1+, MIG-1)
4.25% 11/10/06 1,000 1,005,797
==========
7,610,667
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Michigan - 3.0%
Detroit Economic Development
Corp. RB (E.H. Assoc. Ltd.
Project) Series 2002 DN (First
Federal of Michigan)
3.25%(b) 04/07/06 $3,190 $3,190,000
Detroit Sewer & Disposal
Authority RB Series 2001E
MB (FGIC Insurance)
(A-1+, MIG-1)
3.00% 07/12/06 2,100 2,100,000
Hartland School District GO
Series 2005 BAN
3.50% 08/24/06 1,460 1,462,245
Michigan Municipal Bond
Authority RB Series 2005C
MB (J.P. Morgan Chase Bank
LOC) (SP-1+)
4.25% 08/18/06 1,000 1,004,506
Michigan Strategic Fund Limited
Obligation RB (Horizons of
Michigan Project) Series 2001
DN (Huntington National Bank
LOC)
3.37%(b) 04/07/06 1,475 1,475,000
==========
9,231,751
----------
Minnesota - 1.3%
Minnesota Housing Finance
Agency RB (Residential
Housing Project) Series
2005D MB (SP-1+, MIG-1)
2.90% 05/18/06 4,000 3,997,563
----------
Mississippi - 2.5%
Mississippi Development Bank
Special Obligation RB
(Correctional Facilities Project)
Series 2002 DN (AMBAC
Insurance, Amsouth Bank of
Alabama SBPA) (A-1)
3.27%(b) 04/07/06 3,720 3,720,000
Mississippi Development Bank
Special Obligation RB
(Wachovia Merlots Trust
Receipts) Series 2000HH DN
(AMBAC Insurance, Wachovia
Bank SBPA) (Aaa, VMIG-1)
2.83%(b)(c) 07/19/06 3,000 3,000,000
Mississippi GO Series 2005-800
Refunding Notes MB (Aa3)
4.00% 04/01/06 1,000 1,000,000
==========
7,720,000
----------
Multi-State - 4.0%
Clipper Tax-Exempt Certficates
Trust RB (Certified Partner
Multi-State Project) Series
2004-9 AMT DN (State Street
Bank & Trust Liquidity Facility)
(VMIG-1)
3.32%(b)(c) 04/07/06 6,621 6,621,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Multi-State (Continued)
Municipal Securities Pool Trust
Receipts RB Series 2004-18
DN (Societe Generale SBPA)
(A-1+)
3.30%(b)(c) 04/07/06 $2,025 $2,025,000
Puttable Floating Option
Tax-Exempt Receipts RB
Series 2005A DN (Merrill
Lynch Capital Services SBPA)
(F-1+)
3.30%(b)(c) 04/07/06 2,000 2,000,000
Puttable Floating Option
Tax-Exempt Receipts RB
Series 2005PZP-007 DN
(Multiple LOCs) (AAA, F-1+)
3.27%(b)(c) 04/07/06 1,770 1,770,000
==========
12,416,000
----------
Nevada - 3.2%
Clark County Airport RB
(ABN-AMRO Munitops Trust
Certificates) Series 2005-56
DN (AMBAC Insurance,
ABN-AMRO Bank N.V. SBPA)
(F-1+, AAA)
3.48%(b)(c) 09/11/06 1,000 1,000,000
Clark County Economic
Development RB (Lutheran
Secondary School Assoc.
Project) Series 2000 DN (M&T
Bank Corp. LOC) (VMIG-1)
3.38%(b) 04/07/06 1,500 1,500,000
Clark County School District
Municipal Securities Trust
Certificates RB (Putters
Project-745) Series 2006 DN
(FGIC Insurance, J.P. Morgan
Chase Bank Liquidity Facility)
(A-1+)
3.51%(b)(c) 04/07/06 6,000 6,000,000
Reno Capital Improvement RB
(Bear Stearns Trust
Certificates) Series 2002A DN
(FGIC Insurance, Bear
Stearns LOC) (A-1)
3.23%(b)(c) 04/07/06 1,390 1,390,000
==========
9,890,000
----------
New Jersey - 3.1%
New Jersey Transportation Trust
Fund Authority RB Series
2004-967 DN (FSA Insurance,
Morgan Stanley Group
Liquidity Facility) (AAA, F-1+)
3.19%(b)(c) 04/07/06 8,510 8,510,000
Sussex County GO Series 2005
BAN
4.00% 06/23/06 1,000 1,002,142
==========
9,512,142
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
New Mexico - 2.3%
New Mexico Housing Authority
Region III Multi-Family RB
(Ladera Senior Apartments
Project) Series 2005 AMT MB
(AEGON GIC) (A-1+, AA)
3.47%(b) 08/01/06 $7,000 $7,000,000
----------
New York - 0.7%
TSASC, Inc. RB (Merrill Lynch
P-Float Trust Receipts) Series
2006 PA-1355 DN (Merrill
Lynch Guaranty, Merrill Lynch
Capital Services SBPA)
(AA-, F-1+)
3.24%(b) 04/07/06 2,000 2,000,000
----------
North Carolina - 16.9%
ABN AMRO Munitops Trust
Receipts RB Series 2005-52
DN (ABN AMRO Bank N.V.
LOC) (VMIG-1)
3.21%(b)(c) 04/07/06 2,700 2,700,000
Buncombe County Metropolitan
Sewer District Sewer System
RB Series 2004 DN (XLCA
Insurance, Bank of America
N.A. SBPA) (A-1+, VMIG-1)
3.17%(b) 04/07/06 2,000 2,000,000
Charlotte Airport RB Series
1993A DN (MBIA Insurance,
J.P. Morgan Chase SBPA)
(A-1+, VMIG-1)
3.16%(b) 04/07/06 700 700,000
Charlotte COP (Governmental
Facilities Project) Series
2003F DN (Bank of America
N.A. SBPA) (A-1+, VMIG-1)
3.18%(b) 04/07/06 1,500 1,500,000
Charlotte Water & Sewer System
GO Series 2005 TECP
(Wachovia Bank LOC)
(A-1+, P-1)
3.03% 07/11/06 1,000 1,000,000
Durham County Multi-Family
Housing RB (Merrill Lynch
P-Float Trust Receipts) Series
2005-Pt-3279 DN (Merrill
Lynch Capital Services
Liquidity Facility) (F-1+)
3.30%(b)(c) 04/07/06 1,500 1,500,000
Guilford County Industrial
Facilities PCRB (Recreational
Facilities-YMCA Project)
Series 2002 DN (Branch
Banking & Trust Co. LOC)
(VMIG-1)
3.20%(b) 04/07/06 1,740 1,740,000
North Carolina GO Series 2002F
DN (Wachovia Bank N.A.
LOC) (A-1, VMIG-1)
3.12%(b) 04/07/06 1,300 1,300,000
North Carolina GO Series
2003A-23 DN (Wachovia Bank
N.A. SBPA) (A-1)
3.21%(b)(c) 04/07/06 300 300,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
North Carolina (Continued)
North Carolina Medical Care
Commission Health Care
Facilities RB (Carolina
Meadows, Inc. Project) Series
2004 DN (Allied Irish Bank
PLC LOC) (VMIG-1)
3.19%(b) 04/07/06 $2,300 $2,300,000
North Carolina Medical Care
Commission Health Care
Facilities RB (Novant Health
Group Project) Series 2004A
DN (J.P. Morgan Chase Bank
SBPA) (A-1+, VMIG-1)
3.18%(b) 04/07/06 700 700,000
North Carolina Medical Care
Commission Hospital RB
(Aces-Pooled Equipment
Financing Project) Series 1985
DN (MBIA Insurance, KBC
Bank SBPA) (A-1+, VMIG-1)
3.25%(b) 04/07/06 7,900 7,900,000
North Carolina Medical Care
Commission Hospital RB
(Baptist Hospitals Project)
Series 2000 DN (Wachovia
Bank N.A. LOC)
(A-1, VMIG-1)
3.19%(b) 04/07/06 800 800,000
North Carolina Medical Care
Commission Hospital RB
(Lincoln Health System
Project) Series 1996A DN
(Bank of America N.A. LOC)
(A-1, VMIG-1)
3.18%(b) 04/07/06 750 750,000
North Carolina Medical Care
Commission Hospital RB
(Lutheran Retirement Project)
Series 1999 DN (Bank of
America N.A. LOC) (F-1+)
3.18%(b) 04/07/06 1,870 1,870,000
North Carolina Medical Care
Commission Hospital RB
(McDowell Hospital, Inc.
Project) Series 1999 DN
(Wachovia Bank N.A. SBPA)
(A-1)
3.18%(b) 04/03/06 150 150,000
North Carolina Medical Care
Commission Hospital RB
(Park Ridge Hospital Project)
Series 1988 DN (NationsBank
LOC) (A-1+)
3.17%(b) 04/07/06 4,825 4,825,000
North Carolina Medical Care
Commission Retirement
Facilities RB (Brookwood
Project) Series 2001C DN
(Branch Banking & Trust Co.
LOC) (A-1)
3.27%(b) 04/07/06 600 600,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
North Carolina (Continued)
North Carolina Medical Care
Commission Retirement
Facilities RB (United Methodist
Project) Series 2005B DN
(Branch Banking & Trust Co.
LOC) (VMIG-1)
3.20%(b) 04/07/06 $1,300 $1,300,000
North Carolina Medical Care
Community Health Care
Facilities RB (Duke University
Health Systems Project)
Series 2005C DN
(A-1+, VMIG-1)
3.16%(b) 04/07/06 1,200 1,200,000
North Carolina Medical Care
Community Health Care
Facilities RB (Watauga
Medical Center Project) Series
2005 DN (Wachovia Bank
N.A. LOC) (VMIG-1)
3.18%(b) 04/07/06 1,900 1,900,000
North Carolina State GO (Public
Improvement Projects) Series
2002E DN (Landesbank
Hessen-Thuringen
Girozentrale LOC)
(A-1+, VMIG-1)
3.17%(b) 04/07/06 1,500 1,500,000
North Carolina State Water &
Sewer RB Series 2001 DN
(Bank of America LOC)
(A-1+, VMIG-1)
3.20%(b) 04/07/06 2,700 2,700,000
Pender County Industrial
Facilities Pollution Control
Financing Authority RB (Hey
Realty LLC Project) Series
2006 DN (Suntrust Bank LOC)
(VMIG-1)
3.30%(b) 04/07/06 3,000 3,000,000
Raleigh County COP (Downtown
Improvement Project) Series
2004A DN (Depfa Bank PLC
SBPA) (A-1+, VMIG-1)
3.17%(b) 04/07/06 700 700,000
Raleigh County COP (Packaging
Facilities Project) Series
2000A DN (Bank of America
N.A. SBPA) (A-1+, VMIG-1)
3.20%(b) 04/07/06 1,210 1,210,000
Rockingham County Industrial
Facilities PCRB (Whiteridge,
Inc. Project) Series 1998 AMT
DN (Branch Banking & Trust
Co. LOC) (Aa3, VMIG-1)
3.30%(b) 04/07/06 40 40,000
Union County GO Series 2005A
DN (Depfa Bank PLC SBPA)
(A-1+, VMIG-1)
3.15%(b) 04/07/06 2,500 2,500,000
Union County GO Series 2005B
DN (Depfa Bank PLC SBPA)
(A-1+, VMIG-1)
3.11%(b) 04/07/06 800 800,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
North Carolina (Continued)
Winston-Salem Water & Sewer
System RB Series 2002C DN
(Credit Locale de France
LOC) (A-1+, VMIG-1)
3.20%(b) 04/07/06 $2,775 $2,775,000
==========
52,260,000
----------
North Dakota - 0.1%
North Dakota Housing Finance
Agency RB Series 2001A-19
AMT DN (Wachovia Bank N.A.
LOC) (VMIG-1)
3.26%(b)(c) 04/07/06 280 280,000
----------
Ohio - 2.9%
Fairfield County GO (Airport
Improvement Project) Series
2005 BAN
3.50% 10/19/06 500 500,798
Lucas County Economic
Development RB (Maumee
Valley Country Day School
Project) Series 1998 AMT DN
(MidAmerican National Bank &
Trust Co. LOC)
4.16%(b) 04/07/06 935 935,000
Ohio Higher Educational Facility
Community RB Series 2000C
DN (Fifth Third Bank N.A.
LOC)
3.28%(b) 04/07/06 840 840,000
Ohio PCRB (Ross Incineration
Project) Series 2000-1 AMT
DN (Bank One N.A. LOC)
3.50%(b) 04/07/06 620 620,000
Richland Correctional Facilities
GO Series 2006 BAN
4.25% 02/27/07 1,000 1,007,032
Richland County GO Series
2005 BAN
4.25% 11/07/06 1,000 1,005,252
Summit County Civic Facility RB
(Akron Area Electric Junction
Project) Series 2001 DN
(Keybank N.A. LOC)
3.25%(b) 04/07/06 1,330 1,330,000
Toledo City Services Special
Assesment Notes Series 2006
DN (State Street Bank & Trust
Co. LOC) (MIG-1)
3.17%(b) 04/07/06 1,400 1,400,000
Wood County IDRB (Aluminite,
Inc. Project) Series 1997 AMT
DN (Sky Bank LOC)
4.16%(b) 04/07/06 1,170 1,170,000
==========
8,808,082
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania - 9.6%
Allegheny County Hospital
Developement Authority RB
(Health Care Dialysis Clinic
Project) Series 1997 DN
(Wachovia Bank LOC) (Aa2)
3.18%(b) 04/07/06 $ 500 $ 500,000
Delaware County IDA PCRB
(Exelon Generation Co. LLC
Project) DN (Wachovia Bank
LOC) (A-1+, VMIG-1)
3.17%(b) 04/07/06 400 400,000
Harrisburg Authority School RB
(Harrisburg Project) Series
2003 DN (AMBAC Insurance,
Westdeutsche Landesbank
Girozentrale Liquidity Facility)
(A-1+)
3.17%(b) 04/07/06 17,600 17,600,000
Lancaster County Hospital
Authority RB (Health
Center-Masonic Homes
Project) Series 1996 DN
(Wachovia Bank LOC)
(VMIG-1)
3.18%(b) 04/07/06 3,100 3,100,000
Philadelphia IDRB (Gift of Life
Donor Program Project) Series
2003 DN (Commerce Bank
N.A. LOC) (A-1, VMIG-1)
3.20%(b) 04/07/06 3,000 3,000,000
Philadelphia Water RB
(ABN-AMRO Munitops Trust
Certificates) Series 2005-15
AMT MB (FSA Insurance,
ABN-AMRO Bank N.V. SBPA)
(F-1+)
3.57%(c) 06/30/06 2,995 2,995,000
Venango IDRB (Scrubgrass
Project) Series 2006 MB
(Dexia Group LOC)
(A-1+, P-1)
3.21% 04/06/06 2,000 2,000,000
==========
29,595,000
----------
Puerto Rico - 0.0%
Commonwealth of Puerto Rico
GO (Tender Option
Certificates) Series 2001 DN
(FSA Insurance, Bank of New
York Liquidity Facility) (A-1+)
3.19%(b)(c) 04/03/06 100 100,000
----------
South Carolina - 1.5%
Charleston County School
District GO Series 2005 TAN
(MIG-1)
3.75% 04/13/06 1,000 1,000,266
Greenwood County Exempt
Facility IDRB Series 2004
AMT DN (Fuji Photo Film Co.
Guaranty) (A-1+)
3.30%(b) 04/07/06 1,500 1,500,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
South Carolina (Continued)
Medical University Hospital
Authority RB Series 2005A-5
DN (MBIA Insurance, Bank of
America N.A. SBPA) (VMIG-1)
3.22%(b)(c) 04/07/06 $ 2,230 $2,230,000
==========
4,730,266
----------
Texas - 5.4%
Frisco ISD GO Series 2004C-24
DN (PSF Guaranty, Wachovia
Bank SBPA) (VMIG-1)
3.21%(b)(c) 04/07/06 4,425 4,425,000
Gulf Coast IDRB (Cinergy
Solutions Project) Series 2004
AMT DN (Cinergy Co.
Guaranty) (A-2, VMIG-2)
3.43%(b) 04/07/06 2,800 2,800,000
Houston Housing Finance Corp.
RB (Merrill Lynch P-Float Trust
Receipts) Series 2004
PT-2101 AMT DN (Merrill
Lynch & Co. Guaranty) (F-1+)
3.30%(b)(c) 04/07/06 1,600 1,600,000
Lower Colorado River Authority
RB (Wachovia Merlots Trust
Receipts) Series 2000 DN
(FSA Insurance, Wachovia
Bank N.A. SBPA)
(Aaa, VMIG-1)
3.21%(b)(c) 04/07/06 1,900 1,900,000
Lower Neches Valley Authority
PCRB (Chevron USA, Inc.
Project) Series 1987 MB
(Chevron-Texaco Guaranty)
(A-1+, P-1)
3.35% 08/15/06 1,135 1,135,000
Northside ISD GO (School
Building Project) Series 2005
MB (Depfa Bank SBPA)
(A-1+, MIG-1)
2.85% 06/15/06 1,800 1,800,000
Texas GO Series 2005 TRAN
(SP-1+, MIG-1)
4.50% 08/31/06 3,000 3,015,078
==========
16,675,078
----------
Vermont - 1.1%
Vermont Educational & Health
Buildings Financing Agency
RB (North Country Hospital
Project) Series 2002A DN (TD
BankNorth N.A. LOC)
(VMIG-1)
3.19%(b) 04/07/06 2,900 2,900,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Vermont (Continued)
Vermont Educational & Health
Buildings Financing Agency
RB (Rutland Medical Center
Project) Series 2001A DN
(National Westminster Bank
LOC) (A-1)
3.24%(b) 04/07/06 $ 400 $ 400,000
==========
3,300,000
----------
Virginia - 4.8%
Alexandria IDRB (American
Correctional Assoc. Project)
Series 2006 DN (Bank of
America N.A. LOC) (VMIG-1)
3.18%(b) 04/07/06 600 600,000
Alexandria IDRB (Assoc. for
Supervision & Curriculum
Development Project) Series
1997 DN (Wachovia Bank
N.A. LOC) (A-1)
3.18%(b) 04/07/06 205 205,000
Alexandria IDRB (Goodwin
House Project) Series 2005
DN (Wachovia Bank N.A.
LOC) (A-1)
3.17%(b) 04/03/06 800 800,000
Alexandria IDRB (YMCA of
Billings Project) Series 1998
DN (M&T Bank Corp. LOC)
(A-1)
3.24%(b) 04/07/06 525 525,000
Chesapeake Bay Bridge &
Tunnel Commonwealth District
RB (Wachovia Merlots Trust
Receipts) Series 2003 DN
(MBIA Insurance, Wachovia
Bank N.A. Liquidity Facility)
(VMIG-1)
3.21%(b)(c) 04/03/06 595 595,000
Fairfax County IDRB (Inova
Health Systems Project)
Series 2000 DN (Inova Health
System Liquidity Facility)
(A-1+, VMIG-1)
3.12%(b) 04/07/06 600 600,000
Halifax County GO (Vepco
Project) Series 2006 TECP
(A-2, P-2)
3.36% 04/06/06 2,000 2,000,000
Loudoun County IDRB (Howard
Hughes Medical Institute
Project) Series 2003C DN
(A-1+, VMIG-1)
3.14%(b) 04/07/06 500 500,000
Norfolk Redevelopment &
Housing Authority Multi-Family
Housing RB (Residential
Rental Project) Series 2003
AMT DN (SunTrust Bank
LOC)
3.33%(b) 04/07/06 2,013 2,013,000
Prince William County GO
Series 2006 TECP (A-2, P-2)
3.31% 04/06/06 300 300,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Virginia (Continued)
Richmond IDRB (Diocese of
Virginia Church School
Project) Series 2001 DN
(SunTrust Bank LOC)
(VMIG-1)
3.17%(b) 04/03/06 $ 300 $ 300,000
Tobacco Settlement Financing
Corp. RB (Merrill Lynch
P-Float Trust Receipts) Series
2005 PA-1303 DN (Merrill
Lynch & Co. Guaranty, Merrill
Lynch Capital Services SBPA)
(F-1+)
3.23%(b)(c) 04/07/06 1,200 1,200,000
Tobacco Settlement Financing
Corp. RB (Merrill Lynch
P-Float Trust Receipts) Series
2005 PA-1341 DN (Merrill
Lynch Insured, Merrill Lynch
LOC) (F-1+)
3.23%(b)(c) 04/07/06 300 300,000
University of Virginia RB
(Wachovia Merlots Trust
Receipts) Series 2003B-31 DN
(Wachovia Bank N.A. SBPA)
(VMIG-1)
3.21%(b)(c) 04/07/06 900 900,000
Virginia College Building
Authority RB Series 2003-379
DN (J.P. Morgan Chase Bank
LOC) (A-1+)
3.21%(b)(c) 04/07/06 400 400,000
Virginia Housing Development
Authority RB (Commonwealth
Mortgage Project) Series
2005C-C-II AMT MB
(A-1+, MIG-1)
3.00% 04/04/06 2,000 2,000,000
Virginia State Public School
Authority RB (School
Financing Referendum
Project) Series 2003D MB
(AA+, Aa1)
5.00% 04/07/06 1,600 1,619,557
==========
14,857,557
----------
Washington - 0.7%
Energy Northwest Washington
Electric RB Series 2003D-3-1
DN (FSA Insured, Dexia Credit
Local SBPA) (A-1+, VMIG-1)
3.17%(b) 04/07/06 1,600 1,600,000
Yakima County Public Corp. RB
(Michelsen Packaging Co.
Project) Series 2000 AMT DN
(Bank of America N.A. LOC)
(A-1+)
3.28%(b) 04/07/06 505 505,000
==========
2,105,000
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MUNICIPAL MONEY MARKET PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- --------- -------------
MUNICIPAL BONDS (Continued)
Wisconsin - 0.8%
Amery IDRB (Plastech Corp.
Project) Series 1997 AMT DN
(U.S. Bank N.A. LOC)
3.39%(b) 04/07/06 $2,000 $2,000,000
Mequon IDRB (Johnson Level
GRW Investment Project)
Series 1995 AMT DN (Bank
One N.A. LOC)
3.50%(b) 04/03/06 565 565,000
==========
2,565,000
----------
TOTAL INVESTMENTS IN SECURITIES - 99.5%
(Cost $307,283,681(a)) 307,283,681
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.5% 1,405,463
-----------
NET ASSETS - 100.0% $308,689,144
============
- -------------------
(a) Aggregate cost for federal income tax purposes.
(b) Rates shown are the rates as of March 31, 2006 and maturities shown are
the next interest readjustment date or the date the principal owed can
be recovered through demand.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional investors. As of March
31, 2006, the Portfolio held 26.1% of its net assets, with a current
market value of $80,617,000, in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS - 101.2%
New Jersey - 101.2%
Bernards Township GO Series
2005 BAN
4.25% 09/08/06 $ 2,335 $2,347,419
Burlington County Bridge RB
(Lutheran Home Project)
Series A DN (Commerce Bank
LOC) (VMIG-1)
3.17%(b) 04/07/06 4,170 4,170,000
Burlington County MB Series
2005C BAN
3.75% 07/13/06 2,000 2,002,538
Chester Township GO Series
2005 BAN
3.75% 05/26/06 1,028 1,029,666
Garden State Preservation Trust
RB (New Jersey Open Space
& Farmland Putters Project)
Series 1188 DN (FSA
Insurance, J.P. Morgan Chase
LOC) (F-1)
3.21%(b)(c) 04/07/06 5,310 5,310,000
Gloucester County Industrial
Financing Authority PCRB
(Exxon Mobil Corp. Project)
Series 2003 DN (Exxon Mobil
Corp. Guaranty)
(A-1+, VMIG-1)
2.85%(b) 04/03/06 250 250,000
Hudson County Improvement
Authority RB (Essential
Purpose Pooled Government
Project) Series 1986 DN
(Bank of New York LOC)
3.10%(b) 04/07/06 1,800 1,800,000
Jersey City Redevelopment
Authority RB (Dixon Hills
Project) Series 2000A DN
(Federal National Mortgage
Assoc. Guaranty, Federal
National Mortgage Assoc.
Liquidity Facility) (A-1+)
3.17%(b) 04/07/06 3,350 3,350,000
Little Ferry GO Series 2005 BAN
4.00% 07/21/06 1,100 1,104,002
Manville GO Series 2006 BAN
3.50% 06/27/06 2,683 2,686,632
Middle Township GO (Special
Emergency Notes) Series
2005 MB
4.00% 07/21/06 1,000 1,003,549
Montclair GO Series 2006 BAN
(A-1)
4.25% 08/15/06 2,662 2,669,609
New Jersey Economic
Development Authority
Multi-Mode IDRB (V&S Amboy
Galvanizing LLC Project)
Series 1999 AMT DN
(KeyBank N.A. LOC)
3.32%(b) 04/07/06 2,120 2,120,000
New Jersey Economic
Development Authority RB
(Applewood Estates Project)
Series 2005C DN
(A-2, VMIG-1)
3.10%(b) 04/07/06 5,600 5,600,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
New Jersey Economic
Development Authority RB
(Cigarette Project) Series
2004R ROC-II DN (Citigroup
Guaranty) (VMIG-1)
3.24%(b)(c) 04/07/06 $ 2,075 $2,075,000
New Jersey Economic
Development Authority RB
(Citibank P-Float Trust
Receipts) Series 2004
ROC-II-R-309 DN (Assured
Guaranty Corp. Insurance,
Citibank N.A. SBPA) (A-1+)
3.22%(b)(c) 04/07/06 7,265 7,265,000
New Jersey Economic
Development Authority RB
(Clipper Tax Exempt Trust
Receipts Trust) Series
2005-33B DN (State Street
Bank & Trust Co. SBPA)
(VMIG-1)
3.21%(b)(c) 04/07/06 14,000 14,000,000
New Jersey Economic
Development Authority RB
(Denglas Technologies
Project) Series 2000 AMT DN
(Commerce Bank N.A. LOC)
3.32%(b) 04/07/06 1,200 1,200,000
New Jersey Economic
Development Authority RB
(Hamilton Industrial
Development Project) Series
1998 AMT DN (Wachovia
Bank N.A. LOC)
3.24%(b) 04/07/06 1,540 1,540,000
New Jersey Economic
Development Authority RB (J.
James Realty Co. Project)
Series 1998 AMT DN
(Wachovia Bank N.A. LOC)
3.29%(b) 04/07/06 550 550,000
New Jersey Economic
Development Authority RB
(Jacea LLC Project) Series
2004 AMT DN (Wachovia
Bank N.A. LOC)
3.29%(b) 04/07/06 3,465 3,465,000
New Jersey Economic
Development Authority RB
(Landesbank
Hessen-Thuringen
Girozentrale P-Float Trust
Receipts) Series 2004 MT-035
DN (Assured Guaranty Corp.
Insurance, Landesbank
Hessen-Thuringen
Girozentrale SBPA) (A-1)
3.20%(b)(c) 04/07/06 6,795 6,795,000
New Jersey Economic
Development Authority RB
(Macon Trust Project) Series
2005H DN (FGIC Insurance,
Bank of America N.A. LOC)
(A-1+)
3.20%(b)(c) 04/07/06 625 625,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
New Jersey Economic
Development Authority RB
(Nandan Co. Project) Series
2000 AMT DN (M&T Bank
Corp. LOC) (A-1)
3.22%(b) 04/07/06 $3,220 $3,220,000
New Jersey Economic
Development Authority RB
(Nandan Co. Project) Series
2001 AMT DN (M&T Bank
Corp. LOC) (A-1)
3.22%(b) 04/07/06 1,530 1,530,000
New Jersey Economic
Development Authority RB
(Pennington Montessori
School Project) Series 1998
DN (Wachovia Bank N.A.
LOC)
3.29%(b) 04/07/06 1,125 1,125,000
New Jersey Economic
Development Authority RB
(Project PT-2634) Series 2005
DN (FSA Insurance, Merrill
Lynch SBPA) (A-1)
3.20%(b)(c) 04/07/06 6,780 6,780,000
New Jersey Economic
Development Authority RB
(Somerset Hills YMCA Project)
Series 2003 DN (Commerce
Bank N.A. LOC)
3.22%(b) 04/07/06 100 100,000
New Jersey Economic
Development Authority RB
(Stuart Country Day School
Project) Series 2002 DN (M&T
Bank Corp. LOC) (VMIG-1)
3.15%(b) 04/07/06 1,650 1,650,000
New Jersey Economic
Development Authority RB
(Thermal Energy LP Project)
Series 1995 AMT DN (Bank
One N.A. LOC) (VMIG-1)
3.21%(b) 04/07/06 1,000 1,000,000
New Jersey Educational
Facilities Authority RB
(Princeton University Project)
Series 2002B DN
(A-1+, VMIG-1)
2.85%(b) 04/01/06 400 400,000
New Jersey Educational
Facilities RB (Princeton
University Project) Series
2006 MB (A-1+)
3.26% 05/19/06 5,000 5,000,000
New Jersey Environmental
Infrastructure Trust RB (ENCP
Golf Holdings LLC Project)
Series 2005 AMT DN
(Wachovia Bank LOC)
(VMIG-1)
3.20%(b) 04/07/06 6,800 6,800,000
New Jersey Environmental
Infrastructure Trust RB Series
2004-585 AMT DN (J.P.
Morgan Chase Bank SBPA)
(VMIG-1)
3.24%(b)(c) 04/07/06 4,015 4,015,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
New Jersey Health Care
Facilities Financing Authority
RB (Meridian Nursing &
Rehabilitation Project) Series
2004A-3 DN (Bank of America
N.A. LOC)
3.13%(b) 04/07/06 $ 100 $ 100,000
New Jersey Health Care
Facilities Financing Authority
RB (Merrill Lynch P-Float Trust
Receipts) Series 2001
PT-1319 DN (AMBAC
Insurance, Merrill Lynch
Capital Services SBPA) (A-1)
3.22%(b)(c) 04/07/06 7,860 7,860,000
New Jersey Health Care
Facilities Financing Authority
RB (South Jersey Hospital
Systems Project) Series
2004A-4 DN (Wachovia Bank
LOC) (VMIG-1)
3.14%(b) 04/07/06 300 300,000
New Jersey Health Care
Facilities Financing Authority
RB (St. Joseph's Project)
Series 2003A-6 DN (Valley
National Bank LOC)
(A2, VMIG-1)
3.17%(b) 04/07/06 1,105 1,105,000
New Jersey Health Care
Facilities Financing Authority
RB Series 2004-943 DN
(Morgan Stanley Group
Liquidity Facility, FGIC
Insurance) (F-1+)
3.21%(b)(c) 04/07/06 4,385 4,385,000
New Jersey Higher Education
Student Loan Assistance
Authority RB Series 200A MB
(AAA)
5.50% 06/01/06 545 546,739
New Jersey Housing & Mortgage
Finance Agency Multi-Family
RB Series 2005-1012 AMT
MB (FGIC Insurance, Morgan
Stanley Liquidity Facility)
(VIMG-1)
3.50%(c) 06/01/06 1,380 1,380,000
New Jersey Housing & Mortgage
Finance Agency Multi-Family
RB Series 2006A AMT DN
(FSA Insurance, Lloyds Bank
SBPA) (A-1+)
3.19%(b) 04/07/06 1,000 1,000,000
New Jersey Housing & Mortgage
Finance Agency RB
(Wachovia Merlots Trust
Receipts) Series 2000A-2 DN
(MBIA Insurance, Wachovia
Bank N.A. SBPA) (Aaa)
3.25%(b)(c) 04/07/06 1,055 1,055,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
New Jersey Tobacco Settlment
Financing Corp. RB (Merrill
Lynch P-Float Trust Receipts)
Series 2005 PA-1284 DN
(Merrill Lynch SBPA, Merrill
Lynch Guarantor) (A-1)
3.22%(b)(c) 04/07/06 $5,915 $5,915,000
New Jersey Turnpike Authority
RB Series 2005-II-R-4071 MB
(Citigroup Liquidity Facility,
FSA Insurance) (VMIG-1)
3.54%(c) 08/17/06 2,490 2,490,000
Port Authority of New York &
New Jersey Putter RB Series
2005-1089 AMT DN (CDC
IXIS Financial Guaranty
Insurance, J.P. Morgan Chase
SBPA) (F-1)
3.24%(b)(c) 04/07/06 1,755 1,755,000
Port Authority of New York &
New Jersey Putter RB Series
2005-1095 AMT DN (CDC
IXIS Financial Guaranty
Insurance, J.P. Morgan Chase
SBPA) (VMIG-1)
3.24%(b)(c) 04/07/06 2,980 2,980,000
Port Authority of New York &
New Jersey RB (P-Float Trust
Receipts) Series 2005-3177
AMT DN (AMBAC Insurance,
Merrill Lynch Liquidity Facility)
(A-1)
3.22%(b)(c) 04/07/06 6,575 6,575,000
Port Authority of New York &
New Jersey Special Obligation
RB (Merrill Lynch P-Float Trust
Receipts) Series 2004-056
AMT DN (FGIC Insurance,
Banque Nationale de Paribas
SBPA) (F-1+)
3.22%(b)(c) 04/07/06 7,855 7,855,000
Readington Township GO Series
2006 BAN
4.25% 02/07/07 2,000 2,015,882
Salem County Pollution Control
Financing Authority RB
(Atlantic City Electric Co.
Project) Series 1997B DN
(Bank of New York LOC)
(A-1+, VMIG-1)
3.13%(b) 04/07/06 550 550,000
Southampton GO Series 2005B
BAN
4.00% 07/28/06 2,564 2,573,476
Tobacco Settlement Financing
Corp. RB (Merrill Lynch
P-Float Trust Receipts) Series
2006-1350 DN (Merrill Lynch
& Co. LOC) (F-1+)
3.23%(b)(c) 04/07/06 2,305 2,305,000
Wanaque Borough GO Series
2006 BAN
4.50% 02/16/07 1,000 1,009,780
Washington Township Morris
County GO Series 2005 BAN
4.00% 10/27/06 3,306 3,322,461
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
Weehawken Township GO
Series 2005 BAN
4.00% 07/14/06 $1,000 $1,002,764
==========
TOTAL INVESTMENTS IN SECURITIES -
101.2%
(Cost $162,659,517(a)) 162,659,517
LIABILITIES IN EXCESS OF
OTHER ASSETS - (1.2)% (1,912,461)
-----------
NET ASSETS - 100.0% $160,747,056
============
- -------------------
(a) Aggregate cost for federal income tax purposes.
(b) Rates shown are the rates as of March 31, 2006 and maturities shown are
the next interest readjustment date or the date the principal owed can
be recovered through demand.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional investors. As of March
31, 2006, the Portfolio held 56.9% of its net assets, with a current
market value of $91,420,000, in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NORTH CAROLINA MUNICIPAL MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS - 99.6%
North Carolina - 98.0%
ABN AMRO Munitops Trust
Receipts RB Series 2005-52
DN (ABN AMRO Bank N.V.
LOC) (VMIG-1)
3.21%(b)(c) 04/07/06 $1,300 $1,300,000
Charlotte Water & Sewer System
GO Series 2005 TECP
(Wachovia Bank LOC)
(F-1+, A-1+)
2.90% 04/26/06 1,300 1,300,000
2.88% 06/08/06 1,400 1,400,000
3.25% 08/01/06 1,000 1,000,000
3.32% 08/01/06 1,500 1,500,000
Charlotte-Mecklenburg Hospital
Authority RB (Carolina's
Healthcare Project) Series
2005B DN (Bank of America
SBPA) (A-1+, VMIG-1)
3.14%(c) 04/03/06 200 200,000
Cleveland County Industrial
Facilities PCRB (Blanchford
Rubber Project) Series 2003
AMT DN (Bank One N.A.
LOC)
3.29%(c) 04/07/06 2,530 2,530,000
Durham County Multi-Family
Housing RB (Merrill Lynch
P-Float Trust Receipts) Series
2005-Pt-3279 DN (Merrill
Lynch Capital Services
Liquidity Facility) (F-1+)
3.30%(b)(c) 04/07/06 3,000 3,000,000
Lee County Industrial Facilities
PCRB (Trion, Inc. Project)
Series 1995 DN (Wachovia
Bank N.A. LOC)
3.28%(c) 04/07/06 100 100,000
Lee County Industrial Facilities
PCRB (Var-Arden Corp.
Project) Series 1999 AMT DN
(Comerica Bank N.A. LOC)
3.34%(c) 04/07/06 5,000 5,000,000
Mecklenburg County Industrial
Facilities PCRB (Peidmont
Plastics Project) Series 1997
AMT DN (Branch Banking &
Trust Co. LOC) (Aa3, VMIG-1)
3.30%(c) 04/07/06 880 880,000
North Carolina Capital Facilities
COP (Duke University Project)
TECP (A-1+, P-1)
3.18% 05/03/06 2,500 2,500,000
3.35% 05/03/06 5,000 5,000,000
North Carolina Housing Finance
Agency RB Series 2002
ROC-II-R-175 DN (Citibank
Liquidity Facility) (VMIG-1)
3.25%(b)(c) 04/07/06 3,880 3,880,000
North Carolina Housing Finance
Agency RB Series 2005B-22
AMT MB (Societe Generale
GIC) (A-1+, MIG-1)
3.20% 11/01/06 1,000 1,000,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
North Carolina (Continued)
North Carolina Medical Care
Commission Health Care
Facilities RB (Carolina
Meadows, Inc. Project) Series
2004 DN (Allied Irish Bank
PLC LOC) (VMIG-1)
3.19%(c) 04/07/06 $2,700 $2,700,000
North Carolina Medical Care
Commission Health Care
Facilities RB (Lutheran
Services for the Aging Project)
Series 1998 DN (Branch
Banking & Trust Co. LOC)
(A-1, VMIG-1)
3.18%(c) 04/07/06 100 100,000
North Carolina Medical Care
Commission Hospital RB
(Aces-Pooled Equipment
Financing Project) Series 1985
DN (MBIA Insurance, KBC
Bank SBPA) (A-1+, VMIG-1)
3.25%(c) 04/07/06 500 500,000
North Carolina Medical Care
Commission Hospital RB
(Baptist Hospital Project)
Series 1996 DN (Wachovia
Bank N.A. LOC)
(A-1+, VMIG-1)
3.18%(c) 04/07/06 200 200,000
North Carolina Medical Care
Commission Hospital RB
(Park Ridge Hospital Project)
Series 1988 DN (NationsBank
LOC) (A-1+)
3.17%(c) 04/07/06 2,100 2,100,000
North Carolina Medical Care
Commission Retirement
Facilities RB (Aldersgate
Project) Series 2001 DN
(Branch Banking & Trust Co.
LOC) (A-1)
3.27%(c) 04/07/06 1,155 1,155,000
North Carolina Medical Care
Commission Retirement
Facilities RB (United Methodist
Project) Series 2005B DN
(Branch Banking & Trust Co.
LOC) (VMIG-1)
3.20%(c) 04/07/06 625 625,000
North Carolina Medical Care
Community Health Care
Facilities RB (Duke University
Health Systems Project)
Series 2005C DN
(A-1+, VMIG-1)
3.16%(c) 04/07/06 600 600,000
North Carolina Medical Care
Community Health Care
Facilities RB (Watauga
Medical Center Project) Series
2005 DN (Wachovia Bank
N.A. LOC) (VMIG-1)
3.18%(c) 04/07/06 300 300,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NORTH CAROLINA MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
North Carolina (Continued)
North Carolina Ports Authority
Exempt Facilities RB
(Wilmington Bulk LLC Project)
Series 2001A AMT DN
(Branch Banking & Trust Co.
LOC) (VMIG-1)
3.30%(c) 04/07/06 $1,205 $1,205,000
North Carolina State Educational
Assistance Authority RB
(Student Loans) Series
2005A-2 DN (Kredietbank
LOC) (A-1, VMIG-1)
3.23%(c) 04/07/06 1,250 1,250,000
North Carolina State GO (Public
Improvement Projects) Series
2002E DN (Landesbank
Hessen-Thuringen
Girozentrale LOC)
(A-1+, VMIG-1)
3.17%(c) 04/07/06 650 650,000
North Carolina State GO Series
2005 MB (AAA, Aa1)
5.10% 06/01/06 1,000 1,018,061
Raleigh County COP (Downtown
Improvement Project) Series
2004A DN (Depfa Bank PLC
SBPA) (A-1+, VMIG-1)
3.17%(c) 04/07/06 100 100,000
Raleigh Durham Airport Authority
Airport RB (P-Floats Trust
Receipts) Series 2005-100
AMT DN (AMBAC Insurance,
Landesbank Hessen Liquidity
Facility) (VMIG-1)
3.25%(b)(c) 04/07/06 3,000 3,000,000
Richmond County Industrial
Facilities PCRB (Ritz-Craft
Corp., Inc.) Series 2005 DN
(Mercantile Safe Deposit &
Trust Co. LOC)
(A-1+, VMIG-1)
3.22%(c) 04/07/06 2,900 2,900,000
Rockingham County Industrial
Facilities PCRB (Medibeg, Inc.
Project) Series 1997 AMT DN
(Wachovia Bank N.A. LOC)
(Aa2)
3.28%(c) 04/07/06 1,200 1,200,000
Rockingham County Industrial
Facilities PCRB (Whiteridge,
Inc. Project) Series 1998 AMT
DN (Branch Banking & Trust
Co. LOC) (Aa3, VMIG-1)
3.30%(c) 04/07/06 360 360,000
Rutherford County Industrial
Facilities PCRB (All American
Homes Project) Series 1996
AMT DN (Bank One N.A.
LOC)
3.50%(c) 04/07/06 1,100 1,100,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
North Carolina (Continued)
Sampson County Industrial
Facilities PCRB (Dubose
Strapping, Inc. Project) Series
1997 DN (Wachovia Bank
N.A. LOC)
3.33%(c) 04/07/06 $ 600 $ 600,000
Union County GO Series 2005B
DN (Depfa Bank PLC SBPA)
(A-1+, VMIG-1)
3.11%(c) 04/07/06 1,000 1,000,000
University of North Carolina
Chapel Hill RB Series
2006-1287 DN (Morgan
Stanley Group LOC) (A-1)
3.20%(b)(c) 04/07/06 4,000 4,000,000
Wake County GO Series 2004A
DN (Landesbank
Hessen-Thuringen
Girozentrale SBPA)
(A-1+, MIG-1)
4.00%(c) 04/03/06 1,000 1,000,000
Wake County Housing Finance
Authority RB (Casa Melvid
Multi-Family Housing Project)
Series 2001A AMT DN
(SunTrust Bank LOC)
(VMIG-1)
3.28%(c) 04/07/06 2,800 2,800,000
Washington County Industrial
Facilities PCRB (Mackey's
Ferry Sawmill, Inc. Project)
Series 1997 AMT DN
(Wachovia Bank N.A. LOC)
(Aa2)
3.28%(c) 04/07/06 430 430,000
Winston-Salem COP (Risk
Acceptance Management
Corp. Project) Series 1988 DN
(Dexia Credit Local LOC)
(A-1+)
3.20%(c) 04/07/06 415 415,000
Winston-Salem GO Series 1990
DN (Wachovia Bank N.A.
LOC) (A-1+, VMIG-1)
3.16%(c) 04/07/06 220 220,000
==========
62,118,061
----------
Puerto Rico - 1.6%
Commonwealth of Puerto Rico
GO Series 2005 TRAN
(Multiple LOCs)
(SP-1+, MIG-1)
4.50% 07/28/06 1,000 1,004,066
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NORTH CAROLINA MUNICIPAL MONEY MARKET PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
VALUE
---------------
TOTAL INVESTMENTS IN SECURITIES -
99.6%
(Cost $63,122,127(a)) $ 63,122,127
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.4% 271,758
------------
NET ASSETS - 100.0% $ 63,393,885
============
- -------------------
(a) Aggregate cost for federal income tax purposes.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional investors. As of March
31, 2006, the Portfolio held 23.9% of its net assets, with a current
market value of $15,180,000, in securities restricted as to resale.
(c) Rates shown are the rates as of March 31, 2006 and maturities shown are
the next interest readjustment date or the date the principal owed can
be recovered through demand.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
OHIO MUNICIPAL MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS - 100.6%
Ohio - 100.6%
Akron Income Tax RB
(Community Learning Centers
Project) Series 2004A DN
(FGIC Insurance, ABN-AMRO
Bank N.V. SBPA) (A-1, F-1+)
3.21%(b)(c) 04/07/06 $5,500 $5,500,000
American Municipal Power, Inc.
GO (Amherst City Project)
Series 2005 BAN
3.40% 11/30/06 795 795,000
American Municipal Power, Inc.
GO (Cleveland Public Power
Project) Series 2005 BAN
3.10% 08/17/06 1,783 1,783,000
American Municipal Power, Inc.
GO (Columbus Electric
System Project) Series 2005
BAN
3.00% 07/13/06 500 500,000
American Municipal Power, Inc.
GO (Hubbard Project) Series
2005 BAN
3.50% 12/13/06 945 945,000
American Municipal Power, Inc.
GO (Oberlin Project) Series
2005 BAN
3.45% 12/07/06 475 475,000
American Municipal Power, Inc.
GO (Ohio, Inc. Project) Series
2005-2002 BAN
3.35% 11/02/06 845 845,000
American Municipal Power, Inc.
GO (St. Mary's Project) Series
2005 BAN
3.20% 10/05/06 500 500,000
American Municipal Power, Inc.
GO (Woodville Village Project)
Series 2005 BAN
3.25% 07/20/06 800 800,467
Avon GO Series 2006 BAN
3.85% 04/12/07 275 275,660
Brooklyn IDRB (Dylon Industries,
Inc. Project) Series 1999 AMT
DN (KeyBank N.A. LOC)
3.32%(c) 04/07/06 790 790,000
Brunswick GO Series 2005 BAN
2.90% 04/06/06 2,030 2,030,054
Brunswick GO Series 2006 BAN
3.60% 04/05/07 1,015 1,017,436
Cambridge City Hospital
Facilities Authority RB
(Regional Medical Center
Project) Series 2001 DN
(National City Bank N.A. LOC)
(VMIG-1)
3.20%(c) 04/07/06 2,000 2,000,000
Celina GO Series 2006 BAN
3.75% 11/15/06 760 761,833
4.75% 11/15/06 250 251,592
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Cincinnati City School District
GO (School Improvement
Project) Series 2002 MB (FSA
Insurance) (AAA, Aaa)
4.50% 06/01/06 $ 500 $ 500,935
City of Westerville GO
(ABN-AMRO Munitops Trust
Certificates) Series 2001 DN
(ABN-AMRO Bank N.V. LOC)
(VMIG-1)
3.21%(c) 04/07/06 1,000 1,000,000
Clark County GO (Green
Meadows II Project) Series
2006 MB
3.67% 02/14/07 580 581,322
Clark County GO Series 2006
BAN (Fifth Third Bank N.A.
LOC)
3.70% 11/15/06 2,505 2,510,356
Clark County Multi-Family RB
(Masonic Home Project)
Series 1999 DN (AMBAC
Insurance, KeyBank N.A.
LOC) (VMIG-1)
3.20%(c) 04/07/06 1,765 1,765,000
Cleveland Airport System RB
(Stars Certificates Project)
Series 2004 DN (FSA
Insurance, Banque Nationale
de Paribas LOC) (VMIG-1)
3.25%(b)(c) 04/07/06 5,560 5,560,000
Cleveland-Cuyahoga County
Port Authority Educational
Facility RB (Laurel School
Project) Series 2004 DN
(KeyBank N.A. LOC)
3.25%(c) 04/07/06 1,140 1,140,000
Columbus Regional Airport
Authority RB Series 2005 DN
(U.S. Bank N.A. LOC)
(AA1, VMIG-1)
3.19%(c) 04/07/06 355 355,000
Cuyahoga County Civic Facility
RB (Orion Services, Inc.
Project) Series 2001 DN
(Bank One N.A. LOC)
3.45%(c) 04/07/06 3,200 3,200,000
Cuyahoga County Economic
Development RB (Berea
Children's Home Project)
Series 2000 DN (Huntington
National Bank LOC) (VMIG-1)
3.37%(c) 04/07/06 1,880 1,880,000
Cuyahoga County Economic
Development RB (Cleveland
Botanical Garden Project)
Series 2001 DN (M&T Bank
Corp. LOC) (VMIG-1)
3.20%(c) 04/07/06 635 635,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
OHIO MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Cuyahoga County IDRB (Great
Lakes Brewing Co. Project)
Series 2001 AMT DN
(Huntington National Bank
LOC)
3.47%(c) 04/07/06 $1,170 $1,170,000
Cuyahoga County IDRB (Marine
Mechanical Corp. Project)
Series 2000 AMT DN (Royal
Bank of Scotland LOC)
3.30%(c) 04/07/06 2,040 2,040,000
Cuyahoga County IDRB (Trio
Diversified Co. Project) Series
2000 AMT DN (KeyBank N.A.
LOC)
3.32%(c) 04/07/06 1,645 1,645,000
Darke County GO Series 2005
BAN
3.75% 07/11/06 1,000 1,002,555
Delaware County Economic
Development RB (The
Columbus Zoological Park
Associates, Inc. Project)
Series 2003 DN (Huntington
National Bank LOC)
3.35%(c) 04/07/06 2,295 2,295,000
Delaware County IDRB (Air
Waves, Inc. Project) Series
1995 DN (KeyBank N.A. LOC)
3.32%(c) 04/07/06 80 80,000
Englewood GO Series 2005
BAN
4.00% 08/29/06 625 627,241
Erie County IDRB (Brighton
Manor Co. Project) Series
1986 AMT DN (KeyBank N.A.
LOC)
3.32%(c) 04/07/06 4,200 4,200,000
Franklin County Economic
Development RB (Columbus
Montessori Educational Center
Project) Series 2000 DN
(Huntington National Bank
LOC)
3.27%(c) 04/07/06 1,570 1,570,000
Franklin County Healthcare
Facilities RB (Heritage Day
Health Centers Project) Series
2002 DN (Huntington National
Bank LOC)
3.25%(c) 04/07/06 405 405,000
Franklin County Healthcare
Facilities RB (Willow Brook
Christian Project) Series 2004
DN (Fifth Third Bank LOC)
(A-1+)
3.21%(c) 04/07/06 600 600,000
Franklin County Municipal
Securities Trust Certificates
RB Series 2002A-9047 DN
(AMBAC Insurance, Bear
Stearns SBPA) (A-1)
3.22%(b)(c) 04/07/06 1,500 1,500,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Fulton County IDRB (Haas Door
Co. & Nofziger Doors
International, Inc. Project)
Series 1999 AMT DN
(National City Bank N.A. LOC)
3.40%(c) 04/07/06 $ 360 $ 360,000
Geauga County RB (Thistle
Lane Project) Series 2000
AMT DN (Huntington National
Bank LOC)
3.47%(c) 04/07/06 2,310 2,310,000
Greene County IDRB (AFC
Stamping & Production, Inc.,
Barsplice Products Project)
Series 1995 AMT DN
(KeyBank N.A. LOC)
3.32%(c) 04/07/06 240 240,000
Hamilton County Economic
Development RB (Taft
Museum Project) Series 2002
DN (Fifth Third Bank N.A.
LOC)
3.19%(c) 04/07/06 1,700 1,700,000
Hamilton County Hospital
Facilities RB (Children's
Hospital Medical Center
Project) Series 2000 DN (J.P.
Morgan Chase Bank LOC)
(VMIG-1)
3.17%(c) 04/07/06 750 750,000
Hamilton County Hospital
Facilities RB (Drake Center,
Inc. Project) Series 1999A DN
(VMIG-1)
3.17%(c) 04/07/06 1,300 1,300,000
Hamilton County Hospital
Facilities RB (Health Alliance
Project) Series 1997B DN
(MBIA Insurance, Credit
Suisse SBPA) (A-1+, VMIG-1)
3.19%(c) 04/07/06 850 850,000
Jackson RB (Hospital Facilities
Project) Series 2005 DN
(Radian Insurance, Fifth Third
Bank N.A. LOC) (AA, F-1+)
3.22%(c) 04/07/06 7,000 7,000,000
Lebanon GO (Fire Department
Improvement Project) Series
2005 BAN
3.75% 07/05/06 1,120 1,122,692
Licking County GO (Moundview
Project) Series 2005 BAN
4.00% 09/07/06 700 702,659
Licking County GO Series 2006
MB
4.50% 12/14/06 4,900 4,935,125
Lorain County IDRB (Ohio
Metallurgical Services Project)
Series 2001 AMT DN (First
Merit Bank N.A. LOC)
3.47%(c) 04/07/06 1,790 1,790,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
OHIO MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Lyndhurst City GO Series 2006
BAN
3.70% 03/01/07 $1,000 $1,001,762
Mahoning County IDRB (M&J
Development Ltd. Project)
Series 2002 AMT DN
(KeyBank N.A. LOC)
3.32%(c) 04/07/06 2,560 2,560,000
Mentor IDRB (Arrow Machine
Co. Ltd. Project) Series 1997
DN (First Merit Bank N.A.
LOC)
3.30%(c) 04/07/06 1,335 1,335,000
Montgomery County Healthcare
Facilities RB Series 2002 DN
(Bank One N.A. LOC)
3.28%(c) 04/07/06 2,500 2,500,000
North Canton GO Series 2005
BAN
4.00% 04/07/06 500 501,802
North Olmsted GO Series 2005
BAN
3.15% 05/03/06 875 875,217
Ohio Building Authority RB
(Merrill Lynch P-Floats Trust
Receipts) Series 2005-2937
DN (FSA Insurance Merrill
Lynch SBPA)
3.19%(b)(c) 04/07/06 5 5,000
Ohio Environmental
Improvement RB (Newark
Group Industries, Inc. Project)
Series 1996 AMT DN (Chase
Manhattan LOC) (A-1)
3.22%(c) 04/07/06 5,900 5,900,000
Ohio Higher Educational Facility
Community RB Series 2000C
DN (Fifth Third Bank N.A.
LOC)
3.28%(c) 04/07/06 495 495,000
Ohio Higher Educational Facility
RB (Cedarville University
Project) Series 2004 DN
(KeyBank N.A. LOC)
3.25%(c) 04/07/06 1,175 1,175,000
Ohio Housing Finance Agency
Mortgage RB (Wachovia
Merlots Trust Receipts) Series
2001A-78 DN (Wachovia Bank
N.A. LOC) (VMIG-1)
3.26%(b)(c) 04/07/06 1,510 1,510,000
Ohio Housing Finance Agency
Mortgage RB Series 2001
AMT DN (Bank of America
N.A. LOC) (VMIG-1)
3.29%(b)(c) 04/07/06 1,360 1,360,000
Ohio Housing Finance Agency
Mortgage RB Series 2004D
AMT DN (Federal Home Loan
Bank SBPA) (VMIG-1)
3.19%(c) 04/07/06 1,250 1,250,000
Ohio Housing Finance Agency
Multi-Family Housing RB
(Lincoln Park Assoc. Project)
Series 1985 MB (Bank One
N.A. LOC) (MIG-1)
3.50% 05/01/06 1,600 1,600,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Ohio Housing Finance Agency
RB (Clipper Tax-Exempt
Certificates Trust Project)
Series 2004-08 AMT DN
(Lloyds Bank SBPA) (VMIG-1)
3.26%(b)(c) 04/07/06 $9,231 $9,231,000
Ohio IDRB (Ashley Ward, Inc.
Project) Series 1997 AMT DN
(Fifth Third Bank N.A. LOC)
3.31%(c) 04/07/06 470 470,000
Ohio PCRB (Ross Incineration
Project) Series 2000-1 AMT
DN (Bank One N.A. LOC)
3.50%(c) 04/07/06 1,380 1,380,000
Ohio State Solid Waste RB
(Republic Services, Inc.
Project) Series 2005 AMT DN
(A-2)
3.45%(c) 04/07/06 1,000 1,000,000
Ohio State University GO Series
2006 BAN (A-1+, P-1)
3.25% 04/07/06 1,250 1,250,000
Ohio University General
Receipts RB Series 2005B DN
(A-1+)
3.09%(c) 04/07/06 100 100,000
Pepper Pike City GO Series
2005 BAN
3.00% 06/22/06 396 396,173
Portage County IDRB (Action
Super Abrasive Project) Series
1996 AMT DN (Huntington
National Bank N.A. LOC)
3.41%(c) 04/07/06 750 750,000
Portage County IDRB
(Bauer/Hibbard Properties Ltd.
Project) Series 1998 DN
(National City Bank N.A. LOC)
3.40%(c) 04/07/06 780 780,000
Putnam County Health Care
Facilities RB (Hilty Memorial
Home Project) Series 2004
DN (LaSalle Bank N.A. LOC)
3.26%(c) 04/07/06 3,495 3,495,000
Richland Correctional Facilities
GO Series 2006 BAN
4.25% 02/27/07 1,000 1,007,032
Richland County GO (Computer
Acquistion Project) Series
2006 BAN
4.00% 03/27/07 615 619,969
Richland County GO Series
2005 BAN
4.00% 08/08/06 475 476,712
4.25% 11/07/06 1,310 1,316,881
Rickenbacker Port Authority RB
(P-Float Trust Receipts) Series
2004 PT-2453 AMT DN
(Merrill Lynch Guaranty)
(F-1+)
3.30%(b)(c) 04/07/06 5,155 5,155,000
Sandusky County IDRB
(Brighton Manor Co. Project)
Series 1986 AMT DN
(KeyBank N.A. LOC) (VMIG-1)
3.32%(c) 04/07/06 2,800 2,800,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
OHIO MUNICIPAL MONEY MARKET PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
St. Mary's GO Series 2005 BAN
3.30% 09/14/06 $ 500 $ 500,549
Stark County IDRB (Thakar
Properties LLC Project) Series
2002 AMT DN (National City
Bank N.A. LOC)
3.30%(c) 04/07/06 3,500 3,500,000
Strongsville IDRB (Web Plastics
Co. Project) Series 1997 DN
(National City Bank N.A. LOC)
3.40%(c) 04/07/06 555 555,000
Summit County IDRB (Flutes
LLC Project) Series 2002 AMT
DN (Marshall & Ilsley Bank
LOC)
3.30%(c) 04/07/06 2,330 2,330,000
Summit County IDRB (Jendrisak
Properties Project) Series
2001 AMT DN (First Merit
Bank N.A. LOC)
3.47%(c) 04/07/06 1,970 1,970,000
Summit County IDRB (KB
Compost Services, Inc.
Project) Series 2001 AMT DN
(KeyBank N.A. LOC)
3.32%(c) 04/07/06 1,550 1,550,000
Summit County IDRB (Sigma
Properties Project) Series
2000A AMT DN (National City
Bank N.A. LOC)
3.35%(c) 04/07/06 965 965,000
Summit County IDRB (Waltco
Truck Equipment Project)
Series 1988 AMT MB
(Skandinaviska Enskilda LOC)
4.10% 07/15/06 270 270,000
Summit County Port Authority
RB (Meadow Lane Building
LLC Project) Series 2003A
AMT DN (KeyBank N.A. LOC)
3.32%(c) 04/07/06 2,500 2,500,000
Toledo GO Certificates Trust
Series 2004-18 MB (FGIC
Insurance, State Aid
Withholding Guaranty, ABN
AMRO SBPA) (VMIG-1)
3.54%(b) 06/30/06 1,000 1,000,000
Toledo Multi-Family Housing RB
(Cherrywood Apartments
Project) Series 2001 AMT DN
(KeyBank N.A. LOC)
3.32%(c) 04/07/06 2,675 2,675,000
Trumbull County IDRB (Ellwood
Engineered Project) Series
2004 AMT DN (KeyBank LOC)
3.32%(c) 04/07/06 1,700 1,700,000
Trumbull County IDRB (United
Steel Service, Inc. Project)
Series 2000B AMT DN (Bank
One N.A. LOC)
3.65%(c) 04/07/06 310 310,000
University of Cincinnati RB
Series 2004B DN (AMBAC
Insurance, Bayerische
Landesbank Girozentrale
SBPA) (A-1+, VMIG-1)
3.17%(c) 04/07/06 460 460,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
University of Toledo RB (Societe
Generale Trust Receipts)
Series 2001 SGA-125 DN
(FGIC Insurance, Societe
Generale Liquidity Facility)
(A-1+)
3.22%(b)(c) 04/07/06 $9,855 $ 9,855,000
Western Reserve Housing
Development Corp. Economic
RB (Trumbull Metropolitan
Housing Project) Series 2003
DN (KeyBank N.A. LOC)
3.31%(c) 04/07/06 3,445 3,445,000
Wood County Economic
Development RB (Hammill
Manufacturing Co. Project)
Series 2000 AMT DN (Sky
Bank LOC)
4.16%(c) 04/07/06 1,660 1,660,000
Wood County Economic
Development RB (Precision
Aggregate II Project) Series
1996 AMT DN (Mid American
National Banking & Trust
LOC)
4.16%(c) 04/07/06 1,720 1,720,000
Wood County Economic
Development RB (Sun Seed
Holding Co., Inc. Project)
Series 2001A AMT DN (Sky
Bank LOC)
4.16%(c) 04/07/06 1,365 1,365,000
Wood County Economic
Development RB (Toledo
Electrical Joint Apprenticeship
& Training Fund Project)
Series 2000 DN (Sky Bank
LOC)
4.16%(c) 04/07/06 780 780,000
===========
170,000,024
-----------
TOTAL INVESTMENTS IN SECURITIES -
100.6%
(Cost $170,000,024(a)) 170,000,024
LIABILITIES IN EXCESS OF
OTHER ASSETS - (0.6)% (936,131)
-----------
NET ASSETS - 100.0% $169,063,893
============
- -------------------
(a) Aggregate cost for federal income tax purposes.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional investors. As of March
31, 2006, the Portfolio held 24.1% of its net assets, with a current
market value of $40,676,000, in securities restricted as to resale.
(c) Rates shown are the rates as of March 31, 2006 and maturities shown are
the next interest readjustment date or the date the principal owed can
be recovered through demand.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS - 99.7%
Pennsylvania - 98.8%
Allegheny County Hospital
Developement Authority RB
(Health Care Dialysis Clinic
Project) Series 1997 DN
(Wachovia Bank LOC) (Aa2)
3.18%(b) 04/07/06 $ 2,000 $2,000,000
Allegheny County Hospital
Development Authority RB
(Putter Trust Receipts) Series
1281 DN (FGIC Insurance,
J.P. Morgan Liquidity Facility)
(A-1)
3.21%(b)(c) 04/07/06 10,000 10,000,000
Allegheny County IDRB
(Carnegie Museums
Pittsburgh Project) Series
2005 DN (Citizens Bank LOC)
(Aaa, VMIG-1)
3.20%(b) 04/07/06 4,000 4,000,000
Allegheny County IDRB
(Commonwealth Development
Parkway Project) Series
1994A DN (National City Bank
N.A. LOC) (Aa3)
3.22%(b) 04/07/06 2,400 2,400,000
Allegheny County IDRB (UPMC
Health System Project) Series
2002C DN (Comerica Bank
N.A. LOC) (A-1)
3.19%(b) 04/07/06 1,600 1,600,000
Berks County IDRB (Beacon
Container Corp. Project)
Series 1997A AMT DN
(Wachovia Bank N.A. LOC)
(P-1)
3.33%(b) 04/07/06 605 605,000
Berks County IDRB (Tray Pak
Co. Project) RB Series 2001A
AMT DN (Wachovia Bank N.A.
LOC)
3.33%(b) 04/07/06 2,485 2,485,000
Blair County IDRB Series 2003
AMT DN (Fulton Bank LOC)
(A-1, VMIG-1)
3.37%(b) 04/07/06 2,035 2,035,000
Bucks County IDRB (LTL Color
Compounders Project) Series
1999B DN (Wilmington Trust
Co. LOC)
3.33%(b) 04/07/06 935 935,000
Cambria County IDA Resource
Recovery RB (Cambria Cogen
Co. Project) Series 1998A-2
AMT DN (Bayerische
Landesbank Girozentrale
LOC) (VMIG-1)
3.35%(b) 04/07/06 16,000 16,000,000
Carlisle Area School District GO
Series 2004-G44 DN (MBIA
Insurance, J.P. Morgan Chase
Bank SBPA) (VMIG-1)
3.21%(b)(c) 04/07/06 2,020 2,020,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Chester County Health &
Education Facilities
Retirement Community RB
(Kendal Crosslands
Community Project) Series
2003 DN (Allied Irish Bank
PLC LOC) (A-1)
3.19%(b) 04/07/06 $ 1,965 $1,965,000
Chester County IDA Student
Housing RB (University
Student Housing Limited
Project) Series 2003 DN
(Royal Bank of Scotland PLC
LOC) (VMIG-1)
3.21%(b) 04/07/06 8,150 8,150,000
Chester County IDRB (RV
Industrial, Inc. Project) Series
2001AMT DN (M&T Bank
Corp. LOC) (A-1)
3.32%(b) 04/07/06 3,300 3,300,000
Crawford County IDRB Series
2000 AMT DN (National City
Bank N.A. LOC)
3.35%(b) 04/07/06 1,035 1,035,000
Cumberland County IDRB
(Lawrence Schiff Silk Co.
Project) Series 1998 AMT DN
(Wachovia Bank N.A. LOC)
3.33%(b) 04/07/06 755 755,000
Cumberland County Municipal
Authority RB (Presbyterian
Homes Project) Series 2005B
DN (Radian Insurance,
Wachovia Bank N.A. LOC)
(A-1+)
4.25%(b) 12/01/06 2,800 2,814,385
Cumberland County Municipal
Authority RB (Wesley Affiliated
Services, Inc. Project) Series
2005 DN (Sovereign Bancorp
LOC) (A-1+)
3.19%(b) 04/07/06 8,000 8,000,000
Dauphin County IDRB Series
2005 AMT DN (Citizens Bank
LOC) (A-1+)
3.20%(b) 04/07/06 4,000 4,000,000
Delaware County IDRB
(Melmark Inc. Project) Series
2006 DN
3.22%(b) 04/07/06 750 750,000
Delaware Valley Regional
Finance Authority Local
Government RB Series 1985A
DN (National Australia LOC)
(A-1, VMIG-1)
3.18%(b) 04/07/06 2,500 2,500,000
East Hempfield Township IDRB
(Herley Industrial, Inc. Project)
Series 2001 AMT DN (M&T
Bank Corp. LOC) (A-1)
3.32%(b) 04/07/06 2,590 2,590,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
East Hempfield Township IDRB
(Herley Industrial, Inc. Project)
Series 2005 AMT DN (M&T
Bank Corp. LOC)
(A-1, VMIG-1)
3.32%(b) 04/07/06 $ 2,700 $2,700,000
Erie County IDRB (American
Turned Products Project)
Series 1997 AMT DN
(KeyBank N.A. LOC)
3.32%(b) 04/07/06 1,235 1,235,000
Fayette County IDRB (Dynamic
Material Corp. Project) Series
1998 AMT DN (KeyBank N.A.
LOC)
3.32%(b) 04/07/06 1,675 1,675,000
Franklin County IDRB
(Chambersburg Hospital
Project) Series 2000 DN
(AMBAC Insurance, Wachovia
Bank N.A. SBPA) (A-1)
3.27%(b) 04/07/06 2,050 2,050,000
Franklin County IDRB (Menno
Haven Project) Series 2001
DN (Radian Insurance, Fleet
National Bank SBPA) (A-1+)
3.24%(b) 04/07/06 1,680 1,680,000
Franklin County IDRB (Precast
System Project) Series 2001A
AMT DN (M&T Bank Corp.
LOC) (A-1)
3.32%(b) 04/07/06 1,760 1,760,000
Greater Latrobe School Authority
RB (School Building Project)
Series 1998 MB
4.45% 04/01/06 200 200,000
Harrisburg Authority School RB
(Harrisburg Project) Series
2003 DN (AMBAC Insurance,
Westdeutsche Landesbank
Girozentrale Liquidity Facility)
(A-1+)
3.17%(b) 04/07/06 5,700 5,700,000
Horizon Hospital System
Authority Health & Housing
Facility RB (St. Paul Homes
Project) Series 2002 DN (M&T
Bank Corp. LOC) (VMIG-1)
3.22%(b) 04/07/06 7,345 7,345,000
Horizon Hospital System
Authority Health & Housing
Facility RB (St. Paul Homes
Project) Series 2005 DN (M&T
Bank Corp. LOC) (A-1+)
3.22%(b) 04/07/06 7,900 7,900,000
Indiana County IDA PCRB
(Exelon Generation Project)
Series 2003A AMT DN (BNP
Paribas LOC) (A-1, VMIG-1)
3.23%(b) 04/03/06 285 285,000
Indiana County IDRB
(Conemaugh Project) Series
1997A AMT DN (Bank One
N.A.) (VMIG-1)
3.28%(b) 04/07/06 10,600 10,600,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Lackawanna County IDRB (Herff
Jones, Inc. Project) Series
2001 AMT DN (National City
Bank N.A. LOC)
3.30%(b) 04/07/06 $ 2,800 $2,800,000
Lancaster County Hospital
Authority RB (Ephrata
Community Hospital Project)
Series 2006 DN (Fulton LOC)
(VMIG-1)
3.28%(b) 04/07/06 6,600 6,600,000
Lancaster County Hospital
Authority RB (Health Center
Luthercare Project) Series
1999 DN (M&T Bank Corp.
LOC) (A-1)
3.22%(b) 04/07/06 4,965 4,965,000
Lancaster County Hospital
Authority RB (Lancaster
General Hospital Project)
Series 2002 DN (Fulton Bank
LOC) (VMIG-1)
3.27%(b) 04/07/06 4,000 4,000,000
Lancaster County Hospital
Authority RB (Landis Homes
Retirement Community
Project) Series 2002 DN (M&T
Bank Corp. LOC) (A-1)
3.22%(b) 04/07/06 8,610 8,610,000
Lancaster County Hospital
Authority RB (Quarryville
Presbyterian Project) Series
2000 DN (M&T Bank Corp.
LOC) (A-1)
3.19%(b) 04/07/06 3,175 3,175,000
Lancaster County IDRB (Clean
Creek Partners Project) Series
2000 AMT DN (M&T Bank
Corp. LOC) (A-1)
3.32%(b) 04/07/06 5,030 5,030,000
Lancaster County IDRB (D&P
Skibo LLC Project) Series
2001 AMT DN (Wachovia
Bank N.A. LOC)
3.33%(b) 04/07/06 1,485 1,485,000
Lancaster County IDRB (John F.
Martin & Sons Project) Series
2001 AMT DN (Fulton Bank
LOC) (A-2)
3.42%(b) 04/07/06 700 700,000
Lancaster County IDRB (Miller
Building Systems Project)
Series 1998 AMT DN (Bank
One N.A. LOC)
3.50%(b) 04/07/06 1,500 1,500,000
Lancaster County IDRB
(Oakfront LP Project) Series
2001 AMT DN (M&T Bank
Corp. LOC) (A-2, P-1)
3.32%(b) 04/07/06 2,180 2,180,000
Lawrence County IDRB (L&N
Metallurgical Products Project)
Series 1996 AMT DN (Banque
Nationale de Paribas LOC)
3.40%(b) 04/07/06 3,990 3,990,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Lawrence County IDRB (Villa
Maria Project) Series 2003 DN
(Allied Irish Bank PLC LOC)
(VMIG-1)
3.20%(b) 04/07/06 $ 5,345 $5,345,000
Lebanon County Health Facility
RB (Cornwall Manor Project)
Series 2002 DN (Radian
Insurance, Fleet National Bank
SPBA) (A-1+)
3.27%(b) 04/07/06 5,100 5,100,000
Lebanon County Health Facility
RB (Evangelican Long Church
Retirement Village Project)
Series 2000 DN (Northern
Trust LOC) (A-1+)
3.22%(b) 04/07/06 2,900 2,900,000
Mercer County Industrial
Authority Economic
Development RB (Solar
Atmospheres Western
Pennsylvania Project) Series
2001 DN (A-1)
3.20%(b) 04/07/06 435 435,000
Montgomery County Higher
Education & Health Authority
RB (Pennsylvania Higher
Education & Health Loan
Project) Series 1996A DN
(M&T Bank Corp. LOC) (A-2)
3.25%(b) 04/07/06 2,800 2,800,000
Montgomery County IDRB
(Apple Fresh Foods Ltd.
Project) Series 1996 AMT DN
(Wachovia Bank N.A. LOC)
(VMIG-1)
3.30%(b) 04/07/06 650 650,000
Northampton County IDRB
(Bethlehem Contracting
Project) Series 2001A AMT
DN (M&T Bank Corp. LOC)
(A-1)
3.32%(b) 04/07/06 3,440 3,440,000
Northampton County IDRB
(Trent Family Partnership
Project) Series 2002 AMT DN
(Wachovia Bank N.A. LOC)
3.33%(b) 04/07/06 1,980 1,980,000
Pennsylvania Economic
Development Financing
Authority RB (Homewood
Retirement Project) Series
1992E DN (M&T Bank Corp.
LOC) (VMIG-1)
3.21%(b) 04/07/06 4,575 4,575,000
Pennsylvania Economic
Development Financing
Authority RB (Material
Technology Project) Series
2000D AMT DN (Wachovia
Bank N.A. LOC)
3.28%(b) 04/07/06 700 700,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Pennsylvania Economic
Development Financing
Authority RB (Merrill Lynch
P-Float Trust Receipts) Series
2004-1282 AMT DN (Merrill
Lynch & Co. LOC, Merrill
Lynch Guaranty) (A-1)
3.24%(b)(c) 04/07/06 $ 5,000 $5,000,000
Pennsylvania Economic
Development Financing
Authority RB (Sunoco, Inc.
Project) Series 2004A AMT
DN (Sunoco, Inc. Guaranty)
(A-2, P-2)
3.38%(b) 04/07/06 4,700 4,700,000
Pennsylvania Energy
Development Authority RB
(B&W Ebensburg Project)
Series 1988 DN (Swiss Bank
LOC) (A-1+, VMIG-1)
3.22%(b) 04/07/06 1,000 1,000,000
Pennsylvania Higher Education
Assistance Agency Student
Loan RB Series 1988E AMT
DN (Lloyds Bank LOC, Merrill
Lynch Capital Services SBPA)
(A-1+, VMIG-1)
3.20%(b) 04/07/06 300 300,000
Pennsylvania Higher Educational
Assistance Agency Student
Loan RB Series 1988A AMT
DN (Student Loan Marketing
Assoc. Guaranty,
Westdeutsche Landesbank
Gironzentrale SBPA)
(A-1+, VMIG-1)
3.20%(b) 04/07/06 1,300 1,300,000
Pennsylvania Higher Educational
Assistance Agency Student
Loan RB Series 1994A AMT
DN (Student Loan Marketing
Assoc. Guaranty)
(A-1+, VMIG-1)
3.20%(b) 04/07/06 12,500 12,500,000
Pennsylvania Higher Educational
Assistance Agency Student
Loan RB Series 1997A AMT
DN (Dexia Credit Local SBPA)
(A-1+, VMIG-1)
3.27%(b) 04/07/06 1,900 1,900,000
Pennsylvania Higher Educational
Assistance Agency Student
Loan RB Series 2001A AMT
DN (AMBAC Insurance)
(A-1+, VMIG-1)
3.27%(b) 04/07/06 1,000 1,000,000
Pennsylvania Higher Educational
Assistance Agency Student
Loan RB Series 2001B AMT
DN (Multiple LOCs) (VMIG-1)
3.24%(b) 04/07/06 4,200 4,200,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Pennsylvania Higher Educational
Assistance Agency Student
Loan RB Series 2002A AMT
DN (FSA Insurance)
(A-1+, VMIG-1)
3.27%(b) 04/07/06 $ 6,600 $6,600,000
Pennsylvania Higher Educational
Facilities Authority RB
(Association of Independent
Colleges & Universities
Project) Series 2004M-3 MB
(M&T Bank Corp. LOC) (A-1)
3.20% 11/01/06 4,000 4,000,000
Pennsylvania Higher Educational
Facilities Authority RB
(Lycoming College Project)
Series 2003 MB (Allied Irish
Bank PLC Liquidity Facility)
(MIG-1)
3.20% 11/01/06 5,500 5,500,000
Pennsylvania Higher Educational
Facilities Authority RB (Merrill
Lynch P-Float Trust Receipts)
Series 2004 MT-042 DN
(Lloyds Bank LOC, Merrill
Lynch Capital Services SBPA)
(F-1+)
3.23%(b)(c) 04/07/06 29,600 29,600,000
Pennsylvania Higher Educational
Facilities Authority RB (Merrill
Lynch P-Float Trust Receipts)
Series 2005-2498 DN (Merrill
Lynch Guaranty) (F-1+)
3.27%(b)(c) 04/07/06 4,930 4,930,000
Pennsylvania Higher Educational
Facilities Authority RB (Mount
Aloysuis College Project)
Series 2003 DN (Allied Irish
Bank PLC LOC) (A-1)
3.21%(b) 04/07/06 2,500 2,500,000
Pennsylvania Higher Educational
Facilities Authority RB (Mount
Aloysuis College Project)
Series 2003 MB (M&T Bank
Corp. LOC) (MIG-1)
3.20% 11/01/06 1,300 1,300,000
Pennsylvania Higher Educational
Facilities Authority RB
(Puttable Tax Exempt
Receipts) Series 2006-1271
DN (J.P. Morgan Liquidity
Facility) (A-1+)
3.21%(b)(c) 04/07/06 4,870 4,870,000
Pennsylvania Higher Educational
Facilities Authority RB Series
1998 DN (Banque Nationale
de Paribas LOC) (VMIG-1)
3.25%(b) 04/07/06 2,800 2,800,000
Pennsylvania Housing Finance
Agency RB (Merrill Lynch
P-Float Trust Receipts) Series
2005 MT-163 AMT DN (FSA
Guaranty, Merrill Lynch Capital
Services SBPA) (VMIG-1)
3.24%(b)(c) 04/07/06 3,605 3,605,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Pennsylvania Housing Finance
Agency RB (Putters Trust
Receipts) Series 2005-1213
DN (J.P. Morgan Chase Bank
LOC) (VMIG-1)
3.24%(b)(c) 04/07/06 $ 2,390 $2,390,000
Pennsylvania Housing Finance
Agency Single Family
Mortgage RB (Landesbank
Hessen P-Float Trust
Receipts) Series 2004-82B
AMT DN (Landesbank
Hessen-Thuringen
Girozentrale LOC)
(A-1+, VMIG-1)
3.20%(b) 04/07/06 23,350 23,350,000
Pennsylvania Housing Finance
Agency Single Family
Mortgage RB (Landesbank
Hessen P-Float Trust
Receipts) Series 2004-85B
AMT DN (Landesbank Hessen
SBPA) (A-1+, VMIG-1)
3.19%(b) 04/07/06 1,830 1,830,000
Pennsylvania Housing Finance
Agency Single Family
Mortgage RB (Landesbank
Hessen P-Float Trust
Receipts) Series 2004-85C
AMT DN (Landesbank Hessen
SBPA) (A-1+, VMIG-1)
3.19%(b) 04/07/06 5,645 5,645,000
Pennsylvania Housing Finance
Agency Single Family
Mortgage RB Series 1992-1
AMT DN (Landesbank SBPA)
(VMIG-1)
3.25%(b) 04/07/06 8,000 8,000,000
Pennsylvania Housing Finance
Agency Single Family
Mortgage RB Series 2004-83C
AMT DN (Landesbank
Hessen-Thuringen
Girozentrale LOC)
3.19%(b) 04/07/06 4,900 4,900,000
Pennsylvania Housing Finance
Agency Single Family
Mortgage RB Series 2005-87C
AMT DN (Depfa Bank PLC
SBPA) (A-1+, VMIG-1)
3.19%(b) 04/07/06 8,300 8,300,000
Pennsylvania State GO (Citibank
ROC II R Trust) Series
2006R-506 DN (FSA & MBIA
Insurance, Citibank Liquidity
Facility) (VMIG-1)
3.21%(b)(c) 04/07/06 4,260 4,260,000
Pennsylvania State GO Second
Series 2003 DN (Wachovia
Bank N.A. LOC) (VMIG-1)
3.21%(b)(c) 04/07/06 2,940 2,940,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Pennsylvania State Turnpike
Commission RB (ABN-AMRO
Munitops Trust Certificates)
Series 2004-9 DN (AMBAC
Insurance, ABN AMRO SBPA)
(VMIG-1)
3.21%(b)(c) 04/07/06 $ 2,785 $2,785,000
Philadelphia Airport RB (Merrill
Lynch P-Float Trust Receipts)
Series 2005-3077 AMT DN
(MBIA Insurance, Merrill Lynch
Capital Services SBPA)
3.25%(b)(c) 04/07/06 1,765 1,765,000
Philadelphia Authority for IDRB
(Performing Arts Center
Project) Series 2000 DN (First
Union National Bank of North
Carolina LOC) (VMIG-1)
3.18%(b) 04/07/06 750 750,000
Philadelphia Authority IDRB
(Airport Project) Series
1998P-1 AMT DN (FGIC
Insurance, Bank of America
N.A. SBPA) (A-1+)
3.32%(b)(c) 04/07/06 5,000 5,000,000
Philadelphia Authority IDRB
(Airport Project) Series 2005C
AMT DN (MBIA Insurance, JP
Morgan Chase SBPA)
(A-1+, VMIG-1)
3.26%(b) 04/07/06 9,000 9,000,000
Philadelphia Authority IDRB
(Greater Philadelphia Health
System Project) Series 2003
DN (Commerce Bank N.A.
Liquidity Facility) (VMIG-1)
3.20%(b) 04/07/06 900 900,000
Philadelphia Authority IDRB
(Inglis Housing Project) Series
1997 MB (Morgan Guaranty
Trust LOC) (A-1+)
3.35% 06/26/06 11,000 11,000,000
Philadelphia Authority IDRB
(Settlement Music School
Project) Series 2004 DN
(Allied Irish Bank PLC)
(VMIG-1)
3.17%(b) 04/07/06 2,165 2,165,000
Philadelphia Authority IDRB (The
Franklin Institute Project)
Series 2006 DN (Bank of
America LOC) (VMIG-1)
3.18%(b) 04/07/06 3,400 3,400,000
Philadelphia Authority IDRB
(Universal Community Homes
Project) Series 2003 DN
(Wachovia Bank N.A. LOC)
3.28%(b) 04/07/06 2,480 2,480,000
Philadelphia City Gas Works RB
Series 2006-6 DN (FSA
Insurance) (A-1+)
3.17%(b) 04/07/06 2,000 2,000,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Philadelphia Hospitals & Higher
Education Facilities Authority
RB (Temple University Health)
Series 2005A DN (Wachovia
Bank N.A. LOC)
(A-1+, VMIG-1)
3.20%(b) 04/07/06 $ 5,500 $5,500,000
Philadelphia Redevelopment
Authority RB Series 2005 AMT
DN (FGIC Insurance)
(Deutsche Bank Liquidity
Facility) (F1+)
3.22%(b)(c) 04/07/06 10,310 10,310,000
Philadelphia School District GO
(Merill Lynch R-Float Trust
Receipts) Series 2005
PT-2790 DN (AMBAC
Insurance, Merrill Lynch
SBPA) (A-1)
3.20%(b)(c) 04/07/06 5,290 5,290,000
Philadelphia Water RB
(ABN-AMRO Munitops Trust
Certificates) Series 2005-15
AMT MB (FSA Insurance,
ABN-AMRO Bank N.V. SBPA)
(F-1+)
3.57%(c) 06/30/06 7,000 7,000,000
Pittsburgh Water & Sewer
Systems RB (Merrill Lynch
P-Float Trust Receipts) Series
2005-71 DN (Merrill Lynch
Capital Services SBPA, Merrill
Lynch & Co. Guaranty)
3.25%(b)(c) 04/07/06 5,855 5,855,000
Scranton Lackawanna Health &
Welfare Authority RB
(Wachovia Merlots Trust
Receipts) Series 2002A-18 DN
(Wachovia Bank N.A. LOC)
(VMIG-1)
3.21%(b)(c) 04/07/06 2,235 2,235,000
Southcentral General Authority
RB (Homewood Hanover
Project) Series 2003 DN (M&T
Trust N.A. LOC) (A-1)
3.22%(b) 04/07/06 18,500 18,500,000
Southcentral General Authority
RB (York Cerebral Palsy
Home Project) Series 2000
DN (Fulton Bank LOC) (A-1)
3.27%(b) 04/07/06 3,600 3,600,000
Southcentral General Authority
RB Series 2003 DN (AMBAC
Insurance, RBC Centura Bank
SBPA) (A-1)
3.22%(b) 04/07/06 8,000 8,000,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Southeastern Pennsylvania
Transportation Authority
Municipal Securities Trust
Certificates RB (Bear Stearns
Municipal Trust Certificates)
Series 2001-9016A DN (FGIC
Insurance) (A-1)
3.22%(b)(c) 04/07/06 $ 575 $ 575,000
Southeastern Pennsylvania
Transportation Authority
Municipal Securities Trust
Certificates RB (Bear Stearns
Municipal Trust Certificates)
Series 2001-9022 DN (FGIC
Insurance) (A-1)
3.22%(b)(c) 04/07/06 100 100,000
State Public School Building
Authority RB (Parkland School
District Project) Series 1999D
DN (FGIC Insurance) (A-1)
3.22%(b) 04/07/06 955 955,000
State Public School Building
Authority RB (Philadelphia
School District Project) Series
2003-24 DN (FSA Insurance,
ABN-AMRO Bank N.V. SBPA)
(VMIG-1)
3.21%(b)(c) 04/07/06 2,145 2,145,000
State Public School Building
Authority RB (Wachovia
Merlots Trust Receipts) Series
2004A-1 DN (FSA Insurance,
Wachovia Bank N.A. LOC)
(VMIG-1)
3.21%(b)(c) 04/07/06 3,625 3,625,000
State Public School Building
Authority RB Series 1257 DN
(FSA Insurance, Liquid Facility
Capital Corp.)
3.24%(b)(c) 04/03/06 3,240 3,240,000
Union County Hospital Authority
RB (Evangelical Community
Hospital Project) Series 2001
MB (Fleet National Bank
SPBA, Radian Insurance)
(A-1)
3.40% 02/01/07 8,210 8,210,000
Union County IDRB (Stabler
Cos., Inc. Project) Series 2001
AMT DN (M&T Bank Corp.
LOC) (A-1)
3.32%(b) 04/07/06 7,205 7,205,000
Upper Dauphin IDRB (United
Church Christ Homes Project)
Series 2001 DN (First
Tennessee Bank LOC) (A-1)
3.18%(b) 04/07/06 595 595,000
Upper Merion General Authority
Lease RB Series 2003 DN
(Commerce Bank N.A. LOC)
(VMIG-1)
3.20%(b) 04/07/06 1,135 1,135,000
Upper St. Clair Township GO
Series 2002 MB (FSA
Insurance, ABN-AMRO Bank
N.V. SBPA) (AAA, MIG-1)
3.57%(c) 05/23/06 9,650 9,650,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Venango IDRB (Scrubgrass
Project) Series 2006 MB
(Dexia Group LOC)
(A-1+, P-1)
3.21% 04/06/06 $39,382 $39,382,000
Westmoreland County Authority
RB (Morgan Stanley Trust)
Series 2006-1248 DN (FSA
Insurance, Morgan Stanley
Liquid Facility) (VMIG-1)
3.20%(b)(c) 04/07/06 2,000 2,000,000
Westmoreland County IDRB
(Industrial Development
McCutcheon Enterprise
Project) Series 1999 AMT DN
(National City Bank N.A. LOC)
3.35%(b) 04/07/06 1,820 1,820,000
Westmoreland County IDRB
(Redstone Retirement Project)
Series 2005B DN (Sovereign
Bank LOC, Bank of Nova
Scotia LOC) (A-1+)
3.18%(b) 04/07/06 5,000 5,000,000
York County Hospital Authority
RB (Homewood Retirement
Centers of The United Church
of Christ, Inc. Project) Series
1990 DN (M&T Bank Corp.
LOC) (VMIG-1)
3.21%(b) 04/07/06 4,500 4,500,000
York County IDRB (Allied-Signal,
Inc. Project) Series 1993 DN
(FGIC Insurance) (A-1)
3.45%(b) 04/07/06 1,000 1,000,000
York County IDRB (Interstate
Holdings Co. Project) Series
2003 AMT DN (Wachovia
Bank N.A. Liquidity Facility)
3.33%(b) 04/07/06 1,290 1,290,000
York County IDRB (Raich Family
Limited Partner Project) Series
2000 AMT DN (M&T Bank
Corp. LOC) (A-1)
3.32%(b) 04/07/06 2,285 2,285,000
York County IDRB (York Sheet
Metal, Inc. Project) Series
1998 DN (Wachovia Bank
N.A. LOC)
3.20%(b) 04/07/06 2,450 2,450,000
York General Authority RB
(Strand Capitol Performing
Arts Center Project) Series
2002 DN (M&T Bank Corp.
LOC) (A-2)
3.25%(b) 04/07/06 5,700 5,700,000
===========
565,646,385
-----------
Puerto Rico - 0.9%
Commonwealth of Puerto Rico
Infrastructure Financing
Authority RB (Merlots) Series
2005A-21 MB (Wachovia Bank
LOC) (VMIG-1)
3.32%(c) 11/15/06 4,995 4,995,000
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
VALUE
---------------
TOTAL INVESTMENTS IN SECURITIES -
99.7%
(Cost $570,641,385(a)) $570,641,385
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.3% 1,607,939
------------
NET ASSETS - 100.0% $572,249,324
============
- -------------------
(a) Aggregate cost for federal income tax purposes.
(b) Rates shown are the rates as of March 31, 2006 and maturities shown are
the next interest readjustment date or the date the principal owed can
be recovered through demand.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional investors. As of March
31, 2006, the Portfolio held 23.8% of its net assets, with a current
market value of $136,185,000, in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
VIRGINIA MUNICIPAL MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS - 99.6%
Virginia - 96.3%
Alexandria IDRB (American
Correctional Assoc. Project)
Series 2006 DN (Bank of
America N.A. LOC) (VMIG-1)
3.18%(b) 04/07/06 $4,100 $4,100,000
Alexandria IDRB (Goodwin
House Project) Series 2005
DN (Wachovia Bank N.A.
LOC) (A-1)
3.17%(b) 04/03/06 800 800,000
Alexandria IDRB (YMCA of
Billings Project) Series 1998
DN (M&T Bank Corp. LOC)
(A-1)
3.24%(b) 04/07/06 3,100 3,100,000
Arlington County IDRB
(Woodbury Park Project)
Series 2005A DN (Federal
Home Loan Mortgage Liquidity
Facility) (AAA, VMIG-1)
3.17%(b) 04/07/06 1,550 1,550,000
Chesapeake Bay Bridge &
Tunnel Commonwealth District
RB (Wachovia Merlots Trust
Receipts) Series 2003 DN
(MBIA Insurance, Wachovia
Bank N.A. Liquidity Facility)
(VMIG-1)
3.21%(b)(c) 04/03/06 1,000 1,000,000
Chesterfield County IDRB
(Merrill Lynch P-Float Trust
Receipts) Series 2004
PT-2133 DN (Merrill Lynch &
Co. Guaranty, Merrill Lynch
Capital Services SBPA)
(F-1+, AA-)
3.26%(b)(c) 04/07/06 1,250 1,250,000
Clarke County IDA Hospital
Facilities RB (Winchester
Medical Center, Inc.) Series
2000 DN (Morgan Guaranty
Trust LOC) (A-1+, VMIG-1)
3.20%(b) 04/07/06 1,705 1,705,000
Commonwealth of Virginia
Transportation Board RB
(Citibank Trust Receipts)
Series 2002-1013 DN
(Citibank Liquidity Facility)
(A-1+)
3.21%(b)(c) 04/07/06 395 395,000
Fairfax County Economic
Development Authority RB
(National Industries for Severe
Handicap Project) Series 2002
DN (SunTrust Bank LOC)
(VMIG-1)
3.18%(b) 04/07/06 450 450,000
Fairfax County IDRB (Fairfax
Hospital System Project)
Series 1988C DN (Inova
Health System Liquidity
Facility) (A-1+, VMIG-1)
3.13%(b) 04/07/06 800 800,000
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Virginia (Continued)
Fairfax County IDRB (Inova
Health Systems Project)
Series 2000 DN (Inova Health
System Liquidity Facility)
(A-1+, VMIG-1)
3.12%(b) 04/07/06 $1,550 $1,550,000
Hampton Redevelopment &
Housing Authority RB
(Multi-Family Housing Project)
Series 1998 DN (Federal
National Mortgage Assoc.
Credit Support & LOC)
(VMIG-1)
3.18%(b) 04/07/06 200 200,000
Hampton Roads Regional Jail
Authority Facilities RB
(Citibank Trust Receipts)
Series 2004 ROCS-RR-
II-R-2156 MB (MBIA
Insurance, Citibank Liquidity
Facility) (VMIG-1)
3.43%(c) 06/01/06 665 665,000
Harrisonburg IDRB (Rockingham
Memorial Hospital Project)
Series 2005 DN (Suntrust
Bank LOC) (VMIG-1)
3.16%(b) 04/07/06 1,800 1,800,000
Loudoun County IDRB (Hill
School Project) Series 2002
DN (SunTrust Bank LOC)
(AA-, A-1+)
3.18%(b) 04/07/06 1,100 1,100,000
Loudoun County IDRB (Howard
Hughes Medical Institute
Project) Series 2003D DN
(A-1+, VMIG-1)
3.17%(b) 04/07/06 400 400,000
Loudoun County IDRB (Howard
Hughes Medical Institute
Project) Series 2003F DN
(A-1+, VMIG-1)
3.16%(b) 04/07/06 500 500,000
Newport News IDRB Series
2004 DN (Bank of America
N.A. LOC) (Aa1, VMIG-1)
3.18%(b) 04/07/06 100 100,000
Peninsula Ports Authority Coal
Terminal RB (Dominion
Terminal Project) Series
1987C DN (Citibank N.A.
LOC) (P-1)
3.15%(b) 04/03/06 800 800,000
Prince William County GO
Series 2006 TECP (A-2, P-2)
3.31% 04/06/06 300 300,000
Richmond IDRB (Diocese of
Virginia Church School
Project) Series 2001 DN
(SunTrust Bank LOC)
(VMIG-1)
3.17%(b) 04/03/06 1,000 1,000,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
39
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
VIRGINIA MUNICIPAL MONEY MARKET PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Virginia (Continued)
Tobacco Settlement Financing
Corp. RB (Merrill Lynch
P-Float Trust Receipts) Series
2005 PA-1303 DN (Merrill
Lynch & Co. Guaranty, Merrill
Lynch Capital Services SBPA)
(F-1+)
3.23%(b)(c) 04/07/06 $3,050 $3,050,000
Tobacco Settlement Financing
Corp. RB (Merrill Lynch
P-Float Trust Receipts) Series
2005 PA-1341 DN (Merrill
Lynch Insured, Merrill Lynch
LOC) (F-1+)
3.23%(b)(c) 04/07/06 3,800 3,800,000
University of Virginia RB (ABN
AMRO Munitops Certificates
Trust) Series 2005-48 DN
(ABN AMRO SBPA) (VMIG-1)
3.20%(b)(c) 04/07/06 1,500 1,500,000
Virginia Beach Development
Authority IDRB (Ocean Ranch
Motel Corp. Project) Series
1998 DN (Branch Banking &
Trust Co. LOC) (VMIG-1)
3.20%(b) 04/07/06 800 800,000
Virginia College Building
Authority RB Series 2003-379
DN (J.P. Morgan Chase Bank
LOC) (A-1+)
3.21%(b)(c) 04/07/06 1,985 1,985,000
Virginia Public School Authority
RB (Merrill Lynch P-Floats
Trust Receipts) Series
2005-2746 DN (Merrill Lynch
& Co. Guaranty, Merrill Lynch
Captial Services SBPA) (F-1+)
3.19%(b)(c) 04/07/06 600 600,000
Virginia Resource Authority
Clean Water State Revolving
Fund RB (Merrill Lynch
P-Float Trust Receipts) Series
2000 PA-790 DN (Merrill
Lynch & Co. Guaranty, Merrill
Lynch Captial Services SBPA)
(A-1)
3.19%(b)(c) 04/07/06 505 505,000
Virginia State GO Series 1998
MB (AAA, Aaa)
4.10% 06/01/06 250 250,296
Virginia State Housing Authority
RB (Merrill Lynch P-Floats
Trust Receipts) Series 2005
PA-1310-R DN (MBIA Insured,
Merrill Lynch SBPA) (F-1+)
3.07%(b)(c) 04/07/06 1,600 1,600,000
Virginia State Public School
Authority RB (School
Financing Referendum
Project) Series 2003D MB
(AA+, Aa1)
5.00% 04/07/06 1,300 1,315,876
Virginia State Public School
Authority RB Series 2003 MB
(AA+, Aa1)
4.00% 04/15/06 1,000 1,000,488
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Virginia (Continued)
Virginia State Transportation
Board Transportation Contract
RB (Northern Virginia
Transportation District Project)
Series 1996A MB (AA+, Aa1)
5.12% 05/15/06 $1,345 $1,361,582
Winchester Authority Residential
Care Facility IDRB
(Westminster-Cantenbury
Project) Series 2005B DN
(Branch Banking & Trust LOC)
(VMIG-1)
3.20%(b) 04/07/06 1,000 1,000,000
==========
42,333,242
----------
Puerto Rico - 3.3%
Commonwealth of Puerto Rico
Electric Power Authority RB
(Goldman Sachs Trust
Receipts) Series 2002-1 DN
(MBIA Insurance, Bank of New
York SBPA) (A-1+)
3.19%(b)(c) 04/07/06 800 800,000
Commonwealth of Puerto Rico
Infrastructure Financing
Authority RB (Merlots) Series
2005A-21 MB (Wachovia Bank
LOC) (VMIG-1)
3.32%(c) 11/15/06 250 250,000
Commonwealth of Puerto Rico
Public Improvement GO
Series 2003C DN (MBIA
Insurance, Merrill Lynch
Capital Services SBPA) (A-1)
3.16%(b)(c) 04/07/06 400 400,000
==========
1,450,000
----------
TOTAL INVESTMENTS IN SECURITIES -
99.6%
(Cost $43,783,242(a)) 43,783,242
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.4% 183,152
----------
NET ASSETS - 100.0% $43,966,394
===========
- -------------------
(a) Aggregate cost for federal income tax purposes.
(b) Rates shown are the rates as of March 31, 2006 and maturities shown are
the next interest readjustment date or the date the principal owed can
be recovered through demand.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional investors. As of March
31, 2006, the Portfolio held 40.5% of its net assets, with a current
market value of $17,800,000, in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40
BLACKROCK FUNDS
Key to Investment Abbreviations
AMBAC American Municipal Bond Assurance Corp.
AMT Alternative Minimum Tax
BAN Bond Anticipation Note
CDC CDC Funding Group
COP Certificates of Participation
DN Demand Notes
FGIC Financial Guaranty Insurance Co.
FSA Financial Security Assurance
GIC Guaranteed Investment Contracts
GO General Obligation
IDA Industrial Development Authority
IDRB Industrial Development Revenue Bond
ISD Independent School District
LLC Limited Liability Co.
LOC Letter of Credit
MB Municipal Bond
MBIA Municipal Bond Insurance Association
PCRB Pollution Control Revenue Bond
PLC Public Limited Co.
RB Revenue Bond
ROC Reset Option Certificate
SBPA Stand-by Bond Purchase Agreement
TAN Tax Anticipation Note
TECP Tax-Exempt Commercial Paper
TRAN Tax and Revenue Anticipation Note
XLCA XL Capital Assurance
The ratings provided by the Fitch Investors Service, Moody's Investors Service,
Inc. and Standard & Poor's Ratings Service of the investments in the various
Portfolios are believed to be the most recent ratings available at March 31,
2006.
41
STATEMENTS OF ASSETS AND LIABILITIES
AS OF MARCH 31, 2006 (UNAUDITED)
U.S. TREASURY MUNICIPAL
MONEY MARKET MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ---------------- ---------------
ASSETS
42
Investments at value1 ....................... $ 1,476,534,467 $ 480,658,000 $ 307,283,681
Cash ........................................ 599 467 33,545
Interest receivable ......................... 3,125,849 146,421 1,856,435
Receivable from adviser ..................... 6,322 521 268
Capital shares sold receivable .............. 83,604 - 33,965
Prepaid expenses ............................ 61,922 34,415 35,384
--------------- ------------- -------------
TOTAL ASSETS .............................. 1,479,812,763 480,839,824 309,243,278
--------------- ------------- -------------
LIABILITIES
Investments purchased payable ............... - - -
Payable to custodian ........................ - - -
Capital shares redeemed payable ............. 96,905 - -
Distributions payable ....................... 3,175,857 1,404,343 345,008
Advisory fees payable ....................... 395,895 101,067 72,641
Administration fees payable ................. 102,741 34,272 25,112
Custodian fees payable ...................... 22,443 1,763 6,699
Transfer agent fees payable ................. 136,539 17,288 10,784
Distribution fees payable ................... 11,399 - -
Other accrued expenses payable .............. 466,803 147,553 93,890
--------------- ------------- -------------
TOTAL LIABILITIES ......................... 4,408,582 1,706,286 554,134
--------------- ------------- -------------
NET ASSETS ................................... $ 1,475,404,181 $ 479,133,538 $ 308,689,144
=============== ============= =============
1Cost of Investments ......................... $ 1,476,534,467 $ 480,658,000 $ 307,283,681
=============== ============= =============
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital Paid-in ............................. $ 1,475,539,381 $ 479,137,526 $ 308,668,655
Undistributed net investment income ......... 64,239 46,591 1,193
Acumulated net realized gain (loss) on
investment transactions .................... (199,439) (50,579) 19,296
--------------- ------------- -------------
$ 1,475,404,181 $ 479,133,538 $ 308,689,144
=============== ============= =============
STATEMENTS OF ASSETS AND LIABILITIES
AS OF MARCH 31, 2006 (UNAUDITED)
NEW JERSEY NORTH CAROLINA OHIO PENNSYLVANIA VIRGINA
MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------- --------------- --------------
ASSETS
42
Investments at value1 ....................... $ 162,659,517 $ 63,122,127 $ 170,000,024 $ 570,641,385 $ 43,783,242
Cash ........................................ 28,989 63,017 - - 28,446
Interest receivable ......................... 1,141,224 325,945 1,079,913 3,096,406 263,100
Receivable from adviser ..................... 306 235 337 1,587 139
Capital shares sold receivable .............. - - - - -
Prepaid expenses ............................ 9,984 8,561 8,041 15,557 9,017
------------- ------------ ------------- ------------- ------------
TOTAL ASSETS .............................. 163,840,020 63,519,885 171,088,315 573,754,935 44,083,944
------------- ------------ ------------- ------------- ------------
LIABILITIES
Investments purchased payable ............... 2,669,609 - 1,544,689 - -
Payable to custodian ........................ - - 74,529 18,995 -
Capital shares redeemed payable ............. - - - - -
Distributions payable ....................... 310,985 81,447 305,716 1,142,624 98,201
Advisory fees payable ....................... 36,941 7,042 40,212 148,572 1,353
Administration fees payable ................. 12,130 4,480 12,283 38,966 2,815
Custodian fees payable ...................... 4,338 1,497 4,246 3,305 1,353
Transfer agent fees payable ................. 4,573 1,901 4,572 14,912 705
Distribution fees payable ................... - - - - -
Other accrued expenses payable .............. 54,388 29,633 38,175 138,237 13,123
------------- ------------ ------------- ------------- ------------
TOTAL LIABILITIES ......................... 3,092,964 126,000 2,024,422 1,505,611 117,550
------------- ------------ ------------- ------------- ------------
NET ASSETS ................................... $ 160,747,056 $ 63,393,885 $ 169,063,893 $ 572,249,324 $ 43,966,394
============= ============ ============= ============= ============
1Cost of Investments ......................... $ 162,659,517 $ 63,122,127 $ 170,000,024 $ 570,641,385 $ 43,783,242
============= ============ ============= ============= ============
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital Paid-in ............................. $ 160,749,081 $ 63,396,778 $ 169,091,091 $ 572,283,168 $ 43,965,809
Undistributed net investment income ......... - - - - -
Acumulated net realized gain (loss) on
investment transactions .................... (2,025) (2,893) (27,198) (33,844) 585
------------- ------------ ------------- ------------- ------------
$ 160,747,056 $ 63,393,885 $ 169,063,893 $ 572,249,324 $ 43,966,394
============= ============ ============= ============= ============
BLACKROCK FUNDS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
U.S. TREASURY MUNICIPAL
MONEY MARKET MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------------- ----------------
Institutional Shares:
43
Net Assets ...................................... $564,474,057 $189,078,421 $ 68,392,770
Shares outstanding (unlimited authorization)..... 564,570,979 189,107,177 68,334,073
Net Asset Value ................................. $ 1.00 $ 1.00 $ 1.00
Service Shares:
Net Assets ...................................... $371,599,402 $259,872,671 $107,965,049
Shares outstanding (unlimited authorization)..... 371,643,933 259,925,098 107,993,550
Net Asset Value ................................. $ 1.00 $ 1.00 $ 1.00
Hilliard Lyons Shares:
Net Assets ...................................... $117,082,579 $ - $128,684,103
Shares outstanding (unlimited authorization)..... 117,087,231 - 128,688,733
Net Asset Value ................................. $ 1.00 $ - $ 1.00
Investor A Shares:
Net Assets ...................................... $405,611,335 $ 30,182,446 $ 3,647,222
Shares outstanding (unlimited authorization)..... 405,654,161 30,170,914 3,646,982
Net Asset Value ................................. $ 1.00 $ 1.00 $ 1.00
Investor B Shares:
Net Assets ...................................... $ 14,257,481 $ - $ -
Shares outstanding (unlimited authorization)..... 14,257,678 - -
Net Asset Value ................................. $ 1.00 $ - $ -
Investor C Shares:
Net Assets ...................................... $ 2,379,327 $ - $ -
Shares outstanding (unlimited authorization)..... 2,378,638 - -
Net Asset Value ................................. $ 1.00 $ - $ -
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
NEW JERSEY NORTH CAROLINA OHIO PENNSYLVANIA
MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ---------------- ----------------- -----------------
Institutional Shares:
43
Net Assets ...................................... $85,914,610 $62,431,437 $125,646,625 $461,256,655
Shares outstanding (unlimited authorization)..... 85,909,924 62,434,643 125,661,633 461,271,560
Net Asset Value ................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
Service Shares:
Net Assets ...................................... $59,444,064 $ 646,575 $ 8,207,812 $ 77,178,939
Shares outstanding (unlimited authorization)..... 59,463,491 646,365 8,210,368 77,190,312
Net Asset Value ................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
Hilliard Lyons Shares:
Net Assets ...................................... $ - $ - $ - $ -
Shares outstanding (unlimited authorization)..... - - - -
Net Asset Value ................................. $ - $ - $ - $ -
Investor A Shares:
Net Assets ...................................... $15,388,382 $ 315,873 $ 35,209,456 $ 33,813,730
Shares outstanding (unlimited authorization)..... 15,382,205 315,891 35,219,089 33,816,727
Net Asset Value ................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
Investor B Shares:
Net Assets ...................................... $ - $ - $ - $ -
Shares outstanding (unlimited authorization)..... - - - -
Net Asset Value ................................. $ - $ - $ - $ -
Investor C Shares:
Net Assets ...................................... $ - $ - $ - $ -
Shares outstanding (unlimited authorization)..... - - - -
Net Asset Value ................................. $ - $ - $ - $ -
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
VIRGINA
MUNICIPAL
MONEY MARKET
PORTFOLIO
----------------
Institutional Shares:
43
Net Assets ...................................... $43,966,394
Shares outstanding (unlimited authorization)..... 43,966,000
Net Asset Value ................................. $ 1.00
Service Shares:
Net Assets ...................................... $ -
Shares outstanding (unlimited authorization)..... -
Net Asset Value ................................. $ -
Hilliard Lyons Shares:
Net Assets ...................................... $ -
Shares outstanding (unlimited authorization)..... -
Net Asset Value ................................. $ -
Investor A Shares:
Net Assets ...................................... $ -
Shares outstanding (unlimited authorization)..... -
Net Asset Value ................................. $ -
Investor B Shares:
Net Assets ...................................... $ -
Shares outstanding (unlimited authorization)..... -
Net Asset Value ................................. $ -
Investor C Shares:
Net Assets ...................................... $ -
Shares outstanding (unlimited authorization)..... -
Net Asset Value ................................. $ -
BLACKROCK FUNDS
BLACKROCK FUNDS
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2006 (UNAUDITED)
U.S. TREASURY MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
---------------- --------------- ---------------
Investment income:
Interest ....................................... $ 32,754,531 $ 9,029,437 $ 4,559,852
------------ ----------- -----------
Expenses:
Investment advisory fee ........................ 3,260,068 968,849 675,445
Administration fee ............................. 539,649 175,935 122,563
Administration fee - class specific ............ 542,002 155,048 107,450
Custodian fee .................................. 62,202 27,312 20,345
Transfer agent fee ............................. 202,550 26,654 16,605
Transfer agent fee - class specific ............ 188,904 32,211 20,449
Shareholder servicing fees - class specific..... 1,199,968 325,746 297,474
Distribution fees - class specific ............. 352,218 15,577 67,781
Legal and audit fees ........................... 113,109 40,226 31,884
Printing fee ................................... 219,682 39,810 31,306
Registration fees and expenses ................. 39,167 26,894 31,553
Trustees' fees ................................. 26,506 8,581 4,380
Other .......................................... 32,774 11,248 9,852
------------ ----------- -----------
Total expenses ................................ 6,778,799 1,854,091 1,437,087
Less investment advisory fees waived.......... (1,396,218) (463,359) (328,437)
Less administration fees waived .............. - - -
Less administration fees waived -
class specific .............................. (256,555) (96,116) (37,170)
Less custodian fee waived .................... (4,173) (2,014) (1,398)
Less transfer agent fee waived ............... (25,459) (2,809) (2,156)
Less transfer agent fee waived - class
specific .................................... (2,832) (531) (236)
Less transfer agent fee reimbursed -
class specific .............................. (11,968) (992) (511)
Less distribution fees waived - class
specific .................................... (271,245) (15,577) (67,781)
Less shareholder servicing fees
waived - class specific ..................... (26,889) - (163,963)
------------ ----------- -----------
Net expenses .................................. 4,783,460 1,272,693 835,435
------------ ----------- -----------
Net investment income ........................... 27,971,071 7,756,744 3,724,417
------------ ----------- -----------
Net realized gain (loss) on investments ......... (2,539) - 16,596
------------ ----------- -----------
Net increase in net assets resulting
from operations ................................ $ 27,968,532 $ 7,756,744 $ 3,741,013
============ =========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44
BLACKROCK FUNDS
NEW JERSEY NORTH CAROLINA OHIO PENNSYLVANIA VIRGINIA
MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------- --------------- -------------- -------------- -------------
$ 2,379,315 $ 989,901 $ 2,303,748 $ 8,080,535 $ 477,753
----------- ---------- ----------- ----------- ---------
360,340 147,898 332,406 1,193,808 71,309
65,399 26,775 60,040 214,944 12,811
57,413 23,095 50,936 190,078 10,443
10,199 5,469 9,896 22,627 3,763
7,043 4,307 6,049 25,605 2,249
11,001 4,544 9,250 36,978 1,901
94,106 1,433 48,024 125,201 -
8,155 165 14,024 26,840 -
20,951 15,782 19,587 53,742 10,763
15,038 4,840 11,692 54,758 1,736
9,672 9,377 8,285 12,058 10,282
2,791 1,111 2,277 9,534 396
4,584 2,628 2,485 13,337 1,809
----------- ---------- ----------- ----------- ---------
666,692 247,424 574,951 1,979,510 127,462
(191,261) (122,547) (171,228) (512,155) (66,639)
- - - - (5,119)
(39,266) (22,816) (39,794) (159,239) (10,443)
(732) (383) (680) (1,973) (279)
(1,209) (477) (982) (3,914) (209)
(236) (177) (177) (1,298) (59)
(582) (447) (642) (3,020) (175)
(8,155) (165) (14,024) (26,840) -
- - - - -
----------- ---------- ----------- ----------- ---------
425,251 100,412 347,424 1,271,071 44,539
----------- ---------- ----------- ----------- ---------
1,954,064 889,489 1,956,324 6,809,464 433,214
----------- ---------- ----------- ----------- ---------
- - - - 1,168
----------- ---------- ----------- ----------- ---------
$ 1,954,064 $ 889,489 $ 1,956,324 $ 6,809,464 $ 434,382
=========== ========== =========== =========== =========
45
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
MONEY MARKET PORTFOLIO
---------------------------------------
FOR THE
SIX MONTHS FOR THE
ENDED YEAR
3/31/06 ENDED
(UNAUDITED) 9/30/05
------------------ -------------------
Increase (decrease) in net assets:
Operations:
Net investment income ........................... $ 27,971,071 $ 31,021,152
Net realized gain (loss) on investments ......... (2,539) (12,296)
--------------- ---------------
Net increase in net assets resulting from
operations ..................................... 27,968,532 31,008,856
--------------- ---------------
Distributions to shareholders from:
Net investment income:
Institutional Class ............................. (10,699,211) (11,776,659)
Service Class ................................... (7,227,392) (7,897,918)
Hilliard Lyons Class ............................ (2,160,702) (2,356,333)
Investor A Class ................................ (7,552,604) (8,655,993)
Investor B Class ................................ (272,077) (262,118)
Investor C Class ................................ (59,085) (72,131)
--------------- ---------------
Total distributions from net investment
income ......................................... (27,971,071) (31,021,152)
--------------- ---------------
Capital share transactions ........................ (84,330,872) 103,371,897
--------------- ---------------
Total increase (decrease) in net assets ......... (84,333,411) 103,359,601
Net assets:
Beginning of period ............................. 1,559,737,592 1,456,377,991
--------------- ---------------
End of period ................................... $ 1,475,404,181 $ 1,559,737,592
=============== ===============
End of period undistributed net investment
income ......................................... $ 64,239 $ 64,239
U.S.TREASURY MUNICIPAL
MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
----------------------------------- ----------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED YEAR
3/31/06 ENDED 3/31/06 ENDED
(UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05
---------------- ---------------- ---------------- ---------------
Increase (decrease) in net assets:
Operations:
Net investment income ........................... $ 7,756,744 $ 8,916,517 $ 3,724,417 $ 5,253,149
Net realized gain (loss) on investments ......... - (13,138) 16,596 11,076
------------- ------------- ------------- -------------
Net increase in net assets resulting from
operations ..................................... 7,756,744 8,903,379 3,741,013 5,264,225
------------- ------------- ------------- -------------
Distributions to shareholders from:
Net investment income:
Institutional Class ............................. (3,230,360) (3,930,861) (809,349) (1,830,876)
Service Class ................................... (3,991,955) (4,276,660) (1,194,503) (1,193,977)
Hilliard Lyons Class ............................ - - (1,669,157) (2,152,442)
Investor A Class ................................ (534,429) (708,996) (50,215) (75,854)
Investor B Class ................................ - - - -
Investor C Class ................................ - - - -
------------- ------------- ------------- -------------
Total distributions from net investment
income ......................................... (7,756,744) (8,916,517) (3,723,224) (5,253,149)
------------- ------------- ------------- -------------
Capital share transactions ........................ 25,051,235 16,889,278 8,380,141 (31,069,940)
------------- ------------- ------------- -------------
Total increase (decrease) in net assets ......... 25,051,235 16,876,140 8,397,930 (31,058,864)
Net assets:
Beginning of period ............................. 454,082,303 437,206,163 300,291,214 331,350,078
------------- ------------- ------------- -------------
End of period ................................... $ 479,133,538 $ 454,082,303 $ 308,689,144 $ 300,291,214
============= ============= ============= =============
End of period undistributed net investment
income ......................................... $ 46,591 $ 46,591 $ 1,193 $ -
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
46
BLACKROCK FUNDS
NEW JERSEY MUNICIPAL NORTH CAROLINA MUNICIPAL OHIO MUNICIPAL
MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
- ----------------------------------- --------------------------------- ----------------------------------
FOR THE FOR THE FOR THE
SIX MONTHS FOR THE SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED YEAR ENDED YEAR
3/31/06 ENDED 3/31/06 ENDED 3/31/06 ENDED
(UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05
- ---------------- ---------------- --------------- --------------- ---------------- ---------------
$ 1,954,064 $ 2,406,767 $ 889,489 $ 1,127,667 $ 1,956,324 $ 2,586,302
- (2,025) - 6,898 - -
------------- ------------- ------------ ------------ ------------- -------------
1,954,064 2,404,742 889,489 1,134,565 1,956,324 2,586,302
------------- ------------- ------------ ------------ ------------- -------------
(1,096,273) (1,340,022) (876,157) (1,115,968) (1,491,159) (2,074,310)
(674,045) (875,861) (9,435) (6,820) (125,249) (147,686)
- - - - - -
(183,746) (190,884) (3,897) (4,879) (339,916) (364,306)
- - - - - -
- - - - - -
------------- ------------- ------------ ------------ ------------- -------------
(1,954,064) (2,406,767) (889,489) (1,127,667) (1,956,324) (2,586,302)
------------- ------------- ------------ ------------ ------------- -------------
11,597,312 (4,098,458) 131,703 4,608,534 49,249,690 (49,696,441)
------------- ------------- ------------ ------------ ------------- -------------
11,597,312 (4,100,483) 131,703 4,615,432 49,249,690 (49,696,441)
149,149,744 153,250,227 63,262,182 58,646,750 119,814,203 169,510,644
------------- ------------- ------------ ------------ ------------- -------------
$ 160,747,056 $ 149,149,744 $ 63,393,885 $ 63,262,182 $ 169,063,893 $ 119,814,203
============= ============= ============ ============ ============= =============
$ - $ - $ - $ - $ - $ -
PENNSYLVANIA MUNICIPAL VIRGINIA MUNICIPAL
MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
- ----------------------------------- ---------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED YEAR
3/31/06 ENDED 3/31/06 ENDED
(UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05
- ---------------- ---------------- --------------- ---------------
$ 6,809,464 $ 8,806,806 $ 433,214 $ 365,649
- (33,844) 1,168 (506)
------------- ------------- ------------ ------------
6,809,464 8,772,962 434,382 365,143
------------- ------------- ------------ ------------
(5,608,869) (7,394,998) (433,214) (365,617)
(590,308) (518,169) - (32)
- - - -
(610,287) (893,639) - -
- - - -
- - - -
------------- ------------- ------------ ------------
(6,809,464) (8,806,806) (433,214) (365,649)
------------- ------------- ------------ ------------
35,574,509 48,065,937 19,795,986 6,312,686
------------- ------------- ------------ ------------
35,574,509 48,032,093 19,797,154 6,312,180
536,674,815 488,642,722 24,169,240 17,857,060
------------- ------------- ------------ ------------
$ 572,249,324 $ 536,674,815 $ 43,966,394 $ 24,169,240
============= ============= ============ ============
$ - $ - $ - $ -
47
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET
ASSET DISTRIBUTIONS ASSET
VALUE NET FROM NET VALUE
BEGINNING INVESTMENT INVESTMENT END OF
OF PERIOD INCOME INCOME PERIOD
=========== ============ =============== ===========
------------
Money Market Portfolio
------------
Institutional Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0196 $ (0.0196) $ 1.00
9/30/05 1.00 0.0233 ( 0.0233) 1.00
9/30/04 1.00 0.0083 ( 0.0083) 1.00
9/30/0311 1.00 0.0103 ( 0.0103) 1.00
9/30/0211 1.00 0.0186 ( 0.0186) 1.00
9/30/0111 1.00 0.0496 ( 0.0496) 1.00
Service Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0181 $ (0.0181) $ 1.00
9/30/05 1.00 0.0203 ( 0.0203) 1.00
9/30/04 1.00 0.0054 ( 0.0054) 1.00
9/30/0311 1.00 0.0073 ( 0.0073) 1.00
9/30/0211 1.00 0.0156 ( 0.0156) 1.00
9/30/0111 1.00 0.0466 ( 0.0466) 1.00
Hilliard Lyons Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0180 $ (0.0180) $ 1.00
9/30/05 1.00 0.0198 ( 0.0198) 1.00
9/30/04 1.00 0.0043 ( 0.0043) 1.00
9/30/0311 1.00 0.0056 ( 0.0056) 1.00
9/30/0211 1.00 0.0139 ( 0.0139) 1.00
9/30/0111 1.00 0.0450 ( 0.0450) 1.00
Investor A Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0178 $ (0.0178) $ 1.00
9/30/05 1.00 0.0199 ( 0.0199) 1.00
9/30/04 1.00 0.0044 ( 0.0044) 1.00
9/30/0311 1.00 0.0056 ( 0.0056) 1.00
9/30/0211 1.00 0.0139 ( 0.0139) 1.00
9/30/0111 1.00 0.0449 ( 0.0449) 1.00
Investor B Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0155 $ (0.0155) $ 1.00
9/30/05 1.00 0.0151 ( 0.0151) 1.00
9/30/04 1.00 0.0015 ( 0.0015) 1.00
9/30/0311 1.00 0.0014 ( 0.0014) 1.00
9/30/0211 1.00 0.0079 ( 0.0079) 1.00
9/30/0111 1.00 0.0389 ( 0.0389) 1.00
Investor C Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0155 $ (0.0155) $ 1.00
9/30/05 1.00 0.0151 ( 0.0151) 1.00
9/30/04 1.00 0.0014 ( 0.0014) 1.00
9/30/0311 1.00 0.0014 ( 0.0014) 1.00
9/30/0211 1.00 0.0078 ( 0.0078) 1.00
9/30/0111 1.00 0.0389 ( 0.0389) 1.00
-------------------
U.S. Treasury Money Market Portfolio
-------------------
Institutional Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0188 $ (0.0188) $ 1.00
9/30/05 1.00 0.0221 ( 0.0221) 1.00
9/30/04 1.00 0.0072 ( 0.0072) 1.00
9/30/0311 1.00 0.0091 ( 0.0091) 1.00
9/30/0211 1.00 0.0166 ( 0.0166) 1.00
9/30/0111 1.00 0.0464 ( 0.0464) 1.00
Service Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0174 $ (0.0174) $ 1.00
9/30/05 1.00 0.0190 ( 0.0190) 1.00
9/30/04 1.00 0.0042 ( 0.0042) 1.00
9/30/0311 1.00 0.0061 ( 0.0061) 1.00
9/30/0211 1.00 0.0136 ( 0.0136) 1.00
9/30/0111 1.00 0.0435 ( 0.0435) 1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME (LOSS)
ASSETS RATIO OF EXPENSES TO AVERAGE RATIO OF NET TO AVERAGE
END OF NET EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS)
================ ============ ================= ===================== =================== =========================
1.98%10 $ 564,474 0.42%2 0.68%2 3.93%2 3.67%2
2.36 574,473 0.42 0.71 2.30 2.01
0.84 593,380 0.42 0.63 0.78 0.57
1.04 2,006,202 0.42 0.62 1.04 0.84
1.87 2,462,579 0.42 0.61 1.86 1.67
5.08 2,507,649 0.42 0.60 4.96 4.79
1.83%10 $ 371,599 0.72%2 0.93%2 3.64%2 3.43%2
2.05 411,831 0.72 0.96 2.02 1.78
0.54 374,441 0.71 0.93 0.54 0.32
0.74 431,854 0.72 0.94 0.74 0.53
1.57 567,574 0.72 0.91 1.60 1.41
4.77 853,306 0.72 0.90 4.66 4.49
1.81%10 $ 117,083 0.74%2 1.03%2 3.61%2 3.32%2
2.00 116,066 0.77 1.07 1.98 1.68
0.43 116,254 0.82 1.13 0.42 0.11
0.57 148,277 0.89 1.10 0.56 0.34
1.40 144,271 0.89 1.08 1.40 1.21
4.59 163,056 0.89 1.07 4.49 4.31
1.80%10 $ 405,611 0.78%2 1.07%2 3.57%2 3.28%2
2.01 433,609 0.76 1.06 2.04 1.74
0.44 362,495 0.82 1.13 0.43 0.12
0.57 451,676 0.89 1.11 0.57 0.36
1.39 539,268 0.89 1.08 1.38 1.19
4.59 531,518 0.89 1.07 4.43 4.25
1.56%10 $ 14,257 1.24%2 1.79%2 3.09%2 2.54%2
1.52 18,716 1.24 1.74 1.66 1.16
0.15 8,924 1.10 1.79 0.14 (0.55)
0.14 13,490 1.34 1.86 0.15 (0.37)
0.79 21,864 1.49 1.837 0.77 0.427
3.96 15,853 1.49 1.827 3.64 3.317
1.56%10 $ 2,379 1.24%2 1.78%2 3.04%2 2.50%2
1.52 5,043 1.24 1.73 1.79 1.30
0.15 884 1.10 1.79 0.14 (0.56)
0.14 2,197 1.35 1.86 0.15 (0.35)
0.79 7,873 1.49 1.837 0.79 0.457
3.96 9,429 1.49 1.827 3.68 3.357
1.90%10 $ 189,078 0.41%2 0.70%2 3.80%2 3.51%2
2.23 164,905 0.41 0.73 2.18 1.86
0.72 176,136 0.41 0.70 0.68 0.39
0.92 379,240 0.41 0.70 0.93 0.64
1.68 526,344 0.41 0.68 1.62 1.35
4.74 380,200 0.41 0.68 4.61 4.34
1.75%10 $ 259,873 0.70%2 0.95%2 3.48%2 3.23%2
1.93 257,187 0.71 0.98 1.99 1.72
0.42 219,788 0.71 0.99 0.41 0.13
0.62 250,314 0.71 1.00 0.61 0.32
1.37 265,841 0.71 0.98 1.39 1.11
4.43 398,130 0.71 0.98 4.39 4.12
49
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET
ASSET DISTRIBUTIONS ASSET
VALUE NET FROM NET VALUE
BEGINNING INVESTMENT INVESTMENT END OF
OF PERIOD INCOME INCOME PERIOD
=========== ============ =============== ===========
--------------------------
U.S. Treasury Money Market Portfolio (Continued)
--------------------------
Investor A Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0171 $ (0.0171) $ 1.00
9/30/05 1.00 0.0186 ( 0.0186) 1.00
9/30/04 1.00 0.0031 ( 0.0031) 1.00
9/30/0311 1.00 0.0044 ( 0.0044) 1.00
9/30/0211 1.00 0.0119 ( 0.0119) 1.00
9/30/0111 1.00 0.0417 ( 0.0417) 1.00
Investor C Class
1/22/023,11 through 2/6/02 $ 1.00 $ 0.0003 $ (0.0003) $ 1.00
------------------
Municipal Money Market Portfolio
------------------
Institutional Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0130 $ (0.0130) $ 1.00
9/30/05 1.00 0.0172 ( 0.0172) 1.00
9/30/04 1.00 0.0073 ( 0.0073) 1.00
9/30/0311 1.00 0.0092 ( 0.0092) 1.00
9/30/0211 1.00 0.0142 ( 0.0142) 1.00
9/30/0111 1.00 0.0315 ( 0.0315) 1.00
Service Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0116 $ (0.0116) $ 1.00
9/30/05 1.00 0.0143 ( 0.0143) 1.00
9/30/04 1.00 0.0043 ( 0.0043) 1.00
9/30/0311 1.00 0.0062 ( 0.0062) 1.00
9/30/0211 1.00 0.0112 ( 0.0112) 1.00
9/30/0111 1.00 0.0285 ( 0.0285) 1.00
Hilliard Lyons Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0127 $ (0.0127) $ 1.00
9/30/05 1.00 0.0163 ( 0.0163) 1.00
9/30/04 1.00 0.0056 ( 0.0056) 1.00
9/30/0311 1.00 0.0070 ( 0.0070) 1.00
9/30/0211 1.00 0.0120 ( 0.0120) 1.00
9/30/0111 1.00 0.0292 ( 0.0292) 1.00
Investor A Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0114 $ (0.0114) $ 1.00
9/30/05 1.00 0.0136 ( 0.0136) 1.00
9/30/04 1.00 0.0042 ( 0.0042) 1.00
9/30/0311 1.00 0.0048 ( 0.0048) 1.00
9/30/0211 1.00 0.0095 ( 0.0095) 1.00
9/30/0111 1.00 0.0268 ( 0.0268) 1.00
------------------------
New Jersey Municipal Money Market Portfolio
------------------------
Institutional Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0129 $ (0.0129) $ 1.00
9/30/05 1.00 0.0175 ( 0.0175) 1.00
9/30/04 1.00 0.0074 ( 0.0074) 1.00
9/30/0311 1.00 0.0089 ( 0.0089) 1.00
9/30/0211 1.00 0.0134 ( 0.0134) 1.00
9/30/0111 1.00 0.0305 ( 0.0305) 1.00
Service Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0114 $ (0.0114) $ 1.00
9/30/05 1.00 0.0145 ( 0.0145) 1.00
9/30/04 1.00 0.0044 ( 0.0044) 1.00
9/30/0311 1.00 0.0059 ( 0.0059) 1.00
9/30/0211 1.00 0.0104 ( 0.0104) 1.00
9/30/0111 1.00 0.0275 ( 0.0275) 1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME (LOSS)
ASSETS RATIO OF EXPENSES TO AVERAGE RATIO OF NET TO AVERAGE
END OF NET EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS)
================ =========== ================= ===================== =================== =========================
1.73%10 $ 30,182 0.75%2 1.07%2 3.43%2 3.11%2
1.88 31,990 0.75 1.07 1.83 1.51
0.31 41,283 0.82 1.19 0.31 (0.06)
0.44 49,906 0.88 1.17 0.47 0.17
1.20 68,299 0.88 1.16 1.15 0.87
4.26 35,178 0.88 1.15 4.17 3.90
0.03%10 $ -6 1.48%2 1.76%2 0.72%2 0.44%2
1.31%10 $ 68,393 0.42%2 0.72%2 2.60%2 2.30%2
1.74 75,789 0.42 0.74 1.69 1.37
0.73 126,534 0.42 0.71 0.69 0.41
0.92 437,613 0.42 0.71 0.92 0.64
1.43 428,743 0.42 0.70 1.41 1.13
3.19 491,052 0.42 0.69 3.11 2.83
1.16%10 $ 107,965 0.71%2 0.96%2 2.33%2 2.08%2
1.44 93,844 0.72 0.99 1.45 1.18
0.43 70,344 0.72 1.00 0.42 0.14
0.62 88,769 0.72 1.01 0.63 0.34
1.12 104,474 0.72 1.00 1.13 0.85
2.88 138,402 0.72 0.99 2.82 2.54
1.28%10 $ 128,684 0.49%2 1.06%2 2.55%2 1.98%2
1.64 126,397 0.52 1.09 1.62 1.05
0.57 127,151 0.59 1.13 0.56 0.02
0.70 143,305 0.64 0.93 0.70 0.41
1.20 147,755 0.64 0.92 1.17 0.89
2.96 101,506 0.64 0.94 2.92 2.63
1.15%10 $ 3,647 0.75%2 1.07%2 2.29%2 1.97%2
1.37 4,262 0.79 1.11 1.29 0.97
0.43 7,322 0.72 1.19 0.42 (0.05)
0.49 9,019 0.85 1.18 0.47 0.15
0.95 6,587 0.89 1.17 0.96 0.68
2.71 9,013 0.89 1.16 2.65 2.37
1.29%10 $ 85,915 0.39%2 0.70%2 2.58%2 2.27%2
1.76 74,329 0.39 0.74 1.73 1.38
0.74 80,530 0.39 0.72 0.74 0.40
0.89 77,267 0.39 0.72 0.89 0.56
1.35 86,573 0.39 0.71 1.34 1.02
3.10 97,007 0.39 0.70 3.03 2.72
1.15%10 $ 59,444 0.68%2 0.96%2 2.29%2 2.01%2
1.46 59,794 0.69 0.99 1.45 1.15
0.44 59,899 0.69 1.01 0.44 0.12
0.59 64,313 0.69 1.02 0.59 0.26
1.04 65,074 0.69 1.01 1.04 0.71
2.79 60,296 0.69 1.00 2.75 2.44
51
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET
ASSET DISTRIBUTIONS ASSET
VALUE NET FROM NET VALUE
BEGINNING INVESTMENT INVESTMENT END OF
OF PERIOD INCOME INCOME PERIOD
=========== ============ =============== ===========
------------------------------
New Jersey Municipal Money Market Portfolio (Continued)
------------------------------
Investor A Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0112 $ (0.0112) $ 1.00
9/30/05 1.00 0.0138 ( 0.0138) 1.00
9/30/04 1.00 0.0044 ( 0.0044) 1.00
9/30/0311 1.00 0.0045 ( 0.0045) 1.00
9/30/0211 1.00 0.0087 ( 0.0087) 1.00
9/30/0111 1.00 0.0258 ( 0.0258) 1.00
--------------------------
North Carolina Municipal Money Market
Portfolio
--------------------------
Institutional Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0135 $ (0.0135) $ 1.00
9/30/05 1.00 0.0185 ( 0.0185) 1.00
9/30/04 1.00 0.0084 ( 0.0084) 1.00
9/30/0311 1.00 0.0097 ( 0.0097) 1.00
9/30/0211 1.00 0.0134 ( 0.0134) 1.00
9/30/0111 1.00 0.0313 ( 0.0313) 1.00
Service Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0120 $ (0.0120) $ 1.00
9/30/05 1.00 0.0155 ( 0.0155) 1.00
9/30/04 1.00 0.0054 ( 0.0054) 1.00
9/30/0311 1.00 0.0067 ( 0.0067) 1.00
9/30/0211 1.00 0.0104 ( 0.0104) 1.00
9/30/0111 1.00 0.0283 ( 0.0283) 1.00
Investor A Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0117 $ (0.0117) $ 1.00
9/30/05 1.00 0.0151 ( 0.0151) 1.00
9/30/04 1.00 0.0054 ( 0.0054) 1.00
9/30/0311 1.00 0.0053 ( 0.0053) 1.00
9/30/0211 1.00 0.0082 ( 0.0082) 1.00
9/30/0111 1.00 0.0266 ( 0.0266) 1.00
Investor B Class
10/1/0111 through 12/14/01 $ 1.00 $ 0.0012 $ (0.0012) $ 1.00
9/30/0111 1.00 0.0203 ( 0.0203) 1.00
---------------------
Ohio Municipal Money Market Portfolio
---------------------
Institutional Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0135 $ (0.0135) $ 1.00
9/30/05 1.00 0.0182 ( 0.0182) 1.00
9/30/04 1.00 0.0087 ( 0.0087) 1.00
9/30/0311 1.00 0.0105 ( 0.0105) 1.00
9/30/0211 1.00 0.0154 ( 0.0154) 1.00
9/30/0111 1.00 0.0331 ( 0.0331) 1.00
Service Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0121 $ (0.0121) $ 1.00
9/30/05 1.00 0.0152 ( 0.0152) 1.00
9/30/04 1.00 0.0057 ( 0.0057) 1.00
9/30/0311 1.00 0.0075 ( 0.0075) 1.00
9/30/0211 1.00 0.0124 ( 0.0124) 1.00
9/30/0111 1.00 0.0301 ( 0.0301) 1.00
Investor A Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0119 $ (0.0119) $ 1.00
9/30/05 1.00 0.0150 ( 0.0150) 1.00
9/30/04 1.00 0.0046 ( 0.0046) 1.00
9/30/0311 1.00 0.0058 ( 0.0058) 1.00
9/30/0211 1.00 0.0107 ( 0.0107) 1.00
9/30/0111 1.00 0.0284 ( 0.0284) 1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
52
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME (LOSS)
ASSETS RATIO OF EXPENSES TO AVERAGE RATIO OF NET TO AVERAGE
END OF NET EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS)
================ =========== ================= ===================== =================== =========================
1.13%10 $ 15,388 0.71%2 1.06%2 2.25%2 1.90%2
1.39 15,027 0.75 1.11 1.40 1.04
0.44 12,821 0.69 1.21 0.43 (0.09)
0.45 17,783 0.82 1.19 0.44 0.07
0.87 14,244 0.86 1.18 0.87 0.54
2.61 16,417 0.86 1.17 2.40 2.09
1.36%10 $ 62,431 0.30%2 0.75%2 2.71%2 2.26%2
1.87 56,017 0.30 0.80 1.84 1.34
0.85 58,168 0.30 0.74 0.84 0.40
0.97 162,465 0.30 0.74 0.96 0.53
1.35 156,476 0.30 0.72 1.32 0.90
3.18 115,139 0.30 0.70 3.10 2.70
1.21%10 $ 647 0.60%2 1.02%2 2.31%2 1.89%2
1.56 6,923 0.60 1.07 1.69 1.22
0.54 160 0.60 1.03 0.55 0.11
0.67 227 0.60 1.04 0.63 0.20
1.05 205 0.60 1.02 1.14 0.71
2.87 519 0.60 1.00 2.80 2.40
1.18%10 $ 316 0.66%2 1.13%2 2.35%2 1.88%2
1.52 321 0.64 1.15 1.51 1.00
0.55 319 0.60 1.23 0.54 (0.09)
0.53 338 0.74 1.21 0.53 0.06
0.88 375 0.77 1.19 0.88 0.46
2.70 415 0.77 1.17 2.52 2.12
0.12%10 $ -4 1.37%2 1.79%2 0.60%2 0.18%2
2.05 6 1.37 1.77 2.02 1.62
1.36%10 $ 125,647 0.39%2 0.70%2 2.73%2 2.42%2
1.83 88,697 0.39 0.73 1.79 1.45
0.87 122,030 0.39 0.72 0.87 0.54
1.06 94,936 0.39 0.72 1.05 0.71
1.55 104,426 0.39 0.72 1.52 1.19
3.36 77,620 0.39 0.71 3.31 2.98
1.21%10 $ 8,208 0.68%2 0.95%2 2.42%2 2.15%2
1.53 10,224 0.69 0.98 1.50 1.21
0.57 15,311 0.69 1.01 0.56 0.24
0.75 13,061 0.69 1.03 0.75 0.41
1.25 11,511 0.69 1.02 1.19 0.87
3.05 12,667 0.69 1.01 2.95 2.63
1.20%10 $ 35,209 0.70%2 1.03%2 2.42%2 2.09%2
1.51 20,893 0.71 1.06 1.47 1.12
0.46 32,171 0.80 1.20 0.46 0.06
0.58 26,154 0.86 1.19 0.59 0.25
1.07 30,851 0.86 1.18 1.09 0.77
2.88 44,050 0.86 1.18 2.84 2.51
53
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONCLUDED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET
ASSET DISTRIBUTIONS ASSET
VALUE NET FROM NET VALUE
BEGINNING INVESTMENT INVESTMENT END OF
OF PERIOD INCOME INCOME PERIOD
=========== ============ =============== ===========
-------------------------
Pennsylvania Municipal Money Market Portfolio
-------------------------
Institutional Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0131 $ (0.0131) $ 1.00
9/30/05 1.00 0.0178 ( 0.0178) 1.00
9/30/04 1.00 0.0073 ( 0.0073) 1.00
9/30/0311 1.00 0.0093 ( 0.0093) 1.00
9/30/0211 1.00 0.0131 ( 0.0131) 1.00
9/30/0111 1.00 0.0299 ( 0.0299) 1.00
Service Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0116 $ (0.0116) $ 1.00
9/30/05 1.00 0.0148 ( 0.0148) 1.00
9/30/04 1.00 0.0043 ( 0.0043) 1.00
9/30/0311 1.00 0.0063 ( 0.0063) 1.00
9/30/0211 1.00 0.0101 ( 0.0101) 1.00
9/30/0111 1.00 0.0269 ( 0.0269) 1.00
Investor A Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0115 $ (0.0115) $ 1.00
9/30/05 1.00 0.0155 ( 0.0155) 1.00
9/30/04 1.00 0.0045 ( 0.0045) 1.00
9/30/0311 1.00 0.0049 ( 0.0049) 1.00
9/30/0211 1.00 0.0084 ( 0.0084) 1.00
9/30/0111 1.00 0.0252 ( 0.0252) 1.00
Investor Class B
12/12/011,11 through 4/9/02 $ 1.00 $ 0.0003 $ (0.0003) $ 1.00
----------------------
Virginia Municipal Money Market Portfolio
----------------------
Institutional Class
10/1/05 through 3/31/0612 $ 1.00 $ 0.0134 $ (0.0134) $ 1.00
9/30/05 1.00 0.0181 ( 0.0181) 1.00
9/30/04 1.00 0.0082 ( 0.0082) 1.00
9/30/0311 1.00 0.0094 ( 0.0094) 1.00
9/30/0211 1.00 0.0144 ( 0.0144) 1.00
9/30/0111 1.00 0.0323 ( 0.0323) 1.00
Service Class
05/13/05 through 06/27/059 $ 1.00 $ 0.0023 $ (0.0023) $ 1.00
10/01/03 through 10/07/038,11 1.00 0.0001 ( 0.0001) 1.00
9/30/0311 1.00 0.0084 ( 0.0084) 1.00
9/30/0211 1.00 0.0124 ( 0.0124) 1.00
9/30/0111 1.00 0.0293 ( 0.0293) 1.00
Investor A Class
10/1/01 through 3/12/0211 $ 1.00 $ 0.0051 $ (0.0051) $ 1.00
9/30/0111 1.00 0.0276 ( 0.0276) 1.00
1 Commencement of operations of share class.
2 Annualized.
3 Reissuance of shares.
4 There were no Investor B shares outstanding as of September 30, 2002.
5 There were no Investor A shares outstanding as of September 30, 2002.
6 There were no Investor C shares outstanding as of September 30, 2002.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME (LOSS)
ASSETS RATIO OF EXPENSES TO AVERAGE RATIO OF NET TO AVERAGE
END OF NET EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS)
================ ============ ================= ===================== =================== =========================
1.32%10 $ 461,257 0.42%2 0.69%2 2.63%2 2.36%2
1.79 430,376 0.42 0.72 1.78 1.48
0.73 426,130 0.42 0.71 0.73 0.44
0.93 416,412 0.42 0.71 0.93 0.64
1.31 466,039 0.42 0.70 1.30 1.02
3.03 459,885 0.42 0.69 2.97 2.70
1.17%10 $ 77,179 0.71%2 0.93%2 2.38%2 2.16%2
1.49 34,219 0.72 0.97 1.47 1.22
0.43 32,866 0.72 0.99 0.43 0.15
0.63 44,164 0.72 1.01 0.64 0.35
1.01 54,574 0.72 1.01 1.01 0.73
2.72 75,431 0.72 0.99 2.73 2.46
1.16%10 $ 33,814 0.74%2 1.04%2 2.27%2 1.97%2
1.56 72,079 0.65 0.96 1.64 1.33
0.45 29,647 0.70 1.17 0.44 (0.03)
0.49 33,726 0.87 1.18 0.51 0.19
0.84 68,204 0.88 1.16 0.83 0.55
2.54 75,332 0.89 1.16 2.46 2.19
0.05%10 $ -4 1.49%2 1.76%2 0.14%2 (0.13)%2
1.34%10 $ 43,966 0.28%2 0.80%2 2.73%2 2.21%2
1.83 24,169 0.30 0.92 1.84 1.22
0.82 17,857 0.30 0.89 0.83 0.23
0.95 21,963 0.30 0.75 0.93 0.48
1.45 19,808 0.30 0.75 1.50 1.06
3.28 53,823 0.30 0.73 3.26 2.83
0.23%10 $ -9 0.60%2 1.18%2 1.96%2 1.38%2
0.0110 -8 0.402 1.062 0.712 0.042
0.85 41,011 0.40 1.05 0.85 0.19
1.25 44,143 0.40 1.00 1.19 0.60
2.97 611 0.60 1.03 2.94 2.51
0.51%10 $ -5 0.77%2 1.20%2 1.21%2 0.77%2
2.80 3,008 0.77 1.20 2.72 2.28
7 Certain prior year amounts were reclassified to conform to current year
presentation.
8 There were no Service shares outstanding as of September 30, 2004.
9 There were no Service shares outstanding as of September 30, 2005.
10 Not Annualized.
11 Audited by other auditors.
12 Unaudited.
55
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(A) Organization
BlackRock FundsSM (the "Fund") was organized on December 22, 1988, as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940 (the "1940 Act"), as amended, as an open-end management investment
company. The Fund currently has 51 registered portfolios, eight 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:
BlackRock, Institutional, Service, Hilliard Lyons, Investor A, Investor B and
Investor C. 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, mostly
due to differences in distribution and service fees. As of March 31, 2006, no
BlackRock Shares were outstanding.
Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts with its vendors and others that provide for general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund.
However, based on experience, the Fund considers the risk of loss from such
claims to be remote.
(B) Fund Reorganization
On January 31, 2005, BlackRock, Inc., the parent of BlackRock Advisors,
Inc. ("BlackRock"), acquired SSRM Holdings, Inc., the parent of State Street
Research & Management Company ("SSRM"), the investment adviser to the former
State Street Research mutual funds.
On January 31, 2005, the Money Market Portfolio acquired all of the assets
and certain stated liabilities of the State Street Research Money Market Fund.
The reorganization was pursuant to an Agreement and Plan of Reorganization,
which was approved by the State Street Research Money Market shareholders on
January 25, 2005. Under the Agreement and Plan of Reorganization, 8,688,440
Class B and 154,741,254 Class E shares of the State Street Research Money
Market Fund were exchanged for 8,688,440 and 154,741,254 Investor A Class
shares of the BlackRock Money Market Portfolio, respectively; 15,158,957 Class
B(1) shares of the State Street Research Money Market Fund were exchanged for
15,158,957 Investor B Class shares of the BlackRock Money Market Portfolio;
4,761,926 Class C shares of the State Street Research Money Market Fund were
exchanged for 4,761,926 Investor C Class shares of the BlackRock Money Market
Portfolio and 26,966,565 Class S shares of the State Street Research Money
Market Fund were exchanged for 26,966,565 Institutional Class shares of the
BlackRock Money Market Portfolio. The assets of the State Street Research Money
Market Fund, which consisted of securities and related receivables less
liabilities, were converted on a tax-free basis. Upon the reorganization of
such funds on January 31, 2005, the value of the BlackRock Money Market
Portfolio's net assets (including $210,334,574 in net assets of the State
Street Research Money Market Fund) was $1,605,776,413 before the open of
business.
(C) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Portfolios in the preparation of their financial statements.
Security Valuation - Portfolio securities are valued under the amortized
cost method which approximates current market value in accordance with Rule
2a-7 of the 1940 Act. Under this method, securities are valued at cost when
purchased and thereafter, a constant proportionate amortization of any discount
or premium is recorded until the maturity of the security. Regular review and
monitoring of the valuation is performed in an attempt to avoid dilution or
other unfair results to shareholders. The Fund seeks to maintain the net asset
value per share of each Portfolio at $1.00, although there is no assurance that
it will be able to do so on a continuing basis.
Dividends to Shareholders - Dividends from net investment income are
declared daily and paid monthly. Net realized capital gains, if any, are
distributed at least annually.
Investment 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, generally first in first out, for
both financial reporting and federal income tax purposes. Interest income is
recorded on the accrual basis.
Repurchase Agreements - Money market instruments may be purchased from
banks and non-bank dealers subject to the seller's agreement to repurchase them
at an agreed upon date and price. Collateral for repurchase agreements
57
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
may have longer maturities than the maximum permissible remaining maturity of
portfolio investments. The seller is required on a daily basis to maintain the
value of the securities subject to the agreement at not less than the
repurchase price. The agreements are conditioned upon the collateral being
deposited under the Federal Reserve book-entry system or held in a separate
account by the Portfolio's custodian or an authorized securities depository.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("generally accepted accounting principles") requires the use of management
estimates. Actual results could differ from these estimates and such
differences could be material.
Other - Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses are prorated to
the Portfolios on the basis of relative net assets. Class-specific expenses are
borne by that class. Differences in net expense ratios between classes of a
Portfolio are due to class-specific expenses and waivers. Income, other
expenses and realized and unrealized gains and losses of a Portfolio are
allocated to the respective class on the basis of the relative net assets each
day.
(D) Agreements and Other Transactions with Affiliates and Related Parties
Pursuant to an Investment Advisory Agreement, BlackRock serves as
investment adviser to the Portfolios. BlackRock Institutional Management
Corporation ("BIMC"), 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
payable monthly, at the following annual rates, based on each Portfolio's
average daily net assets: 0.45% of the first $1 billion, 0.40% of the next $1
billion, 0.375% of the next $1 billion and 0.35% of net assets in excess of $3
billion.
BlackRock pays BIMC a fee for its sub-advisory services.
PFPC Trust Company, an indirect subsidiary of The PNC Financial Services
Group, Inc., serves as custodian for each of the Fund's Portfolios. PFPC serves
as transfer and dividend disbursing agent. The custodian and the transfer agent
have agreed to voluntarily waive a portion of their fees during the period.
Shares of each class of each Portfolio of the Fund bear their pro rata
portion of all operating expenses paid by a Portfolio, except transfer agency
fees, certain administrative/servicing fees and amounts payable under the
Fund's Amended and Restated Distribution and Service Plan.
Prior to February 1, 2006, the Institutional, Service, Hilliard Lyons,
Investor A, Investor B and Investor C share classes each bore a transfer agent
fee at an annual rate not to exceed .018% of the annual average net assets of
such respective classes plus per account fees and disbursements. Certain other
transfer agency fees were allocated on relative net assets of each class of
each portfolio.
Effective February 1, 2006, each class of each Portfolio bears the costs
of transfer agent fees associated with such respective classes. Transfer agency
fees borne by each class of each Portfolio are comprised of those fees charged
by the Transfer Agent for issuing and redeeming shares of each class of each
Portfolio, all shareholder communications including shareholder reports,
dividend and distribution notices, proxy materials for its meetings to
shareholders and maintenance of shareholder accounts; networking and
recordkeeping/shareholder services fees; and reimbursements to BlackRock for
costs related to the investor service center.
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. Prior to February 1, 2006, the
fee was paid at the following annual rates: 0.085% of the first $500 million,
0.075% of the next $500 million and 0.065% of assets in excess of $1 billion.
In addition, each of the share classes was charged an administration fee based
on the following percentage of average daily net assets of each respective
class: 0.095% of the first $500 million, 0.085% of the next $500 million and
0.075% of assets in excess of $1 billion. Effective February 1, 2006, the
administration fee is payable at the following annual rates: 0.075% of the
first $500 million, 0.065% of the next $500 million and 0.055% of assets in
excess of $1 billion. In addition, each of the share classes is charged an
administration fee based on the following percentage of average daily net
assets of each respective class: 0.025% of the first $500 million, 0.015% of
the next $500 million and 0.005% of assets in excess of $1 billion. In
addition, PFPC and BlackRock may have, at their discretion, voluntarily waived
all or any portion of their administration fees for any Portfolio or share
class.
58
BLACKROCK FUNDS
For the period ended March 31, 2006, the following shows the various types
of class-specific expenses borne directly by each class of each Portfolio and
any associated waivers of those expenses.
SHARE CLASSES
ADMINISTRATION FEES -------------------------------------------------------------------------------
HILLIARD
INSTITUTIONAL SERVICE LYONS INVESTOR A INVESTOR B INVESTOR C TOTAL
--------------- ------------ ----------- ------------ ------------ ------------ ------------
Money Market ..................... $ 195,134 $ 141,366 $ 43,181 $ 154,137 $ 6,655 $ 1,529 $ 542,002
U.S. Treasury .................... 60,344 83,273 - 11,431 - - 155,048
Municipal ........................ 22,382 36,134 47,319 1,615 - - 107,450
New Jersey Municipal ............. 30,175 21,302 - 5,936 - - 57,413
North Carolina Municipal ......... 22,662 314 - 119 - - 23,095
Ohio Municipal ................... 38,185 3,762 - 8,989 - - 50,936
Pennsylvania Municipal ........... 153,018 16,320 - 20,740 - - 190,078
Virginia Municipal ............... 10,443 - - - - - 10,443
SHARE CLASSES
ADMINISTRATION FEES WAIVED ----------------------------------------------------------------------------
HILLIARD
INSTITUTIONAL SERVICE LYONS INVESTOR A INVESTOR B INVESTOR C TOTAL
--------------- ----------- --------- ------------ ------------ ------------ --------------
Money Market ..................... $ 195,134 $ 58,920 $ - $- $ 1,910 $ 591 $ 256,555
U.S. Treasury .................... 60,345 35,771 - - - - 96,116
Municipal ........................ 22,383 14,697 90 - - - 37,170
New Jersey Municipal ............. 30,175 9,091 - - - - 39,266
North Carolina Municipal ......... 22,662 154 - - - - 22,816
Ohio Municipal ................... 38,186 1,608 - - - - 39,794
Pennsylvania Municipal ........... 153,018 6,221 - - - - 159,239
Virginia Municipal ............... 10,443 - - - - - 10,443*
* Fund also had a fund level administration waiver of $5,119.
SHARE CLASSES
TRANSFER AGENT FEES ----------------------------------------------------------------------------
HILLIARD
INSTITUTIONAL SERVICE LYONS INVESTOR A INVESTOR B INVESTOR C TOTAL
--------------- ----------- --------- ------------ ------------ ------------ ------------
Money Market ..................... $ 39,707 $ 33,360 $ 7,972 $ 96,152 $ 9,883 $ 1,830 $ 188,904
U.S. Treasury .................... 11,576 15,984 - 4,651 - - 32,211
Municipal ........................ 4,506 7,587 7,974 382 - - 20,449
New Jersey Municipal ............. 5,849 4,044 - 1,108 - - 11,001
North Carolina Municipal ......... 4,375 92 - 77 - - 4,544
Ohio Municipal ................... 7,123 677 - 1,450 - - 9,250
Pennsylvania Municipal ........... 29,932 2,845 - 4,201 - - 36,978
Virginia Municipal ............... 1,901 - - - - - 1,901
SHARE CLASSES
TRANSFER AGENT FEES WAIVED ---------------------------------------------
INSTITUTIONAL INVESTOR B INVESTOR C TOTAL
--------------- ------------ ------------ ----------
Money Market ..................... $ 1,652 $ 1,003 $ 177 $ 2,832
U.S. Treasury .................... 531 - - 531
Municipal ........................ 236 - - 236
New Jersey Municipal ............. 236 - - 236
North Carolina Municipal ......... 177 - - 177
Ohio Municipal ................... 177 - - 177
Pennsylvania Municipal ........... 1,298 - - 1,298
Virginia Municipal ............... 59 - - 59
59
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
SHARE CLASSES
TRANSFER AGENT FEES REIMBURSED ---------------------------------------------
INSTITUTIONAL INVESTOR B INVESTOR C TOTAL
--------------- ------------ ------------ -----------
Money Market ..................... $ 4,784 $ 6,070 $ 1,114 $ 11,968
U.S. Treasury .................... 992 - - 992
Municipal ........................ 511 - - 511
New Jersey Municipal ............. 582 - - 582
North Carolina Municipal ......... 447 - - 447
Ohio Municipal ................... 642 - - 642
Pennsylvania Municipal ........... 3,020 - - 3,020
Virginia Municipal ............... 175 - - 175
SHARE CLASSES
SHAREHOLDER SERVICE FEES ----------------------------------------------------------------
HILLIARD
SERVICE LYONS INVESTOR A INVESTOR B INVESTOR C TOTAL
------------ ------------ ------------ ------------ ------------ --------------
Money Market ..................... $ 495,753 $ 149,538 $ 528,131 $ 21,651 $ 4,895 $ 1,199,968
U.S. Treasury .................... 286,795 - 38,951 - - 325,746
Municipal ........................ 128,022 163,962 5,490 - - 297,474
New Jersey Municipal ............. 73,718 - 20,388 - - 94,106
North Carolina Municipal ......... 1,019 - 414 - - 1,433
Ohio Municipal ................... 12,964 - 35,060 - - 48,024
Pennsylvania Municipal ........... 61,950 - 63,251 - - 125,201
SHARE CLASSES
SHAREHOLDER SERVICE FEES WAIVED ----------------------------------------------------
HILLIARD
SERVICE LYONS INVESTOR B INVESTOR C TOTAL
--------- ---------- ------------ ------------ -----------
Money Market ................. $- $ - $ 22,026 $ 4,863 $ 26,889
Municipal .................... - 163,963 - - 163,963
SHARE CLASSES
DISTRIBUTION FEES -------------------------------------------------------------
HILLIARD LYONS INVESTOR A INVESTOR B INVESTOR C TOTAL
---------------- ------------ ------------ ------------ ------------
Money Market ..................... $ 59,815 $ 211,430 $ 66,233 $ 14,740 $ 352,218
U.S. Treasury .................... - 15,577 - - 15,577
Municipal ........................ 65,585 2,196 - - 67,781
New Jersey Municipal ............. - 8,155 - - 8,155
North Carolina Municipal ......... - 165 - - 165
Ohio Municipal ................... - 14,024 - - 14,024
Pennsylvania Municipal ........... - 26,840 - - 26,840
SHARE CLASSES
DISTRIBUTION FEES WAIVED -------------------------------
HILLIARD LYONS INVESTOR A TOTAL
---------------- ------------ ------------
Money Market ..................... $ 59,815 $ 211,430 $ 271,245
U.S. Treasury .................... - 15,577 15,577
Municipal ........................ 65,585 2,196 67,781
New Jersey Municipal ............. - 8,155 8,155
North Carolina Municipal ......... - 165 165
Ohio Municipal ................... - 14,024 14,024
Pennsylvania Municipal ........... - 26,840 26,840
60
BLACKROCK FUNDS
In the interest of limiting the expenses of the Portfolios, BlackRock and
the Fund have entered into a series of annual expense limitation agreements.
The agreements set a limit on certain of the operating expenses of each
Portfolio for the next year and require BlackRock to waive or reimburse fees or
expenses if these operating expenses exceed that limit. These expense limits
apply to the aggregate expenses incurred on a share class (excluding: interest,
taxes, brokerage commissions and other extraordinary expenses).
At March 31, 2006, the receivable from BlackRock in each portfolio was as
follows.
Money Market ..................... $6,322
U.S. Treasury .................... 521
Municipal ........................ 268
New Jersey Municipal ............. 306
North Carolina Municipal ......... 235
Ohio Municipal ................... 337
Pennsylvania Municipal ........... 1,587
Virginia Municipal ............... 139
BlackRock has contractually agreed to waive or reimburse fees or expenses
until February 1, 2007, in order to limit expenses as follows. This agreement
is reviewed annually by the Fund's Board.
SHARE CLASSES
--------------------------------------------------------------------------------
INSTITUTIONAL SERVICE HILLIARD LYONS INVESTOR A INVESTOR B INVESTOR C
--------------- --------- ---------------- ------------ ------------ -----------
Money Market ................. 0.42% 0.72% 0.91% 0.89% 1.49% 1.49%
U.S. Treasury ................ 0.41% 0.71% NA 0.88% NA NA
Municipal .................... 0.42% 0.72% 0.66% 0.89% NA NA
New Jersey Municipal ......... 0.39% 0.69% NA 0.96% NA NA
North Carolina Municipal ..... 0.30% 0.60% NA 0.87% NA NA
Ohio Municipal ............... 0.39% 0.69% NA 0.96% NA NA
Pennsylvania Municipal ....... 0.42% 0.72% NA 0.99% NA NA
Virginia Municipal ........... 0.30% NA NA NA NA NA
If in the following two years the operating expenses of a share class that
previously received a waiver or reimbursement from BlackRock are less than the
expense limit for that share class, the share class is required to repay
BlackRock up to the amount of fees waived or expenses reimbursed under the
agreement if: (1) the Portfolio of which the share class is a part 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 at the previous quarterly meeting. Under terms of the
Agreement and Plan of Reorganization of the State Street Research Money Market
Fund, fees waived by BlackRock Advisors through February 1, 2007, on the
Institutional, Investor A, Investor B, and Investor C share classes of the
Money Market Portfolio are not subject to future recoupment by BlackRock.
At March 31, 2006, the amounts subject to possible future reimbursement
under the expense limitation agreement are as follows:
TOTAL WAIVERS
EXPIRING EXPIRING EXPIRING SUBJECT TO
JANUARY 31, 2007 JANUARY 31, 2008 JANUARY 31, 2009 REIMBURSEMENT
------------------ ------------------ ------------------ --------------
U.S. Treasury .................... $ 1,317,236 $ 1,194,807 $ 124,929 $ 2,636,972
Municipal ........................ 1,151,500 630,099 50,210 1,831,809
New Jersey Municipal ............. 479,468 456,571 49,167 985,206
North Carolina Municipal ......... 261,156 304,943 40,918 607,017
Ohio Municipal ................... 431,627 413,974 45,060 890,661
Pennsylvania Municipal ........... 1,334,315 1,359,479 147,694 2,841,488
Virginia Municipal ............... 101,140 142,461 23,854 267,455
61
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
The following waivers previously incurred on the portfolios which were
subject to recoupment by BlackRock expired on January 31, 2006, as follows:
Money Market ..................... $6,569,912
U.S. Treasury .................... 2,107,024
Municipal ........................ 1,946,590
New Jersey Municipal ............. 553,395
North Carolina Municipal ......... 645,013
Ohio Municipal ................... 492,327
Pennsylvania Municipal ........... 1,505,526
Virginia Municipal ............... 233,309
Pursuant to the Fund's Amended and Restated Distribution and Service Plan
(the "Plan"), the Fund may pay BlackRock Distributors, Inc. (the "Distributor")
and/or BlackRock or any other affiliate of The PNC Financial Services Group,
Inc. fees for distribution and sales support services. Currently, only Hilliard
Lyons Shares, Investor A Shares, Investor B Shares and Investor C Shares bear
the expense of distribution fees under the Plan. In addition, the Fund may pay
brokers, dealers, financial institutions and industry professionals (including
The PNC Financial Services Group, Inc. and its affiliates) ("service
organizations") fees for the provision of personal services to shareholders.
BlackRock may receive some of the service fees paid by the Fund in return for
providing services to shareholders. Currently, only Hilliard Lyons Shares,
Investor A Shares, Investor B Shares, Investor C Shares and Service Shares bear
the expense of service fees under the Plan.
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.
Class-Specific Fee Arrangement
Portfolio Share Classes
Institutional Service Hilliard Lyons
Contractual Actual Contractual Actual Contractual Actual
Fees Fees (4) Fees (1) Fees (4) Fees (2) Fees (4)
Money Market None None 0.25% 0.25% 0.35% 0.25%
U.S. Treasury None None 0.25% 0.25% N/A N/A
Municipal None None 0.25% 0.25% 0.35% None
New Jersey Municipal None None 0.25% 0.25% N/A N/A
North Carolina Municipal None None 0.25% 0.25% N/A N/A
Ohio Municipal None None 0.25% 0.25% N/A N/A
Pennsylvania Municipal None None 0.25% 0.25% N/A N/A
Virginia Municipal None None 0.25% N/A N/A N/A
Portfolio Share Classes
Investor A Investor B Investor C
Contractual Actual Contractual Actual Contractual Actual
Fees (2) Fees (4) Fees (3) Fees (4) Fees (3) Fees (4)
Money Market 0.35% 0.25% 1.00% 0.75% 1.00% 0.75%
U.S. Treasury 0.35% 0.25% 1.00% N/A 1.00% N/A
Municipal 0.35% 0.25% 1.00% N/A 1.00% N/A
New Jersey Municipal 0.35% 0.25% 1.00% N/A 1.00% N/A
North Carolina Municipal 0.35% 0.25% 1.00% N/A 1.00% N/A
Ohio Municipal 0.35% 0.25% 1.00% N/A 1.00% N/A
Pennsylvania Municipal 0.35% 0.25% 1.00% N/A 1.00% N/A
Virginia Municipal 0.35% N/A 1.00% N/A 1.00% N/A
(1) - the maximum annual contractual fees are comprised of a 0.25% service fee.
(2) - the maximum annual contractual fees are comprised of a 0.10% distribution
fee and a 0.25% service fee.
(3) - the maximum annual contractual fees are comprised of a 0.75% distribution
fee and a 0.25% service fee.
(4) - the actual fees are for the period ending March 31, 2006.
62
BLACKROCK FUNDS
BlackRock maintains a call center which is responsible for providing
certain shareholder services to the BlackRock Funds, such as responding to
shareholder inquiries and processing transactions based upon instructions from
shareholders with respect to the subscription and redemption of Fund shares.
During the six months ended March 31, 2006, the following amounts have been
accrued by each Portfolio to reimburse BlackRock for costs incurred running the
call center, which are a component of the Transfer Agent fees in the
accompanying Statement of Operations.
HILLIARD
INSTITUTIONAL SERVICE LYONS INVESTOR A INVESTOR B INVESTOR C TOTAL
--------------- ----------- --------- ------------ ------------ ------------ -----------
Money Market ..................... $ 20,353 $ 15,654 $ 4,757 $ 25,343 $ 1,648 $ 332 $ 68,087
U.S. Treasury .................... 5,642 9,209 - 1,240 - - 16,091
Municipal ........................ 2,415 3,825 4,352 214 - - 10,806
New Jersey Municipal ............. 2,531 1,986 - 519 - - 5,036
North Carolina Municipal ......... 1,780 58 - 38 - - 1,876
Ohio Municipal ................... 3,142 322 - 709 - - 4,173
Pennsylvania Municipal ........... 13,132 1,099 - 2,312 - - 16,543
Virginia Municipal ............... 756 - - - - - 756
As of March 31, 2006, affiliated payables were as follows:
PNC BANK
PFPC(1) BLACKROCK(2) AFFILIATES(3)
------------ -------------- --------------
Money Market ..................... $ 129,069 $ 514,103 $ 210,334
U.S. Treasury .................... 23,337 134,644 56,462
Municipal ........................ 16,469 96,847 24,918
New Jersey Municipal ............. 9,243 47,708 15,956
North Carolina Municipal ......... 4,787 10,738 207
Ohio Municipal ................... 84,909 50,837 9,933
Pennsylvania Municipal ........... 48,505 181,111 23,862
Virginia Municipal ............... 3,346 3,307 -
(1) - payables to PFPC are for Accounting, Administration, Custody and Transfer
Agent services provided as of March 31, 2006.
(2) - payables to BlackRock are for Advisory and Administration services
provided as of March 31, 2006, and for amounts due BlackRock for costs
incurred related to the BlackRock Funds Call Center.
(3) - payables to PNC Bank affiliates are for distribution and sales support
services as described under the Plan. The total payable on behalf of the
Fund, as of March 31, 2006, was $5,632,572, a portion of which is paid to
service organizations, including other PNC Bank affiliates.
In April of 2005, BlackRock determined that the Municipal Money Market
Portfolio had purchased a security, the interest on which was subject to
Federal Alternative Minimum Tax ("AMT") (an "AMT Security"), in violation of
the Portfolio's investment policy that limits investments in AMT securities to
20% of Portfolio net assets. Once the issue was identified, the amount of AMT
securities was decreased and the Portfolio did not incur a gain or loss. Due
to the violation of investment policy, the Adviser reimbursed the Portfolio
$3,098, which represents the additional tax liability that would be incurred by
shareholders if all of the shareholders of the Portfolio were subject to the
AMT.
(E) Capital Shares
Because the Portfolios have each sold and redeemed shares only at a
constant net asset value of $1.00 per share, the number of shares represented
by such sales, acquisitions, reinvestments, and redemptions is the same as the
dollar amounts shown on the following pages for such transactions.
63
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
Transactions in capital shares for each period were as follows:
MONEY MARKET
----------------------------------------
FOR THE FOR THE YEAR
SIX MONTHS ENDED ENDED
3/31/06 9/30/05
------------------ -------------------
Shares issued from the acquisition:(1)
Institutional Class .................... $ - $ 26,966,565
Investor A Class ....................... - 163,429,694
Investor B Class ....................... - 15,158,957
Investor C Class ....................... - 4,761,926
Shares sold:
Institutional Class .................... 894,493,444 1,471,011,786
Service Class .......................... 777,792,833 1,456,169,230
Hilliard Lyons Class ................... 46,111,141 114,338,508
Investor A Class ....................... 169,529,748 364,963,335
Investor B Class ....................... 6,043,396 9,040,751
Investor C Class ....................... 2,754,851 4,097,308
Shares issued in reinvestment of dividends:
Institutional Class .................... 386,451 411,878
Service Class .......................... 1,032,174 1,285,575
Hilliard Lyons Class ................... 2,160,363 2,448,010
Investor A Class ....................... 7,201,896 8,575,542
Investor B Class ....................... 245,447 235,555
Investor C Class ....................... 47,828 64,255
Shares redeemed:
Institutional Class .................... (904,877,942) (1,517,293,240)
Service Class .......................... (819,056,192) (1,420,060,947)
Hilliard Lyons Class ................... (47,254,586) (116,973,705)
Investor A Class ....................... (204,727,133) (465,850,554)
Investor B Class ....................... (10,747,079) (14,643,659)
Investor C Class ....................... (5,467,512) (4,764,873)
-------------- ----------------
Net increase (decrease) ................... $ (84,330,872) $ 103,371,897
============== ================
(1) See Note (B).
U.S. TREASURY
----------------------------------------
FOR THE FOR THE YEAR
SIX MONTHS ENDED ENDED
3/31/06 9/30/05
------------------ -------------------
Shares sold:
Institutional Class .................... $ 150,348,348 $ 581,006,132
Service Class .......................... 491,413,848 1,246,791,596
Investor A Class ....................... 20,733,298 31,284,000
Shares issued in reinvestment of dividends:
Institutional Class .................... 1,625 536
Service Class .......................... 175,947 210,607
Investor A Class ....................... 534,429 736,089
Shares redeemed:
Institutional Class .................... (126,174,603) (592,231,695)
Service Class .......................... (488,906,366) (1,209,596,697)
Investor A Class ....................... (23,075,291) (41,311,290)
-------------- ----------------
Net increase .............................. $ 25,051,235 $ 16,889,278
============== ================
64
BLACKROCK FUNDS
MUNICIPAL
---------------------------------------
FOR THE FOR THE YEAR
SIX MONTHS ENDED ENDED
3/31/06 9/30/05
------------------ ------------------
Shares sold:
Institutional Class .................... $ 89,765,736 $ 285,681,384
Service Class .......................... 213,202,330 228,128,150
Hilliard Lyons Class ................... 62,997,742 136,113,807
Investor A Class ....................... 10,750,757 32,576,400
Shares issued in reinvestment of dividends:
Institutional Class .................... 5,418 8,419
Service Class .......................... 215,275 211,590
Hilliard Lyons Class ................... 1,669,166 2,251,776
Investor A Class ....................... 50,215 79,599
Shares redeemed:
Institutional Class .................... (97,170,493) (336,438,973)
Service Class .......................... (199,303,162) (204,841,772)
Hilliard Lyons Class ................... (62,387,093) (139,124,201)
Investor A Class ....................... (11,415,750) (35,716,119)
-------------- --------------
Net increase (decrease) ................... $ 8,380,141 $ (31,069,940)
============== ==============
NEW JERSEY MUNICIPAL
-------------------------------------
FOR THE FOR THE YEAR
SIX MONTHS ENDED ENDED
3/31/06 9/30/05
------------------ ----------------
Shares sold:
Institutional Class .................... $ 140,912,646 $ 227,139,327
Service Class .......................... 9,240,848 60,335,438
Investor A Class ....................... 22,203,648 32,747,181
Shares issued in reinvestment of dividends:
Institutional Class .................... 26,476 106,670
Service Class .......................... 44,459 52,789
Investor A Class ....................... 183,393 197,999
Shares redeemed:
Institutional Class .................... (129,353,524) (233,444,754)
Service Class .......................... (9,635,310) (60,492,949)
Investor A Class ....................... (22,025,324) (30,740,159)
-------------- --------------
Net increase (decrease) ................... $ 11,597,312 $ (4,098,458)
============== ==============
65
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
NORTH CAROLINA MUNICIPAL
-------------------------------------
FOR THE FOR THE YEAR
SIX MONTHS ENDED ENDED
3/31/06 9/30/05
------------------ ----------------
Shares sold:
Institutional Class .................... $ 142,290,600 $ 209,741,015
Service Class .......................... 686,550 7,584,781
Investor A Class ....................... 42,000 42,000
Shares issued in reinvestment of dividends:
Institutional Class .................... 458,289 613,029
Service Class .......................... 2,312 -
Investor A Class ....................... 3,897 5,082
Shares redeemed:
Institutional Class .................... (136,334,771) (212,511,399)
Service Class .......................... (6,965,699) (821,749)
Investor A Class ....................... (51,475) (44,225)
-------------- --------------
Net increase .............................. $ 131,703 $ 4,608,534
============== ==============
OHIO MUNICIPAL
---------------------------------------
FOR THE FOR THE YEAR
SIX MONTHS ENDED ENDED
3/31/06 9/30/05
------------------ ------------------
Shares sold:
Institutional Class .................... $ 190,725,614 $ 416,216,719
Service Class .......................... 53,011,504 102,881,674
Investor A Class ....................... 55,266,457 74,822,659
Shares issued in reinvestment of dividends:
Institutional Class .................... 71,029 193,067
Service Class .......................... 20,264 34,216
Investor A Class ....................... 339,916 384,943
Shares redeemed:
Institutional Class .................... (153,847,199) (449,742,164)
Service Class .......................... (55,048,178) (108,002,227)
Investor A Class ....................... (41,289,717) (86,485,328)
-------------- --------------
Net increase (decrease) ................... $ 49,249,690 $ (49,696,441)
============== ==============
66
BLACKROCK FUNDS
PENNSYLVANIA MUNICIPAL
-------------------------------------
FOR THE FOR THE YEAR
SIX MONTHS ENDED ENDED
3/31/06 9/30/05
------------------ ----------------
Shares sold:
Institutional Class .................... $ 363,763,169 $ 691,010,747
Service Class .......................... 115,811,734 82,803,397
Investor A Class ....................... 67,135,435 150,289,355
Shares issued in reinvestment of dividends:
Institutional Class .................... 151,540 113,667
Service Class .......................... 299,635 183,050
Investor A Class ....................... 610,104 914,451
Shares redeemed:
Institutional Class .................... (333,034,721) (686,849,356)
Service Class .......................... (73,151,628) (81,630,970)
Investor A Class ....................... (106,010,759) (108,768,404)
-------------- --------------
Net increase .............................. $ 35,574,509 $ 48,065,937
============== ==============
VIRGINIA MUNICIPAL
------------------------------------
FOR THE FOR THE YEAR
SIX MONTHS ENDED ENDED
3/31/06 9/30/05
------------------ ---------------
Shares sold:
Institutional Class .................... $ 85,474,909 $ 94,946,827
Service Class .......................... - 14,980
Shares issued in reinvestment of dividends:
Institutional Class .................... 33,329 36,052
Shares redeemed:
Institutional Class .................... (65,712,252) (88,670,193)
Service Class .......................... - (14,980)
------------- -------------
Net increase .............................. $ 19,795,986 $ 6,312,686
============= =============
On March 31, 2006, four shareholders held approximately 78% of the
outstanding shares of the Money Market Portfolio, four shareholders held
approximately 91% of the outstanding shares of the U.S. Treasury Money Market
Portfolio, three shareholders held approximately 87% of the outstanding shares
of the Municipal Money Market Portfolio, four shareholders held approximately
91% of the outstanding shares of the New Jersey Municipal Money Market
Portfolio, four shareholders held approximately 92% of the outstanding shares
of the North Carolina Municipal Money Market Portfolio, two shareholders held
approximately 87% of the outstanding shares of the Ohio Municipal Money Market
Portfolio, three shareholders held approximately 88% of the outstanding shares
of the Pennsylvania Municipal Money Market Portfolio and four shareholders held
approximately 91% of the outstanding shares of the Virginia Municipal Money
Market Portfolio. Some of the shareholders are comprised of omnibus accounts,
which are held on behalf of several individual shareholders.
67
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Concluded)
(F) Federal Tax Information
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.
Dividends from tax-free income, net investment income and distributions
from net realized capital gains are determined in accordance with U.S. Federal
income tax regulations, which may differ from those amounts determined under
accounting principles generally accepted in the United States.
The tax character of distributions paid during the fiscal year ended
September 30, 2005 were as follows:
TAX-FREE ORDINARY
INCOME INCOME
------------ ---------------
Money Market
9/30/05 ............... $ - $ 31,021,152
U.S. Treasury
9/30/05 ............... - 8,916,517
Municipal Money
9/30/05 ............... 5,253,149 -
New Jersey Municipal
9/30/05 ............... 2,406,767 -
North Carolina Municipal
9/30/05 ............... 1,127,667 -
Ohio Municipal
9/30/05 ............... 2,586,302 -
Pennsylvania Municipal
9/30/05 ............... 8,806,806 -
Virginia Municipal
9/30/05 ............... 365,649 -
For the year ended September 30, 2005, the Portfolios had capital loss
carryforwards available to offset future realized capital gains through the
indicated expiration dates:
EXPIRING SEPTEMBER 30
--------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 TOTAL
-------- --------- -------- ----------- --------- ----------- ------------
Money Market ............... $ 547 $ 268 $ - $ 97,341 $ - $ 86,448 $ 184,604
U.S. Treasury .............. - - - 13,150 11,911 12,380 37,441
Ohio Municipal ............. 3,203 16,541 6,193 - - 1,261 27,198
Virginia Municipal ......... - - - - 77 - 77
68
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED)
(A) Board of Trustees' Consideration of the Advisory Agreements. The Board of
Trustees (the "Board") of BlackRock Funds (the "Fund"), including a
majority of the non-interested Trustees of the Fund (the "Independent
Trustees"), unanimously approved the renewal of the investment advisory and
sub-advisory agreements (the "Advisory Agreements") with respect to the
Money Market Portfolios of the Fund (each, a "Portfolio"), at an in-person
meeting of the Board held on February 28, 2006. In connection with its
consideration of the Advisory Agreements, the Board met with personnel from
the investment adviser and sub-adviser to the Portfolios, including
BlackRock Advisors, Inc. and BlackRock Institutional Management Corporation
(collectively, "BlackRock"), at an in-person meeting of the Board held on
February 7, 2006. The Board reviewed materials that it received in advance
of that meeting, including (i) fee information and expense ratios for
retail and institutional share classes of each Portfolio in comparison to
fee information and expense ratios for peer funds of such Portfolio; (ii)
information about the investment performance of each Portfolio in
comparison to the investment performance for peer funds of such Portfolio;
(iii) BlackRock's economic outlook for the Portfolios and its general
investment outlook for the markets; (iv) information on the profitability
of BlackRock and its affiliates with respect to each Portfolio, including
details regarding the methodology used to calculate such profitability; (v)
information regarding fees paid to service providers that are BlackRock
affiliates; and (vi) information regarding compliance records and
regulatory matters relating to BlackRock and the Fund. In approving the
Advisory Agreements, the Board, including all of the Independent Trustees,
considered each of the matters discussed below in executive sessions held
at the February 7 and February 28 meetings, during which counsel to the
Independent Trustees was present.
Nature, Extent and Quality of Services. The Board received and considered
various information and data regarding the nature, extent and quality of
services provided by BlackRock to each of the Portfolios under the Advisory
Agreements during the past year. The Board reviewed BlackRock's investment
philosophy and process used to manage each of the Portfolios, as well as a
description of its capabilities, personnel and services. The Board
considered the scope of services provided by BlackRock to each of the
Portfolios under the Advisory Agreements relative to services typically
provided by third parties to comparable mutual funds, and considered
BlackRock's in-house research capabilities as well as other resources
available to its personnel. The Board noted that the standard of care
applicable under the Advisory Agreements was comparable to that generally
found in investment advisory agreements of their nature. The Board
considered the legal and compliance programs of each of the Fund and
BlackRock, as well as the integrity of the systems in place to ensure
implementation of such programs and the records of each of the Fund and
BlackRock with regard to these matters. The Board also considered
information relating to the qualifications, backgrounds and
responsibilities of BlackRock's investment professionals and other
personnel who provide services to each Portfolio under the applicable
Advisory Agreement, and took into account the time and attention devoted by
BlackRock senior management to each of the Portfolios. The Board also
considered BlackRock's general business reputation and overall financial
resources and concluded that BlackRock would be able to meet any reasonably
foreseeable obligation under the Advisory Agreements.
Following consideration of this information, the Board, including all of
the Independent Trustees, concluded that the nature, extent and quality of
the services provided by BlackRock to each Portfolio under the applicable
Advisory Agreement were consistent with the Portfolio's operational
requirements and reasonable in terms of approving the renewal of such
Advisory Agreement.
Advisory Fees. The Board received and considered statistical information
regarding the fees and expense ratios of retail and institutional share
classes of each Portfolio. The Board compared the advisory fees, both
before (contractual) and after (actual) any fee waivers and expense
reimbursements, and total
69
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
expenses of each Portfolio, against the fees and total expenses of the
Portfolio's peers selected by Lipper, Inc. ("Lipper"), an independent
provider of investment company data. The Board was provided with a
description of the methodology used by Lipper to determine the peers for
each Portfolio. For each Portfolio, the Investor A Class (except with
respect to the Virginia Money Market Portfolio) and Institutional Class
were used to represent such Portfolio's share classes for purposes of the
Lipper survey, as Lipper differentiated between retail and institutional
funds in selecting peers.
In considering the fee and expense data provided by Lipper, the Board
noted that:
o except for each of the Money Market, Municipal Money Market,
Pennsylvania Municipal Money Market and U.S. Treasury Money Market
Portfolios and the Investor A Class of the New Jersey Municipal Money
Market, North Carolina Municipal Money Market and Ohio Municipal
Money Market Portfolios, each Portfolio had contractual advisory fees
and expenses that were equal to or lower than the median for its
peers; and
o except for each of the Money Market, Municipal Money Market,
Pennsylvania Municipal Money Market and U.S. Treasury Money Market
Portfolios, each Portfolio had actual advisory fees and expenses that
were equal to or lower than the median for it peers.
However, the Board took into consideration the fact that:
o with respect to the Investor A Class of the New Jersey Municipal
Money Market, North Carolina Municipal Money Market and Ohio
Municipal Money Market Portfolios, the difference by which such
Portfolios' contractual advisory fees were higher than the median for
their respective peers was not significant;
o with respect to the Institutional Class of the Pennsylvania Money
Market Portfolio and the Investor A Class of the Money Market,
Municipal Money Market, Pennsylvania Municipal Money Market and U.S.
Treasury Money Market Portfolios, although the contractual advisory
fee of each such Portfolio was higher than the median for its peers,
its actual total expenses were equal to or lower than the median; and
o with respect to the Institutional Class of the Money Market and U.S.
Treasury Money Market Portfolios, although the contractual advisory
fee of each such Portfolio was higher than the median for its peers,
each Portfolio had investment performance during at least two of the
one-year, three-year and five-year periods that were at least equal
to or above the performance median for the Portfolio's peers.
In addition to Lipper data, the Board also took into account the complexity
of the investment management of each Portfolio relative to its peers. The
Board was also provided with comparative information about services
rendered and fee rates offered to other similar clients advised by
BlackRock, including separate accounts.
Following consideration of this information, the Board, including all of
the Independent Trustees, concluded that the contractual fees to be paid to
BlackRock pursuant to the Advisory Agreements are fair and reasonable in
light of the services being provided.
Fund Performance. The Board received and considered information about each
Portfolio's one-, three- and five-year (as applicable) investment
performance for the period ended November 30, 2005, in comparison to the
performance peers selected by Lipper. The Board was provided with a
description of
70
BLACKROCK FUNDS
the methodology used by Lipper to select the peers. In addition, the Board
reviewed BlackRock's market outlook and discussed other factors relevant to
the performance of the Portfolios.
In considering the performance data provided by Lipper, the Board noted
that for each Portfolio that had existed for more than five years, except
for the Investor A Class of each of the Municipal Money Market, New Jersey
Municipal Money Market, North Carolina Municipal Money Market, Ohio
Municipal Money Market, Pennsylvania Municipal Money Market and U.S.
Treasury Money Market Portfolios and the Institutional Class of the
Municipal Money Market Portfolio, each Portfolio had investment performance
during at least two of the one-year, three-year and five-year periods that
were at least equal to or above the median for the Portfolio's peers. The
Board discussed the performance issues of these Portfolios with BlackRock,
and was satisfied that appropriate measures were being taken to address
them.
Profitability. The Board considered the level of BlackRock's and its
affiliates' profits in respect of their relationship with each of the
Portfolios. This consideration included a broad review of BlackRock's
methodology in allocating its costs to the management of each Portfolio.
The Board considered the profits realized by BlackRock and its affiliates
in connection with the operation of each Portfolio and whether the amount
of profit is a fair profit relative to their relationship with the
Portfolio. The Board also considered BlackRock's profit margins in
comparison with available industry data. The Board, including all of the
Independent Trustees, concluded that BlackRock's profitability with respect
to the Portfolios is reasonable relative to the services provided.
Economies of Scale. The Board considered whether there have been economies
of scale in respect of the management of each Portfolio, whether each
Portfolio has appropriately benefited from any economies of scale, and
whether there is potential for realization of any further economies of
scale. The Board noted that economies of scale were passed on to the
shareholders in the form of breakpoints to the advisory fee rate of certain
of the Portfolios. The Board also considered the fee waivers and expense
reimbursement arrangements by BlackRock for each of the Portfolios. The
Board, including all of the Independent Trustees, determined that the
advisory fee structure was reasonable and that no changes were currently
necessary to realize any economies of scale.
Other Benefits to BlackRock. The Board also took into account other
ancillary benefits that BlackRock may derive from its relationship with
each of the Portfolios, such as BlackRock's ability to leverage its
investment professionals that manage other portfolios, an increase in
BlackRock's profile in the broker-dealer community, and the engagement of
BlackRock's affiliates as service providers to the Portfolios, including
for administrative, transfer agency, distribution and custodial services.
The Board, including all of the Independent Trustees, concluded that these
ancillary benefits that BlackRock and its affiliates could receive with
regard to providing investment advisory and other services to the
Portfolios were consistent with those generally available to other mutual
fund sponsors.
No single factor was considered in isolation or to be determinative in the
Board's decision to approve the renewal of the Advisory Agreements.
Rather, the Board concluded, in light of a weighing and balancing of all
factors considered, that it was in the best interests of each Portfolio to
approve the continuation of the Advisory Agreements, including the fees to
be charged for services thereunder.
(B) The Fund's Audit Committee approved engaging Deloitte & Touche LLP as the
independent registered public accounting firm to audit the Fund's financial
statements for fiscal year 2006. On November 29, 2005, a majority of the
Fund's Board of Trustees, including a majority of the independent Trustees,
approved the appointment of Deloitte & Touche LLP as the Fund's independent
registered public accounting firm for the
71
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED) (CONCLUDED)
Fund's fiscal 2006 audit subject to the right of the Fund, by a majority
vote of the shareholders at any meeting called for that purpose, to
terminate the appointment without penalty.
(C) As previously disclosed, BlackRock has received subpoenas from various
federal and state governmental and regulatory authorities and various
information requests from the Securities and Exchange Commission in
connection with ongoing industry-wide investigations of mutual fund
matters.
(D) BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill Lynch") announced
on February 15, 2006 that they had reached an agreement to combine Merrill
Lynch's investment management business, Merrill Lynch Investment Managers,
with BlackRock, Inc. to create a new independent company. Merrill Lynch
will have a 49.8% economic interest and a 45% voting interest in the
combined company and The PNC Financial Services Group, Inc. ("PNC"), which
currently holds a majority interest in BlackRock, Inc., will have
approximately a 34% economic and voting interest. The new company will
operate under the BlackRock name and be governed by a board of directors
with a majority of independent members. Each of Merrill Lynch and PNC has
agreed that it will vote all of its shares on all matters in accordance
with the recommendation of BlackRock's board in order to assure its
independence. Completion of the transaction is subject to various
regulatory approvals, client consents, approval by BlackRock, Inc.
shareholders and customary conditions.
(E) The amounts estimated to be paid by the Fund to the Chief Compliance
Officer (CCO) and certain of his staff for the six months ended March 31,
2006, are $255,572.
72
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK FUNDS
Investment Adviser
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Sub-Adviser
BlackRock Institutional Management Corporation
Wilmington, Delaware 19809
Custodian
PFPC Trust Company
Philadelphia, Pennsylvania 19153
Co-Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware 19809
Distributor
BlackRock Distributors, Inc.
King of Prussia, Pennsylvania 19406
Co-Administrator
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Counsel
Simpson Thacher & Bartlett LLP
New York, New York 10017
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Philadelphia, Pennsylvania 19103
The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it is intended to reduce expenses and
eliminate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be combined
with those for other members of your household, please contact the Fund at
(800) 441-7762.
The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Trustees. A
description of the policies and procedures that BlackRock and its affiliates
use to determine how to vote proxies relating to portfolio securities is
available without charge, upon request, by calling (800)441-7762, or on the
website of the Securities and Exchange Commission (the "Commission") at
http://www.sec.gov.
Information on how proxies relating to the Fund's voting securities were voted
(if any) by BlackRock during the most recent 12-month period ended June 30th is
available, upon request and without charge, by calling (800) 441-7762 or on the
website of the Commission at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings for the first and
third quarters of its fiscal year with the Commission on
Form N-Q. The Fund's Form N-Q is available on the Commission's website at
http://www.sec.gov and may be reviewed and copied at the Commission's Public
Reference Room in Washington, D.C. Information regarding the operation of the
Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's
Form N-Q may also be obtained upon request, without charge, by calling (800)
441-7762.
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Fund shares.
BLACKROCK FUNDS
FUND SPECTRUM
BlackRock Funds is a leading mutual fund company that currently has assets of
approximately $27 billion in the following portfolios, which are 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.
STOCK PORTFOLIOS
- --------------------------------------
Investment Trust Small Cap Core Equity
Large Cap Value Equity Small Cap Growth Equity
Large Cap Growth Equity Global Science & Technology Opportunities
Dividend AchieversTM Global Resources
Legacy All-Cap Global Resources
Mid-Cap Value Equity Health Sciences
Mid-Cap Growth Equity U.S. Opportunities
Aurora Global Opportunities
Small/Mid-Cap Growth International Opportunities
Small Cap Value Equity Index Equity
STOCK & BOND PORTFOLIOS
- --------------------------------------
Asset Allocation
BOND PORTFOLIOS
- --------------------------------------
Enhanced Income Government Income
Low Duration Bond Inflation Protected Bond
Intermediate Government Bond GNMA
Intermediate Bond Managed Income
Intermediate PLUS Bond International Bond
Core Bond Total Return High Yield Bond
Core PLUS Total Return
TAX-FREE BOND PORTFOLIOS
- --------------------------------------
UltraShort Municipal Ohio Tax-Free Income
Tax-Free Income Delaware Tax-Free Income
Pennsylvania Tax-Free Income Kentucky Tax-Free Income
New Jersey Tax-Free Income
MONEY MARKET PORTFOLIOS
- --------------------------------------
Money Market North Carolina Municipal Money Market
U.S. Treasury Money Market Ohio Municipal Money Market
Municipal Money Market Pennsylvania Municipal Money Market
New Jersey Municipal Money Market Virginia Municipal Money Market
SHAREHOLDER PRIVILEGES
ACCOUNT INFORMATION
Call us at 1-800-441-7762 to get information about your account balances,
recent transactions and share prices. You can also reach us on the web at
www.blackrock.com.
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 $50 or more from their BlackRock portfolios, as
long as their account is at least $10,000.
RETIREMENT PLANS
Shareholders may make investments in conjunction with Traditional, Rollover,
Roth, Coverdell and Simple IRA's.
ADDITIONAL INFORMATION ABOUT THE BLACKROCK FUNDS
For additional reports or additional information, as well as more current
information about portfolio holdings and characteristics, BlackRock Fund
shareholders and prospective investors may call 1-800-441-7762.
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.
[GRAPHIC OMITTED]
MM-SEMI 3/06
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED INCOME
LIQUIDITY REAL ESTATE
BlackRock Funds
Strategic Portfolio
Semi-Annual Report
March 31, 2006 (Unaudited)
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BLACKROCK FUNDS
BLACKROCK STRATEGIC PORTFOLIO I
TABLE OF CONTENTS
Portfolio Summary.........................................................1-2
Schedule of Investments.....................................................3
Portfolio Financial Statements
Statement of Assets and Liabilities.......................................4
Statement of Operations...................................................5
Statements of Changes in Net Assets.......................................6
Financial Highlights......................................................7
Notes to Financial Statements............................................8-12
Additional Information..................................................14-16
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 generally receive any nonpublic personal information
relating to its shareholders who purchase shares through their broker-dealers.
However, in certain limited circumstances, BlackRock receives a limited amount
of nonpublic personal information from broker-dealers in connection with
monitoring for inappropriate trading activity. 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.
BLACKROCK STRATEGIC PORTFOLIO I
Total Net Assets (3/31/06): $73.2 million
Performance Benchmark:
Citigroup Non-U.S. World Government Bond Index (Hedged)
Investment Approach:
Seeks to maximize total return through the investment in a portfolio of
investment grade fixed income securities of non U.S. and U.S. issuers
denominated in non-U.S. currencies, baskets of foreign currencies and the U.S.
dollar.
Recent Portfolio Management Activity:
o The Portfolio underperformed the benchmark for the semi-annual period.
o During the semi-annual period, the Bank of Japan joined its U.S. and
European counterparts and began removing monetary stimulus from the Japanese
economy by ending Quantitative Easing. In reaction to this policy shift and a
stronger global economic environment, 10-year Japanese rates rose by 30 basis
points during the first quarter of 2006 while December EuroYen futures were
higher by 40 basis points. We believe Japan is in the very early stages of the
removal of monetary policy stimulus. Domestic economic indicators have shown
sustained strength. National core inflation has been positive for four months,
and the Nikkei closed above the technically important 17,000 level at
quarter-end. We expect longer-term rates to begin pricing in a stronger and
more inflationary growth environment going forward.
o The European Cental Bank ("ECB") raised rates 50 basis points over the
semi-annual period. The ECB has increased its anti-inflationary rhetoric as
pass-though effects from oil prices remain of great concern. Euro-zone
sentiment surveys are at multiyear highs and there is optimism regarding the
impact of confidence on actual growth. In addition, with encouraging growth
prospects abroad, we expect the pace of ECB hikes to quicken, with rate hikes
anticipated in the second quarter of this year. Despite these positive economic
indicators, labor rigidity and strife continue to be a major concern within
Europe. The need for structural reform and fiscal discipline are often
emphasized by the ECB. Over the quarter, 10-year European rates rose 44 basis
points and the yield on the December 3-month Euribor contract rose 40 basis
points.
o During the first half of the period, with respect to portfolio strategy
within the Dollar Bloc, the Portfolio's allocation to New Zealand benefited
performance. Despite the fact that the Reserve Bank of New Zealand raised the
Official Cash Rate at both its October and December meetings, rates rallied
during the quarter. In the Euro Bloc, the Portfolio's yield curve flattening
position also benefited performance as the European yield curve flattened.
Elsewhere in the Euro Bloc, positions in Germany benefited performance. The yen
depreciated during the quarter, and therefore the Portfolio's long position in
Japanese yen versus the U.S. dollar currency position detracted from
performance.
o During the second half of the period, the Portfolio's country
allocation to New Zealand was a contributor to performance, while Mexico was a
detractor. In the Euro Bloc, the Portfolio's yield curve flattening position
also benefited performance as the European yield curve flattened. Elsewhere in
the Euro Bloc, the Portfolio had positions in Germany, France, Portugal and
Spain. In the Asia Bloc, the Portfolio has added exposure to Japanese
government bond floaters.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE STRATEGIC
PORTFOLIO I AND
THE CITIGROUP NON-U.S. WORLD GOVERNMENT BOND INDEX (HEDGED) FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Citigroup Non-U.S. World Government Bond Index (Hedged)
10/06/1997 10,000 10,000
12/31/1997 10,141 10,203
03/31/1998 10,303 10,515
06/30/1998 10,515 10,758
09/30/1998 11,084 11,319
12/31/1998 11,136 11,381
03/31/1999 11,131 11,590
06/30/1999 11,164 11,517
09/30/1999 11,290 11,572
12/31/1999 11,349 11,708
03/31/2000 11,478 11,962
06/30/2000 11,786 12,179
09/30/2000 12,245 12,378
12/31/2000 13,268 12,834
03/31/2001 13,709 13,186
06/30/2001 13,542 13,236
09/30/2001 14,144 13,524
12/31/2001 14,448 13,617
03/31/2002 14,484 13,563
06/30/2002 15,350 13,869
09/30/2002 15,521 14,326
12/31/2002 16,037 14,550
03/31/2003 16,070 14,742
06/30/2003 16,490 14,935
09/30/2003 16,512 14,819
12/31/2003 16,566 14,823
03/31/2004 16,949 15,071
06/30/2004 16,612 14,909
09/30/2004 16,956 15,263
12/31/2004 17,268 15,591
03/31/2005 17,215 15,784
06/30/2005 17,738 16,283
09/30/2005 17,714 16,337
12/31/2005 17,716 16,479
03/31/2006 17,669 16,328
FOR PERIOD ENDING MARCH 31, 2006
Strategic Portfolio I - Average Annual Return
1 Year 3 Year 5 Year From Inception
- ------------ ---------- ---------- ---------------
2.64% 3.21% 5.21% 6.94%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
1
BLACKROCK STRATEGIC PORTFOLIO I
FUND PROFILE
Credit Quality (% of long-term investments)/1/
AAA 65.1%
AA 31.7
A 3.2
-----
Total 100.0%
=====
Countries (% of long-term investments)
Japan 31.9%
Germany 19.4
Canada 10.9
United States 8.3
Italy 5.4
New Zealand 5.3
Netherlands 4.9
Spain 4.9
France 4.7
Mexico 4.3
-----
Total 100.0%
=====
Portfolio Statistics
Average maturity (years) 10.67
Effective Duration/2/ 1.13
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the portfolio for every 1%
change in interest rates. Effective duration is typically calculated for
bonds with embedded options and assumes that expected cash flows will
fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur ongoing costs, including advisory
fees and other Portfolio expenses. This Example is intended to help you
understand your ongoing costs (in dollars) of investing in the Portfolio and to
compare these costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds.
Hypothetical Expenses
Actual Expenses (5% return before expenses)
--------------------- ----------------------------
Institutional Class Institutional Class
--------------------- ----------------------------
Beginning Account Value (10/01/05) $ 1,000.00 $ 1,000.00
Ending Account Value (3/31/06) 997.50 1,024.14
Expenses Incurred During Period (10/01/05 - 3/31/06) 0.85 0.86
For the Institutional share class of the Portfolio, expenses are equal to the
annualized expense ratio of 0.17%, multiplied by the average account value over
the period, multiplied by 182/365 (to reflect the one-half year period).
2
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BLACKROCK STRATEGIC PORTFOLIO I
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ------------ -------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 6.2%
U.S. Treasury Notes
3.50%(b) 12/15/09 $ 2,800 $2,675,750
4.25% 10/10-08/15 1,365 1,325,187
4.50% 11/15/15 570 553,123
----------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $4,713,683) 4,554,060
----------
FOREIGN BONDS - 67.8%
Canada - 8.0%
Government of Canada Bonds
(CND)
4.00% 09/01/10 3,500 2,978,230
Province of Ontario, Unsecured
Notes (NZD)
6.25% 06/16/15 4,700 2,866,122
Province of Quebec Bonds
(NZD)
6.75% 11/09/15 70 43,833
----------
5,888,185
----------
France - 3.5%
French Treasury Note (EUR)
2.50% 06/12/10 2,200 2,557,842
----------
Germany - 14.4%
Bundesobligation (EUR)
3.25% 04/17/09 850 1,025,134
Bundesrepublic Deutschland
(EUR)
4.00% 01/04/37 7,800 9,474,224
----------
10,499,358
----------
Italy - 4.0%
Buoni Poliennali del Tes (EUR)
2.75% 06/15/10 2,500 2,932,693
----------
Japan - 23.6%
Japanese Government Bonds
(JPY)
0.79%(c) 01/20/21 2,100,000 17,251,045
----------
Mexico - 3.2%
Mexican Fixed Rate Bonds
(MXP)
12/22/11-
9.00% 12/20/12 8,270 782,846
8.00% 12/19/13 14,370 1,288,237
9.50% 12/18/14 2,450 239,167
----------
2,310,250
----------
Netherlands - 3.6%
Kingdom of Netherlands Bonds
(EUR)
4.00% 01/15/37 2,200 2,665,552
----------
New Zealand - 3.9%
General Electric Capital Corp.,
Senior Unsubordinated Notes
(NZD)
6.50% 09/28/15 4,680 2,858,079
----------
Spain - 3.6%
Bonos Y Oblig del Estado (EUR)
3.25% 07/30/10 2,200 2,635,558
----------
TOTAL FOREIGN BONDS
(Cost $51,761,026) 49,598,562
----------
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- ---------------
SHORT TERM INVESTMENTS - 27.3%
Federal Home Loan Bank,
Discount Notes
4.55%(d) 04/03/06 $ 500 $ 499,874
U.S. Treasury Bills
4.58% 04/13/06 17,000 16,974,075
Galileo Money Market Fund 2,462 2,462,290
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $19,936,239) 19,936,239
-----------
TOTAL INVESTMENTS IN SECURITIES - 101.3%
(Cost $76,410,948(a)) 74,088,861
LIABILITIES IN EXCESS OF
OTHER ASSETS - (1.3)% (932,336)
-----------
NET ASSETS - 100.0% $73,156,525
===========
- -------------------
(a) Cost for federal income tax purposes is $76,413,810. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 862,459
Gross unrealized depreciation (3,187,408)
-----------
$(2,324,949)
===========
(b) Securities, or a portion thereof, pledged as collateral with a value of
$1,433,437 on 421 short Euro Bobl futures contracts and 60 short Canadian
Bank Acceptance futures contracts expiring June 2006. The notional value of
such contracts on March 31, 2006 was $68,405,560, with an unrealized gain
of $325,870 (including commissions of $1,204).
(c) Rates shown are the rates as of March 31, 2006.
(d) The rate shown is the effective yield on the discount notes at the time of
purchase.
KEY TO INVESTMENT ABBREVIATIONS
CND Canadian Dollar
EUR Euro
JPY Japanese Yen
MXP Mexican Peso
NZD New Zealand Dollar
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
BLACKROCK STRATEGIC PORTFOLIO I
AS OF MARCH 31, 2006 (UNAUDITED)
ASSETS
Investments at value/1/ ................................................................. $ 74,088,861
Cash denominated in foreign currencies/2/ ............................................... 100,966
Interest receivable ..................................................................... 486,651
Investments sold receivable ............................................................. 844,199
Prepaid expenses ........................................................................ 890
Unrealized appreciation on forward foreign currency contracts ........................... 761,953
Futures margin receivable ............................................................... 2,407
------------
TOTAL ASSETS ......................................................................... 76,285,927
------------
LIABILITIES
Investments purchased payable ........................................................... 2,958,100
Distributions payable ................................................................... 7,284
Futures margin payable .................................................................. 18,985
Unrealized depreciation on forward foreign currency contracts ........................... 118,923
Administration fees payable ............................................................. 5,253
Custodian fees payable .................................................................. 2,767
Transfer agent fees payable ............................................................. 563
Other accrued expenses payable .......................................................... 17,527
------------
TOTAL LIABILITIES .................................................................... 3,129,402
------------
NET ASSETS ............................................................................... $ 73,156,525
============
/1/Cost of Investments ................................................................... $ 76,410,948
============
/2/Cost of Investments - foreign currencies .............................................. $ 100,464
============
AT MARCH 31, 2006, NET ASSETS CONSISTED OF:
Capital Paid in ......................................................................... $ 72,986,234
End of period distributions in excess of net investment income .......................... (1,190,098)
Accumulated net realized gain on investment transactions, futures and foreign currency
related transactions .................................................................. 2,719,873
Net unrealized depreciation on investment transactions, futures and foreign currency
related transactions ..................................................................... (1,359,484)
------------
$ 73,156,525
============
Institutional Shares:
Net Assets .............................................................................. $ 73,156,525
Shares outstanding (unlimited authorization) ............................................ 8,546,648
Net Asset Value, offering and redemption price per share ................................ $ 8.56
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
BLACKROCK FUNDS
STATEMENT OF OPERATIONS
BLACKROCK STRATEGIC PORTFOLIO I
FOR THE SIX MONTHS ENDED MARCH 31, 2006 (UNAUDITED)
Investment income:
Interest ................................................................................ $ 1,416,492
------------
Expenses:
Investment advisory fee ................................................................. 68,202
Administration fee ...................................................................... 63,818
Custodian fee ........................................................................... 10,560
Transfer agent fee ...................................................................... 6,160
Legal and audit fees .................................................................... 14,447
Printing ................................................................................ 3,534
Trustees' fees .......................................................................... 1,276
Other ................................................................................... 2,599
------------
Total expenses ........................................................................ 170,596
------------
Less investment advisory fee waived .................................................. (68,202)
Less administration fee waived ....................................................... (41,856)
Less custodian fee waived ............................................................ (746)
Less transfer agent fee waived ....................................................... (515)
------------
Net expenses .......................................................................... 59,277
------------
Net investment income .................................................................... 1,357,215
------------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Net realized gain (loss) from:
Investment transactions ............................................................... 532,805
Futures contracts ..................................................................... 1,734,407
Foreign currency transactions ......................................................... (2,890,775)
------------
(623,563)
------------
Change in unrealized appreciation/depreciation from:
Investments ........................................................................... (3,423,744)
Futures contracts ..................................................................... 83,580
Foreign currency transactions ......................................................... 2,341,352
------------
(998,812)
------------
Net loss on investments, futures and foreign currency transactions ....................... (1,622,375)
------------
Net decrease in net assets resulting from operations ..................................... $ (265,160)
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
BLACKROCK STRATEGIC PORTFOLIO I
FOR THE
SIX MONTHS ENDED FOR THE
3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05
------------------ ----------------
Increase in net assets:
Operations:
Net investment income .................................................. $ 1,357,215 $ 2,808,275
Net realized gain (loss) on investments, futures contracts and
foreign currency related transactions ................................. (623,563) 3,315,083
Net change in unrealized appreciation/depreciation on
investments, futures contracts and foreign currency related
transactions .......................................................... (998,812) (2,950,005)
------------- -------------
Net increase (decrease) in net assets resulting from operations ........ (265,160) 3,173,353
------------- -------------
Distributions to shareholders from:
Net investment income .................................................. (1,357,215) (2,808,275)
Net realized gains ..................................................... (196,270) -
------------- -------------
Total distributions to shareholders .................................... (1,553,485) (2,808,275)
------------- -------------
Capital share transactions:
Shares sold ............................................................ 12,579,200 59,016,869
Shares issued in reinvestment of distributions ......................... 1,517,597 2,793,808
Shares redeemed ........................................................ (10,407,655) (58,199,623)
------------- -------------
Net increase in net assets resulting from capital share
transactions .......................................................... 3,689,142 3,611,054
------------- -------------
Total increase in net assets ........................................... 1,870,497 3,976,132
------------- -------------
Net assets:
Beginning of period .................................................... 71,286,028 67,309,896
------------- -------------
End of period .......................................................... $ 73,156,525 $ 71,286,028
============= =============
End of period undistributed net investment income (distributions in
excess of net investment income) ........................................ $ (1,190,098) $ 1,700,677
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE
SIX MONTHS ENDED FOR THE
3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05
------------------ ------------
Per share operating performance:
Net asset value, beginning of period ............................. $ 8.78 $ 8.75
-------- --------
Net investment income ........................................... 0.17/2/ 0.36/2/
Net realized and unrealized gain (loss) on investments .......... (0.19) 0.03
-------- --------
Net increase (decrease) from investment operations ............. (0.02) 0.39
-------- --------
Distributions from net investment income ........................ (0.17) (0.36)
Distributions from net realized gains ........................... (0.03) -
Distributions from capital ...................................... - -
-------- --------
Total distributions ............................................ (0.20) (0.36)
-------- --------
Net asset value, end of period .................................. $ 8.56 $ 8.78
======== ========
Total Return ..................................................... (0.25)%/3/ 4.47%
Ratios / Supplemental data
Net assets, end of period (in thousands) ......................... $ 73,157 $ 71,286
Ratio of expenses to average net assets .......................... 0.17%/4/ 0.22%
Ratio of expenses to average net assets (excluding interest
expense) ........................................................ 0.17%/4/ 0.20%
Ratio of expenses to average net assets (excluding waivers) ...... 0.50%/4/ 0.58%
Ratio of net investment income to average net assets ............. 3.98%/4/ 4.03%
Ratio of net investment income to average net assets (excluding
waivers) ........................................................ 3.65%/4/ 3.67%
Portfolio turnover ............................................... 111% 223%
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/04 9/30/03 /1/ 9/30/02 /1/ 9/30/01 /1/
------------ ------------ ------------ -----------
Per share operating performance:
Net asset value, beginning of period ............................. $ 8.85 $ 8.87 $ 9.20 $ 8.63
-------- -------- -------- --------
Net investment income ........................................... 0.33/2/ 0.42 0.42 0.72
Net realized and unrealized gain (loss) on investments .......... (0.10) 0.13 0.40 0.58
-------- -------- -------- --------
Net increase (decrease) from investment operations ............. 0.23 0.55 0.82 1.30
-------- -------- -------- --------
Distributions from net investment income ........................ (0.16) (0.57) (1.15) (0.65)
Distributions from net realized gains ........................... - - - (0.08)
Distributions from capital ...................................... (0.17) - - -
-------- -------- -------- --------
Total distributions ............................................ (0.33) (0.57) (1.15) (0.73)
-------- -------- -------- --------
Net asset value, end of period .................................. $ 8.75 $ 8.85 $ 8.87 $ 9.20
======== ======== ======== ========
Total Return ..................................................... 2.69% 6.39% 9.74% 15.51%
Ratios / Supplemental data
Net assets, end of period (in thousands) ......................... $ 67,310 $ 56,122 $ 31,253 $ 33,297
Ratio of expenses to average net assets .......................... 0.42% 0.26% 0.85% 0.27%
Ratio of expenses to average net assets (excluding interest
expense) ........................................................ 0.23% 0.26% 0.26% 0.26%
Ratio of expenses to average net assets (excluding waivers) ...... 0.71% 0.50% 1.15% 0.60%
Ratio of net investment income to average net assets ............. 3.80% 3.89% 4.73% 5.82%
Ratio of net investment income to average net assets (excluding
waivers) ........................................................ 3.51% 3.65% 4.43% 5.49%
Portfolio turnover ............................................... 203% 235% 180% 189%
- ---------
/1/ Audited by other auditors.
/2/ Calculated using the average shares outstanding method.
/3/ Not annualized.
/4/ Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(A) Organization
BlackRock FundsSM (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 51 investment portfolios. These financial statements relate to
the Fund's Strategic Portfolio I (the "Portfolio"). The Portfolio is authorized
to issue an unlimited number of shares with a par value of $0.001.
Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts with its vendors and others that provide for general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund.
However, based on experience, the Fund considers the risk of loss from such
claims to be remote.
(B) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund in preparation of its financial statements.
Investment Valuation - Valuation of investments held by the Portfolio is
as follows: fixed income investments are valued by using market quotations or
prices provided by market makers; a portion of the fixed income investments are
valued utilizing one or more pricing services approved by the Board of Trustees
(the "Board"); an option or futures contract is valued at the last sales price
prior to 4:00 p.m. (Eastern time), as quoted on the principal exchange or board
of trade on which such option or futures contract is traded, or in the absence
of a sale, the mean between the last bid and asked prices prior to 4:00 p.m.
(Eastern time); the amortized cost method of valuation will be used with
respect to debt obligations with sixty days or less remaining to maturity
unless the investment advisor under the supervision of the Board determines
that such method does not represent fair value. Any assets which are
denominated in a non-U.S. currency are translated into U.S. dollars at the
prevailing market rates. In the event that application of these methods of
valuation results in a price for an investment which is deemed not to be
representative of the market value of such investment, the investment will be
valued by, under the direction of or in accordance with a method approved by
the Board as reflecting fair value ("Fair Value Assets"). The investment
adviser will submit its recommendations regarding the valuation and/or
valuation methodologies for Fair Value Assets to a valuation committee. Such
valuation committee may accept, modify or reject any recommendations. The
pricing of all Fair Value Assets shall be subsequently reported to the Board.
When determining the price for a Fair Value Asset, the investment adviser
shall seek to determine the price that the Portfolio might reasonably expect to
receive from the current sale of that asset in an arm's-length transaction.
Fair value determinations shall be based upon all available factors that the
adviser deems relevant.
Dividends to Shareholders - Dividends from net investment income are
declared by the Portfolio each day on "settled" shares (i.e. shares for which
the Portfolio has received payment) and are paid monthly. Over the course of a
year, substantially all of the Portfolio's net investment income will be
declared as dividends. Net realized capital gains, if any, are distributed at
least annually.
Foreign Currency Translation - The books and records of the Portfolio are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(I) Market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) Purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of such
transactions.
The Portfolio isolates that portion of gains and losses on investment
securities which is due to changes in the foreign exchange rates from that
which is due to changes in market prices of such securities.
The Portfolio reports certain foreign currency related transactions as
components of realized and unrealized gains for financial reporting purposes,
whereas such components are treated as ordinary income for federal income tax
purposes.
Forward Foreign Currency Contracts - The Portfolio enters into forward
foreign currency contracts. These contracts are adjusted by the daily forward
exchange rate of the underlying currency and any gains or losses are recorded
as unrealized until the contract settlement date. Such contracts, which protect
the value of the Portfolio's investment securities against a decline in the
value of currency, do not eliminate fluctuations in the underlying prices of
the securities. They
8
BLACKROCK FUNDS
simply establish an exchange rate at a future date. Also, although such
contracts tend to minimize the risk of loss due to a decline in the value of a
hedged currency, at the same time they tend to limit any potential gain that
might be realized should the value of such foreign currency increase. Risks may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
The aggregate principal amounts of the contracts are not recorded as the
Portfolio intends to settle the contracts prior to delivery. Under the terms of
foreign currency contracts open at March 31, 2006, the Portfolio is obligated
to deliver or receive currency in exchange for U.S. dollars as indicated below:
UNREALIZED
FOREIGN
VALUE AT EXCHANGE
SETTLEMENT DATE CURRENCY AMOUNT CURRENCY SOLD CONTRACT AMOUNT MARCH 31, 2006 GAIN (LOSS)
- ----------------- ----------------- ----------------------- ----------------- ---------------- ------------
04/06/06 10,866,413 Euro .................. $ 13,175,527 $ 13,173,278 $ 2,249
04/06/06 4,345,500 Euro .................. 5,206,926 5,268,020 (61,094)
04/06/06 2,500,000 Euro .................. 3,029,615 3,030,733 (1,118)
04/12/06 64,132,237 Mexican Peso .......... 6,040,083 5,888,105 151,978
04/12/06 9,214,001 New Zealand Dollar .... 6,260,914 5,667,186 593,728
04/12/06 27,300,000 Japanese Yen .......... 239,054 232,361 6,693
04/13/06 3,494,000 Canadian Dollar ....... 2,999,270 2,992,927 6,343
------------ ------------ ---------
$ 36,951,389 $ 36,252,610 $ 698,779
============ ============ =========
UNREALIZED
FOREIGN
VALUE AT EXCHANGE
SETTLEMENT DATE CURRENCY AMOUNT CURRENCY BOUGHT CONTRACT AMOUNT MARCH 31, 2006 GAIN (LOSS)
- ----------------- ----------------- ----------------------- ----------------- ---------------- --------------
04/05/06 2,500,000 Euro .................. $ 3,029,438 $ 3,029,642 $ 205
04/06/06 10,866,413 Euro .................. 13,214,733 13,173,278 (41,455)
04/06/06 133,000 Euro .................. 163,650 161,235 (2,415)
04/06/06 148,829 Euro .................. 179,667 180,424 757
04/12/06 6,898,119 Mexican Peso .......... 644,896 633,330 (11,566)
04/12/06 23,885,776 Mexican Peso .......... 2,194,274 2,192,999 (1,275)
------------ ------------ ---------
$ 19,426,658 $ 19,370,908 $ (55,749)
============ ============ =========
Investment Transactions and Investment Income - Investment transactions
are accounted for on the trade date. The cost of investments sold and the
related gain or loss is determined by use of specific identification method,
generally first in first out, for both financial reporting and federal income
purposes. Interest income is recorded on the accrual basis. 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.
Reverse Repurchase Agreements - The Portfolio may enter into reverse
repurchase agreements with qualified third party brokers-dealers as determined
by and under the direction of the Board. Interest on the value of the reverse
repurchase agreements issued and outstanding is based upon competitive market
rates at the time of issuance. At the time the Portfolio enters into a reverse
repurchase agreement, it identifies for segregation certain liquid securities
having a value not less than the repurchase price, including accrued interest,
of the reverse repurchase agreement. There were no reverse repurchase
agreements held by the Portfolio at March 31, 2006.
Futures Transactions - The Portfolio invests in futures contracts
typically as a substitute for taking a position in the underlying asset and/or
as part of a strategy designed to reduce exposure to other risks, such as
interest rate or currency risk. The Portfolio may also use these instruments
for leverage. These futures contracts obligate a portfolio, at maturity, to
take or make delivery of securities, the cash value of a securities index or a
stated quantity of a foreign currency. Upon entering into a futures contract,
the Portfolio is required to deposit cash or pledge U.S. Government securities
of an initial margin. Subsequent payments, which are dependent on the daily
fluctuations in the value of the underlying security or securities, are made or
received by the Portfolio each day (daily variation margin) and are recorded as
cumulative unrealized gains or losses until the contracts are closed. When
contracts are closed, the Portfolio records a realized gain or loss equal to
the difference between the proceeds from (or cost of) the closing
9
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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.
Financing Transactions - The Portfolio may enter into financing
transactions consisting of a sale by the Portfolio of securities, together with
a commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, a Portfolio's right to repurchase the security may be
restricted. The value of the security may change over the term of the financing
transaction.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("generally accepted accounting principles") requires the use of management
estimates. Actual results could differ from the estimates and such differences
could be material.
Other - Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in exchange rates.
Some countries in which the Portfolio invests require governmental
approval for the repatriation of investment income, capital or the proceeds of
sales of securities by foreign investors. In addition, if there is
deterioration in a country's balance of payments or for the other reasons, a
country may impose temporary restrictions on foreign capital remittances
abroad.
The securities exchanges of certain foreign markets are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. Consequently, acquisition and disposition of securities by the
Portfolio may be inhibited.
(C) Agreements and Other Transactions with Affiliates and Related Parties
Pursuant to an Investment Advisory Agreement, BlackRock Financial
Management, Inc. ("BlackRock"), a wholly-owned subsidiary of BlackRock, Inc.,
serves as investment adviser to the Portfolio. For its advisory services,
BlackRock is entitled to receive fees, computed daily and paid monthly, at the
annual rate of 0.20% of the Portfolio's average daily net assets.
BlackRock has contractually agreed to waive or reimburse all of its
advisory fees for the Portfolio until February 1, 2007, and may reimburse the
Portfolio for certain operating expenses.
In addition, PFPC Trust Company, an indirect wholly-owned subsidiary of
The PNC Financial Services Group, Inc., serves as custodian for the Portfolio.
PFPC Inc. ("PFPC"), an indirect subsidiary of The PNC Financial Services Group,
Inc., serves as transfer and dividend disbursing agent. The custodian and the
transfer agent voluntarily agreed to waive a portion of their fees during the
period.
Prior to February 1, 2006, the Portfolio bore a transfer agent fee at an
annual rate not to exceed .018% of the annual average net assets of such
respective classes plus per account fees and disbursements.
Effective February 1, 2006, transfer agency fees are comprised of those
fees charged by the Transfer Agent for issuing and redeeming shares of each
class of each Portfolio, all shareholder communications including shareholder
reports, dividend and distribution notices, proxy materials for its meetings to
shareholders and maintenance of shareholder accounts.
PFPC and BlackRock Advisors, Inc. ("BAI"), act as co-administrators for
the Portfolio. For theses services, the co-administrators receive a combined
administration fee computed daily and payable monthly, based on a percentage of
the average daily net assets of the Portfolio. Prior to February 1, 2006 the
fee was paid at the following annual rates: 0.085% of the first $500 million,
0.075% of the next $500 million and 0.065% of assets in excess of $1 billion.
In addition, the Portfolio was charged an administration fee based on the
following percentage of average daily net assets: 0.145% of the first $500
million, 0.135% of the next $500 million and 0.125% of assets in excess of $1
billion. Effective February 1, 2006, the administration fee is paid at the
following annual rates: 0.075% of the first $500 million, 0.065% of the next
$500 million and 0.055% of assets in excess of $1 billion. In addition, the
Portfolio is charged an administration fee based on the following percentage of
average daily net assets of the Portfolio: 0.025% of the first $500 million,
0.015% of the next $500 million and 0.005% of assets in excess of $1 billion.
10
BLACKROCK FUNDS
PFPC and BAI may, at their discretion, waive all or any portion of their
administration fees for the Portfolio.
In the interest of limiting the expenses of the Portfolio, BlackRock and
the Portfolio have entered into a series of annual expense limitation
agreements. The agreements set a limit on certain operating expenses of the
Portfolio for the next year and require BlackRock to waive or reimburse fees or
expenses if these operating expenses exceed that limit. These expense limits
apply to the aggregate expenses incurred on a share class (excluding: interest,
taxes, brokerage commissions and other extraordinary expenses).
BlackRock has contractually agreed to waive or reimburse fees or expenses
in order to limit expenses to 0.26% of the Portfolio's average daily net
assets. This agreement is reviewed annually by the Fund's Board.
If in the following two years the operating expenses of the Portfolio that
previously received a waiver on reimbursement from BlackRock are less than the
expense limit for the 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 at the previous quarterly meeting.
At March 31, 2006, the amounts subject to possible future reimbursement
under the expense limitation agreement are as follows:
TOTAL WAIVERS
EXPIRING EXPIRING EXPIRING SUBJECT TO
JANUARY 31, 2007 JANUARY 31, 2008 JANUARY 31, 2009 REIMBURSEMENT
- ------------------ ------------------ ------------------ --------------
$ 158,645 $ 224,974 $ 14,933 $ 398,552
As of the six months ended March 31, 2006, affiliated payables were as
follows:
PFPC/(1)/ ......... $ 9,287
(1) - payables to PFPC are for Accounting, Administration, Custody and Transfer
Agent services.
(D) Purchase and Sales of Securities
For the six months ended March 31, 2006, purchases and sales of investment
securities, other than short-term investments and government securities, were
$57,035,859 and $50,740,751 respectively. For the six months ended March 31,
2006, purchases and sales of government securities were $2,505,807 and
$6,155,731, respectively.
(E) Capital Shares
Transactions in capital shares for each period were as follows:
FOR THE
SIX MONTHS FOR THE
ENDED YEAR ENDED
3/31/06 9/30/05
--------------- ---------------
Shares sold ............................................ 1,461,316 6,719,554
Shares issued in reinvestment of distributions ......... 176,931 316,853
Shares redeemed ........................................ (1,207,970) (6,614,510)
---------- ----------
Net increase ........................................... 430,277 421,897
========== ==========
On March 31, 2006, four shareholders held approximately 65% of the
outstanding shares of the Portfolio. Some of the shareholders are comprised of
omnibus accounts, which are held on behalf of several individual shareholders.
11
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
(F) Federal Tax Information
No provision is made for federal taxes as it is the Fund's intention to
have the Portfolio continue to qualify for and elect the tax treatment
applicable 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. Short-term capital and foreign currency gain distributions that
are reported in the Statement of Changes in Net Assets are reported as ordinary
income for federal income tax purposes.
Dividends from net investment income and distributions from net realized
capital gains are determined in accordance with U.S. federal income tax
regulations, which may differ from those amounts determined under accounting
principles generally accepted in the United States.
The tax character of distributions paid during the year ended September
30, 2005 was as follows:
ORDINARY LONG-TERM TOTAL
DATE INCOME CAPITAL GAIN DISTRIBUTIONS
- ----------- -------------- -------------- --------------
9/30/05 $ 2,097,256 $ 711,019 $ 2,808,275
12
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED)
(A) Board of Trustees' Consideration of the Advisory Agreement. The Board of
Trustees (the "Board") of BlackRock Funds (the "Fund"), including a
majority of the non-interested Trustees of the Fund (the "Independent
Trustees"), unanimously approved the renewal of the investment advisory
agreement (the "Advisory Agreement") with respect to the BlackRock
Strategic Portfolio I of the Fund (the "Portfolio"), at an in-person
meeting of the Board held on February 28, 2006. In connection with its
consideration of the Advisory Agreement, the Board met with personnel from
the investment adviser, BlackRock Financial Management, Inc. ("BlackRock"),
at an in-person meeting of the Board held on February 7, 2006. The Board
reviewed materials that it received in advance of that meeting, including
(i) fee information and expense ratios for the institutional share class of
the Portfolio in comparison to fee information and expense ratios for peer
funds of such Portfolio; (ii) information about the investment performance
of the Portfolio in comparison to the investment performance for peer funds
of such Portfolio; (iii) BlackRock's economic outlook for the Portfolio and
its general investment outlook for the markets; (iv) information on the
profitability of BlackRock and its affiliates with respect to the
Portfolio, including details regarding the methodology used to calculate
such profitability; (v) information regarding fees paid to service
providers that are BlackRock affiliates; and (vi) information regarding
compliance records and regulatory matters relating to BlackRock and the
Fund. In approving the Advisory Agreement, the Board, including all of the
Independent Trustees, considered each of the matters discussed below in
executive sessions held at the February 7 and February 28 meetings, during
which counsel to the Independent Trustees was present.
Nature, Extent and Quality of Services. The Board received and considered
various information and data regarding the nature, extent and quality of
services provided by BlackRock to the Portfolio under the Advisory
Agreement during the past year. The Board reviewed BlackRock's investment
philosophy and process used to manage the Portfolio, as well as a
description of its capabilities, personnel and services. The Board
considered the scope of services provided by BlackRock to the Portfolio
under the Advisory Agreement relative to services typically provided by
third parties to comparable mutual funds, and considered BlackRock's
in-house research capabilities as well as other resources available to its
personnel. The Board noted that the standard of care applicable under the
Advisory Agreement was comparable to that generally found in investment
advisory agreements of their nature. The Board considered the legal and
compliance programs of each of the Fund and BlackRock, as well as the
integrity of the systems in place to ensure implementation of such programs
and the records of each of the Fund and BlackRock with regard to these
matters. The Board also considered information relating to the
qualifications, backgrounds and responsibilities of BlackRock's investment
professionals and other personnel who provide services to the Portfolio
under the Advisory Agreement, and took into account the time and attention
devoted by BlackRock senior management to the Portfolio. The Board also
considered BlackRock's general business reputation and overall financial
resources and concluded that BlackRock would be able to meet any reasonably
foreseeable obligation under the Advisory Agreement.
Following consideration of this information, the Board, including all of
the Independent Trustees, concluded that the nature, extent and quality of
the services provided by BlackRock to the Portfolio under the Advisory
Agreement were consistent with the Portfolio's operational requirements and
reasonable in terms of approving the renewal of such Advisory Agreement.
14
BLACKROCK FUNDS
Advisory Fees. The Board received and considered statistical information
regarding the fees and expense ratios of the institutional share class of
the Portfolio. The Board compared the advisory fees, both before
(contractual) and after (actual) any fee waivers and expense
reimbursements, and total expenses of the Portfolio against the fees and
total expenses of the Portfolio's peers selected by Lipper, Inc.
("Lipper"), an independent provider of investment company data. The Board
was provided with a description of the methodology used by Lipper to
determine the peers for the Portfolio.
In considering the fee and expense data provided by Lipper, the Board noted
that:
o the Portfolio had contractual advisory fees and expenses that
were equal to or lower than the median for its peers; and
o the Portfolio had actual advisory fees and expenses that were
equal to or lower than the median for its peers.
In addition to Lipper data, the Board also took into account the complexity
of the investment management of the Portfolio relative to its peers. The
Board was also provided with comparative information about services
rendered and fee rates offered to other similar clients advised by
BlackRock, including separate accounts.
Following consideration of this information, the Board, including all of
the Independent Trustees, concluded that the contractual fees to be paid to
BlackRock pursuant to the Advisory Agreement are fair and reasonable in
light of the services being provided.
Fund Performance. The Board received and considered information about the
Portfolio's one-, three- and five-year investment performance for the
period ended November 30, 2005, in comparison to the performance of its
performance peers selected by Lipper. The Board was provided with a
description of the methodology used by Lipper to select the peers. In
addition, the Board reviewed BlackRock's market outlook and discussed other
factors relevant to the performance of the Portfolio.
In considering the performance data provided by Lipper, the Board noted
that the Portfolio had investment performance during at least two of the
one-year, three-year and five-year periods that was below the median for
its peers. The Board discussed the performance issues of the Portfolio with
BlackRock, and was satisfied that appropriate measures were being taken to
address them.
Profitability. The Board considered the level of BlackRock's and its
affiliates' profits in respect of their relationship with the Portfolio.
This consideration included a broad review of BlackRock's methodology in
allocating its costs to the management of the Portfolio. The Board
considered the profits realized by BlackRock and its affiliates in
connection with the operation of the Portfolio and whether the amount of
profit is a fair profit relative to their relationship with the Portfolio.
The Board also considered BlackRock's profit margins in comparison with
available industry data. The Board, including all of the Independent
Trustees, concluded that BlackRock's profitability with respect to the
Portfolio is reasonable relative to the services provided.
Economies of Scale. The Board considered whether there have been economies
of scale in respect of the management of the Portfolio, whether the
Portfolio has appropriately benefited from any economies of scale, and
whether there is potential for realization of any further economies of
scale. The Board also considered the fee waivers and expense reimbursement
arrangements by BlackRock for the Portfolio. The Board, including all of
the Independent Trustees, determined that the advisory fee structure was
reasonable and that no changes were currently necessary to realize any
economies of scale.
15
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED) (CONCLUDED)
Other Benefits to BlackRock. The Board also took into account other
ancillary benefits that BlackRock may derive from its relationship with the
Portfolio, such as BlackRock's ability to leverage its investment
professionals that manage other portfolios, an increase in BlackRock's
profile in the broker-dealer community, and the engagement of BlackRock's
affiliates as service providers to the Portfolio, including for
administrative, transfer agency, distribution and custodial services. The
Board, including all of the Independent Trustees, concluded that these
ancillary benefits that BlackRock and its affiliates could receive with
regard to providing investment advisory and other services to the Portfolio
were consistent with those generally available to other mutual fund
sponsors.
No single factor was considered in isolation or to be determinative in the
Board's decision to approve the renewal of the Advisory Agreement. Rather,
the Board concluded, in light of a weighing and balancing of all factors
considered, that it was in the best interests of the Portfolio to approve
the continuation of the Advisory Agreement, including the fees to be
charged for services thereunder.
(B) The Fund's Audit Committee approved engaging Deloitte & Touche LLP as the
independent registered public accounting firm to audit the Fund's financial
statements for fiscal year 2006. On November 29, 2005, a majority of the
Fund's Board of Trustees, including a majority of the independent Trustees,
approved the appointment of Deloitte & Touche LLP as the Fund's independent
registered public accounting firm for the Fund's fiscal 2006 audit, subject
to the right of the Fund, by a majority vote of the shareholders at any
meeting called for that purpose, to terminate the appointment without
penalty.
(C) As previously disclosed, BlackRock has received subpoenas from various
federal and state governmental and regulatory authorities and various
information requests from the Securities and Exchange Commission in
connection with ongoing industry-wide investigations of mutual fund
matters.
(D) BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill Lynch") announced
on February 15, 2006 that they had reached an agreement to combine Merrill
Lynch's investment management business, Merrill Lynch Investment Managers,
with BlackRock, Inc. to create a new independent company. Merrill Lynch
will have a 49.8% economic interest and a 45% voting interest in the
combined company and The PNC Financial Services Group, Inc. ("PNC"), which
currently holds a majority interest in BlackRock, Inc., will have
approximately a 34% economic and voting interest. The new company will
operate under the BlackRock name and be governed by a board of directors
with a majority of independent members. Each of Merrill Lynch and PNC has
agreed that it will vote all of its shares on all matters in accordance
with the recommendation of BlackRock's board in order to assure its
independence. Completion of the transaction is subject to various
regulatory approvals, client consents, approval by BlackRock, Inc.
shareholders and customary conditions.
(E) The amounts estimated to be paid by the Fund to the Chief Compliance
Officer (CCO) and certain of his staff for the six months ended March 31,
2006, are $255,572.
16
BLACKROCK FUNDS
Investment Adviser
BlackRock Financial Management, Inc.
New York, New York 10022
Custodian
PFPC Trust Company
Philadelphia, Pennsylvania 19153
Co-Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware 19809
Co-Administrator
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Distributor
BlackRock Distributors, Inc.
King of Prussia, Pennsylvania 19406
Counsel
Simpson Thacher & Bartlett LLP
New York, New York 10017
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Philadelphia, Pennsylvania 19103
The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Trustees. A
description of the policies and procedures that BlackRock and its affiliates
use to determine how to vote proxies relating to portfolio securities is
available without charge, upon request, by calling 1-800-441-7762, or on the
website of the Securities and Exchange Commission (the "Commission") at
http://www.sec.gov.
Information on how proxies relating to the Fund's voting securities were voted
(if any) by BlackRock during the most recent 12-month period ended June 30th is
available, upon request and without charge, by calling (800) 441-7762 or on the
website of the Commission at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings for the first and
third quarters of its fiscal year with the Commission on Form N-Q. The Fund's
Form N-Q is available on the Commission's website at http://www.sec.gov and may
be reviewed and copied at the Commission's Public Reference Room in Washington,
D.C. Information regarding the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The Fund's Form N-Q may also be obtained
upon request, without charge, by calling (800) 441-7762.
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Fund shares.
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.
[GRAPHIC OMITTED]
SPI 3/06
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED
INCOME LIQUIDITYREAL ESTATE BlackRock Funds
Taxable Bond Portfolios
Semi-Annual Report
March 31, 2006 (Unaudited)
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BLACKROCK FUNDS
TAXABLE BOND PORTFOLIOS
*Enhanced Income
*Low Duration Bond
*Intermediate Government Bond
*Intermediate Bond
*Intermediate PLUS Bond
*Core Bond Total Return
*Core PLUS Total Return
*Government Income
*Inflation Protected Bond
*GNMA
*Managed Income
*International Bond
*High Yield Bond
TABLE OF CONTENTS
Shareholder Letter..........................................................1
Portfolio Summaries
Enhanced Income.........................................................2-3
Low Duration Bond.......................................................4-5
Intermediate Government Bond............................................6-7
Intermediate Bond.......................................................8-9
Intermediate PLUS Bond................................................10-11
Core Bond Total Return................................................12-13
Core PLUS Total Return................................................14-15
Government Income.....................................................16-17
Inflation Protected Bond..............................................18-19
GNMA..................................................................20-21
Managed Income........................................................22-23
International Bond....................................................24-25
High Yield Bond.......................................................26-27
Note on Performance Information..........................................28
Schedules of Investments.............................................29-108
Investment Abbreviations................................................109
Portfolio Financial Statements
Statements of Assets and Liabilities................................110-115
Statements of Operations............................................116-117
Statements of Cash Flows
Low Duration Bond.......................................................118
Intermediate Government Bond............................................119
Intermediate Bond.......................................................120
Intermediate PLUS Bond..................................................121
Managed Income..........................................................122
Statements of Changes in Net Assets.................................124-127
Financial Highlights................................................128-145
Notes to Financial Statements.......................................147-178
Additional Information..............................................179-182
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 generally receive any nonpublic personal information
relating to its shareholders who purchase shares through their broker-dealers.
However, in certain limited circumstances, BlackRock receives a limited amount
of nonpublic personal information from broker-dealers in connection with
monitoring for inappropriate trading activity. 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.
BLACKROCK FUNDS
March 31, 2006
Dear Shareholder:
You may be aware that on February 15, 2006, we announced that BlackRock
and Merrill Lynch Investment Managers (MLIM) intended to unite to create a new
independent asset management company.
We believe this combination of asset management strength will benefit our
investors. BlackRock is one of the largest publicly traded investment
management firms in the United States, with approximately $463 billion in
assets under management and over 1,800 employees. We manage assets on behalf of
institutional and individual investors worldwide through a variety of equity,
fixed income, cash management and alternative investment products. MLIM is also
a leading investment management organization, with over $576 billion in assets
under management globally and over 2,700 employees in 17 countries. It offers
over 100 investment strategies in vehicles ranging from mutual funds to
institutional portfolios.
At the completion of the transaction, which is expected at the end of the
third quarter of this year, the combined firm will be a top-ten investment
manager worldwide, with more than $1 trillion in assets under management. The
combined company will provide a wider selection of high-quality investment
solutions across a range of asset classes and investment styles. BlackRock and
MLIM possess complementary capabilities that together create a well-rounded
organization, uniting some of the finest money managers in the industry. At the
same time, the firms share similar values and beliefs - focused on delivering
excellence to clients, they both make investment performance their most
important mission. In short, the combination reinforces our commitment to
shareholders.
As a shareholder in one or more BlackRock-advised mutual funds, you will
receive proxy materials in the coming weeks in connection with this
transaction. After you receive this information, do not hesitate to contact
your financial advisor should you have any questions or concerns.
As always, we thank you for entrusting us with your investment assets, and
we look forward to continuing to serve your investment needs with even greater
strength and scale.
Sincerely,
[GRAPHIC OMITTED]
Anne F. Ackerley
Managing Director
BlackRock Advisors, Inc.
Data, including assets under management, are as of March 31, 2006.
1
ENHANCED INCOME PORTFOLIO
Total Net Assets (3/31/06): $58.2 million
Performance Benchmark:
Citigroup 1 Year Treasury Index
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management by investing primarily in bonds. The management
team selects bonds from several sectors including: U.S. Treasuries and agency
securities, commercial and residential mortgage-backed securities ("CMBS" and
"MBS"), collateralized mortgage obligations ("CMOs"), asset-backed securities
("ABS"), corporate bonds and non-U.S. Government securities. The Portfolio may
also invest in money market instruments. The Portfolio's dollar weighted
effective duration will be between 0 and 18 months during normal market
conditions. Individual investments will be restricted to those securities whose
maximum effective duration at the time of purchase is less than 5 years.
Recent Portfolio Management Activity:
o The BlackRock Share class outperformed the benchmark for the
semi-annual period. The Institutional Share class performed in-line with the
benchmark for the semi-annual period. The Investor A and Service Share classes
underperformed the benchmark for the semi-annual period.
o During the semi-annual period, yields rose as the Federal Reserve
("Fed") continued to "normalize" short-term interest rates. The Federal Open
Market Committee voted a 0.25% tightening at each of its four meetings, lifting
the Fed Funds target rate by 1.00% to 4.75%, the highest level in five years.
The yield curve flattened as the front end of the yield curve tracked the
increases in the Fed Funds rate while the long end of the yield curve continued
to trade in a relatively narrow range, supported by low volatility, benign
inflation and demand from overseas investors. While economic activity slowed
over the early part of the semi-annual period in the wake of a catastrophic
2005 hurricane season, the ultimate impact on interest rates proved to be
short-lived as growth rebounded nicely during the opening months of 2006.
Longer-term interest rates, as measured by the 5-year Treasury, increased by
0.62%, ending the period at 4.81%, while shorter-term interest rates, as
measured by the 2-year Treasury, ended the period at 4.82%.
o All major domestic spread sectors - CMBS, investment grade corporate
securities, MBS, ABS and agencies - outperformed duration-adjusted Treasuries
during the semi-annual period. Much of the performance can be attributed to
increased acceptance of risk by investors during the second half of the
semi-annual period as all domestic spread sectors outperformed
duration-adjusted Treasuries. CMBS was the best performing spread sector even
though the sector struggled during the first half of the semi-annual period due
to a challenging technical environment. However, the sector enjoyed strong
demand for new issues in the latter half of the period due to favorable
relative valuations and new investors to the sector. Investment grade
corporate securities was the weakest performing spread sector due to growing
event risk, auto sector weakness, a robust new issue calendar and growing
pressures on margins. MBS benefited from strong performance due to a
combination of low volatility and confidence that the Fed is near its
tightening campaign. ABS enjoyed outperformance relative to duration-adjusted
Treasuries due to strong demand as the sector remained attractively valued
versus other spread sectors. Lastly, agencies continued to trade in a narrow
range versus swaps despite Congress' failure to reach a resolution on
Government-Sponsored Enterprise reform.
o During the semi-annual period, the Portfolio was short duration versus
the benchmark with a slight steepening bias. The Portfolio's duration position
versus the benchmark benefited performance. With respect to sector positioning,
contributors to performance included allocations to CMBS and ABS as both
sectors outperformed duration-adjusted Treasuries. CMBS continued to offer
attractive relative valuations; specifically, seasoned, high quality issues.
Credit card and home equity issues continued to provide areas of opportunities
within ABS. Despite tight valuations, the portfolio management team believes
the sector remains attractive relative to other spread sectors. Within the
mortgage sector, the Portfolio continued to favor sectors such as CMOs and
hybrid adjustable rate mortgages which have lagged MBS in the recent spread
tightening cycle. During the period, the Portfolio increased its allocation to
corporate securities on a duration-weight basis, with a bias toward financials
and higher credit quality issues. The Portfolio also maintained a small
allocation to taxable municipals. Lastly, the Portfolio reduced its allocation
to callable debentures in the agency sector.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ENHANCED INCOME
PORTFOLIO
AND THE CITIGROUP 1 YEAR TREASURY INDEX FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A Citigroup 1 Year Treasury Index
03/19/2004 10,000 9,699 10,000
03/31/2004 10,013 9,700 10,016
06/30/2004 9,988 9,660 9,983
09/30/2004 10,040 9,688 10,031
12/31/2004 10,087 9,696 10,047
03/31/2005 10,112 9,724 10,068
06/30/2005 10,187 9,797 10,152
09/30/2005 10,245 9,845 10,197
12/31/2005 10,312 9,899 10,279
03/31/2006 10,405 9,979 10,357
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year From Inception
------------ ---------------
BlackRock Class 3.09% 2.14%
Institutional Class 2.89% 2.03%
Service Class 2.61% 1.92%
Investor A Class (Load Adjusted) (0.51)% (0.01)%
Investor A Class (NAV) 2.62% 1.47%
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: BLACKROCK SHARES, 3/4/04; INSTITUTIONAL SHARES,
3/19/04; SERVICE SHARES, 3/19/04; INVESTOR A SHARES, 3/19/04. SEE "NOTE ON
PERFORMANCE INFORMATION" ON PAGE 28 FOR FURTHER INFORMATION ON HOW PERFORMANCE
DATA WAS CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.
2
ENHANCED INCOME PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 92.8%
AA 3.9
A 1.6
BBB 1.7
-----
Total 100.0%
=====
Sector Allocation (% of long-term investments)
Asset Backed Securities 37.6%
U.S. Government & Agency Obligations 15.6
Commercial Mortgage Backed Securities 14.4
Collateralized Mortgage Obligations 14.1
Mortgage Pass-Throughs 9.5
Corporate Bonds 8.3
Multiple Class Mortgage Pass-Throughs 0.4
Taxable Municipal Bonds 0.1
-----
Total 100.0%
=====
Portfolio Statistics
Average maturity (years) 1.54
Effective Duration2 0.85
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Effective duration is typically calculated for
bonds with embedded options and assumes that expected cash flows will
fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
---------------------------------------------------------------
BlackRock Institutional Service Investor
Class Class Class A Class
--------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,017.00 1,015.60 1,015.20 1,013.60
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 1.51 1.91 3.67 3.82
Hypothetical Expenses
(5% return before expenses)
---------------------------------------------------------------
BlackRock Institutional Service Investor
Class Class Class A Class
--------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,023.49 1,023.08 1,021.31 1,021.16
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 1.51 1.92 3.69 3.84
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.30%, 0.38%, 0.73%, and 0.76% for the BlackRock, Institutional,
Service, and Investor A share class, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
3
LOW DURATION BOND PORTFOLIO
Total Net Assets (3/31/06): $1.4 billion
Performance Benchmark:
Merrill Lynch 1-3 Year Treasury Index
Investment Approach:
Seeks to realize a rate of return that exceeds the total return of the
Merrill Lynch 1-3 Year Treasury Index by investing primarily in investment
grade bonds that allow it to maintain an average portfolio duration that is
within +/- 20% of the duration of the benchmark. The management team selects
bonds from several sectors including: U.S. Treasuries and agency securities,
commercial and residential mortgage-backed securities ("CMBS" and "MBS"),
collateralized mortgage obligations ("CMOs"), asset-backed securities ("ABS"),
and corporate bonds. The Portfolio may invest up to 5% of its assets in
non-investment grade bonds and up to 10% of its assets in non-dollar
denominated bonds of issuers located outside of the United States. Securities
are purchased for the Portfolio when the management team determines that they
have the potential for above-average total return.
Recent Portfolio Management Activity:
o The BlackRock and Institutional Share classes outperformed the
benchmark for the semi-annual period. The Investor A, B, C and Service Share
classes underperformed the benchmark for the semi-annual period.
o During the semi-annual period, yields rose as the Federal Reserve
("Fed") continued to "normalize" short-term interest rates. The Federal Open
Market Committee voted a 0.25% tightening at each of its four meetings, lifting
the Fed Funds target rate by 1.00% to 4.75%, the highest level in five years.
The yield curve flattened as the front end of the yield curve tracked the
increases in the Fed Funds rate while the long end of the yield curve continued
to trade in a relatively narrow range, supported by low volatility, benign
inflation and demand from overseas investors. While economic activity slowed
over the early part of the semi-annual period in the wake of a catastrophic
2005 hurricane season, the ultimate impact on interest rates proved to be
short-lived as growth rebounded nicely during the opening months of 2006.
Longer-term interest rates, as measured by the 5-year Treasury, increased by
0.62%, ending the period at 4.81%, while shorter-term interest rates, as
measured by the 2-year Treasury, ended the period at 4.82%.
o All major domestic spread sectors - CMBS, investment grade corporate
securities, MBS, ABS and agencies - outperformed duration-adjusted Treasuries
during the semi-annual period. Much of the performance can be attributed to
increased acceptance of risk by investors during the second half of the
semi-annual period as all domestic spread sectors outperformed
duration-adjusted Treasuries. CMBS was the best performing spread sector even
though the sector struggled during the first half of the semi-annual period due
to a challenging technical environment. However, the sector enjoyed strong
demand for new issues in the latter half of the period due to favorable
relative valuations and new investors to the sector. Investment grade
corporate securities was the weakest performing spread sector due to growing
event risk, auto sector weakness, a robust new issue calendar and growing
pressures on margins. MBS benefited from strong performance due to a
combination of low volatility and confidence that the Fed is near its
tightening campaign. ABS enjoyed outperformance relative to duration-adjusted
Treasuries due to strong demand as the sector remained attractively valued
versus other spread sectors. Lastly, agencies continued to trade in a narrow
range versus swaps despite Congress' failure to reach a resolution on
Government-Sponsored Enterprise reform.
o During the semi-annual period, the Portfolio was short duration versus
the benchmark with a slight steepening bias. The Portfolio's duration position
versus the benchmark benefited performance. With respect to sector positioning,
contributors to performance included allocations to CMBS and ABS as both
sectors outperformed duration-adjusted Treasuries. CMBS continued to offer
attractive relative valuations; specifically, seasoned, high quality issues.
Credit card and home equity issues continued to provide areas of opportunities
within ABS. Despite tight valuations, the portfolio management team believes
the sector remains attractive relative to other spread sectors. Within the
mortgage sector, the Portfolio continued to favor sectors such as CMOs and
hybrid adjustable rate mortgages which have lagged MBS in the recent spread
tightening cycle. During the period, the Portfolio increased its allocation to
corporate securities on a duration-weight basis, with a bias toward financials
and higher credit quality issues. The Portfolio also maintained a small
allocation to taxable municipals, and reduced its allocation to callable
debentures in the agency sector. Lastly, during the semi-annual period, the
Portfolio had on a Euro curve flattener trade as well as an outright long
position in New Zealand rates, both of which contributed to performance.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE LOW DURATION BOND
PORTFOLIO AND
THE MERRILL LYNCH 1-3 YEAR TREASURY INDEX FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Merrill Lynch 1-3 Year
Institutional Investor A Treasury Index
03/31/1996 10,000 9,703 10,000
06/30/1996 10,109 9,797 10,101
09/30/1996 10,274 9,945 10,268
12/31/1996 10,492 10,144 10,463
03/31/1997 10,541 10,179 10,532
06/30/1997 10,768 10,387 10,764
09/30/1997 10,982 10,580 10,975
12/31/1997 11,127 10,708 11,159
03/31/1998 11,308 10,870 11,323
06/30/1998 11,491 11,033 11,496
09/30/1998 11,781 11,298 11,850
12/31/1998 11,865 11,365 11,940
03/31/1999 12,005 11,485 12,012
06/30/1999 12,085 11,549 12,080
09/30/1999 12,242 11,684 12,233
12/31/1999 12,347 11,771 12,306
03/31/2000 12,509 11,911 12,460
06/30/2000 12,711 12,090 12,674
09/30/2000 13,012 12,362 12,941
12/31/2000 13,368 12,685 13,290
03/31/2001 13,737 13,033 13,657
06/30/2001 13,893 13,153 13,817
09/30/2001 14,340 13,561 14,284
12/31/2001 14,400 13,615 14,393
03/31/2002 14,437 13,620 14,394
06/30/2002 14,760 13,908 14,736
09/30/2002 15,104 14,229 15,091
12/31/2002 15,255 14,345 15,221
03/31/2003 15,342 14,414 15,311
06/30/2003 15,495 14,560 15,421
09/30/2003 15,531 14,580 15,486
12/31/2003 15,543 14,579 15,510
03/31/2004 15,689 14,689 15,665
06/30/2004 15,543 14,554 15,498
09/30/2004 15,690 14,681 15,648
12/31/2004 15,753 14,716 15,651
03/31/2005 15,745 14,699 15,610
06/30/2005 15,871 14,821 15,788
09/30/2005 15,915 14,838 15,802
12/31/2005 15,994 14,902 15,911
03/31/2006 16,095 14,985 15,973
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------------ ------------ ---------- ----------
BlackRock Class 2.37% 1.76% 3.35% 5.00%
Institutional Class 2.22% 1.61% 3.22% 4.87%
Service Class 1.95% 1.33% 2.92% 4.57%
Investor A Class (Load Adjusted) (1.12)% 0.27% 2.21% 4.13%
Investor A Class (NAV) 1.95% 1.30% 2.83% 4.44%
Investor B Class (Load Adjusted) (3.25)% (0.58)% 1.72% 3.72%
Investor B Class (NAV) 1.19% 0.55% 2.09% 3.72%
Investor C Class (Load Adjusted) 0.30% 0.55% 2.09% 3.72%
Investor C Class (NAV) 1.29% 0.55% 2.09% 3.72%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE
PORTFOLIO'S SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 7 /17/92;
SERVICE SHARES, 1 /12 /96; INVESTOR A SHARES, 1 /12 /96; INVESTOR B SHARES,
11/18 /96; INVESTOR C SHARES,
2 /24 /97; AND BLACKROCK SHARES, 6/3/97. SEE "NOTE ON PERFORMANCE INFORMATION"
ON PAGE 28 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED,
INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.
4
LOW DURATION BOND PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 89.3%
AA 6.5
A 1.3
BBB 2.6
Unrated 0.3
-----
Total 100.0%
=====
Sector Allocation (% of long-term investments)
Asset Backed Securities 39.7%
Collateralized Mortgage Obligations 16.9
Commercial Mortgage Backed Securities 13.4
Corporate Bonds 12.9
Mortgage Pass-Throughs 9.7
U.S. Government & Agency Obligations 4.5
Foreign Bonds 1.4
Taxable Municipal Bonds 0.7
Preferred Stocks 0.7
Multiple Class Mortgage Pass-Throughs 0.1
------
Total 100.0%
======
Portfolio Statistics
Average maturity (years) 1.99
Effective Duration2 1.72
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Effective duration is typically calculated for
bonds with embedded options and assumes that expected cash flows will
fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,012.00 1,011.30 1,009.90 1,009.90 1,006.10 1,006.10
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.01 2.61 4.01 4.06 7.80 7.80
Hypothetical Expenses
(5% return before expenses)
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,022.98 1,022.37 1,020.96 1,020.91 1,017.12 1,017.12
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.02 2.63 4.04 4.09 7.88 7.88
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.40%, 0.52%, 0.80%, 0.81%, 1.56%, and 1.56% for the BlackRock,
Institutional, Service, Investor A, B, and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period).
5
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
Total Net Assets (3/31/06): $586.8 million
Performance Benchmark:
Lehman Brothers Intermediate Government Index
Investment Approach:
Seeks to maximize total return consistent with income generation and
prudent investment management, by investing primarily in the highest rated
government and agency bonds that allow it to maintain an average portfolio
duration that is within +/- 20% of the Lehman Brothers Intermediate Government
Index. The Portfolio normally invests at least 80% of its assets in bonds that
are issued or guaranteed by the U.S. Government and its agencies. The
management team selects bonds from several sectors including: U.S. Treasuries
and agency securities, commercial and residential mortgage-backed securities
("CMBS" and "MBS"), collateralized mortgage obligations ("CMOs"), asset-backed
securities ("ABS") and corporate bonds. Securities are purchased for the
Portfolio when the management team determines that they have the potential for
above-average total return.
Recent Portfolio Management Activity:
o The Institutional and Service Share classes outperformed the benchmark
for the semi-annual period. The Investor A Share class performed in-line with
the benchmark for the semi-annual period. The Investor B and C Share classes
underperformed the benchmark for the semi-annual period.
o During the semi-annual period, yields rose as the Federal Reserve
("Fed") continued to "normalize" short-term interest rates. The Federal Open
Market Committee voted a 0.25% tightening at each of its four meetings, lifting
the Fed Funds target rate by 1.00% to 4.75%, the highest level in five years.
The yield curve flattened as the front end of the yield curve tracked the
increases in the Fed Funds rate while the long end of the yield curve continued
to trade in a relatively narrow range, supported by low volatility, benign
inflation and demand from overseas investors. While economic activity slowed
over the early part of the semi-annual period in the wake of a catastrophic
2005 hurricane season, the ultimate impact on interest rates proved to be
short-lived as growth rebounded nicely during the opening months of 2006.
Longer-term interest rates, as measured by the 10-year Treasury, ended the
period at 4.85%, while shorter-term interest rates, as measured by the 2-year
Treasury, ended the period at 4.82%.
o All major domestic spread sectors - CMBS, investment grade corporate
securities, MBS, ABS and agencies - outperformed duration-adjusted Treasuries
during the semi-annual period. Much of the performance can be attributed to
increased acceptance of risk by investors during the second half of the
semi-annual period as all domestic spread sectors outperformed
duration-adjusted Treasuries. CMBS was the best performing spread sector even
though the sector struggled during the first half of the semi-annual period due
to a challenging technical environment. However, the sector enjoyed strong
demand for new issues in the latter half of the period due to favorable
relative valuations and new investors to the sector. Investment grade
corporate securities was the weakest performing spread sector due to growing
event risk, auto sector weakness, a robust new issue calendar and growing
pressures on margins. MBS benefited from strong performance due to a
combination of low volatility and confidence that the Fed is near its
tightening campaign. ABS enjoyed outperformance relative to duration-adjusted
Treasuries due to strong demand as the sector remained attractively valued
versus other spread sectors. Lastly, agencies continued to trade in a narrow
range versus swaps despite Congress' failure to reach a resolution on
Government-Sponsored Enterprise reform.
o During the semi-annual period, the Portfolio benefited from its short
duration positioning relative to its benchmark as interest rates rose. The
Portfolio's overweight to agencies benefited performance as the sector
outperformed duration-adjusted Treasuries for the semi-annual period. The
Portfolio continued to maintain a focus on callable debentures. With respect
to non-benchmark allocations, the Portfolio favored CMOs and hybrid adjustable
rate mortgages which have lagged MBS in the recent spread tightening cycle.
The Portfolio's allocation to ABS and CMBS contributed to performance as both
sectors outperformed duration-adjusted Treasuries. CMBS continued to offer
attractive relative valuations; specifically, seasoned, high quality issues.
Credit card and home equity issues continued to provide areas of opportunities
within ABS. Despite tight valuations, the portfolio management team believes
the sector remains attractive relative to other spread sectors.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INTERMEDIATE
GOVERNMENT BOND
PORTFOLIO AND THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT INDEX FOR THE PAST
TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A Lehman Brothers Intermediate Government Index
03/31/1996 10,000 9,596 10,000
06/30/1996 10,060 9,642 10,068
09/30/1996 10,239 9,802 10,240
12/31/1996 10,496 10,037 10,477
03/31/1997 10,494 10,023 10,474
06/30/1997 10,787 10,291 10,767
09/30/1997 11,066 10,544 11,042
12/31/1997 11,308 10,762 11,287
03/31/1998 11,476 10,909 11,456
06/30/1998 11,697 11,106 11,668
09/30/1998 12,154 11,527 12,212
12/31/1998 12,169 11,528 12,243
03/31/1999 12,189 11,534 12,209
06/30/1999 12,125 11,459 12,186
09/30/1999 12,245 11,559 12,309
12/31/1999 12,270 11,581 12,303
03/31/2000 12,469 11,743 12,505
06/30/2000 12,685 11,944 12,732
09/30/2000 13,046 12,270 13,074
12/31/2000 13,527 12,707 13,592
03/31/2001 13,960 13,099 14,000
06/30/2001 14,018 13,150 14,058
09/30/2001 14,728 13,812 14,756
12/31/2001 14,712 13,768 14,736
03/31/2002 14,701 13,741 14,697
06/30/2002 15,227 14,215 15,266
09/30/2002 15,903 14,828 16,001
12/31/2002 16,045 14,943 16,157
03/31/2003 16,186 15,070 16,307
06/30/2003 16,478 15,310 16,582
09/30/2003 16,395 15,215 16,560
12/31/2003 16,355 15,174 16,527
03/31/2004 16,673 15,450 16,891
06/30/2004 16,343 15,128 16,502
09/30/2004 16,725 15,449 16,875
12/31/2004 16,790 15,493 16,912
03/31/2005 16,692 15,403 16,797
06/30/2005 17,020 15,690 17,185
09/30/2005 16,955 15,615 17,095
12/31/2005 17,041 15,678 17,197
03/31/2006 17,055 15,660 17,146
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------------ ------------ ---------- ----------
Institutional Class 2.18% 1.76% 4.08% 5.48%
Service Class 1.87% 1.45% 3.76% 5.16%
Investor A Class (Load Adjusted) (2.43)% (0.08)% 2.79% 4.59%
Investor A Class (NAV) 1.67% 1.29% 3.64% 5.02%
Investor B Class (Load Adjusted) (3.43)% (0.53)% 2.50% 4.26%
Investor B Class (NAV) 1.00% 0.56% 2.85% 4.26%
Investor C Class (Load Adjusted) 0.02% 0.56% 2.87% 4.27%
Investor C Class (NAV) 1.00% 0.56% 2.87% 4.27%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 4/20/92; INVESTOR A
SHARES, 5 /11/92; SERVICE SHARES, 7/29/93; INVESTOR C SHARES, 10/8/96; AND
INVESTOR B SHARES, 10 /11/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE
28 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING
IMPORTANT INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.
6
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 98.7%
AA 0.4
A 0.3
Unrated 0.6
-----
Total 100.0%
=====
Sector Allocation (% of long-term investments)
U.S. Government & Agency Obligations 45.8%
Mortgage Pass-Throughs 26.5
Collateralized Mortgage Obligations 12.9
Commercial Mortgage Backed Securities 6.8
Corporate Bonds 3.9
Asset Backed Securities 3.1
Taxable Municipal Bonds 0.7
Project Loans 0.2
Multiple Class Mortgage Pass-Throughs 0.1
------
Total 100.0%
======
Portfolio Statistics
Average maturity (years) 3.33
Effective Duration2 2.90
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Effective duration is typically calculated for
bonds with embedded options and assumes that expected cash flows will
fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,005.90 1,004.40 1,002.90 1,000.00 1,000.10
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.00 4.50 4.99 8.83 8.83
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,021.97 1,020.46 1,019.95 1,016.06 1,016.06
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.03 4.54 5.05 8.94 8.94
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.60%, 0.90%, 1.00%, 1.77%, and 1.77% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
7
INTERMEDIATE BOND PORTFOLIO
Total Net Assets (3/31/06): $871.8 million
Performance Benchmark:
Lehman Brothers Intermediate Government/Credit Index
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management by investing primarily in bonds that allow it to
maintain an average portfolio duration that is within +/- 20% of the Lehman
Brothers Intermediate Government/Credit Index. The Portfolio normally invests
at least 80% of its assets in bonds and only buys securities rated investment
grade at the time of purchase by at least one major rating agency or determined
by the management team to be of similar quality. The portfolio management team
selects bonds from several sectors including: U.S. Treasuries and agency
securities, commercial and residential mortgage-backed securities ("CMBS" and
"MBS"), collateralized mortgage obligations ("CMOs"), asset-backed securities
("ABS") and corporate bonds. Securities are purchased for the Portfolio when
the management team determines that they have the potential for above-average
total return. The Portfolio's dollar-weighted average maturity will be between
3 and 10 years.
Recent Portfolio Management Activity:
o The BlackRock, Institutional and Investor A Share classes outperformed
the benchmark for the semi-annual period. The Investor B, C and Service Share
classes underperformed the benchmark for the semi-annual period.
o During the semi-annual period, yields rose as the Federal Reserve
("Fed") continued to "normalize" short-term interest rates. The Federal Open
Market Committee voted a 0.25% tightening at each of its four meetings, lifting
the Fed Funds target rate by 1.00% to 4.75%, the highest level in five years.
The yield curve flattened as the front end of the yield curve tracked the
increases in the Fed Funds rate while the long end of the yield curve continued
to trade in a relatively narrow range, supported by low volatility, benign
inflation and demand from overseas investors. While economic activity slowed
over the early part of the semi-annual period in the wake of a catastrophic
2005 hurricane season, the ultimate impact on interest rates proved to be
short-lived as growth rebounded nicely during the opening months of 2006.
Longer-term interest rates, as measured by the 10-year Treasury, ended the
period at 4.85%, while shorter-term interest rates, as measured by the 2-year
Treasury, ended the period at 4.82%.
o All major domestic spread sectors - CMBS, investment grade corporate
securities, MBS, ABS and agencies - outperformed duration-adjusted Treasuries
during the semi-annual period. Much of the performance can be attributed to
increased acceptance of risk by investors during the second half of the
semi-annual period as all domestic spread sectors outperformed
duration-adjusted Treasuries. CMBS was the best performing spread sector even
though the sector struggled during the first half of the semi-annual period due
to a challenging technical environment. However, the sector enjoyed strong
demand for new issues in the latter half of the period due to favorable
relative valuations and new investors to the sector. Investment grade
corporate securities was the weakest performing spread sector due to growing
event risk, auto sector weakness, a robust new issue calendar and growing
pressures on margins. MBS benefited from strong performance due to a
combination of low volatility and confidence that the Fed is near its
tightening campaign. ABS enjoyed outperformance relative to duration-adjusted
Treasuries due to strong demand as the sector remained attractively valued
versus other spread sectors. Lastly, agencies continued to trade in a narrow
range versus swaps despite Congress' failure to reach a resolution on
Government-Sponsored Enterprise reform.
o During the semi-annual period, the Portfolio was short duration
relative to its benchmark which benefited performance as interest rates rose.
While the Portfolio maintained an underweight to corporate securities, which
detracted from performance, this was offset by security selection within
corporate securities, which benefited performance for the period. Within the
corporate sector, the Portfolio exhibited a bias towards financials and higher
quality issues. The Portfolio's allocations to non-benchmark sectors CMBS and
ABS aided performance as both sectors outperformed duration-adjusted
Treasuries. CMBS continued to offer attractive relative valuations;
specifically, seasoned, high quality issues. Credit card and home equity
issues continued to provide areas of opportunities within ABS. The portfolio
management team favored higher quality ABS issues as lower quality ABS issues
have outperformed and offer little value. Despite tight valuations, the
portfolio management team believes the sector remains attractive relative to
other spread sectors. Lastly, within mortgages, the Portfolio continued to
favor CMOs and hybrid adjustable rate mortgages which possess more stable
average life profiles.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INTERMEDIATE BOND
PORTFOLIO AND
THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CREDIT INDEX FOR THE PAST TEN
YEARS.
[GRAPHIC OMITTED]
Lehman Brothers Intermediate
Institutional Investor A Government/Credit Index
03/31/1996 10,000 9,600 10,000
06/30/1996 10,074 9,659 10,063
09/30/1996 10,251 9,818 10,241
12/31/1996 10,512 10,056 10,493
03/31/1997 10,507 10,039 10,481
06/30/1997 10,818 10,325 10,790
09/30/1997 11,112 10,593 11,081
12/31/1997 11,312 10,771 11,318
03/31/1998 11,491 10,929 11,494
06/30/1998 11,696 11,110 11,710
09/30/1998 12,091 11,472 12,235
12/31/1998 12,114 11,480 12,271
03/31/1999 12,179 11,529 12,248
06/30/1999 12,128 11,467 12,200
09/30/1999 12,223 11,544 12,312
12/31/1999 12,233 11,539 12,319
03/31/2000 12,441 11,709 12,504
06/30/2000 12,667 11,907 12,715
09/30/2000 13,065 12,281 13,081
12/31/2000 13,545 12,718 13,565
03/31/2001 14,008 13,137 14,025
06/30/2001 14,090 13,184 14,119
09/30/2001 14,793 13,827 14,769
12/31/2001 14,749 13,784 14,781
03/31/2002 14,787 13,803 14,748
06/30/2002 15,253 14,222 15,272
09/30/2002 15,934 14,839 15,964
12/31/2002 16,234 15,106 16,235
03/31/2003 16,506 15,346 16,479
06/30/2003 16,980 15,757 16,928
09/30/2003 16,953 15,734 16,924
12/31/2003 16,942 15,726 16,934
03/31/2004 17,330 16,055 17,353
06/30/2004 16,932 15,673 16,915
09/30/2004 17,389 16,084 17,373
12/31/2004 17,468 16,147 17,449
03/31/2005 17,353 16,030 17,297
06/30/2005 17,722 16,361 17,726
09/30/2005 17,642 16,277 17,634
12/31/2005 17,719 16,336 17,725
03/31/2006 17,695 16,302 17,656
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------------ ---------- ---------- ----------
BlackRock Class 2.12% 2.50% 4.94% 6.00%
Institutional Class 1.97% 2.35% 4.78% 5.87%
Service Class 1.70% 2.06% 4.48% 5.56%
Investor A Class (Load Adjusted) (2.39)% 0.66% 3.55% 5.01%
Investor A Class (NAV) 1.70% 2.04% 4.41% 5.44%
Investor B Class (Load Adjusted) (3.48)% 0.20% 3.29% 4.80%
Investor B Class (NAV) 0.93% 1.27% 3.63% 4.80%
Investor C Class (Load Adjusted) (0.05)% 1.31% 3.63% 4.81%
Investor C Class (NAV) 0.94% 1.31% 3.63% 4.81%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 9/17/93; SERVICE SHARES, 9
/23/93; INVESTOR A SHARES, 5 /20/94; INVESTOR B SHARES, 2 /5/98; BLACKROCK
SHARES, 5/1/98 AND INVESTOR C SHARES, 10/16/98. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 28 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.
8
INTERMEDIATE BOND PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 66.3%
AA 16.3
A 9.5
BBB 7.0
\qBBB 0.2
Unrated 0.7
-----
Total 100.0%
=====
Sector Allocation (% of long-term investments)
Corporate Bonds 37.2%
U.S. Government & Agency Obligations 25.3
Asset Backed Securities 13.7
Collateralized Mortgage Obligations 9.2
Commercial Mortgage Backed Securities 8.4
Mortgage Pass-Throughs 3.2
Certificate of Deposit 1.4
Taxable Municipal Bonds 1.3
Multiple Class Mortgage Pass-Throughs 0.2
Project Loans 0.1
------
Total 100.0%
======
Portfolio Statistics
Average maturity (years) 2.84
Effective Duration2 3.24
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Effective duration is typically calculated for
bonds with embedded options and assumes that expected cash flows will
fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,003.70 1,003.00 1,000.50 1,001.60 997.80 997.80
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.25 2.80 4.34 4.34 8.17 8.02
Hypothetical Expenses
(5% return before expenses)
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,022.73 1,022.17 1,020.61 1,020.61 1,016.72 1,016.87
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.27 2.83 4.39 4.39 8.28 8.13
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.45%, 0.56%, 0.87%, 0.87%, 1.64%, and 1.61% for the BlackRock,
Institutional, Service, Investor A, B, and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period).
9
INTERMEDIATE PLUS BOND PORTFOLIO
Total Net Assets (3/31/06): $30.8 million
Performance Benchmark:
Lehman Brothers Intermediate Aggregate Index
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management, by investing primarily in bonds that allow it to
maintain an average portfolio duration that is within +/- 20% of the duration
of the Lehman Brothers Intermediate Aggregate Index. The Portfolio invests
primarily in dollar-denominated investment grade bonds, but may invest up to
20% of its assets in any combination of non-investment grade bonds (high yield
or junk bonds), non-dollar denominated bonds and bonds of emerging market
issuers. The Portfolio's investment in non-dollar denominated bonds may be on
a currency hedged or unhedged basis. The portfolio management team selects
bonds from several categories including: U.S. Treasuries and agency securities,
commercial and residential mortgage-backed securities ("CMBS" and "MBS"),
collateralized mortgage obligations ("CMOs"), asset-backed securities ("ABS")
and corporate bonds. Securities are purchased for the Portfolio when the
management team determines that they have the potential for above-average total
return. The Portfolio's dollar-weighted average maturity will be between 3 and
10 years.
Recent Portfolio Management Activity:
o The BlackRock Share class outperformed the benchmark for the
semi-annual period. The Institutional, Service, Investor A, B and C Share
classes underperformed the benchmark for the semi-annual period.
o During the semi-annual period, yields rose as the Federal Reserve
("Fed") continued to "normalize" short-term interest rates. The Federal Open
Market Committee voted a 0.25% tightening at each of its four meetings, lifting
the Fed Funds target rate by 1.00% to 4.75%, the highest level in five years.
The yield curve flattened as the front end of the yield curve tracked the
increases in the Fed Funds rate while the long end of the yield curve continued
to trade in a relatively narrow range, supported by low volatility, benign
inflation and demand from overseas investors. While economic activity slowed
over the early part of the semi-annual period in the wake of a catastrophic
2005 hurricane season, the ultimate impact on interest rates proved to be
short-lived as growth rebounded nicely during the opening months of 2006.
Longer-term interest rates, as measured by the 10-year Treasury, ended the
period at 4.85%, while shorter-term interest rates, as measured by the 2-year
Treasury, ended the period at 4.82%.
o All major domestic spread sectors - CMBS, investment grade corporate
securities, MBS, ABS and agencies - outperformed duration-adjusted Treasuries
during the semi-annual period. Much of the performance can be attributed to
increased acceptance of risk by investors during the second half of the
semi-annual period as all domestic spread sectors outperformed
duration-adjusted Treasuries. CMBS was the best performing spread sector even
though the sector struggled during the first half of the semi-annual period due
to a challenging technical environment. However, the sector enjoyed strong
demand for new issues in the latter half of the period due to favorable
relative valuations and new investors to the sector. Investment grade
corporate securities was the weakest performing spread sector due to growing
event risk, auto sector weakness, a robust new issue calendar and growing
pressures on margins. MBS benefited from strong performance due to a
combination of low volatility and confidence that the Fed is near its
tightening campaign. ABS enjoyed outperformance relative to duration-adjusted
Treasuries due to strong demand as the sector remained attractively valued
versus other spread sectors. Lastly, agencies continued to trade in a narrow
range versus swaps despite Congress' failure to reach a resolution on
Government-Sponsored Enterprise reform.
o During the semi-annual period, the Portfolio was short duration
relative to its benchmark, which benefited performance as interest rates rose.
While the Portfolio maintained an underweight to corporate securities which
detracted from performance, this was offset by security selection within
corporate securities which benefited performance for the period. Within the
corporate sector, the Portfolio exhibited a bias towards financials and higher
quality issues. The Portfolio's overweight to the CMBS and ABS sectors aided
performance as both sectors outperformed duration-adjusted Treasuries. CMBS
continued to offer attractive relative valuations; specifically, seasoned, high
quality issues. Credit card and home equity issues continued to provide areas
of opportunities within ABS. Despite tight valuations, the portfolio
management team believes the sector remains attractive relative to other spread
sectors. Lastly, within mortgages, the Portfolio continued to favor
non-benchmark sectors such as CMOs and hybrid adjustable rate mortgages. High
yield exposure in the Portfolio was approximately 2%, with a focus on higher
quality issues. During the semi-annual period, the allocation was beneficial
to performance as the high yield sector significantly outperformed
duration-adjusted Treasuries. Lastly, the Portfolio maintained a small
non-U.S. dollar allocation to New Zealand and German bonds.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INTERMEDIATE PLUS
BOND
PORTFOLIO AND THE LEHMAN BROTHERS INTERMEDIATE AGGREGATE INDEX FROM INCEPTION.
[GRAPHIC OMITTED]
Lehman Brothers Intermediate
Institutional Investor A Aggregate Index
08/18/2004 10,000 9,597 10,000
09/30/2004 10,060 9,655 10,064
12/31/2004 10,109 9,701 10,142
03/31/2005 10,059 9,643 10,085
06/30/2005 10,259 9,833 10,329
09/30/2005 10,239 9,809 10,289
12/31/2005 10,280 9,832 10,345
03/31/2006 10,263 9,808 10,319
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year From Inception
------------ ---------------
BlackRock Class 2.26% 1.83%
Institutional Class 2.03% 1.62%
Service Class 1.74% 1.25%
Investor A Class (Load Adjusted) (2.38)% (1.20)%
Investor A Class (NAV) 1.71% 1.35%
Investor B Class (Load Adjusted) (3.29)% (1.68)%
Investor B Class (NAV) 1.14% 0.76%
Investor C Class (Load Adjusted) 0.10% 0.74%
Investor C Class (NAV) 1.10% 0.74%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO ON
8/18/04. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 28 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.
10
INTERMEDIATE PLUS BOND PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 80.0%
AA 9.9
A 4.2
BBB 3.6
\qBBB 1.8
Unrated 0.5
-----
Total 100.0%
=====
Sector Allocation (% of long-term investments)
Mortgage Pass-Throughs 33.3%
Corporate Bonds 18.5
U.S. Government & Agency Obligations 17.1
Asset Backed Securities 11.5
Commercial Mortgage Backed Securities 11.0
Collateralized Mortgage Obligations 5.7
Certificate of Deposit 1.0
Foreign Bonds 1.0
Taxable Municipal Bonds 0.5
Multiple Class Mortgage Pass-Throughs 0.3
Preferred Stocks 0.1
------
Total 100.0%
======
Portfolio Statistics
Average maturity (years) 3.74
Effective Duration2 3.34
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Effective duration is typically calculated for
bonds with embedded options and assumes that expected cash flows will
fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,004.10 1,002.30 1,000.40 999.90 998.20 998.10
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.00 2.60 4.04 3.99 7.47 7.52
Hypothetical Expenses
(5% return before expenses)
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,022.98 1,022.37 1,020.91 1,020.96 1,017.43 1,017.38
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.02 2.63 4.09 4.04 7.57 7.62
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.40%, 0.52%, 0.81%, 0.80%, 1.50%, and 1.51% for the BlackRock,
Institutional, Service, Investor A, B, and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the period the fund was open during the one-half year period).
11
CORE BOND TOTAL RETURN PORTFOLIO
Total Net Assets (3/31/06): $2.6 billion
Performance Benchmark:
Lehman Brothers U.S. Aggregate Index
Investment Approach:
Seeks to realize a total return that exceeds that of the Lehman Brothers
U.S. Aggregate Index by normally investing at least 80% of its assets in bonds
that allow it to maintain an average portfolio duration that is within +/- 20%
of the duration of the benchmark. The portfolio management team selects bonds
from several sectors including: U.S. Treasuries and agency securities,
commercial and residential mortgage-backed securities ("CMBS" and "MBS"),
collateralized mortgage obligations ("CMOs"), asset-backed securities ("ABS")
and corporate bonds. The Portfolio may invest up to 10% of its assets in
non-dollar denominated bonds of issuers located outside of the United States.
The Portfolio's investment in non-dollar denominated bonds may be on a currency
hedged or unhedged basis. Securities are purchased for the Portfolio when the
portfolio management team determines that they have the potential for
above-average total return.
Recent Portfolio Management Activity:
o The BlackRock, Institutional, Service and Investor A Share classes
outperformed the benchmark for the semi-annual period. The Investor B and C
Share classes underperformed the benchmark for the semi-annual period.
o During the semi-annual period, yields rose as the Federal Reserve
("Fed") continued to "normalize" short-term interest rates. The Federal Open
Market Committee voted a 0.25% tightening at each of its four meetings, lifting
the Fed Funds target rate by 1.00% to 4.75%, the highest level in five years.
The yield curve flattened as the front end of the yield curve tracked the
increases in the Fed Funds rate while the long end of the yield curve continued
to trade in a relatively narrow range, supported by low volatility, benign
inflation and demand from overseas investors. While economic activity slowed
over the early part of the semi-annual period in the wake of a catastrophic
2005 hurricane season, the ultimate impact on interest rates proved to be
short-lived as growth rebounded nicely during the opening months of 2006.
Longer-term interest rates, as measured by the 10-year Treasury, ended the
period at 4.85%, while shorter-term interest rates, as measured by the 2-year
Treasury, ended the period at 4.82%.
o All major domestic spread sectors - CMBS, investment grade corporate
securities, MBS, ABS and agencies - outperformed duration-adjusted Treasuries
during the semi-annual period. Much of the performance can be attributed to
increased acceptance of risk by investors during the second half of the
semi-annual period as all domestic spread sectors outperformed
duration-adjusted Treasuries. CMBS was the best performing spread sector even
though the sector struggled during the first half of the semi-annual period due
to a challenging technical environment. Investment grade corporate securities
was the weakest performing spread sector due to growing event risk, auto sector
weakness, a robust new issue calendar and growing pressures on margins. MBS
benefited from strong performance due to a combination of low volatility and
confidence that the Fed is near its tightening campaign. ABS enjoyed
outperformance relative to duration-adjusted Treasuries due to strong demand as
the sector remained attractively valued versus other spread sectors. Lastly,
agencies continued to trade in a narrow range versus swaps despite Congress'
failure to reach a resolution on Government-Sponsored Enterprise reform.
o During the semi-annual period, the Portfolio's short duration position
relative to its benchmark benefited performance as interest rates rose. With
respect to sector positioning, contributors to performance included an
overweight to CMBS and ABS as both sectors outperformed duration-adjusted
Treasuries. CMBS continued to offer attractive relative valuations;
specifically, seasoned, high quality issues. Credit card and home equity
issues continued to provide areas of opportunities within ABS. Despite tight
valuations, the portfolio management team believes the sector remains
attractive relative to other spread sectors. A detractor from performance
included an underweight to MBS, as the sector returned 0.20% over
duration-adjusted Treasuries. The portfolio management team remains cautious
of increased volatility and extension risk (inability to reinvest capital at
higher interest rates since the likelihood of prepayment decreases in a rising
interest rate environment) within MBS. Within mortgages, the Portfolio
continued to favor non-benchmark sectors such as CMOs and hybrid adjustable
rate mortgages. During the period, the Portfolio continued to be underweight
corporate securities on a duration-weight basis, with a bias towards financials
and higher quality credits. Lastly, the Portfolio maintained an underweight to
agencies, with holdings focused in callable debentures.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE CORE BOND TOTAL
RETURN PORTFOLIO
AND THE LEHMAN BROTHERS U.S. AGGREGATE INDEX FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A Lehman Brothers U.S. Aggregate Index
03/31/1996 10,000 9,600 10,000
06/30/1996 10,059 9,646 10,057
09/30/1996 10,260 9,827 10,242
12/31/1996 10,611 10,152 10,550
03/31/1997 10,582 10,112 10,491
06/30/1997 10,936 10,438 10,878
09/30/1997 11,290 10,763 11,240
12/31/1997 11,569 11,016 11,571
03/31/1998 11,756 11,181 11,750
06/30/1998 12,034 11,433 12,024
09/30/1998 12,483 11,844 12,533
12/31/1998 12,513 11,858 12,575
03/31/1999 12,496 11,828 12,511
06/30/1999 12,373 11,698 12,401
09/30/1999 12,462 11,768 12,486
12/31/1999 12,436 11,729 12,470
03/31/2000 12,747 12,009 12,746
06/30/2000 12,966 12,188 12,967
09/30/2000 13,371 12,568 13,358
12/31/2000 13,956 13,103 13,920
03/31/2001 14,373 13,492 14,343
06/30/2001 14,390 13,492 14,423
09/30/2001 15,115 14,155 15,088
12/31/2001 15,100 14,125 15,095
03/31/2002 15,106 14,113 15,109
06/30/2002 15,655 14,609 15,668
09/30/2002 16,228 15,110 16,386
12/31/2002 16,562 15,423 16,644
03/31/2003 16,822 15,636 16,875
06/30/2003 17,269 16,038 17,297
09/30/2003 17,232 16,005 17,272
12/31/2003 17,275 16,015 17,327
03/31/2004 17,670 16,366 17,787
06/30/2004 17,341 16,047 17,353
09/30/2004 17,866 16,538 17,907
12/31/2004 18,058 16,688 18,078
03/31/2005 18,017 16,656 17,992
06/30/2005 18,446 17,041 18,533
09/30/2005 18,367 16,958 18,408
12/31/2005 18,466 17,038 18,517
03/31/2006 18,389 16,954 18,397
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------------ ---------- ---------- ----------
BlackRock Class 2.20% 3.16% 5.24% 6.44%
Institutional Class 2.07% 3.01% 5.05% 6.28%
Service Class 1.80% 2.73% 4.75% 5.97%
Investor A Class (Load Adjusted) (2.27)% 1.34% 3.82% 5.42%
Investor A Class (NAV) 1.79% 2.73% 4.68% 5.85%
Investor B Class (Load Adjusted) (3.36)% 0.87% 3.56% 5.05%
Investor B Class (NAV) 1.02% 1.93% 3.89% 5.05%
Investor C Class (Load Adjusted) 0.05% 1.93% 3.91% 5.06%
Investor C Class (NAV) 1.02% 1.93% 3.91% 5.06%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 12 /9 /92; SERVICE SHARES,
1 /12/96; INVESTOR A SHARES, 1 /31/96; INVESTOR B SHARES, 3 /18/96; INVESTOR C
SHARES,
2 /28/97; AND BLACKROCK SHARES, 5 /1/97. SEE "NOTE ON PERFORMANCE INFORMATION"
ON PAGE 28 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED,
INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
12
CORE BOND TOTAL RETURN PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 78.6%
AA 12.6
A 4.3
BBB 4.2
\qBBB 0.3
-----
Total 100.0%
=====
Sector Allocation (% of long-term investments)
Mortgage Pass-Throughs 25.3%
Corporate Bonds 23.4
U.S. Government & Agency Obligations 16.0
Asset Backed Securities 14.0
Commercial Mortgage Backed Securities 11.5
Collateralized Mortgage Obligations 7.2
Certificate of Deposit 1.3
Foreign Bonds 1.2
Taxable Municipal Bonds 0.1
------
Total 100.0%
======
Portfolio Statistics
Average maturity (years) 5.20
Effective Duration2 4.09
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Effective duration is typically calculated for
bonds with embedded options and assumes that expected cash flows will
fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,001.90 1,001.20 999.90 999.80 995.90 996.00
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.00 2.54 3.89 4.04 7.91 7.86
Hypothetical Expenses
(5% return before expenses)
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,022.98 1,022.43 1,021.06 1,020.91 1,016.97 1,017.02
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.02 2.57 3.94 4.09 8.03 7.98
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.40%, 0.51%, 0.78%, 0.81%, 1.59%, and 1.58% for the BlackRock,
Institutional, Service, Investor A, B, and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period).
13
CORE PLUS TOTAL RETURN PORTFOLIO
Total Net Assets (3/31/06): $349.2 million
Performance Benchmark:
Lehman Brothers U.S. Aggregate Index
Investment Approach:
Seeks to realize a total return that exceeds that of the Lehman Brothers
U.S. Aggregate Index by normally investing at least 80% of its assets in bonds
that allow it to maintain an average portfolio duration that is within +/- 20%
of the duration of the benchmark. The Portfolio invests primarily in
dollar-denominated investment grade bonds but may invest up to 20% of its
assets in any combination of non-investment grade bonds (high yield or junk
bonds), non-dollar denominated bonds and bonds of emerging market issuers. The
Portfolio's investment in non-dollar denominated bonds may be on a currency
hedged or unhedged basis. The portfolio management team selects bonds from
several sectors including: U.S. Treasuries and agency securities, commercial
and residential mortgage-backed securities ("CMBS" and "MBS"), collateralized
mortgage obligations ("CMOs"), asset-backed securities ("ABS") and corporate
bonds. Securities are purchased for the Portfolio when the portfolio management
team determines that they have the potential for above-average total return.
Recent Portfolio Management Activity:
o The BlackRock, Institutional, Service and Investor A Share classes
outperformed the benchmark for the semi-annual period. The Investor B and C
Share classes underperformed the benchmark for the semi-annual period.
o During the semi-annual period, yields rose as the Federal Reserve
("Fed") continued to "normalize" short-term interest rates. The Federal Open
Market Committee voted a 0.25% tightening at each of its four meetings, lifting
the Fed Funds target rate by 1.00% to 4.75%, the highest level in five years.
The yield curve flattened as the front end of the yield curve tracked the
increases in the Fed Funds rate while the long end of the yield curve continued
to trade in a relatively narrow range, supported by low volatility, benign
inflation and demand from overseas investors. While economic activity slowed
over the early part of the semi-annual period in the wake of a catastrophic
2005 hurricane season, the ultimate impact on interest rates proved to be
short-lived as growth rebounded nicely during the opening months of 2006.
Longer-term interest rates, as measured by the 10-year Treasury, ended the
period at 4.85%, while shorter-term interest rates, as measured by the 2-year
Treasury ended the period at 4.82%.
o All major domestic spread sectors - CMBS, investment grade corporate
securities, MBS, ABS and agencies - outperformed duration-adjusted Treasuries
during the semi-annual period. Much of the performance can be attributed to
increased acceptance of risk by investors during the second half of the
semi-annual period as all domestic spread sectors outperformed
duration-adjusted Treasuries. CMBS was the best performing spread sector even
though the sector struggled during the first half of the semi-annual period due
to a challenging technical environment. Investment grade corporate securities
was the weakest performing spread sector due to growing event risk, auto sector
weakness, a robust new issue calendar and growing pressures on margins. MBS
benefited from strong performance due to a combination of low volatility and
confidence that the Fed is near its tightening campaign. ABS enjoyed
outperformance relative to duration-adjusted Treasuries due to strong demand as
the sector remained attractively valued versus other spread sectors. Lastly,
agencies continued to trade in a narrow range versus swaps despite Congress'
failure to reach a resolution on Government-Sponsored Enterprise reform.
o During the semi-annual period, the Portfolio's short duration position
relative to its benchmark benefited performance as interest rates rose. The
Portfolio's overweight to ABS was beneficial as the sector outperformed
duration-adjusted Treasuries. Credit card and home equity issues continued to
provide areas of opportunities within ABS. Despite tight valuations, the
portfolio management team believes the sector remains attractive relative to
other spread sectors. Additionally, the Portfolio's overweight to CMBS
contributed to performance. CMBS continued to offer attractive relative
valuations; specifically, seasoned, high quality issues. A detractor from
performance included an underweight to MBS, as the sector returned 0.20% over
duration-adjusted Treasuries. Within mortgages, the Portfolio continued to
favor non-benchmark sectors such as CMOs and hybrid adjustable rate mortgages.
The Portfolio maintained an underweight to corporate securities on a
duration-weight basis, with a bias towards financials and higher quality
credits. Furthermore, the Portfolio maintained an underweight to agencies,
with holdings focused in callable debentures. The Portfolio's allocation to
high yield, with a focus on higher quality issues, was beneficial to
performance as the sector significantly outperformed duration-adjusted
Treasuries. In the non-dollar allocation, the Portfolio maintained a European
curve flattening trade (underweight the short maturity and overweight the
longer maturity portions of the yield curve) and held a small allocation to New
Zealand Dollar securities.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE CORE PLUS TOTAL
RETURN PORTFOLIO
AND THE LEHMAN BROTHERS U.S. AGGREGATE INDEX FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A Lehman Brothers U.S. Aggregate Index
12/07/2001 10,000 9,597 10,000
12/31/2001 10,099 9,691 10,086
03/31/2002 10,061 9,648 10,095
06/30/2002 10,358 9,921 10,468
09/30/2002 10,721 10,257 10,948
12/31/2002 10,992 10,507 11,120
03/31/2003 11,143 10,642 11,275
06/30/2003 11,489 10,963 11,557
09/30/2003 11,455 10,921 11,540
12/31/2003 11,492 10,957 11,576
03/31/2004 11,705 11,172 11,884
06/30/2004 11,434 10,937 11,594
09/30/2004 11,788 11,276 11,964
12/31/2004 11,926 11,400 12,079
03/31/2005 11,892 11,359 12,021
06/30/2005 12,197 11,642 12,382
09/30/2005 12,151 11,590 12,299
12/31/2005 12,211 11,640 12,372
03/31/2006 12,179 11,588 12,292
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year From Inception
------------ ---------- ---------------
BlackRock Class 2.54% 3.35% 4.97%
Institutional Class 2.41% 3.01% 4.68%
Service Class 2.11% 3.09% 4.70%
Investor A Class (Load Adjusted) (2.09)% 1.50% 3.48%
Investor A Class (NAV) 2.01% 2.88% 4.47%
Investor B Class (Load Adjusted) (3.14)% 1.02% 3.33%
Investor B Class (NAV) 1.25% 2.11% 3.74%
Investor C Class (Load Adjusted) 0.28% 2.08% 3.72%
Investor C Class (NAV) 1.25% 2.08% 3.72%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO ON
12/7/01. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 28 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
14
CORE PLUS TOTAL RETURN PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 80.0%
AA 10.5
A 3.7
BBB 4.2
\qBBB 1.6
-----
Total 100.0%
=====
Sector Allocation (% of long-term investments)
Mortgage Pass-Throughs 22.0%
Corporate Bonds 21.5
U.S. Government & Agency Obligations 19.3
Asset Backed Securities 13.0
Commercial Mortgage Backed Securities 11.9
Collateralized Mortgage Obligations 9.4
Foreign Bonds 1.4
Certificate of Deposit 1.3
Taxable Municipal Bonds 0.1
Preferred Stocks 0.1
------
Total 100.0%
======
Portfolio Statistics
Average maturity (years) 5.58
Effective Duration2 4.12
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Effective duration is typically calculated for
bonds with embedded options and assumes that expected cash flows will
fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,002.90 1,002.30 1,000.80 999.80 997.00 997.00
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.00 2.30 4.24 4.24 7.92 7.92
Hypothetical Expenses
(5% return before expenses)
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,022.98 1,022.68 1,020.71 1,020.71 1,016.97 1,016.97
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.02 2.32 4.29 4.29 8.03 8.03
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.40%, 0.46%, 0.85%, 0.85%, 1.59%, and 1.59% for the BlackRock,
Institutional, Service, Investor A, B, and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period).
15
GOVERNMENT INCOME PORTFOLIO
Total Net Assets (3/31/06): $594.5 million
Performance Benchmark:
Lehman Brothers Mortgage/Merrill Lynch 10-Year Treasury Index
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management, by investing primarily in the highest rated
government and agency bonds in the ten to fifteen year maturity range and in
mortgages guaranteed by the U.S. Government or its agencies. Securities
purchased for the Portfolio are rated in the highest rating category (AAA or
Aaa) at the time of purchase by at least one major rating agency or are
determined by the management team to be of similar quality. The portfolio
management team selects bonds from several sectors including: U.S. Treasuries
and agency securities, commercial and residential mortgage-backed securities
("CMBS and MBS"), collateralized mortgage obligations ("CMOs"), asset-backed
securities and corporate bonds. Securities are purchased for the Portfolio
when the management team determines that they have the potential for
above-average total return.
Recent Portfolio Management Activity:
o The BlackRock, Service and Investor A Share classes outperformed the
benchmark for the semi-annual period. The Investor B Share class underperformed
and the Investor C Share class performed in-line with the benchmark for the
semi-annual period.
o During the semi-annual period, yields rose as the Federal Reserve
("Fed") continued to "normalize" short-term interest rates. The Federal Open
Market Committee voted a 0.25% tightening at each of its four meetings, lifting
the Fed Funds target rate by 1.00% to 4.75%, the highest level in five years.
The yield curve flattened as the front end of the yield curve tracked the
increases in the Fed Funds rate while the long end of the yield curve continued
to trade in a relatively narrow range, supported by low volatility, benign
inflation and demand from overseas investors. While economic activity slowed
over the early part of the semi-annual period in the wake of a catastrophic
2005 hurricane season, the ultimate impact on interest rates proved to be
short-lived as growth rebounded nicely during the opening months of 2006.
Longer-term interest rates, as measured by the 10-year Treasury, ended the
period at 4.85%, while shorter-term interest rates, as measured by the 2-year
Treasury, ended the period at 4.82%.
o All major domestic spread sectors - CMBS, investment grade corporate
securities, MBS, ABS and agencies - outperformed duration-adjusted Treasuries
during the semi-annual period. Much of the performance can be attributed to
increased acceptance of risk by investors during the second half of the
semi-annual period as all domestic spread sectors outperformed
duration-adjusted Treasuries. CMBS was the best performing spread sector even
though the sector struggled during the first half of the semi-annual period due
to a challenging technical environment. However, the sector enjoyed strong
demand for new issues in the latter half of the period due to favorable
relative valuations and new investors to the sector. Investment grade
corporate securities was the weakest performing spread sector due to growing
event risk, auto sector weakness, a robust new issue calendar and growing
pressures on margins. During 2005, MBS performed well in periods of declining
implied volatility while languishing in periods of stable or rising volatility.
MBS benefited from strong performance due to a combination of low volatility
and confidence that the Fed is near its tightening campaign. ABS enjoyed
outperformance relative to duration-adjusted Treasuries due to strong demand as
the sector remained attractively valued versus other spread sectors. Lastly,
agencies continued to trade in a narrow range versus swaps despite Congress'
failure to reach a resolution on Government-Sponsored Enterprise reform.
o During the semi-annual period, the Portfolio's short duration position
relative to its benchmark benefited performance as interest rates rose. The
Portfolio's yield curve positioning detracted from performance. Within MBS, the
Portfolio continued to have a bias toward 15-year maturity bonds relative to
30-year maturity bonds, which was beneficial to performance. The Portfolio
favors higher coupon issues versus current coupon MBS. The Portfolio has a
preference for seasoned pools versus TBAs. Lastly, the Portfolio held small
allocations to both CMOs and CMBS.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GOVERNMENT INCOME
PORTFOLIO AND
THE LEHMAN BROTHERS MORTGAGE/MERRILL LYNCH 10-YEAR TREASURY INDEX FOR THE PAST
TEN YEARS.
[GRAPHIC OMITTED]
Investor A Lehman Brothers Mortgage/Merrill Lynch 10 year Treasury Index
03/31/1996 9,546 10,000
06/30/1996 9,571 10,000
09/30/1996 9,774 10,186
12/31/1996 10,072 10,513
03/31/1997 10,049 10,405
06/30/1997 10,442 10,848
09/30/1997 10,799 11,231
12/31/1997 11,132 11,601
03/31/1998 11,309 11,775
06/30/1998 11,591 12,040
09/30/1998 12,001 12,753
12/31/1998 12,022 12,745
03/31/1999 11,920 12,602
06/30/1999 11,747 12,369
09/30/1999 11,833 12,449
12/31/1999 11,750 12,324
03/31/2000 12,004 12,657
06/30/2000 12,266 12,894
09/30/2000 12,706 13,234
12/31/2000 13,329 13,928
03/31/2001 13,709 14,247
06/30/2001 13,677 14,161
09/30/2001 14,630 14,963
12/31/2001 14,547 14,799
03/31/2002 14,538 14,724
06/30/2002 15,348 15,411
09/30/2002 16,322 16,471
12/31/2002 16,517 16,532
03/31/2003 16,686 16,705
06/30/2003 17,107 17,052
09/30/2003 17,030 16,947
12/31/2003 17,020 16,909
03/31/2004 17,561 17,462
06/30/2004 16,953 16,940
09/30/2004 17,599 17,587
12/31/2004 17,686 17,719
03/31/2005 17,583 17,599
06/30/2005 18,141 18,271
09/30/2005 17,953 18,053
12/31/2005 18,033 18,129
03/31/2006 17,825 17,871
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------------ ---------- ---------- ----------
BlackRock Class 1.89% 2.74% 5.75% 6.62%
Service Class 1.48% 2.23% 5.40% 6.45%
Investor A Class (Load Adjusted) (3.15)% 0.68% 4.42% 5.95%
Investor A Class (NAV) 1.37% 2.23% 5.39% 6.44%
Investor B Class (Load Adjusted) (3.77)% 0.38% 4.27% 5.65%
Investor B Class (NAV) 0.61% 1.46% 4.61% 5.65%
Investor C Class (Load Adjusted) (0.26)% 1.47% 4.62% 5.64%
Investor C Class (NAV) 0.71% 1.47% 4.62% 5.64%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INVESTOR A SHARES, 10/3 /94; INVESTOR B SHARES,
10/3/94; INVESTOR C SHARES, 2 /28/97; BLACKROCK SHARES, 2/10/03; AND SERVICE
SHARES, 10/27/04. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 28 FOR
FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED. THE PERFORMANCE
SHOWN IN THE LINE GRAPH IS THAT OF INVESTOR A SHARES OF THE PORTFOLIO.
EXCLUDING THE EFFECTS OF SALES CHARGES, THE ACTUAL PERFORMANCE OF INVESTOR B
AND INVESTOR C SHARES IS LOWER THAN THE PERFORMANCE OF INVESTOR A SHARES
BECAUSE INVESTOR B AND INVESTOR C SHARES HAVE HIGHER EXPENSES THAN INVESTOR A
SHARES. PURCHASES OF INVESTOR A SHARES GENERALLY PAY A FRONT-END SALES CHARGE,
WHILE PURCHASERS OF INVESTOR B AND INVESTOR C SHARES MAY PAY A CONTINGENT
DEFERRED SALES CHARGE (DEPENDING ON HOW LONG THEY HOLD THEIR SHARES) WHEN THEY
SELL THEIR SHARES.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
16
GOVERNMENT INCOME PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 99.8%
AA 0.2
-----
Total 100.0%
=====
Sector Allocation (% of long-term investments)
U.S. Government & Agency Obligations 49.0%
Mortgage Pass-Throughs 48.0
Commercial Mortgage Backed Securities 1.5
Asset Backed Securities 1.5
------
Total 100.0%
======
Portfolio Statistics
Average maturity (years) 8.41
Effective Duration2 5.09
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Effective duration is typically calculated for
bonds with embedded options and assumes that expected cash flows will
fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
BlackRock Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 995.80 993.80 992.80 989.00 990.00
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.24 4.18 4.32 8.23 8.04
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
BlackRock Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,022.73 1,020.76 1,020.61 1,016.62 1,016.82
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.27 4.24 4.39 8.38 8.18
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.45%, 0.84%, 0.87%, 1.66%, and 1.62% for the BlackRock, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
17
INFLATION PROTECTED BOND PORTFOLIO
Total Net Assets (3/31/06): $44.5 million
Performance Benchmark:
Lehman Global Real: U.S. TIPS Index
Investment Approach:
Seeks to maximize real return, consistent with preservation of real
capital and prudent investment management. The Portfolio normally invests at
least 80% of its assets in inflation-indexed bonds of varying maturities issued
by the U.S. and non-U.S. governments, their agencies or instrumentalities and
U.S. and non-U.S. corporations. The Portfolio maintains an average portfolio
duration that is within +/- 20% of the Lehman Global Real: U.S. TIPS Index.
The Portfolio may invest up to 20% of its assets in non-investment grade bonds
or securities of emerging market issuers. The Portfolio may also invest up to
20% of its assets in non-dollar denominated securities of non-U.S. issuers, and
may invest without limit in U.S. dollar denominated securities of non-U.S.
issuers. The management team may also purchase: U.S. Treasury and agency
securities, commercial and residential mortgage-backed securities,
collateralized mortgage obligations ("CMOs"), investment grade corporate bonds
and asset-backed securities. Securities are purchased for the Portfolio when
the management team believes that they have the potential for above-average
real return.
Recent Portfolio Management Activity:
o All share classes outperformed the benchmark for the semi-annual
period.
o During the semi-annual period, yields rose as the Federal Reserve
("Fed") continued to "normalize" short-term interest rates. The Federal Open
Market Committee voted a 0.25% tightening at each of its four meetings, lifting
the Fed Funds target rate by 1.00% to 4.75%, the highest level in five years.
The yield curve flattened as the front end of the yield curve tracked the
increases in the Fed Funds rate while the long end of the yield curve continued
to trade in a relatively narrow range, supported by low volatility, benign
inflation and demand from overseas investors. While economic activity slowed
over the early part of the semi-annual period in the wake of a catastrophic
2005 hurricane season, the ultimate impact on interest rates proved to be
short-lived as growth rebounded nicely during the opening months of 2006.
o Treasury Inflation Protected Securities ("TIPS") underperformed nominal
Treasuries during the semi-annual period. During the first half of the
semi-annual period, TIPS underperformed nominals significantly. Energy prices
declined from post-hurricane highs, causing the headline Consumer Price Index
("CPI") to turn negative. In response, one-year inflation expectations fell
from 3.5% to 1.8%, while ten-year expectations fell from 2.5% to 2.3%. TIPS
continued be under pressure during the second half of the semi-annual period,
as the Fed continued to raise rates in an effort to keep inflation under
control. Ten-year real yields ended the period at 2.35%. Inflation
expectations in the 30-year part of the curve hovered around 2.75% despite the
Fed's promise to keep inflation contained. We believe that while real yields
look closer to fair at these levels, long-term inflation expectations seem too
high.
o During the semi-annual period, the Portfolio's short duration relative
to its benchmark benefited performance as interest rates rose. The yield curve
flattening (underweight the short maturity and overweight the longer maturity
portions of the yield curve) positions in Europe was also a contributor to
performance. In Europe, this position was achieved through non-dollar
exposures in France and Germany. The Portfolio maintained its allocation to
adjustable rate mortgages, which continues to give the Portfolio exposure to an
attractively priced, high quality spread product in the front end of the yield
curve. At the end of the semi-annual period, the Portfolio held a small
allocation to corporate securities through Mexican sovereign bonds and had some
exposure to New Zealand swap spreads.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INFLATION
PROTECTED BOND PORTFOLIO AND THE LEHMAN GLOBAL REAL: U.S. TIPS INDEX FROM
INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A Lehman Global Real: U.S. TIPS Index
06/28/2004 10,000 9,699 10,000
06/30/2004 10,110 9,806 10,118
09/30/2004 10,540 10,195 10,506
12/31/2004 10,808 10,438 10,771
03/31/2005 10,796 10,427 10,735
06/30/2005 11,098 10,703 11,062
09/30/2005 11,162 10,758 11,065
12/31/2005 11,218 10,816 11,077
03/31/2006 11,068 10,650 10,827
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year From Inception
------------ ---------------
BlackRock Class 2.68% 5.83%
Institutional Class 2.52% 5.95%
Service Class 2.05% 4.71%
Investor A Class (Load Adjusted) (0.91)% 3.65%
Investor A Class (NAV) 2.14% 5.47%
Investor B Class (Load Adjusted) (2.79)% 2.67%
Investor B Class (NAV) 1.48% 4.86%
Investor C Class (Load Adjusted) 0.43% 5.02%
Investor C Class (NAV) 1.38% 5.02%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO ON
6/28/04. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 28 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.
18
INFLATION PROTECTED BOND PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 99.8%
BBB 0.2
-----
Total 100.0%
=====
Sector Allocation (% of long-term investments)
U.S. Government & Agency Obligations 95.7%
Mortgage Pass-Throughs 2.8
Foreign Bonds 1.3
Corporate Bonds 0.2
-----
Total 100.0%
=====
Portfolio Statistics
Average maturity (years) 9.59
Effective Duration2 8.06
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Effective duration is typically calculated for
bonds with embedded options and assumes that expected cash flows will
fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 992.90 991.60 988.80 990.00 987.40 986.60
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 1.49 1.84 3.52 3.47 7.09 6.98
Hypothetical Expenses
(5% return before expenses)
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,023.49 1,023.13 1,021.42 1,021.47 1,017.78 1,017.88
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 1.51 1.87 3.58 3.53 7.22 7.12
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.30%, 0.37%, 0.71%, 0.70%, 1.43%, and 1.41% for the BlackRock,
Institutional, Service, Investor A, B, and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the period the fund was open during the one-half year period).
19
GNMA PORTFOLIO
Total Net Assets (3/31/06): $181.4 million
Performance Benchmark:
Lehman Brothers GNMA MBS Index
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management, by investing primarily in securities issued by
the Government National Mortgage Association ("GNMA") as well as other U.S.
Government securities in the five to ten year maturity range. Securities
purchased by the Portfolio are rated in the highest rating category (AAA or
Aaa) at the time of purchase by at least one major rating agency or are
determined by the portfolio management team to be of similar quality.
Securities are purchased for the Portfolio when the management team determines
that they have the potential for above-average total return.
Recent Portfolio Management Activity:
o The BlackRock and Institutional Share classes outperformed the benchmark
for the semi-annual period. The Investor A, B, C and Service Share classes
underperformed the benchmark for the semi-annual period.
o During the semi-annual period, yields rose as the Federal Reserve
("Fed") continued to "normalize" short-term interest rates. The Federal Open
Market Committee voted a 0.25% tightening at each of its four meetings, lifting
the Fed Funds target rate by 1.00% to 4.75%, the highest level in five years.
The yield curve flattened as the front end of the yield curve tracked the
increases in the Fed Funds rate while the long end of the yield curve continued
to trade in a relatively narrow range, supported by low volatility, benign
inflation and demand from overseas investors. While economic activity slowed
over the early part of the semi-annual period in the wake of a catastrophic
2005 hurricane season, the ultimate impact on interest rates proved to be
short-lived as growth rebounded nicely during the opening months of 2006.
Longer-term interest rates, as measured by the 10-year Treasury, ended the
period at 4.85%, while shorter-term interest rates, as measured by the 2-year
Treasury, ended the period at 4.82%.
o All major domestic spread sectors - commercial mortgage-backed
securities ("CMBS"), investment grade corporate securities, mortgage-backed
securities ("MBS"), ABS and agencies - outperformed duration-adjusted
Treasuries during the semi-annual period. Much of the performance can be
attributed to increased acceptance of risk by investors during the second half
of the semi-annual period as all domestic spread sectors outperformed
duration-adjusted Treasuries while during the first half of the semi-annual
period all domestic spread sectors underperformed duration-adjusted Treasuries.
CMBS was the best performing spread sector even though the sector struggled
during the first half of the semi-annual period due to a challenging technical
environment driven by over $56 billion in new issues. However, the sector
enjoyed strong demand for new issues in the latter half of the period due to
favorable relative valuations and new investors to the sector. Investment
grade corporate securities was the weakest performing spread sector due to
growing event risk, auto sector weakness, a robust new issue calendar and
growing pressures on margins. During 2005, MBS performed well in periods of
declining implied volatility while languishing in periods of stable or rising
volatility. MBS benefited from strong performance due to a combination of low
volatility and confidence that the Fed is near its tightening campaign. ABS
enjoyed outperformance relative to duration-adjusted Treasuries due to strong
demand as the sector remained attractively valued versus other spread sectors.
Spreads for many ABS sub-sectors are near all time tights, liquidity is high
and risk premiums continue to decline. Lastly, agencies continued to trade in
a narrow range versus swaps despite Congress' failure to reach a resolution on
Government-Sponsored Enterprise reform.
o During the semi-annual period, the Portfolio's short duration position
relative to its benchmark benefited performance as interest rates rose. The
Portfolio's yield curve positioning detracted from performance. Within MBS, the
Portfolio continued to have a bias toward 15-year maturity bonds relative to
30-year maturity bonds, which was beneficial to performance. The Portfolio
favors higher coupon issues versus current coupon MBS. The Portfolio has a
preference for seasoned pools versus TBAs. Lastly, the Portfolio had small
allocations to both collateralized mortgage obligations and CMBS.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GNMA PORTFOLIO AND
THE LEHMAN
BROTHERS GNMA MBS INDEX FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A Lehman Brothers GNMA MBS Index
05/18/1998 10,000 9,597 10,000
06/30/1998 10,099 9,684 10,077
09/30/1998 10,331 9,896 10,334
12/31/1998 10,448 9,996 10,426
03/31/1999 10,529 10,061 10,531
06/30/1999 10,409 9,935 10,486
09/30/1999 10,503 10,013 10,581
12/31/1999 10,477 9,977 10,627
03/31/2000 10,702 10,179 10,834
06/30/2000 10,963 10,415 11,064
09/30/2000 11,311 10,722 11,396
12/31/2000 11,719 11,141 11,808
03/31/2001 12,073 11,464 12,126
06/30/2001 12,186 11,557 12,283
09/30/2001 12,762 12,088 12,755
12/31/2001 12,884 12,200 12,778
03/31/2002 13,029 12,323 12,915
06/30/2002 13,478 12,730 13,334
09/30/2002 13,773 12,994 13,695
12/31/2002 14,020 13,210 13,889
03/31/2003 14,119 13,288 14,005
06/30/2003 14,262 13,406 14,081
09/30/2003 14,324 13,448 14,141
12/31/2003 14,471 13,570 14,285
03/31/2004 14,660 13,730 14,511
06/30/2004 14,533 13,596 14,380
09/30/2004 14,892 13,919 14,728
12/31/2004 15,031 14,039 14,907
03/31/2005 15,001 14,002 14,915
06/30/2005 15,232 14,208 15,220
09/30/2005 15,231 14,198 15,227
12/31/2005 15,394 14,340 15,384
03/31/2006 15,381 14,317 15,367
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
------------ ---------- ---------- ---------------
BlackRock Class 2.58% 3.01% 5.04% 5.67%
Institutional Class 2.54% 2.89% 4.96% 5.62%
Service Class 2.17% 2.58% 4.64% 5.30%
Investor A Class (Load Adjusted) (1.86)% 1.12% 3.69% 4.67%
Investor A Class (NAV) 2.25% 2.52% 4.55% 5.22%
Investor B Class (Load Adjusted) (2.90)% 0.70% 3.45% 4.41%
Investor B Class (NAV) 1.49% 1.76% 3.78% 4.41%
Investor C Class (Load Adjusted) 0.52% 1.76% 3.79% 4.40%
Investor C Class (NAV) 1.50% 1.76% 3.79% 4.40%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO ON
5/18/98. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 28 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
20
GNMA PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 98.6%
AA 0.7
Unrated 0.7
-----
Total 100.0%
=====
Sector Allocation (% of long-term investments)
Mortgage Pass-Throughs 90.9%
U.S. Government & Agency Obligations 4.4
Asset Backed Securities 2.8
Commercial Mortgage Backed Securities 1.8
Collateralized Mortgage Obligations 0.1
------
Total 100.0%
======
Portfolio Statistics
Average maturity (years) 7.00
Effective Duration2 3.56
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Effective duration is typically calculated for
bonds with embedded options and assumes that expected cash flows will
fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,010.50 1,009.90 1,008.50 1,008.40 1,004.60 1,004.60
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.26 2.81 4.16 4.31 8.15 8.15
Hypothetical Expenses
(5% return before expenses)
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,022.73 1,022.17 1,020.81 1,020.66 1,016.77 1,016.77
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.27 2.83 4.19 4.34 8.23 8.23
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.45%, 0.56%, 0.83%, 0.86%, 1.63%, and 1.63% for the BlackRock,
Institutional, Service, Investor A, B, and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period).
21
MANAGED INCOME PORTFOLIO
Total Net Assets (3/31/06): $685.9 million
Performance Benchmark:
Lehman Brothers U.S. Aggregate Index
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management, by investing primarily in investment grade bonds
that allow it to maintain an average portfolio duration that is within +/- 20%
of the duration of the Lehman Brothers U.S. Aggregate Index. The Portfolio
normally invests at least 80% of its assets in bonds and only buys securities
rated investment grade at the time of purchase by at least one major rating
agency or determined by the portfolio management team to be of similar quality.
The Portfolio may invest up to 10% of its assets in non-dollar denominated
bonds of issuers located outside of the United States. The Portfolio's
investment in non-dollar denominated bonds may be on a currency hedged or
unhedged basis. The portfolio management team selects bonds from several
sectors including: U.S. Treasuries and agency securities, commercial and
residential mortgage-backed securities ("CMBS" and "MBS"), collateralized
mortgage obligations ("CMOs"), asset-backed securities ("ABS") and corporate
bonds. Securities are purchased for the Portfolio when the portfolio
management team determines that they have the potential for above-average total
return.
Recent Portfolio Management Activity:
o The Institutional Share class outperformed the benchmark for the
semi-annual period. The Investor A, B, C and Service Share classes
underperformed the benchmark for the semi-annual period.
o During the semi-annual period, yields rose as the Federal Reserve
("Fed") continued to "normalize" short-term interest rates. The Federal Open
Market Committee voted a 0.25% tightening at each of its four meetings, lifting
the Fed Funds target rate by 1.00% to 4.75%, the highest level in five years.
The yield curve flattened as the front end of the yield curve tracked the
increases in the Fed Funds rate while the long end of the yield curve continued
to trade in a relatively narrow range, supported by low volatility, benign
inflation and demand from overseas investors. While economic activity slowed
over the early part of the semi-annual period in the wake of a catastrophic
2005 hurricane season, the ultimate impact on interest rates proved to be
short-lived as growth rebounded nicely during the opening months of 2006.
Longer-term interest rates, as measured by the 10-year Treasury, ended the
period at 4.85%, while shorter-term interest rates, as measured by the 2-year
Treasury, ended the period at 4.82%.
o All major domestic spread sectors - CMBS, investment grade corporate
securities, MBS, ABS and agencies - outperformed duration-adjusted Treasuries
during the semi-annual period. Much of the performance can be attributed to
increased acceptance of risk by investors during the second half of the
semi-annual period as all domestic spread sectors outperformed
duration-adjusted Treasuries. CMBS was the best performing spread sector even
though the sector struggled during the first half of the semi-annual period due
to a challenging technical environment. Investment grade corporate securities
was the weakest performing spread sector due to growing event risk, auto sector
weakness, a robust new issue calendar and growing pressures on margins. MBS
benefited from strong performance due to a combination of low volatility and
confidence that the Fed is near its tightening campaign. ABS enjoyed
outperformance relative to duration-adjusted Treasuries due to strong demand as
the sector remained attractively valued versus other spread sectors. Lastly,
agencies continued to trade in a narrow range versus swaps despite Congress'
failure to reach a resolution on Government-Sponsored Enterprise reform.
o During the semi-annual period, the Portfolio's short duration position
relative to its benchmark benefited performance as interest rates rose. With
respect to sector positioning, contributors to performance included an
overweight to CMBS and ABS as both sectors outperformed duration-adjusted
Treasuries. CMBS continued to offer attractive relative valuations;
specifically, seasoned, high quality issues. Credit card and home equity
issues continued to provide areas of opportunities within ABS. Despite tight
valuations, the portfolio management team believes the sector remains
attractive relative to other spread sectors. A detractor from performance
included an underweight to MBS, as the sector returned 0.20% over
duration-adjusted Treasuries. The portfolio management team remains cautious
of increased volatility and extension risk (inability to reinvest capital at
higher interest rates since the likelihood of prepayment decreases in a rising
interest rate environment) within MBS. Within mortgages, the Portfolio
continued to favor non-benchmark sectors such as CMOs and hybrid adjustable
rate mortgages. During the period, the Portfolio continued to be underweight
corporate securities on a duration-weight basis, with a bias towards financials
and higher quality credits. Lastly, the Portfolio maintained an underweight to
agencies, with holdings focused in callable debentures.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MANAGED INCOME
PORTFOLIO AND
THE LEHMAN BROTHERS U.S. AGGREGATE INDEX FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A Lehman Brothers U.S. Aggregate Index
03/31/1996 10,000 9,551 10,000
06/30/1996 10,042 9,579 10,057
09/30/1996 10,212 9,730 10,242
12/31/1996 10,554 10,045 10,550
03/31/1997 10,524 10,004 10,491
06/30/1997 10,902 10,352 10,878
09/30/1997 11,259 10,678 11,240
12/31/1997 11,553 10,944 11,571
03/31/1998 11,722 11,091 11,750
06/30/1998 12,029 11,369 12,024
09/30/1998 12,301 11,611 12,533
12/31/1998 12,395 11,687 12,575
03/31/1999 12,402 11,680 12,511
06/30/1999 12,275 11,547 12,401
09/30/1999 12,370 11,622 12,486
12/31/1999 12,319 11,561 12,470
03/31/2000 12,584 11,795 12,746
06/30/2000 12,800 11,996 12,967
09/30/2000 13,217 12,360 13,358
12/31/2000 13,789 12,892 13,920
03/31/2001 14,217 13,277 14,343
06/30/2001 14,262 13,303 14,423
09/30/2001 14,986 13,949 15,088
12/31/2001 14,984 13,931 15,095
03/31/2002 14,964 13,896 15,109
06/30/2002 15,504 14,381 15,668
09/30/2002 16,008 14,831 16,386
12/31/2002 16,411 15,186 16,644
03/31/2003 16,661 15,400 16,875
06/30/2003 17,141 15,825 17,297
09/30/2003 17,129 15,795 17,272
12/31/2003 17,163 15,808 17,327
03/31/2004 17,547 16,142 17,787
06/30/2004 17,205 15,809 17,353
09/30/2004 17,730 16,274 17,907
12/31/2004 17,898 16,428 18,078
03/31/2005 17,859 16,360 17,992
06/30/2005 18,293 16,741 18,533
09/30/2005 18,219 16,673 18,408
12/31/2005 18,310 16,723 18,517
03/31/2006 18,218 16,623 18,397
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------------ ---------- ---------- ----------
Institutional Class 2.01% 3.02% 5.08% 6.18%
Service Class 1.70% 2.71% 4.77% 5.86%
Investor A Class (Load Adjusted) (2.95)% 1.01% 3.64% 5.21%
Investor A Class (NAV) 1.61% 2.58% 4.60% 5.70%
Investor B Class (Load Adjusted) (3.52)% 0.77% 3.51% 5.01%
Investor B Class (NAV) 0.83% 1.81% 3.84% 5.01%
Investor C Class (Load Adjusted) (0.12)% 1.85% 3.85% 5.00%
Investor C Class (NAV) 0.85% 1.85% 3.85% 5.00%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 11 /1/89; INVESTOR A
SHARES, 2 /5 /92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 7/15 /97; AND
INVESTOR C SHARES, 11/22/99. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE
28 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING
IMPORTANT INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
22
MANAGED INCOME PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 81.8%
AA 11.1
A 3.9
BBB 3.0
\qBBB 0.2
-----
Total 100.0%
=====
Sector Allocation (% of long-term investments)
Mortgage Pass-Throughs 24.5%
Corporate Bonds 21.9
U.S. Government & Agency Obligations 16.1
Asset Backed Securities 13.5
Commercial Mortgage Backed Securities 12.8
Collateralized Mortgage Obligations 5.5
Project Loans 2.3
Certificate of Deposit 1.4
Taxable Municipal Bonds 1.1
Foreign Bonds 0.9
------
Total 100.0%
======
Portfolio Statistics
Average maturity (years) 6.02
Effective Duration2 4.09
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Effective duration is typically calculated for
bonds with embedded options and assumes that expected cash flows will
fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 999.90 998.40 997.00 993.10 994.20
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.24 4.73 5.13 9.04 8.90
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,021.72 1,020.20 1,019.80 1,015.81 1,015.96
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.28 4.80 5.20 9.19 9.04
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.65%, 0.95%, 1.03%, 1.82%, and 1.79% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
23
INTERNATIONAL BOND PORTFOLIO
Total Net Assets (3/31/06): $602.2 million
Performance Benchmark:
Citigroup Non-U.S.World Government Bond Index
Investment Approach:
Seeks to realize a total return that exceeds that of the Citigroup
Non-U.S. World Government Bond Index by investing primarily in non-dollar
denominated bonds of issuers located outside of the United States in the five
to fifteen year maturity range. The Portfolio normally invests at least 80% of
its assets in bonds and at least 65% of it assets in bonds of a diversified
group on non-U.S. issuers from at least three developed countries. The
Portfolio may only buy securities rated investment grade at the time of
purchase by at least one major rating agency or determined by the management
team to be of similar quality. Securities are purchased for the Portfolio when
the management team determines that they have the potential for above-average
total return.
Recent Portfolio Management Activity:
o The BlackRock, Institutional, Investor A and Service Share classes of
the Portfolio outperformed the benchmark for the semi-annual period. The
Investor B and C Share classes of the Portfolio underperformed the benchmark
for the semi-annual period.
o During the semi-annual period, the Bank of Japan joined its U.S. and
European counterparts and began removing monetary stimulus from the Japanese
economy by ending Quantitative Easing. In reaction to this policy shift and a
stronger global economic environment, 10-year Japanese rates rose by 30 basis
points during the first quarter of 2006 while December EuroYen futures were
higher by 40 basis points. We believe Japan is in the very early stages of the
removal of monetary policy stimulus. Domestic economic indicators have shown
sustained strength. National core inflation has been positive for four months,
and the Nikkei closed above the technically important 17,000 level at
quarter-end. We expect longer-term rates to begin pricing in a stronger and
more inflationary growth environment going forward.
o The European Central Bank ("ECB") raised rates 50 basis points over the
semi-annual period. The ECB has increased its anti-inflationary rhetoric as
pass-though effects from oil prices remain of great concern. Euro-zone
sentiment surveys are at multiyear highs and there is optimism regarding the
impact of confidence on actual growth. In addition, with encouraging growth
prospects abroad, we expect the pace of ECB hikes to quicken, with rate hikes
anticipated in the second quarter of this year. Despite these positive economic
indicators, labor rigidity and strife continue to be a major concern within
Europe.
o During the first half of the period, in New Zealand, despite the fact
that the Reserve Bank of New Zealand raised the Official Cash Rate, rates
rallied. As a result, the Portfolio's allocation to New Zealand benefited
performance. The Portfolio's yield curve flattening position in Canada was also
a positive contributor to performance. In the Euro Bloc, the Portfolio's yield
curve flattening position also benefited performance as the European yield
curve flattened. Elsewhere in the Euro Bloc, the overweight positions in Poland
and Germany benefited performance, while the underweight to the United Kingdom
("UK") had a negative impact on performance. However, the Portfolio's position
in U.K. inflation-linked bonds contributed positively to performance. In the
Asia Bloc, the Portfolio's underweight to Japan and yield curve flattening bias
in Japan benefited performance, as rates backed up in this market. Also, the
yen depreciated during the quarter, and therefore the Portfolio's long position
in Japanese yen versus the U.S. dollar currency position detracted from
performance. However, the long position in the Singapore dollar versus U.S.
dollar benefited performance.
o During the second half of the period, the Portfolio's short duration
positioning in the Dollar Bloc, Europe and Japan was a positive contributor to
performance. The Portfolio's country allocation to New Zealand was a
contributor to performance, while Mexico was a detractor. In the Euro Bloc,
the Portfolio's yield curve flattening position also benefited performance as
the European yield curve flattened. Elsewhere in the Euro Bloc, the overweight
position in Poland and underweight to the United Kingdom benefited performance.
In the Asia Bloc, the Portfolio is underweight Japan with a yield curve
flattening bias. The Portfolio has also added exposure to Japanese government
bond floaters. The long position in the Singapore dollar versus U.S. dollar
benefited performance.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INTERNATIONAL BOND
PORTFOLIO
AND THE CITIGROUP NON-U.S. WORLD GOVERNMENT BOND INDEX FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Citigroup Non-U.S. World
Service Investor A Government Bond Index
03/31/1996 10,000 9,502 10,000
06/30/1996 10,228 9,716 10,040
09/30/1996 10,623 10,087 10,367
12/31/1996 11,002 10,440 10,587
03/31/1997 11,108 10,536 9,975
06/30/1997 11,479 10,884 10,257
09/30/1997 11,816 11,199 10,278
12/31/1997 12,095 11,458 10,136
03/31/1998 12,406 11,748 10,178
06/30/1998 12,617 11,943 10,347
09/30/1998 13,254 12,541 11,342
12/31/1998 13,444 12,715 11,939
03/31/1999 13,633 12,889 11,361
06/30/1999 13,507 12,763 10,851
09/30/1999 13,467 12,720 11,515
12/31/1999 13,468 12,716 11,334
03/31/2000 13,740 12,967 11,202
06/30/2000 14,092 13,294 11,113
09/30/2000 14,371 13,551 10,610
12/31/2000 14,997 14,136 11,035
03/31/2001 15,515 14,618 10,494
06/30/2001 15,642 14,732 10,287
09/30/2001 16,092 15,148 11,085
12/31/2001 16,149 15,196 10,645
03/31/2002 16,066 15,111 10,446
06/30/2002 16,483 15,497 11,905
09/30/2002 16,956 15,936 12,243
12/31/2002 17,231 16,187 12,985
03/31/2003 17,596 16,522 13,470
06/30/2003 18,309 17,169 14,036
09/30/2003 18,764 17,605 14,423
12/31/2003 19,956 18,699 15,390
03/31/2004 20,156 18,895 15,632
06/30/2004 19,525 18,295 15,102
09/30/2004 20,057 18,792 15,598
12/31/2004 22,115 20,719 17,257
03/31/2005 21,394 20,044 16,722
06/30/2005 20,635 19,350 16,272
09/30/2005 20,500 19,207 16,088
12/31/2005 19,957 18,680 15,668
03/31/2006 19,949 18,689 15,638
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------------- ---------- ---------- ----------
BlackRock Class ( 6.38)% 4.66% 5.50% 7.48%
Institutional Class ( 6.52)% 4.56% 5.44% 7.45%
Service Class ( 6.76)% 4.27% 5.16% 7.15%
Investor A Class (Load Adjusted) (11.39)% 2.42% 3.96% 6.45%
Investor A Class (NAV) ( 6.76)% 4.19% 5.04% 7.00%
Investor B Class (Load Adjusted) (11.53)% 2.31% 3.91% 6.20%
Investor B Class (NAV) ( 7.47)% 3.41% 4.25% 6.20%
Investor C Class (Load Adjusted) ( 8.34)% 3.44% 4.27% 6.23%
Investor C Class (NAV) ( 7.44)% 3.44% 4.27% 6.23%
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: SERVICE SHARES, 7/1/91; INVESTOR B SHARES, 4
/19/96; INVESTOR A SHARES, 4 /22 /96; INSTITUTIONAL SHARES, 6 /10 /96; AND
INVESTOR C SHARES, 9/11/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 28
FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING
IMPORTANT INFORMATION ON THE LINE GRAPH * ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
24
INTERNATIONAL BOND PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 75.3%
AA 21.5
A 2.2
BBB 0.1
Unrated 0.9
-----
Total 100.0%
=====
Top 10 Country Allocation (% of
long-term investments)
United States 18.8%
Japan 13.3
Germany 8.8
Netherlands 7.2
United Kingdom 6.9
Italy 5.8
Finland 5.4
Spain 5.0
Canada 4.8
France 4.4
----
Total 80.4%
====
Portfolio Statistics
Average maturity (years) 8.24
Effective Duration2 4.87
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Effective duration is typically calculated for
bonds with embedded options and assumes that expected cash flows will
fluctuate as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 975.10 974.40 973.10 973.10 969.30 969.50
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.84 4.43 5.76 5.90 9.67 9.53
Hypothetical Expenses
(5% return before expenses)
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,021.06 1,020.46 1,019.09 1,018.94 1,015.05 1,015.21
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.94 4.54 5.91 6.06 9.95 9.79
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.78%, 0.90%, 1.17%, 1.20%, 1.97%, and 1.94% for the BlackRock,
Institutional, Service, Investor A, B, and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period).
25
HIGH YIELD BOND PORTFOLIO
Total Net Assets (3/31/06): $937.2 million
Performance Benchmark:
Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management, by investing primarily in non-investment grade
bonds with maturities of ten years or less. The Portfolio normally invests at
least 80% of its assets in high yield bonds, including convertible and
preferred securities. The high yield securities acquired by the Portfolio will
generally be in the lower rating categories of major rating agencies (BB or
lower by Standard & Poors or Ba or lower by Moody's) or will be determined by
the portfolio management team to be of similar quality. The Portfolio may
invest up to 10% of its assets in non-dollar denominated bonds of issuers
located outside of the United States. The management team evaluates sectors of
the high yield market and individual bonds within these sectors. Securities
are purchased for the Portfolio when the management team determines that they
have the potential for above-average total return.
Recent Portfolio Management Activity:
o In July 2005, the Portfolio changed its benchmark to the Lehman
Brothers U.S. Corporate High Yield 2% Issuer Cap Index. The recent downgrade
of General Motors' ("GM") debt securities from investment grade to high yield
and the subsequent introduction of GM into high yield indices at as much as a
6% weight has changed the composition of many indices. The new benchmark's 2%
issuer limit allows BlackRock to overweight a particular issuer but the
Portfolio must maintain prudent diversification.
o All share classes underperformed the Portfolio's former benchmark for
the semi-annual period. The BlackRock and Institutional Share classes
outperformed the Portfolio's current benchmark for the semi-annual period. The
Service, Investor A, Investor B and Investor C Share classes underperformed the
Portfolio's current benchmark for the semi-annual period.
o During the semi-annual period, yields rose as the Federal Reserve
("Fed") continued to "normalize" short-term interest rates. The Federal Open
Market Committee ("FOMC") voted a 0.25% tightening at each of its four
meetings, lifting the Fed Funds target rate by 1.00% to 4.75%, the highest
level in five years. The yield curve flattened as the front end of the yield
curve tracked the increases in the Fed Funds rate while the long end of the
yield curve continued to trade in a relatively narrow range, supported by low
volatility, benign inflation and demand from overseas investors. While
economic activity slowed over the early part of the semi-annual period in the
wake of a catastrophic 2005 hurricane season, the ultimate impact on interest
rates proved to be short-lived as growth rebounded nicely during the opening
months of 2006. Longer term interest rates, as measured by the 10-year
Treasury, ended the period at 4.85% while shorter term interest rates, as
measured by the 2-year Treasury, ended the period at 4.82%.
o During the first half of the period, the high yield market returned
0.11% over duration-adjusted Treasuries. Investor concerns over rising interest
rates, inflation, and higher commodity costs negatively impacted
speculative-grade paper early in the period. This effect gradually gave way to
renewed optimism late in the period, as recovery spending more than outweighed
the negative economic impact of the devastating hurricane season. During the
period, the Portfolio's overweight relative to the benchmark to `B' names
benefited performance, as the quality subsector returned 0.47% over
duration-adjusted Treasuries. The Portfolio's overweight to transportation
services and underweight to automotive and paper was beneficial to performance.
Negative contributors to performance included the Portfolio's underweight to
media cable and wirelines and overweight to metals, and security selection
within `BB' names.
o During the second half of the period, the high yield market returned
3.54% over duration-adjusted Treasuries. Much of the outperformance was
attributable to investors' demand for yield, as CCC-paper outperformed the
other ratings buckets during this period. Autos continued to dominate the news
during the second half of the period. The industry returned 5.60% during this
period, and accounted for a large portion of the total return. Ford's
better-than-expected fourth quarter results and announcement of a major
restructuring plan along with GM's agreement to sell a majority interest in its
financing subsidiary, GMAC contributed to the auto industry rally. During the
period, the Portfolio's overweight relative to the benchmark to CCC names
benefited performance, as the quality subsector returned 5.34% over
duration-adjusted Treasuries. The Portfolio's overweight to aerospace/defense,
construction machinery and electric was beneficial to performance. Negative
contributors to performance included the Portfolio's underweight to retail,
wirelines and health care and the underweight in `BB' names. The Portfolio
remains biased toward higher credit companies with pricing power and the
ability to generate free cash flow to reduce debt.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE HIGH YIELD BOND
PORTFOLIO, THE LEHMAN BROTHERS U.S. CORPORATE HIGH YIELD 2% ISSUER CAP INDEX
AND THE LEHMAN BROTHERS U.S. CORPORATE HIGH YIELD INDEX FROM INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A
11/19/1998 10,000 9,497
12/31/1998 10,128 9,613
03/31/1999 10,465 9,922
06/30/1999 10,622 10,059
09/30/1999 10,593 10,019
12/31/1999 11,013 10,394
03/31/2000 10,883 10,269
06/30/2000 10,994 10,362
09/30/2000 10,923 10,283
12/31/2000 10,221 9,610
03/31/2001 10,764 10,110
06/30/2001 10,647 9,988
09/30/2001 10,318 9,667
12/31/2001 10,941 10,239
03/31/2002 11,210 10,478
06/30/2002 10,860 10,140
09/30/2002 10,510 9,800
12/31/2002 11,060 10,301
03/31/2003 11,785 10,949
06/30/2003 13,024 12,088
09/30/2003 13,346 12,373
12/31/2003 14,164 13,133
03/31/2004 14,518 13,446
06/30/2004 14,450 13,368
09/30/2004 15,085 13,944
12/31/2004 15,894 14,700
03/31/2005 15,702 14,494
06/30/2005 16,000 14,760
09/30/2005 16,371 15,093
12/31/2005 16,517 15,218
03/31/2006 16,936 15,592
Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index* Lehman Brothers U.S. Corporate High Yield Index
11/19/1998 10,000 10,000
12/31/1998 10,011 10,160
03/31/1999 10,196 10,347
06/30/1999 10,231 10,382
09/30/1999 10,086 10,234
12/31/1999 10,250 10,402
03/31/2000 10,011 10,159
06/30/2000 10,127 10,276
09/30/2000 10,182 10,334
12/31/2000 9,657 9,793
03/31/2001 10,283 10,415
06/30/2001 10,054 10,177
09/30/2001 9,630 9,746
12/31/2001 10,184 10,310
03/31/2002 10,360 10,483
06/30/2002 9,842 9,810
09/30/2002 9,547 9,523
12/31/2002 10,159 10,164
03/31/2003 10,922 10,938
06/30/2003 12,025 12,044
09/30/2003 12,359 12,377
12/31/2003 13,083 13,109
03/31/2004 13,394 13,416
06/30/2004 13,265 13,287
09/30/2004 13,907 13,931
12/31/2004 14,540 14,568
03/31/2005 14,307 14,334
06/30/2005 14,678 14,730
09/30/2005 14,823 14,866
12/31/2005 14,941 14,967
03/31/2006 15,330 15,399
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
---------- ----------- ---------- ---------------
BlackRock Class 8.02% 13.01% 9.65% 7.55%
Institutional Class 7.86% 12.85% 9.49% 7.42%
Service Class 7.58% 12.54% 9.18% 7.08%
Investor A Class (Load Adjusted) 2.24% 10.58% 7.94% 6.22%
Investor A Class (NAV) 7.57% 12.51% 9.05% 6.97%
Investor B Class (Load Adjusted) 2.35% 10.73% 7.99% 6.16%
Investor B Class (NAV) 6.77% 11.68% 8.27% 6.16%
Investor C Class (Load Adjusted) 5.78% 11.62% 8.23% 6.15%
Investor C Class (NAV) 6.76% 11.62% 8.23% 6.15%
* THE PERFORMANCE FOR THE LEHMAN BROTHERS U.S. CORPORATE HIGH YIELD 2% ISSUER
CAP INDEX IN THE CHART STARTS ON 12/1/1998.
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO ON
11/19/98. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 28 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
26
HIGH YIELD BOND PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
BBB 6.8%
BB 30.2
B 49.0
CCC 6.7
\qCCC 1.1
Unrated 6.2
-----
Total 100.0%
=====
Top 10 Industries (% of long-term
investments)
Telecommunications 10.7%
Energy & Utilities 10.7
Oil & Gas 8.3
Manufacturing 7.8
Broadcasting 5.8
Entertainment & Leisure 5.4
Business Services 5.3
Chemicals 3.8
Finance 3.7
Aerospace 3.5
-----
Total 54.3%
=====
Portfolio Statistics
Average maturity (years) 5.03
Modified Duration2 4.30
1 Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
("Moody's") rating.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Modified duration assumes that cash flows remain
constant as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,035.20 1,034.50 1,033.10 1,033.00 1,029.20 1,027.90
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.84 3.40 4.66 4.92 8.70 8.70
Hypothetical Expenses
(5% return before expenses)
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,022.17 1,021.62 1,020.36 1,020.10 1,016.32 1,016.32
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.83 3.38 4.64 4.90 8.68 8.68
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.56%, 0.67%, 0.92%, 0.97%, 1.72%, and 1.72% for the BlackRock,
Institutional, Service, Investor A, B, and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period).
27
BLACKROCK FUNDS
NOTE ON PERFORMANCE INFORMATION
The performance information above includes information for each class of
each Portfolio since the commencement of operations of each 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/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. Additionally, the performance information above does not
reflect accounting adjustments required under accounting principles generally
accepted in the United States of America and as a result there may be variances
between what is reported within this section and that reported in the total
return calculation in the Financial Highlights.
Performance information is restated to reflect the current maximum
front-end sales charge (in the case of Investor A Shares) or the maximum
contingent deferred sales charge (in the case of Investor B and Investor C
Shares), and assumes the reinvestment of dividends and distributions. The
maximum front-end sales charges for Investor A Shares are as follows:
Intermediate PLUS Bond, Intermediate Government Bond, Intermediate Bond, Core
Bond Total Return, Core PLUS Total Return and GNMA - 4.00%; Government Income
and Managed Income - 4.50%; International Bond and High Yield Bond - 5.00%; and
Inflation Protected Bond, Enhanced Income and Low Duration Bond - 3.00%. 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 and reimbursements
that subsidize and reduce the total operating expenses of each Portfolio. The
Portfolios' returns would have been lower if there were not such waivers and
reimbursements. BlackRock Advisors, Inc. is under no obligation to waive or
continue waiving its fees after February 1, 2007 as described in the prospectus
of the Portfolios. 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.
\^ The performance shown in the line graph is that of Institutional Shares and
Investor A Shares of the Portfolios. The actual performance of Investor B,
Investor C and Service Shares is lower than the performance of Institutional
Shares because Investor B, Investor C and Service Shares have higher
expenses than Institutional Shares. Excluding the effects of sales charges,
the actual performance of Investor B and Investor C Shares is lower than the
performance of Investor A Shares because Investor B and Investor C Shares
have higher expenses than Investor A Shares. Purchasers of Investor A Shares
generally pay a front-end sales charge, while purchasers of Investor B and
Investor C Shares may pay a contingent deferred sales charge (depending on
how long they hold their shares) when they sell their shares.
* The performance shown in the line graph is that of Service Shares and
Investor A Shares of the Portfolios. The actual performance of Investor B
and Investor C Shares is lower than the performance of Service Shares
because Investor B and Investor C Shares have higher expenses than Service
Shares. Excluding the effects of sales charges, the actual performance of
Investor B and Investor C Shares is lower than the performance of Investor A
Shares because Investor B and Investor C Shares have higher expenses than
Investor A shares. Purchasers of Investor A Shares generaly pay a front-end
sales charge, while purchasers of Investor B and Investor C Shares may pay a
contingent deferred sales charge (depending on how long they hold their
shares) when they sell their shares.
28
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ENHANCED INCOME PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- ------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 15.6%
Federal National Mortgage
Association, Unsecured Notes
2.75% 05/10/06 $ 800 $ 798,123
2.77%(b) 12/29/06 275 270,321
2.71% 01/30/07 550 539,316
U.S. Treasury Bonds
10.38% 11/15/12 325 352,511
U.S. Treasury Notes
2.38% 08/31/06 140 138,649
3.12% 01/31/07 1,095 1,079,558
4.00%(c) 08/31/07 1,470 1,452,831
4.38%(c) 12/07-01/08 2,375 2,355,442
4.25% 01/15/11 2,125 2,072,290
==========
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $9,151,111) 9,059,041
----------
MORTGAGE PASS-THROUGHS - 9.5%
Federal Home Loan Mortgage Corp.
ARM
3.54%(b) 05/01/34 638 611,530
3.55%(b) 07/01/34 592 584,439
4.31%(b) 11/01/34 457 443,180
4.86%(b) 05/01/35 735 717,668
5.00%(b) 09/01/35 558 550,196
5.52%(b) 10/01/37 190 191,230
Federal National Mortgage
Association ARM
3.85%(b) 10/01/33 794 781,467
4.87%(b) 06/01/35 430 426,950
5.03%(b) 10/01/35 384 379,609
5.33%(b) 10/01/35 395 386,669
Government National Mortgage
Association II ARM
5.12%(b) 11/20/29 61 61,206
4.50%(b) 08/20/31 114 113,918
Government National Mortgage
Association II Hybrid
3.75%(b) 06/20/34 286 278,767
==========
TOTAL MORTGAGE PASS-THROUGHS
(Cost $5,604,670) 5,526,829
----------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 0.4%
Federal National Mortgage
Association, Series 05-68, Class
PB
5.75%
(Cost $247,373) 07/25/35 240 240,550
----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 14.1%
Adjustable Rate Mortgage Trust,
Series 04-4, Class 5A3
5.19%(b) 03/25/35 228 229,077
Banc of America Funding Corp.,
Series 04-C, Class 4A2
5.12%(b) 12/20/34 326 327,474
Bear Stearns Mortgage Trust, Series
04-12, Class 1A1
5.17%(b) 01/25/35 275 276,631
Bear Stearns Mortgage Trust, Series
04-13, Class A1
5.19%(b) 11/25/34 389 391,200
Bear Stearns Mortgage Trust, Series
04-7, Class 4A
3.20%(b) 10/25/34 228 222,920
PAR
MATURITY (000) VALUE
-------------- ---------- ------------
COLLATERALIZED MORTGAGE OBLIGATIONS (Continued)
Commercial Mortgage Pass-Through
Certificates, Series 00-C1, Class
A2
7.42% 04/15/10 $ 340 $ 360,270
Countrywide Home Loans, Series
04-29, Class 1A1
5.09%(b) 02/25/35 338 338,234
Credit Suisse First Boston Mortgage
Securities Corp., Series 02-10,
Class 2A1
7.50% 05/25/32 55 55,515
Federal Home Loan Mortgage Corp.,
Series 04-SF5, Class GB
1.77% 12/15/07 132 131,885
Federal Home Loan Mortgage Corp.,
Series 2763, Class PA
4.50% 09/15/10 60 60,141
Federal Home Loan Mortgage Corp.,
Series 2808, Class PA
4.00% 09/15/12 283 282,322
Federal National Mortgage
Association, Series 93-188, Class
K
6.00% 10/25/08 349 349,900
Federal National Mortgage
Association, Series 02-39, Class
FB
5.02%(b) 03/18/32 47 46,850
Federal National Mortgage
Association, Series 04-25, Class
PA
5.50% 10/25/30 109 108,436
Federal National Mortgage
Association, Series 04-36, Class
BS
5.50% 11/25/30 148 147,362
Federal National Mortgage
Association, Series 04-W10, Class
A1
5.75% 08/25/34 134 133,683
Federal National Mortgage
Association, Series 05-84, Class
XE
5.75%(b) 01/25/26 315 315,606
Federal National Mortgage
Association, Series 05-84, Class
XK
5.75% 08/25/23 351 351,343
GSAA Home Equity Trust, Series
04-8, Class A3A
5.19%(b) 09/25/34 246 246,919
GSAA Home Equity Trust, Series
06-2N, Class Note
6.00%(d) 12/25/35 198 198,101
GSR Mortgage Loan Trust, Series
04-9, Class 3A1
3.69%(b) 08/25/34 141 140,513
J.P. Morgan Mortgage Trust, Series
06-A2, Class 4A1
3.89%(b)(e) 08/25/34 600 581,344
Merrill Lynch Mortgage Investors,
Inc., Series 97-B, Class A
4.85%(b) 11/15/25 578 578,553
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ENHANCED INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- ------------
COLLATERALIZED MORTGAGE OBLIGATIONS (Continued)
Merrill Lynch Mortgage Investors,
Inc., Series 04-E, Class A2A
4.44%(b) 11/25/29 $ 270 $ 270,517
MortgageIT Trust, Series 04-1, Class
A1
5.21%(b) 11/25/34 422 425,078
Residential Accredit Loans, Inc.,
Series 01-QS19, Class A1
6.00% 12/25/16 168 167,027
Structured Asset Securities Corp.,
Series 04-3AC, Class A2
4.92%(b) 03/25/34 199 196,700
Structured Mortgage Loan Trust,
Series 04-13, Class A2
5.12%(b) 09/25/34 238 240,762
Washington Mutual Mortgage Loan
Trust, Series 03-AR8, Class A
4.03% 08/25/33 231 229,297
Wells Fargo Mortgage Backed
Securities Trust, Series 04-V, Class
1A2
3.83%(b) 10/25/34 785 785,175
==========
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $8,217,496) 8,188,835
----------
COMMERCIAL MORTGAGE BACKED SECURITIES - 14.4%
American Home Mortgage Assets,
Series 05-1, Class 3A11
5.09%(b) 11/25/35 585 585,658
Banc of America Commercial
Mortgage Inc., Series 03-1, Class
A1
3.88% 09/11/36 432 412,458
Bayview Financial Acquisition Trust,
Series 98-1, Class A1
7.01%(d) 05/25/29 195 192,976
Bear Stearns Commercial Mortgage
Securities, Series 00-WF, Class A1
7.11% 10/15/32 274 280,119
Chase Commercial Mortgage
Securities Corp., Series 00-1,
Class A2
7.76% 04/15/32 325 345,203
Commercial Mortgage Acceptance
Corp., Series 98-C2, Class A2
6.03% 09/15/30 253 255,712
Credit Suisse First Boston Mortgage
Securities Corp., Series 98-C1,
Class A1B
6.48% 05/17/40 294 299,863
Credit Suisse First Boston Mortgage
Securities Corp., Series 00-C1,
Class A1
7.32% 04/15/42 355 365,138
Deutsche Alt-A Securities, Inc.,
Series 06-AF1, Class A1
4.90%(b) 04/25/36 425 425,000
Donaldson, Lufkin and Jenrette, Inc.,
Commerical Mortgage Corp.,
Series 00-CKP1, Class A1B
7.18% 11/10/33 370 393,907
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 99-C3, Class A2
7.18% 08/15/36 141 147,451
PAR
MATURITY (000) VALUE
---------- ---------- ------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 00-C1, Class A2
7.72% 03/15/33 $ 335 $ 359,786
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 03-C2, Class X2 (IO)
0.35%(d)(f) 05/10/40 6,560 39,487
Goldman Sachs Mortgage Securities
Corp. II, Series 98-C1, Class A3
6.14% 10/18/30 459 465,105
Homebanc Mortgage Trust, Series
05-4, Class A1
5.09%(b) 10/25/35 605 604,833
Impac Secured Assets Corp., Series
05-2, Class A2A
4.94%(b) 03/25/36 550 550,449
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 00-C5,
Class A1
6.41% 12/15/19 379 382,781
Merrill Lynch Mortgage Trust, Series
02-MW1, Class XP (IO)
1.79%(d)(f) 07/12/34 2,521 99,276
Nationslink Funding Corp., Series 99,
Class 1
6.32% 01/20/31 427 434,881
Opteum Mortgage Acceptance Corp.,
Series 06-1, Class 1A1A
4.79%(b) 04/25/36 450 450,000
Structured Asset Receivable Trust,
Series 04-1
4.13%(b)(d) 04/21/11 474 474,337
Wachovia Bank Commercial
Mortgage Trust
4.04% 02/15/34 470 453,091
Washington Mutual Asset Securities
Corp., Series 05-C1A, Class A1
4.24%(d) 05/25/36 372 364,175
==========
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $8,489,589) 8,381,686
----------
ASSET BACKED SECURITIES - 37.5%
Auto Receivables Owner Trust,
Series 05-1, Class A3
3.53% 10/21/08 550 542,459
Bear Stearns, Inc., Series 06-HE1,
Class 1A1
4.91%(b) 12/25/35 424 424,010
Bear Stearns, Inc., Series 06-PC1,
Class A1
4.59% 01/25/29 373 373,284
Bear Stearns, Series 06-HE3, Class
A1
4.88%(b) 01/25/36 850 850,000
BMW Vehicle Owner Trust, Series
05-A, Class A3
4.02% 02/25/09 575 568,646
Capital Auto Receivables Asset Trust,
Series 04-1, Class A3
2.00% 11/15/07 404 399,199
Capital Auto Receivables Asset Trust,
Series 04-2, Class A2
3.35% 02/15/08 725 716,391
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ENHANCED INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- ------------
ASSET BACKED SECURITIES (Continued)
Carrington Mortgage Loan Trust,
Series 06-OPT1, Class A1
4.80%(b) 02/25/36 $ 475 $ 475,000
Chase Issuance Trust, Series 04-A9,
Class A9
3.22% 06/15/10 400 388,620
Chase Manhattan Auto Owner Trust,
Series 03-C, Class A3
2.26% 11/15/07 288 286,065
Citibank Credit Card Issuance Trust,
Series 04, Class A1
2.55% 01/20/09 325 318,484
Citibank Credit Card Issuance Trust,
Series 04-A4, Class A4
3.20% 08/24/09 300 291,849
Citigroup Mortgage Loan Trust, Inc.,
Series 06-HE1, Class A1
4.88%(b) 01/25/36 625 625,000
Conseco Finance Securitizations
Corp., Series 01-4, Class A3
6.09% 09/01/33 161 161,456
Countrywide Certificates, Series
05-16, Class 4AV1
4.68%(b) 05/25/36 403 402,985
Countrywide Certificates, Series
05-BC4, Class 2A1
4.94%(b) 08/25/35 427 427,625
Countrywide Certificates, Series
05-IM3, Class A1
4.94%(b) 03/25/36 493 493,478
Encore Credit Receivables Trust,
Series 05-4, Class 2A1
4.92%(b) 01/25/36 287 286,831
Fieldstone Mortgage Investment
Corp., Series 05-3, Class 2A1
4.94%(b) 02/25/36 371 371,336
First Franklin Mortgage Loan
Certificates, Series 06-FF3, Class
A2A
4.65%(b) 02/25/36 613 613,240
Ford Credit Auto Owner Trust, Series
05-A, Class A3
3.48% 11/17/08 722 713,148
Ford Credit Auto Owner Trust, Series
05-B, Class A3
4.17% 01/15/09 225 222,857
Ford Credit Auto Owner Trust, Series
05-C, Class A2
4.24% 03/15/08 430 429,034
Home Equity Asset Trust, Series
05-6, Class 2A1
4.94%(b) 12/25/35 484 483,898
Home Equity Asset Trust, Series
05-7, Class 2A1
4.65%(b) 01/25/36 451 450,669
Honda Auto Receivables Owner
Trust, Series 04-2, Class A3
3.30% 06/16/08 144 142,948
Honda Auto Receivables Owner
Trust, Series 05-4, Class A3
4.51% 05/21/09 325 321,886
J.P. Morgan Mortgage Acquisition
Corp., Series 05-OPT2, Class A2
4.90%(b) 05/25/25 324 324,128
PAR
MATURITY (000) VALUE
---------- ---------- ------------
ASSET BACKED SECURITIES (Continued)
Long Beach Asset Holdings Corp.,
Series 05-2, Class N1
4.15%(d) 04/25/35 $ 115 $ 113,940
Long Beach Mortgage Loan Trust,
Series 06-2, Class 2A1
4.74%(b) 03/25/36 625 625,000
Master Asset Backed Securities
Trust, Series 06-FRE1, Class A1
4.64%(b) 12/25/35 564 564,346
MBNA Master Credit Card Trust,
Series 96-G, Class A
4.93%(b) 12/15/08 1,180 1,180,642
Morgan Stanley Capital, Inc., Series
05-HE5, Class A2A
4.92%(b) 09/25/35 344 344,133
New Century Home Equity Loan
Trust, Series 05-C, Class A2A
4.90%(b) 12/25/35 401 400,995
Nissan Auto Receivables Owner
Trust, Series 03-C, Class A4
2.70% 12/17/07 611 606,902
Nissan Auto Receivables Owner
Trust, Series 04-C, Class A3
2.85% 10/15/07 550 545,418
Option One Mortgage Loan Trust,
Series 01-4, Class A
5.42%(b) 01/25/32 23 23,074
Option One Mortgage Loan Trust,
Series 05-4, Class A2
4.08% 11/25/35 426 426,645
Ownit Mortgage Loan Certificates,
Series 05-4, Class A2A1
4.94%(b) 08/25/36 438 438,012
Peoples Choice Home Loan
Securities Trust, Series 05-1, Class
1A1
4.98%(b) 10/25/26 86 86,474
Peoples Choice Home Loan
Securities Trust, Series 05-4, Class
1A1
4.94%(b) 12/25/35 335 335,001
Popular Mortgage Pass Through
Trust, Series 04-4, Class AF1
5.07%(b) 09/25/34 550 550,277
Residential Asset Securities Corp.,
Series 01-KS4, Class AIB
5.14%(b) 05/25/32 252 252,130
Specialty Underwriting & Residential
Finance, Series 05-BC3, Class
A2A
4.94%(b) 06/25/36 392 391,639
Structured Asset Investment Loan
Trust, Series 05-10, Class A3
4.91%(b) 12/25/35 491 490,818
Structured Asset Investment Loan
Trust, Series 06-BNC1, Class A2
4.65%(b) 03/25/36 436 435,539
USAA Auto Owner Trust, Series 04-1,
Class A3
2.06% 04/15/08 276 273,227
USAA Auto Owner Trust, Series 04-2,
Class A3
3.03% 06/16/08 195 193,688
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ENHANCED INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
ASSET BACKED SECURITIES (Continued)
USAA Auto Owner Trust, Series 05-1,
Class A2
3.55% 09/17/07 $ 149 $ 148,495
USAA Auto Owner Trust, Series 05-1,
Class A3
3.93% 07/15/09 325 320,489
USAA Auto Owner Trust, Series 05-2,
Class A3
4.07% 12/15/09 650 640,426
Vanderbilt Mortgage & Finance, Inc.,
Series 99-D, Class IA3
7.06%(b) 10/07/17 7 7,113
WFS Financial Owner Trust, Series
02-4, Class A4A
3.11% 08/20/10 290 285,918
===========
TOTAL ASSET BACKED SECURITIES
(Cost $21,886,170) 21,784,867
-----------
CORPORATE BONDS - 8.2%
Aerospace - 0.3%
Northrop Grumman Corp., Senior
Unsecured Notes
4.08% 11/16/06 150 148,938
-----------
Banks - 2.0%
Banc One Corp., Senior Unsecured
Notes
2.62% 06/30/08 20 18,889
Bank of America Corp., Senior
Unsecured Notes
3.88% 01/15/08 100 97,684
Bayerische Landesbank New York,
Senior Notes
2.50% 04/28/06 500 499,216
Citigroup, Inc., Senior Unsecured
Notes
3.50% 02/01/08 200 194,056
J.P. Morgan Chase & Co., Senior
Unsecured Notes
5.25% 05/30/07 150 149,764
U.S. Central Credit Union, Unsecured
Notes
2.75% 05/30/08 30 28,509
Wells Fargo & Co., Senior Unsecured
Notes
5.12% 02/15/07 180 179,904
===========
1,168,022
-----------
Computer Software & Services - 0.1%
Oracle Corp./Ozark Holdings,
Unsecured Notes
5.00%(d) 01/15/11 75 73,252
-----------
Finance - 3.0%
General Electric Capital Corp.,
Unsecured Notes
3.45%(b) 07/07-01/08 1,450 1,441,629
3.60% 10/15/08 125 119,956
Golden West Financial Corp., Senior
Unsecured Notes
4.12% 08/15/07 15 14,769
Household Finance Corp., Unsecured
Notes
4.12% 12/15/08 150 145,515
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
CORPORATE BONDS (Continued)
Finance (Continued)
PSEG Funding Trust, Inc., Capital
Securities
5.38% 11/16/07 $ 25 $ 24,916
===========
1,746,785
-----------
Insurance - 0.3%
ASIF Global Financing, Unsecured
Notes
3.90%(d) 10/22/08 20 19,318
Metropolitan Life Global Funding,
Inc., Unsecured Notes
2.60%(d) 06/19/08 75 70,583
Prudential Insurance Co., Notes
6.38%(d) 07/23/06 100 100,351
===========
190,252
-----------
Oil & Gas - 0.2%
Consolidated Natural Gas Co.,
Senior Unsecured Notes
5.38% 11/01/06 130 129,929
-----------
Pharmaceuticals - 0.1%
Merck & Co., Inc., Senior Unsecured
Notes
5.25% 07/01/06 50 49,995
-----------
Railroad & Shipping - 0.2%
Canadian National Railway Co.,
Senior Notes
6.45% 07/15/06 125 125,460
-----------
Real Estate - 0.3%
Avalonbay Communities, Inc., Senior
Unsecured Notes
8.25% 07/15/08 140 148,254
-----------
Retail Merchandising - 0.3%
Federated Department Stores, Inc.,
Senior Unsecured Notes
6.62% 09/01/08 25 25,684
May Department Stores Co.,
Unsecured Notes
3.95% 07/15/07 150 146,866
===========
172,550
-----------
Telecommunications - 0.9%
BellSouth Corp., Unsecured Notes
4.26%(b)(d)(g) 04/26/06 250 249,853
Lenfest Communications, Inc., Senior
Notes
7.62% 02/15/08 125 129,277
Verizon Global Funding Corp., Senior
Unsecured Notes
6.12% 06/15/07 125 126,180
Vodafone Group PLC (United
Kingdom), Senior Unsecured Notes
3.95%(h) 01/30/08 10 9,757
===========
515,067
-----------
Transportation - 0.2%
Union Pacific Corp., Senior
Unsecured Notes
5.75% 10/15/07 75 75,410
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ENHANCED INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------- ------------
CORPORATE BONDS (Continued)
Transportation (Continued)
Union Pacific Corp., Unsecured
Notes
6.79% 11/09/07 $ 50 $ 51,109
==========
126,519
----------
Yankee - 0.3%
Republic of Italy, Unsecured Notes
2.75%(h) 12/15/06 125 123,255
Tyco International Group SA
(Luxembourg), Senior Unsecured
Notes
5.80%(h) 08/01/06 75 75,089
==========
198,344
----------
TOTAL CORPORATE BONDS
(Cost $4,850,382) 4,793,367
----------
TAXABLE MUNICIPAL BONDS - 0.1%
New York Sales Tax Asset
Receivables Corp. Revenue
Bonds, Series 04, Class B
3.29%
(Cost $80,000) 10/15/07 80 77,828
----------
PAR/SHARES
(000)
-----------
SHORT TERM INVESTMENTS - 1.0%
German Treasury Bills (EUR)
2.34%(h)(i) 04/12/06 405 488,544
Galileo Money Market Fund 92 91,658
=======
TOTAL SHORT TERM INVESTMENTS
(Cost $581,162) 580,202
-------
TOTAL INVESTMENTS IN
SECURITIES - 100.8%
(Cost $59,107,953(a)) 58,633,205
----------
NUMBER OF
CONTRACTS
---------------
PUT SWAPTIONS WRITTEN - 0.0%
Deutsche Bank, Strike
Price 5.30,
Expires 10/26/06
(Premiums received (590)(j) (11,977)
-------
$10,178)
LIABILITIES IN EXCESS OF OTHER
ASSETS - (0.8)% (438,222)
--------
NET ASSETS - 100.0% $58,183,006
===========
- -------------------
(a) Cost for federal Income tax purposes is $59,109,460. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 30,019
Gross unrealized depreciation (506,274)
---------
$(476,255)
=========
(b) Variable rate security. Rates shown are the rates as of March 31, 2006.
(c) Securities, or a portion thereof, subject to financing transactions.
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 3.4% of its net assets, with a current market value
of $1,995,649, in securities restricted as to resale.
(e) Securities valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, these securities
had a total market value of $581,344 which represents 1.0% of net
assets.
(f) Rates shown are the effective yields as of March 31, 2006.
(g) Securities, or a portion thereof, pledged as collateral with a value of
$259,876 on 58 long U.S. Treasury Note futures contracts and 67 short
U.S. Treasury Notes futures contracts expiring June 2006 and 1 short
Euro-dollar futures contract expiring December 2006. The value of such
contracts on March 31, 2006 was $19,058,019, with an unrealized gain of
$21,472 (including commissions of $278).
(h) Security is a foreign domiciled issuer which is registered with the
Securities and Exchange Commission.
(i) The rate shown is the effective yield on the discount notes at the time
of purchase.
(j) Each swaption contract is equivalent to $10,000 notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LOW DURATION BOND PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
PREFERRED STOCKS - 0.6%
Raytheon Co. Trust I
7.00%
(Cost $9,572,029) 180,000 $9,090,000
----------
PAR
MATURITY (000)
-------------- ---------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 4.5%
Federal National Mortgage
Association, Unsecured Notes
2.77%(b)(c) 12/29/06 $ 7,640 7,510,013
2.71%(c) 01/30/07 44,825 43,954,275
Small Business Administration
Participation Certificates, Series
97, Class A
5.35%(b)(d) 08/15/22 799 791,845
U.S. Treasury Bonds
10.38%(c)(e)(f) 11/15/12 9,020 9,783,525
==========
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $63,835,306) 62,039,658
----------
MORTGAGE PASS-THROUGHS - 9.8%
Federal Home Loan Mortgage Corp.
ARM
5.36%(b) 07/01/20 486 487,144
3.54%(b) 05/01/34 5,207 4,988,604
3.31%(b) 07/01/34 1,108 1,089,641
3.55%(b) 07/01/34 3,379 3,338,815
4.31%(b) 11/01/34 16,385 15,905,042
Federal Home Loan Mortgage Corp.
Gold
8.25% 06/01/09 1 1,475
Federal National Mortgage
Association
6.50% 11/01/08 305 309,047
6.00% 03/12-02/17 1,023 1,037,811
5.00% 04/01/21 100 97,499
Federal National Mortgage
Association 1Year CMT
5.48%(b) 09/01/29 29 29,264
5.96%(b) 12/01/30 690 709,156
6.69%(b) 12/01/31 749 759,082
5.55%(b) 08/01/32 1,950 1,955,726
5.57%(b) 01/01/33 3,192 3,198,923
Federal National Mortgage
Association ARM
4.12%(b) 10/01/33 926 906,533
4.28%(b) 01/01/34 846 829,143
4.00%(b) 04/01/34 1,331 1,295,994
3.92%(b) 05/01/34 17,725 17,252,859
4.56%(b) 02/01/35 24,799 24,250,925
4.87%(b) 06/01/35 14,482 14,393,946
6.17%(b) 04/01/40 2,429 2,473,924
Federal National Mortgage
Association COFI
4.85%(b) 05/01/27 156 157,030
Federal National Mortgage
Association MULTI
4.43%(b) 12/01/09 8,709 8,708,549
Government National Mortgage
Association
6.00% 12/08-02/11 610 614,530
6.50% 06/15/09 466 478,172
PAR
MATURITY (000) VALUE
---------- ---------- --------------
MORTGAGE PASS-THROUGHS (Continued)
Government National Mortgage
Association 1 Year CMT
3.75%(b) 05/20/34 $12,420 $ 12,118,547
Government National Mortgage
Association II Hybrid
3.75%(b) 06/20/34 18,370 17,888,517
============
TOTAL MORTGAGE PASS-THROUGHS
(Cost $137,618,536) 135,275,898
------------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 0.1%
Federal National Mortgage
Association Grantor Trust, Series
02-T6, Class A1
3.31%
(Cost $2,120,702) 02/25/32 2,213 2,040,490
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 17.0%
Bear Stearns Mortgage Trust, Series
04-13, Class A1
5.19%(b) 11/25/34 10,417 10,475,475
Bear Stearns Mortgage Trust, Series
04-7, Class 4A
3.20% 10/25/34 12,834 12,551,303
Commercial Mortgage Pass-Through
Certificates, Series 00-C1, Class
A2
7.42% 04/15/10 9,040 9,578,945
Countrywide Alternative Loan Trust,
Series 05-CB, Class 2A3
5.50% 07/25/35 10,940 10,797,043
Countrywide Home Loans, Series
04-29, Class 1A1
5.09%(b) 02/25/35 6,085 6,092,125
Federal Home Loan Mortgage Corp.
Strip Notes, Series 19, Class F
4.74%(b) 06/01/28 1,173 1,165,141
Federal Home Loan Mortgage Corp.,
Series 1165, Class LD
7.00% 11/15/21 1,724 1,723,080
Federal Home Loan Mortgage Corp.,
Series 231 (IO)
5.50%(g) 08/01/35 11,220 2,873,641
Federal Home Loan Mortgage Corp.,
Series 232 (IO)
5.00%(g) 08/01/35 22,906 5,879,467
Federal Home Loan Mortgage Corp.,
Series 2642, Class JA
5.00% 11/15/16 1,816 1,812,038
Federal Home Loan Mortgage Corp.,
Series 2663, Class LA
5.00% 09/15/23 3,123 3,114,030
Federal Home Loan Mortgage Corp.,
Series 2744, Class PB
5.50% 03/15/26 7,310 7,300,763
Federal Home Loan Mortgage Corp.,
Series 2996, Class PB
5.50% 05/15/35 14,156 14,015,037
Federal National Mortgage
Association, Series 93-188, Class
K
6.00% 10/25/08 9,251 9,282,640
Federal National Mortgage
Association, Series 03-27, Class
TJ
4.00% 10/25/16 369 368,118
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LOW DURATION BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
COLLATERALIZED MORTGAGE OBLIGATIONS (Continued)
Federal National Mortgage
Association, Series 04-W10, Class
A1
5.75% 08/25/34 $ 19,310 $ 19,277,040
Federal National Mortgage
Association, Series 05-84, Class
XK
5.75% 08/25/23 9,523 9,525,295
Federal National Mortgage
Association, Series 354, Class 2
(IO)
5.50%(g) 11/01/34 9,630 2,399,683
Goldman Sachs Mortgage Securities
Corp. II, Series 00-1, Class A
5.13%(b)(d) 06/20/24 551 552,415
Goldman Sachs Mortgage Securities
Corp., Series 04-11, Class 2A2
5.14%(b) 12/25/34 8,904 8,942,524
GSR Mortgage Loan Trust, Series
04-9, Class 3A1
3.69%(b) 08/25/34 18,351 18,350,961
Harborview Mortgage Loan Trust,
Series 05-10, Class 2A1A
5.09%(b) 11/19/35 17,139 17,145,962
J.P. Morgan Mortgage Trust, Series
06-A2, Class 4A1
3.89%(b)(h) 08/25/34 14,325 13,879,583
Merrill Lynch Mortgage Investors,
Inc., Series 97-B, Class A
4.85%(b) 11/15/25 1,492 1,494,319
MLCC Mortgage Investors, Inc.,
Series 99-A, Class A
5.13%(b) 03/15/25 716 719,125
MortgageIT Trust, Series 04-1, Class
A1
5.21%(b) 11/25/34 13,684 13,773,709
Residential Accredit Loans, Inc.,
Series 01-QS19, Class A1
6.00% 12/25/16 424 422,114
Residential Funding Mortgage
Securities, Inc., Series 04-SRI,
Class A1
5.50% 09/25/33 14,715 14,592,853
Structured Asset Securities Corp.,
Series 04-3AC, Class A2
4.92%(b) 03/25/34 11,254 11,113,528
Structured Mortgage Loan Trust,
Series 04-13, Class A2
5.12%(b) 09/25/34 5,229 5,283,302
Washington Mutual Mortgage
Securities Corp., Series 02-AR1,
Class IA1
5.96%(b) 11/25/30 851 849,190
============
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $236,923,118) 235,350,449
------------
COMMERCIAL MORTGAGE BACKED SECURITIES - 13.5%
American Home Mortgage Assets,
Series 05-1, Class 3A11
5.09%(b) 11/25/35 15,490 15,519,932
Bayview Financial Acquisition Trust,
Series 98-1, Class A1
7.01%(d) 05/25/29 477 473,669
PAR
MATURITY (000) VALUE
---------- ---------- --------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Citigroup Commercial Mortgage
Trust, Series 05-EMG, Class A1
4.15%(d) 12/20/49 $ 7,446 $ 7,264,278
Commercial Mortgage Acceptance
Corp., Series 98-C2, Class A2
6.03% 09/15/30 8,204 8,282,221
Credit Suisse First Boston Mortgage
Securities Corp., Series 98-C2,
Class A2
6.30% 11/11/30 8,383 8,541,261
Deutsche Alt-A Securities, Inc.,
Series 06-AF1, Class A1
4.90%(b) 04/25/36 10,300 10,300,000
Donaldson, Lufkin and Jenrette, Inc.,
Commerical Mortgage Corp.,
Series 00-CKP1, Class A1B
7.18% 11/10/33 8,850 9,421,837
First Union-Chase Commercial
Mortgage Trust, Series 99-C2,
Class A2
6.64% 04/15/09 14,511 14,942,211
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 99-C3, Class A2
7.18% 08/15/36 7,993 8,364,839
Goldman Sachs Mortgage Securities
Corp. II, Series 98-C1, Class A3
6.14% 10/18/30 12,186 12,361,616
Goldman Sachs Mortgage Securities
Corp. II, Series 03-C1, Class X2
(IO)
1.11%(d)(g) 01/10/40 249,705 5,989,852
Impac Secured Assets Corp., Series
05-2, Class A2A
4.94%(b) 03/25/36 14,072 14,079,144
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 00-C5,
Class A1
6.41% 12/15/19 10,199 10,313,818
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 03-C3,
Class XCP (IO)
1.48%(d)(g) 02/15/37 40,827 1,295,351
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 03-C5,
Class XCP (IO)
1.30%(d)(g) 04/15/37 194,719 4,185,762
Nationslink Funding Corp., Series 99,
Class 1
6.32% 01/20/31 10,450 10,652,306
Opteum Mortgage Acceptance Corp.,
Series 06-1, Class 1A1A
4.79%(b) 04/25/36 10,700 10,700,000
Structured Asset Receivables Trust,
Series 03-1
3.18%(b)(d)(i) 01/21/10 14,277 14,276,636
Wachovia Bank Commercial
Mortgage Trust
4.04% 02/15/34 10,544 10,160,042
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LOW DURATION BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Washington Mutual Asset Securities
Corp., Series 05-C1A, Class A1
4.24%(d) 05/25/36 $ 9,943 $ 9,725,995
============
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $189,979,266) 186,850,770
------------
PROJECT LOANS - 0.0%
Federal Housing Authority
7.43%
(Cost $5,172) 09/01/22 5 5,282
------------
ASSET BACKED SECURITIES - 40.0%
Accredited Mortgage Loan Trust,
Series 05-3, Class A2A
4.92%(b) 09/25/35 7,821 7,821,731
Amresco Independence Funding,
Inc., Series 99-1, Class A
4.75%(b)(d)(j) 06/15/20 4,390 4,359,847
Bank One Issuance Trust, Series
03-A3, Class A3
4.86%(b) 12/15/10 14,550 14,579,817
Bank One Issuance Trust, Series
04-A2, Class A2
4.78%(b) 10/15/09 15,000 15,002,826
Bear Stearns, Inc., Series 06-HE1,
Class 1A1
4.91%(b) 12/25/35 10,276 10,275,166
Bear Stearns, Inc., Series 06-PC1,
Class A1
4.59%(b) 01/25/29 8,650 8,649,871
Bear Stearns, Series 06-HE3, Class
A1
4.88%(b) 01/25/36 20,450 20,450,000
BMW Vehicle Owner Trust, Series
05-A, Class A3
4.02% 02/25/09 14,075 13,919,471
Business Loan Express, Inc., Series
98-1, Class A
6.50%(b)(d) 01/15/25 333 324,295
Capco America Securitization Corp.,
Series 98-D7, Class PS1 (IO)
1.69%(d)(g) 10/15/30 33,894 1,007,387
Capital Auto Receivables Asset Trust,
Series 04-1, Class A3
2.00% 11/15/07 8,881 8,784,962
Capital Auto Receivables Asset Trust,
Series 04-2, Class A2
3.35% 02/15/08 18,300 18,082,688
Capital Auto Receivables Asset Trust,
Series 05-1, Class A4
4.05% 07/15/09 12,825 12,632,625
Chase Issuance Trust, Series 04-A9,
Class A9
3.22% 06/15/10 13,875 13,480,256
Citibank Credit Card Issuance Trust,
Series 04, Class A1
2.55% 01/20/09 17,550 17,198,123
Citibank Credit Card Issuance Trust,
Series 04-A4, Class A4
3.20% 08/24/09 16,700 16,246,261
Countrywide Certificates, Series
05-16, Class 4AV1
4.68%(b) 05/25/36 10,495 10,501,314
Countrywide Certificates, Series
05-BC4, Class 2A1
4.94%(b) 08/25/35 12,077 12,085,706
PAR
MATURITY (000) VALUE
---------- ---------- --------------
ASSET BACKED SECURITIES (Continued)
Countrywide Certificates, Series
05-IM3, Class A1
4.94%(b) 03/25/36 $12,874 $ 12,875,300
DaimlerChrysler Auto Trust, Series
05-A, Class A2
3.17% 09/08/07 2,102 2,096,684
Encore Credit Receivables Trust,
Series 05-4, Class 2A1
4.92%(b) 01/25/36 7,702 7,703,475
Epoch, Series 02, Class 2l
4.95%(b)(d) 05/30/07 8,500 8,563,750
Fieldstone Mortgage Investment
Corp., Series 05-3, Class 2A1
4.94%(b) 02/25/36 9,770 9,770,777
First Franklin Mortgage Loan
Certificates, Series 06-FF3, Class
A2A
4.65%(b) 02/25/36 13,397 13,397,081
Ford Credit Auto Owner Trust, Series
05-A, Class A2
3.08% 07/15/07 2,673 2,667,673
Ford Credit Auto Owner Trust, Series
05-A, Class A3
3.48% 11/17/08 17,500 17,285,450
Ford Credit Auto Owner Trust, Series
05-C, Class A2
4.24% 03/15/08 11,326 11,290,361
Green Tree Financial Corp., Series
93-4, Class A5
7.05% 01/15/19 1,585 1,604,016
Green Tree Financial Corp., Series
96-8, Class A6
7.60% 10/15/27 3,762 3,885,089
Green Tree Financial Corp., Series
98-6, Class A6
6.27% 06/01/30 109 109,500
Green Tree Financial Corp., Series
99-2, Class A3
6.08% 12/01/30 2,396 2,400,881
Heller Financial Commercial
Mortgage Asset Corp., Series 98-1,
Class A
5.12%(b)(d) 07/15/24 2,250 2,227,072
Honda Auto Receivables Owner
Trust, Series 04-2, Class A3
3.30% 06/16/08 17,228 17,072,769
Honda Auto Receivables Owner
Trust, Series 04-3, Class A3
2.91% 10/20/08 15,350 15,111,154
Honda Auto Receivables Owner
Trust, Series 05-4, Class A3
4.51% 05/21/09 11,150 11,043,183
IFC Small Business Administration
Loan-Backed Certificates, Series
97-1, Class A
5.50%(b)(d) 01/15/24 827 827,284
IndyMac Residential Trust, Series
06-B, Class 2A1
4.65%(b) 06/25/36 9,075 9,027,592
J.P. Morgan Mortgage Acquisition
Corp., Series 05-OPT2, Class A2
4.90%(b) 05/25/25 8,599 8,600,191
Long Beach Mortgage Loan Trust,
Series 06-2, Class 2A1
4.74%(b) 03/25/36 14,026 14,026,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LOW DURATION BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
ASSET BACKED SECURITIES (Continued)
Master Asset Backed Securities
Trust, Series 06-FRE1, Class A1
4.64%(b) 12/25/35 $12,345 $ 12,345,069
The Money Store Small Business
Administration Loan-Backed
Securities, Series 97-1, Class A
5.25%(b) 01/15/25 1,611 1,550,043
The Money Store Small Business
Administration Loan-Backed
Securities, Series 97-1, Class B
5.73%(b) 01/15/25 299 287,441
Morgan Stanley Capital, Inc., Series
05-HE5, Class A2A
4.92%(b) 09/25/35 9,392 9,392,795
Mortgage Capital Funding, Inc.,
Series 98-MC1, Class X (IO)
0.78%(g) 03/18/30 68,247 587,166
New Century Home Equity Loan
Trust, Series 05-C, Class A2A
4.90%(b) 12/25/35 10,603 10,604,097
Nissan Auto Receivables Owner
Trust, Series 05-B, Class A3
3.99% 07/15/09 15,350 15,124,969
Option One Mortgage Loan Trust,
Series 05-4, Class A2
4.08%(b) 11/25/35 11,677 11,681,944
Ownit Mortgage Loan Certificates,
Series 05-4, Class A2A1
4.94%(b) 08/25/36 11,532 11,532,867
PBG Equipment Trust, Series 00-1A,
Class A
6.27%(d) 01/20/12 1,153 1,153,409
Peoples Choice Home Loan
Securities Trust, Series 05-1, Class
1A1
4.98%(b) 10/25/26 2,283 2,283,240
Peoples Choice Home Loan
Securities Trust, Series 05-4, Class
1A1
4.94%(b) 12/25/35 8,925 8,926,779
PMC Capital LP, Series 98-1, Class A
6.50%(b)(d) 04/01/21 2,870 2,914,779
Residential Asset Mortgage Products,
Inc., Series 05-RS8, Class A1
4.93%(b) 05/25/25 8,460 8,466,182
Specialty Underwriting & Residential
Finance, Series 05-BC3, Class
A2A
4.94%(b) 06/25/36 10,709 10,710,464
Structured Asset Investment Loan
Trust, Series 05-10, Class A3
4.91%(b) 12/25/35 12,894 12,895,125
Structured Asset Investment Loan
Trust, Series 06-BNC1, Class A2
4.65%(b) 03/25/36 9,509 9,509,271
Student Loan Marketing Association
Student Loan Trust, Series 05-5,
Class A1
4.62%(b) 01/25/18 12,648 12,643,666
SWB Loan-Backed Certificates,
Series 98-1, Class AV
5.25%(b)(d) 09/15/24 782 781,802
USAA Auto Owner Trust, Series 05-1,
Class A2
3.55% 09/17/07 4,188 4,179,061
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
ASSET BACKED SECURITIES (Continued)
USAA Auto Owner Trust, Series 05-1,
Class A3
3.93% 07/15/09 $ 8,650 $ 8,529,938
USAA Auto Owner Trust, Series 05-2,
Class A3
4.07% 12/15/09 20,750 20,444,353
============
TOTAL ASSET BACKED SECURITIES
(Cost $556,484,972) 553,532,088
------------
CORPORATE BONDS - 12.9%
Aerospace - 0.2%
Northrop Grumman Corp., Senior
Unsecured Notes
4.08% 11/16/06 2,225 2,209,247
------------
Banks - 3.7%
Bayerische Landesbank New York,
Senior Notes
2.50% 04/28/06 12,300 12,280,701
Citigroup, Inc., Senior Unsecured
Notes
3.50%(e) 02/01/08 5,200 5,045,456
J.P. Morgan Chase & Co., Senior
Unsecured Notes
6.00% 08/01/08 3,180 3,227,554
U.S. Bank N.A., Subordinated Notes
6.50% 02/01/08 3,580 3,661,259
U.S. Central Credit Union, Unsecured
Notes
2.75% 05/30/08 3,700 3,516,147
Wells Fargo & Co., Senior Unsecured
Notes
5.01%(b) 09/15/09 22,515 22,517,477
Wells Fargo & Co., Unsecured Notes
3.50% 04/04/08 1,200 1,161,279
============
51,409,873
------------
Computer Software & Services - 0.1%
Oracle Corp./Ozark Holdings,
Unsecured Notes
5.00%(d) 01/15/11 1,700 1,660,382
------------
Energy & Utilities - 0.3%
Dominion Resources, Inc., Senior
Unsecured Notes
3.66% 11/15/06 4,550 4,502,762
------------
Finance - 4.0%
General Electric Capital Corp., Notes
8.75% 05/21/07 5,320 5,518,925
General Electric Capital Corp.,
Unsecured Notes
3.45%(b) 07/07-01/08 34,750 34,477,064
4.12% 03/04/08 8,300 8,130,912
Household Finance Corp., Unsecured
Notes
4.12% 12/15/08 4,375 4,244,188
Nationwide Building Society, Senior
Unsecured Notes
3.50%(d) 07/31/07 1,975 1,932,142
PSEG Funding Trust, Inc., Capital
Securities
5.38% 11/16/07 1,250 1,245,825
============
55,549,056
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LOW DURATION BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS (Continued)
Insurance - 0.3%
ASIF Global Financing, Unsecured
Notes
3.90%(d) 10/22/08 $ 2,540 $ 2,453,386
Prudential Insurance Co., Notes
6.38%(d) 07/23/06 1,250 1,254,386
============
3,707,772
------------
Pharmaceuticals - 0.1%
Merck & Co., Inc., Senior Unsecured
Notes
5.25% 07/01/06 1,750 1,749,821
------------
Railroad & Shipping - 0.3%
Canadian National Railway Co.,
Senior Notes
6.45% 07/15/06 3,970 3,984,606
------------
Real Estate - 0.3%
Avalonbay Communities, Inc., Senior
Unsecured Notes
8.25% 07/15/08 3,945 4,177,593
------------
Retail Merchandising - 0.4%
Federated Department Stores, Inc.,
Senior Unsecured Notes
6.62% 09/01/08 800 821,890
May Department Stores Co.,
Unsecured Notes
3.95% 07/15/07 4,675 4,577,316
============
5,399,206
------------
Telecommunications - 1.2%
BellSouth Corp., Unsecured Notes
4.26%(b)(d) 04/26/06 5,450 5,446,774
Lenfest Communications, Inc., Senior
Notes
7.62% 02/15/08 3,850 3,981,739
Verizon Global Funding Corp., Senior
Unsecured Notes
6.12% 06/15/07 5,415 5,466,118
Vodafone Group PLC (United
Kingdom), Senior Unsecured Notes
3.95%(k) 01/30/08 1,543 1,505,508
============
16,400,139
------------
Transportation - 0.3%
Union Pacific Corp., Senior
Unsecured Notes
5.75% 10/15/07 2,025 2,036,081
Union Pacific Corp., Unsecured
Notes
6.79% 11/09/07 1,775 1,814,359
============
3,850,440
------------
Yankee - 1.7%
Eksportfinans ASA (Norway),
Unsecured Notes
3.38%(k) 01/15/08 9,315 9,036,556
Republic of Italy, Unsecured Notes
2.75%(k) 12/15/06 13,100 12,917,124
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS (Continued)
Yankee (Continued)
Tyco International Group SA
(Luxembourg), Senior Unsecured
Notes
5.80%(k) 08/01/06 $ 2,200 $ 2,202,598
============
24,156,278
------------
TOTAL CORPORATE BONDS
(Cost $181,006,549)
178,757,175
------------
FOREIGN BONDS - 1.5%
Bundesrepublic Deutschland
(Germany) (EUR)
4.75% 07/04/34 4,350 5,926,834
4.00% 01/04/37 7,025 8,532,875
General Electric Capital Corp., Senior
Unsubordinated Notes (NZD)
6.50% 09/28/15 545 332,832
Province of Manitoba (Canada),
Senior Unsecured Notes (NZD)
6.38% 09/01/15 1,300 794,680
Province of Ontario (Canada),
Unsecured Notes (NZD)
6.25% 06/16/15 5,960 3,634,487
Province of Quebec (Canada), Bonds
(NZD)
6.75%(b) 11/09/15 1,520 951,807
============
TOTAL FOREIGN BONDS
(Cost $21,540,571)
20,173,515
------------
TAXABLE MUNICIPAL BONDS - 0.7%
New York Sales Tax Asset
Receivables Corp. Revenue
Bonds, Series 04, Class B
3.29% 10/15/07 2,640 2,568,324
Texas Public Finance Authority
Unemployment Compensation
Obligation Assessment Revenue
Bonds, Series 03, Class B
2.62% 06/15/06 7,430 7,395,153
============
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $10,069,419) 9,963,477
------------
PAR/SHARES
(000)
-----------
SHORT TERM INVESTMENTS - 0.2%
U.S. Treasury Bills
4.34%(f)(l) 04/06/06 1,000 999,397
4.35%(e)(f)(l) 04/06/06 1,300 1,299,215
Galileo Money Market Fund 94 94,016
=========
TOTAL SHORT TERM INVESTMENTS
(Cost $2,392,628) 2,392,628
---------
TOTAL INVESTMENTS IN
SECURITIES - 100.8%
(Cost $1,411,548,268(a)) 1,395,471,430
-------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LOW DURATION BOND PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
------------------ -------------
CALL SWAPTIONS PURCHASED - 0.0%
Deutsche Bank, Strike
Price 5.205,
Expires 03/01/16
(Cost $1,534,785) 3,290(m) $1,172,556
----------
PUT SWAPTIONS PURCHASED - 0.2%
Deutsche Bank, Strike
Price 5.205,
Expires 03/01/16 3,290(m) 1,829,569
Deutsche Bank, Strike
Price 5.30,
Expires 10/12/07 1,260(m) 447,804
Deutsche Bank, Strike
Price 5.45,
Expires 05/31/06 5,080(m) 404,876
==========
TOTAL PUT SWAPTIONS PURCHASED
(Cost $2,148,750) 2,682,249
----------
PUT SWAPTIONS WRITTEN - 0.0%
Deutsche Bank, Strike
Price 5.30,
Expires 10/26/06
(Premiums received (15,590)(m) (316,477)
----------
$268,928)
LIABILITIES IN EXCESS OF
OTHER
ASSETS - (1.0)% (13,968,529)
-----------
NET ASSETS - 100.0% $1,385,041,229
==============
- -------------------
(a) Cost for federal Income tax purposes is $1,411,596,468. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 8,151,409
Gross unrealized depreciation (24,276,447)
------------
$(16,125,038)
============
(b) Variable rate security. Rates shown are the rates as of March 31, 2006.
(c) Securities, or a portion thereof, subject to financing transactions.
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 4.7% of its net assets, with a current market value
of $65,185,862, in securities restricted as to resale.
(e) Securities, or a portion thereof, with a market value of $799,517 have
been pledged as collateral for swap and swaption contracts. (f) Securities,
or a portion thereof, pledged as collateral with a value of $1,704,629
on 3,269 long U.S. Treasury Notes futures contracts, 40 short U.S.
Treasury Notes futures contracts, and 394 short Euro-Bobl futures
contract expiring June 2006 and 28 short Euro-dollar futures contracts
expiring December 2006. The value of such contracts on March 31, 2006
was $690,138,983 with an unrealized loss of $1,157,493 (including
commissions of $8,312). (g) Rates shown are the effective yields as of March
31, 2006.
(h) Securities valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, these securities
had a total market value of $13,879,583 which represents 1.0% of net
assets.
(i) Security is illiquid. As of March 31, 2006, the Portfolio held 1.0% of
its net assets, with a current market value of $14,276,636 in these
securities.
(j) Security restricted as to public resale.
(k) Security is a foreign domiciled issuer which is registered with the
Securities and Exchange Commission.
(l) The rate shown is the effective yield on the discount notes at the time
of purchase.
(m) Each swaption contract is equivalent to $10,000 notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
39
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 58.1%
Federal Home Loan Bank,
Unsecured Bonds
3.05% 03/07/07 $ 7,175 $ 7,028,659
4.25%(b) 05/08/07 30,000 29,718,960
4.00%(b) 06/07-02/09 17,020 16,754,632
3.19% 08/13/07 4,500 4,386,632
3.50% 10/18/07 5,000 4,882,215
3.60%(b) 10/19/07 11,170 10,922,819
2.75% 01/09/08 4,410 4,237,476
3.01%(b) 04/02/08 10,000 9,611,090
3.00% 06/08-07/08 9,760 9,338,440
2.90% 07/15/08 2,000 1,907,790
3.25%(b) 07/30/08 17,955 17,248,866
3.35% 01/23/09 2,000 1,909,128
Federal Home Loan Bank,
Unsecured Notes
2.40% 03/30/07 6,000 5,842,788
3.00% 04/30/07 5,010 4,899,329
Federal Home Loan Mortgage Corp.,
Unsecured Notes
2.50% 08/24/06 4,525 4,481,483
2.75%(c) 09/15/06 8,100 8,017,145
2.70% 03/16/07 6,575 6,425,195
3.01% 04/07-04/07 10,760 10,532,435
3.50%(b) 07/07-05/08 21,215 20,589,938
3.30% 09/14/07 7,125 6,946,882
3.38%(b) 10/05/07 10,835 10,565,913
3.25% 11/02/07 6,918 6,713,130
3.06% 07/15/08 3,155 3,020,026
4.50%(b) 08/04/08 9,610 9,490,288
3.00%(b) 06/30/09 19,600 18,368,238
Federal National Mortgage
Association, Unsecured Notes
2.10% 04/19/06 5,400 5,392,964
2.00% 04/20/06 5,100 5,092,707
2.75% 05/10/06 5,925 5,911,100
2.80% 11/17/06 5,000 4,929,080
2.71% 01/30/07 7,275 7,133,683
3.00%(c) 02/07-05/08 9,500 9,286,570
4.15%(b) 07/13/07 8,855 8,748,660
3.53%(b) 10/19/07 8,950 8,733,866
3.55% 11/16/07 6,675 6,515,875
4.00% 12/07-06/09 14,687 14,334,575
3.25% 05/16/08 6,725 6,482,221
3.74%(b) 02/24/09 15,000 14,454,720
4.75% 02/21/13 1,595 1,545,758
5.00%(b) 03/02/15 3,300 3,194,816
Small Business Administration
Participation Certificates, Series
96-20H, Class 1
7.25% 08/01/16 1,431 1,483,141
Small Business Administration
Participation Certificates, Series
96-20J, Class 1
7.20% 10/01/16 1,329 1,376,225
Small Business Administration
Participation Certificates, Series
98-20J, Class 1
5.50% 10/01/18 2,334 2,340,469
============
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $342,890,876) 340,795,927
------------
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
MORTGAGE PASS-THROUGHS - 33.4%
Federal Home Loan Mortgage Corp.
ARM
3.54%(c) 05/01/34 $ 4,004 $ 3,835,962
3.55%(c) 07/01/34 3,296 3,256,160
3.73%(c) 07/01/34 2,255 2,166,466
4.40%(c) 11/01/34 2,816 2,760,261
4.34%(c) 03/01/35 9,277 9,076,542
4.76%(c) 03/35-04/35 20,891 20,570,685
4.77%(c) 09/01/35 10,104 9,921,194
Federal Home Loan Mortgage Corp.
Gold
9.00% 12/01/09 316 324,280
5.00% 10/20-03/21 31,997 31,192,741
5.50% 11/15/27 3,080 3,080,721
Federal National Mortgage
Association
8.00% 04/08-06/08 465 470,313
6.50% 05/08-12/29 2,684 2,738,160
6.09% 10/01/08 5,747 5,801,295
8.50% 02/09-08/09 526 534,240
9.00% 05/09-04/16 523 536,415
6.00% 04/01/16 5 4,754
7.00% 01/17-04/32 1,462 1,504,438
5.00% 06/18-06/23 2,063 1,988,957
4.50% 10/01/18 19 18,068
5.50% 01/24-09/35 1,238 1,213,923
7.50% 07/01/29 653 682,796
Federal National Mortgage
Association ARM
4.26%(c) 05/01/33 2,870 2,793,583
4.00%(c) 04/01/34 1,904 1,853,764
3.87%(c) 05/01/34 2,138 2,064,834
4.38%(c) 06/01/34 7,127 6,996,522
3.74%(c) 07/01/34 2,597 2,484,627
4.52%(c) 07/01/34 8,929 8,748,084
4.64%(c) 02/01/35 12,551 12,344,646
4.59%(c) 03/01/35 6,089 6,002,348
4.75%(c) 07/01/35 6,715 6,594,941
4.94%(c) 07/01/35 14,904 14,723,835
5.01%(c) 07/01/35 3,461 3,395,089
Federal National Mortgage
Association Hybrid, ARM
3.52%(c) 06/01/34 2,462 2,448,458
Federal National Mortgage
Association Multi-Family
6.54%(c) 12/01/18 540 544,473
Government National Mortgage
Association
6.00% 02/15/11 359 361,574
9.50% 09/15/19 45 48,896
5.00% 05/20/35 9,726 9,633,172
Government National Mortgage
Association II ARM
4.50%(c) 02/20/35 4,356 4,309,149
Government National Mortgage
Association II Hybrid
3.75% 06/20/34 2,977 2,899,171
3.50%(c) 07/20/34 6,586 6,395,739
============
TOTAL MORTGAGE PASS-THROUGHS
(Cost $199,038,226) 196,321,276
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 0.1%
Federal National Mortgage
Association Grantor Trust, Series
02-T6, Class A1
3.31%
(Cost $544,117) 02/25/32 $ 586 $ 540,299
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 16.3%
Bear Stearns Mortgage Trust, Series
04-13, Class A1
5.19%(c) 11/25/34 1,937 1,947,851
Commercial Mortgage Pass-Through
Certificates, Series 00-C1, Class
A2
7.42% 04/15/10 3,930 4,164,298
Countrywide Alternative Loan Trust,
Series 05-56, Class 1A1
5.55%(c)(d) 11/25/35 5,969 6,051,331
Deutsche Mortgage Securities, Inc.,
Series 04-4, Class 3AR1
3.71%(c) 06/25/34 1,073 1,054,120
Federal Home Loan Mortgage Corp.,
Series 1361, Class I
6.00% 09/15/07 71 71,260
Federal Home Loan Mortgage Corp.,
Series 06-3110, Class HA
5.50% 01/15/27 5,950 5,945,552
Federal Home Loan Mortgage Corp.,
Series 2668, Class AD
4.00% 01/15/15 2,143 2,087,699
Federal Home Loan Mortgage Corp.,
Series 2718, Class MR
4.00% 08/15/13 2,056 2,020,224
Federal Home Loan Mortgage Corp.,
Series 2730, Class PA
3.75% 03/15/11 1,958 1,947,106
Federal Home Loan Mortgage Corp.,
Series 2748, Class LJ
4.00% 03/15/10 1,326 1,318,769
Federal Home Loan Mortgage Corp.,
Series 2931, Class DE
4.00% 02/15/20 10,000 8,927,072
Federal National Mortgage
Association, Series 01-35, Class
VC
6.50% 07/25/31 2,655 2,654,191
Federal National Mortgage
Association, Series 01-T2, Class B
6.02% 11/25/10 3,600 3,697,884
Federal National Mortgage
Association, Series 04-W10, Class
A1
5.75% 08/25/34 2,317 2,312,710
Federal National Mortgage
Association, Series 05-109, Class
PV
6.00% 10/25/32 4,505 4,544,388
Federal National Mortgage
Association, Series 05-29, Class
JB
4.50% 04/25/35 8,849 8,578,574
Federal National Mortgage
Association, Series 05-57, Class
PA
5.50% 05/25/27 3,200 3,199,564
PAR
MATURITY (000) VALUE
---------- ---------- -------------
COLLATERALIZED MORTGAGE OBLIGATIONS (Continued)
Federal National Mortgage
Association, Series 05-68, Class
PC
5.50% 07/25/35 $ 5,447 $ 5,424,145
Federal National Mortgage
Association, Series 05-70, Class
KB
5.50% 05/25/35 3,719 3,699,121
Federal National Mortgage
Association, Series 05-83, Class
LA
5.50% 10/25/35 4,444 4,415,922
Federal National Mortgage
Association, Series 05-84, Class
MB
5.75% 10/25/35 11,575 11,607,307
GSR Mortgage Loan Trust, Series
04-9, Class 3A1
3.69%(c) 08/25/34 2,775 2,775,126
MortgageIT Trust, Series 04-1, Class
A1
5.21%(c) 11/25/34 2,258 2,272,987
Structured Mortgage Loan Trust,
Series 04-13, Class A2
5.12%(c) 09/25/34 841 849,396
Summit Mortgage Trust, Series 00-1,
Class B1
6.26%(c)(e) 12/28/12 56 56,129
Washington Mutual Mortgage
Securities Corp., Series 03-AR4,
Class A6
3.42%(c) 05/25/33 4,003 3,889,368
===========
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $97,050,087) 95,512,094
-----------
COMMERCIAL MORTGAGE BACKED SECURITIES - 8.6%
Banc of America Commercial
Mortgage, Inc., Series 02-PB2,
Class A4
6.19% 06/11/35 3,380 3,495,709
Bear Stearns Commercial Mortgage
Securities, Series 02-TOP6, Class
A1
5.92% 10/15/36 2,235 2,263,214
Bear Stearns Commercial Mortgage
Securities, Series 04-PWR4, Class
A1
4.36% 06/11/41 2,064 2,016,592
Federal Home Loan Mortgage Corp.,
Series 3143, Class NA
5.50% 05/15/36 5,060 5,057,628
First Union National Bank
Commercial Mortgage Trust, Series
00-C2, Class A2
7.20% 10/15/32 3,640 3,886,601
First Union-Chase Commercial
Mortgage Trust, Series 99-C2,
Class A2
6.64% 04/15/09 5,789 5,960,729
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
41
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
General Electric Capital Commercial
Mortgage Corp., Series 02-1A,
Class A3
6.27% 12/10/35 $3,540 $ 3,685,918
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 97-C1, Class X (IO)
1.55%(f) 07/15/27 8,879 269,116
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 99-C3, Class A2
7.18% 08/15/36 1,276 1,335,027
J.P. Morgan Chase Commercial
Mortgage Securities Corp., Series
01-C1, Class A3
5.86% 10/12/35 3,580 3,639,598
J.P. Morgan Chase Commercial
Mortgage Securities Corp., Series
01-CIBC, Class A3
6.26% 03/15/33 1,650 1,706,598
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 00-C5,
Class A1
6.41% 12/15/19 2,071 2,094,662
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 01-C7,
Class A3
5.64% 12/15/25 3,724 3,746,830
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 04-C2,
Class A2
3.25% 03/15/29 2,100 1,986,594
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 04-C4,
Class A1
3.82% 06/15/29 2,068 2,023,085
Morgan Stanley Dean Witter Capital
I, Series 02-TOP7, Class A1
5.38% 01/15/39 2,918 2,922,960
Wachovia Bank Commercial
Mortgage Trust, Series 03-C5,
Class A1
2.99% 06/15/35 2,480 2,286,822
Wachovia Bank Commercial
Mortgage Trust, Series 04-C12,
Class A1
3.40% 07/15/41 2,114 2,046,178
===========
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $51,945,509) 50,423,861
-----------
PROJECT LOANS - 0.3%
Federal Housing Authority, Merrill
Lynch Project, Series 29, Class
1A1
7.43% 06/01/22 434 434,488
Federal Housing Authority, USGI
Project, Series 56
7.46% 01/01/23 1,277 1,279,997
===========
TOTAL PROJECT LOANS
(Cost $1,747,878) 1,714,485
-----------
PAR
MATURITY (000) VALUE
---------- ---------- -------------
ASSET BACKED SECURITIES - 3.9%
Bear Stearns, Inc., Series 06-HE1,
Class 1A1
4.91%(c) 12/25/35 $4,499 $ 4,499,213
Countrywide Certificates, Series
05-IM2, Class A1
4.93%(c) 01/25/36 3,657 3,657,341
Green Tree Financial Corp., Series
97-5, Class A7
7.13% 05/15/29 1,911 1,918,573
Master Securities Trust, Series
05-HE2, Class A2
4.64%(c) 10/25/35 3,811 3,812,942
The Money Store Small Business
Administration Loan Trust, Series
99-1, Class A
5.30%(c) 07/15/25 1,026 1,019,136
Residential Asset Mortgage Products,
Inc., Series 05-RZ4, Class A1
4.94%(c) 11/25/35 4,513 4,513,450
Structured Asset Receivables Trust,
Series 03-2
4.91%(c)(e)(g) 01/21/09 2,619 2,619,401
SWB Loan-Backed Certificates,
Series 99-1, Class A
7.38%(e) 05/15/25 694 704,627
===========
TOTAL ASSET BACKED SECURITIES
(Cost $22,739,446) 22,744,683
-----------
CORPORATE BONDS - 4.9%
Banks - 0.7%
Depfa Bank PLC, Senior Notes
4.25% 08/16/10 3,850 3,701,248
-----------
Finance - 2.9%
General Electric Capital Corp.,
Unsecured Notes
3.45%(c)(h) 01/15/08 6,650 6,623,733
4.88% 10/21/10 3,590 3,516,638
5.00% 11/15/11 2,060 2,019,245
Private Export Funding Corp., Senior
Unsecured Notes
3.38% 02/15/09 5,250 5,014,674
===========
17,174,290
-----------
Oil & Gas - 0.4%
ENSCO Offshore Co., Bonds
6.36% 12/01/15 2,317 2,403,142
-----------
Yankee - 0.9%
International Bank for Reconstruction
& Development (Multiple
Countries), Unsecured Notes
1.00%(i) 02/05/15 4,100 2,855,502
National Landeskreditbank
Baden-Wurttemberg (Germany),
Unsecured Notes
4.25%(i) 09/15/10 2,700 2,605,635
===========
5,461,137
-----------
TOTAL CORPORATE BONDS
(Cost $29,440,951)
28,739,817
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- --------- -------------
TAXABLE MUNICIPAL BONDS - 0.9%
Stanislaus County California Taxable
Pension Obligation Refunding
Revenue Bonds, Series 95
7.15% 08/15/13 $3,200 $3,388,992
United States Department of Housing
and Urban Development, Section
108 Government Guaranteed
Participation Certificates, Series
03-A
4.44% 08/01/11 2,099 2,027,668
==========
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $5,299,000) 5,416,660
----------
PAR/SHARES
(000)
-----------
SHORT TERM INVESTMENTS - 0.3%
U.S. Treasury Bills
4.38%(j)(k) 04/06/06 1,000 999,397
Galileo Money Market Fund 1,066 1,066,313
=========
TOTAL SHORT TERM INVESTMENTS
(Cost $2,065,710) 2,065,710
---------
TOTAL INVESTMENTS IN
SECURITIES - 126.8%
(Cost $752,761,800(a)) 744,274,812
-----------
PAR
(000)
-----------
TBA SALE COMMITMENTS - (0.2)%
Federal National Mortgage
Association TBA
6.50%
(Proceeds
$ 1,020,469) 04/01/36 (1,000) (1,020,000)
----------
NUMBER OF
CONTRACTS
------------
CALL SWAPTIONS PURCHASED - 0.1%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 830(l) 305,440
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 860(l) 510,840
=======
TOTAL CALL SWAPTIONS PURCHASED
(Cost $944,505) 816,280
-------
CALL OPTIONS WRITTEN - 0.0%
June 10 year U.S.
Treasury Note
futures, Strike Price
$111, Expires
05/26/06 (58) (91)
September 10 year U.S.
Treasury
Note futures, Strike
Price $110,
Expires 08/25/06 (51) (8,766)
=======
TOTAL CALL OPTIONS WRITTEN
(Premiums received (8,857)
-------
$52,835)
NUMBER OF
CONTRACTS VALUE
--------------- --------------
CALL SWAPTIONS WRITTEN - 0.0%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08 (970)(l) $ (235,710)
Citibank, Strike Price
$5.67, Expires
01/04/10 (390)(l) (185,835)
==========
TOTAL CALL SWAPTIONS WRITTEN
(Premiums received (421,545)
----------
$624,350)
PUT OPTIONS WRITTEN - 0.0%
June 10 year U.S.
Treasury Notes
futures, Strike Price
$107, Expires
05/26/06 (58) (61,625)
September 10 year U.S.
Treasury
Notes futures, Strike
Price $106,
Expires 08/25/06 (51) (51,000)
==========
TOTAL PUT OPTIONS WRITTEN
(Premiums received (112,625)
----------
$56,679)
PUT SWAPTIONS PURCHASED - 0.2%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 830(l) 450,690
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 860(l) 570,180
==========
TOTAL PUT SWAPTIONS PURCHASED
(Cost $944,505) 1,020,870
----------
PUT SWAPTIONS WRITTEN - (0.1)%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08 (970)(l) (461,623)
Citibank, Strike Price
$5.67, Expires
01/04/10 (390)(l) (154,674)
==========
TOTAL PUT SWAPTIONS WRITTEN
(Premiums received (616,297)
----------
$624,350)
LIABILITIES IN EXCESS OF OTHER
ASSETS - (26.8)% (157,120,068)
------------
NET ASSETS - 100.0% $ 586,812,570
==============
- -------------------
(a) Also cost for federal Income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 910,975
Gross unrealized depreciation (9,397,963)
-----------
$(8,486,988)
===========
(b) Securities, or a portion thereof, subject to financing transactions.
(c) Variable rate security. Rates shown are the rates as of March 31, 2006.
(d) Securities valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, these securities
had a total market value of $6,051,331 which represents 1.0% of net
assets.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
43
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
(e) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 0.6% of its net assets, with a current market value
of $3,380,157, in securities restricted as to resale.
(f) Rates shown are the effective yields as of March 31, 2006.
(g) Security is illiquid. As of March 31, 2006, the Portfolio held 0.4% of its
net assets, with a current market value of $2,619,401 in these
securities.
(h) Securities, or a portion thereof, pledged as collateral with a value of
$1,003,333 on 754 long U.S. Treasury Note futures contracts, 186 long
U.S. Treasury Bond futures contracts, and 1247 short U.S. Treasury Notes
futures contracts expiring June 2006. The value of such contracts on
March 31, 2006 was $276,886,912 with an unrealized gain of $711
(including commissions of $5,083).
(i) Security is a foreign domiciled issuer which is registered with the
Securities and Exchange Commission.
(j) The rate shown is the effective yield on the discount notes at the time
of purchase.
(k) Securities, or a portion thereof, with a market value of $934,436 have
been pledged as collateral for swap and swaption contracts. (l) Each
swaption contract is equivalent to $10,000 notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE BOND PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 26.3%
Federal Home Loan Bank, Discount
Notes
4.12% 02/15/08 $ 4,500 $ 4,421,038
Federal Home Loan Mortgage Corp.,
Unsecured Notes
2.60% 08/07/06 5,955 5,905,877
3.00% 04/19/07 7,820 7,652,026
3.30% 09/14/07 9,420 9,184,509
3.25% 11/02/07 9,000 8,733,474
3.75% 02/27/09 10,025 9,617,253
5.00% 10/27/14 5,500 5,341,694
Federal National Mortgage
Association, Subordinated Notes
4.62% 05/01/13 1,960 1,861,777
Federal National Mortgage
Association, Unsecured Notes
2.15% 04/13/06 9,875 9,867,080
2.74%(b) 05/05/06 8,030 8,013,611
1.75% 06/16/06 4,175 4,147,378
2.71% 01/30/07 9,625 9,438,034
3.00% 04/19/07 5,600 5,479,712
4.15% 07/13/07 12,015 11,870,712
3.55% 11/16/07 8,985 8,770,807
3.25% 05/16/08 8,594 8,283,748
5.00% 08/12-03/15 14,885 14,490,929
Small Business Administration
Participation Certificates, Series
92-20H, Class 1
7.40% 08/01/12 611 632,080
Small Business Administration
Participation Certificates, Series
96-20H, Class 1
7.25% 08/01/16 1,631 1,691,301
Small Business Administration,
Series 01-P10, Class B-1
6.34%(b) 08/01/11 1,638 1,680,548
Small Business Investment Cos.
Pass-Through, Series 97-P10D,
Class 1
6.51% 11/10/07 93 94,256
U.S. Treasury Bonds
8.50%(c)(d) 02/15/20 2,520 3,379,557
U.S. Treasury Notes
4.00%(e) 09/30/07 26,160 25,839,121
4.25%(e) 10/31/07 33,130 32,827,159
4.38%(e) 12/07-11/08 29,445 29,155,550
4.12%(e) 08/15/08 1,140 1,123,701
============
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $232,226,332) 229,502,932
------------
MORTGAGE PASS-THROUGHS - 3.4%
Federal Home Loan Mortgage Corp.
ARM
4.98%(b) 10/01/35 13,183 12,976,799
Federal Home Loan Mortgage Corp.
Gold
5.50% 11/15/27 4,510 4,511,055
Federal National Mortgage
Association
8.50% 08/01/09 113 114,346
6.00% 05/16-02/17 602 610,689
5.50% 01/01/20 422 419,582
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
MORTGAGE PASS-THROUGHS (Continued)
Federal National Mortgage
Association ARM
4.00%(b) 04/01/34 $ 5,999 $ 5,840,178
4.83%(b) 09/01/35 4,384 4,311,579
============
TOTAL MORTGAGE PASS-THROUGHS
(Cost $29,277,392)
28,784,228
------------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 0.2%
Federal National Mortgage
Association Grantor Trust, Series
02-T6, Class A1
3.31%
(Cost $1,528,159) 02/25/32 1,646 1,517,435
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 9.5%
Bear Stearns Mortgage Trust, Series
04-12, Class 1A1
5.17%(b) 01/25/35 884 888,133
Bear Stearns Mortgage Trust, Series
04-13, Class A1
5.19%(b) 11/25/34 5,813 5,846,271
Bear Stearns Mortgage Trust, Series
04-7, Class 4A
3.20% 10/25/34 6,306 6,167,461
Countrywide Alternative Loan Trust,
Series 05-56, Class 1A1
5.55%(b)(f) 11/25/35 9,159 9,285,322
Countrywide Home Loans, Series
04-29, Class 1A1
5.09%(b) 02/25/35 3,866 3,871,119
Federal Home Loan Mortgage Corp.,
Series 1361, Class I
6.00% 09/15/07 133 132,340
Federal National Mortgage
Association, Series 89-16, Class B
(PO)
10.00%(g) 03/25/19 113 94,206
Federal National Mortgage
Association, Series 05-109, Class
PV
6.00% 10/25/32 6,515 6,572,211
Federal National Mortgage
Association, Series 05-29, Class
AT
4.50% 04/25/35 3,090 3,013,646
Federal National Mortgage
Association, Series 05-29, Class
WB
4.75% 04/25/35 3,580 3,493,292
Federal National Mortgage
Association, Series 05-57, Class
PA
5.50% 05/25/27 4,228 4,227,100
Federal National Mortgage
Association, Series 05-62, Class
CQ
4.75% 07/25/35 3,791 3,612,179
Federal National Mortgage
Association, Series 05-83, Class
LA
5.50% 10/25/35 5,600 5,564,248
GSAA Home Equity Trust, Series
04-8, Class A3A
5.19%(b) 09/25/34 904 908,663
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
COLLATERALIZED MORTGAGE OBLIGATIONS (Continued)
MortgageIT Trust, Series 04-1, Class
A1
5.21%(b) 11/25/34 $ 7,138 $ 7,185,000
Structured Mortgage Loan Trust,
Series 04-13, Class A2
5.12%(b) 09/25/34 3,181 3,213,647
Structured Mortgage Loan Trust,
Series 04-6, Class 4A1
4.84%(b) 06/25/34 9,349 9,007,096
Summit Mortgage Trust, Series 00-1,
Class B1
6.26%(b)(h) 12/28/12 93 93,409
Wells Fargo Mortgage Backed
Securities Trust, Series 04-5, Class
A1
4.53%(b) 06/25/34 10,122 9,997,119
===========
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $83,944,550) 83,172,462
-----------
COMMERCIAL MORTGAGE BACKED SECURITIES - 8.7%
Banc of America Commercial
Mortgage, Inc., Series 01-1, Class
A2
6.50% 04/15/36 4,910 5,088,291
Bayview Financial Acquisition Trust,
Series 98-1, Class A1
7.01%(h) 05/25/29 300 297,827
Chase Commercial Mortgage
Securities Corp., Series 00-3,
Class A2
7.32% 10/15/32 2,005 2,139,415
Commercial Mortgage Acceptance
Corp., Series 98-C2, Class A2
6.03% 09/15/30 4,207 4,247,657
Credit Suisse First Boston Mortgage
Securities Corp., Series 02-CP5,
Class A2
4.94% 12/15/35 6,185 5,990,307
Federal Home Loan Mortgage Corp.,
Series 2626, Class NA
5.00% 06/15/23 4,490 4,439,839
First Union National Bank
Commercial Mortgage Trust, Series
00-C2, Class A2
7.20%(b) 10/15/32 4,430 4,730,121
First Union National Bank
Commercial Mortgage Trust, Series
01-C3, Class A3
6.42% 08/15/33 7,025 7,318,468
General Electric Capital Commercial
Mortgage Corp., Series 02-1A,
Class A3
6.27% 12/10/35 4,850 5,049,917
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 97
7.43% 02/21/21 50 50,151
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 97-C1, Class X (IO)
1.55%(i) 07/15/27 13,291 402,840
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 99-C3, Class A2
7.18% 08/15/36 3,945 4,128,620
PAR
MATURITY (000) VALUE
---------- ---------- -------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 00-C2, Class A2
7.46% 08/16/33 $ 4,690 $ 5,013,922
J.P. Morgan Commercial Mortgage
Finance Corp., Series 97-C5,
Class E
7.61% 09/15/29 4,896 5,418,167
J.P. Morgan Mortgage Trust, Series
06-A2, Class 5A3
3.75%(b) 11/25/33 8,735 8,495,811
Lehman Brothers Commercial
Conduit Mortgage Trust, Series
99-C2, Class A1
7.10% 10/15/32 2,664 2,678,321
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 00-C5,
Class A1
6.41% 12/15/19 4,430 4,479,954
NationsLink Funding Corp., Series
99-SL, Class A6
6.61% 11/10/30 723 724,878
Washington Mutual Asset Securities
Corp., Series 05-C1A, Class A1
4.24%(h) 05/25/36 5,784 5,657,277
===========
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $78,565,028) 76,351,783
-----------
PROJECT LOANS - 0.2%
Federal Housing Authority, USGI
Project, Series 56
7.46%
(Cost $1,262,342) 01/01/23 1,256 1,259,014
-----------
CERTIFICATE OF DEPOSIT - 1.5%
Barclays Bank PLC NY
4.90%(b) 03/13/09 11,655 11,655,000
SunTrust Bank, Inc.
4.42% 06/15/09 1,375 1,338,150
===========
TOTAL CERTIFICATE OF DEPOSIT
(Cost $13,030,000) 12,993,150
-----------
ASSET BACKED SECURITIES - 14.2%
Amresco Independence Funding,
Inc., Series 00-1, Class A
5.65%(b)(h) 01/15/27 1,634 1,633,778
Boston Edison Co., Series 99-1,
Class A4
6.91% 09/15/09 3,295 3,342,335
Chase Issuance Trust, Series 04-A9,
Class A9
3.22% 06/15/10 6,100 5,926,455
Citibank Credit Card Issuance Trust,
Series 04, Class A1
2.55% 01/20/09 7,880 7,722,006
Citibank Credit Card Issuance Trust,
Series 04-A4, Class A4
3.20% 08/24/09 8,375 8,147,451
Countrywide Certificates, Series
04-12, Class 2AV3
4.95%(b) 10/25/35 5,008 5,009,173
Countrywide Certificates, Series
05-IM2, Class A1
4.93%(b) 01/25/36 4,864 4,864,263
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
46
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
ASSET BACKED SECURITIES (Continued)
Countrywide Certificates, Series
05-IM3, Class A1
4.94%(b) 03/25/36 $7,648 $ 7,648,915
Countrywide Certificates, Series
06-IM1, Class A1
4.91%(b) 09/01/28 5,747 5,750,749
DaimlerChrysler Auto Trust, Series
04-5, Class A3
3.18% 09/08/08 5,979 5,925,037
Epoch, Series 02, Class 2l
4.95%(b)(h) 05/30/07 4,900 4,936,750
Green Tree Financial Corp., Series
96-7, Class A6
7.65%(c) 10/15/27 1,164 1,205,054
IFC Small Business Administration
Loan-Backed Certificates, Series
97-1, Class A
5.50%(b)(h) 01/15/24 582 581,839
MBNA Credit Card Master Notes
Trust, Series 04-A4, Class A4
2.70% 09/15/09 7,900 7,706,205
MBNA Credit Card Master Notes
Trust, Series 06-A1, Class A1
4.90% 07/15/11 6,575 6,525,687
The Money Store Small Business
Administration Loan Trust, Series
97-2, Class A
5.30%(b) 02/15/29 1,762 1,705,674
The Money Store Small Business
Administration Loan Trust, Series
99-1, Class A
5.30%(b) 07/15/25 1,971 1,958,315
PBG Equipment Trust, Series 00-1A,
Class A
6.27%(h) 01/20/12 1,008 1,008,822
PMC Capital LP, Series 98-1, Class A
6.50%(b)(h) 04/01/21 949 963,906
Residential Asset Mortgage Products,
Inc., Series 05-NC1, Class AI1
4.91%(b) 12/25/35 5,756 5,756,135
Residential Asset Mortgage Products,
Inc., Series 05-RZ4, Class A1
4.94%(b) 11/25/35 6,025 6,025,810
Structured Asset Receivables Trust,
Series 03-2
4.91%(b)(h)(j) 01/21/09 5,429 5,428,920
Structured Asset Securities Corp.,
Series 03-AL1, Class A
3.36%(h) 04/25/31 2,571 2,289,206
Student Loan Marketing Association
Student Loan Trust, Series 05-10,
Class A1
4.53%(b) 04/25/12 6,450 6,448,452
Student Loan Marketing Association
Student Loan Trust, Series 05-5,
Class A1
4.62%(b) 01/25/18 6,717 6,714,842
Student Loan Marketing Association
Student Loan Trust, Series 05-8
Class A4
4.25% 01/25/28 7,375 7,210,759
SWB Loan-Backed Certificates,
Series 99-1, Class A
7.38%(h) 05/15/25 1,478 1,500,173
============
TOTAL ASSET BACKED SECURITIES
(Cost $124,755,045) 123,936,711
------------
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS - 38.7%
Aerospace - 0.5%
Lockheed Martin Corp., Debentures
7.65% 05/01/16 $1,340 $ 1,535,373
Northrop Grumman Corp., Senior
Unsecured Notes
4.08% 11/16/06 1,445 1,434,770
Raytheon Co., Senior Notes
6.75% 08/15/07 1,752 1,779,424
============
4,749,567
------------
Banks - 9.5%
Banc One Corp., Senior Unsecured
Notes
2.62% 06/30/08 60 56,667
Bank of America Corp., Subordinated
Notes
7.20% 04/15/06 795 795,423
7.80% 02/15/10 1,115 1,205,660
Bank of America Corp., Unsecured
Notes
4.96%(b) 03/24/09 6,775 6,774,709
Bank of New York Co., Inc., Senior
Subordinated Notes
3.80% 02/01/08 1,400 1,364,502
Bank One N.A., Senior Unsecured
Notes
3.70% 01/15/08 2,325 2,269,130
BankBoston N.A., Subordinated Bank
Notes
6.38% 04/15/08 2,575 2,626,917
BankBoston N.A., Subordinated
Notes
7.00% 09/15/07 450 461,187
Barclays Bank PLC, Subordinated
Notes
7.38%(b)(h) 06/29/49 1,500 1,617,069
Citigroup, Inc., Senior Unsecured
Notes
5.75% 05/10/06 2,150 2,151,550
Citigroup, Inc., Subordinated Notes
7.75% 06/15/06 3,480 3,496,259
6.38% 11/15/08 1,710 1,757,488
Citigroup, Inc., Unsecured Notes
4.12% 02/22/10 6,585 6,307,837
4.62% 08/03/10 860 835,106
Depfa ACS Bank, Senior Secured
Bonds
4.88%(h)(k) 10/28/15 2,800 2,765,000
Deutsche Bank AG, Deposit Notes
3.84%(f) 03/15/07 1,975 1,963,347
HBOS Treasury Services PLC,
Unsecured Notes
3.75%(h) 09/30/08 1,360 1,312,070
HSBC Bank USA, Subordinated
Notes
3.87% 06/07/07 9,700 9,548,146
The Huntington National Bank,
Subordinated Bank Notes
2.75% 10/16/06 750 740,497
J.P. Morgan Chase & Co., Senior
Unsecured Notes
5.25% 05/30/07 609 608,042
J.P. Morgan Chase & Co.,
Subordinated Notes
6.25% 02/15/11 1,500 1,545,849
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Banks (Continued)
SunTrust Bank, Inc., Senior
Unsecured Notes
3.62% 10/15/07 $1,485 $ 1,450,236
4.00% 10/15/08 1,100 1,066,918
Swedish Export Credit Corp.,
Unsecured Notes
3.50% 01/15/08 6,625 6,446,854
U.S. Bank N.A., Senior Bank Notes
2.40% 03/12/07 4,560 4,430,040
3.75% 02/06/09 850 817,012
U.S. Bank N.A., Subordinated Notes
6.30% 07/15/08 1,360 1,393,275
U.S. Central Credit Union, Unsecured
Notes
2.75% 05/30/08 1,915 1,819,844
UBS Preferred Funding Trust, Inc.,
Capital Securities
8.62%(b) 10/29/49 475 529,965
USB Capital IX, Unsecured Notes
6.19%(b) 03/29/49 940 931,712
Wachovia Capital Trust III, Trust
Preferred Security
5.80%(b) 03/15/42 1,000 982,479
Wachovia Corp., Subordinated Notes
5.62% 12/15/08 2,150 2,170,345
Wachovia Corp., Unsecured Notes
4.95% 11/01/06 3,000 2,994,006
Wells Fargo & Co., Senior Unsecured
Notes
5.90% 05/21/06 1,600 1,601,466
5.25% 12/01/07 1,700 1,702,196
4.20% 01/15/10 675 648,742
Wells Fargo & Co., Unsecured Notes
4.62% 08/09/10 3,150 3,056,404
4.88% 01/12/11 830 811,678
===========
83,055,627
-----------
Broadcasting - 0.4%
Cox Communications, Inc., Senior
Unsecured Notes
7.75% 11/01/10 295 315,479
7.12% 10/01/12 900 944,157
News America Holdings, Inc.,
Secured Notes
8.50% 02/23/25 650 750,727
News America Holdings, Inc., Senior
Debentures
9.50% 07/15/24 550 690,104
News America, Inc., Unsecured
Notes
5.30% 12/15/14 410 395,486
===========
3,095,953
-----------
Computer Software & Services - 0.5%
Oracle Corp., Unsecured Notes
5.25%(h) 01/15/16 775 743,452
Oracle Corp./Ozark Holdings,
Unsecured Notes
5.00%(h) 01/15/11 3,650 3,564,937
===========
4,308,389
-----------
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Energy & Utilities - 1.9%
American Electric Power Co., Senior
Notes
4.71%(b) 08/16/07 $1,205 $ 1,192,822
Carolina Power & Light Co., First
Mortgage Bonds
5.25% 12/15/15 1,415 1,368,766
Dominion Resources, Inc., Senior
Unsecured Notes
3.66% 11/15/06 2,250 2,226,641
5.12% 12/15/09 455 446,519
DTE Energy Co., Senior Unsecured
Notes
5.63% 08/16/07 1,475 1,477,544
NiSource Finance Corp., Secured
Notes
7.88% 11/15/10 2,400 2,605,819
NiSource Finance Corp., Unsecured
Notes
5.34%(b) 11/23/09 2,450 2,454,851
PECO Energy Co., First Refunding
Mortgages
5.95% 11/01/11 1,900 1,936,333
Virginia Electric and Power Co.,
Unsecured Notes
5.73% 11/25/08 2,514 2,523,241
===========
16,232,536
-----------
Entertainment & Leisure - 1.0%
Comcast Cable Communications
Corp., Senior Notes
8.38% 05/01/07 340 350,464
Comcast Cable Communications
Corp., Senior Unsecured Notes
5.45% 11/15/10 4,000 3,955,544
Comcast Cable Holdings LLC, Senior
Debentures
7.88% 08/01/13 735 806,339
8.75% 08/01/15 965 1,129,141
Comcast Corp., Unsecured Notes
5.90% 03/15/16 1,250 1,225,862
Time Warner Cos., Inc., Senior
Unsecured Notes
6.75% 04/15/11 1,110 1,151,191
Turner Broadcasting Corp., Senior
Notes
8.38% 07/01/13 300 335,474
===========
8,954,015
-----------
Finance - 9.7%
Archstone-Smith Trust Corp., Senior
Unsecured Notes
5.00% 08/15/07 850 845,011
Associates Corp. N.A., Senior Notes
6.25% 11/01/08 2,000 2,045,608
BAE Systems Holdings, Inc.,
Unsecured Notes
5.20%(h) 08/15/15 680 642,655
The Bear Stearns Cos., Inc.,
Unsecured Notes
3.25% 03/25/09 3,500 3,307,955
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
CORPORATE BONDS (Continued)
Finance (Continued)
Berkshire Hathaway Finance Corp.,
Senior Unsecured Notes
3.40% 07/02/07 $ 2,400 $ 2,349,168
4.12% 01/15/10 1,025 982,534
Cable and Wireless Optus Finance
Ltd., Unsecured Notes
8.00%(h) 06/22/10 1,425 1,552,794
CitiFinancial Credit Co., Unsecured
Notes
6.62% 11/15/06 2,675 2,698,551
General Electric Capital Corp.,
Unsecured Notes
3.45%(b) 07/07-01/08 8,420 8,372,909
3.50% 08/15/07 3,820 3,734,661
4.12% 09/01/09 1,115 1,074,339
4.88% 10/21/10 4,980 4,878,234
5.00% 11/15/11 8,890 8,714,120
The Goldman Sachs Group, Inc.,
Unsecured Notes
5.00% 01/15/11 5,675 5,554,003
4.75% 07/15/13 2,000 1,889,444
Household Finance Corp., Senior
Unsecured Notes
5.75% 01/30/07 500 502,094
HSBC Finance Corp., Senior
Unsecured Notes
7.20% 07/15/06 1,975 1,985,647
Kinder Morgan Finance Co. ULC,
Senior Unsecured Notes
5.35% 01/05/11 1,700 1,672,890
Lehman Brothers Holdings, Inc.,
Unsecured Notes
5.00% 01/14/11 4,500 4,408,677
Morgan Stanley, Senior Notes
4.91%(b) 03/07/08 10,265 10,261,951
Morgan Stanley, Senior Unsecured
Notes
6.75% 04/15/11 350 368,428
Morgan Stanley, Unsecured Notes
5.05% 01/21/11 7,050 6,910,875
Nationwide Building Society,
Unsecured Notes
4.25%(h) 02/01/10 350 335,562
Nuveen Investments, Senior
Unsecured Notes
5.50% 09/15/15 925 887,135
Principal Life Global Funding, Inc.,
Unsecured Notes
3.62%(h) 04/30/08 1,085 1,049,618
Prudential Financial, Inc., Senior
Unsecured Notes
3.75% 05/01/08 1,375 1,332,911
Prudential Funding LLC, Senior
Unsecured Notes
6.60%(h) 05/15/08 810 829,602
PSEG Funding Trust, Inc., Capital
Securities
5.38% 11/16/07 1,450 1,445,157
SP Powerassets Ltd., Unsecured
Notes
3.80%(h) 10/22/08 1,325 1,277,022
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
CORPORATE BONDS (Continued)
Finance (Continued)
Washington Mutual Finance Corp.,
Senior Unsecured Notes
6.25% 05/15/06 $ 2,750 $ 2,753,715
===========
84,663,270
-----------
Insurance - 1.9%
Allstate Financial Global Funding,
Unsecured Notes
5.25%(h) 02/01/07 1,430 1,427,586
ASIF Global Financing, Unsecured
Notes
3.90%(h) 10/22/08 320 309,088
CHUBB Corp., Senior Unsecured
Notes
4.93% 11/16/07 2,925 2,906,424
MassMutual Global Funding II,
Senior Secured Notes
2.55%(h) 07/15/08 2,535 2,385,209
MetLife, Inc., Unsecured Notes
5.00% 06/15/15 1,825 1,729,934
Metropolitan Life Global Funding,
Inc., Unsecured Notes
2.60%(h) 06/19/08 1,540 1,449,311
New York Life Global Funding,
Unsecured Notes
3.88%(h) 01/15/09 2,945 2,836,226
TIAA Global Markets, Senior
Unsecured Notes
3.88%(h) 01/22/08 520 507,001
WellPoint Health Network, Inc.,
Senior Unsecured Notes
6.38% 06/15/06 2,750 2,756,958
===========
16,307,737
-----------
Manufacturing - 0.2%
Cisco Systems, Inc., Senior
Unsecured Notes
5.25% 02/22/11 1,300 1,288,906
-----------
Medical & Medical Services - 0.6%
UnitedHealth Group, Inc., Unsecured
Notes
5.25% 03/15/11 2,600 2,578,628
WellPoint, Inc., Unsecured Notes
3.50% 09/01/07 630 612,634
5.00% 01/15/11 1,925 1,881,701
===========
5,072,963
-----------
Motor Vehicles - 0.4%
DaimlerChrysler N.A. Holding Corp.,
Unsecured Notes
4.88% 06/15/10 2,000 1,926,860
6.50% 11/15/13 475 483,107
Johnson Controls, Inc., Unsecured
Notes
5.25% 01/15/11 1,390 1,366,882
===========
3,776,849
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
49
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Oil & Gas - 2.5%
Anadarko Petroleum Corp., Senior
Unsecured Notes
3.25% 05/01/08 $1,600 $ 1,533,098
ConocoPhillips, Senior Unsecured
Notes
8.75% 05/25/10 2,400 2,693,443
EnCana Corp. (Canada), Unsecured
Notes
4.60%(l) 08/15/09 175 170,550
Gulfstream Natural Gas Systems,
Unsecured Notes
5.56%(h) 11/01/15 800 785,816
Halliburton Co., Senior Unsecured
Notes
5.50% 10/15/10 1,850 1,854,366
Ocean Energy, Inc., Senior
Unsecured Notes
4.38% 10/01/07 1,660 1,636,163
Oneok, Inc., Senior Unsecured Notes
5.51% 02/16/08 2,410 2,406,298
Texas Eastern Transmission LLP,
Senior Unsecured Notes
5.25% 07/15/07 1,590 1,584,228
Tosco Corp., Senior Notes
7.62% 05/15/06 2,525 2,531,888
Tosco Corp., Senior Unsecured
Notes
7.25% 01/01/07 805 814,663
Union Pacific Resources, Inc.,
Debentures
7.38% 05/15/06 5,845 5,859,671
===========
21,870,184
-----------
Pharmaceuticals - 0.7%
Merck & Co., Inc., Unsecured Notes
2.50% 03/30/07 1,640 1,595,569
Schering-Plough Corp., Senior Notes
5.55%(b) 12/01/13 795 786,551
Wyeth, Unsecured Notes
5.50% 02/15/16 3,965 3,893,789
===========
6,275,909
-----------
Real Estate - 0.7%
Avalonbay Communities, Inc., Senior
Unsecured Notes
5.00% 08/01/07 1,380 1,373,486
EOP Operating LP, Unsecured Notes
4.65% 10/01/10 765 733,314
ERP Operating LP, Senior Notes
7.12% 10/15/17 725 796,084
ProLogis, Unsecured Notes
5.25%(h) 11/15/10 1,590 1,564,282
The Rouse Co., Unsecured Notes
3.62% 03/15/09 600 557,786
5.38% 11/26/13 1,405 1,309,528
===========
6,334,480
-----------
Retail Merchandising - 0.2%
Federated Department Stores, Inc.,
Senior Unsecured Notes
6.62% 09/01/08 820 842,437
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Retail Merchandising (Continued)
May Department Stores Co.,
Debentures
7.45% 10/15/16 $ 860 $ 935,252
===========
1,777,689
-----------
Telecommunications - 2.5%
AT&T Broadband Corp., Unsecured
Notes
8.38% 03/15/13 1,235 1,388,941
BellSouth Corp., Unsecured Notes
4.26%(b)(h) 04/26/06 2,750 2,748,372
Continental Cablevision, Inc., Senior
Notes
8.30% 05/15/06 1,050 1,053,231
Lenfest Communications, Inc., Senior
Notes
7.62% 02/15/08 1,815 1,877,106
SBC Communications, Inc., Senior
Unsecured Notes
5.88% 02/01/12 130 130,769
SBC Communications, Inc.,
Unsecured Notes
4.39%(h) 06/05/06 1,900 1,897,283
Sprint Capital Corp., Senior
Unsecured Notes
7.62% 01/30/11 1,125 1,216,683
Verizon New Jersey, Inc., Senior
Debentures
5.88% 01/17/12 5,015 4,959,384
Vodafone Group PLC (United
Kingdom), Senior Unsecured Notes
3.95%(l) 01/30/08 2,595 2,531,947
Vodafone Group PLC (United
Kingdom), Unsecured Notes
5.05%(b)(l) 12/28/07 3,455 3,456,068
5.00%(l) 09/15/15 110 102,588
===========
21,362,372
-----------
Transportation - 0.2%
Union Pacific Corp., Unsecured
Notes
7.25% 11/01/08 1,750 1,833,095
-----------
Yankee - 5.3%
Canadian National Railway Co.
(Canada), Senior Unsecured Notes
4.25%(l) 08/01/09 2,075 2,007,563
Deutsche Telekom International
Finance BV (Netherlands), Senior
Notes
5.75%(l) 03/23/16 1,500 1,465,330
Eksportfinans ASA (Norway),
Unsecured Notes
4.38%(l) 07/15/09 6,550 6,394,568
EnCana Holdings Finance Corp.
(Canada), Senior Unsecured Notes
5.80%(l) 05/01/14 1,630 1,645,240
KFW Bankengruppe (Germany),
Senior Unsecured Notes
3.25%(l) 09/21/07 3,400 3,316,136
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS (Continued)
Yankee (Continued)
Landeskreditbank
Baden-Wurttemberg-Forderbank
(Germany), Unsecured Notes
3.42%(l) 07/27/06 $19,090 $ 18,988,441
National Westminster Bank (United
Kingdom), Subordinated Notes
7.75%(b)(l) 04/29/49 1,550 1,599,614
Nationwide Building Society (United
Kingdom), Unsecured Notes
2.62%(h)(l) 01/30/07 2,045 2,002,855
Scottish Power PLC (United
Kingdom), Unsecured Notes
4.90%(l) 03/15/10 2,300 2,245,557
Telecom Italia Capital (Luxembourg),
Senior Unsecured Notes
5.25%(l) 11/15/13 665 630,091
Telefonica Europe BV (Netherlands),
Senior Unsecured Notes
7.75%(l) 09/15/10 510 548,737
Tyco International Group SA
(Luxembourg), Senior Unsecured
Notes
5.80%(l) 08/01/06 650 650,768
6.38%(l) 10/15/11 2,660 2,732,804
Vodafone Group PLC (United
Kingdom), Senior Unsecured Notes
7.75%(l) 02/15/10 1,845 1,977,141
============
46,204,845
------------
TOTAL CORPORATE BONDS
(Cost $342,947,909) 337,164,386
------------
TAXABLE MUNICIPAL BONDS - 1.3%
Elmhurst Illinois Sales Tax Revenue
Bonds, Series 98
5.62% 05/15/10 250 250,125
New York Sales Tax Asset
Receivable Corp. Revenue Bonds,
Series 04, Class B
3.83% 10/15/09 1,280 1,221,747
Oregon School Board Taxable
Pension Deferred Interest Bonds,
Series 03, Class A
1.00% 06/30/07 2,700 2,533,680
Port Authority of New York & New
Jersey Revenue Notes, Series 04,
Class XX
3.30% 09/15/07 4,200 4,089,666
Texas Public Finance Authority
Taxable Revenue Bonds, Series 03
3.12% 06/15/07 2,020 1,972,873
Wisconsin General Revenue Bonds,
Series 03, Class A
4.80% 05/01/13 1,910 1,846,550
============
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $12,065,629) 11,914,641
------------
NUMBER
OF SHARES VALUE
----------- -------------
SHORT TERM INVESTMENTS - 0.5%
Galileo Money Market Fund
(Cost $4,716,279) 4,716,279 $4,716,279
----------
TOTAL MARKET VALUE OF
SECURITIES
BEFORE INVESTMENT IN
AFFILIATE - 104.5%
(Cost $924,318,665) 911,313,021
-----------
INVESTMENT IN AFFILIATE - 0.4%
Institutional Money
Market Trust
(Cost $2,912,000) 2,912,000 2,912,000
---------
TOTAL INVESTMENTS IN SECURITIES -
104.9%
(Cost $927,230,665(a)) 914,225,021
-----------
NUMBER OF
CONTRACTS
-----------------
CALL OPTIONS WRITTEN - 0.0%
June 10 year U.S.
Treasury Note
futures, Strike Price
$111, Expires
05/26/06 (83) (1,297)
September 10 year U.S.
Treasury
Note futures, Strike
Price $110,
Expires 08/25/06 (73) (12,547)
=======
TOTAL CALL OPTIONS WRITTEN
(Premiums received (13,844)
-------
$75,579)
CALL SWAPTIONS PURCHASED - 0.1%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 1,210(m) 445,280
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 1,160(m) 689,040
=======
TOTAL CALL SWAPTIONS PURCHASED
(Cost $1,316,095) 1,134,320
---------
CALL SWAPTIONS WRITTEN - (0.1)%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08 (1,220)(m) (296,460)
Citibank, Strike Price
$5.67, Expires
01/04/10 (1,250)(m) (595,625)
=========
TOTAL CALL SWAPTIONS WRITTEN
(Premiums received (892,085)
---------
$1,175,640)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
51
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE BOND PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
----------------- ---------------
PUT OPTIONS WRITTEN - 0.0%
June 10 year U.S.
Treasury Notes
futures, Strike Price
$107, Expires
05/26/06 (83) $ (88,188)
September 10 year U.S.
Treasury
Notes futures, Strike
Price $106,
Expires 08/25/06 (73) (73,000)
============
TOTAL PUT OPTIONS WRITTEN
(Premiums received (161,188)
------------
$81,141)
PUT SWAPTIONS PURCHASED - 0.1%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 1,210(m) 657,030
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 1,160(m) 769,080
============
TOTAL PUT SWAPTIONS PURCHASED
(Cost $1,316,095) 1,426,110
------------
PUT SWAPTIONS WRITTEN - (0.1)%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08 (1,220)(m) (580,598)
Citibank, Strike Price
$5.67, Expires
01/04/10 (1,250)(m) (495,750)
============
TOTAL PUT SWAPTIONS WRITTEN
(Premiums received (1,076,348)
------------
$1,175,640)
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (0.3)% (2,912,000)
----------
LIABILITIES IN EXCESS OF OTHER
ASSETS - (4.6)% (39,896,269)
-----------
NET ASSETS - 100.0% $ 871,833,717
=============
- -------------------
(a) Cost for federal Income tax purposes is $927,258,629. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 1,147,451
Gross unrealized depreciation (14,181,059)
------------
$(13,033,608)
============
(b) Variable rate security. Rates shown are the rates as of March 31, 2006.
(c) Securities, or a portion thereof, pledged as collateral with a value of
$1,344,152 on 1,661 long U.S. Treasury Notes futures contracts, 326 long
Treasury Bonds futures contracts and 993 short U.S. Treasury Notes
futures contracts expiring June 2006. The value of such contracts on
March 31, 2006 was $330,431,586 with an unrealized loss of $1,788,798
(including commissions of $5,959).
(d) Securities, or a portion thereof, with a market value of $804,656 have
been pledged as collateral for swap and swaption contracts. (e) Securities,
or a portion thereof, subject to financing transactions.
(f) Securities valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, these securities
had a total market value of $11,248,669 which represents 1.3% of net
assets.
(g) Interest rate of underlying collateral.
(h) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 6.7% of its net assets, with a current market value
of $57,994,717, in securities restricted as to resale.
(i) Rates shown are the effective yields as of March 31, 2006.
(j) Security is illiquid. As of March 31, 2006, the Portfolio held 0.6% of
its net assets, with a current market value of $5,428,920 in these
securities.
(k) Total or partial securities on loan.
(l) Security is a foreign domiciled issuer which is registered with the
Securities and Exchange Commission.
(m) Each swaption contract is equivalent to $10,000 notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
52
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE PLUS BOND PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ----------
PREFERRED STOCKS - 0.1%
Raytheon Co. Trust I
7.00%
(Cost $42,375) 800 $40,400
-------
PAR
MATURITY (000)
-------------- --------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 21.7%
Federal Home Loan Mortgage
Corp.,
Unsecured Notes
3.01% 04/19/07 $ 275 269,120
5.00% 10/27/14 100 97,122
Federal National Mortgage
Association, Unsecured Notes
2.15% 04/13/06 300 299,759
2.74%(b) 05/05/06 225 224,541
1.75% 06/16/06 125 124,173
2.71% 01/30/07 250 245,144
Small Business Administration
Participation Certificates,
Series
96-20E, Class 1
7.60% 05/01/16 96 99,973
Small Business Administration,
Series 03-P10A
4.52% 02/10/13 146 138,743
U.S. Treasury Notes
3.62%(c) 04/30/07 1,050 1,036,383
4.00%(c) 08/07-09/07 1,280 1,264,458
4.25% 10/31/07 35 34,680
4.38%(c) 12/07-11/08 2,645 2,623,151
3.38% 02/15/08 60 58,439
4.12%(c) 08/15/08 175 172,498
=========
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $6,748,770) 6,688,184
---------
MORTGAGE PASS-THROUGHS - 42.5%
Federal Home Loan Mortgage Corp.
ARM
3.31%(b) 07/01/34 235 231,136
Federal Home Loan Mortgage Corp.
Gold
4.50% 03/10-08/20 492 471,190
5.00% 06/20-09/35 2,631 2,557,941
5.50% 11/15/27 160 160,075
Federal Home Loan Mortgage Corp.
Gold ARM
3.99%(b) 03/01/34 123 119,559
Federal Home Loan Mortgage Corp.
Gold TBA
4.50% 04/01/21 300 286,312
Federal National Mortgage
Association
6.00% 08/16-02/34 386 386,321
5.00% 01/18-04/36 3,005 2,888,026
4.50% 03/21-04/36 998 943,929
5.50% 04/21-04/36 4,065 4,002,985
PAR
MATURITY (000) VALUE
---------- ------- -------------
MORTGAGE PASS-THROUGHS (Continued)
Federal National Mortgage
Association ARM
4.12%(b) 10/01/33 $277 $ 270,607
4.29%(b) 12/01/33 184 180,000
4.28%(b) 01/01/34 242 236,898
4.00%(b) 04/01/34 371 360,910
===========
TOTAL MORTGAGE PASS-THROUGHS
(Cost $13,291,446) 13,095,889
-----------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 0.4%
Federal Home Loan Mortgage Corp.,
Series 05, Class B1
4.50% 05/01/20 92 87,486
Structured Asset Securities Corp.,
Series 96-CFL, Class X1 (IO)
2.05%(d) 02/25/28 351 15,828
===========
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $115,456) 103,314
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 7.2%
Bear Stearns Mortgage Trust, Series
04-13, Class A1
5.19%(b) 11/25/34 165 165,717
Countrywide Alternative Loan Trust,
Series 05-56, Class 1A1
5.55%(b)(e) 11/25/35 284 287,686
Countrywide Home Loans, Series
04-29, Class 1A1
5.09%(b) 02/25/35 94 93,845
Federal Home Loan Mortgage Corp.,
Series 2927, Class BA
5.50% 10/15/33 108 107,448
Federal Home Loan Mortgage Corp.,
Series 2949, Class PA
5.50% 03/15/34 216 215,169
Federal Home Loan Mortgage Corp.,
Series 2979, Class BC
5.00% 04/15/20 190 182,779
Federal Home Loan Mortgage Corp.,
Series 2996, Class MK
5.50% 06/15/35 96 94,976
Federal National Mortgage
Association, Series 04-25, Class
PA
5.50% 10/25/30 181 180,727
Federal National Mortgage
Association, Series 04-36, Class
BS
5.50% 11/25/30 148 147,362
Federal National Mortgage
Association, Series 05-48, Class
AR
5.50% 02/25/35 105 104,097
Federal National Mortgage
Association, Series 363, Class 2
(IO)
5.50%(d) 11/01/35 292 77,868
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
53
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE PLUS BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- ------------
COLLATERALIZED MORTGAGE OBLIGATIONS (Continued)
Federal National Mortgage
Association, Series 367, Class 2
(IO)
5.50%(d) 01/25/36 $ 298 $ 79,005
MortgageIT Trust, Series 04-1, Class
A1
5.21%(b) 11/25/34 235 236,155
Structured Mortgage Loan Trust,
Series 04-13, Class A2
5.12%(b) 09/25/34 71 71,780
Wells Fargo Mortgage Backed
Securities Trust, Series 04-5, Class
A1
4.53%(b) 06/25/34 182 179,948
==========
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $2,250,769) 2,224,562
----------
COMMERCIAL MORTGAGE BACKED SECURITIES - 14.0%
Banc of America Commercial
Mortgage, Inc., Series 02-2, Class
A3
5.12%(f) 07/11/43 130 128,085
Banc of America Commercial
Mortgage, Inc., Series 02-PB2,
Class A4
6.19% 06/11/35 180 186,162
Banc of America Commercial
Mortgage, Inc., Series 05-4, Class
A5A
4.93% 07/10/45 160 152,544
Bear Stearns Commercial Mortgage
Securities, Inc., Series 00-WF2,
Class A2
7.32% 10/15/32 110 117,415
Bear Stearns Commericial Mortgage
Securities, Inc., Series 05-PWR7,
Class A2
4.94% 02/11/41 140 135,603
Chase Commercial Mortgage
Securities Corp., Series 97-1,
Class X (IO)
1.36%(d) 04/19/15 1,877 30,871
Chase Commercial Mortgage
Securities Corp., Series 00-3,
Class A2
7.32% 10/15/32 55 58,687
Chase Manhattan Bank-First Union
National Bank, Series 99-1, Class
A2
7.44% 08/15/31 185 195,736
Citigroup Commercial Mortgage
Trust, Series 05-EMG, Class A2
4.22%(g) 09/20/49 150 143,683
Credit Suisse First Boston Mortgage
Securities Corp., Series 97-C1,
Class AX (IO)
1.70%(d)(g) 06/20/29 2,226 59,899
Credit Suisse First Boston Mortgage
Securities Corp., Series 97-C2,
Class AX (IO)
1.34%(d) 01/17/35 668 11,415
Credit Suisse First Boston Mortgage
Securities Corp., Series 00-C1,
Class A1
7.32% 04/15/42 126 129,416
PAR
MATURITY (000) VALUE
---------- ---------- ------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Credit Suisse First Boston Mortgage
Securities Corp., Series 01-CP4,
Class D
6.61% 12/15/35 $ 185 $ 193,968
Donaldson, Lufkin and Jenrette, Inc.,
Commerical Mortgage Corp.,
Series 98-CF1, Class A1B
6.41% 02/18/31 183 185,542
Donaldson, Lufkin and Jenrette, Inc.,
Commerical Mortgage Corp.,
Series 00-CKP1, Class A1B
7.18% 11/10/33 100 106,461
First Union National Bank
Commercial Mortgage Trust, Series
01-C3, Class A3
6.42% 08/15/33 250 260,444
First Union National Bank
Commercial Mortgage Trust, Series
02-C1 Class A2
6.14% 02/12/34 175 180,792
General Electric Capital Commercial
Mortgage Corp., Series 00-1, Class
A2
6.50% 01/15/33 125 130,055
General Electric Capital Commercial
Mortgage Corp., Series 02-1A,
Class A3
6.27% 12/10/35 170 177,007
General Electric Capital Commercial
Mortgage Corp., Series 02-2A,
Class A3
5.35% 08/11/36 190 189,024
General Electric Capital Commercial
Mortgage Corp., Series 05-C1,
Class A3
4.58% 06/10/48 130 125,018
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 97-C1, Class X (IO)
1.55%(d) 07/15/27 1,460 44,250
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 99-C2, Class A2
6.94% 09/15/33 100 104,088
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 00-C2, Class A2
7.46% 08/16/33 115 122,943
Goldman Sachs Mortgage Securities
Corp. II, Series 06-GG6, Class A4
5.55% 04/10/38 70 69,861
J.P. Morgan Mortgage Trust, Series
06-A2, Class 5A3
3.75%(b) 11/25/33 310 301,511
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 00-C3,
Class A2
7.95% 05/15/25 140 151,611
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 01-C2,
Class A2
6.65% 11/15/27 150 157,737
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 03-C7,
Class A3
4.56%(b) 09/15/27 110 106,244
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE PLUS BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- ------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 05-C1,
Class A3
4.54% 02/15/30 $ 150 $ 143,274
Morgan Stanley Capital, Inc., Series
97-HF1, Class X
1.76%(g) 07/15/29 284 2,513
Washington Mutual Asset Securities
Corp., Series 05-C1A, Class A1
4.24%(g) 05/25/36 212 207,203
==========
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $4,475,884) 4,309,062
----------
CERTIFICATE OF DEPOSIT - 1.3%
Barclays Bank PLC NY
4.90%(b)
(Cost $410,000) 03/13/09 410 410,000
----------
ASSET BACKED SECURITIES - 14.7%
Ace Securities Corp., Series 06-HE1,
Class A2A
4.90%(b) 02/25/36 212 211,523
Capital Auto Receivables Asset Trust,
Series 04-2, Class A4
3.75% 07/15/09 225 218,931
Chase Credit Card Master Trust,
Series 01-6, Class A
4.88%(b) 03/16/09 250 250,219
Chase Issuance Trust, Series 04-A9,
Class A9
3.22% 06/15/10 175 170,021
Citibank Credit Card Issuance Trust,
Series 03-A3, Class A3
3.10% 03/10/10 125 120,234
Citibank Credit Card Issuance Trust,
Series 04, Class A1
2.55% 01/20/09 225 220,489
Countrywide Certificates, Series
05-BC5, Class 3A1
4.92%(b) 10/25/27 177 177,320
Countrywide Certificates, Series
05-IM2, Class A1
4.93%(b) 01/25/36 165 164,580
Countrywide Certificates, Series
05-IM3, Class A1
4.94%(b) 03/25/36 269 269,170
Countrywide Certificates, Series
06-IM1, Class A1
4.91%(b) 09/01/28 210 210,393
DaimlerChrysler Auto Trust, Series
05-B, Class A3
4.04% 09/08/09 225 221,864
Green Tree Financial Corp., Series
99-2, Class A3
6.08% 12/01/30 33 33,410
Honda Auto Receivables Owner
Trust, Series 05-4, Class A3
4.51% 05/21/09 225 222,845
MBNA Credit Card Master Notes
Trust, Series 04-A4, Class A4
2.70% 09/15/09 175 170,707
MBNA Credit Card Master Notes
Trust, Series 06-A1, Class A1
4.90% 07/15/11 225 223,312
PAR
MATURITY (000) VALUE
---------- ---------- ------------
ASSET BACKED SECURITIES (Continued)
Morgan Stanley Home Equity Loans,
Series 06-2, Class A1
4.77%(b) 01/25/36 $ 225 $ 225,000
Nissan Auto Receivables Owner
Trust, Series 05-C, Class A3
4.19% 07/15/09 250 246,243
Residential Asset Mortgage Products,
Inc., Series 05-RS8, Class A1
4.93%(b) 05/25/25 181 180,901
Residential Asset Mortgage Products,
Inc., Series 05-RZ4, Class A1
4.94%(b) 11/25/35 213 212,676
Soundview Home Equity Loan Trust,
Series 06-2, Class A1
4.91% 04/25/36 225 225,000
Standard Credit Card Master Trust,
Inc., Series 94-2, Class A
7.25% 04/07/06 235 235,054
Student Loan Marketing Association
Student Loan Trust, Series 04-9,
Class A2
4.64%(b) 10/25/12 122 121,790
Student Loan Marketing Association
Student Loan Trust, Series 05-6,
Class A5B
4.63%(b) 07/27/26 175 175,097
==========
TOTAL ASSET BACKED SECURITIES
(Cost $4,538,996) 4,506,779
----------
CORPORATE BONDS - 23.5%
Aerospace - 0.3%
BE Aerospace, Inc., Senior Notes
8.50% 10/01/10 5 5,332
Lockheed Martin Tactical Systems,
Inc., Senior Debentures
7.00% 09/15/23 30 33,181
Northrop Grumman Corp., Senior
Unsecured Notes
4.08% 11/16/06 35 34,752
Raytheon Co., Senior Unsecured
Notes
4.50% 11/15/07 7 6,905
==========
80,170
----------
Banks - 5.0%
Bank of America Corp., Senior
Unsecured Notes
4.50% 08/01/10 25 24,245
Bank of America Corp., Subordinated
Notes
7.80% 02/15/10 5 5,406
Bank of America Corp., Unsecured
Notes
4.96%(b) 03/24/09 250 249,989
Bank of New York Co., Inc., Senior
Notes
3.75% 02/15/08 25 24,355
Citigroup, Inc., Senior Unsecured
Notes
6.20% 03/15/09 35 35,853
Citigroup, Inc., Subordinated Notes
6.38% 11/15/08 30 30,833
Citigroup, Inc., Unsecured Notes
4.12% 02/22/10 260 249,057
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE PLUS BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- ------------
CORPORATE BONDS (Continued)
Banks (Continued)
Depfa ACS Bank, Senior Notes
3.62% 10/29/08 $ 50 $ 48,209
HBOS Treasury Services PLC,
Unsecured Notes
3.50%(g) 11/30/07 30 29,199
HSBC Bank USA, Subordinated
Notes
3.87% 06/07/07 225 221,478
J.P. Morgan Chase & Co.,
Subordinated Notes
7.12% 06/15/09 25 26,207
SunTrust Bank, Inc., Senior
Unsecured Notes
3.62% 10/15/07 70 68,361
4.00% 10/15/08 40 38,797
Swedish Export Credit Corp.,
Unsecured Notes
3.50% 01/15/08 75 72,983
U.S. Bancorp, Senior Unsecured
Notes
3.95% 08/23/07 115 113,058
UBS Preferred Funding Trust, Inc.,
Capital Securities
8.62%(b) 10/29/49 10 11,157
USB Capital IX, Unsecured Notes
6.19%(b) 03/29/49 40 39,647
Wachovia Capital Trust III, Trust
Preferred Security
5.80%(b) 03/15/42 40 39,299
Wells Fargo & Co., Senior Unsecured
Notes
5.90% 05/21/06 100 100,092
Wells Fargo & Co., Unsecured Notes
4.62% 08/09/10 100 97,029
==========
1,525,254
----------
Broadcasting - 0.5%
Charter Communications Holdings
LLC, Unsecured Notes
10.25% 09/15/10 45 44,325
Cox Communications, Inc., Senior
Unsecured Notes
7.12% 10/01/12 25 26,227
DirecTV Holdings LLC, Senior
Unsecured Notes
6.38% 06/15/15 10 9,875
News America Holdings, Inc.,
Secured Notes
8.50% 02/23/25 25 28,874
News America Holdings, Inc., Senior
Debentures
9.50% 07/15/24 15 18,821
News America, Inc., Unsecured
Notes
5.30% 12/15/14 20 19,292
==========
147,414
----------
Chemicals - 0.0%
BCP Crystal U.S. Holdings Corp.,
Senior Subordinated Notes
9.62% 06/15/14 5 5,538
----------
PAR
MATURITY (000) VALUE
---------- ---------- ------------
CORPORATE BONDS (Continued)
Computer Software & Services - 0.4%
Oracle Corp./Ozark Holdings,
Unsecured Notes
5.00%(g) 01/15/11 $ 125 $ 122,087
Sungard Data Systems, Inc., Senior
Unsecured Notes
9.12%(g) 08/15/13 5 5,287
==========
127,374
----------
Construction - 0.0%
International Steel Group, Inc.,
Senior Unsecured Notes
6.50% 04/15/14 15 14,887
----------
Electronics - 0.0%
L-3 Communications Corp., Senior
Subordinated Notes
6.38% 10/15/15 5 4,925
----------
Energy & Utilities - 0.7%
AES Corp., Senior Secured Notes
8.75%(g) 05/15/13 10 10,738
Carolina Power & Light Co., First
Mortgage Bonds
5.25% 12/15/15 40 38,693
Dominion Resources, Inc., Senior
Unsecured Notes
7.20% 09/15/14 40 43,068
Midwest Generation LLC,
Pass-Through Certificates
8.56% 01/02/16 22 24,141
Midwest Generation LLC, Senior
Secured Notes
8.75% 05/01/34 10 10,825
NiSource Finance Corp., Unsecured
Notes
5.34%(b) 11/23/09 75 75,148
Northwestern Corp., Notes
5.88% 11/01/14 5 4,925
Reliant Energy, Inc., Senior Secured
Notes
6.75% 12/15/14 15 13,350
==========
220,888
----------
Entertainment & Leisure - 0.5%
Comcast Cable Communications,
Inc., Senior Unsecured Notes
6.75% 01/30/11 35 36,383
Comcast Cable Holdings LLC, Senior
Debentures
7.88% 08/01/13 5 5,485
Comcast Corp., Unsecured Notes
5.90% 03/15/16 50 49,034
MGM Mirage, Inc., Senior Notes
6.00% 10/01/09 20 19,700
Mohegan Tribal Gaming Authority,
Senior Unsecured Notes
6.12% 02/15/13 10 9,825
Seneca Gaming Corp., Senior
Unsecured Notes
7.25% 05/01/12 15 15,150
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
56
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE PLUS BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- ------------
CORPORATE BONDS (Continued)
Entertainment & Leisure (Continued)
Time Warner Cos., Inc., Senior
Unsecured Notes
6.75% 04/15/11 $ 10 $ 10,371
Turner Broadcasting Corp., Senior
Notes
8.38% 07/01/13 15 16,774
==========
162,722
----------
Finance - 6.6%
BAE Systems Holdings, Inc.,
Unsecured Notes
5.20%(g) 08/15/15 40 37,803
The Bear Stearns Cos., Inc.,
Unsecured Notes
3.25% 03/25/09 50 47,256
Berkshire Hathaway Finance Corp.,
Senior Unsecured Notes
4.12% 01/15/10 80 76,685
General Electric Capital Corp.,
Unsecured Notes
3.50% 08/15/07 50 48,883
3.45%(b) 01/15/08 370 368,538
4.12% 09/01/09 30 28,906
3.75% 12/15/09 65 61,502
4.88% 10/21/10 175 171,424
5.00% 11/15/11 170 166,637
The Goldman Sachs Group, Inc.,
Unsecured Notes
5.00% 01/15/11 200 195,736
Household Finance Corp., Senior
Notes
6.45% 02/01/09 20 20,460
Kinder Morgan Finance, Secured
Notes
5.35% 01/05/11 50 49,203
Lehman Brothers Holdings, Inc.,
Unsecured Notes
5.00% 01/14/11 120 117,565
Morgan Stanley, Senior Notes
4.91%(b) 03/07/08 360 359,893
Morgan Stanley, Unsecured Notes
5.05% 01/21/11 150 147,040
Nationwide Building Society, Senior
Unsecured Notes
3.50%(g) 07/31/07 50 48,915
Principal Life Global Funding, Inc.,
Unsecured Notes
3.62%(g) 04/30/08 20 19,348
Prudential Funding LLC, Senior
Unsecured Notes
6.60%(g) 05/15/08 25 25,605
PSEG Funding Trust, Inc., Capital
Securities
5.38% 11/16/07 50 49,833
==========
2,041,232
----------
Food & Agriculture - 0.1%
Smithfield Foods, Inc., Senior
Unsecured Notes
7.00% 08/01/11 25 24,875
----------
PAR
MATURITY (000) VALUE
---------- ---------- ------------
CORPORATE BONDS (Continued)
Industrial - 0.1%
Osprey Trust/Osprey, Inc., Senior
Secured Notes
7.80%(g)(h) 01/15/49 $ 50 $ 27,000
----------
Insurance - 1.1%
Allstate Financial Global Funding,
Unsecured Notes
5.25%(g) 02/01/07 25 24,958
ASIF Global Financing, Unsecured
Notes
3.90%(g) 10/22/08 45 43,466
CHUBB Corp., Senior Unsecured
Notes
4.93% 11/16/07 75 74,524
MassMutual Global Funding II,
Senior Secured Notes
2.55%(g) 07/15/08 35 32,932
MetLife, Inc., Unsecured Notes
5.00% 06/15/15 50 47,395
New York Life Global Funding,
Unsecured Notes
3.88%(g) 01/15/09 45 43,338
TIAA Global Markets, Senior
Unsecured Notes
3.88%(g) 01/22/08 45 43,875
WellPoint Health Network, Inc.,
Senior Unsecured Notes
6.38% 06/15/06 25 25,063
==========
335,551
----------
Manufacturing - 0.1%
Briggs & Stratton Corp., Senior
Unsecured Notes
8.88% 03/15/11 20 22,150
----------
Medical & Medical Services - 0.4%
Bio-Rad Laboratories, Inc., Senior
Subordinated Notes
6.12% 12/15/14 10 9,600
UnitedHealth Group, Inc., Unsecured
Notes
5.25% 03/15/11 75 74,384
WellPoint, Inc., Unsecured Notes
5.00% 01/15/11 50 48,875
==========
132,859
----------
Metal & Mining - 0.0%
Massey Energy Co., Senior
Unsecured Notes
6.88%(g) 12/15/13 15 14,700
----------
Motor Vehicles - 0.3%
Arvinmeritor, Inc., Senior Notes
6.80% 02/15/09 2 2,000
DaimlerChrysler N.A. Holding Corp.,
Notes
4.75% 01/15/08 25 24,644
Johnson Controls, Inc., Unsecured
Notes
5.25% 01/15/11 50 49,168
==========
75,812
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
57
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE PLUS BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -----------
CORPORATE BONDS (Continued)
Oil & Gas - 0.9%
Anadarko Petroleum Corp., Senior
Unsecured Notes
3.25% 05/01/08 $ 50 $ 47,909
ANR Pipeline Co., Senior Debentures
9.62% 11/01/21 5 6,137
7.38% 02/15/24 5 5,162
Chesapeake Energy Corp., Senior
Notes
7.50% 06/15/14 10 10,475
Chesapeake Energy Corp., Senior
Unsecured Notes
6.25% 01/15/18 20 19,650
6.88%(g) 11/15/20 5 5,037
Colorado Interstate Gas Co., Senior
Unsecured Notes
6.80%(g) 11/15/15 5 5,087
Dynegy Holdings, Inc., Secured
Notes
10.12%(g) 07/15/13 15 17,186
EnCana Corp. (Canada), Bonds
6.30%(i) 11/01/11 25 25,910
Halliburton Co., Senior Unsecured
Notes
5.50% 10/15/10 25 25,059
KCS Energy, Inc., Senior Unsecured
Notes
7.12% 04/01/12 5 5,012
Northwest Pipeline Corp., Senior
Unsecured Notes
8.12% 03/01/10 15 15,825
Oneok, Inc., Senior Unsecured Notes
5.51% 02/16/08 75 74,885
Transcontinental Gas Pipeline Corp.,
Senior Notes
8.88% 07/15/12 5 5,738
The Williams Cos., Inc., Senior
Unsecured Notes
7.12% 09/01/11 10 10,288
========
279,360
--------
Pharmaceuticals - 0.5%
Merck & Co., Inc., Senior Unsecured
Notes
5.25% 07/01/06 25 24,997
Merck & Co., Inc., Unsecured Notes
2.50% 03/30/07 25 24,323
Wyeth, Unsecured Notes
5.50% 02/15/16 100 98,204
========
147,524
--------
Railroad & Shipping - 0.0%
Burlington Northern Santa Fe Corp.,
Debentures
7.29% 06/01/36 10 11,594
--------
Real Estate - 0.5%
American Real Estate Partners LP,
Senior Unsecured Notes
8.12% 06/01/12 5 5,150
ERP Operating LP, Unsecured Notes
5.25% 09/15/14 30 29,079
ProLogis, Unsecured Notes
5.25%(g) 11/15/10 55 54,110
PAR
MATURITY (000) VALUE
---------- ---------- -----------
CORPORATE BONDS (Continued)
Real Estate (Continued)
The Rouse Co., Unsecured Notes
3.62% 03/15/09 $ 40 $ 37,186
5.38% 11/26/13 40 37,282
========
162,807
--------
Retail Merchandising - 0.1%
Federated Department Stores, Inc.,
Senior Unsecured Notes
6.30% 04/01/09 10 10,220
May Department Stores Co.,
Debentures
7.45% 10/15/16 10 10,875
========
21,095
--------
Semiconductors & Related Devices - 0.0%
Freescale Semiconductor, Inc.,
Senior Unsecured Notes
7.35%(b) 07/15/09 5 5,112
Magnachip Semiconductor, Secured
Notes
8.16%(b) 12/15/11 10 10,125
========
15,237
--------
Telecommunications - 1.5%
AT&T Broadband Corp., Unsecured
Notes
8.38% 03/15/13 140 157,451
Cincinnati Bell, Inc., Senior
Unsecured Notes
7.25% 07/15/13 15 15,488
Intelsat Ltd., Senior Unsecured Notes
9.60%(b) 01/15/12 10 10,225
Qwest Corp., Unsecured Notes
8.16%(b) 06/15/13 15 16,425
Rogers Wireless, Inc., Senior
Secured Notes
7.50% 03/15/15 25 26,812
Verizon Maryland, Inc., Senior
Debentures
6.12% 03/01/12 30 30,061
Verizon New Jersey, Inc., Senior
Debentures
5.88% 01/17/12 70 69,224
Vodafone Group PLC (United
Kingdom), Unsecured Notes
5.05%(b)(i) 12/28/07 120 120,037
Wind Acquistion Finance SA, Senior
Unsecured Notes
10.75%(g) 12/01/15 15 16,200
========
461,923
--------
Transportation - 0.2%
Overseas Shipholding Group, Inc.,
Senior Unsecured Notes
7.50% 02/15/24 10 10,000
Union Pacific Corp., Senior Notes
6.62% 02/01/08 50 51,037
========
61,037
--------
Waste Management - 0.2%
Allied Waste N.A., Inc., Senior Notes
8.88% 04/01/08 15 15,750
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
58
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE PLUS BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- ------------
CORPORATE BONDS (Continued)
Waste Management (Continued)
Allied Waste N.A., Inc., Senior
Secured Notes
8.50% 12/01/08 $ 25 $ 26,125
==========
41,875
----------
Yankee - 3.5%
Canadian National Railway Co.
(Canada), Senior Unsecured Notes
4.25%(i) 08/01/09 40 38,700
Eksportfinans ASA (Norway),
Unsecured Notes
4.38%(i) 07/15/09 20 19,525
EnCana Holdings Finance Corp.
(Canada), Senior Unsecured Notes
5.80%(i) 05/01/14 10 10,093
Ispat Inland ULC (Canada), Senior
Secured Notes
9.75%(i) 04/01/14 22 24,888
Landeskreditbank
Baden-Wurttemberg-Forderbank
(Germany), Unsecured Notes
3.42%(i) 07/27/06 575 571,941
Omi Corp. (Mali), Senior Notes
7.62%(i) 12/01/13 5 5,100
Republic of Italy, Senior Unsecured
Notes
4.38%(i) 10/25/06 80 79,677
Scottish Power PLC (United
Kingdom), Unsecured Notes
4.90%(i) 03/15/10 25 24,408
Telecom Italia Capital (Luxembourg),
Senior Unsecured Notes
5.25%(i) 11/15/13 25 23,688
Telefonica Europe BV (Netherlands),
Senior Unsecured Notes
7.75%(i) 09/15/10 10 10,760
Tyco International Group SA
(Luxembourg), Senior Unsecured
Notes
5.80%(i) 08/01/06 30 30,035
6.75%(i) 02/15/11 75 78,006
6.38%(i) 10/15/11 15 15,411
Vodafone Group PLC (United
Kingdom), Senior Unsecured Notes
7.75%(i) 02/15/10 135 144,669
==========
1,076,901
----------
TOTAL CORPORATE BONDS
(Cost $7,363,710) 7,242,704
----------
FOREIGN BONDS - 1.2%
Bundesrepublic Deutschland
(Germany) (EUR)
4.75% 07/04/34 100 136,249
4.00% 01/04/37 125 151,830
Province of Manitoba (Canada),
Senior Unsecured Notes (NZD)
6.38% 09/01/15 30 18,339
Province of Ontario (Canada),
Unsecured Notes (NZD)
6.25% 06/16/15 90 54,883
PAR
MATURITY (000) VALUE
---------- ---------- ------------
FOREIGN BONDS (Continued)
Province of Quebec (Canada), Bonds
(NZD)
6.75%(b) 11/09/15 $ 30 $ 18,786
==========
TOTAL FOREIGN BONDS
(Cost $405,942)
380,087
----------
TAXABLE MUNICIPAL BONDS - 0.7%
New York Sales Tax Asset
Receivable Corp. Revenue Bonds,
Series 04, Class B
3.60% 10/15/08 35 33,681
Port Authority of New York & New
Jersey Revenue Notes, Series 04,
Class XX
3.30% 09/15/07 125 121,716
Wisconsin General Revenue Bonds,
Series 03, Class A
4.80% 05/01/13 50 48,339
==========
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $210,157) 203,736
----------
NUMBER
OF SHARES
----------
SHORT TERM INVESTMENTS - 0.7%
Galileo Money Market Fund
(Cost $197,066) 197,066 197,066
-------
TOTAL INVESTMENTS IN
SECURITIES - 128.0%
(Cost $40,050,571(a)) 39,401,783
----------
PAR
(000)
-----------
TBA SALE COMMITMENTS - (20.4)%
Federal Home Loan Mortgage
Corp.
Gold TBA
4.50% 04/01/21 (400) (381,750)
5.00% 04/21-04/36 (900) (874,625)
Federal National Mortgage
Association TBA
4.50% 04/01/21 (600) (573,563)
5.00% 04/21-05/34 (2,500) (2,402,501)
5.50% 04/15/34 (1,800) (1,756,688)
6.00% 04/01/36 (300) (299,906)
==========
TOTAL TBA SALE COMMITMENTS
(Proceeds $6,313,051) (6,289,033)
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
59
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERMEDIATE PLUS BOND PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
-------------- -----------
CALL OPTIONS WRITTEN - 0.0%
June 10 year U.S.
Treasury Note
futures, Strike Price
$111, Expires
05/26/06 (2) $ (31)
September 10 year U.S.
Treasury
Note futures, Strike
Price $110,
Expires 08/25/06 (2) (344)
=========
TOTAL CALL OPTIONS WRITTEN
(Premiums received (375)
---------
$2,051)
CALL SWAPTIONS PURCHASED - 0.1%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 40(j) 14,720
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 40(j) 23,760
=========
TOTAL CALL SWAPTIONS PURCHASED
(Cost $44,580) 38,480
---------
CALL SWAPTIONS WRITTEN - (0.1)%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08 (30)(j) (7,290)
Citibank, Strike Price
$5.67, Expires
01/04/10 (40)(j) (19,060)
=========
TOTAL CALL SWAPTIONS WRITTEN
(Premiums received (26,350)
---------
$33,670)
PUT OPTIONS WRITTEN - 0.0%
June 10 year U.S.
Treasury Notes
futures, Strike Price
$107, Expires
05/26/06 (2) (2,125)
September 10 year U.S.
Treasury
Notes futures, Strike
Price $106,
Expires 08/25/06 (2) (2,000)
=========
TOTAL PUT OPTIONS WRITTEN
(Premiums received (4,125)
---------
$2,083)
PUT SWAPTIONS PURCHASED - 0.1%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 40(j) 21,720
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 40(j) 26,520
=========
TOTAL PUT SWAPTIONS PURCHASED
(Cost $44,580) 48,240
---------
PUT SWAPTIONS WRITTEN - (0.1)%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08 (30)(j) (14,277)
Citibank, Strike Price
$5.67, Expires
01/04/10 (40)(j) (15,864)
=========
TOTAL PUT SWAPTIONS WRITTEN
(Premiums received (30,141)
---------
$33,670)
LIABILITIES IN EXCESS OF
OTHER
ASSETS - (7.6)% (2,344,500)
----------
NET ASSETS - 100.0% $ 30,793,979
============
- -------------------
(a) Cost for federal Income tax purposes is $40,061,635. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 8,174
Gross unrealized depreciation (668,026)
---------
$(659,852)
=========
(b) Variable rate security. Rates shown are the rates as of March 31, 2006.
(c) Securities, or a portion thereof, subject to financing transactions.
(d) Rates shown are the effective yields as of March 31, 2006.
(e) Securities valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, these securities
had a total market value of $287,686 which represents 0.9% of net
assets.
(f) Securities, or a portion thereof, pledged as collateral with a value of
$128,639 on 43 long U.S. Treasury Notes futures contracts, 14 long U.S.
Treasury Bonds futures contracts, 27 short U.S. Treasury Notes futures
contracts and 9 short Euro-Bobl futures contract expiring June 2006. The
value of such contracts on March 31, 2006 was $10,219,169 with an
unrealized loss of $41,604 (including commissions of $204).
(g) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 3.4% of its net assets, with a current market value
of $1,040,169, in securities restricted as to resale.
(h) Security in default.
(i) Security is a foreign domiciled issuer which is registered with the
Securities and Exchange Commission.
(j) Each swaption contract is equivalent to $10,000 notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND TOTAL RETURN PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -----------
PREFERRED STOCKS - 0.0%
Centaur Funding Corp.
9.08%(b)
(Cost $216,892) 205 $245,795
--------
PAR
MATURITY (000)
-------------- ---------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 18.1%
Federal Home Loan Mortgage Corp.,
Unsecured Notes
3.35% 11/09/07 $ 6,425 6,253,780
4.62% 05/28/13 7,375 6,982,853
Federal National Mortgage
Association, Unsecured Notes
2.35% 04/06-04/07 9,135 9,017,415
3.02% 06/01/06 60,450 60,254,747
1.75% 06/16/06 4,175 4,147,378
4.00% 10/16/06 26,225 26,064,346
2.71% 01/30/07 14,300 14,022,223
Overseas Private Investment Co.
4.09% 05/29/12 336 297,079
4.30% 05/29/12 939 850,235
4.64% 05/29/12 702 643,726
4.68% 05/29/12 396 353,926
4.87% 05/29/12 2,996 2,773,550
5.40% 05/29/12 3,754 3,615,998
Resolution Funding Corp. Strip
Bonds
6.29%(c) 07/15/18 2,850 1,511,583
6.30%(c) 10/15/18 2,850 1,492,197
Small Business Administration
Participation Certificates, Series
92-20H, Class 1
7.40% 08/01/12 37 37,925
Small Business Administration
Participation Certificates, Series
96-20J, Class 1
7.20% 10/01/16 1,035 1,071,699
Small Business Administration
Participation Certificates, Series
97-20B, Class 1
7.10% 02/01/17 1,076 1,114,821
Small Business Investment Cos.
Pass-Through, Series 97-P10C,
Class 1
6.85% 08/01/07 1,127 1,145,999
Small Business Investment Cos.
Pass-Through, Series 97-P10D,
Class 1
6.51% 11/10/07 87 87,972
Small Business Investment Cos.
Pass-Through, Series 03-10A,
Class 1
4.63% 03/10/13 8,180 7,801,264
U.S. Treasury Bonds
8.75% 05/15/17 1,645 2,171,015
8.12%(d) 08/15/19 32,195 41,778,035
6.00%(d) 02/15/26 3,328 3,713,319
6.75%(d)(e) 08/15/26 24,070 29,152,910
5.38%(f) 02/15/31 3,047 3,207,443
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (Continued)
U.S. Treasury Notes
4.62% 05/15/06 $ 405 $ 404,937
7.00% 07/15/06 7,370 7,414,625
4.00%(f) 08/07-02/15 67,130 66,300,049
4.25%(f) 10/07-11/14 31,235 30,946,945
4.38%(f) 12/07-11/08 83,100 82,382,544
4.12%(f) 08/15/08 45,455 44,805,130
6.00% 08/15/09 2,300 2,383,106
3.62% 01/15/10 465 445,783
5.00% 02/15/11 320 322,600
4.75% 05/15/14 145 143,731
4.50%(f) 02/15/16 350 340,402
U.S. Treasury Strip
4.77%(c) 11/15/27 36,760 12,428,556
============
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $484,230,122) 477,881,846
------------
MORTGAGE PASS-THROUGHS - 28.5%
Federal Home Loan Mortgage Corp.
Gold
4.00% 07/10-05/19 7,890 7,588,410
5.50% 03/11-04/33 17,226 17,111,025
6.00% 10/11-06/34 18,216 18,404,965
6.50% 06/13-10/34 2,064 2,108,722
4.50% 04/18-08/20 57,598 55,103,004
5.00% 04/18-09/35 43,971 42,489,925
8.00% 11/22-10/25 17 17,903
7.00% 03/25-05/31 242 248,927
7.50% 07/26-03/32 241 251,574
Federal Home Loan Mortgage Corp.
Gold TBA
5.00% 04/01/21 69,500 67,719,063
Federal National Mortgage
Association
6.50% 06/08-06/34 3,859 3,948,298
7.00% 11/08-08/32 8,190 8,426,655
5.50% 06/11-03/36 268,649 264,471,454
6.00% 09/11-11/34 12,674 12,697,080
4.00% 06/14-03/20 116 109,037
8.00% 11/01/15 6 5,998
4.50% 01/18-04/36 58,342 54,712,598
5.00% 01/18-11/35 95,394 91,826,923
7.50% 09/01/22 2 2,367
Federal National Mortgage
Association ARM
6.41%(g) 01/01/31 4,925 4,974,098
4.83%(g) 09/01/35 15,943 15,679,458
Federal National Mortgage
Association TBA
6.50% 04/01/36 65,000 66,300,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
61
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
------------- ---------- --------------
MORTGAGE PASS-THROUGHS (Continued)
Government National Mortgage
Association
7.00% 03/13-02/33 $ 3,308 $ 3,447,429
6.00% 11/14-11/33 4,871 4,922,199
9.00% 07/15/18 5 5,347
6.50% 03/24-04/32 1,196 1,239,343
7.50% 11/15/29 3 3,304
5.50% 03/32-02/35 9,765 9,675,973
============
TOTAL MORTGAGE PASS-THROUGHS
(Cost $766,077,467) 753,491,079
------------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 0.0%
Structured Asset Securities Corp.,
Series 96-CFL, Class X1 (IO)
2.05%(c)
(Cost $636,608) 02/25/28 6,226 280,937
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 8.1%
Banc of America Alternative Loan
Trust, Series 04-6, Class 4A1
5.00% 07/25/19 8,392 8,141,848
Federal Home Loan Mortgage Corp.,
Series 1361, Class I
6.00% 09/15/07 245 244,319
Federal Home Loan Mortgage Corp.,
Series 1591, Class PK
6.35% 10/15/23 7,546 7,668,241
Federal Home Loan Mortgage Corp.,
Series 231 (IO)
5.50%(c) 08/01/35 27,275 6,985,518
Federal Home Loan Mortgage Corp.,
Series 235 , Class IO
5.50%(c) 02/01/36 28,711 7,763,069
Federal Home Loan Mortgage Corp.,
Series 2529, Class MB
5.00% 11/15/17 8,292 8,025,604
Federal Home Loan Mortgage Corp.,
Series 2594, Class TV
5.50% 03/15/14 6,695 6,685,665
Federal Home Loan Mortgage Corp.,
Series 2864, Class NA
5.50% 01/15/31 15,930 15,850,752
Federal Home Loan Mortgage Corp.,
Series 2922, Class GA
5.50% 05/15/34 23,630 23,358,611
Federal Home Loan Mortgage Corp.,
Series 2996, Class MK
5.50% 06/15/35 14,835 14,693,496
Federal National Mortgage
Association, Series 96-48, Class Z
7.00% 11/25/26 3,854 3,961,563
Federal National Mortgage
Association, Series 03-16, Class
BC
5.00% 03/25/18 4,080 3,907,180
Federal National Mortgage
Association, Series 04-28, Class
PB
6.00% 08/25/28 12,370 12,429,404
Federal National Mortgage
Association, Series 04-88, Class
HA
6.50% 07/25/34 13,790 14,049,929
Federal National Mortgage
Association, Series 04-99, Class
AO
5.50% 01/25/34 14,201 14,003,764
PAR
MATURITY (000) VALUE
------------- ---------- --------------
COLLATERALIZED MORTGAGE OBLIGATIONS (Continued)
Federal National Mortgage
Association, Series 05-3, Class AP
5.50% 02/25/35 $13,836 $ 13,711,370
Federal National Mortgage
Association, Series 05-57, Class
PA
5.50% 05/25/27 19,972 19,969,287
Federal National Mortgage
Association, Series 05-70, Class
NA
5.50% 08/25/35 1,107 1,098,968
Goldman Sachs Residential
Mortgage Loan Trust, Series
03-10, Class 2A1
4.47%(g) 10/25/33 7,221 6,901,679
Salomon Brothers Mortgage
Securities VI, Series 87-1 (IO)
11.00%(c) 02/17/17 199 46,161
Salomon Brothers Mortgage
Securities VI, Series 87-1 (PO)
11.50%(h) 02/17/17 207 191,726
Salomon Brothers Mortgage
Securities VI, Series 87-2 (IO)
11.00%(c) 03/06/17 127 32,326
Salomon Brothers Mortgage
Securities VI, Series 87-2 (PO)
11.50%(h) 03/06/17 127 115,169
Salomon Brothers Mortgage
Securities, Series 87-3, Class A
(PO)
13.00%(h) 10/23/17 78 68,993
Summit Mortgage Trust, Series 00-1,
Class B1
6.26%(b)(g) 12/28/12 159 159,437
Wells Fargo Mortgage Backed
Securities, Series 04-K, Class 1A2
4.48%(g) 07/25/34 25,185 24,663,298
============
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $218,891,177)
214,727,377
------------
COMMERCIAL MORTGAGE BACKED SECURITIES - 13.1%
Banc of America Commercial
Mortgage, Inc., Series 01-1, Class
A2
6.50% 04/15/36 13,640 14,134,143
Banc of America Commercial
Mortgage, Inc., Series 02-2, Class
A3
5.12% 07/11/43 21,805 21,483,788
Banc of America Commercial
Mortgage, Inc., Series 05-1, Class
A4
4.88%(g) 11/10/42 13,880 13,617,529
Banc of America Commercial
Mortgage, Inc., Series 05-4, Class
A5A
4.93% 07/10/45 13,781 13,138,805
Bear Stearns Commercial Mortgage
Securities, Inc., Series 04-PWR6,
Class A6
4.82% 11/11/41 4,495 4,275,509
Chase Commercial Mortgage
Securities Corp., Series 97-1,
Class X (IO)
1.36%(c) 04/19/15 19,934 327,886
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
62
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Chase Commercial Mortgage
Securities Corp., Series 99-2,
Class A2
7.20% 01/15/32 $10,105 $ 10,667,918
Chase Commercial Mortgage
Securities Corp., Series 00-3,
Class A2
7.32% 10/15/32 5,755 6,140,816
Commercial Mortgage Acceptance
Corp., Series 98-C2, Class A2
6.03% 09/15/30 11,820 11,933,217
Credit Suisse First Boston Mortgage
Securities Corp., Series 97-C1,
Class AX (IO)
1.70%(b)(c) 06/20/29 36,698 987,552
Credit Suisse First Boston Mortgage
Securities Corp., Series 97-C2,
Class AX (IO)
1.34%(c) 01/17/35 12,892 220,225
Donaldson, Lufkin and Jenrette, Inc.,
Commercial Mortgage Corp.,
Series 98-CG1, Class B1
6.91% 06/10/31 16,991 17,629,267
Donaldson, Lufkin and Jenrette, Inc.,
Commerical Mortgage Corp.,
Series 00-CKP1, Class A1B
7.18% 11/10/33 18,130 19,301,459
First Union National Bank
Commercial Mortgage Trust, Series
00-C2, Class A2
7.20% 10/15/32 10,000 10,677,474
First Union-Lehman Brothers
Commercial Mortgage Trust, Series
97-C1, Class D
7.50% 04/18/29 50 51,130
First Union-Lehman Brothers-Bank of
America Commercial Mortgage
Trust, Series 98-C2, Class C3
6.56% 11/18/08 9,743 9,926,707
General Electric Capital Commercial
Mortgage Corp., Series 02-1A,
Class A3
6.27% 12/10/35 14,170 14,754,086
General Electric Capital Commercial
Mortgage Corp., Series 02-2A,
Class A3
5.35% 08/11/36 16,200 16,116,774
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 97-C1, Class X (IO)
1.55%(c) 07/15/27 29,598 897,101
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 99-C3, Class A2
7.18% 08/15/36 9,113 9,536,474
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 00-C1, Class A2
7.72% 03/15/33 16,105 17,296,556
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 00-C2, Class A2
7.46% 08/16/33 11,470 12,262,194
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 03-C3, Class A3
4.65% 04/10/40 1,840 1,777,002
PAR
MATURITY (000) VALUE
---------- ---------- --------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Goldman Sachs Mortgage Securities
Corp. II, Series 98-C1, Class A2
6.62% 10/18/30 $ 27 $ 28,036
Goldman Sachs Mortgage Securities
Corp. II, Series 98-C1, Class A3
6.14% 10/18/30 6,136 6,224,413
Goldman Sachs Mortgage Securities
Corp. II, Series 04-GG2, Class A6
5.40% 08/10/38 640 631,330
Goldman Sachs Mortgage Securities
Corp. II, Series 06-GG6, Class A4
5.55% 04/10/38 6,050 6,037,946
Homebanc Mortgage Trust, Series
05-4, Class A1
5.09%(g) 10/25/35 11,931 11,933,041
J.P. Morgan Chase Commercial
Mortgage Securities Corp., Series
01-C1, Class A3
5.86% 10/12/35 14,370 14,609,226
Lehman Brothers Commercial
Conduit Mortgage Trust, Series
98-C4, Class X (IO)
0.71%(c) 09/15/23 13,973 242,543
Lehman Brothers Commercial
Conduit Mortgage Trust, Series
99-C2, Class A1
7.10% 10/15/32 665 668,519
Lehman Brothers Commercial
Conduit Mortgage Trust, Series
99-C2, Class A2
7.32% 10/15/32 85 89,573
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 00-C5,
Class A1
6.41% 12/15/19 9,119 9,222,184
Merrill Lynch Mortgage Investors,
Inc., Series 03-KEY1, Class A4
5.24% 11/12/35 7,100 6,940,597
Morgan Stanley Capital Investments,
Series 99-FNV1, Class A2
6.53% 03/15/31 10,415 10,678,343
Residential Asset Mortgage Products,
Inc., Series 04-RS7, Class AI3
4.45% 07/25/28 350 347,703
Terra, Series 06-1A, Class A1
5.03%(b)(g) 06/15/17 14,450 14,450,000
Wachovia Bank Commercial
Mortgage Trust, Series 03, Class
C6
5.12% 08/15/35 18,000 17,534,619
Washington Mutual Asset Securities
Corp., Series 05-C1A, Class A1
4.24%(b) 05/25/36 18,529 18,123,854
============
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $355,016,347) 344,915,539
------------
CERTIFICATE OF DEPOSIT - 1.5%
Barclays Bank PLC NY
4.90%(g) 03/13/09 35,505 35,505,000
SunTrust Bank, Inc.
4.42% 06/15/09 3,795 3,693,294
============
TOTAL CERTIFICATE OF DEPOSIT
(Cost $39,300,000) 39,198,294
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
63
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
ASSET BACKED SECURITIES - 15.9%
Ace Securities Corp., Series 06-HE1,
Class A2A
4.90%(g) 02/25/36 $18,779 $ 18,778,557
Bank One Issuance Trust, Series
03-A3, Class A3
4.86%(g) 12/15/10 24,025 24,074,235
Capital Auto Receivables Asset Trust,
Series 05-1, Class A4
4.05% 07/15/09 19,850 19,552,250
Chase Issuance Trust, Series 04-A9,
Class A9
3.22% 06/15/10 18,875 18,338,006
Citibank Credit Card Issuance Trust,
Series 03-A6, Class A6
2.90% 05/17/10 17,060 16,284,299
Citibank Credit Card Issuance Trust,
Series 04, Class A1
2.55% 01/20/09 21,980 21,539,301
Citibank Credit Card Issuance Trust,
Series 04-A4, Class A4
3.20% 08/24/09 23,700 23,056,071
Countrywide Certificates, Series
04-12, Class 2A1
4.69%(g) 01/25/29 15,723 15,724,437
Countrywide Certificates, Series
04-14, Class A4
5.10%(g) 06/25/35 8,781 8,807,163
Countrywide Certificates, Series
05-BC5, Class 3A1
4.92%(g) 10/25/27 15,538 15,545,044
Countrywide Certificates, Series
06-3, Class 2A1
4.89%(g) 10/25/27 21,613 21,614,280
Countrywide Certificates, Series
06-IM1, Class A1
4.91%(g) 09/01/28 17,850 17,860,043
Greenwich Capital Commercial
Funding Corp., Series 04-GG1A,
Class A4
4.76% 06/10/36 5,255 5,118,475
GSAA Home Equity Trust, Series
06-5, Class 2A1
4.90%(g) 03/25/36 20,000 20,000,000
Long Beach Mortgage Loan Trust,
Series 05-WL2, Class 3A2
4.69%(g) 08/25/35 18,909 18,912,703
MBNA Credit Card Master Notes
Trust, Series 03, Class A7
2.65% 11/15/10 20,000 18,957,338
MBNA Credit Card Master Notes
Trust, Series 04-A4, Class A4
2.70% 09/15/09 21,400 20,875,037
MBNA Credit Card Master Notes
Trust, Series 06-A1, Class A1
4.90% 07/15/11 19,900 19,750,750
Residential Asset Securities Corp.,
Series 05-KS11, Class AI1
4.90%(g) 09/25/26 17,617 17,619,142
Structured Asset Receivables Trust,
Series 03-2
4.91%(b)(g)(i) 01/21/09 13,562 13,561,737
Structured Mortgage Loan Trust,
Series 05-19XS, Class 1A1
5.14%(g) 10/25/35 14,768 14,835,025
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
ASSET BACKED SECURITIES (Continued)
Student Loan Marketing Association
Student Loan Trust, Series 99-3,
Class A2
4.78%(g) 07/25/12 $ 8,487 $ 8,505,862
Student Loan Marketing Association
Student Loan Trust, Series 05-10,
Class A1
4.53%(g) 04/25/12 20,250 20,245,140
Student Loan Marketing Association
Student Loan Trust, Series 05-5,
Class A1
4.62%(g) 01/25/18 19,724 19,717,830
============
TOTAL ASSET BACKED SECURITIES
(Cost $423,453,060) 419,272,725
------------
CORPORATE BONDS - 26.5%
Aerospace - 0.3%
Lockheed Martin Corp., Senior
Debentures
8.50% 12/01/29 2,345 3,055,394
Northrop Grumman Corp., Senior
Debentures
7.75% 03/15/26 1,100 1,304,710
Northrop Grumman Corp., Senior
Unsecured Notes
4.08% 11/16/06 3,860 3,832,671
Raytheon Co., Senior Notes
6.15% 11/01/08 18 18,344
============
8,211,119
------------
Banks - 9.2%
Banc One Corp., Senior Unsecured
Notes
2.62% 06/30/08 2,836 2,678,443
Bank of America Corp., Senior
Unsecured Notes
4.50% 08/01/10 6,000 5,818,860
Bank of America Corp., Subordinated
Notes
6.25% 04/01/08 1,385 1,408,731
Bank of America Corp., Unsecured
Notes
4.96%(g) 03/24/09 20,875 20,874,102
Bank of New York Co., Inc., Senior
Subordinated Notes
3.80% 02/01/08 3,100 3,021,396
Bank One Texas N.A., Subordinated
Bank Notes
6.25% 02/15/08 3,225 3,273,088
BankBoston N.A., Subordinated Bank
Notes
6.38% 03/ 08-04/08 2,275 2,320,667
Citigroup Global Markets Holdings,
Inc., Senior Unsecured Notes
6.50% 02/15/08 2,880 2,943,441
Citigroup, Inc., Senior Unsecured
Notes
5.75% 05/10/06 4,095 4,097,952
5.50% 08/09/06 2,500 2,504,168
3.50% 02/01/08 11,660 11,313,465
6.20% 03/15/09 1,700 1,741,420
Citigroup, Inc., Subordinated Notes
7.75% 06/15/06 675 678,154
6.38% 11/15/08 1,010 1,038,049
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
CORPORATE BONDS (Continued)
Banks (Continued)
Citigroup, Inc., Unsecured Notes
3.62% 02/09/09 $ 1,080 $ 1,034,456
4.12% 02/22/10 14,650 14,033,382
4.62% 08/03/10 4,415 4,287,203
Depfa ACS Bank, Senior Notes
3.62% 10/29/08 8,000 7,713,472
Deutsche Bank AG, Deposit Notes
3.84%(g)(j) 03/15/07 5,500 5,467,550
Export-Import Bank Korea,
Unsecured Notes
4.12%(b) 02/10/09 135 130,347
FleetBoston Financial Corp., Senior
Unsecured Notes
4.20% 11/30/07 3,310 3,258,132
HBOS Treasury Services PLC,
Senior Unsecured Notes
3.60%(b) 08/15/07 2,750 2,692,451
HBOS Treasury Services PLC,
Unsecured Notes
3.50%(b) 11/30/07 5,450 5,304,469
HSBC Bank USA, Subordinated
Notes
3.87% 06/07/07 20,275 19,957,595
The Huntington National Bank,
Subordinated Bank Notes
2.75% 10/16/06 1,685 1,663,651
J.P. Morgan Chase & Co., Senior
Unsecured Notes
5.35% 03/01/07 4,902 4,893,716
4.00% 02/01/08 1,915 1,872,724
3.62% 05/01/08 2,509 2,424,941
Korea Development Bank, Notes
4.25% 11/13/07 70 68,768
National City Bank Indiana,
Unsecured Notes
3.30% 05/15/07 1,000 976,703
Rabobank Nederland, Senior Notes
5.01%(b)(g) 04/06/09 47,270 47,256,386
The Royal Bank of Scotland Capital
Trust (United Kingdom)
6.80%(k) 12/31/49 3,000 3,008,317
The Royal Bank of Scotland Capital
Trust, Unsecured Notes
4.71%(g)(k) 12/29/49 1,395 1,291,774
SunTrust Bank, Inc., Senior
Unsecured Notes
3.62% 10/15/07 2,855 2,788,164
4.00% 10/15/08 3,000 2,909,775
Swedish Export Credit Corp.,
Unsecured Notes
2.88% 01/26/07 2,700 2,649,699
U.S. Bancorp, Senior Unsecured
Notes
3.95% 08/23/07 1,315 1,292,790
U.S. Bank N.A., Senior Bank Notes
2.40% 03/12/07 6,500 6,314,750
UBS Preferred Funding Trust, Inc.,
Capital Securities
8.62%(g) 10/29/49 1,390 1,550,844
USB Capital IX, Unsecured Notes
6.19%(g) 03/29/49 4,510 4,470,235
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
CORPORATE BONDS (Continued)
Banks (Continued)
Wachovia Bank N.A., Senior Bank
Notes
4.38% 08/15/08 $ 3,325 $ 3,264,605
4.98%(g) 03/23/09 11,150 11,150,000
Wachovia Capital Trust III, Trust
Preferred Security
5.80%(g) 03/15/42 4,580 4,499,754
Wells Fargo & Co., Senior Unsecured
Notes
4.20% 01/15/10 3,970 3,815,567
Wells Fargo & Co., Unsecured Notes
4.62% 08/09/10 6,735 6,534,883
4.88% 01/12/11 2,680 2,620,839
============
244,909,878
------------
Broadcasting - 0.4%
BSKYB Finance UK PLC, Senior
Unsecured Notes
6.50%(b) 10/15/35 445 423,147
News America Holdings, Inc.,
Secured Notes
8.50% 02/23/25 1,900 2,194,433
News America, Inc., Notes
6.40%(b) 12/15/35 875 836,617
News America, Inc., Senior
Debentures
7.75% 01/ 24-12/45 1,395 1,507,530
7.12% 04/08/28 1,175 1,199,798
7.28% 06/30/28 300 310,996
7.62% 11/30/28 2,010 2,158,698
8.45% 08/01/34 840 989,013
6.75% 01/09/38 30 30,639
8.25% 10/17/49 45 49,824
7.90% 12/01/49 120 129,829
============
9,830,524
------------
Computer Software & Services - 0.4%
Oracle Corp., Unsecured Notes
5.25%(b) 01/15/16 9,500 9,113,283
------------
Energy & Utilities - 0.5%
Centerpoint Energy Resources Corp.,
Unsecured Notes
7.88% 04/01/13 205 228,385
Detroit Edison Co., Senior Notes
6.35% 10/15/32 5 5,063
Detroit Edison Co., Senior Secured
Notes
6.12% 10/01/10 210 215,250
Dominion Resources, Inc., Senior
Unsecured Notes
6.25% 06/30/12 60 61,070
FirstEnergy Corp., Senior Unsecured
Notes
5.50% 11/15/06 415 415,106
6.45% 11/15/11 185 191,669
Florida Power & Light Co., First
Mortgage Bonds
5.90% 03/01/33 550 533,955
4.95% 06/01/35 2,200 1,893,966
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
65
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
CORPORATE BONDS (Continued)
Energy & Utilities (Continued)
Korea Electric Power Corp., Notes
5.12%(b) 04/23/34 $ 75 $ 72,564
Progress Energy, Inc., Senior
Unsecured Notes
7.75% 03/01/31 1,800 2,095,164
Talisman Energy, Inc.
5.85% 02/01/37 2,400 2,256,134
Tenaska Alabama II Partners LP,
Senior Secured Notes
6.12%(b) 03/30/23 135 133,304
TXU Corp., Senior Unsecured Notes
4.80% 11/15/09 6,000 5,764,260
============
13,865,890
------------
Entertainment & Leisure - 1.0%
Comcast Cable Holdings LLC, Senior
Debentures
9.80% 02/01/12 260 306,388
7.88% 08/ 13-02/26 5,005 5,487,723
Comcast Corp., Senior Unsecured
Bonds
6.50% 11/15/35 2,905 2,818,710
Comcast Corp., Senior Unsecured
Notes
7.05% 03/15/33 1,235 1,270,979
Comcast Corp., Unsecured Notes
6.45% 03/15/37 4,970 4,782,144
Mashantucket West Pequot, Notes
5.91%(b) 09/01/21 1,060 1,015,671
Time Warner Cos., Inc., Debentures
6.95% 01/15/28 8,720 8,844,399
Time Warner Cos., Inc., Senior
Debentures
9.12% 01/15/13 605 700,464
8.05% 01/15/16 70 78,278
Time Warner Cos., Inc., Senior
Unsecured Notes
6.75% 04/15/11 1,080 1,120,078
============
26,424,834
------------
Finance - 7.0%
BAE Systems Holdings, Inc.,
Unsecured Notes
5.20%(b) 08/15/15 2,685 2,537,540
BankBoston Capital Trust, Inc.,
Capital Securities
8.25% 12/15/26 75 79,297
Berkshire Hathaway Finance Corp.,
Senior Unsecured Notes
3.40% 07/02/07 8,030 7,859,925
4.12% 01/15/10 895 857,920
4.75% 05/15/12 3,290 3,170,014
General Electric Capital Corp.,
Unsecured Notes
3.45%(g) 07/07-01/08 41,180 40,985,094
4.12% 09/01/09 16,155 15,565,876
5.00% 11/15/11 27,730 27,181,390
Golden West Financial Corp., Senior
Unsecured Notes
4.12% 08/15/07 160 157,532
The Goldman Sachs Group, Inc.,
Unsecured Notes
5.35% 01/15/16 4,925 4,756,865
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
CORPORATE BONDS (Continued)
Finance (Continued)
HSBC Finance Corp., Senior
Unsecured Notes
7.88% 03/01/07 $ 2,200 $ 2,249,720
4.75% 05/15/09 2,780 2,729,293
Kinder Morgan Finance Co. ULC,
Senior Unsecured Notes
5.35% 01/05/11 3,350 3,296,578
Kinder Morgan Finance Co. ULC,
Unsecured Notes
6.40% 01/05/36 1,100 1,071,074
Lehman Brothers Holdings, Inc.,
Senior Unsecured Notes
7.88% 08/15/10 2,307 2,519,694
Morgan Stanley, Senior Notes
4.91%(g) 03/07/08 31,650 31,640,600
Morgan Stanley, Senior Unsecured
Notes
6.75% 04/15/11 2,125 2,236,881
Morgan Stanley, Unsecured Notes
5.05% 01/21/11 12,175 11,934,739
Nationwide Building Society, Senior
Unsecured Notes
3.50%(b) 07/31/07 7,250 7,092,675
Nationwide Building Society,
Unsecured Notes
4.25%(b) 02/01/10 2,100 2,013,369
NB Capital Trust IV, Capital
Securities
8.25% 04/15/27 125 132,814
Pricoa Global Funding Inc., Senior
Secured Notes
4.35%(b) 06/15/08 2,735 2,675,341
Qwest Capital Funding, Inc., Senior
Notes
6.38% 07/15/08 3,350 3,333,250
SP Powerassets Ltd., Unsecured
Notes
5.00%(b) 10/22/13 300 289,869
Telecom Polska SA Eurofinance BV,
Senior Notes
7.75%(b) 12/10/08 110 115,859
Toll Brothers Finance Corp., Senior
Notes
6.88% 11/15/12 4,040 4,133,845
UnitedHealth Group, Inc., Unsecured
Notes
5.80% 03/15/36 2,675 2,547,320
USAA Capital Corp., Senior
Unsecured Notes
4.00%(b) 12/10/07 3,065 3,000,632
============
186,165,006
------------
Industrial - 0.1%
Osprey Trust/Osprey, Inc., Senior
Secured Notes
7.80%(b)(l) 01/15/49 2,375 1,282,500
------------
Insurance - 0.6%
MassMutual Global Funding II,
Senior Secured Notes
2.55%(b) 07/15/08 3,740 3,519,007
MetLife, Inc., Senior Unsecured
Notes
6.38% 06/15/34 900 928,701
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
66
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Insurance (Continued)
Monumental Global Funding II,
Senior Unsecured Notes
5.20%(b) 01/30/07 $ 2,650 $ 2,648,945
Monumental Global Funding II,
Unsecured Notes
3.85%(b) 03/03/08 210 204,262
New York Life Global Funding,
Unsecured Notes
3.88%(b) 01/15/09 2,000 1,926,130
Sun Life of Canada Capital Trust
(Canada), Capital Securities
8.53%(b)(k) 05/29/49 390 416,653
TIAA Global Markets, Senior
Unsecured Notes
3.88%(b) 01/22/08 1,605 1,564,877
WellPoint, Inc., Unsecured Notes
5.95% 12/15/34 2,890 2,782,136
5.85% 01/15/36 2,475 2,338,449
===========
16,329,160
-----------
Manufacturing - 0.2%
Belvoir Land LLC Revenue Bonds,
Unsecured Notes
5.27%(b) 12/15/47 2,000 1,792,680
Cisco Systems, Inc., Senior
Unsecured Notes
5.25% 02/22/11 4,200 4,164,157
ITT Industries, Inc., Debentures
7.40% 11/15/25 125 141,876
===========
6,098,713
-----------
Motor Vehicles - 0.1%
DaimlerChrysler AG, Senior
Debentures
7.45% 03/01/27 1,425 1,497,950
DaimlerChrysler N.A. Holding Corp.,
Unsecured Notes
4.05% 06/04/08 205 198,284
===========
1,696,234
-----------
Oil & Gas - 0.7%
Atlantic Richfield Co., Debentures
9.12%(e) 03/01/11 4,960 5,746,805
Consolidated Natural Gas Co.,
Debentures
6.80% 12/15/27 2,500 2,615,495
Consolidated Natural Gas Co.,
Senior Unsecured Notes
5.38% 11/01/06 2,405 2,403,677
Devon Financing Corp., Senior
Unsecured Notes
7.88% 09/30/31 2,335 2,818,985
EnCana Corp. (Canada), Unsecured
Notes
6.50%(k) 08/15/34 50 52,461
Halliburton Co., Debentures
7.60% 08/15/46 1,429 1,608,321
XTO Energy Inc., Senior Unsecured
Notes
6.10%(j) 04/01/36 2,100 2,097,526
===========
17,343,270
-----------
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Pharmaceuticals - 0.3%
Bristol-Myers Squibb Co., Senior
Debentures
6.88% 08/01/47 $ 559 $ 586,589
Merck & Co., Inc., Senior Debentures
6.40% 03/01/28 1,000 1,020,095
Wyeth, Unsecured Notes
5.50% 02/15/16 2,000 1,964,080
6.00% 02/15/36 4,200 4,102,749
===========
7,673,513
-----------
Railroad & Shipping - 0.1%
Union Pacific Corp., Senior
Debentures
7.12% 02/01/28 2,000 2,249,222
-----------
Real Estate - 0.5%
Avalonbay Communities, Inc.,
Unsecured Notes
4.95% 03/15/13 2,300 2,194,683
Camden Property Trust, Unsecured
Notes
4.70% 07/15/09 1,400 1,361,458
EOP Operating LP, Unsecured Notes
4.65% 10/01/10 665 637,456
Prologis, Unsecured Notes
5.50% 04/01/12 5,430 5,366,925
The Rouse Co., Unsecured Notes
3.62% 03/15/09 1,455 1,352,632
5.38% 11/26/13 1,685 1,570,501
===========
12,483,655
-----------
Retail Merchandising - 0.1%
Federated Department Stores, Senior
Debentures
6.79% 07/15/27 590 595,226
May Department Stores Co.,
Debentures
6.65% 07/15/24 1,000 1,014,706
7.88% 03/01/30 375 424,679
May Department Stores Co., Senior
Debentures
8.12% 08/15/35 1,150 1,230,898
May Department Stores Co.,
Unsecured Notes
4.80% 07/15/09 50 48,981
===========
3,314,490
-----------
Telecommunications - 2.0%
AT&T Broadband Corp., Unsecured
Notes
8.38% 03/15/13 2,905 3,267,105
BellSouth Corp., Unsecured Notes
4.26%(b)(g) 04/26/06 13,325 13,317,112
Continental Cablevision, Inc., Senior
Notes
8.30%(e) 05/15/06 5,655 5,672,400
GTE Corp., Debentures
6.94% 04/15/28 475 477,014
New England Telephone & Telegraph
Co., Debentures
7.88% 11/15/29 1,355 1,433,698
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
67
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
CORPORATE BONDS (Continued)
Telecommunications (Continued)
SBC Communications, Inc.,
Unsecured Notes
4.39%(b) 06/05/06 $11,500 $ 11,483,555
6.45% 06/15/34 1,625 1,603,794
6.15% 09/15/34 265 251,653
Sprint Capital Corp., Senior Notes
6.12% 11/15/08 70 71,241
6.88% 11/15/28 1,055 1,088,479
Sprint Capital Corp., Senior
Unsecured Notes
8.38% 03/15/12 55 62,145
8.75% 03/15/32 1,230 1,537,816
Verizon Global Funding Corp., Senior
Unsecured Notes
7.75% 12/01/30 75 82,856
Verizon Global Funding Corp.,
Unsecured Notes
5.85% 09/15/35 1,600 1,435,110
Verizon Maryland, Inc., Debentures
5.12% 06/15/33 650 512,329
Vodafone Group PLC (United
Kingdom), Unsecured Notes
5.05%(g)(k) 12/28/07 10,510 10,513,248
============
52,809,555
------------
Transportation - 0.0%
Canadian National Railway Co.,
Senior Unsecured Notes
6.25% 08/01/34 600 632,856
------------
Yankee - 3.0%
AID-Israel, Unsecured Notes
5.50%(k) 04/24-09/33 12,210 12,486,923
Deutsche Telekom International
Finance BV (Netherlands), Senior
Notes
5.75%(k) 03/23/16 3,325 3,248,149
Deutsche Telekom International
Finance BV (Netherlands), Senior
Unsecured Notes
8.75%(k) 06/15/30 1,285 1,537,157
Eksportfinans ASA (Norway),
Unsecured Notes
3.38%(k) 01/15/08 12,900 12,514,393
EnCana Holdings Finance Corp.
(Canada), Senior Unsecured Notes
5.80%(k) 05/01/14 4,400 4,441,140
France Telecom (France), Senior
Unsecured Notes
8.00%(k) 03/01/11 600 655,267
8.50%(g)(k) 03/01/31 195 243,577
National Landeskreditbank
Baden-Wurttemberg (Germany),
Unsecured Notes
4.25%(k) 09/15/10 10,575 10,205,404
Pemex Finance Ltd. (Luxembourg),
Senior Unsecured Notes
9.03%(k) 02/15/11 1,700 1,828,027
Petro-Canada (Canada), Senior
Unsecured Notes
5.95%(k) 05/15/35 1,090 1,054,094
Scottish Power PLC (United
Kingdom), Unsecured Notes
4.90%(k) 03/15/10 3,200 3,124,253
5.38% 03/15/15 2,150 2,083,645
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
CORPORATE BONDS (Continued)
Yankee (Continued)
Suncor Energy, Inc. (Canada)
5.95%(k) 12/01/34 $ 285 $ 285,710
Teck Cominco Ltd. (Canada), Senior
Unsecured Notes
6.12%(k) 10/01/35 1,900 1,787,600
Telecom Italia Capital (Luxembourg),
Senior Unsecured Notes
5.25%(k) 11/15/13 285 270,039
6.00%(k) 09/30/34 785 706,202
Telefonica Europe BV (Netherlands),
Senior Unsecured Notes
7.75%(k) 09/15/10 1,970 2,119,631
Trans-Canada Pipelines, Debentures
5.85%(k) 03/15/36 1,275 1,246,420
Tyco International Group SA
(Luxembourg), Senior Unsecured
Notes
6.38%(k) 10/15/11 4,090 4,201,943
United Mexican States (Mexico),
Bonds
8.12%(k) 12/30/19 2,975 3,489,675
United Mexican States (Mexico),
Senior Unsecured Notes
8.00%(k) 09/24/22 4,235 4,950,715
8.30%(k) 08/15/31 295 356,507
Vodafone Group PLC (United
Kingdom), Senior Unsecured Notes
7.75%(k) 02/15/10 6,590 7,061,982
============
79,898,453
------------
TOTAL CORPORATE BONDS
(Cost $712,108,955) 700,332,155
------------
FOREIGN BONDS - 1.4%
Bundesrepublic Deutschland
(Germany) (EUR)
4.75% 07/04/34 11,100 15,123,646
4.00% 01/04/37 9,425 11,448,020
General Electric Capital Corp., Senior
Unsubordinated Notes (NZD)
6.50% 09/28/15 1,115 680,931
Province of Manitoba (Canada),
Senior Unsecured Notes (NZD)
6.38% 09/01/15 2,695 1,647,433
Province of Ontario (Canada),
Unsecured Notes (NZD)
6.25% 06/16/15 9,190 5,604,183
Province of Quebec (Canada), Bonds
(NZD)
6.75%(g) 11/09/15 2,850 1,784,639
============
TOTAL FOREIGN BONDS
(Cost $38,716,669) 36,288,852
------------
TAXABLE MUNICIPAL BONDS - 0.1%
Fort Irwin Land California LLC
Military Housing Revenue Bonds,
Class II, Series A
5.30%(b)
(Cost $3,413,967) 12/15/35 3,415 3,143,234
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR/SHARES
MARUTITY (000) VALUE
---------- ----------- -------------
SHORT TERM INVESTMENTS - 0.3%
Federal Home Loan Bank, Discount
Notes
4.55%(m) 04/03/06 $2,000 $1,999,494
Galileo Money Market Fund 6,285 6,285,229
==========
TOTAL SHORT TERM INVESTMENTS
(Cost $8,284,723) 8,284,723
----------
TOTAL INVESTMENTS IN SECURITIES - 113.5%
(Cost $3,050,345,988(a)) 2,998,062,556
-------------
PAR
(000)
------------
TBA SALE COMMITMENTS - (9.6)%
Federal Home Loan Mortgage
Corp.
Gold TBA
4.50% 04/01/21 (26,000) (24,813,750)
5.00% 04/01/36 (16,000) (15,220,000)
5.50% 04/01/36 (1,900) (1,854,875)
6.00% 04/01/36 (3,000) (3,000,936)
Federal National Mortgage
Association TBA
4.50% 04/01/21 (22,300) (21,317,417)
5.00% 04/21-04/36 (29,000) (28,174,700)
5.50% 04/01/36 (144,000) (140,535,072)
6.00% 04/01/36 (10,000) (9,996,880)
Government National
Mortgage
Association TBA
5.50% 04/01/36 (8,900) (8,811,000)
============
TOTAL TBA SALE COMMITMENTS
(Proceeds $254,661,320) (253,724,630)
------------
NUMBER OF
CONTRACTS
--------------
CALL OPTIONS WRITTEN - 0.0%
June 10 year U.S.
Treasury Notes
futures, Strike Price
$111, Expires
05/26/06 (253) (3,953)
September 10 year U.S.
Treasury
Notes futures, Strike
Price $110,
Expires 08/25/06 (227) (39,016)
=======
TOTAL CALL OPTIONS WRITTEN
(Premiums received (42,969)
-------
$232,859)
CALL SWAPTIONS PURCHASED - 0.1%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 3,700(n) 1,361,600
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 3,620(n) 2,150,280
=========
TOTAL CALL SWAPTIONS PURCHASED
(Cost $4,071,730) 3,511,880
---------
NUMBER OF
CONTRACTS VALUE
----------------- --------------
CALL SWAPTIONS WRITTEN - (0.1)%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08 (3,420)(n) $ (831,060)
Citibank, Strike Price
$5.67, Expires
01/04/10 (3,270)(n) (1,558,155)
Deutsche Bank, Strike
Price $5.02,
Expires 01/29/07 (2,992)(n) (297,953)
Union Bank, Strike
Price $4.73,
Expires 06/13/07 (8,800)(n) (743,600)
============
TOTAL CALL SWAPTIONS WRITTEN
(Premiums received (3,430,768)
------------
$7,736,873)
PUT OPTIONS WRITTEN - 0.0%
June 10 year U.S.
Treasury Notes
futures, Strike Price
$107, Expires
05/26/06 (253) (268,812)
September 10 year U.S.
Treasury
Notes futures, Strike
Price $106,
Expires 08/25/06 (227) (227,000)
============
TOTAL PUT OPTIONS WRITTEN
(Premiums received (495,812)
------------
$249,922)
PUT SWAPTIONS PURCHASED - 0.2%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 3,700(n) 2,009,100
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 3,620(n) 2,400,060
=========
TOTAL PUT SWAPTIONS PURCHASED
(Cost $4,071,730) 4,409,160
---------
PUT SWAPTIONS WRITTEN - (0.4)%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08 (3,420)(n) (1,627,578)
Citibank, Strike Price
$5.67, Expires
01/04/10 (3,270)(n) (1,296,882)
Deutsche Bank, Strike
Price $5.02,
Expires 01/29/07 (2,992)(n) (1,193,010)
Union Bank, Strike
Price $4.73,
Expires 06/13/07 (8,800)(n) (5,256,240)
==========
TOTAL PUT SWAPTIONS WRITTEN
(Premiums received (9,373,710)
----------
$7,736,873)
LIABILITIES IN EXCESS OF OTHER
ASSETS - (3.7)% (97,805,552)
-----------
NET ASSETS - 100.0% $2,641,110,155
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
69
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND TOTAL RETURN PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
- -------------------
(a) Cost for federal Income tax purposes is $3,051,406,818. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 2,700,912
Gross unrealized depreciation (56,045,174)
------------
$(53,344,262)
============
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 6.6% of its net assets, with a current market value
of $173,530,854, in securities restricted as to resale. (c) Rates shown
are the effective yields as of March 31, 2006.
(d) Securities, or a portion thereof, with a market value of $13,554,632 have
been pledged as collateral for swap and swaption contracts. (e) Securities,
or a portion thereof, pledged as collateral with a value of $7,778,411
on 4,445 short U.S. Treasury Note futures contracts, 3,892 long U.S.
Treasury Note futures contracts, 1,605 long U.S. Treasury Bond futures
contracts and 729 short Euro-Bobl futures contracts expiring June 2006.
The value of such contracts on March 31, 2006 was $1,150,603,986, with
an unrealized loss of $2,920,136 (including commissions of $22,444).
(f) Securities, or a portion thereof, subject to financing transactions.
(g) Variable rate security. Rates shown are the rates as of March 31, 2006.
(h) Interest rate of underlying collateral.
(i) Security is illiquid. As of March 31, 2006, the Portfolio held 0.5% of
its net assets, with a current market value of $13,561,737 in these
securities.
(j) Securities valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, these securities
had a total market value of $7,565,076 which represents 0.3% of net
assets.
(k) Security is a foreign domiciled issuer which is registered with the
Securities and Exchange Commission.
(l) Security in default.
(m) The rate shown is the effective yield on the discount notes at the time of
purchase.
(n) Each swaption contract is equivalent to $10,000 notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE PLUS TOTAL RETURN PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -----------
PREFERRED STOCKS - 0.1%
Raytheon Co. Trust I
7.00%
(Cost $469,966) 8,950 $451,975
--------
PAR
MATURITY (000)
-------------- ---------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 21.1%
Federal National Mortgage
Association, Notes
3.12% 03/16/09 $1,800 1,700,620
Federal National Mortgage
Association, Unsecured Notes
2.35% 04/06-04/07 3,335 3,258,726
3.02% 06/01/06 9,000 8,970,930
1.75% 06/16/06 185 183,776
4.00% 10/06-01/09 7,245 7,123,056
Resolution Funding Corp. Strip
Bonds
6.29%(b) 07/15/18 100 53,038
6.30%(b) 10/15/18 100 52,358
Small Business Administration
Participation Certificates,
Series
02-P10B, Class 1
5.20% 08/01/12 459 453,043
Small Business Administration
Participation Certificates,
Series
04-P10A, Class 1
4.50% 02/01/14 1,415 1,348,565
U.S. Treasury Bonds
8.12%(c) 08/15/19 4,415 5,729,151
8.50% 02/15/20 2,650 3,553,899
8.75% 08/15/20 3,135 4,305,973
6.25%(c) 08/15/23 8,025 9,101,482
6.75% 08/15/26 1,095 1,326,233
5.38% 02/15/31 375 394,746
U.S. Treasury Notes
4.00%(d) 08/07-09/07 8,905 8,796,510
4.25%(d) 10/31/07 3,250 3,220,292
4.38%(d) 12/07-11/08 6,070 6,014,514
4.62% 02/29/08 6,000 5,975,862
U.S. Treasury Strip
4.77%(b) 11/15/27 6,285 2,124,958
=========
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $75,349,514) 73,687,732
----------
MORTGAGE PASS-THROUGHS - 24.1%
Federal Home Loan Mortgage Corp.
Gold
4.00% 05/10-05/19 739 710,182
6.00% 05/13-08/17 617 624,297
5.50% 08/17-10/17 341 339,104
4.50% 05/18-08/20 6,448 6,168,595
5.00% 10/18-09/35 6,541 6,327,663
6.50% 04/31-12/34 1,167 1,190,560
Federal Home Loan Mortgage Corp.
Gold TBA
5.00% 04/01/21 5,800 5,651,375
PAR
MATURITY (000) VALUE
------------- --------- -------------
MORTGAGE PASS-THROUGHS (Continued)
Federal National Mortgage
Association
6.00% 04/09-08/35 $ 1,564 $ 1,567,668
5.50% 07/14-12/35 33,608 33,110,066
6.50% 03/16-01/17 263 269,612
5.00% 09/17-03/36 12,702 12,220,300
4.50% 04/19-04/36 6,702 6,264,340
4.00% 05/01/20 32 30,218
7.00% 03/31-07/34 432 445,087
Federal National Mortgage
Association 10 Year Balloon
6.28% 08/01/11 1,800 1,870,206
Federal National Mortgage
Association ARM
4.57%(e) 01/01/35 2,574 2,534,660
Government National Mortgage
Association
6.00% 11/28-06/32 1,042 1,054,969
6.50% 04/15/31 196 203,704
7.00% 06/31-09/31 248 259,214
5.50% 11/33-02/35 996 986,498
Government National Mortgage
Association 1 Year CMT
3.75%(e) 05/20/34 2,226 2,172,320
===========
TOTAL MORTGAGE PASS-THROUGHS
(Cost $85,460,048) 84,000,638
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 10.3%
Bank of America Alternative Loan
Trust, Series 04-7, Class 4A1
5.00% 08/25/19 898 871,220
Countrywide Alternative Loan Trust,
Series 04-18CB, Class 2A5
5.27%(e) 09/25/34 1,102 1,104,870
Countrywide Home Loans, Series
04-29, Class 1A1
5.09% 02/25/35 955 956,049
Federal Home Loan Mortgage Corp.,
Series 04-2877, Class PA
5.50% 07/15/33 1,193 1,183,423
Federal Home Loan Mortgage Corp.,
Series 2825, Class VP
5.50% 06/15/15 1,307 1,303,113
Federal Home Loan Mortgage Corp.,
Series 2922, Class GA
5.50% 05/15/34 2,676 2,645,285
Federal Home Loan Mortgage Corp.,
Series 2927, Class BA
5.50% 10/15/33 1,785 1,768,006
Federal National Mortgage
Association, Series 99-7, Class AB
6.00% 03/25/29 749 750,476
Federal National Mortgage
Association, Series 02-73, Class
AN
5.00% 11/25/17 1,800 1,744,990
Federal National Mortgage
Association, Series 03-35, Class
TE
5.00% 05/25/18 1,680 1,630,314
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
71
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
COLLATERALIZED MORTGAGE OBLIGATIONS (Continued)
Federal National Mortgage
Association, Series 04-29, Class
HC
7.50% 07/25/30 $ 1,485 $ 1,556,568
Federal National Mortgage
Association, Series 04-60, Class
LB
5.00% 04/25/34 2,082 2,018,501
Federal National Mortgage
Association, Series 04-99, Class
AO
5.50% 01/25/34 1,579 1,557,061
Federal National Mortgage
Association, Series 05-15, Class
PL
5.50% 03/25/35 1,912 1,894,041
Federal National Mortgage
Association, Series 05-57, Class
PA
5.50% 05/25/27 1,601 1,601,147
Federal National Mortgage
Association, Series 05-70, Class
NA
5.50% 08/25/35 1,176 1,167,583
Federal National Mortgage
Association, Series 05-80, Class
PB
5.50% 04/25/30 1,737 1,734,198
Federal National Mortgage
Association, Series 363, Class 2
(IO)
5.50%(b) 11/01/35 3,217 856,546
Federal National Mortgage
Association, Series 367, Class 2
(IO)
5.50%(b) 01/25/36 3,570 948,064
Harborview Mortgage Loan Trust,
Series 05-10, Class 2A1A
5.09%(e) 11/19/35 2,167 2,167,600
Indymac Index Mortgage Loan Trust,
Series 05-AR18, Class 2A1B
5.60%(e) 10/25/36 2,922 2,972,779
J.P. Morgan Mortgage Trust, Series
06-A2, Class 4A1
3.89%(e)(f) 08/25/34 3,625 3,512,285
===========
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $36,504,931) 35,944,119
-----------
COMMERCIAL MORTGAGE BACKED SECURITIES - 13.0%
Banc of America Commercial
Mortgage, Inc., Series 01-1, Class
A2
6.50% 04/15/36 2,014 2,086,713
Bear Stearns Commercial Mortgage
Securities, Inc., Series 00-WF2,
Class A2
7.32% 10/15/32 1,400 1,494,376
Chase Commercial Mortgage
Securities Corp., Series 99-2,
Class A2
7.20% 01/15/32 285 300,876
Chase Commercial Mortgage
Securities Corp., Series 00-1,
Class A2
7.76% 04/15/32 510 541,777
PAR
MATURITY (000) VALUE
---------- ---------- -------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Commercial Mortgage Acceptance
Corp., Series 98-C2, Class A2
6.03% 09/15/30 $ 1,731 $ 1,747,364
Credit Suisse First Boston Mortgage
Securities Corp., Series 98-C2,
Class A2
6.30% 11/11/30 3,919 3,992,886
Credit Suisse First Boston Mortgage
Securities Corp., Series 01-CK6,
Class A3
6.39% 10/15/11 325 338,676
Donaldson, Lufkin and Jenrette, Inc.,
Commerical Mortgage Corp.,
Series 00-CKP1, Class A1B
7.18% 11/10/33 2,220 2,363,444
General Electric Capital Commercial
Mortgage Corp., Series 01-3, Class
A2
6.07% 06/10/38 1,670 1,720,617
General Electric Capital Commercial
Mortgage Corp., Series 02-1A,
Class A3
6.27% 12/10/35 1,730 1,801,310
General Electric Capital Commercial
Mortgage Corp., Series 05-C4,
Class A4
5.33% 11/10/45 2,900 2,860,600
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 99-C2, Class A2
6.94% 09/15/33 1,400 1,457,225
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 99-C3, Class A2
7.18% 08/15/36 1,321 1,382,848
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 00-C1, Class A2
7.72% 03/15/33 1,490 1,600,240
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 00-C2, Class A2
7.46% 08/16/33 1,390 1,486,003
Goldman Sachs Mortgage Securities
Corp. II, Series 99-C1, Class A2
6.11%(e) 11/18/30 1,659 1,682,064
Goldman Sachs Mortgage Securities
Corp. II, Series 03-C1, Class X2
(IO)
1.11%(b)(g) 01/10/40 20,950 502,546
Goldman Sachs Mortgage Securities
Corp. II, Series 04-GG2, Class A4
4.96% 08/10/38 1,625 1,593,768
Goldman Sachs Mortgage Securities
Corp. II, Series 06-GG6, Class A4
5.55% 04/10/38 795 793,416
Greenwich Capital Commercial
Funding Corp., Series 05-GG3,
Class A3
4.57% 08/10/42 2,445 2,347,396
J.P. Morgan Chase Commercial
Mortgage Securities Corp., Series
01-CIB2, Class A3
6.43% 04/15/35 820 851,473
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
J.P. Morgan Chase Commercial
Mortgage Securities Corp., Series
01-CIBC, Class A3
6.26% 03/15/33 $1,150 $ 1,189,447
Keycorp, Series 00-C1, Class A2
7.73% 05/17/32 2,060 2,206,110
Lehman Brothers Commercial
Conduit Mortgage Trust, Series
98-C4, Class A1B
6.21% 10/15/35 900 916,004
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 00-C4,
Class A2
7.37% 08/15/26 1,245 1,331,815
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 02-C7,
Class A2
3.90% 12/15/26 510 497,607
Morgan Stanley Capital Investments,
Series 98-HF2, Class A2
6.48% 11/15/30 313 319,086
Morgan Stanley Capital Investments,
Series 99-FNV1, Class A2
6.53% 03/15/31 500 512,643
Salomon Brothers Mortgage
Securities VII, Series 99-C1, Class
A2
7.10%(e) 05/18/32 1,723 1,783,737
Salomon Brothers Mortgage
Securities VII, Series 00-C3, Class
A2
6.59% 10/18/10 1,650 1,715,956
Salomon Brothers Mortgage
Securities VII, Series 01-C2, Class
A3
6.50% 10/13/11 1,960 2,052,770
===========
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $46,719,720) 45,470,793
-----------
CERTIFICATE OF DEPOSIT - 1.4%
Barclays Bank PLC NY
4.90%(e) 03/13/09 4,665 4,665,000
SunTrust Bank, Inc.
4.42% 06/15/09 430 418,476
===========
TOTAL CERTIFICATE OF DEPOSIT
(Cost $5,095,000) 5,083,476
-----------
ASSET BACKED SECURITIES - 14.2%
American Express Credit Account
Master Trust, Series 05-3, Class A
4.75%(e) 01/18/11 2,675 2,679,548
Asset Securitization Corp., Series
97-D5, Class A1C
6.75% 02/14/41 945 961,197
Bank One Issuance Trust, Series
03-A3, Class A3
4.86%(e) 12/15/10 2,375 2,379,867
Bear Stearns Securities, Inc., Series
06-EC1, Class A1
4.90%(e) 08/25/29 2,461 2,460,525
PAR
MATURITY (000) VALUE
---------- ---------- -------------
ASSET BACKED SECURITIES (Continued)
Capital Auto Receivables Asset Trust,
Series 05-1, Class A4
4.05% 07/15/09 $2,650 $ 2,610,250
Chase Issuance Trust, Series 04-A9,
Class A9
3.22% 06/15/10 2,275 2,210,276
Citibank Credit Card Issuance Trust,
Series 03-A3, Class A3
3.10% 03/10/10 1,125 1,082,109
Citibank Credit Card Issuance Trust,
Series 03-A6, Class A6
2.90% 05/17/10 1,805 1,722,928
Citibank Credit Card Issuance Trust,
Series 03-A9, Class A9
4.85%(e) 11/22/10 3,525 3,529,943
Citibank Credit Card Issuance Trust,
Series 04, Class A1
2.55% 01/20/09 3,270 3,204,437
Citibank Credit Card Issuance Trust,
Series 06-A2, Class A2
4.85% 02/10/11 2,550 2,523,531
Countrywide Certificates, Series
04-13, Class AV4
5.11%(e) 06/25/35 1,238 1,242,310
Countrywide Certificates, Series
05-BC5, Class 3A1
4.92%(e) 10/25/27 1,969 1,970,221
Countrywide Certificates, Series
05-IM2, Class A1
4.93%(e) 01/25/36 1,810 1,810,384
MBNA Credit Card Master Notes
Trust, Series 03, Class A7
2.65% 11/15/10 3,250 3,080,567
MBNA Credit Card Master Notes
Trust, Series 03-A6, Class A6
2.75% 10/15/10 1,500 1,427,575
MBNA Credit Card Master Notes
Trust, Series 04-A4, Class A4
2.70% 09/15/09 2,620 2,555,729
Merrill Lynch Mortgage Investors,
Inc., Series 05-HE2, Class A2A
4.93%(e) 09/25/36 2,030 2,030,389
Structured Asset Investment Loan
Trust, Series 06-1, Class A1
4.90%(e) 01/25/36 2,508 2,510,369
Structured Asset Receivables Trust,
Series 03-2
4.91%(e)(g)(h) 01/21/09 1,331 1,330,825
Structured Asset Securities Corp.,
Series 03-AL2, Class A
3.36%(g) 01/25/31 747 662,138
Student Loan Marketing Association
Student Loan Trust, Series 04-5,
Class A2
4.65%(e) 04/25/14 1,434 1,434,415
Student Loan Marketing Association
Student Loan Trust, Series 04-9,
Class A2
4.64%(e) 10/25/12 1,326 1,323,449
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
73
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
ASSET BACKED SECURITIES (Continued)
Student Loan Marketing Association
Student Loan Trust, Series 05-6,
Class A5B
4.63%(e) 07/27/26 $2,800 $ 2,801,555
===========
TOTAL ASSET BACKED SECURITIES
(Cost $50,199,629) 49,544,537
-----------
CORPORATE BONDS - 23.5%
Aerospace - 0.3%
BE Aerospace, Inc., Senior Notes
8.50% 10/01/10 110 117,288
Lockheed Martin Corp., Senior
Debentures
8.50% 12/01/29 295 384,367
Northrop Grumman Corp.,
Debentures
7.88% 03/01/26 105 125,743
Northrop Grumman Corp., Senior
Unsecured Notes
4.08% 11/16/06 495 491,495
===========
1,118,893
-----------
Banks - 8.1%
Banc One Corp., Senior Unsecured
Notes
2.62% 06/30/08 220 207,778
Bank of America Corp., Senior
Unsecured Notes
4.50% 08/01/10 855 829,187
Bank of America Corp., Subordinated
Notes
7.80% 02/15/10 75 81,098
Bank of America Corp., Unsecured
Notes
4.96%(e) 03/24/09 2,725 2,724,883
Bank of New York Co., Inc., Senior
Subordinated Notes
3.80%(i) 02/01/08 400 389,858
Citigroup, Inc., Senior Unsecured
Notes
5.75% 05/10/06 2,000 2,001,442
4.25% 07/29/09 1,945 1,883,596
Citigroup, Inc., Unsecured Notes
3.62% 02/09/09 75 71,837
4.12% 02/22/10 2,475 2,370,827
Depfa ACS Bank, Senior Notes
3.62% 10/29/08 850 819,556
Deutsche Bank AG, Deposit Notes
3.84%(f) 03/15/07 800 795,280
HBOS Treasury Services PLC,
Unsecured Notes
3.50%(g) 11/30/07 350 340,654
3.75%(g) 09/30/08 505 487,202
HSBC Bank USA, Subordinated
Notes
3.87% 06/07/07 1,875 1,845,647
4.62% 04/01/14 415 388,627
J.P. Morgan Chase & Co.,
Subordinated Notes
5.75% 10/15/08 375 377,616
7.12% 06/15/09 100 104,827
Rabobank Nederland, Senior Notes
5.01%(e)(g) 04/06/09 5,200 5,198,502
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Banks (Continued)
The Royal Bank of Scotland Capital
Trust, Unsecured Notes
4.71%(e)(j) 12/29/49 $ 200 $ 185,201
SunTrust Bank, Inc., Senior
Unsecured Notes
3.62% 10/15/07 665 649,432
4.00% 10/15/08 325 315,226
Swedish Export Credit Corp.,
Unsecured Notes
2.88% 01/26/07 375 368,014
U.S. Bancorp, Senior Unsecured
Notes
3.95% 08/23/07 115 113,058
U.S. Bank N.A., Senior Bank Notes
2.40% 03/12/07 715 694,622
UBS Preferred Funding Trust, Inc.,
Capital Securities
8.62%(e) 10/29/49 40 44,629
USB Capital IX, Unsecured Notes
6.19%(e) 03/29/49 640 634,357
Wachovia Bank N.A., Senior Bank
Notes
4.38% 08/15/08 45 44,183
4.98%(e) 03/23/09 1,575 1,575,000
Wachovia Capital Trust III, Trust
Preferred Security
5.80%(e) 03/15/42 670 658,261
Wachovia Corp., Subordinated Notes
6.30% 04/15/28 440 449,405
Wells Fargo & Co., Senior Unsecured
Notes
4.20% 01/15/10 600 576,660
Wells Fargo & Co., Unsecured Notes
4.62% 08/09/10 255 247,423
4.88% 01/12/11 740 723,664
===========
28,197,552
-----------
Broadcasting - 0.4%
BSKYB Finance UK PLC, Senior
Unsecured Notes
6.50%(g) 10/15/35 50 47,544
Charter Communications Holdings
LLC, Unsecured Notes
10.25% 09/15/10 30 29,550
DirecTV Holdings LLC, Senior
Unsecured Notes
6.38% 06/15/15 80 79,000
Echostar DBS Corp., Senior
Unsecured Notes
7.12%(g) 02/01/16 65 63,944
News America, Inc., Notes
6.40%(g) 12/15/35 200 191,227
News America, Inc., Senior
Debentures
7.12% 04/08/28 125 127,638
7.30% 04/30/28 150 155,914
7.28% 06/30/28 125 129,582
7.62% 11/30/28 140 150,357
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
74
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- ------------
CORPORATE BONDS (Continued)
Broadcasting (Continued)
News America, Inc., Senior
Unsecured Notes
6.20% 12/15/34 $ 325 $ 304,367
==========
1,279,123
----------
Chemicals - 0.0%
BCP Crystal U.S. Holdings Corp.,
Senior Subordinated Notes
9.62% 06/15/14 20 22,150
----------
Computer Software & Services - 0.4%
Oracle Corp., Unsecured Notes
5.25%(g) 01/15/16 1,325 1,271,063
Sungard Data Systems, Inc., Senior
Unsecured Notes
9.12%(g) 08/15/13 10 10,575
9.43%(e)(g) 08/15/13 25 26,375
==========
1,308,013
----------
Construction - 0.0%
D.R. Horton, Inc., Senior Unsecured
Notes
8.50% 04/15/12 25 26,500
International Steel Group, Inc.,
Senior Unsecured Notes
6.50% 04/15/14 20 19,850
==========
46,350
----------
Containers - 0.0%
Owens-Brockway Glass Container,
Inc., Senior Unsecured Notes
6.75% 12/01/14 100 97,750
----------
Electronics - 0.0%
L-3 Communications Corp., Senior
Subordinated Notes
6.38% 10/15/15 50 49,250
----------
Energy & Utilities - 0.7%
AES Ironwood LLC, Senior Secured
Notes
8.86% 11/30/25 93 104,280
Centerpoint Energy, Inc., Senior
Unsecured Notes
7.25% 09/01/10 480 506,377
Florida Power & Light Co., First
Mortgage Bonds
5.62% 04/01/34 150 142,962
Midwest Generation LLC,
Pass-Through Certificates
8.56% 01/02/16 125 135,188
Midwest Generation LLC, Senior
Secured Notes
8.75% 05/01/34 45 48,712
Mirant N.A. LLC, Senior Unsecured
Notes
7.38%(g) 12/31/13 50 51,000
Northwestern Corp., Notes
5.88% 11/01/14 60 59,098
NRG Energy, Inc., Senior Unsecured
Notes
7.25% 02/01/14 25 25,406
7.38% 02/01/16 110 112,338
Orion Power Holdings, Inc., Senior
Unsecured Notes
12.00% 05/01/10 120 135,300
PAR
MATURITY (000) VALUE
-------------- ---------- ------------
CORPORATE BONDS (Continued)
Energy & Utilities (Continued)
Progress Energy, Inc., Senior
Unsecured Notes
7.75% 03/01/31 $ 360 $ 419,033
Reliant Energy, Inc., Senior Secured
Notes
9.25% 07/15/10 10 10,025
6.75% 12/15/14 90 80,100
Talisman Energy, Inc.
5.85% 02/01/37 125 117,507
Tenaska Alabama Partners LP,
Senior Secured Notes
7.00%(g) 06/30/21 49 49,571
TXU Corp., Senior Unsecured Notes
4.80% 11/15/09 300 288,213
==========
2,285,110
----------
Entertainment & Leisure - 1.0%
Comcast Cable Holdings LLC, Senior
Debentures
7.88% 08/13-02/26 290 318,056
8.75% 08/01/15 360 421,234
Comcast Corp., Senior Unsecured
Bonds
6.50% 11/15/35 525 509,405
Comcast Corp., Senior Unsecured
Notes
7.05% 03/15/33 155 159,516
Comcast Corp., Unsecured Notes
6.45% 03/15/37 500 481,101
Mashantucket West Pequot, Notes
5.91%(g) 09/01/21 100 95,818
MGM Mirage, Inc., Senior Notes
6.00% 10/01/09 230 226,550
Mohegan Tribal Gaming Authority,
Senior Unsecured Notes
6.12% 02/15/13 70 68,775
Time Warner Cos., Inc., Senior
Debentures
8.38% 03/15/23 150 169,595
7.57% 02/01/24 720 774,956
7.62% 04/15/31 100 108,934
Time Warner Cos., Inc., Senior
Unsecured Notes
6.75% 04/15/11 200 207,422
==========
3,541,362
----------
Finance - 5.5%
Associates Corp. N.A., Senior Notes
6.25% 11/01/08 275 281,271
BAE Systems Holdings, Inc.,
Unsecured Notes
5.20%(g) 08/15/15 340 321,327
Berkshire Hathaway Finance Corp.,
Senior Unsecured Notes
3.40% 07/02/07 410 401,316
3.38% 10/15/08 500 478,872
4.12% 01/15/10 105 100,650
General Electric Capital Corp., Senior
Unsecured Notes
6.50% 12/10/07 200 203,882
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
75
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
------------- ---------- -------------
CORPORATE BONDS (Continued)
Finance (Continued)
General Electric Capital Corp.,
Unsecured Notes
3.45%(e) 07/07-01/08 $4,050 $ 4,029,774
4.12% 09/01/09 1,475 1,421,211
5.00% 11/15/11 3,780 3,705,216
The Goldman Sachs Group, Inc.,
Unsecured Notes
5.35% 01/15/16 600 579,517
HSBC Finance Corp., Senior
Unsecured Notes
7.20% 07/15/06 50 50,270
4.75% 05/15/09 340 333,798
Morgan Stanley, Senior Notes
4.91%(e) 03/07/08 4,115 4,113,778
Morgan Stanley, Senior Unsecured
Notes
6.75% 04/15/11 250 263,163
Morgan Stanley, Unsecured Notes
5.05% 01/21/11 1,515 1,485,103
Nationwide Building Society, Senior
Unsecured Notes
3.50%(g) 07/31/07 850 831,555
Nationwide Building Society,
Unsecured Notes
4.25%(g) 02/01/10 70 67,112
UnitedHealth Group, Inc., Unsecured
Notes
5.80% 03/15/36 325 309,487
USAA Capital Corp., Senior
Unsecured Notes
4.00%(g) 12/10/07 370 362,230
===========
19,339,532
-----------
Food & Agriculture - 0.0%
Smithfield Foods, Inc., Senior
Unsecured Notes
7.00% 08/01/11 50 49,750
-----------
Insurance - 0.4%
American General Corp., Senior
Unsecured Notes
7.50%(i) 08/11/10 150 161,103
New York Life Insurance Co.,
Unsecured Notes
5.88%(g) 05/15/33 100 98,280
TIAA Global Markets, Senior
Unsecured Notes
3.88%(g) 01/22/08 465 453,375
WellPoint, Inc., Unsecured Notes
5.95% 12/15/34 345 332,124
5.85% 01/15/36 325 307,069
===========
1,351,951
-----------
Leasing - 0.0%
United Rentals N. A., Inc., Senior
Unsecured Notes
6.50% 02/15/12 40 39,200
-----------
Manufacturing - 0.1%
Belvoir Land LLC Revenue Bonds,
Unsecured Notes
5.27%(g) 12/15/47 325 291,310
PAR
MATURITY (000) VALUE
------------- ---------- -------------
CORPORATE BONDS (Continued)
Manufacturing (Continued)
Briggs & Stratton Corp., Senior
Unsecured Notes
8.88% 03/15/11 $ 50 $ 55,375
===========
346,685
-----------
Medical & Medical Services - 0.1%
Bio-Rad Laboratories, Inc., Senior
Subordinated Notes
7.50% 08/15/13 40 41,300
6.12% 12/15/14 100 96,000
HCA, Inc., Unsecured Notes
5.50% 12/01/09 75 73,087
Omnicare, Inc., Senior Subordinated
Notes
6.88% 12/15/15 90 89,775
===========
300,162
-----------
Metal & Mining - 0.1%
Massey Energy Co., Senior
Unsecured Notes
6.88%(g) 12/15/13 265 259,700
-----------
Motor Vehicles - 0.1%
DaimlerChrysler AG, Senior
Debentures
7.45% 03/01/27 135 141,911
DaimlerChrysler N.A. Holding Corp.,
Unsecured Notes
4.05% 06/04/08 65 62,871
===========
204,782
-----------
Oil & Gas - 0.9%
Amerada Hess Corp., Senior
Unsecured Notes
7.12% 03/15/33 200 218,738
ANR Pipeline Co., Senior Debentures
9.62% 11/01/21 10 12,275
7.38% 02/15/24 5 5,162
Chesapeake Energy Corp., Senior
Notes
7.50% 06/15/14 70 73,325
Chesapeake Energy Corp., Senior
Unsecured Notes
6.25% 01/15/18 160 157,200
6.88%(g) 11/15/20 45 45,338
Colorado Interstate Gas Co., Senior
Unsecured Notes
6.80%(g) 11/15/15 45 45,782
Consolidated Natural Gas, Inc.,
Senior Debentures
5.00% 03/01/14 235 221,022
Consolidated Natural Gas, Inc.,
Senior Unsecured Notes
6.25% 11/01/11 150 153,267
Devon Financing Corp., Senior
Unsecured Notes
7.88% 09/30/31 195 235,418
Dynegy Holdings, Inc., Secured
Notes
10.12%(g) 07/15/13 205 234,868
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
76
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- ------------
CORPORATE BONDS (Continued)
Oil & Gas (Continued)
El Paso Natural Gas Co., Debentures
8.62% 01/15/22 $ 130 $ 147,915
El Paso Natural Gas Co., Senior
Unsecured Notes
8.38% 06/15/32 5 5,650
EnCana Corp. (Canada), Unsecured
Notes
6.50%(j) 08/15/34 140 146,891
Enterprise Products Operating LP,
Senior Unsecured Notes
4.00% 10/15/07 225 219,960
4.95% 06/01/10 450 436,503
KCS Energy, Inc., Senior Unsecured
Notes
7.12% 04/01/12 35 35,088
Northwest Pipeline Corp., Senior
Unsecured Notes
8.12% 03/01/10 175 184,625
Phillips Petroleum Co., Senior
Debentures
7.00% 03/30/29 80 90,776
Targa Resources, Inc., Senior
Unsecured Notes
8.50%(g) 11/01/13 10 10,400
Transcontinental Gas Pipeline Corp.,
Senior Notes
8.88% 07/15/12 180 206,550
The Williams Cos., Inc., Senior
Unsecured Notes
7.62% 07/15/19 70 74,900
7.75% 06/15/31 25 26,500
==========
2,988,153
----------
Pharmaceuticals - 0.1%
Bristol-Myers Squibb Co., Senior
Debentures
6.88% 08/01/47 75 78,701
Wyeth, Unsecured Notes
6.00% 02/15/36 350 341,896
==========
420,597
----------
Real Estate - 0.7%
American Real Estate Partners LP,
Senior Unsecured Notes
8.12% 06/01/12 75 77,250
7.12% 02/15/13 40 39,400
Avalonbay Communities, Inc., Senior
Unsecured Notes
6.62% 09/15/11 180 188,264
Camden Property Trust, Unsecured
Notes
4.70% 07/15/09 380 369,538
EOP Operating LP, Unsecured Notes
4.65% 10/01/10 160 153,373
ERP Operating LP, Senior Notes
6.58% 04/13/15 240 252,347
Prologis, Unsecured Notes
5.50% 04/01/12 700 691,869
The Rouse Co., Unsecured Notes
5.38% 11/26/13 825 768,940
==========
2,540,981
----------
PAR
MATURITY (000) VALUE
---------- ---------- ------------
CORPORATE BONDS (Continued)
Retail Merchandising - 0.2%
Delhaize America, Inc., Senior
Debentures
9.00% 04/15/31 $ 105 $ 121,452
Federated Department Stores, Senior
Debentures
6.79% 07/15/27 240 242,125
May Department Stores Co.,
Debentures
6.65% 07/15/24 150 152,206
May Department Stores Co., Senior
Debentures
8.50% 06/01/19 25 29,643
==========
545,426
----------
Semiconductors & Related Devices - 0.0%
Freescale Semiconductor, Inc.,
Senior Unsecured Notes
7.35%(e) 07/15/09 50 51,125
Magnachip Semiconductor, Secured
Notes
8.16%(e) 12/15/11 135 136,687
==========
187,812
----------
Telecommunications - 2.3%
AT&T Broadband Corp., Unsecured
Notes
8.38% 03/15/13 670 753,515
BellSouth Corp., Unsecured Notes
4.26%(e)(g) 04/26/06 1,550 1,549,082
Cincinnati Bell, Inc., Senior
Unsecured Notes
7.25% 07/15/13 200 206,500
Continental Cablevision, Inc., Senior
Notes
8.30% 05/15/06 400 401,231
GTE Corp., Debentures
6.94% 04/15/28 75 75,318
Intelsat Ltd., Senior Unsecured Notes
9.60%(e) 01/15/12 90 92,025
New Jersey Bell Telephone,
Debentures
7.85% 11/15/29 35 36,737
Qwest Corp., Senior Unsecured
Notes
7.88% 09/01/11 130 138,613
Qwest Corp., Unsecured Notes
8.16%(e) 06/15/13 135 147,825
Rogers Wireless, Inc., Senior
Secured Notes
7.50% 03/15/15 190 203,775
SBC Communications, Inc.,
Unsecured Notes
4.39%(g) 06/05/06 1,500 1,497,855
6.45% 06/15/34 230 226,999
6.15% 09/15/34 25 23,741
Sprint Capital Corp., Senior
Unsecured Notes
8.75% 03/15/32 350 437,590
Verizon Global Funding Corp., Senior
Unsecured Notes
7.75% 12/01/30 260 287,234
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
77
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
CORPORATE BONDS (Continued)
Telecommunications (Continued)
Verizon Maryland, Inc., Debentures
5.12% 06/15/33 $ 95 $ 74,879
Verizon Virginia, Inc., Debentures
4.62% 03/15/13 60 54,819
Vodafone Group PLC (United
Kingdom), Unsecured Notes
5.05%(e)(j) 12/28/07 1,380 1,380,426
5.00%(j) 12/13-09/15 330 311,916
Wind Acquistion Finance SA, Senior
Unsecured Notes
10.75%(g) 12/01/15 150 162,000
===========
8,062,080
-----------
Transportation - 0.0%
Overseas Shipholding Group, Inc.,
Senior Unsecured Notes
7.50% 02/15/24 115 115,000
-----------
Yankee - 2.1%
AID-Israel, Unsecured Notes
5.50%(j) 09/23-04/24 1,475 1,501,604
Deutsche Telekom International
Finance BV (Netherlands), Senior
Notes
5.75%(j) 03/23/16 800 781,509
Deutsche Telekom International
Finance BV (Netherlands), Senior
Unsecured Notes
8.75%(j) 06/15/30 30 35,887
Eksportfinans ASA (Norway),
Unsecured Notes
3.38%(j) 01/15/08 1,555 1,508,518
France Telecom (France), Senior
Unsecured Notes
8.50%(e)(j) 03/01/31 55 68,701
Ispat Inland ULC (Canada), Senior
Secured Notes
9.75%(j) 04/01/14 415 469,469
Omi Corp. (Mali), Senior Notes
7.62%(j) 12/01/13 35 35,700
Petro-Canada (Canada), Senior
Unsecured Notes
5.95%(j) 05/15/35 140 135,388
Teck Cominco Ltd. (Canada), Senior
Unsecured Notes
6.12%(j) 10/01/35 225 211,689
Telecom Italia Capital (Luxembourg),
Senior Unsecured Notes
6.00%(j) 09/30/34 260 233,901
Telefonica Europe BV (Netherlands),
Senior Unsecured Notes
7.75%(j) 09/15/10 160 172,153
Tyco International Group SA
(Luxembourg), Senior Unsecured
Notes
6.38%(j) 10/15/11 275 282,527
Tyco International Group SA
(Luxembourg), Unsecured Notes
6.00%(j) 11/15/13 480 482,181
7.00%(j) 06/15/28 275 289,337
United Mexican States (Mexico),
Bonds
8.12%(j) 12/30/19 460 539,580
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
CORPORATE BONDS (Continued)
Yankee (Continued)
United Mexican States (Mexico),
Senior Unsecured Notes
8.00%(j) 09/24/22 $ 605 $ 707,245
===========
7,455,389
-----------
TOTAL CORPORATE BONDS
(Cost $83,385,234)
82,152,753
-----------
FOREIGN BONDS - 1.5%
Bundesrepublic Deutschland
(Germany) (EUR)
4.75% 07/04/34 1,275 1,737,176
4.00% 01/04/37 1,385 1,682,282
General Electric Capital Corp., Senior
Unsubordinated Notes (NZD)
6.50% 09/28/15 260 158,782
Mexican Fixed Rate Bonds (MXP)
12/22/11-
9.00% 12/20/12 1,620 153,453
8.00% 12/19/13 2,400 215,154
9.50% 12/18/14 620 60,524
Province of Manitoba (Canada),
Senior Unsecured Notes (NZD)
6.38% 09/01/15 635 388,171
Province of Ontario (Canada),
Unsecured Notes (NZD)
6.25% 06/16/15 1,130 689,089
Province of Quebec (Canada), Bonds
(NZD)
6.75%(e) 11/09/15 350 219,166
===========
TOTAL FOREIGN BONDS
(Cost $5,652,358) 5,303,797
-----------
TAXABLE MUNICIPAL BONDS - 0.2%
Fort Irwin Land California LLC
Revenue Bonds, Series 05
5.40%(g)
(Cost $599,725) 12/15/47 600 545,940
-----------
NUMBER OF
SHARES
-----------
SHORT TERM INVESTMENTS - 0.3%
Galileo Money Market
Fund
(Cost $1,022,021) 1,022,021 1,022,021
---------
TOTAL INVESTMENTS IN
SECURITIES - 109.7%
(Cost $390,458,146(a)) 383,207,781
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
78
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ------------ ----------------
TBA SALE COMMITMENTS - (7.7)%
Federal Home Loan Mortgage
Corp.
Gold TBA
4.50% 04/01/21 $ (2,300) $ (2,195,062)
5.00% 04/01/36 (2,000) (1,902,500)
Federal National Mortgage
Association TBA
4.50% 04/01/21 (2,400) (2,294,251)
5.00% 04/21-04/36 (3,000) (2,901,251)
5.50% 04/01/36 (17,000) (16,590,946)
6.00% 04/01/36 (1,000) (999,689)
=============
TOTAL TBA SALE COMMITMENTS
(Proceeds $26,981,031) (26,883,699)
-------------
NUMBER OF
CONTRACTS
------------
CALL OPTIONS WRITTEN - 0.0%
June 10 year U.S.
Treasury Note
futures, Strike Price
$111, Expires
05/26/06 (32) (500)
September 10 year U.S.
Treasury
Note futures, Strike
Price $110,
Expires 08/25/06 (29) (4,984)
======
TOTAL CALL OPTIONS WRITTEN
(Premiums received (5,484)
------
$29,564)
CALL SWAPTIONS PURCHASED - 0.1%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 490(k) 180,320
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 460(k) 273,240
=======
TOTAL CALL SWAPTIONS PURCHASED
(Cost $526,635) 453,560
-------
CALL SWAPTIONS WRITTEN - (0.1)%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08 (500)(k) (121,500)
Citibank, Strike Price
$5.67, Expires
01/04/10 (370)(k) (176,305)
Deutsche Bank, Strike
Price $5.02,
Expires 01/29/07 (442)(k) (43,973)
Union Bank, Strike
Price $4.73,
Expires 06/13/07 (1,130)(k) (95,485)
========
TOTAL CALL SWAPTIONS WRITTEN
(Premiums received (437,263)
--------
$1,016,338)
PUT OPTIONS WRITTEN - 0.0%
June 10 year U.S.
Treasury Notes
futures, Strike Price
$107, Expires
05/26/06 (32) (34,000)
September 10 year U.S.
Treasury
Notes futures, Strike
Price $106,
Expires 08/25/06 (29) (29,000)
=======
TOTAL PUT OPTIONS WRITTEN
(Premiums received (63,000)
-------
$31,845)
NUMBER OF
CONTRACTS VALUE
----------- -----------
PUT SWAPTIONS PURCHASED - 0.2%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 490(k) $266,070
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 460(k) 304,980
========
TOTAL PUT SWAPTIONS PURCHASED
(Cost $526,635) 571,050
--------
PUT SWAPTIONS WRITTEN - (0.4)%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08 (500)(k) (237,950)
Citibank, Strike Price
$5.67, Expires
01/04/10 (370)(k) (146,742)
Deutsche Bank, Strike
Price $5.02,
Expires 01/29/07 (442)(k) (176,070)
Union Bank, Strike
Price $4.73,
Expires 06/13/07 (1,130)(k) (674,949)
========
TOTAL PUT SWAPTIONS WRITTEN
(Premiums received (1,235,711)
----------
$1,016,338)
LIABILITIES IN
EXCESS OF OTHER
ASSETS - (1.8)% (6,429,480)
----------
NET ASSETS - 100.0% $349,177,754
============
- -------------------
(a) Cost for federal Income tax purposes is $390,655,291. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 1,094,169
Gross unrealized depreciation (8,541,679)
-----------
$(7,447,510)
===========
(b) Rates shown are the effective yields as of March 31, 2006.
(c) Securities, or a portion thereof, with a market value of $2,437,383 have
been pledged as collateral for swap and swaption contracts. (d) Securities,
or a portion thereof, subject to financing transactions.
(e) Variable rate security. Rates shown are the rates as of March 31, 2006.
(f) Securities valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, these securities
had a total market value of $4,307,565 which represents 1.2% of net
assets.
(g) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 4.9% of its net assets, with a current market value
of $17,105,138, in securities restricted as to resale.
(h) Security is illiquid. As of March 31, 2006, the Portfolio held 0.4% of its
net assets, with a current market value of $1,330,825 in these
securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
79
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE PLUS TOTAL RETURN PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
(i) Securities, or a portion thereof, pledged as collateral with a value of
$555,056 on 113 long U.S. Treasury Bond futures contracts, 362 long U.S.
Treasury Note futures contracts, 373 short U.S. Treasury Note futures
contracts, 67 long U.S Treasury Note futures contracts and 96 short
Euro-Bobl futures contracts expiring June 2006. The value of such
contracts on March 31, 2006 was $116,250,134 with an unrealized loss of
$273,279 (including commissions of $2,211).
(j) Security is a foreign domiciled issuer which is registered with the
Securities and Exchange Commission.
(k) Each swaption contract is equivalent to $10,000 notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
80
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GOVERNMENT INCOME PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 59.7%
Small Business Administration
Participation Certificates, Series
96-20J, Class 1
7.20% 10/01/16 $ 127 $ 131,767
Small Business Administration
Participation Certificates, Series
98-20J, Class 1
5.50% 10/01/18 114 113,822
Small Business Investment Cos.
Pass-Through, Series 03-10A,
Class 1
4.63% 03/10/13 1,020 972,863
U.S. Treasury Bonds
8.00%(b)(c) 11/15/21 2,820 3,704,335
6.50% 11/15/26 735 868,391
5.38%(d) 02/15/31 4,000 4,210,624
U.S. Treasury Notes
3.50% 12/15/09 2,475 2,365,172
4.50%(b)(d) 02/11-02/16 352,465 342,286,511
============
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $364,106,866) 354,653,485
------------
MORTGAGE PASS-THROUGHS - 58.5%
Federal Home Loan Mortgage Corp.
Gold
5.50% 10/13-04/36 8,289 8,101,216
6.00% 10/13-10/33 2,044 2,068,580
5.00% 04/18-02/36 22,636 21,657,494
4.50% 05/18-04/36 8,466 7,957,148
8.00% 01/25-11/26 128 136,876
7.50% 11/01/25 1 1,263
6.50% 03/29-10/34 419 428,225
7.00% 09/31-04/32 139 143,288
Federal National Mortgage
Association
7.00% 08/09-12/11 22 22,773
6.00% 11/09-12/35 88,054 88,116,552
4.00% 05/10-03/20 13,747 12,952,248
6.50% 01/13-04/35 11,567 11,827,967
5.50%(c) 12/13-04/36 120,286 118,134,346
8.00% 08/01/14 11 11,899
5.00% 02/18-10/35 28,617 27,830,792
4.50% 03/19-12/35 16,453 15,524,441
7.50% 06/24-04/26 42 43,857
Federal National Mortgage
Association TBA
5.00% 04/01/36 27,300 25,986,188
6.50% 04/01/36 5,400 5,508,000
Government National Mortgage
Association
8.00% 04/20/13 75 78,977
6.00% 01/14-06/14 247 251,241
5.50% 03/14-08/33 494 493,789
7.00% 10/27-06/28 292 304,230
7.50% 11/15/27 1 538
6.50% 10/15/34 83 86,471
============
TOTAL MORTGAGE PASS-THROUGHS
(Cost $354,035,805) 347,668,399
------------
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.0%
Federal National Mortgage
Association, Series 03-130, Class
SP (IO)
2.18%(e) 08/25/28 $ 5,802 $ 139,251
Salomon Brothers Mortgage
Securities VI, Series 87-1 (IO)
11.00%(e) 02/17/17 35 8,111
Salomon Brothers Mortgage
Securities VI, Series 87-1 (PO)
11.50%(f) 02/17/17 35 32,271
============
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $351,399)
179,633
------------
COMMERCIAL MORTGAGE BACKED SECURITIES - 1.8%
Banc of America Alternative Loan
Trust, Series 06-1, Class 4CB1
6.50%(g) 02/25/36 4,131 4,155,582
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 99-C3, Class A2
7.18% 08/15/36 861 900,645
J.P. Morgan Mortgage Trust, Series
06-A2, Class 5A3
3.75%(g) 11/25/33 5,900 5,738,441
============
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $10,872,920) 10,794,668
------------
PROJECT LOANS - 0.0%
Federal Housing Authority
7.43%
(Cost $664) 09/01/22 1 640
------------
ASSET BACKED SECURITIES - 1.8%
The Money Store Small Business
Administration Loan Trust, Series
99-1, Class A
5.30%(g) 07/15/25 76 75,320
Option One Mortgage Loan Trust,
Series 06-1, Class 2A1
4.55%(g) 01/25/36 9,249 9,248,768
Structured Asset Receivables Trust,
Series 03-2
4.91%(g)(h)(i) 01/21/09 1,289 1,288,576
============
TOTAL ASSET BACKED SECURITIES
(Cost $10,610,675)
10,612,664
------------
NUMBER
OF SHARES
-----------
SHORT TERM INVESTMENTS - 0.6%
Galileo Money Market Fund
(Cost $3,648,492) 3,648,492 3,648,492
---------
TOTAL INVESTMENTS IN SECURITIES - 122.4%
(Cost $743,626,821(a)) 727,557,981
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
81
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GOVERNMENT INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
------------- ------------ ----------------
TBA SALE COMMITMENTS - (20.2)%
Federal Home Loan Mortgage Corp.
Gold TBA
4.50% 04/21-05/36 $ (7,200) $ (6,729,062)
Federal National Mortgage
Association TBA
5.00% 04/01/21 (19,100) (18,616,541)
5.50% 04/15/34 (38,200) (37,280,832)
6.00% 04/01/36 (57,200) (57,182,154)
==============
TOTAL TBA SALE COMMITMENTS
(Proceeds $120,216,035) (119,808,589)
--------------
NUMBER OF
CONTRACTS
---------------
CALL OPTIONS WRITTEN - 0.0%
September 10 year U.S.
Treasury
Note futures, Strike
Price $110,
Expires 08/25/06
(Premiums received (55) (9,453)
------
$28,205)
CALL SWAPTIONS WRITTEN - 0.0%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08
(Premiums received (610)(j) (148,230)
--------
$266,570)
PUT OPTIONS WRITTEN - 0.0%
September 10 year U.S.
Treasury
Notes futures, Strike
Price $106,
Expires 08/25/06
(Premiums received (55) (5,500)
--------
$29,065)
PUT SWAPTIONS WRITTEN - 0.0%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08
(Premiums received (610)(j) (290,299)
--------
$266,570)
LIABILITIES IN EXCESS OF OTHER
ASSETS - (2.2)% (12,812,029)
-----------
NET ASSETS - 100.0% $ 594,483,881
=============
- -------------------
(a) Cost for federal Income tax purposes is $743,978,469. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 108,630
Gross unrealized depreciation (16,529,118)
------------
$(16,420,488)
============
(b) Securities, or a portion thereof, with a market value of $1,991,425 have
been pledged as collateral for swap and swaption contracts. (c) Securities,
or a portion thereof, pledged as collateral with a value of $1,187,070
on 281 long U.S. Treasury Note futures contracts and 1,951 short U.S.
Treasury Note futures contracts expiring June 2006 and 51 short
Euro-dollar futures contracts expiring December 2006. The value of such
contracts on March 31, 2006 was $245,733,317, with an unrealized gain
of $845,290 (including commissions of $4,863).
(d) Securities, or a portion thereof, subject to financing transactions.
(e) Rates shown are the effective yields as of March 31, 2006.
(f) Interest rate of underlying collateral.
(g) Variable rate security. Rates shown are the rates as of March 31, 2006.
(h) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 0.2% of its net assets, with a current market value
of $1,288,576, in securities restricted as to resale.
(i) Security is illiquid. As of March 31, 2006, the Portfolio held 0.2% of
its net assets, with a current market value of $1,288,576 in these
securities.
(j) Each swaption contract is equivalent to $10,000 notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
82
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INFLATION PROTECTED BOND PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR/SHARES
MATURITY (000) VALUE
-------------- ----------- -------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 94.5%
Federal National Mortgage
Association, Unsecured Notes
2.35% 04/29/06 $ 800 $ 798,451
U.S. Treasury Bonds
6.25%(b) 08/15/23 190 215,487
4.50% 02/15/36 270 253,336
U.S. Treasury Inflation
Protected
Bonds
1.88% 07/15/15 2,790 2,735,679
2.38% 01/15/25 3,660 3,869,716
2.00% 01/15/26 1,650 1,562,335
3.62%(c) 04/15/28 1,635 2,464,223
3.88%(b) 04/15/29 1,725 2,670,731
U.S. Treasury Inflation
Protected
Notes
3.62% 01/15/08 3,500 4,413,667
3.88% 01/15/09 2,155 2,728,245
4.25% 01/15/10 1,155 1,462,730
0.88%(b) 04/15/10 3,685 3,653,773
3.50% 01/15/11 435 523,943
3.38% 01/15/12 790 935,457
3.00% 07/15/12 2,975 3,419,381
1.88% 07/15/13 2,425 2,542,628
2.00% 01/14-01/16 5,940 6,154,852
1.62% 01/15/15 1,725 1,690,722
===========
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $43,316,324) 42,095,356
-----------
MORTGAGE PASS-THROUGHS - 2.8%
Federal National Mortgage
Association ARM
4.38%(d) 06/01/34 447 439,057
4.64%(d) 02/01/35 804 791,010
===========
TOTAL MORTGAGE PASS-THROUGHS
(Cost $1,256,554) 1,230,067
-----------
CORPORATE BONDS - 0.2%
Yankee - 0.2%
United Mexican States (Mexico),
Senior Unsecured Notes
6.62%(e) 03/03/15 25 26,100
6.75%(e) 09/27/34 50 51,625
===========
77,725
-----------
TOTAL CORPORATE BONDS
(Cost $78,729) 77,725
-----------
FOREIGN BONDS - 1.3%
Bundesrepublic Deutschland
(Germany) (EUR)
4.75% 07/04/34 100 136,249
4.00% 01/04/37 175 212,563
Government of France, Treasury
Inflation Protected Notes (EUR)
2.25% 07/25/20 175 237,018
===========
TOTAL FOREIGN BONDS
(Cost $620,236) 585,830
-----------
NUMBER
OF SHARES VALUE
----------- -------------
SHORT TERM INVESTMENTS - 3.8%
Galileo Money Market Fund
(Cost $1,709,224) 1,709,224 $1,709,224
----------
TOTAL INVESTMENTS IN
SECURITIES - 102.6%
(Cost $46,981,067(a)) 45,698,202
----------
NUMBER OF
CONTRACTS
---------------
CALL OPTIONS WRITTEN - 0.0%
June 10 year U.S.
Treasury Note
futures, Strike Price
$111, Expires
05/26/06 (9) (141)
September 10 year U.S.
Treasury
Note futures, Strike
Price $110,
Expires 08/25/06 (12) (2,062)
======
TOTAL CALL OPTIONS WRITTEN
(Premiums received (2,203)
------
$7,879)
CALL SWAPTIONS WRITTEN - 0.0%
Deutsche Bank, Strike
Price $4.80,
Expires 01/11/07 (120)(f) (6,732)
Union Bank, Strike
Price $4.73,
Expires 06/13/07 (140)(f) (11,830)
=======
TOTAL CALL SWAPTIONS WRITTEN
(Premiums received (18,562)
-------
$74,497)
PUT OPTIONS PURCHASED - 0.0%
September 90 day Euro
Bobl futures
contracts, Strike
Price $94.75,
Expires 09/18/06
(Cost $18,049) 75 27,188
-------
PUT OPTIONS WRITTEN - (0.1)%
June 10 year U.S.
Treasury Notes
futures, Strike Price
$107, Expires
05/26/06 (9) (9,562)
September 10 year U.S.
Treasury
Notes futures, Strike
Price $106,
Expires 08/25/06 (12) (12,000)
=======
TOTAL PUT OPTIONS WRITTEN
(Premiums received (21,562)
-------
$11,722)
PUT SWAPTIONS WRITTEN - (0.2)%
Union Bank, Strike
Price $4.73,
Expires 06/13/07 (140)(f) (83,622)
Deutsche Bank, Strike
Price $5.40,
Expires 01/11/07 (120)(f) (26,484)
=======
TOTAL PUT SWAPTIONS WRITTEN
(Premiums received (110,106)
--------
$81,030)
LIABILITIES IN EXCESS OF OTHER
ASSETS - (2.3)% (1,033,091)
----------
NET ASSETS - 100.0% $ 44,539,866
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
83
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INFLATION PROTECTED BOND PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
- -------------------
(a) Cost for federal Income tax purposes is $47,162,586. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 158,113
Gross unrealized depreciation (1,622,497)
-----------
$(1,464,384)
===========
(b) Securities, or a portion thereof, subject to financing transactions.
(c) Securities, or a portion thereof, pledged as collateral with a value of
$373,557 on 25 long U.S. Treasury Bond futures contracts, 11 short
Euro-Bobl futures contracts, 2 short Euro-Bund futures contracts and 27
short U.S. Treasury Note futures contracts expiring June 2006, 8 long
Euro-dollar futures contracts expiring September 2006 and 8 short
Euro-dollar futures contracts expiring December 2006. The value of such
contracts on March 31, 2006 was $12,081,473, with an unrealized gain of
$30,551 (including commissions of $187).
(d) Variable rate security. Rates shown are the rates as of March 31, 2006.
(e) Security is a foreign domiciled issuer which is registered with the
Securities and Exchange Commission.
(f) Each swaption contract is equivalent to $10,000 notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
84
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GNMA PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 5.7%
U.S. Treasury Notes
4.50%(b)
(Cost $10,556,667) 11/10-02/16 $10,625 $ 10,360,561
------------
MORTGAGE PASS-THROUGHS - 118.8%
Federal Home Loan Mortgage Corp.
Gold
5.50% 06/13-02/18 564 561,484
6.00% 11/13-10/33 317 320,355
6.50% 12/13-08/30 380 387,866
8.00% 07/01/17 38 40,605
9.00% 12/01/19 1 793
7.50% 02/27-03/27 9 9,879
5.00% 09/01/33 71 67,881
4.50% 08/01/34 1,624 1,501,470
Federal National Mortgage
Association
6.50% 02/13-04/35 4,852 4,962,142
5.50% 12/13-07/35 8,810 8,633,185
8.00% 08/01/14 87 91,228
6.00% 04/16-04/36 10,160 10,166,009
4.00% 07/01/18 138 129,328
4.50% 04/19-12/35 3,659 3,465,631
5.00% 10/20-04/36 9,266 8,947,577
8.50% 10/01/24 4 4,817
Government National Mortgage
Association
8.00%(c) 12/07-08/24 471 499,876
5.50% 11/08-01/36 15,492 15,356,614
6.50% 03/16-11/34 19,589 20,117,206
7.00%(c) 09/17-05/32 1,731 1,801,660
9.00% 05/18-07/21 221 237,942
10.00% 12/15/20 3 3,610
7.50% 10/25-11/29 437 458,544
6.00% 01/28-04/36 42,918 43,356,549
4.50% 12/34-01/35 5,286 4,975,032
5.00% 11/35-04/36 36,138 34,868,336
Government National Mortgage
Association TBA
5.50% 04/01/36 55,000 54,450,000
============
TOTAL MORTGAGE PASS-THROUGHS
(Cost $218,252,710) 215,415,619
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.1%
Federal National Mortgage
Association, Series 03-130, Class
SP (IO)
2.18%(d)
(Cost $271,038) 08/25/28 6,570 157,685
------------
COMMERCIAL MORTGAGE BACKED SECURITIES - 2.4%
Banc of America Alternative Loan
Trust, Series 06-1, Class 4CB1
6.50% 02/25/36 1,334 1,341,802
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 99-C3, Class A2
7.18% 08/15/36 1,097 1,147,724
J.P. Morgan Mortgage Trust, Series
06-A2, Class 5A3
3.75%(e) 11/25/33 1,845 1,794,479
============
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $4,331,858) 4,284,005
------------
PAR
MATURITY (000) VALUE
------------- ---------- --------------
PROJECT LOANS - 0.0%
Federal Housing Authority
7.43%
(Cost $3,422) 09/01/22 $ 3 $ 3,362
------------
ASSET BACKED SECURITIES - 3.6%
The Money Store Small Business
Administration Loan Trust, Series
99-1, Class A
5.30%(e) 07/15/25 227 225,959
Option One Mortgage Loan Trust,
Series 06-1, Class 2A1
4.55%(e) 01/25/36 4,719 4,718,759
Structured Asset Receivables Trust,
Series 03-2
4.91%(e)(f)(g) 01/21/09 1,648 1,647,688
============
TOTAL ASSET BACKED SECURITIES
(Cost $6,590,657)
6,592,406
------------
PAR/SHARES
(000)
-----------
SHORT TERM INVESTMENTS - 25.0%
Federal Farm Credit Bank,
Discount
Notes
4.55%(h) 04/11/06 200 199,747
Federal Home Loan Bank,
Discount
Notes
4.55%(h) 04/03/06 11,500 11,497,093
4.63%(h) 04/03/06 2,500 2,499,357
4.65%(h) 04/21/06 25,000 24,935,417
Galileo Money Market Fund 6,231 6,230,646
==========
TOTAL SHORT TERM INVESTMENTS
(Cost $45,362,260) 45,362,260
----------
TOTAL INVESTMENTS IN
SECURITIES - 155.6%
(Cost $285,368,612(a)) 282,175,898
-----------
PAR
(000)
-----------
TBA SALE COMMITMENTS - (14.0)%
Federal Home Loan
Mortgage Corp.
Gold TBA
4.50% 05/01/36 (1,600) (1,474,000)
Federal National
Mortgage
Association TBA
5.00% 05/13/34 (4,000) (3,807,500)
5.50% 04/01/36 (7,700) (7,514,723)
6.00% 04/01/36 (9,400) (9,397,067)
6.50% 04/01/36 (3,200) (3,264,000)
==========
TOTAL TBA SALE COMMITMENTS
(Proceeds $25,529,406) (25,457,290)
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
85
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GNMA PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
--------------- ------------
CALL OPTIONS WRITTEN - 0.0%
September 10 year U.S.
Treasury
Note futures, Strike
Price $110,
Expires 08/25/06
(Premiums received (17) $ (2,922)
---------
$8,718)
CALL SWAPTIONS WRITTEN - (0.1)%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08
(Premiums received (300)(i) (72,900)
---------
$131,100)
PUT OPTIONS WRITTEN - 0.0%
September 10 year U.S.
Treasury
Notes futures, Strike
Price $106,
Expires 08/25/06
(Premiums received (17) (17,000)
-------
$8,984)
PUT SWAPTIONS WRITTEN - (0.1)%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08
(Premiums received (300)(i) (142,770)
--------
$131,100)
LIABILITIES IN EXCESS OF OTHER
ASSETS - (41.4)% (75,129,998)
-----------
NET ASSETS - 100.0% $ 181,353,018
=============
- -------------------
(a) Cost for federal Income tax purposes is $285,404,036. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 221,299
Gross unrealized depreciation (3,449,437)
-----------
$(3,228,138)
===========
(b) Securities, or a portion thereof, with a market value of $606,754 have
been pledged as collateral for swap and swaption contracts. (c) Securities,
or a portion thereof, pledged as collateral with a value of $354,307 on
75 long U.S. Treasury Note futures contracts and 370 short U.S. Treasury
Note futures contracts expiring June 2006, and 19 short Euro-dollar
futures contracts expiring December 2006. The value of such contracts on
March 31, 2006 was $51,121,560, with an unrealized gain of $149,305
(including commissions of $1,204).
(d) Rates shown are the effective yields as of March 31, 2006.
(e) Variable rate security. Rates shown are the rates as of March 31, 2006.
(f) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 0.9% of its net assets, with a current market value
of $1,647,688, in securities restricted as to resale.
(g) Security is illiquid. As of March 31, 2006, the Portfolio held 0.9% of its
net assets, with a current market value of $1,647,688 in these
securities.
(h) The rate shown is the effective yield on the discount notes at the time of
purchase.
(i) Each swaption contract is equivalent to $10,000 notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
86
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 18.0%
Federal Home Loan Mortgage Corp.,
Unsecured Notes
3.00% 04/19/07 $ 5,900 $ 5,773,268
Federal National Mortgage
Association, Unsecured Notes
2.35% 04/06-04/07 9,980 9,763,135
1.75% 06/16/06 2,120 2,105,974
4.00% 10/06-01/09 13,870 13,638,241
Overseas Private Investment Co.
4.09% 05/29/12 474 418,611
4.30% 05/29/12 1,323 1,198,059
4.64% 05/29/12 989 907,068
4.68% 05/29/12 559 498,714
4.87% 05/29/12 4,222 3,908,184
5.40% 05/29/12 5,289 5,095,270
Resolution Funding Corp. Strip
Bonds
6.29%(b) 07/15/18 1,725 914,906
6.30%(b) 10/15/18 1,725 903,172
Small Business Administration
Participation Certificates, Series
96-20B, Class 1
6.38% 02/01/16 1,844 1,879,848
Small Business Administration
Participation Certificates, Series
96-20K, Class 1
6.95% 11/01/16 3,116 3,213,539
Small Business Administration
Participation Certificates, Series
97, Class A
5.35%(c)(d) 08/15/22 621 615,880
Small Business Administration
Participation Certificates, Series
97-20B, Class 1
7.10% 02/01/17 2,341 2,424,175
Small Business Administration
Participation Certificates, Series
97-20F, Class 1
7.20% 06/01/17 693 719,362
Small Business Administration
Participation Certificates, Series
97-20G, Class 1
6.85% 07/01/17 4,350 4,490,322
U.S. Treasury Bonds
8.12%(e)(f) 08/15/19 25,860 33,557,384
8.50%(e) 02/15/20 4,175 5,599,068
8.75% 08/15/20 1,175 1,613,881
8.00% 11/15/21 6,380 8,380,730
6.25%(e) 08/15/23 6,320 7,167,771
6.00%(e)(f) 02/15/26 4,280 4,775,543
6.75% 08/15/26 1,975 2,392,065
5.38%(e) 02/15/31 2,060 2,168,471
============
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $125,714,895) 124,122,641
------------
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
MORTGAGE PASS-THROUGHS - 27.4%
Federal Home Loan Mortgage Corp.
Gold
6.50% 03/09-12/30 $ 842 $ 858,639
4.00% 05/01/10 1,940 1,866,497
6.00% 11/14-11/34 2,581 2,600,378
5.50% 10/01/17 1,043 1,036,832
4.50% 05/18-08/20 11,842 11,330,550
5.00% 05/20-09/35 11,541 11,144,658
7.50% 11/25-10/27 24 25,025
7.00% 04/29-04/32 68 70,394
Federal Home Loan Mortgage Corp.
Gold TBA
5.00% 04/01/21 7,600 7,405,250
Federal Home Loan Mortgage Corp.,
ARM
4.37%(c) 01/01/35 8,111 7,945,055
Federal National Mortgage
Association
7.00% 06/06-09/34 2,085 2,148,902
6.00% 01/09-11/29 1,426 1,437,992
6.50% 02/11-04/31 3,025 3,097,120
5.50% 09/13-12/35 70,046 69,006,683
5.00% 01/18-11/35 17,700 17,190,635
4.50% 03/19-04/36 14,208 13,278,835
Federal National Mortgage
Association ARM
4.29%(c) 12/01/34 7,054 6,851,693
Federal National Mortgage
Association TBA
5.00% 04/01/36 9,000 8,566,875
6.50% 04/01/36 20,000 20,400,000
Government National Mortgage
Association
9.50% 09/16-11/16 19 20,856
9.00% 03/15/18 13 14,136
6.50% 12/23-10/34 924 958,170
6.00% 11/28-10/33 535 542,419
5.50% 11/15/33 47 46,463
============
TOTAL MORTGAGE PASS-THROUGHS
(Cost $190,612,913)
187,844,057
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 6.2%
Countrywide Alternative Loan Trust,
Series 05-56, Class 1A1
5.55%(c)(g) 11/25/35 8,063 8,174,257
Federal Home Loan Mortgage Corp.,
Series 231 (IO)
5.50%(b) 08/01/35 4,379 1,121,421
Federal Home Loan Mortgage Corp.,
Series 2587, Class WX
5.00% 03/15/18 2,370 2,269,416
Federal Home Loan Mortgage Corp.,
Series 2825, Class VP
5.50% 06/15/15 3,333 3,323,818
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
87
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
COLLATERALIZED MORTGAGE OBLIGATIONS (Continued)
Federal Home Loan Mortgage Corp.,
Series 2933, Class HD
5.50% 02/15/35 $3,837 $ 3,807,109
Federal Home Loan Mortgage Corp.,
Series 3033, Class JB
5.50% 11/15/32 3,143 3,128,706
Federal National Mortgage
Association, Series 03-118, Class
FD
5.22%(c) 12/25/33 3,622 3,629,542
Federal National Mortgage
Association, Series 04-82, Class
HJ
5.50% 09/25/32 7,105 7,029,727
Federal National Mortgage
Association, Series 05-48, Class
AR
5.50% 02/25/35 3,893 3,859,651
Federal National Mortgage
Association, Series 354, Class 2
(IO)
5.50%(b) 11/01/34 3,758 936,462
Federal National Mortgage
Association, Series 367, Class 2
(IO)
5.50%(b) 01/25/36 7,438 1,975,134
J.P. Morgan Alternative Loan Trust,
Series 05-S1, Class 2A16
6.00% 12/25/35 3,067 3,072,569
Summit Mortgage Trust, Series 00-1,
Class B1
6.26%(c)(d) 12/28/12 122 121,834
===========
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $43,061,773) 42,449,646
-----------
COMMERCIAL MORTGAGE BACKED SECURITIES - 14.3%
Banc of America Commercial
Mortgage, Inc., Series 01-1, Class
A2
6.50% 04/15/36 3,998 4,142,589
Banc of America Commercial
Mortgage, Inc., Series 02-PB2,
Class A4
6.19% 06/11/35 3,670 3,795,637
Bear Stearns Commercial Mortgage
Securities, Inc., Series 00-WF2,
Class A2
7.32% 10/15/32 4,590 4,899,420
Bear Stearns Commercial Mortgage
Securities, Inc., Series 04-PWR6,
Class A6
4.82% 11/11/41 1,315 1,250,789
Commercial Mortgage Acceptance
Corp., Series 98-C2, Class A2
6.03% 09/15/30 3,433 3,466,315
Credit Suisse First Boston Mortgage
Securities Corp., Series 98-C2,
Class A2
6.30% 11/11/30 7,666 7,809,985
Credit Suisse First Boston Mortgage
Securities Corp., Series 02-CP5,
Class A2
4.94% 12/15/35 4,865 4,711,858
PAR
MATURITY (000) VALUE
---------- ---------- -------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Donaldson, Lufkin and Jenrette, Inc.,
Commerical Mortgage Corp.,
Series 98-CF1, Class A1B
6.41% 02/18/31 $7,095 $ 7,189,754
Donaldson, Lufkin and Jenrette, Inc.,
Commerical Mortgage Corp.,
Series 00-CKP1, Class A1B
7.18% 11/10/33 4,380 4,663,011
General Electric Capital Commercial
Mortgage Corp., Series 02-1A,
Class A3
6.27% 12/10/35 3,800 3,956,636
General Electric Capital Commercial
Mortgage Corp., Series 02-2A,
Class A3
5.35% 08/11/36 4,240 4,218,217
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 99-C3, Class A2
7.18% 08/15/36 3,328 3,483,024
Goldman Sachs Mortgage Securities
Corp. II, Series 98-C1, Class A3
6.14% 10/18/30 4,943 5,014,412
Goldman Sachs Mortgage Securities
Corp. II, Series 04-GG2, Class A4
4.96% 08/10/38 3,500 3,432,730
Goldman Sachs Mortgage Securities
Corp. II, Series 06-GG6, Class A4
5.55% 04/10/38 1,565 1,561,882
J.P. Morgan Chase Commercial
Mortgage Securities Corp., Series
01-C1, Class A3
5.86% 10/12/35 3,840 3,903,927
J.P. Morgan Chase Commercial
Mortgage Securities Corp., Series
01-CIB2, Class A3
6.43% 04/15/35 3,320 3,447,429
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 00-C4,
Class A2
7.37% 08/15/26 5,680 6,076,073
Lehman Brothers-UBS Commerical
Mortgage Trust, Series 03-C7,
Class A2
4.06%(c) 09/15/27 2,480 2,389,981
Morgan Stanley Capital Investments,
Series 98-HF2, Class A2
6.48% 11/15/30 3,982 4,060,697
Morgan Stanley Dean Witter Capital,
Series 00-LIF2, Class A2
7.20% 09/15/10 4,160 4,409,942
Salomon Brothers Mortgage
Securities VII, Series 00-C1, Class
A2
7.52% 12/18/09 5,565 5,838,854
USGI, Series 87
7.43% 12/01/22 111 111,476
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
88
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Wachovia Bank Commercial
Mortgage Trust, Series 03, Class
C6
5.12% 08/15/35 $ 4,470 $ 4,354,430
============
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $101,437,823) 98,189,068
------------
PROJECT LOANS - 2.7%
Whittier Rehab at Haverhill Project
Loan
7.60% 12/01/39 10,815 11,000,617
Whittier Rehab at Westborough
Project Loan
8.12% 02/28/37 6,904 7,024,333
============
TOTAL PROJECT LOANS
(Cost $17,454,336) 18,024,950
------------
CERTIFICATE OF DEPOSIT - 1.5%
Barclays Bank PLC NY
4.90%(c) 03/13/09 9,180 9,180,000
SunTrust Bank, Inc.
4.42% 06/15/09 1,260 1,226,232
============
TOTAL CERTIFICATE OF DEPOSIT
(Cost $10,440,000) 10,406,232
------------
ASSET BACKED SECURITIES - 15.1%
American Express Credit Account
Master Trust, Series 05-3, Class A
4.75%(c) 01/18/11 5,525 5,534,393
American Express Credit Account
Master Trust, Series 05-5, Class A
4.79%(c) 02/15/13 5,350 5,347,825
Bear Stearns, Inc., Series 06-HE1,
Class 1A1
4.91%(c) 12/25/35 5,041 5,041,003
Chase Issuance Trust, Series 04-A9,
Class A9
3.22% 06/15/10 5,675 5,513,546
Citibank Credit Card Issuance Trust,
Series 00, Class A3
6.88% 11/16/09 6,275 6,434,268
Citibank Credit Card Issuance Trust,
Series 04, Class A1
2.55% 01/20/09 9,150 8,966,543
Countrywide Certificates, Series
04-14, Class A4
5.10%(c) 06/25/35 2,577 2,584,341
Countrywide Certificates, Series
05-16, Class 4AV1
4.68%(c) 05/25/36 5,046 5,049,164
Countrywide Certificates, Series
05-IM2, Class A1
4.93%(c) 01/25/36 3,931 3,931,641
Daimler Chrysler Auto Trust, Series
06-A, Class A3
5.00% 05/08/10 5,200 5,180,500
Fieldstone Mortgage Investment
Corp., Series 06-1, Class A1
4.74%(c) 05/25/36 5,150 5,150,000
Ford Credit Auto Owner Trust, Series
05-A, Class A3
3.48% 11/17/08 7,450 7,358,663
Ford Credit Auto Owner Trust, Series
05-C, Class A3
4.30% 08/15/09 5,325 5,244,254
PAR
MATURITY (000) VALUE
---------- ---------- --------------
ASSET BACKED SECURITIES (Continued)
Green Tree Financial Corp., Series
96-7, Class A6
7.65% 10/15/27 $ 3,623 $ 3,752,099
MBNA Credit Card Master Notes
Trust, Series 04-A4, Class A4
2.70% 09/15/09 7,200 7,023,377
MBNA Credit Card Master Notes
Trust, Series 06-A1, Class A1
4.90% 07/15/11 5,175 5,136,188
Merrill Lynch Mortgage Investors,
Inc., Series 05-HE2, Class A2A
4.93%(c) 09/25/36 4,219 4,220,025
Morgan Stanley Home Equity Loans,
Series 06-2, Class A1
4.77%(c) 02/25/36 4,975 4,975,000
Railcar Leasing LLC, Series 97-1,
Class A1
6.75%(d) 07/15/06 648 648,411
Structured Asset Investment Loan
Trust, Series 06-2, Class A1
4.88%(c) 04/25/36 2,950 2,950,000
Structured Asset Receivables Trust,
Series 03-2
4.91%(c)(d)(h) 01/21/09 3,887 3,886,853
============
TOTAL ASSET BACKED SECURITIES
(Cost $104,780,910)
103,928,094
------------
CORPORATE BONDS - 24.6%
Aerospace - 0.3%
Lockheed Martin Corp., Senior
Debentures
8.50% 12/01/29 615 801,308
Northrop Grumman Corp., Senior
Unsecured Notes
4.08% 11/16/06 1,205 1,196,469
Raytheon Co., Senior Unsecured
Notes
4.50% 11/15/07 383 377,799
============
2,375,576
------------
Banks - 8.0%
Banc One Corp., Senior Unsecured
Notes
2.62% 06/30/08 835 788,611
Bank of America Corp., Senior
Unsecured Notes
4.50% 08/01/10 130 126,075
Bank of America Corp., Subordinated
Notes
7.80%(i) 02/15/10 1,190 1,286,758
Bank of New York Co., Inc., Senior
Notes
3.75% 02/15/08 1,350 1,315,156
BankBoston N.A., Subordinated
Notes
7.00% 09/15/07 1,500 1,537,290
Citigroup, Inc., Senior Unsecured
Notes
6.20% 03/15/09 1,200 1,229,238
Citigroup, Inc., Unsecured Notes
3.62% 02/09/09 3,655 3,500,869
4.12% 02/22/10 3,900 3,735,849
Depfa Bank PLC, Senior Notes
4.25% 08/16/10 2,150 2,066,931
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
89
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Banks (Continued)
Deutsche Bank AG, Deposit Notes
3.84%(g) 03/15/07 $ 1,600 $ 1,590,560
HBOS Treasury Services PLC,
Senior Unsecured Notes
3.60%(d) 08/15/07 855 837,107
HBOS Treasury Services PLC,
Unsecured Notes
3.50%(d) 11/30/07 1,630 1,586,474
HSBC Bank USA, Subordinated
Notes
3.87% 06/07/07 4,875 4,798,682
The Huntington National Bank,
Subordinated Bank Notes
2.75% 10/16/06 480 473,918
J.P. Morgan Chase & Co., Senior
Unsecured Notes
5.25% 05/30/07 2,380 2,376,256
Lloyds TSB Bank PLC (United
Kingdom), Subordinated Notes
6.90%(j) 11/29/49 2,000 2,005,840
Rabobank Nederland, Senior Notes
5.01%(c)(d) 04/06/09 12,170 12,170,000
The Royal Bank of Scotland Capital
Trust (United Kingdom)
6.80%(j) 12/31/49 1,000 1,002,772
The Royal Bank of Scotland Capital
Trust, Unsecured Notes
4.71%(c)(j) 12/29/49 600 555,602
SunTrust Bank, Inc., Senior
Unsecured Notes
3.62% 10/15/07 1,540 1,503,949
Swedish Export Credit Corp.,
Unsecured Notes
2.88% 01/26/07 1,550 1,521,124
U.S. Bancorp, Senior Unsecured
Notes
3.95% 08/23/07 335 329,342
U.S. Bank N.A., Senior Bank Notes
2.87% 02/01/07 1,040 1,018,763
2.40% 03/12/07 1,580 1,534,970
U.S. Bank N.A., Subordinated Notes
6.50% 02/01/08 2,420 2,474,929
Wachovia Bank N.A., Senior Bank
Notes
4.38% 08/15/08 95 93,274
Wells Fargo & Co., Senior Unsecured
Notes
4.20% 01/15/10 580 557,438
Wells Fargo & Co., Unsecured Notes
4.62% 08/09/10 2,115 2,052,157
4.88% 01/12/11 705 689,437
===========
54,759,371
-----------
Broadcasting - 0.4%
BSKYB Finance UK PLC, Senior
Unsecured Notes
6.50%(d) 10/15/35 120 114,107
News America, Inc., Notes
6.40%(d) 12/15/35 500 478,067
News America, Inc., Senior
Debentures
7.12% 04/08/28 300 306,332
7.62% 11/30/28 1,150 1,235,076
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Broadcasting (Continued)
News America, Inc., Senior
Unsecured Notes
6.20% 12/15/34 $ 275 $ 257,541
===========
2,391,123
-----------
Computer Software & Services - 0.4%
Oracle Corp., Unsecured Notes
5.25%(d) 01/15/16 2,550 2,446,197
-----------
Energy & Utilities - 0.2%
Florida Power & Light Co., First
Mortgage Bonds
5.90% 03/01/33 175 169,895
4.95% 06/01/35 600 516,536
Florida Power Corp., First Mortgage
Bonds
6.65% 07/15/11 960 1,006,632
===========
1,693,063
-----------
Entertainment & Leisure - 0.9%
Comcast Cable Holdings LLC, Senior
Debentures
7.88% 02/15/26 1,040 1,140,263
Comcast Cable Holdings LLC, Senior
Notes
7.12% 02/15/28 620 628,457
Comcast Corp., Senior Unsecured
Bonds
6.50% 11/15/35 475 460,891
Comcast Corp., Senior Unsecured
Notes
7.05% 03/15/33 315 324,177
Comcast Corp., Unsecured Notes
6.45% 03/15/37 1,015 976,635
Time Warner Cos., Inc., Senior
Debentures
9.15% 02/01/23 535 648,714
8.38% 03/15/23 500 565,315
7.57% 02/01/24 750 807,246
7.70% 05/01/32 455 502,197
===========
6,053,895
-----------
Finance - 6.4%
Associates Corp. N.A., Senior Notes
6.25%(i) 11/01/08 690 705,735
BAE Systems Holdings, Inc.,
Unsecured Notes
5.20%(d) 08/15/15 710 671,007
The Bear Stearns & Co., Inc., Notes
4.55% 06/23/10 750 724,525
Berkshire Hathaway Finance Corp.,
Senior Unsecured Notes
3.38% 10/15/08 1,925 1,843,655
4.12% 01/15/10 215 206,092
General Electric Capital Corp.,
Unsecured Notes
3.45%(c) 01/15/08 10,250 10,209,512
4.12% 09/01/09 3,065 2,953,229
5.00% 11/15/11 8,495 8,326,935
The Goldman Sachs Group, Inc.,
Unsecured Notes
5.35% 01/15/16 1,275 1,231,473
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
90
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Finance (Continued)
Household Finance Corp., Senior
Unsecured Notes
6.50% 11/15/08 $1,615 $ 1,660,314
Morgan Stanley, Senior Notes
4.91%(c) 03/07/08 8,105 8,102,593
Morgan Stanley, Senior Unsecured
Notes
6.75% 04/15/11 625 657,906
Morgan Stanley, Unsecured Notes
5.05% 01/21/11 3,175 3,112,345
Nationwide Building Society, Senior
Unsecured Notes
3.50%(d) 07/31/07 1,725 1,687,567
Nationwide Building Society,
Unsecured Notes
4.25%(d) 02/01/10 90 86,287
UnitedHealth Group, Inc., Unsecured
Notes
5.80% 03/15/36 675 642,782
USAA Capital Corp., Senior
Unsecured Notes
4.00%(d) 12/10/07 920 900,679
===========
43,722,636
-----------
Insurance - 1.4%
Allstate Financial Global Funding,
Unsecured Notes
5.25%(d) 02/01/07 1,150 1,148,059
ASIF Global Financing, Unsecured
Notes
3.90%(d) 10/22/08 285 275,281
MetLife, Inc., Senior Unsecured
Notes
6.38% 06/15/34 350 361,162
Monumental Global Funding II,
Unsecured Notes
2.80%(d) 07/15/08 2,480 2,345,058
New York Life Global Funding,
Unsecured Notes
3.88%(d) 01/15/09 775 746,375
Sun Life of Canada Capital Trust
(Canada), Capital Securities
8.53%(d)(j) 05/29/49 1,070 1,143,124
TIAA Global Markets, Senior
Unsecured Notes
4.12%(d) 11/15/07 1,850 1,814,887
WellPoint Health Network, Inc.,
Senior Unsecured Notes
6.38% 06/15/06 700 701,771
WellPoint, Inc., Unsecured Notes
5.95% 12/15/34 675 649,807
5.85% 01/15/36 700 661,380
===========
9,846,904
-----------
Manufacturing - 0.2%
Belvoir Land LLC Class II,
Unsecured Notes
5.40%(d) 12/15/47 1,175 1,062,975
-----------
Motor Vehicles - 0.2%
DaimlerChrysler AG, Senior
Debentures
7.45% 03/01/27 870 914,538
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Motor Vehicles (Continued)
DaimlerChrysler N.A. Holding Corp.,
Unsecured Notes
4.05% 06/04/08 $ 150 $ 145,086
===========
1,059,624
-----------
Oil & Gas - 0.6%
Consolidated Natural Gas Co.,
Senior Unsecured Notes
5.38% 11/01/06 1,850 1,848,983
Devon Energy Corp., Senior
Debentures
7.95% 04/15/32 575 704,157
Devon Financing Corp., Senior
Unsecured Notes
7.88% 09/30/31 60 72,436
Texaco Capital, Inc., Debentures
8.88% 09/01/21 1,350 1,787,671
===========
4,413,247
-----------
Pharmaceuticals - 0.2%
Wyeth, Unsecured Notes
5.50% 02/15/16 950 932,938
6.00% 02/15/36 775 757,055
===========
1,689,993
-----------
Real Estate - 0.4%
EOP Operating LP, Senior Notes
7.25% 06/15/28 230 241,737
EOP Operating LP, Unsecured Notes
4.65% 10/01/10 255 244,438
ERP Operating LP, Senior Notes
7.12% 10/15/17 495 543,533
The Rouse Co., Unsecured Notes
3.62% 03/15/09 1,615 1,501,375
===========
2,531,083
-----------
Retail Merchandising - 0.1%
Federated Department Stores, Senior
Debentures
6.79% 07/15/27 320 322,834
May Department Stores Co.,
Debentures
7.88% 03/01/30 220 249,145
May Department Stores Co., Senior
Debentures
8.50% 06/01/19 300 355,714
===========
927,693
-----------
Telecommunications - 1.9%
AT&T Broadband Corp., Unsecured
Notes
8.38% 03/15/13 1,195 1,343,956
BellSouth Telecommunications,
Debentures
0.00%(k) 12/15/35 900 431,542
Continental Cablevision, Inc., Senior
Notes
8.30% 05/15/06 2,640 2,648,123
GTE Corp., Debentures
6.94% 04/15/28 150 150,636
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
91
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS (Continued)
Telecommunications (Continued)
New England Telephone & Telegraph
Co., Debentures
7.88% 11/15/29 $ 200 $ 211,616
SBC Communications, Inc.,
Unsecured Notes
4.39%(d) 06/05/06 3,000 2,995,710
6.45% 06/15/34 435 429,323
6.15% 09/15/34 70 66,474
Sprint Capital Corp., Senior
Unsecured Notes
8.75% 03/15/32 560 700,144
Verizon Global Funding Corp., Senior
Unsecured Notes
7.75% 12/01/30 80 88,380
Verizon Global Funding Corp.,
Unsecured Notes
5.85% 09/15/35 675 605,437
Vodafone Group PLC (United
Kingdom), Senior Unsecured Notes
7.88%(j) 02/15/30 660 760,162
Vodafone Group PLC (United
Kingdom), Unsecured Notes
5.05%(c)(j) 12/28/07 2,715 2,715,839
5.00%(j) 12/16/13 90 85,295
============
13,232,637
------------
Yankee - 3.0%
AID-Israel, Unsecured Notes
5.50%(j) 09/18/23 5,000 5,072,700
Deutsche Telekom International
Finance BV (Netherlands), Senior
Notes
5.75%(j) 03/23/16 275 268,644
Deutsche Telekom International
Finance BV (Netherlands), Senior
Unsecured Notes
8.75%(j) 06/15/30 590 705,776
Eksportfinans ASA (Norway),
Unsecured Notes
3.38%(j) 01/15/08 3,770 3,657,307
National Landeskreditbank
Baden-Wurttemberg (Germany),
Unsecured Notes
4.25%(j) 09/15/10 2,800 2,702,140
Pemex Finance Ltd. (Luxembourg),
Senior Unsecured Notes
9.03%(j) 02/15/11 3,505 3,768,962
Petro-Canada (Canada), Senior
Unsecured Notes
5.95%(j) 05/15/35 310 299,788
Province of Quebec (Canada),
Debentures
6.12%(j) 01/22/11 710 733,974
Suncor Energy, Inc. (Canada)
5.95%(j) 12/01/34 70 70,174
Teck Cominco Ltd. (Canada), Senior
Unsecured Notes
6.12%(j) 10/01/35 475 446,900
Telecom Italia Capital (Luxembourg),
Senior Unsecured Notes
6.00%(j) 09/30/34 175 157,434
Telefonica Europe BV (Netherlands),
Senior Unsecured Notes
7.75%(j) 09/15/10 475 511,079
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS (Continued)
Yankee (Continued)
Tyco International Group SA
(Luxembourg), Senior Unsecured
Notes
6.75%(j) 02/15/11 $ 575 $ 598,044
Tyco International Group SA
(Luxembourg), Unsecured Notes
7.00%(j) 06/15/28 570 599,716
United Mexican States (Mexico),
Senior Unsecured Notes
6.75%(j)(l) 09/27/34 725 748,563
============
20,341,201
------------
TOTAL CORPORATE BONDS
(Cost $171,416,344) 168,547,218
------------
FOREIGN BONDS - 1.0%
Bundesrepublic Deutschland
(Germany) (EUR)
4.75% 07/04/34 2,475 3,372,164
4.00% 01/04/37 2,750 3,340,271
============
TOTAL FOREIGN BONDS
(Cost $6,961,270)
6,712,435
------------
TAXABLE MUNICIPAL BONDS - 1.3%
Los Angeles County California
Pension Obligation Revenue
Bonds, Series 95, Class D
6.97% 06/30/08 7,355 7,616,250
Ohana Hawaii Military Communities
LLC, Military Housing Revenue
Bonds (Navy Hawaii Housing
Privatization Project), Series 04-A,
Class 1
6.19% 04/01/49 750 771,037
============
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $8,105,000)
8,387,287
------------
NUMBER
OF SHARES
-----------
SHORT TERM INVESTMENTS - 0.2%
Galileo Money Market Fund
(Cost $1,538,656) 1,538,656 1,538,656
---------
TOTAL MARKET VALUE OF SECURITIES
BEFORE INVESTMENT IN
AFFILIATE - 112.3%
(Cost $781,523,920) 770,150,284
-----------
INVESTMENT IN AFFILIATE - 0.1%
Institutional Money
Market Trust
(Cost $768,500) 768,500 768,500
-------
TOTAL INVESTMENTS IN SECURITIES -
112.4%
(Cost $782,292,420(a)) 770,918,784
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
92
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------ ----------------
TBA SALE COMMITMENTS - (6.9)%
Federal Home Loan
Mortgage Corp.
Gold TBA
4.50% 04/01/21 $ (5,400) $ (5,153,625)
5.00% 04/01/36 (4,000) (3,805,000)
6.00% 04/01/36 (1,000) (1,000,312)
Federal National
Mortgage
Association TBA
4.50% 04/01/21 (2,600) (2,485,439)
5.00% 04/01/21 (4,000) (3,898,752)
5.50% 04/01/36 (32,000) (31,230,016)
=============
TOTAL TBA SALE COMMITMENTS
(Proceeds $47,742,703) (47,573,144)
-------------
NUMBER OF
CONTRACTS
-----------------
CALL OPTIONS WRITTEN - 0.0%
June 10 year U.S.
Treasury Note
futures, Strike Price
$111, Expires
05/26/06 (66) (1,031)
September 10 year U.S.
Treasury
Note futures, Strike
Price $110,
Expires 08/25/06 (59) (10,141)
=======
TOTAL CALL OPTIONS WRITTEN
(Premiums received (11,172)
-------
$60,712)
CALL SWAPTIONS PURCHASED - 0.0%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 960(m) 353,280
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 960(m) 570,240
=======
TOTAL CALL SWAPTIONS PURCHASED
(Cost $1,069,920) 923,520
-------
CALL SWAPTIONS WRITTEN - (0.1)%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08 (960)(m) (233,280)
Citibank, Strike Price
$5.67, Expires
01/04/10 (1,000)(m) (476,500)
Deutsche Bank, Strike
Price $5.02,
Expires 01/29/07 (877)(m) (87,349)
Union Bank, Strike
Price $4.73,
Expires 06/13/07 (2,330)(m) (196,885)
========
TOTAL CALL SWAPTIONS WRITTEN
(Premiums received (994,014)
--------
$2,173,739)
PUT OPTIONS WRITTEN - 0.0%
June 10 year U.S.
Treasury Notes
futures, Strike Price
$107, Expires
05/26/06 (66) (7,012)
September 10 year U.S.
Treasury
Notes futures, Strike
Price $106,
Expires 08/25/06 (59) (5,900)
========
TOTAL PUT OPTIONS WRITTEN
(Premiums received (12,912)
--------
$64,962)
NUMBER OF
CONTRACTS VALUE
----------------- ---------------
PUT SWAPTIONS PURCHASED - 0.2%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 960(m) $ 521,280
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 960(m) 636,480
============
TOTAL PUT SWAPTIONS PURCHASED
(Cost $1,069,920) 1,157,760
------------
PUT SWAPTIONS WRITTEN - (0.4)%
Barclays Capital,
Strike Price $5.14,
Expires 04/21/08 (960)(m) (456,864)
Citibank, Strike Price
$5.67, Expires
01/04/10 (1,000)(m) (396,600)
Deutsche Bank, Strike
Price $5.02,
Expires 01/29/07 (877)(m) (349,748)
Union Bank, Strike
Price $4.73,
Expires 06/13/07 (2,330)(m) (1,391,709)
============
TOTAL PUT SWAPTIONS WRITTEN
(Premiums received (2,594,921)
------------
$2,173,739)
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (0.1)% (768,500)
-------------
LIABILITIES IN EXCESS OF OTHER
ASSETS - (5.1)% (35,182,881)
-------------
TOTAL NET ASSETS - 100.0% $ 685,862,520
=============
- -------------------
(a) Cost for federal Income tax purposes is $783,025,286. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 2,005,784
Gross unrealized depreciation (14,112,286)
------------
$(12,106,502)
============
(b) Rates shown are the effective yields as of March 31, 2006.
(c) Variable rate security. Rates shown are the rates as of March 31, 2006.
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 5.5% of its net assets, with a current market value
of $37,781,939, in securities restricted as to resale.
(e) Securities, or a portion thereof, subject to financing transactions.
(f) Securities, or a portion thereof, with a market value of $1,663,115 have
been pledged as collateral for swap and swaption contracts. (g) Securities
valued at fair value as determined in good faith by or under the
direction of the Trustees. As of March 31, 2006, these securities had a
total market value of $9,764,817 which represents 1.4% of net assets.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
93
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
(h) Security is illiquid. As of March 31, 2006, the Portfolio held 0.6% of its
net assets, with a current market value of $3,886,853 in these
securities.
(i) Securities, or a portion thereof, pledged as collateral with a value of
$1,992,492 on 753 long U.S. Treasury Note futures contracts, 93 long
U.S. Treasury Bond futures contracts, 761 short U.S. Treasury Note
futures contracts and 186 short Euro-Bobl futures contracts expiring
June 2006. The value of such contracts on March 31, 2006 was
$163,375,175, with an unrealized gain of $298,253 (including commissions
of $3,315).
(j) Security is a foreign domiciled issuer which is registered with the
Securities and Exchange Commission.
(k) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified date and rate. The rates shown are the
effective yields as of March 31, 2006.
(l) Securities purchased with the cash proceeds from securities loaned.
(m) Each swaption contract is equivalent to $10,000 notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
94
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL BOND PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ------------- -------------
FOREIGN BONDS - 71.3%
Australia - 0.2%
QBE Insurance Group Ltd., Senior
Unsecured Bonds (GBP)
5.62% 09/28/09 $ 620 $ 1,090,130
-----------
Austria - 2.2%
Republic of Austria Government
Bonds (EUR)
5.00% 07/15/12 10,250 13,341,968
-----------
Belgium - 2.6%
Kingdom of Belgium (EUR)
5.75% 03/28/08 8,500 10,773,589
3.75% 03/28/09 4,250 5,197,517
===========
15,971,106
-----------
Canada - 4.3%
Government of Canada Bonds (CND)
5.25% 06/01/12 17,390 15,721,805
Province of Ontario, Notes (CND)
4.50% 03/08/15 3,600 3,071,017
Province of Ontario, Unsecured
Notes (NZD)
6.25% 06/16/15 290 176,846
Province of Quebec, Bonds (NZD)
6.75% 11/09/15 760 475,904
Royal Bank of Canada, Senior
Unsecured Notes (GBP)
4.62% 12/07/10 3,830 6,578,539
===========
26,024,111
-----------
Denmark - 3.1%
Kingdom of Denmark (DKK)
7.00% 11/10/24 60,790 13,676,615
Realkredit Danmark (DKK)
3.06%(b) 10/01/38 31,175 4,834,018
===========
18,510,633
-----------
Finland - 4.8%
Finnish Government Bonds (EUR)
3.00% 07/04/08 13,050 15,704,028
4.25% 07/04/15 10,385 13,078,470
===========
28,782,498
-----------
France - 3.9%
France Government Bonds (EUR)
3.15% 07/25/32 2,125 3,527,326
5.75% 10/25/32 1,500 2,321,530
French Treasury Notes (EUR)
3.00% 07/08-01/10 11,050 13,207,014
Government of France, Treasury
Inflation Protected Notes (EUR)
2.25% 07/25/20 2,650 3,589,133
Reseau Ferre de France, Unsecured
Notes (GBP)
5.25% 12/07/28 435 831,575
===========
23,476,578
-----------
Germany - 7.8%
Bundesrepublic Deutschland (EUR)
3.75% 07/04/13 785 954,542
6.25% 01/04/24 5,940 9,278,775
5.50% 01/04/31 195 290,889
PAR
MATURITY (000) VALUE
-------------- ------------- -------------
FOREIGN BONDS (Continued)
Germany (Continued)
Bundesrepublic Deutschland
(Germany) (EUR)
4.75% 07/04/34 $ 26,850 $36,582,873
===========
47,107,079
-----------
Ireland - 2.8%
Irish Treasury Notes (EUR)
3.25% 04/18/09 14,000 16,876,076
-----------
Italy - 5.1%
Buoni Poliennali Del Tesoro (EUR)
5.00% 02/01/12 6,500 8,407,432
4.25% 02/01/15 18,150 22,523,086
===========
30,930,518
-----------
Japan - 11.9%
Development Bank of Japan (JPY)
1.70% 09/20/22 401,000 3,264,435
Japan Finance Corp. (GBP)
5.75% 08/09/19 2,860 5,478,736
Japan Government Bonds (JPY)
1.00% 06/20/13 748,000 6,096,550
1.90% 06/20/14 1,500,000 12,947,281
1.30% 03/20/15 2,708,350 22,174,644
2.50% 09/20/35 750,000 6,715,017
Japan Government, Treasury Inflation
Protected Notes (JPY)
0.50% 06/10/15 479,000 3,928,644
Japanese Government Bonds (JPY)
0.79%(b) 01/20/21 1,351,000 11,098,172
===========
71,703,479
-----------
Mexico - 0.2%
Mexican Fixed Rate Bonds (MXP)
9.00% 12/11-12/12 5,650 534,729
8.00% 12/19/13 3,420 306,595
9.50% 12/18/14 1,480 144,476
===========
985,800
-----------
Netherlands - 6.4%
Netherland Government Bonds
(EUR)
5.75% 02/15/07 1,845 2,285,624
2.50% 01/15/08 10,500 12,553,352
4.25% 07/15/13 7,400 9,275,334
3.75% 01/15/23 1,950 2,299,553
Rabobank Nederland, Senior Notes
5.01%(b)(c) 04/06/09 12,200 12,196,486
===========
38,610,349
-----------
New Zealand - 0.6%
International Bank Reconstruction
and Development (NZD)
7.49%(d) 08/20/07 6,620 3,711,026
-----------
Poland - 1.8%
Poland Government Bonds (PLN)
5.00% 10/24/13 8,850 2,743,652
6.25% 10/24/15 24,800 8,380,475
===========
11,124,127
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
95
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
------------- ---------- --------------
FOREIGN BONDS (Continued)
Portugal - 0.6%
Portugal Government Bonds (EUR)
4.38% 06/16/14 $ 2,950 $ 3,718,692
------------
Singapore - 1.9%
Singapore Goverment Bonds (SGD)
3.50% 07/01/12 17,970 11,182,248
------------
Spain - 4.5%
Bonos y Obligation del Estado (EUR)
6.00% 01/31/08 1,650 2,093,943
4.00% 01/31/10 8,300 10,238,960
5.75% 07/30/32 5,895 9,102,752
Kingdom of Spain (EUR)
5.00% 07/30/12 4,155 5,407,875
============
26,843,530
------------
Sweden - 0.4%
AB Spintab, Notes (EUR)
4.38% 04/20/09 1,780 2,203,699
------------
United Kingdom - 6.2%
BP Capital Markets PLC, Senior
Unsecured Notes (GBP)
5.12% 12/07/08 1,345 2,354,365
Network Rail Infrastructure Finance,
Senior Secured Notes (GBP)
4.88% 11/27/15 1,630 2,875,277
Royal Bank of Scotland PLC (GBP)
5.50%(b) 12/03/49 690 1,224,572
United Kingdom Treasury Bonds
(GBP)
4.00% 03/07/09 3,500 5,999,991
8.00% 06/07/21 2,000 4,863,457
5.00% 03/07/25 6,300 11,991,310
United Kingdom Treasury Inflation
Protected Gilt Stock (GBP)
6.14%(b) 05/20/09 1,819 7,870,839
============
37,179,811
------------
TOTAL FOREIGN BONDS
(Cost $437,095,844) 429,373,458
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 1.1%
U.S. Treasury Notes
4.50%
(Cost $6,824,506) 2/28/11 6,875 6,774,831
------------
MORTGAGE PASS-THROUGHS - 1.1%
Federal Home Loan Mortgage Corp.
ARM
4.62%(b)
(Cost $6,655,034) 02/01/35 6,639 6,490,588
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 2.1%
Bear Stearns Mortgage Trust, Series
04-13, Class A1
5.19%(b) 11/25/34 3,855 3,876,686
Countrywide Alternative Loan Trust,
Series 05-56, Class 1A1
5.55%(b)(e) 11/25/35 8,630 8,749,630
============
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $12,572,110) 12,626,316
------------
PAR
MATURITY (000) VALUE
------------- ---------- --------------
COMMERCIAL MORTGAGE BACKED SECURITIES - 7.2%
Banc of America Commercial
Mortgage, Inc., Series 01-1, Class
A2
6.50% 04/15/36 $ 3,660 $ 3,793,090
Banc of America Commercial
Mortgage, Inc., Series 04-5, Class
A3
4.56% 11/10/41 2,470 2,366,482
Banc of America Commercial
Mortgage, Inc., Series 05-1, Class
A4
4.88%(b) 11/10/42 4,320 4,238,309
Bear Stearns Commercial Mortgage
Securities, Inc., Series 04-PWR6,
Class A6
4.82% 11/11/41 1,015 965,438
Commercial Mortgage Acceptance
Corp., Series 98-C2, Class A2
6.03% 09/15/30 3,152 3,182,191
Credit Suisse First Boston Mortgage
Securities Corp., Series 02-CP5,
Class A2
4.94% 12/15/35 5,655 5,476,990
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 00-C2, Class A2
7.46% 08/16/33 1,890 2,020,536
Goldman Sachs Mortgage Securities
Corp. II, Series 05-GG4, Class A4
4.76% 07/10/39 2,150 2,026,318
J.P. Morgan Chase Commercial
Mortgage Securities Corp., Series
01-C1, Class A3
5.86% 10/12/35 4,530 4,605,414
J.P. Morgan Chase Commercial
Mortgage Security, Series 04-CBX,
Class A4
4.53% 07/15/41 2,700 2,581,038
J.P. Morgan Mortgage Trust, Series
06-A2, Class 5A3
3.75%(b) 11/25/33 6,050 5,884,334
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 00-C4,
Class A2
7.37% 08/15/26 1,800 1,925,516
Lehman Brothers-UBS Commercial
Mortgage Trust, Series 04-C8,
Class A4
4.51% 12/15/29 3,825 3,657,337
Morgan Stanley Capital Investments,
Series 99-FNV1, Class A2
6.53% 03/15/31 685 702,320
============
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $44,997,238)
43,425,313
------------
ASSET BACKED SECURITIES - 4.9%
Chase Issuance Trust, Series 04-A9,
Class A9
3.22% 06/15/10 3,450 3,351,847
Citibank Credit Card Issuance Trust,
Series 03-A6, Class A6
2.90%(f) 05/17/10 1,375 1,312,480
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
96
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
ASSET BACKED SECURITIES (Continued)
Citibank Credit Card Issuance Trust,
Series 04-A4, Class A4
3.20%(b) 08/24/09 $ 3,175 $ 3,088,735
Ford Credit Auto Owner Trust, Series
05-C, Class A3
4.30% 08/15/09 6,300 6,204,470
Ford Credit Auto Owner Trust, Series
06-A, Class A3
5.07% 03/15/10 5,125 5,106,581
Greenwich Capital Commercial
Funding Corp., Series 04-GG1A,
Class A4
4.76% 06/10/36 740 720,775
Student Loan Marketing Association
Student Loan Trust, Series 99-3,
Class A2
4.78%(b)(f) 07/25/12 485 486,049
Student Loan Marketing Association
Student Loan Trust, Series 03-7
(GBP)
5.15% 09/15/39 1,280 2,271,251
Student Loan Marketing Association
Student Loan Trust, Series 05-6,
Class A2
4.62%(b) 07/25/16 7,225 7,224,748
===========
TOTAL ASSET BACKED SECURITIES
(Cost $29,989,173) 29,766,936
-----------
CORPORATE BONDS - 1.6%
Citigroup, Inc., Unsecured Bonds
(JPY)
2.24% 12/09/22 200,000 1,628,784
General Electric Capital Corp., Senior
Unsecured Bonds (NZD)
6.62% 02/04/10 5,925 3,655,386
General Electric Capital Corp., Senior
Unsubordinated Notes (NZD)
6.50% 09/28/15 5,945 3,630,615
Pemex Project Funding Master Trust,
Unsecured Notes
5.75% 12/15/15 480 459,120
===========
TOTAL CORPORATE BONDS
(Cost $10,646,217) 9,373,905
-----------
PAR/SHARES
(000)
-----------
SHORT TERM INVESTMENTS - 6.4%
Federal Home Loan Bank, Discount
Notes
4.55%(g) 04/03/06 2,500 2,499,361
4.65%(g) 04/21/06 25,000 24,935,417
U.S. Treasury Bills
4.59%(g)(h) 04/20/06 3,000 2,992,732
Galileo Money Market Fund 8,264 8,263,542
==========
TOTAL SHORT TERM INVESTMENTS
(Cost $38,691,052) 38,691,052
----------
TOTAL INVESTMENTS IN
SECURITIES - 95.7%
(Cost $587,471,174(a)) 576,522,399
-----------
NUMBER OF
CONTRACTS VALUE
----------------- ---------------
CALL SWAPTIONS PURCHASED - 0.1%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 850(i) $ 312,800
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 900(i) 534,600
Salmon Brothers, Strike
Price $1.23,
Expires 04/07/06 598(i) 7,029
============
TOTAL CALL SWAPTIONS PURCHASED
(Cost $1,083,218) 854,429
------------
CALL SWAPTIONS WRITTEN - 0.0%
Union Bank, Strike
Price $4.73,
Expires 06/13/07
(Premiums received (2,650)(i) (223,925)
------------
$1,029,525)
PUT SWAPTIONS PURCHASED - 0.2%
Merrill Lynch, Strike
Price $5.26,
Expires 03/02/16 850(i) 461,550
Merrill Lynch, Strike
Price $5.50,
Expires 12/14/15 900(i) 596,700
============
TOTAL PUT SWAPTIONS PURCHASED
(Cost $979,775) 1,058,250
------------
PUT SWAPTIONS WRITTEN - (0.2)%
Union Bank, Strike
Price $4.73,
Expires 06/13/07
(Premiums received (2,650)(i) (1,582,845)
------------
$1,029,525)
OTHER ASSETS IN EXCESS OF
LIABILITIES - 4.2% 25,580,448
----------
NET ASSETS - 100.0% $602,208,756
============
- -------------------
(a) Cost for federal Income tax purposes is $587,752,679. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 5,526,764
Gross unrealized depreciation (16,757,044)
------------
$(11,230,280)
============
(b) Variable rate security. Rates shown are the rates as of March 31, 2006.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31,
2006, the Portfolio held 2.0% of its net assets, with a current market
value of $12,196,486, in securities restricted as to resale.
(d) Rates shown are the effective yields as of March 31, 2006.
(e) Securities valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, these securities
had a total market value of $8,749,630 which represents 1.5% of net
assets.
(f) Securities, or a portion thereof, pledged as collateral with a value of
$1,827,879 on 1,091 short U.S. Treasury Note futures contracts, 373 long
Euro-Bobl futures contracts, 58 long Euro-Bund futures contracts, 47
short Canada Government Bond futures contracts, 49 short Gilt British
futures contracts and 29 long Japan Government Bond futures contracts
expiring June 2006. The value of such contracts on March 31, 2006 was
$236,035,980, with an unrealized gain of $342,553 (including
commissions of $3,899).
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
97
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL BOND PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
(g) The rate shown is the effective yield on the discount notes at the time of
purchase.
(h) Securities, or a portion thereof, with a market value of $2,664,214 have
been pledged as collateral for swap and swaption contracts. (i) Each
swaption contract is equivalent to $10,000 notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
98
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS - 1.4%
American Tower Corp. - Class A(b)(c) 475 $ 14,402
Freedom Pay, Inc.(b)(d) 314,534 3,145
HCI Direct, Inc., Class A(b)(d)(e) 242,857 3,521,427
Mach Gen LLC(b)(d) 202 0
Massey Energy Co.(b)(c) 64,583 2,329,509
Mattress Discounters Corp.(b)(d)(e) 22,488 0
Mirant Corp.(b) 277,105 6,927,621
Phase Metrics, Inc.(b)(d) 842,908 16,858
Reunion Industries, Inc.(b) 8,341 10,009
===========
TOTAL COMMON STOCKS
(Cost $23,658,945) 12,822,971
-----------
PREFERRED STOCKS - 0.2%
Adelphia Business Solutions, Inc.,
Series B
3.22%(b) 2,200 0
Mach Gen LLC
0.00%(b)(d) 814 0
New York Community Capital Trust V
7.50% 30,000 1,464,000
Paxson Communications Corp.
7.12%(f) 20 169,810
=========
TOTAL PREFERRED STOCKS
(Cost $3,385,766) 1,633,810
---------
WARRANTS - 0.0%
ATEP Holdings, Inc. (expiring
10/24/15, strike price $.01)(b)(d) 136 0
ATH Holdings, Inc. (expiring
10/24/15, strike price $.01)(b)(d) 136 0
ATPP Holdings, Inc. (expiring
10/24/15, strike price $.01)(b)(d) 136 26,119
ATPR Holdings, Inc. (expiring
10/24/15, strike price $.01)(b)(d) 136 0
DIVA Systems Corp. (issued
02/19/98, expiring 03/01/08, strike
price $0.01)(b)(e)(g) 4,500 0
Mattress Discounters Co. (issued
08/03/99, expiring 07/15/07, strike
price $.01)(b)(d) 1,500 2
Ubiquitel, Inc. (issued 04/11/00
expiring 04/15/10, strike price
$ 22.74)(b)(e)(g) 3,000 0
======
TOTAL WARRANTS
(Cost $142,414) 26,121
------
PAR
MATURITY (000)
---------- ---------
ASSET BACKED SECURITIES - 0.1%
Continental Airlines, Inc.,
Pass-Through Certificates, Series
99-1B
6.80%
(Cost $1,323,086) 08/02/18 $1,521 1,452,978
---------
CORPORATE BONDS - 79.6%
Aerospace - 2.4%
AAR Corp., Senior Unsecured Notes
6.88% 12/15/07 1,845 1,856,531
8.39%(g) 05/15/11 3,850 3,888,500
PAR
MATURITY (000) VALUE
---------- -------- -------------
CORPORATE BONDS (Continued)
Aerospace (Continued)
Amor Holdings, Inc., Senior
Subordinated Notes
8.25% 08/15/13 $ 870 $ 933,075
BE Aerospace, Inc., Senior Notes
8.50% 10/01/10 5,745 6,125,606
Sequa Corp., Senior Unsecured
Notes
8.88% 04/01/08 1,390 1,452,550
9.00% 08/01/09 1,130 1,209,100
Standard Aero Holdings, Inc., Senior
Subordinated Notes
8.25% 09/01/14 8,070 7,101,600
===========
22,566,962
-----------
Air Transportation - 0.2%
American Airlines, Inc., Pass-Through
Certificates, Series 99-1
7.32% 10/15/09 2,040 1,958,400
-----------
Broadcasting - 5.0%
Adelphia Communications Corp.,
Senior Notes
0.13%(h)(i) 12/31/49 625 540,625
10.50%(h) 12/31/49 2,000 1,210,000
Adelphia Communications Corp.,
Senior Unsecured Notes
11.88%(h) 09/15/07 500 619,375
12.71%(h) 10/01/10 5,950 3,570,000
Allbritton Communications Co.,
Senior Subordinated Notes
7.75% 12/15/12 2,210 2,221,050
Cablevision Systems Corp., Senior
Unsecured Notes
8.72%(d)(j) 04/01/09 8,235 8,636,456
Charter Communications Holdings II
LLC, Senior Unsecured Notes
10.25%(g) 09/15/10 1,600 1,568,000
Charter Communications Holdings
LLC, Senior Unsecured Notes
8.00%(g) 04/30/12 1,825 1,825,000
11.12%(c) 01/15/14 1,925 991,375
17.15%(c)(k) 01/15/15 2,745 1,207,800
Charter Communications Holdings
LLC, Unsecured Notes
10.25% 09/15/10 3,360 3,309,600
Charter Communications, Inc., Senior
Unsecured Notes
5.88% 11/16/09 2,370 1,637,670
DirecTV Holdings LLC, Senior
Unsecured Notes
6.38% 06/15/15 1,265 1,249,187
Echostar DBS Corp., Senior
Unsecured Notes
7.78%(j) 10/01/08 1,585 1,620,662
7.12%(g) 02/01/16 5,025 4,943,344
Fisher Communications, Inc., Senior
Unsecured Notes
8.62% 09/15/14 1,145 1,210,838
Nexstar Finance Holdings LLC, Inc.,
Senior Unsecured Notes
11.74%(i) 04/01/13 1,070 888,100
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
99
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Broadcasting (Continued)
Rainbow National Services LLC,
Senior Notes
8.75%(g) 09/01/12 $ 370 $ 394,050
Rainbow National Services LLC,
Senior Subordinated Notes
10.38% 09/01/14 6,895 7,739,638
Rogers Cable, Inc., Senior Secured
Notes
6.75% 03/15/15 640 654,400
Sinclair Broadcast Group, Inc.,
Senior Subordinated Notes
4.88%(j) 07/15/18 1,285 1,129,194
===========
47,166,364
-----------
Business Services - 3.7%
Cooper Standard Automotive, Senior
Unsecured Notes
7.00%(c) 12/15/12 3,070 2,793,700
Crystal U.S. Holdings, Senior
Unsecured Notes
3.88%(i) 10/01/14 460 358,800
DI Finance/Dyncorp International,
Senior Subordinated Notes
9.50% 02/15/13 9,585 9,920,475
Knowledge Learning Center, Senior
Subordinated Notes
7.75%(g) 02/01/15 5,420 5,149,000
Newpage Corp., Senior Secured
Notes
10.00%(c) 05/01/12 6,835 7,210,925
10.93%(j) 05/01/12 1,175 1,239,625
Rent-A-Center, Senior Subordinated
Notes
7.50% 05/01/10 925 925,000
Service Corp. International, Senior
Unsecured Notes
7.70% 04/15/09 2,475 2,555,437
UGS Corp., Senior Subordinated
Notes
10.00% 06/01/12 4,150 4,565,000
===========
34,717,962
-----------
Chemicals - 3.3%
Airgas, Inc., Senior Subordinated
Notes
9.12% 10/01/11 1,240 1,311,300
Airgas, Inc., Senior Unsecured Notes
6.25% 07/15/14 614 601,720
BCI US Finance Borden 2, Senior
Secured Notes
10.10%(g)(j) 07/15/10 1,120 1,142,400
BCP Crystal U.S. Holdings Corp.,
Senior Subordinated Notes
9.62% 06/15/14 1,646 1,822,945
Equistar Chemicals LP, Senior
Unsecured Notes
10.12% 09/01/08 3,725 3,957,812
8.75% 02/15/09 1,215 1,257,525
10.62% 05/01/11 1,635 1,769,888
Huntsman LLC, Senior Secured
Notes
11.62% 10/15/10 1,971 2,232,158
Huntsman LLC, Senior Unsecured
Notes
11.85%(j) 07/15/11 1,200 1,263,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Chemicals (Continued)
11.50% 07/15/12 $1,114 $ 1,281,100
IMC Global, Inc., Senior Unsecured
Notes
10.88% 06/01/08 1,505 1,644,212
Innophos, Inc., Senior Unsecured
Notes
8.88% 08/15/14 4,625 4,810,000
Lyondell Chemical Co., Senior
Secured Notes
9.62% 05/01/07 2,250 2,323,125
11.12% 07/15/12 495 544,500
Nova Chemicals Corp., Senior
Unsecured Notes
7.56%(j) 11/15/13 3,775 3,793,875
Rockwood Specialties Group, Inc.,
Senior Subordinated Notes
10.62% 05/15/11 1,094 1,200,665
===========
30,956,225
-----------
Computer Software & Services - 1.2%
SS&C Technologies, Inc., Senior
Subordinated Notes
11.75%(g) 12/01/13 1,885 2,016,950
Sungard Data Systems, Inc., Senior
Unsecured Notes
9.12%(g) 08/15/13 1,185 1,253,138
9.43%(g)(j) 08/15/13 3,530 3,724,150
Xerox Corp., Senior Notes
6.88% 08/15/11 1,905 1,955,006
Xerox Corp., Senior Unsecured
Notes
7.62% 06/15/13 250 263,125
5.85% 03/15/16 2,360 2,342,300
===========
11,554,669
-----------
Construction - 1.8%
Beazer Homes USA, Inc., Senior
Unsecured Notes
8.62% 05/15/11 580 606,100
Compression Polymers Holdings,
Senior Unsecured Notes
10.50%(g) 07/01/13 2,450 2,499,000
D.R. Horton, Inc., Senior Unsecured
Notes
6.88% 05/01/13 1,300 1,329,250
K. Hovnanian Enterprises, Inc.,
Senior Unsecured Notes
10.50% 10/01/07 2,000 2,130,000
North American Energy Partners,
Inc., Senior Secured Notes
9.00% 06/01/10 6,700 7,102,000
North American Energy Partners,
Inc., Senior Unsecured Notes
8.75% 12/01/11 2,900 2,842,000
===========
16,508,350
-----------
Containers - 1.0%
Ball Corp., Senior Unsecured Notes
6.25% 03/15/18 655 651,725
Concentra Operating Corp., Senior
Subordinated Notes
9.12% 06/01/12 2,145 2,246,887
Crown Holdings, Inc., Debentures
8.00% 04/15/23 1,195 1,162,137
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
100
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Containers (Continued)
Crown Holdings, Inc., Senior
Debentures
7.38% 12/15/26 $ 920 $ 853,300
Pregis Corp., Senior Secured Notes
(EUR)
7.51%(j) 04/15/13 875 1,060,375
Pregis Corp., Senior Subordinated
Notes
12.38%(c)(g) 10/15/13 3,185 3,336,288
===========
9,310,712
-----------
Electronics - 0.8%
Amkor Technology, Inc., Senior
Unsecured Notes
9.25%(c) 02/15/08 4,010 4,090,200
Amkor Technology, Inc., Unsecured
Notes
5.00%(c) 03/15/07 1,650 1,610,813
Condor Systems, Inc., Senior
Subordinated Notes, Series B
11.88%(h) 05/01/09 1,500 0
Flextronics International Ltd., Senior
Subordinated Notes
6.50% 05/15/13 1,610 1,597,925
===========
7,298,938
-----------
Energy & Utilities - 8.5%
AES Eastern Energy LP, Pass
Through Certificates, Series 99-B
9.67% 01/02/29 500 605,400
AES Eastern Energy LP,
Pass-Through Certificates
9.00% 01/02/17 3,456 3,904,873
AES Ironwood LLC, Senior Secured
Notes
8.86% 11/30/25 3,846 4,317,180
AES Red Oak LLC, Senior Secured
Notes
8.54% 11/30/19 2,844 3,107,327
CE Generation LLC, Senior Notes
7.42% 12/15/18 6,230 6,479,421
Centerpoint Energy, Inc., Senior
Unsecured Notes
7.25% 09/01/10 505 532,751
Citizens Communications Co., Senior
Unsecured Notes
6.25% 01/15/13 3,525 3,436,875
CMS Energy Corp., Senior Notes
7.50% 01/15/09 740 761,275
CMS Energy Corp., Senior
Unsecured Notes
7.75% 08/01/10 1,405 1,471,738
8.50% 04/15/11 790 857,150
Copano Energy LLC, Senior
Unsecured Notes
8.12%(g) 03/01/16 1,700 1,759,500
Elwood Energy LLC, Senior Secured
Notes
8.16% 07/05/26 7,864 8,414,131
FPL Energy National Wind, Senior
Secured Notes
6.12%(g) 03/25/19 608 592,337
Homer City Funding LLC, Senior
Secured Notes
8.73% 10/01/26 1,682 1,908,854
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Energy & Utilities (Continued)
Midwest Generation LLC,
Pass-Through Certificates
8.56% 01/02/16 $4,655 $ 5,050,243
Mirant America Corp., Escrow Bonds
0.00%(c)(g)(l) 12/31/49 5,150 290,200
Mirant Americas Generation LLC,
Escrow Bonds
0.00%(c)(e)(l) 12/31/49 1,215 0
Mirant Americas Generation LLC,
Senior Unsecured Notes
9.12%(j) 05/01/31 2,450 2,609,250
Mirant Americas Generation, Inc.,
Senior Unsecured Notes
8.30% 05/01/11 4,380 4,533,300
Mirant Mid-Atlantic LLC, Pass
Through Certificates
9.12% 06/30/17 1,193 1,393,140
Mission Energy Holding Co., Senior
Secured Notes
13.50% 07/15/08 4,935 5,662,913
Northwestern Corp., Notes
5.88% 11/01/14 2,570 2,531,363
NRG Energy, Inc., Senior Unsecured
Notes
7.38% 02/01/16 3,725 3,804,156
Orion Power Holdings, Inc., Senior
Unsecured Notes
12.00% 05/01/10 6,650 7,497,875
Reliant Energy, Inc., Senior Secured
Notes
9.25% 07/15/10 1,365 1,368,413
6.75% 12/15/14 3,265 2,905,850
Sithe Independence Funding Corp.,
Notes
9.00%(i) 12/30/13 1,535 1,657,631
Tenaska Alabama Partners LP,
Senior Secured Notes
7.00%(g) 06/30/21 941 946,804
Verasun Energy Corp., Notes
9.88%(g) 12/15/12 1,145 1,213,700
===========
79,613,650
-----------
Entertainment & Leisure - 4.5%
Caesars Entertainment, Senior
Subordinated Notes
8.12% 05/15/11 500 543,750
Greektown Holdings LLC, Senior
Notes
10.75%(g) 12/01/13 3,615 3,723,450
Kerzner International Ltd., Senior
Subordinated Notes
6.75% 10/01/15 3,650 3,841,625
Lazydays RV Center, Inc., Senior
Notes
11.75% 05/15/12 4,520 4,463,500
Mashantucket West Pequot, Notes
5.91%(g) 09/01/21 500 479,090
MGM Mirage, Inc., Senior Notes
6.00% 10/01/09 4,060 3,999,100
MGM Mirage, Inc., Senior Unsecured
Notes
6.75% 09/01/12 825 822,938
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
101
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Entertainment & Leisure (Continued)
Mohegan Tribal Gaming Authority,
Senior Unsecured Notes
6.12% 02/15/13 $1,790 $ 1,758,675
Riddell Bell Holdings, Inc., Senior
Subordinated Notes
8.38% 10/01/12 2,235 2,223,825
San Pasqual Casino, Senior
Unsecured Notes
8.00%(g) 09/15/13 1,230 1,242,300
Seneca Gaming Corp., Senior
Unsecured Notes
7.25% 05/01/12 7,170 7,252,450
Station Casinos, Inc., Senior Notes
6.00% 04/01/12 1,450 1,430,063
Station Casinos, Inc., Senior
Subordinated Notes
6.62%(g) 03/15/18 1,750 1,710,625
Steinway Musical Instruments, Inc.,
Senior Unsecured Notes
7.00%(g) 03/01/14 1,010 1,015,050
Virgin River Casino Corp., Senior
Secured Notes
9.00% 01/15/12 3,820 3,877,300
Waterford Gaming LLC, Senior
Unsecured Notes
8.62%(g) 09/15/12 3,152 3,356,880
Wynn Las Vegas LLC, First Mortgage
Notes
6.62% 12/01/14 155 151,512
===========
41,892,133
-----------
Finance - 3.1%
Arch Western Finance, Senior Notes
6.75%(j) 07/01/13 1,575 1,567,125
Borden U.S. Finance Corp., Notes
9.00% 07/15/14 400 413,000
Capital Guardian Ltd., Subordinated
Bonds
11.45%(g) 05/24/13 1,000 1,005,700
Chukchansi Economic Development
Authority, Unsecured Notes
8.06%(g)(j) 11/15/12 990 1,009,800
Chukchansi Economic Devolopment
Authority, Senior Unsecured Notes
8.00%(g) 11/15/13 1,225 1,252,563
Compton Petroleum Finance Corp.,
Senior Notes
7.62% 12/01/13 1,945 1,945,000
Ford Motor Credit Co., Unsecured
Notes
5.70% 01/15/10 7,880 6,992,893
7.38% 02/01/11 2,345 2,157,316
Hilcorp Energy I LP, Senior
Unsecured Notes
7.75%(g) 11/01/15 625 623,438
Hilcorp Energy/Finance, Senior Notes
10.50%(g) 09/01/10 2,402 2,645,202
Ineos Group Holdings PLC,
Unsecured Notes
8.50%(g) 02/15/16 1,260 1,197,000
Jason, Inc., Second Lien Notes
Certificates
15.00%(d)(e)(f)(j) 12/15/07 1,622 1,622,233
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Finance (Continued)
K&F Acquisition, Inc., Senior
Subordinated Notes
7.75% 11/15/14 $ 260 $ 263,900
Nell Af Sarl, Senior Unsecured Notes
8.38%(c)(g) 08/15/15 3,000 2,977,500
Poster Financial Group, Inc., Senior
Secured Notes
8.75% 12/01/11 1,780 1,873,450
Salton Sea Funding, Senior Secured
Notes
7.48% 11/30/18 1,042 1,115,444
Zais Investment Grade Ltd. (Cayman
Islands), Secured Notes
9.95%(f)(g)(m) 09/23/14 1,405 163,935
===========
28,825,499
-----------
Food & Agriculture - 1.0%
B&G Foods Holding Corp., Senior
Notes
8.00% 10/01/11 2,170 2,251,375
Gold Kist, Inc., Senior Notes
10.25% 03/15/14 2,696 2,911,680
Merisant Co., Senior Subordinated
Notes
9.50%(c)(j) 07/15/13 5,570 3,843,300
Nebco Evans Holding Co., Senior
Notes
17.25%(b)(d)(h)(i) 07/15/07 800 0
===========
9,006,355
-----------
Insurance - 0.7%
Coventry Health Care, Inc., Senior
Unsecured Notes
5.88% 01/15/12 990 981,397
6.12% 01/15/15 990 984,040
Crum & Forster Holdings Corp.,
Senior Notes
10.38% 06/15/13 2,160 2,214,000
Fairfax Financial Holdings Ltd.,
Debentures
8.30% 04/15/26 530 442,550
Fairfax Financial Holdings Ltd.,
Senior Notes
6.88%(c) 04/15/08 665 638,400
First Mercury Holdings, Senior
Unsecured Notes
12.75%(g)(j) 08/15/12 1,800 1,799,064
===========
7,059,451
-----------
Leasing - 1.1%
Ahern Rentals, Inc., Notes
9.25% 08/15/13 2,075 2,163,188
United Rentals N.A., Inc., Senior
Subordinated Notes
7.75%(c) 11/15/13 4,015 4,015,000
7.00% 02/15/14 1,395 1,339,200
1.88%(c) 10/15/23 1,760 2,842,400
===========
10,359,788
-----------
Machinery & Heavy Equipment - 0.4%
JLG Industries, Inc., Senior
Subordinated Notes
8.38%(c) 06/15/12 2,315 2,430,750
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
102
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Machinery & Heavy Equipment (Continued)
Terex Corp., Senior Subordinated
Notes
7.38% 01/15/14 $1,000 $ 1,022,500
===========
3,453,250
-----------
Manufacturing - 6.0%
Argo Tech Corp., Senior Unsecured
Notes
9.25% 06/01/11 1,435 1,521,100
Blount International, Inc., Senior
Subordinated Notes
8.88% 08/01/12 4,050 4,212,000
California Steel Industries, Inc.,
Senior Unsecured Notes
6.12% 03/15/14 1,990 1,915,375
Covalence Speciality Materials Corp.,
Senior Subordinated Notes
10.25%(g) 03/01/16 1,445 1,517,250
Delco Remy International, Inc.,
Senior Secured Notes
8.60%(c)(j) 04/15/09 1,185 1,122,788
Delco Remy International, Inc.,
Senior Subordinated Notes
9.38%(e)(g) 04/15/12 700 336,000
Domtar, Inc., Senior Unsecured
Notes
7.88% 10/15/11 600 568,500
7.12% 08/15/15 1,250 1,103,125
Erico International Corp., Senior
Subordinated Notes
8.88% 03/01/12 5,425 5,587,750
General Cable Corp., Senior
Unsecured Notes
9.50% 11/15/10 3,230 3,480,325
Gentek, Inc., Escrow Bonds
0.00%(l) 12/01/33 1,000 0
Goodman Global Holdings, Inc.,
Senior Subordinated Notes
7.88% 12/15/12 3,450 3,406,875
Goodman Global Holdings, Inc.,
Senior Unsecured Notes
7.49%(j) 06/15/12 1,160 1,174,500
Graftech International Ltd., Senior
Debentures
1.62% 01/15/24 2,180 1,550,525
Keystone Automotive Operations,
Inc., Senior Subordinated Notes
9.75% 11/01/13 2,280 1,995,000
Metaldyne Corp., Senior Unsecured
Notes
10.00%(c)(g)(j) 11/01/13 4,300 4,020,500
Norcross Safety Products LLC,
Senior Subordinated Notes
9.88% 08/15/11 3,350 3,484,000
Park-Ohio Industries, Inc., Senior
Subordinated Notes
8.38% 11/15/14 4,120 3,903,700
Russell Metals, Inc., Senior
Subordinated Notes
6.38% 03/01/14 1,625 1,596,562
Smurfit-Stone Container Corp.,
Senior Unsecured Notes
9.75% 02/01/11 3,670 3,770,925
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Manufacturing (Continued)
Southern Copper Corp., Senior
Unsecured Notes
6.38% 07/27/15 $ 545 $ 530,779
Stanadyne Corp., Senior
Subordinated Notes
10.00% 08/15/14 2,415 2,312,362
Stanadyne Holdings, Inc., Senior
Unsecured Notes
15.90%(i) 02/15/15 4,755 2,520,150
Tenneco, Inc., Senior Subordinated
Notes
8.62%(c) 11/15/14 2,650 2,650,000
Texas Industries, Inc., Senior
Unsecure Notes
7.25% 07/15/13 1,350 1,393,875
Westlake Chemicals Corp., Senior
Unsecured Notes
6.62% 01/15/16 685 677,294
===========
56,351,260
-----------
Medical & Medical Services - 1.1%
Bio-Rad Laboratories, Inc., Senior
Subordinated Notes
7.50% 08/15/13 2,820 2,911,650
Duloxetine Royalty, Senior Secured
Notes
13.00%(e)(n) 10/15/13 2,500 2,600,000
HCA, Inc., Unsecured Notes
5.50% 12/01/09 1,775 1,729,737
Select Medical Corp., Senior
Subordinated Notes
7.62% 02/01/15 1,740 1,570,350
Tenet Healthcare Corp., Senior
Unsecured Notes
6.88% 11/15/31 2,170 1,733,288
===========
10,545,025
-----------
Medical Instruments & Supplies - 0.5%
Universal Hospital Services, Inc.,
Senior Notes
10.12% 11/01/11 4,525 4,683,375
-----------
Metal & Mining - 2.2%
Adaro Finance BV, Notes
8.50%(g) 12/08/10 1,250 1,284,375
Alpha Natural Resources, Senior
Unsecured Notes
10.00% 06/01/12 3,395 3,734,500
Century Aluminum Co., Senior
Unsecured Notes
7.50% 08/15/14 2,605 2,702,687
Foundation Pennsylvania Coal Co.,
Senior Unsecured Notes
7.25% 08/01/14 3,225 3,257,250
Ipsco, Inc., Senior Notes
8.75% 06/01/13 4,800 5,232,000
Massey Energy Co., Senior
Unsecured Notes
6.62% 11/15/10 350 356,125
6.88%(g) 12/15/13 1,500 1,470,000
Plains E&P Co., Senior Unsecured
Notes
7.12% 06/15/14 450 464,625
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
103
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
------------ ---------- -------------
CORPORATE BONDS (Continued)
Metal & Mining (Continued)
TRIMAS Corp., Senior Subordinated
Notes
9.88% 06/15/12 $2,275 $ 2,007,688
===========
20,509,250
-----------
Motor Vehicles - 2.8%
Arvinmeritor, Inc., Senior Notes
6.80% 02/15/09 176 176,000
Arvinmeritor, Inc., Senior Unsecured
Notes
8.75% 03/01/12 100 99,500
CSK Auto, Inc., Senior Subordinated
Notes
7.00% 01/15/14 740 704,850
CSK Auto, Inc., Senior Unsecured
Notes
3.38%(g) 08/15/25 1,100 1,009,250
Dura Operating Corp., Senior
Subordinated Notes
9.00% 05/01/09 1,250 612,500
Dura Operating Corp., Senior
Unsecured Notes
8.62%(c) 04/15/12 4,020 3,291,375
Eagle-Picher, Inc., Senior Notes
9.75%(c)(h) 09/01/13 3,285 2,266,650
General Motors, Senior Unsecured
Notes
8.25% 07/15/23 1,200 864,000
Lear Corp., Senior Unsecured Notes
8.11%(c) 05/15/09 2,590 2,408,700
5.75% 08/01/14 1,670 1,352,700
5.18%(c)(k) 02/20/22 2,430 1,126,913
Nationsrent, Inc., Senior Unsecured
Notes
9.50% 05/01/15 4,150 4,497,562
Sunstate Equipment Co. LLC, Senior
Secured Notes
10.50%(g) 04/01/13 7,760 8,109,200
===========
26,519,200
-----------
Oil & Gas - 7.2%
ANR Pipeline Co., Senior Debentures
9.62% 11/01/21 1,765 2,166,538
Chaparral Energy, Inc., Senior Notes
8.50% 12/01/15 1,255 1,305,200
Chesapeake Energy Corp., Senior
Unsecured Notes
7.00% 08/15/14 415 425,375
6.38% 06/15/15 2,080 2,048,800
6.50% 08/15/17 2,475 2,444,062
6.88%(g) 11/15/20 300 302,250
Clayton Williams Energy, Inc., Senior
Unsecured Notes
7.75% 08/01/13 1,815 1,697,025
Colorado Interstate Gas Co., Senior
Unsecured Notes
6.80%(g) 11/15/15 1,300 1,322,603
Compton Petroleum Finance Corp.,
Senior Unsecured Notes
7.62%(g) 12/01/13 1,750 1,750,000
Dynegy Holdings, Inc., Secured
Notes
10.12%(g) 07/15/13 3,965 4,542,700
PAR
MATURITY (000) VALUE
------------ ---------- -------------
CORPORATE BONDS (Continued)
Oil & Gas (Continued)
Dynegy-Roseton Danskammer LLC,
Pass-Through Certificates
7.27% 11/08/10 $4,555 $ 4,600,550
El Paso Corp., Senior Notes
9.62% 05/15/12 3,285 3,654,562
El Paso Corp., Senior Unsecured
Notes
10.75% 10/01/10 390 435,825
El Paso Natural Gas Co., Senior
Unsecured Notes
8.38%(j) 06/15/32 1,090 1,231,700
Exco Resources, Inc., Senior
Secured Notes
7.25% 01/15/11 4,215 4,230,806
Frontier Oil Corp., Senior Unsecured
Notes
6.62% 10/01/11 785 786,962
KCS Energy, Inc., Senior Unsecured
Notes
7.12% 04/01/12 4,700 4,711,750
Newfield Exploration Co., Senior
Subordinated Notes
8.38% 08/15/12 420 449,400
6.62% 09/01/14 250 250,625
Ocean Rig Norway ASA, Senior
Secured Notes
8.38%(g) 07/01/13 960 1,032,000
Pogo Producing Co., Senior
Subordinated Notes
6.88% 10/01/17 2,225 2,219,438
The Premcor Refining Group, Inc.,
Senior Notes
6.75% 05/01/14 790 820,612
7.50% 06/15/15 1,195 1,257,738
Pride International, Inc., Senior
Unsecured Notes
7.38% 07/15/14 1,190 1,261,400
Range Resources Corp., Senior
Subordinated Notes
7.38% 07/15/13 2,325 2,406,375
Southern Natural Gas Co., Senior
Unsecured Notes
8.00% 03/01/32 750 822,553
Tennessee Gas Pipeline Co., Senior
Debentures
7.00% 10/15/28 1,000 988,587
Tennessee Gas Pipeline Co., Senior
Unsecured Notes
8.38% 06/15/32 1,565 1,784,100
Transcontinental Gas Pipeline Corp.,
Senior Debentures
7.25% 12/01/26 2,515 2,625,031
Transcontinental Gas Pipeline Corp.,
Senior Notes
8.88% 07/15/12 3,645 4,182,638
Whiting Petroleum Corp., Senior
Subordinated Notes
05/01/12-
7.25% 05/01/13 2,355 2,343,225
7.00%(g) 02/01/14 375 371,250
The Williams Cos., Inc., Credit Link
Certificates
6.75%(g) 04/15/09 2,800 2,838,500
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
104
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Oil & Gas (Continued)
The Williams Cos., Inc., Senior
Unsecured Notes
6.54%(g)(j) 10/01/10 $2,110 $ 2,154,838
7.62% 07/15/19 500 535,000
7.75% 06/15/31 325 344,500
8.75% 03/15/32 1,030 1,205,100
===========
67,549,618
-----------
Paper & Forest Products - 1.9%
Bowater Canada Finance Corp.,
Senior Unsecured Notes
7.95% 11/15/11 1,760 1,755,600
Bowater, Inc., Senior Unsecured
Notes
7.91%(j) 03/15/10 1,955 1,964,775
Caraustar Industries, Inc., Senior
Subordinated Notes
9.88% 04/01/11 8,750 9,209,375
Cascades, Inc., Unsecured Notes
7.25% 02/15/13 1,030 973,350
Donohue Forest Products, Senior
Notes
7.62% 05/15/07 1,515 1,530,150
Norske Skog Canada Ltd., Senior
Unsecured Notes
7.38% 03/01/14 2,200 2,079,000
===========
17,512,250
-----------
Pharmaceuticals - 0.9%
Angiotech Pharmaceuticals, Inc.,
Senior Subordinated Notes
7.75%(g) 04/01/14 4,060 4,100,600
Curative Health Services, Senior
Unsecured Notes
10.75%(h) 05/01/11 4,115 2,422,706
Valeant Pharmaceuticals,
Subordinated Notes
4.00% 11/15/13 2,820 2,411,100
===========
8,934,406
-----------
Publishing & Printing - 1.7%
Dex Media West/Finance, Senior
Subordinated Notes
9.88% 08/15/13 1,573 1,740,131
Network Communications, Inc.,
Senior Unsecured Notes
10.75%(g) 12/01/13 1,780 1,811,150
Primedia, Inc., Senior Unsecured
Notes
10.12%(j) 05/15/10 1,700 1,734,000
8.88% 05/15/11 405 394,875
8.00% 05/15/13 4,625 4,231,875
RH Donnelley Corp., Senior
Unsecured Notes
8.88% 01/15/16 3,050 3,152,938
Scholastic Corp., Unsecured Notes
5.00% 04/15/13 3,000 2,578,332
===========
15,643,301
-----------
Real Estate - 0.9%
American Real Estate Partners LP,
Senior Unsecured Notes
8.12% 06/01/12 3,075 3,167,250
7.12% 02/15/13 3,150 3,102,750
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Real Estate (Continued)
The Rouse Co., Unsecured Notes
5.38% 11/26/13 $ 540 $ 503,306
Ventas Realty LP, Senior Unsecured
Notes
6.75% 06/01/10 1,910 1,943,425
===========
8,716,731
-----------
Retail Merchandising - 1.5%
AutoNation, Inc., Senior Unsecured
Notes
9.00% 08/01/08 1,600 1,730,000
Duane Reade, Inc., Senior Secured
Notes
9.41%(j) 12/15/10 800 792,000
Finlay Fine Jewelry Corp., Senior
Unsecured Notes
8.38% 06/01/12 1,880 1,652,050
Movie Gallery, Inc., Senior
Unsecured Notes
11.00%(c) 05/01/12 3,950 1,955,250
Neiman Marcus Group, Inc., Senior
Unsecured Notes
9.00%(g) 10/15/15 2,126 2,253,560
Rite Aid Corp., Senior Unsecured
Notes
6.12%(c)(g) 12/15/08 5,395 5,246,638
===========
13,629,498
-----------
Semiconductors & Related Devices - 1.0%
Freescale Semiconductor, Inc.,
Senior Unsecured Notes
7.35%(c)(j) 07/15/09 1,550 1,584,875
Magnachip Semiconductor, Notes
6.88% 12/15/11 1,365 1,303,575
Magnachip Semiconductor, Secured
Notes
8.16%(j) 12/15/11 4,105 4,156,312
Stats Chippac Ltd., Senior
Unsecured Notes
7.50% 07/19/10 430 436,988
6.75% 11/15/11 2,100 2,058,000
===========
9,539,750
-----------
Telecommunications - 9.3%
American Tower Corp., Senior
Unsecured Notes
7.50%(c) 05/01/12 5,025 5,263,688
American Tower Corp., Unsecured
Notes
3.00% 08/15/12 4,600 7,250,750
Asia Global Crossing Ltd., Senior
Unsecured Notes
13.38%(h) 10/15/10 2,000 65,000
CCO Holdings LLC, Capital Corp.,
Senior Unsecured Notes
9.04%(j) 12/15/10 1,270 1,262,063
Centennial Communications, Senior
Subordinated Notes
10.75%(c) 12/15/08 3,530 3,605,013
Centennial Communications, Senior
Unsecured Notes
8.12% 02/01/14 4,530 4,631,925
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
105
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
------------ ---------- -------------
CORPORATE BONDS (Continued)
Telecommunications (Continued)
Cincinnati Bell, Inc., Senior
Unsecured Notes
7.25% 07/15/13 $5,025 $ 5,188,313
CSC Holdings, Inc., Senior Notes
7.88% 12/15/07 700 715,750
CSC Holdings, Inc., Senior
Unsecured Notes
6.75%(g) 04/15/12 285 280,012
Dobson Cellular Systems, Inc.,
Senior Secured Notes
8.38% 11/01/11 2,895 3,061,462
9.43%(j) 11/01/11 1,595 1,650,825
Dobson Communications Corp.,
Debentures
1.50%(g) 10/01/25 930 915,594
Dobson Communications Corp.,
Senior Notes
8.85%(c)(j) 10/15/12 1,480 1,468,900
Intelsat Ltd., Senior Unsecured Notes
9.60%(j) 01/15/12 5,750 5,879,375
8.62% 01/15/15 900 929,250
IWO Holdings, Inc., Senior
Unsecured Notes
8.50%(i) 01/15/15 3,297 2,464,508
Lucent Technologies, Inc.,
Debentures
6.50% 01/15/28 3,056 2,727,480
Lucent Technologies, Inc., Senior
Debentures
6.45% 03/15/29 2,465 2,224,662
Lucent Technologies, Inc., Senior
Unsecured Notes
5.50% 11/15/08 265 262,350
Nortel Networks Corp., Unsecured
Notes
6.88% 09/01/23 1,385 1,267,275
Ntelos Holdings Corp., Senior
Unsecured Notes
13.35%(g)(j) 10/15/13 1,289 1,289,417
PanAmSat Corp., Senior Debentures
6.88% 01/15/28 2,690 2,394,100
PF Net Communications, Inc., Senior
Unsecured Notes
13.75%(h) 05/15/10 1,000 0
Qwest Communications International,
Senior Unsecured Notes
8.25%(j) 02/15/09 485 495,912
Qwest Corp., Debentures
7.25% 10/15/35 1,845 1,842,694
7.12% 11/15/43 2,105 2,041,850
Qwest Corp., Senior Unsecured
Notes
7.88% 09/01/11 3,175 3,385,344
Qwest Corp., Unsecured Notes
8.88%(j) 03/15/12 965 1,080,800
8.16%(j) 06/15/13 2,000 2,190,000
Rogers Wireless, Inc., Senior
Secured Notes
8.04%(j) 12/15/10 795 816,862
9.62% 05/01/11 1,750 2,010,312
7.25% 12/15/12 360 376,200
7.50% 03/15/15 500 536,250
PAR
MATURITY (000) VALUE
------------ ---------- -------------
CORPORATE BONDS (Continued)
Telecommunications (Continued)
Rogers Wireless, Inc., Senior
Subordinated Notes
8.00% 12/15/12 $2,730 $ 2,893,800
Rural Cellular Corp., Senior Secured
Notes
9.41%(j) 03/15/10 1,050 1,076,250
Superior Essex Communications &
Essex Group, Senior Notes
9.00% 04/15/12 4,845 4,869,225
Wind Acquistion Finance SA, Senior
Unsecured Notes
10.75%(g) 12/01/15 7,840 8,467,200
===========
86,880,411
-----------
Transportation - 1.8%
Allied Holdings, Inc., Senior Notes,
Series B
8.62%(h) 10/01/07 5,590 4,052,750
CHC Helicopter Corp., Senior
Subordinated Notes
7.38% 05/01/14 760 775,200
H-Lines Finance Holding Corp.,
Senior Notes
10.25%(i) 04/01/13 3,062 2,556,770
Horizon Lines LLC, Senior
Unsecured Notes
9.00% 11/01/12 2,915 3,075,325
Hornbeck Offshore Services, Inc.,
Senior Unsecured Notes
6.12% 12/01/14 955 928,737
Overseas Shipholding Group, Inc.,
Debentures
8.75% 12/01/13 3,980 4,368,050
Teekay Shipping Corp., Senior
Unsecured Notes
8.88% 07/15/11 1,250 1,381,250
===========
17,138,082
-----------
Waste Management - 0.1%
Casella Waste Systems, Inc., Senior
Subordinated Notes
9.75% 02/01/13 1,225 1,310,750
-----------
Yankee - 2.0%
Abitibi-Consolidated, Inc. (Canada),
Senior Unsecured Notes
8.38%(c)(m) 04/01/15 970 940,900
Abitibi-Consolidated, Inc. (Canada),
Unsecured Notes
6.00%(m) 06/20/13 2,100 1,806,000
Ainsworth Lumber Co. Ltd. (Canada),
Senior Unsecured Notes
8.71%(j)(m) 10/01/10 3,800 3,800,000
7.25%(m) 10/01/12 465 420,825
Compagnie Generale de
Geophysique (France), Senior
Unsecured Notes
05/05/15-
7.50%(g)(m) 05/15/15 2,440 2,533,950
Eircom Funding (Ireland), Senior
Subordinated Notes
8.25%(m) 08/15/13 1,390 1,495,988
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
106
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS (Continued)
Yankee (Continued)
Ispat Inland ULC (Canada), Senior
Secured Notes
9.75%(m) 04/01/14 $ 5,449 $ 6,164,181
Omi Corp. (Mali), Senior Notes
7.62%(m) 12/01/13 1,455 1,484,100
============
18,645,944
------------
TOTAL CORPORATE BONDS
(Cost $749,984,655) 746,357,559
------------
FOREIGN BONDS - 0.6%
Aero Investments (Luxembourg)
(EUR)
11.16%(f)(g)(j)
(Cost $5,870,819) 03/01/15 4,592 5,732,137
------------
TERM LOANS - 4.6%
Applied Tech Products Corp. Tranche
A
9.03%(d)(j) 10/24/10 1,232 1,223,574
Applied Tech Products Corp. Tranche
B
13.53%(d)(j) 04/24/11 566 560,274
Applied Tech Products Corp. Tranche
C
17.03%(d)(j) 10/24/11 204 176,772
Blb Wembley Term 2nd Lien
8.74%(j) 08/31/12 500 507,500
Dunkin Brands, Inc.
8.94%(j) 03/01/07 1,770 1,772,120
10.32%(j) 03/01/07 4,449 4,448,686
Eggborough Power Station Terminal
(GBP)
7.00%(m) 09/08/15 900 4,300,085
Healthsouth Corp.
7.94%(j) 03/15/13 2,000 2,015,000
Hit Entertainment 2nd Lien Loan
9.97%(j) 01/31/13 1,500 1,515,000
Mach Gen LLC Tranche A
Construction
0.00%(h)(j) 12/31/49 889 1,173,498
Mach Gen LLC Tranche B
Construction
0.00%(h)(j) 12/31/49 1,526 2,013,983
Mach Gen LLC Working Capital
Communications
0.00%(h)(j) 12/31/49 272 358,702
Mach Gen LLC Working Capital LOC
1.00%(h)(j) 12/31/49 115 152,072
Navistar International Corp., Delayed
Draw
0.00%(j) 02/28/09 3,407 3,390,129
9.69%(j) 02/28/09 11,593 11,534,871
NTL Bridge Term Loan
5.50%(j) 03/23/11 4,146 4,176,822
Polar Corp. Term 2nd Lien Loan
11.07%(j) 05/30/10 1,250 1,262,500
Synventive Mezzanine Loan
14.00%(j) 02/17/14 503 487,452
UAL Corp.
8.32%(j) 06/30/06 250 253,437
PAR
MATURITY (000) VALUE
---------- ---------- --------------
TERM LOANS (Continued)
UAL Corp., Term B
8.32%(j) 01/31/12 $ 1,750 $ 1,774,062
============
TOTAL TERM LOANS
(Cost $41,320,105)
43,096,539
------------
PAR/SHARES
(000)
-----------
SHORT TERM INVESTMENTS - 2.8%
Federal Home Loan Bank, Discount
Notes
4.55%(o) 04/03/06 16,000 15,996,080
Federal Home Loan Mortgage Corp.
Gold, Discount Notes
4.70%(o) 08/29/06 700 686,292
Galileo Money Market Fund 10,000 10,000,000
==========
TOTAL SHORT TERM INVESTMENTS
(Cost $26,682,372) 26,682,372
----------
REPURCHASE AGREEMENTS - 10.7%
Lehman Brothers, Inc.
4.98%
(Agreement dated 03/31/06 to be repurchased at
$100,041,458, collateralized by $146,854,000
Intelsat Ltd., Senior Unsecured Notes 8.62% to
8.70% due from 01/15/12 to 01/15/15. The value
of the collateral is $96,352.320.)
(Cost $100,000,000) 04/03/06 100,000 100,000,000
-----------
TOTAL MARKET VALUE OF SECURITIES
BEFORE SECURITIES
LENDING COLLATERAL AND
INVESTMENT IN AFFILIATE - 100.0%
(Cost $952,368,162) 937,804,487
-----------
SECURITIES LENDING COLLATERAL - 0.0%
Bank of America, Master Notes
4.08%(j)(p)
(Cost $13,282) 04/03/06 13 13,282
------
NUMBER OF
SHARES
------------
INVESTMENT IN AFFILIATE - 7.0%
Institutional Money
Market Trust(p)
(Cost $65,324,004) 65,324,004 65,324,004
----------
TOTAL INVESTMENTS IN SECURITIES - 107.0%
(Cost $1,017,705,448(a)) 1,003,141,773
-------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
107
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
----------- ------------
PUT OPTIONS WRITTEN - 0.0%
Dunk Senior Bridge
Debt, Strike
Price $100.00, (177) $ (4,425)
Expires 04/01/06(d)
Dunk Senior Sub Bridge
Debt, Strike
Price $100.00, (445) (11,122)
Expires 04/01/06(d)
Festfun Senior Bridge
Debt, Strike
Price $100.00, (27) (20,093)
Expires 05/30/06(d)
Intel Panamsat Bridge
Debt, Strike
Price $100.00, (128) (96,270)
Expires 04/01/06(d)
Intelsat Opco Bridge
Debt, Strike
Price $100.00, (64) (32,090)
Expires 04/01/06(d)
Multiplan Senior Bridge
Debt, Strike
Price $100.00, (27) (20,212)
Expires 05/02/06(d)
Panamsat Opco Bridge
Debt, Strike
Price $100.00, (64) (32,090)
Expires 04/01/06(d)
==========
TOTAL PUT OPTIONS WRITTEN
(Premiums received (216,303)
----------
$216,303)
OBLIGATION TO RETURN
SECURITIES
LENDING COLLATERAL - (65,337,286)
-----------
(7.0)%
LIABILITIES IN EXCESS OF
OTHER
ASSETS - 0.0% (409,254)
-------------
TOTAL NET ASSETS - 100% $ 937,178,930
=============
- -------------------
(a) Cost for federal Income tax purposes is $1,018,232,850. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 20,464,310
Gross unrealized depreciation (35,555,387)
------------
$(15,091,077)
============
(b) Non-income producing security.
(c) Total or partial securities on loan.
(d) Securities valued at fair value as determined in good faith by or under
the direction of the Trustees. As of March 31, 2006, these securities
had a total market value of $15,570,558 which represents 1.7% of net
assets.
(e) Security is illiquid. As of March 31, 2006, the Portfolio held 0.9% of its
net assets, with a current market value of $8,079,660 in these
securities.
(f) Payment in kind security.
(g) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 13.4% of its net assets, with a current market value
of $125,434,932, in securities restricted as to resale.
(h) Security in default.
(i) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified date and rate. The rates shown are the
effective yields as of March 31, 2006.
(j) Variable rate security. Rates shown are the rates as of March 31, 2006.
(k) Rates shown are the effective yields as of March 31, 2006.
(l) Security held in escrow for future payments
(m) Security is a foreign domiciled issuer which is registered with the
Securities and Exchange Commission.
(n) Security restricted as to public resale.
(o) The rate shown is the effective yield on the discount notes at the time of
purchase.
(p) Securities purchased with the cash proceeds from securities loaned.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
108
BLACKROCK FUNDS
Investment Abbreviations
ARM Adjustable Rate Mortgage
CMT Constant Maturity Treasury Rate
CND Canadian Dollar
COFI Cost of Funds Index
DKK Danish Krone
EUR European Currency Unit
GBP Great British Pound
IO Interest Only
JPY Japanese Yen
LLC Limited Liability Company
LLP Limited Liability Partnership
LP Limited Partnership
MULTI Multi-issued pools
MXP Mexican Peso
NZD New Zealand Dollar
PLC Project Loan Certificate
PLN Polish Zloty
PO Principal Only
SEK Swedish Krone
SGD Singapore Dollar
109
STATEMENTS OF ASSETS AND LIABILITIES
AS OF MARCH 31, 2006(UNAUDITED)
ENHANCED LOW DURATION INTERMEDIATE
INCOME BOND GOVERNMENT
PORTFOLIO PORTFOLIO BOND PORTFOLIO
--------------- ------------------ ----------------
ASSETS
Investments at value1,2 ....................... $ 58,633,205 $ 1,395,471,430 $ 744,274,812
110
Collateral received for securities loaned -
affiliated3 .................................. - - -
Investment in swap contracts .................. - - 146,467
Collateral received for swap contracts ........ - 1,792,291 1,310,776
Cash denominated in foreign currencies4 ....... 558,314 22,616,756 -
Interest receivable ........................... 262,254 6,735,168 5,263,259
Investments sold receivable ................... 15,635 265,639 1,547,674
Receivable from adviser ....................... 56 12,825 2,540
Capital shares sold receivable ................ 20,407 2,564,908 419,369
Prepaid expenses .............................. 10,179 73,632 36,881
Swaptions purchased, at fair value5 ........... - 3,854,805 1,837,150
Unrealized appreciation on forward foreign
currency contracts ........................... - 1,334,983 -
Unrealized appreciation on interest rate
swaps ........................................ 30,920 1,270,168 2,873,687
Futures margin receivable ..................... 1,557 220,397 69,077
------------ --------------- -------------
TOTAL ASSETS ................................ 59,532,527 1,436,213,002 757,781,692
------------ --------------- -------------
LIABILITIES
Payable upon return of securities loaned ...... - - -
Payable upon termination of swap contracts..... - 1,792,291 2,510,776
Investments purchased payable ................. - - 5,103,801
Distributions payable ......................... 192,114 1,448,143 1,011,329
Capital shares redeemed payable ............... - 1,955,073 1,813,713
Collateral paid for swap contracts ............ - 510,000 -
Payable for financing transactions ............ 1,099,541 40,783,615 155,214,685
Options written, at fair value6 ............... - - 121,481
Swaptions written, at fair value7 ............. 11,977 316,477 1,037,842
TBA sale commitments, at value8 ............... - - 1,020,000
Futures margin payable ........................ 528 15,633 71,512
Futures sold payable .......................... - 220 -
Unrealized depreciation on forward foreign
currency contracts ........................... - 77,014 -
Unrealized depreciation on interest rate
swaps ........................................ 13,260 3,103,207 2,367,190
Advisory fees payable ......................... 3,498 359,354 242,469
Administration fees payable ................... 5,612 92,039 43,920
Custodian fees payable ........................ 3,730 24,670 27,522
Transfer agent fees payable ................... 1,155 194,486 125,179
Distribution fees payable ..................... - 64,654 52,223
Other accrued expenses payable ................ 18,106 434,897 205,480
------------ --------------- -------------
TOTAL LIABILITIES ........................... 1,349,521 51,171,773 170,969,122
------------ --------------- -------------
NET ASSETS .................................... $ 58,183,006 $ 1,385,041,229 $ 586,812,570
============ =============== =============
STATEMENTS OF ASSETS AND LIABILITIES
AS OF MARCH 31, 2006(UNAUDITED)
INTERMEDIATE INTERMEDIATE CORE BOND CORE PLUS
BOND PLUS BOND TOTAL RETURN TOTAL RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- -------------- ------------------ ----------------
ASSETS
Investments at value1,2 ....................... $ 911,313,021 $ 39,401,783 $ 2,998,062,556 $ 383,207,781
110
Collateral received for securities loaned -
affiliated3 .................................. 2,912,000 - - -
Investment in swap contracts .................. - - - -
Collateral received for swap contracts ........ 3,479,182 - 8,852,250 993,102
Cash denominated in foreign currencies4 ....... - 316,302 25,660,178 3,173,579
Interest receivable ........................... 8,189,943 244,035 18,841,736 2,568,836
Investments sold receivable ................... 5,356 6,335,038 267,931,275 27,171,882
Receivable from adviser ....................... 8,121 134 5,739 1,359
Capital shares sold receivable ................ 1,134,505 - 5,377,785 192,299
Prepaid expenses .............................. 51,931 4,146 76,730 13,201
Swaptions purchased, at fair value5 ........... 2,560,430 86,720 7,921,040 1,024,610
Unrealized appreciation on forward foreign
currency contracts ........................... - 31,990 1,801,416 164,653
Unrealized appreciation on interest rate
swaps ........................................ 4,248,512 67,505 6,612,954 914,259
Futures margin receivable ..................... 82,650 2,039 86,314 15,880
------------- ------------ --------------- -------------
TOTAL ASSETS ................................ 933,985,651 46,489,692 3,341,229,973 419,441,441
------------- ------------ --------------- -------------
LIABILITIES
Payable upon return of securities loaned ...... 2,912,000 - - -
Payable upon termination of swap contracts..... 3,479,182 - 8,852,250 993,102
Investments purchased payable ................. 1,920,118 4,597,648 280,964,712 22,076,673
Distributions payable ......................... 1,262,545 35,472 3,870,895 187,876
Capital shares redeemed payable ............... 652,046 - 6,802,231 50,906
Collateral paid for swap contracts ............ - - - -
Payable for financing transactions ............ 45,773,964 4,579,608 122,113,660 16,989,433
Options written, at fair value6 ............... 175,032 4,500 538,781 68,484
Swaptions written, at fair value7 ............. 1,968,433 56,491 12,804,478 1,672,974
TBA sale commitments, at value8 ............... - 6,289,033 253,724,630 26,883,699
Futures margin payable ........................ - 359 40,459 3,811
Futures sold payable .......................... - - - -
Unrealized depreciation on forward foreign
currency contracts ........................... - 27,602 1,099,319 13,099
Unrealized depreciation on interest rate
swaps ........................................ 3,396,968 72,665 7,550,151 1,121,380
Advisory fees payable ......................... 253,180 1,965 659,126 83,560
Administration fees payable ................... 59,706 2,011 158,807 22,454
Custodian fees payable ........................ 21,508 5,566 71,355 11,888
Transfer agent fees payable ................... 84,050 197 185,968 12,020
Distribution fees payable ..................... 11,790 - 70,788 134
Other accrued expenses payable ................ 181,412 22,596 612,208 72,194
------------- ------------ --------------- -------------
TOTAL LIABILITIES ........................... 62,151,934 15,695,713 700,119,818 70,263,687
------------- ------------ --------------- -------------
NET ASSETS .................................... $ 871,833,717 $ 30,793,979 $ 2,641,110,155 $ 349,177,754
============= ============ =============== =============
BLACKROCK FUNDS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
ENHANCED LOW DURATION INTERMEDIATE
INCOME BOND GOVERNMENT
PORTFOLIO PORTFOLIO BOND PORTFOLIO
-------------- ----------------- ----------------
1Cost of Investments .......................... $59,107,953 $1,411,548,268 $ 752,761,800
2Market value of securities loaned ............ - - -
111
3Cost of investment in affiliates ............. - - -
4Cost of Investments - foreign currencies ..... 576,828 23,862,914 -
5Cost of purchased swaptions .................. - 3,683,535 1,889,010
6Premiums received - written options .......... - - 109,514
7Premiums received - written swaptions ........ 10,178 268,928 1,248,700
8Proceeds paid - TBA sale commitments ......... - - 1,020,469
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital Paid in ............................... $59,180,128 $1,436,887,408 $ 619,614,816
End of period undistributed net investment
income (distributions in excess of net
investment income or accumulated net
investment loss) ............................. (1,672) 742,324 83,560
Accumulated net realized loss on
investment transactions, futures, options,
swaptions, swap contracts and foreign
currency related transactions ................ (539,521) (33,649,369) (16,128,004)
Net unrealized depreciation on investment
transactions, futures, options, swaptions,
swap contracts and foreign currency
related transactions ......................... (455,929) (18,939,134) (16,757,802)
----------- -------------- -------------
$58,183,006 $1,385,041,229 $ 586,812,570
=========== ============== =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
INTERMEDIATE INTERMEDIATE CORE BOND CORE PLUS
BOND PLUS BOND TOTAL RETURN TOTAL RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- -------------- ----------------- ---------------
1Cost of Investments .......................... $ 924,318,665 $40,050,571 $3,050,345,988 $390,458,146
2Market value of securities loaned ............ 2,765,000 - - -
111
3Cost of investment in affiliates ............. 2,912,000 - - -
4Cost of Investments - foreign currencies ..... - 326,417 26,530,911 3,296,322
5Cost of purchased swaptions .................. 2,632,190 89,160 8,143,460 1,053,270
6Premiums received - written options .......... 156,720 4,134 482,781 61,409
7Premiums received - written swaptions ........ 2,351,280 67,340 15,473,746 2,032,676
8Proceeds paid - TBA sale commitments ......... - 6,313,051 254,661,320 26,981,031
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital Paid in ............................... $ 894,460,564 $31,852,820 $2,714,698,066 $358,097,816
End of period undistributed net investment
income (distributions in excess of net
investment income or accumulated net
investment loss) ............................. 515,532 (1,731) (3,269,242) 197,170
Accumulated net realized loss on
investment transactions, futures, options,
swaptions, swap contracts and foreign
currency related transactions ................ (9,492,256) (387,801) (16,477,956) (1,835,453)
Net unrealized depreciation on investment
transactions, futures, options, swaptions,
swap contracts and foreign currency
related transactions ......................... (13,650,123) (669,309) (53,840,713) (7,281,779)
------------- ----------- -------------- ------------
$ 871,833,717 $30,793,979 $2,641,110,155 $349,177,754
============= =========== ============== ============
BLACKROCK FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
AS OF MARCH 31, 2006(UNAUDITED)
ENHANCED LOW DURATION INTERMEDIATE
INCOME BOND GOVERNMENT
PORTFOLIO PORTFOLIO BOND PORTFOLIO
---------------- ----------------- ------------------
BlackRock Shares:
Net Assets ...................................... $27,075,653 $551,804,917 $ -
112
Shares outstanding (unlimited authorization)..... 2,755,663 56,116,594 -
Net Asset Value, offering and redemption
price per share ................................ $ 9.83 $ 9.83 $ -
Institutional Shares:
Net Assets ...................................... $31,055,479 $297,788,390 $199,479,177
Shares outstanding (unlimited authorization)..... 3,161,718 30,256,814 19,812,250
Net Asset Value, offering and redemption
price per share ................................ $ 9.82 $ 9.84 $ 10.07
Service Shares:
Net Assets ...................................... $ 49,185 $364,928,835 $ 791,073
Shares outstanding (unlimited authorization)..... 5,088 37,082,840 78,639
Net Asset Value, offering and redemption
price per share ................................ $ 9.67 $ 9.84 $ 10.06
Investor A Shares:
Net Assets ...................................... $ 2,689 $ 73,298,578 $307,523,095
Shares outstanding (unlimited authorization)..... 274 7,446,327 30,470,692
Net Asset Value ................................. $ 9.81 $ 9.84 $ 10.09
Maximum Sales Charge ............................ 3.0% 3.0% 4.0%
Maximum offering price per share ................ $ 10.11 $ 10.14 $ 10.51
Investor B Shares:
Net Assets ...................................... $ - $ 37,470,017 $ 62,667,198
Shares outstanding (unlimited authorization)..... - 3,807,879 6,224,434
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 4.5%) ................. $ - $ 9.84 $ 10.07
Investor C Shares:
Net Assets ...................................... $ - $ 59,750,492 $ 16,352,027
Shares outstanding (unlimited authorization)..... - 6,074,483 1,622,951
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 1.0%) ................. $ - $ 9.84 $ 10.08
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
AS OF MARCH 31, 2006(UNAUDITED)
INTERMEDIATE INTERMEDIATE CORE BOND CORE PLUS
BOND PLUS BOND TOTAL RETURN TOTAL RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ------------------ ------------------- -------------------
BlackRock Shares:
Net Assets ...................................... $438,586,256 $29,944,575 $1,509,488,629 $344,951,151
112
Shares outstanding (unlimited authorization)..... 47,988,705 3,103,221 160,726,047 34,442,060
Net Asset Value, offering and redemption
price per share ................................ $ 9.14 $ 9.65 $ 9.39 $ 10.02
Institutional Shares:
Net Assets ...................................... $290,951,707 $ 802,711 $ 657,550,295 $ 3,909,912
Shares outstanding (unlimited authorization)..... 31,837,834 80,317 70,167,523 392,414
Net Asset Value, offering and redemption
price per share ................................ $ 9.14 $ 9.99 $ 9.37 $ 9.96
Service Shares:
Net Assets ...................................... $ 97,993,464 $ 102 $ 135,524,327 $ 119
Shares outstanding (unlimited authorization)..... 10,721,001 10 14,462,649 12
Net Asset Value, offering and redemption
price per share ................................ $ 9.14 $ 10.07(a) $ 9.37 $ 10.08(b)
Investor A Shares:
Net Assets ...................................... $ 26,062,110 $ 44,512 $ 229,188,962 $ 103,490
Shares outstanding (unlimited authorization)..... 2,852,711 4,526 24,433,142 10,324
Net Asset Value ................................. $ 9.14 $ 9.83 $ 9.38 $ 10.02
Maximum Sales Charge ............................ 4.0% 4.0% 4.0% 4.0%
Maximum offering price per share ................ $ 9.52 $ 10.24 $ 9.77 $ 10.44
Investor B Shares:
Net Assets ...................................... $ 9,448,522 $ 1,978 $ 43,359,093 $ 139,060
Shares outstanding (unlimited authorization)..... 1,033,871 201 4,625,282 13,881
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 4.5%) ................. $ 9.14 $ 9.84 $ 9.37 $ 10.02
Investor C Shares:
Net Assets ...................................... $ 8,791,658 $ 101 $ 65,998,849 $ 74,022
Shares outstanding (unlimited authorization)..... 961,287 10 7,036,941 7,397
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 1.0%) ................. $ 9.15 $ 10.01(c) $ 9.38 $ 10.01
(a) Exact net assets and shares outstanding at March 31, 2006 were $102.01 and
10.129, respectively.
(b) Exact net assets and shares outstanding at March 31, 2006 were $119.41 and
11.847, respectively.
(c) Exact net assets and shares outstanding at March 31, 2006 were $101.27 and
10.117, respectively.
BLACKROCK FUNDS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
INFLATION
GOVERNMENT PROTECTED
INCOME BOND
PORTFOLIO PORTFOLIO
---------------- ---------------
ASSETS
113
Investments at value1,2 ....................... $ 727,557,981 $ 45,698,202
Collateral received for securities loaned -
unaffiliated3 ................................ - -
Collateral received for securities loaned -
affiliated4 .................................. - -
Investment in swap contracts .................. - -
Cash .......................................... - -
Collateral received for swap contracts ........ 1,805,424 -
Cash denominated in foreign currencies5 ....... - 461,199
Dividends and reclaims receivable ............. - -
Interest receivable ........................... 6,759,844 292,318
Investments sold receivable ................... 172,686,881 -
Receivable from adviser ....................... 41 104
Receivable for financing transactions ......... - -
Capital shares sold receivable ................ 1,663,902 191,392
Prepaid expenses .............................. 33,977 11,061
Options purchased, at fair value6 ............. - 27,188
Swaptions purchased, at fair value7 ........... - -
Unrealized appreciation on forward foreign
currency contracts ........................... - -
Unrealized appreciation on interest rate
swaps ........................................ 4,507,579 27,424
Futures margin receivable ..................... 9,725 375
------------- ------------
TOTAL ASSETS ................................ 915,025,354 46,709,263
------------- ------------
LIABILITIES
Payable upon return of securities loaned ...... - -
Payable upon termination of swap contracts..... 1,805,424 -
Investments purchased payable ................. 124,726,051 -
Distributions payable ......................... 369,653 72,216
Capital shares redeemed payable ............... 1,844,038 71,229
Collateral paid for swap contracts ............ - -
Payable for financing transactions ............ 66,168,315 1,828,027
Options written, at fair value8 ............... 14,953 23,765
Swaptions written, at fair value9 ............. 438,529 128,668
Premiums paid - swaps ......................... - -
TBA sale commitments, at value10 .............. 119,808,589 -
Futures margin payable ........................ 70,125 2,579
Futures sold payable .......................... - -
Unrealized depreciation on forward foreign
currency contracts ........................... - 1,665
Unrealized depreciation on interest rate
swaps ........................................ 4,632,833 -
Advisory fees payable ......................... 154,453 3,703
Administration fees payable ................... 49,425 3,384
Custodian fees payable ........................ 54,626 2,998
Transfer agent fees payable ................... 149,595 3,291
Distribution fees payable ..................... 44,649 4,047
Other accrued expenses payable ................ 210,215 23,825
------------- ------------
TOTAL LIABILITIES ........................... 320,541,473 2,169,397
------------- ------------
NET ASSETS .................................... $ 594,483,881 $ 44,539,866
============= ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
MANAGED INTERNATIONAL HIGH YIELD
GNMA INCOME BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ---------------- --------------- ----------------
ASSETS
113
Investments at value1,2 ....................... $ 282,175,898 $ 770,150,284 $ 576,522,399 $ 937,804,487
Collateral received for securities loaned -
unaffiliated3 ................................ - - - 13,282
Collateral received for securities loaned -
affiliated4 .................................. - 768,500 - 65,324,004
Investment in swap contracts .................. 21,144 - - -
Cash .......................................... - - - 1,176,062
Collateral received for swap contracts ........ - 2,086,914 5,461,290 -
Cash denominated in foreign currencies5 ....... - 6,589,295 36,471,567 3,823,943
Dividends and reclaims receivable ............. - - - 2,583
Interest receivable ........................... 1,032,644 5,268,063 6,850,567 16,846,403
Investments sold receivable ................... 66,448,701 48,801,749 200,349 2,666,249
Receivable from adviser ....................... 50 - 7,872 9,909
Receivable for financing transactions ......... - - 95,796 -
Capital shares sold receivable ................ 86,737 971,216 2,091,119 2,954,614
Prepaid expenses .............................. 23,633 37,850 70,060 50,837
Options purchased, at fair value6 ............. - - - -
Swaptions purchased, at fair value7 ........... - 2,081,280 1,912,679 -
Unrealized appreciation on forward foreign
currency contracts ........................... - - 2,819,282 6,456
Unrealized appreciation on interest rate
swaps ........................................ 1,756,913 3,292,906 4,063,624 664,203
Futures margin receivable ..................... 2,048 27,236 72,039 -
------------- ------------- ------------- --------------
TOTAL ASSETS ................................ 351,547,768 840,075,293 636,638,643 1,031,343,032
------------- ------------- ------------- --------------
LIABILITIES
Payable upon return of securities loaned ...... - 768,500 - 65,337,286
Payable upon termination of swap contracts..... - 2,086,914 5,461,290 -
Investments purchased payable ................. 142,003,419 73,651,237 12,200,000 22,780,063
Distributions payable ......................... 510,944 2,288,838 511,832 2,471,753
Capital shares redeemed payable ............... 180,861 1,897,501 5,302,554 1,231,817
Collateral paid for swap contracts ............ - - 600,000 520,000
Payable for financing transactions ............ - 19,012,191 - -
Options written, at fair value8 ............... 19,922 24,084 - 216,302
Swaptions written, at fair value9 ............. 215,670 3,588,935 1,806,770 -
Premiums paid - swaps ......................... - - - 94,637
TBA sale commitments, at value10 .............. 25,457,290 47,573,144 - -
Futures margin payable ........................ 11,720 7,381 66,123 -
Futures sold payable .......................... - - 3,049 -
Unrealized depreciation on forward foreign
currency contracts ........................... - 25,013 6,125,346 3,735
Unrealized depreciation on interest rate
swaps ........................................ 1,570,128 2,727,843 1,657,315 545,498
Advisory fees payable ......................... 50,567 294,284 285,360 343,920
Administration fees payable ................... 15,321 46,026 47,995 62,392
Custodian fees payable ........................ 47,629 15,622 3,395 21,449
Transfer agent fees payable ................... 23,691 33,258 147,804 169,215
Distribution fees payable ..................... 25,544 4,307 45,815 93,579
Other accrued expenses payable ................ 62,044 167,695 165,239 272,456
------------- ------------- ------------- --------------
TOTAL LIABILITIES ........................... 170,194,750 154,212,773 34,429,887 94,164,102
------------- ------------- ------------- --------------
NET ASSETS .................................... $ 181,353,018 $ 685,862,520 $ 602,208,756 $ 937,178,930
============= ============= ============= ==============
BLACKROCK FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (CONCLUDED)
AS OF MARCH 31, 2006(UNAUDITED)
INFLATION
GOVERNMENT PROTECTED
INCOME BOND GNMA
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- -------------- ---------------
1Cost of Investments ........................... $ 743,626,821 $ 46,981,067 $285,368,612
114
2Market value of securities loaned ............. - - -
3Cost of collateral received from securities
loaned ........................................ - - -
4Cost of investment in affiliates .............. - - -
5Cost of Investments - foreign currencies ...... - 476,838 -
6Cost of purchased options ..................... - 18,049 -
7Cost of purchased swaptions ................... - - -
8Premiums received - written options ........... 57,270 19,601 17,702
9Premiums received - written swaptions ......... 533,140 155,527 262,200
10Proceeds paid - TBA sale commitments ......... 120,216,035 - 25,529,406
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital Paid in ................................ $ 619,068,865 $ 46,500,931 $193,717,191
End of period undistributed net investment
income (distributions in excess of net
investment income or accumulated net
investment loss) .............................. 619,661 (629,250) 356,590
Accumulated net realized gain (loss) on
investment transactions, futures, options,
swaptions, swap contracts and foreign
currency related transactions ................. (10,400,216) (121,493) (9,980,564)
Net unrealized appreciation (depreciation)
on investment transactions, futures,
options, swaptions, swap contracts and
foreign currency related transactions ......... (14,804,429) (1,210,322) (2,740,199)
------------- ------------ ------------
$ 594,483,881 $ 44,539,866 $181,353,018
============= ============ ============
STATEMENTS OF ASSETS AND LIABILITIES (CONCLUDED)
AS OF MARCH 31, 2006(UNAUDITED)
MANAGED INTERNATIONAL HIGH YIELD
INCOME BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- -----------------
1Cost of Investments ........................... $ 781,523,920 $ 587,471,174 $ 952,368,162
114
2Market value of securities loaned ............. 748,563 - 65,517,105
3Cost of collateral received from securities
loaned ........................................ - - 13,282
4Cost of investment in affiliates .............. 768,500 - 65,324,004
5Cost of Investments - foreign currencies ...... 6,845,730 36,387,781 4,128,788
6Cost of purchased options ..................... - - -
7Cost of purchased swaptions ................... 2,139,840 2,062,993 -
8Premiums received - written options ........... 125,675 - 216,302
9Premiums received - written swaptions ......... 4,347,478 2,059,050 -
10Proceeds paid - TBA sale commitments ......... 47,742,703 - -
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital Paid in ................................ $ 701,302,515 $ 657,834,716 $1,017,562,291
End of period undistributed net investment
income (distributions in excess of net
investment income or accumulated net
investment loss) .............................. (168,830) (45,080,325) 2,754,892
Accumulated net realized gain (loss) on
investment transactions, futures, options,
swaptions, swap contracts and foreign
currency related transactions ................. (4,861,991) 774,113 (68,199,220)
Net unrealized appreciation (depreciation)
on investment transactions, futures,
options, swaptions, swap contracts and
foreign currency related transactions ......... (10,409,174) (11,319,748) (14,939,033)
------------- ------------- --------------
$ 685,862,520 $ 602,208,756 $ 937,178,930
============= ============= ==============
BLACKROCK FUNDS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
INFLATION
GOVERNMENT PROTECTED
INCOME BOND
PORTFOLIO PORTFOLIO
----------------- ------------------
BlackRock Shares:
115
Net Assets ...................................... $ 9,123,399 $19,886,396
Shares outstanding (unlimited authorization)..... 858,596 2,039,528
Net Asset Value, offering and redemption
price per share ................................ $ 10.63 $ 9.75
Institutional Shares:
Net Assets ...................................... $ - $13,942,694
Shares outstanding (unlimited authorization)..... - 1,404,803
Net Asset Value, offering and redemption
price per share ................................ $ - $ 9.93
Service Shares:
Net Assets ...................................... $237,135,400 $ 2,906
Shares outstanding (unlimited authorization)..... 22,336,433 292
Net Asset Value, offering and redemption
price per share ................................ $ 10.62 $ 9.94(a)
Investor A Shares:
Net Assets ...................................... $279,419,996 $ 4,057,955
Shares outstanding (unlimited authorization)..... 26,298,782 411,477
Net Asset Value ................................. $ 10.62 $ 9.86
Maximum Sales Charge ............................ 4.5% 3.0%
Maximum offering price per share ................ $ 11.12 $ 10.16
Investor B Shares:
Net Assets ...................................... $ 36,311,002 $ 2,630,236
Shares outstanding (unlimited authorization)..... 3,417,940 266,308
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 4.5%) ................. $ 10.62 $ 9.88
Investor C Shares:
Net Assets ...................................... $ 32,494,084 $ 4,019,679
Shares outstanding (unlimited authorization)..... 3,063,508 405,122
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 1.0%) ................. $ 10.61 $ 9.92
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
MANAGED INTERNATIONAL HIGH YIELD
GNMA INCOME BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ----------------- ----------------- -----------------
BlackRock Shares:
115
Net Assets ...................................... $11,314,333 $ - $101,788,269 $177,133,028
Shares outstanding (unlimited authorization)..... 1,190,856 - 9,532,884 22,398,834
Net Asset Value, offering and redemption
price per share ................................ $ 9.50 $ - $ 10.68 $ 7.91
Institutional Shares:
Net Assets ...................................... $108,888,808 $554,439,425 $219,724,792 $158,689,829
Shares outstanding (unlimited authorization)..... 11,450,205 56,008,414 20,571,984 20,066,348
Net Asset Value, offering and redemption
price per share ................................ $ 9.51 $ 9.90 $ 10.68 $ 7.91
Service Shares:
Net Assets ...................................... $ 8,150,630 $ 99,777,383 $ 74,978,589 $193,868,221
Shares outstanding (unlimited authorization)..... 857,812 10,079,790 7,014,011 24,513,149
Net Asset Value, offering and redemption
price per share ................................ $ 9.50 $ 9.90 $ 10.69 $ 7.91
Investor A Shares:
Net Assets ...................................... $14,121,248 $ 25,090,861 $135,721,659 $262,249,018
Shares outstanding (unlimited authorization)..... 1,478,948 2,533,778 12,697,723 33,161,375
Net Asset Value ................................. $ 9.55 $ 9.90 $ 10.69 $ 7.91
Maximum Sales Charge ............................ 4.0% 4.5% 5.0% 5.0%
Maximum offering price per share ................ $ 9.95 $ 10.37 $ 11.25 $ 8.33
Investor B Shares:
Net Assets ...................................... $16,855,686 $ 5,393,720 $ 16,861,777 $ 97,356,884
Shares outstanding (unlimited authorization)..... 1,771,038 544,725 1,577,110 12,313,694
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 4.5%) ................. $ 9.52 $ 9.90 $ 10.69 $ 7.91
Investor C Shares:
Net Assets ...................................... $22,022,313 $ 1,161,131 $ 53,133,670 $ 47,881,950
Shares outstanding (unlimited authorization)..... 2,316,548 117,563 4,957,936 6,051,411
Net Asset Value, offering and redemption
price per share (maximum contingent
deferred sales charge of 1.0%) ................. $ 9.51 $ 9.88 $ 10.72 $ 7.91
(a) Exact net assets and shares outstanding at March 31, 2006 were $2,906.02
and 292.259, respectively.
BLACKROCK FUNDS
BLACKROCK FUNDS
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2006(UNAUDITED)
ENHANCED LOW DURATION INTERMEDIATE INTERMEDIATE INTERMEDIATE
INCOME BOND GOVERNMENT BOND PLUS BOND
PORTFOLIO PORTFOLIO BOND PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ---------------- ---------------- ---------------- -------------
Investment income:
Interest .................................. $ 1,234,329 $ 29,581,503 $ 14,343,957 $ 19,289,723 $ 725,390
Securities lending income (Note C) ........ - 186 - 1,620 -
Dividends ................................. - 157,500 - - 1,400
----------- ------------ ------------ ------------- ----------
Total investment income .................. 1,234,329 29,739,189 14,343,957 19,291,343 726,790
----------- ------------ ------------ ------------- ----------
Expenses:
Investment advisory fee ................... 116,399 3,481,159 1,555,402 2,162,725 76,953
Administration fee ........................ 23,740 518,862 248,503 335,140 12,582
Administration fee - class specific ....... 21,338 564,740 334,594 304,158 5,195
Custodian fee ............................. 9,723 77,608 54,964 55,480 21,984
Transfer agent fee ........................ 1,281 78,000 147,415 20,435 534
Transfer agent fee - class specific ....... 4,269 271,486 168,642 126,581 1,147
Shareholder servicing fees - class
specific ................................. 70 698,227 518,010 175,427 41
Distribution fees - class specific ........ 2 446,430 493,354 84,308 23
Legal and audit fees ...................... 15,204 142,425 58,083 76,400 13,498
Printing fee .............................. 4,526 186,678 71,312 102,790 2,164
Registration fees and expenses ............ 16,166 54,689 27,425 36,870 16,728
Trustees' fees ............................ 940 27,474 11,905 16,312 552
Other ..................................... 2,785 60,458 24,482 33,817 2,751
----------- ------------ ------------ ------------- ----------
Total expenses excluding interest
expense ................................. 216,443 6,608,236 3,714,091 3,530,443 154,152
Interest expense ........................ - 1,862 198 - -
----------- ------------ ------------ ------------- ----------
Total expenses ........................... 216,443 6,610,098 3,714,289 3,530,443 154,152
----------- ------------ ------------ ------------- ----------
Less investment advisory fees
waived ................................. (104,808) (1,803,812) (378,613) (923,414) (73,290)
Less administration fees waived ......... - - - - (8,834)
Less administration fee waived -
class specific ......................... (10,302) (101,101) (114,338) (79,341) (4,754)
Less distribution fee waived - class
specific ............................... (2) (39,929) (162,912) (13,625) (15)
Less custodian fees waived .............. (619) (5,560) (3,544) (3,961) (1,575)
Less transfer agent fees waived ......... (359) (19,057) (19,315) (5,500) (128)
Less transfer agent fees waived -
class specific ......................... (63) (7,906) (1,743) (2,008) (122)
Less transfer agent fees
reimbursed - class specific ............ (154) (23,421) (4,840) (15,690) (254)
Less expenses reimbursed by
adviser ................................ - - - - (3,083)
------------ ------------ ------------ ------------- ----------
Net expenses ............................. 100,136 4,609,312 3,028,984 2,486,904 62,097
------------ ------------ ------------ ------------- ----------
Net investment income ...................... 1,134,193 25,129,877 11,314,973 16,804,439 664,693
------------ ------------ ------------ ------------- ----------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions .................. (124,491) (5,159,240) (2,372,171) (8,718,504) (283,009)
Options and swaptions contracts .......... 124 3,447 33,813 45,348 1,123
Futures and swaps contracts .............. 13,923 (1,458,761) 382,883 (489,164) 66,535
Foreign currency related transactions..... (575) (785,321) - - (11,207)
------------ ------------ ------------ ------------- ----------
(111,019) (7,399,875) (1,955,475) (9,162,320) (226,558)
------------ ------------ ------------ ------------- ----------
Change in unrealized appreciation
(depreciation) from:
Investments .............................. (119,407) (1,601,612) (8,392,100) (5,161,663) (293,036)
Options and swaptions contracts .......... (1,799) (47,549) 118,173 233,250 6,779
Futures and swaps contracts .............. 34,222 (720,865) 1,124,869 (727,693) (39,333)
Foreign currency related transactions..... (17,980) 16,131 - - (1,714)
------------ ------------ ------------ ------------- ----------
(104,964) (2,353,895) (7,149,058) (5,656,106) (327,304)
------------ ------------ ------------ ------------- ----------
Net gain (loss) on investments and foreign
currency transactions ..................... (215,983) (9,753,770) (9,104,533) (14,818,426) (553,862)
------------ ------------ ------------ ------------- ----------
Net increase (decrease) in net assets
resulting from operations ................. $ 918,210 $ 15,376,107 $ 2,210,440 $ 1,986,013 $ 110,831
============ ============ ============ ============= ==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
116
BLACKROCK FUNDS
INFLATION
CORE BOND CORE PLUS GOVERNMENT PROTECTED
TOTAL RETURN TOTAL RETURN INCOME BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------- -------------- ----------------- --------------
$ 63,783,594 $ 8,049,872 $ 14,158,099 $ 1,042,763
1,350 - - -
9,307 15,663 - -
------------- ------------ ------------- ------------
63,794,251 8,065,535 14,158,099 1,042,763
------------- ------------ ------------- ------------
6,149,193 841,823 1,424,120 88,323
895,708 137,495 229,005 18,038
744,203 53,592 294,577 15,124
197,893 51,698 109,873 13,118
101,513 - 46,056 3,676
299,079 18,135 188,927 5,365
595,293 359 699,378 12,943
539,585 787 402,880 25,949
203,281 34,927 50,262 14,302
246,090 28,408 50,910 3,398
64,756 7,699 27,843 47,533
48,164 5,937 9,892 745
96,385 15,819 19,450 1,479
------------- ------------ ------------- ------------
10,181,143 1,196,679 3,553,173 249,993
- 206 - -
------------- ------------ ------------- ------------
10,181,143 1,196,885 3,553,173 249,993
------------- ------------ ------------- ------------
(2,769,965) (460,676) (699,173) (82,720)
- - - (12,558)
(189,082) (53,071) (1,448) (4,081)
(107,903) (44) (131,746) (1,974)
(13,455) (3,416) (6,489) (939)
(19,556) (1,629) (8,684) (572)
(4,779) (12) (59) (74)
(10,923) (2,583) (79) (198)
- - - (32,313)
------------- ------------ ------------- ------------
7,065,480 675,454 2,705,495 114,564
------------- ------------ ------------- ------------
56,728,771 7,390,081 11,452,604 928,199
------------- ------------ ------------- ------------
(17,946,962) (2,134,450) (5,976,308) (139,310)
230,864 25,721 76,533 31,429
3,877,792 540,861 (126,871) 425,720
(678,936) (69,815) - 19,246
------------- ------------ ------------- ------------
(14,517,242) (1,637,683) (6,026,646) 337,085
------------- ------------ ------------- ------------
(39,982,902) (5,152,899) (11,020,739) (1,555,284)
1,387,036 187,368 111,613 10,685
302,784 (7,765) 1,375,685 (8,526)
(89,933) 29,576 - 1,142
------------- ------------ ------------- ------------
(38,383,015) (4,943,720) (9,533,441) (1,551,983)
------------- ------------ ------------- ------------
(52,900,257) (6,581,403) (15,560,087) (1,214,898)
------------- ------------ ------------- ------------
$ 3,828,514 $ 808,678 $ (4,107,483) $ (286,699)
============= ============ ============= ============
MANAGED INTERNATIONAL HIGH YIELD
GNMA INCOME BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------- --------------- ------------------ ------------------
$ 4,757,046 $ 17,435,855 $ 12,519,573 $ 35,721,958
- 651 - 343,705
- - - 27,360
------------ ------------- -------------- -----------
4,757,046 17,436,506 12,519,573 36,093,023
------------ ------------- -------------- -----------
525,731 1,737,812 1,863,391 2,215,227
78,261 274,417 269,074 342,437
98,786 366,058 337,174 409,662
50,369 79,677 180,330 52,365
11,991 13,287 131,241 221,380
35,946 80,228 203,656 240,111
81,144 154,989 393,357 714,411
165,766 40,830 356,499 692,258
28,233 64,747 54,028 77,357
23,762 64,218 79,996 101,386
27,441 28,040 43,970 30,315
3,654 12,880 14,716 16,560
8,883 30,017 18,476 56,933
------------ ------------- -------------- ------------
1,139,967 2,947,200 3,945,908 5,170,402
- - - 28,261
------------ ------------- -------------- ------------
1,139,967 2,947,200 3,945,908 5,198,663
------------ ------------- -------------- ------------
(332,857) (105,570) (83,856) (698,379)
- - - -
(4,975) (328,262) (16,909) (44,930)
(7,322) (13,555) (76,311) (127,765)
(2,514) (6,699) (8,106) (3,600)
(2,579) (5,647) (18,319) (28,124)
(59) (20) (9,027) (17,680)
(95) - (11,990) (19,142)
- - - -
------------ ------------- -------------- ------------
789,566 2,487,447 3,721,390 4,259,043
------------ ------------- -------------- ------------
3,967,480 14,949,059 8,798,183 31,833,980
------------ ------------- -------------- ------------
(1,268,356) (5,139,407) 9,294 (6,883,274)
25,610 56,950 (22,140) 433,516
87,119 1,739,415 2,140,217 (177,143)
- (72,373) (25,254,750) 283,434
------------ ------------- -------------- ------------
(1,155,627) (3,415,415) (23,127,379) (6,343,467)
------------ ------------- -------------- ------------
(1,532,335) (12,931,498) (14,626,909) 3,460,399
31,860 517,577 (35,694) (3)
382,981 635,066 2,534,184 (911)
- (288,580) 3,508,442 (324,582)
------------ ------------- -------------- ------------
(1,117,494) (12,067,435) (8,619,977) 3,134,903
------------ ------------- -------------- ------------
(2,273,121) (15,482,850) (31,747,356) (3,208,564)
------------ ------------- -------------- ------------
$ 1,694,359 $ (533,791) $ (22,949,173) $ 28,625,416
============ ============= ============== ============
117
BLACKROCK FUNDS
STATEMENTS OF CASH FLOWS
LOW DURATION BOND PORTFOLIO
FOR THE SIX MONTHS ENDED MARCH 31, 2006 (UNAUDITED)
Increase in cash
Cash flows from operating activities:
Net increase in net assets from operations .............................................. $ 15,376,107
Adjustments to reconcile net increase in net assets from operations to net cash provided
by
operating activities:
Purchase of long-term investment securities .......................................... (810,229,282)
Proceeds from disposition of long-term investment securities ......................... 1,264,307,918
Net purchase of short term investment securities ..................................... 17,465,453
Amortization (accretion) of premium (discount) ....................................... 309,588
Increase in futures variation margin ................................................. 27,702
Decrease in interest receivable ...................................................... 4,125,524
Increase in swaptions purchased ...................................................... (3,854,805)
Increase in swaptions written, at cost ............................................... 316,477
Decrease in prepaid expenses ......................................................... 756
Increase in receivable from adviser .................................................. (12,825)
Decrease in investments purchased payable ............................................ (61,793,382)
Increase in collateral received for swap contracts ................................... 510,000
Increase in accrued expenses ......................................................... 246,600
Net increase in unrealized appreciation on foreign currency related transactions ..... (16,131)
Net decrease in unrealized appreciation on investment securities ..................... 1,601,612
Net decrease in unrealized appreciation on futures and options ....................... 720,865
Net decrease in unrealized appreciation on swap and swaption contracts ............... 47,549
Net realized loss on foreign currency related transactions ........................... 785,321
Net realized loss on investment securities ........................................... 5,159,240
Net realized loss on futures and options ............................................. 1,458,761
Net realized gain on swap and swaption contracts ..................................... (3,447)
--------------
Net cash provided by operating activities ............................................... 436,549,601
--------------
Cash flows from financing activities:
Net borrowing (repayment) of reverse repurchase agreements and other
short term borrowings ............................................................... (307,748,728)
Proceeds from units sold ............................................................. 201,145,839
Payments on units redeemed (net of redemption fees) .................................. (313,398,795)
Cash distributions paid .............................................................. (10,300,646)
--------------
Net cash used for financing activities .................................................. (430,302,330)
--------------
Net increase in cash ..................................................................... 6,247,271
--------------
Cash and cash equivalents (including foreign currency):
Beginning balance ....................................................................... 16,369,485
--------------
Ending balance .......................................................................... $ 22,616,756
==============
Supplemental disclosure of cash flow information:
Reinvestment of dividends and distributions (non-cash financing activity) ................ $ 18,422,465
Cash (paid) during the year for interest ................................................. $ (1,862)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
118
BLACKROCK FUNDS
STATEMENTS OF CASH FLOWS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
FOR THE SIX MONTHS ENDED MARCH 31, 2006 (UNAUDITED)
Increase (decrease) in cash-
Cash flows from operating activities:
Net increase in net assets from operations .............................................. $ 2,210,440
Adjustments to reconcile net increase in net assets from operations to net cash operating
activities:
Purchase of long-term investment securities .......................................... (637,807,789)
Proceeds from disposition of long-term investment securities ......................... 670,115,406
Increase in swap contracts, at cost .................................................. (146,467)
Decrease in swaptions transactions, at cost .......................................... (3,035,410)
Net purchase of short term investment securities ..................................... (2,035,965)
Amortization (accretion) of premium (discount) ....................................... 137,259
Increase in futures variation margin (net) ........................................... (116,737)
Decrease in interest receivable ...................................................... 619,513
Decrease in investments sold receivable .............................................. 1,820,736
Increase in prepaid expenses ......................................................... (118)
Increase in receivable from adviser .................................................. (2,540)
Increase in investments purchased payable ............................................ 1,130,866
Increase in TBA sale commitments ..................................................... 1,020,000
Increase in options written, at cost ................................................. 121,481
Increase in collateral received for swap contracts ................................... 1,200,000
Increase in accrued expenses ......................................................... (120,482)
Net decrease in unrealized appreciation on investment securities ..................... 8,392,100
Net increase in unrealized appreciation on futures and options ....................... (118,173)
Net increase in unrealized appreciation on swap and swaption contracts ............... (1,124,869)
Net realized loss on investment securities ........................................... 2,372,171
Net realized gain on futures and options ............................................. (382,883)
Net realized gain on swap and swaption contracts ..................................... (33,813)
--------------
Net cash provided by operating activities ............................................... 44,214,726
--------------
Cash flows from financing activities:
Net borrowing (repayment) of reverse repurchase agreements and other
short term borrowings ............................................................... 27,571,739
Proceeds from units sold ............................................................. 27,095,199
Payments on units redeemed ........................................................... (93,082,950)
Cash distributions paid .............................................................. (5,798,714)
--------------
Net cash used for financing activities .................................................. (44,214,726)
--------------
Net increase (decrease) in cash .......................................................... -
--------------
Cash and cash equivalents (including foreign currency):
Beginning balance ....................................................................... -
--------------
Ending balance .......................................................................... $ -
==============
Supplemental disclosure of cash flow information:
Reinvestment of dividends and distributions (non-cash financing activity) ................ $ 4,636,801
Cash (paid) during the year for interest ................................................. $ (198)
119
BLACKROCK FUNDS
STATEMENTS OF CASH FLOWS
INTERMEDIATE BOND PORTFOLIO
FOR THE SIX MONTHS ENDED MARCH 31, 2006 (UNAUDITED)
Increase (decrease) in cash-
Cash flows from operating activities:
Net increase in net assets from operations .............................................. $ 1,986,013
Adjustments to reconcile net increase in net assets from operations to net cash operating
activities:
Purchase of long-term investment securities .......................................... (509,380,384)
Proceeds from disposition of long-term investment securities ......................... 561,209,104
Decrease in swaptions written, at cost ............................................... (4,337,767)
Net purchase of short term investment securities ..................................... (533,836)
Amortization (accretion) of premium (discount) ....................................... 493,273
Decrease in futures variation margin (net) ........................................... 22,306
Decrease in interest receivable ...................................................... 495,619
Increase in receivable from adviser .................................................. (8,121)
Decrease in investments sold receivable .............................................. 25,553,367
Increase in prepaid expenses ......................................................... (7,107)
Decrease in investments purchased payable ............................................ (27,347,524)
Increase in options written, at cost ................................................. 175,031
Increase in accrued expenses ......................................................... 141,408
Net decrease in unrealized appreciation on investment securities ..................... 5,161,663
Net decrease in unrealized appreciation on futures and options ....................... 727,693
Net increase in unrealized appreciation on swap and swaption contracts ............... (233,250)
Net realized loss on investment securities ........................................... 8,718,504
Net realized loss on futures and options ............................................. 489,164
Net realized gain on swap and swaption contracts ..................................... (45,348)
--------------
Net cash provided by operating activities ............................................... 63,279,808
--------------
Cash flows from financing activities:
Net borrowing (repayment) of reverse repurchase agreements and other
short term borrowings ............................................................... (35,044,623)
Proceeds from units sold ............................................................. 148,644,636
Payments on units redeemed ........................................................... (167,414,979)
Cash distributions paid .............................................................. (9,464,842)
--------------
Net cash used for financing activities .................................................. (63,279,808)
--------------
Net increase (decrease) in cash .......................................................... -
--------------
Cash and cash equivalents (including foreign currency):
Beginning balance ....................................................................... -
--------------
Ending balance .......................................................................... $ -
==============
Supplemental disclosure of cash flow information:
Reinvestment of dividends and distributions (non-cash financing activity) ................ $ 9,914,103
Cash (paid) during the year for interest ................................................. $ -
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
120
BLACKROCK FUNDS
STATEMENTS OF CASH FLOWS
INTERMEDIATE PLUS BOND PORTFOLIO
FOR THE SIX MONTHS ENDED MARCH 31, 2006 (UNAUDITED)
Increase in cash-
Cash flows from operating activities:
Net decrease in net assets from operations .............................................. $ 110,831
Adjustments to reconcile net increase in net assets from operations to net cash used for
operating activities:
Purchase of long-term investment securities .......................................... (111,585,644)
Proceeds from disposition of long-term investment securities ......................... 103,940,586
Decrease in swaptions written, at cost ............................................... (46,706)
Decrease in swaptions purchased, at cost ............................................. (86,720)
Net purchase of short term investment securities ..................................... 3,966,601
Amortization (accretion) of premium (discount) ....................................... 14,939
Decrease in futures variation margin ................................................. 6,112
Increase in interest receivable ...................................................... (6,919)
Decrease in investments sold receivable .............................................. 2,910,490
Decrease in prepaid expenses ......................................................... 6,777
Decrease in receivable from adviser .................................................. 2,981
Decrease in receivable from affiliates ............................................... 10,549
Decrease in investments purchased payable ............................................ (10,301,526)
Increase in TBA sale commitments ..................................................... 6,289,033
Increase in options written .......................................................... 4,500
Decrease in accrued expenses ......................................................... (4,191)
Net decrease in unrealized appreciation on foreign currency related transactions ..... 1,714
Net decrease in unrealized appreciation on investment securities ..................... 293,036
Net decrease in unrealized appreciation on futures and options ....................... 39,333
Net increase in unrealized appreciation on swap and swaption contracts ............... (6,779)
Net realized loss on foreign currency related transactions ........................... 11,207
Net realized loss on investment securities ........................................... 283,009
Net realized gain on futures and options ............................................. (1,123)
Net realized gain on swap and swaption contracts ..................................... (66,535)
--------------
Net cash used for operating activities .................................................. (4,214,445)
--------------
Cash flows from financing activities:
Net borrowing (repayment) of reverse repurchase agreements and other
short term borrowings ............................................................... 4,579,608
Proceeds from units sold ............................................................. 467,662
Payments on units redeemed ........................................................... (569,049)
Cash distributions paid .............................................................. (189,177)
--------------
Net cash provided by financing activities ............................................... 4,289,044
--------------
Net increase in cash ..................................................................... 74,599
--------------
Cash and cash equivalents (including foreign currency):
Beginning balance ....................................................................... 241,703
--------------
Ending balance .......................................................................... $ 316,302
==============
Supplemental disclosure of cash flow information:
Reinvestment of dividends and distributions (non-cash financing activity) ................ $ 468,265
Cash (paid) during the year for interest ................................................. $ -
121
BLACKROCK FUNDS
STATEMENTS OF CASH FLOWS
MANAGED INCOME PORTFOLIO
FOR THE SIX MONTHS ENDED MARCH 31, 2006 (UNAUDITED)
Decrease in cash-
Cash flows from operating activities:
Net decrease in net assets from operations .............................................. $ (533,791)
Adjustments to reconcile net increase in net assets from operations to net cash used for
operating activities:
Purchase of long-term investment securities .......................................... (1,750,163,855)
Proceeds from disposition of long-term investment securities ......................... 1,748,833,510
Increase in swapoptions purchased .................................................... (2,081,280)
Net purchase of short term investment securities ..................................... (1,420,617)
Amortization (accretion) of premium (discount) ....................................... 1,024,660
Decrease in investments sold receivable .............................................. 35,759,613
Decrease in interest receivable ...................................................... 300,366
Decrease in interest receivable on interest rate swaps ............................... 86,995
Increase in prepaid expenses ......................................................... (1,179)
Decrease in investments purchased payable ............................................ (98,085,350)
Increase in collateral received for swap contracts ................................... 47,573,144
Decrease in payable on closing swap .................................................. (923,000)
Decrease in futures variation margin ................................................. 269,028
Decrease in swaptions written, at value .............................................. (415,986)
Increase in options written, at cost ................................................. 24,084
Increase in accrued expenses ......................................................... 72,912
Net decrease in unrealized appreciation on foreign currency related transactions ..... 288,580
Net decrease in unrealized appreciation on investment securities ..................... 12,931,498
Net increase in unrealized appreciation on futures and options ....................... (635,066)
Net increase in unrealized appreciation on swap and swaption contracts ............... (517,577)
Net realized loss on foreign currency related transactions ........................... 72,373
Net realized loss on investment securities ........................................... 5,139,407
Net realized gain on futures and options ............................................. (1,739,415)
Net realized gain on swap and swaption contracts ..................................... (56,950)
----------------
Net cash used for operating activities .................................................. (4,197,896)
----------------
Cash flows from financing activities:
Net borrowing (repayment) of reverse repurchase agreements and other
short term borrowings ............................................................... 18,305,339
Proceeds from units sold ............................................................. 77,193,618
Payments on units redeemed (net of redemption fees) .................................. (79,729,012)
Cash distributions paid .............................................................. (11,743,284)
----------------
Net cash provided by financing activities ............................................... 4,026,661
----------------
Net decrease in cash ..................................................................... (171,235)
----------------
Cash and cash equivalents (including foreign currency):
Beginning balance ....................................................................... 6,760,530
----------------
Ending balance .......................................................................... $ 6,589,295
================
Supplemental disclosure of cash flow information:
Reinvestment of dividends and distributions (non-cash financing activity) ................ $ 5,187,900
Cash (paid) during the year for interest ................................................. $ -
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
122
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
ENHANCED INCOME
PORTFOLIO
---------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE
3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05
---------------- ----------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................... $ 1,134,193 $ 1,653,272
Net realized gain (loss) on investments, futures,
options, swap and swaption contracts and foreign
currency related transactions .......................... (111,019) (139,711)
Net unrealized appreciation/depreciation on
investments, futures, options, swap and swaption
contracts and foreign currency related
transactions ........................................... (104,964) (320,102)
------------ ------------
Net increase in net assets resulting from operations..... 918,210 1,193,459
------------ ------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ......................................... (499,122) (685,290)
Institutional Class ..................................... (649,309) (991,596)
Service Class ........................................... (980) (869)
Investor A Class ........................................ (44) (31)
Investor B Class ........................................ - -
Investor C Class ........................................ - -
------------ ------------
Total distributions from net investment income .......... (1,149,455) (1,677,786)
------------ ------------
Capital:
Institutional Class ..................................... - -
Service Class ........................................... - -
Investor A Class ........................................ - -
Investor B Class ........................................ - -
Investor C Class ........................................ - -
------------ ------------
Total distributions from capital ........................ - -
------------ ------------
Net realized gains:
BlackRock Class ......................................... - -
Institutional Class ..................................... - -
Service Class ........................................... - -
Investor A Class ........................................ - -
Investor B Class ........................................ - -
Investor C Class ........................................ - -
------------ ------------
Total distributions from net realized gains ............. - -
------------ ------------
Total distributions to shareholders ..................... (1,149,455) (1,677,786)
------------ ------------
Capital share transactions (Note D) ....................... 2,076,046 2,178,387
------------ ------------
Redemption fees ........................................... - -
------------ ------------
Total increase (decrease) in net assets ................. 1,844,801 1,694,060
Net assets:
Beginning of period ..................................... 56,338,205 54,644,145
------------ ------------
End of period ........................................... $ 58,183,006 $ 56,338,205
============ ============
End of period undistributed net investment income
(distributions in excess of net investment
income) ................................................ $ (1,672) $ 14,165
INTERMEDIATE
LOW DURATION GOVERNMENT
BOND PORTFOLIO BOND PORTFOLIO
--------------------------------------- -----------------
FOR THE FOR THE
SIX MONTHS SIX MONTHS
ENDED FOR THE ENDED
3/31/06 YEAR ENDED 3/31/06
(UNAUDITED) 9/30/05 (UNAUDITED)
------------------- ------------------- -----------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................... $ 25,129,877 $ 51,161,302 $ 11,314,973
Net realized gain (loss) on investments, futures,
options, swap and swaption contracts and foreign
currency related transactions .......................... (7,399,875) (13,417,126) (1,955,475)
Net unrealized appreciation/depreciation on
investments, futures, options, swap and swaption
contracts and foreign currency related
transactions ........................................... (2,353,895) (15,271,343) (7,149,058)
--------------- --------------- -------------
Net increase in net assets resulting from operations..... 15,376,107 22,472,833 2,210,440
--------------- --------------- -------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ......................................... (11,493,995) (21,399,011) -
Institutional Class ..................................... (6,797,929) (12,976,033) (3,891,940)
Service Class ........................................... (7,049,560) (10,327,815) (13,968)
Investor A Class ........................................ (1,534,581) (2,215,025) (5,440,064)
Investor B Class ........................................ (639,304) (1,096,050) (897,034)
Investor C Class ........................................ (1,015,100) (1,841,995) (236,896)
--------------- --------------- -------------
Total distributions from net investment income .......... (28,530,469) (49,855,929) (10,479,902)
--------------- --------------- -------------
Capital:
Institutional Class ..................................... - - -
Service Class ........................................... - - -
Investor A Class ........................................ - - -
Investor B Class ........................................ - - -
Investor C Class ........................................ - - -
--------------- --------------- -------------
Total distributions from capital ........................ - - -
--------------- --------------- -------------
Net realized gains:
BlackRock Class ......................................... - - -
Institutional Class ..................................... - - -
Service Class ........................................... - - -
Investor A Class ........................................ - - -
Investor B Class ........................................ - - -
Investor C Class ........................................ - - -
--------------- --------------- -------------
Total distributions from net realized gains ............. - - -
--------------- --------------- -------------
Total distributions to shareholders ..................... (28,530,469) (49,855,929) (10,479,902)
--------------- --------------- -------------
Capital share transactions (Note D) ....................... (94,708,625) (353,543,952) (61,207,601)
--------------- --------------- -------------
Redemption fees ........................................... - 3,856 -
--------------- --------------- -------------
Total increase (decrease) in net assets ................. (107,862,987) (380,923,192) (69,477,063)
Net assets:
Beginning of period ..................................... 1,492,904,216 1,873,827,408 656,289,633
--------------- --------------- -------------
End of period ........................................... $ 1,385,041,229 $ 1,492,904,216 $ 586,812,570
=============== =============== =============
End of period undistributed net investment income
(distributions in excess of net investment
income) ................................................ $ 742,324 $ 4,928,237 $ 83,560
INTERMEDIATE
GOVERNMENT
BOND PORTFOLIO
-----------------
FOR THE
YEAR ENDED
9/30/05
-----------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................... $ 19,873,290
Net realized gain (loss) on investments, futures,
options, swap and swaption contracts and foreign
currency related transactions .......................... (2,886,184)
Net unrealized appreciation/depreciation on
investments, futures, options, swap and swaption
contracts and foreign currency related
transactions ........................................... (13,811,460)
-------------
Net increase in net assets resulting from operations..... 3,175,646
-------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ......................................... -
Institutional Class ..................................... (5,987,593)
Service Class ........................................... (28,235)
Investor A Class ........................................ (6,367,147)
Investor B Class ........................................ (1,067,572)
Investor C Class ........................................ (342,355)
-------------
Total distributions from net investment income .......... (13,792,902)
-------------
Capital:
Institutional Class ..................................... (1,705,727)
Service Class ........................................... (8,044)
Investor A Class ........................................ (1,813,851)
Investor B Class ........................................ (304,127)
Investor C Class ........................................ (97,529)
-------------
Total distributions from capital ........................ (3,929,278)
-------------
Net realized gains:
BlackRock Class ......................................... -
Institutional Class ..................................... (1,106,478)
Service Class ........................................... (6,048)
Investor A Class ........................................ (183,301)
Investor B Class ........................................ (47,030)
Investor C Class ........................................ (55,783)
-------------
Total distributions from net realized gains ............. (1,398,640)
-------------
Total distributions to shareholders ..................... (19,120,820)
-------------
Capital share transactions (Note D) ....................... 366,560,310
-------------
Redemption fees ........................................... 838
-------------
Total increase (decrease) in net assets ................. 350,615,974
Net assets:
Beginning of period ..................................... 305,673,659
-------------
End of period ........................................... $ 656,289,633
=============
End of period undistributed net investment income
(distributions in excess of net investment
income) ................................................ $ (751,511)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
124
BLACKROCK FUNDS
INTERMEDIATE INTERMEDIATE PLUS
BOND PORTFOLIO BOND PORTFOLIO
- ----------------------------------- ----------------------------------
FOR THE FOR THE
SIX MONTHS SIX MONTHS
ENDED FOR THE ENDED FOR THE
3/31/06 YEAR ENDED 3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05
- ----------------- ----------------- ------------------ ---------------
$ 16,804,439 $ 33,190,206 $ 664,693 $ 974,699
(9,162,320) 973,668 (226,558) (134,527)
(5,656,106) (20,170,037) (327,304) (347,302)
------------- ------------- ------------ ------------
1,986,013 13,993,837 110,831 492,870
------------- ------------- ------------ ------------
(9,671,019) (15,416,741) (647,781) (986,708)
(6,841,291) (10,587,518) (16,274) (4,907)
(1,977,886) (2,833,389) (1) -
(572,677) (965,616) (606) (373)
(173,078) (277,811) (30) (14)
(151,757) (265,015) (1) -
------------- ------------- ------------ ------------
(19,387,708) (30,346,090) (664,693) (992,002)
------------- ------------- ------------ ------------
- - - -
- - - -
- - - -
- - - -
- - - -
------------- ------------- ------------- ------------
- - - -
------------- ------------- ------------- ------------
(43,118) (3,605,317) - (22,983)
(33,239) (2,617,586) - -
(10,093) (720,929) - -
(2,968) (278,111) - -
(1,115) (106,933) - -
(954) (110,018) - -
------------- ------------- ----------- ------------
(91,487) (7,438,894) - (22,983)
------------- ------------- ----------- ------------
(19,479,195) (37,784,984) (664,693) (1,014,985)
------------- ------------- ----------- ------------
(8,352,511) (2,239,453) 366,878 5,506,774
------------- ------------- ----------- ------------
47 327 - -
------------- ------------- ----------- ------------
(25,845,646) (26,030,273) (186,984) 4,984,659
897,679,363 923,709,636 30,980,963 25,996,304
------------- ------------- ----------- ------------
$ 871,833,717 $ 897,679,363 $30,793,979 $ 30,980,963
============= ============= =========== ============
$ 515,532 $ 3,098,801 $ (1,731) $ 9,475
CORE BOND CORE PLUS
TOTAL RETURN PORTFOLIO TOTAL RETURN PORTFOLIO
- --------------------------------------- --------------------------------------
FOR THE FOR THE
SIX MONTHS SIX MONTHS
ENDED FOR THE ENDED FOR THE
3/31/06 YEAR ENDED 3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05
- ------------------- ------------------- ------------------- ------------------
$ 56,728,771 $ 103,561,095 $ 7,390,081 $ 13,652,000
(14,517,242) 9,490,234 (1,637,683) 2,168,605
(38,383,015) (41,358,086) (4,943,720) (5,138,698)
--------------- --------------- ------------ ------------
3,828,514 71,693,243 808,678 10,681,907
--------------- --------------- ------------ ------------
(36,186,734) (61,252,277) (7,698,321) (13,248,140)
(14,281,699) (23,166,365) (29,522) (7)
(3,122,448) (5,497,287) (2) (885)
(4,569,887) (6,235,815) (1,810) (1,220)
(806,407) (1,486,721) (2,329) (2,999)
(1,197,961) (2,243,809) (1,035) (636)
--------------- --------------- ------------ ------------
(60,165,136) (99,882,274) (7,733,019) (13,253,887)
--------------- --------------- ------------ ------------
- - - -
- - - -
- - - -
- - - -
- - - -
--------------- --------------- ------------ ------------
- - - -
--------------- --------------- ------------ ------------
(7,579,173) (2,614,942) (1,561,658) -
(3,029,266) (1,031,692) - -
(773,275) (256,095) - -
(1,017,963) (232,258) (326) -
(230,083) (94,378) (616) -
(339,860) (143,147) (271) -
--------------- --------------- ------------ ------------
(12,969,620) (4,372,512) (1,562,871) -
--------------- --------------- ------------ ------------
(73,134,756) (104,254,786) (9,295,890) (13,253,887)
--------------- --------------- ------------ ------------
56,116,107 161,228,013 31,354,397 43,644,304
--------------- --------------- ------------ ------------
- - - -
--------------- --------------- ------------ ------------
(13,190,135) 128,666,470 22,867,185 41,072,324
2,654,300,290 2,525,633,820 326,310,569 285,238,245
--------------- --------------- ------------ ------------
$ 2,641,110,155 $ 2,654,300,290 $349,177,754 $326,310,569
=============== =============== ============ ============
$ (3,269,242) $ 846,059 $ 197,170 $ 609,923
125
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
GOVERNMENT
INCOME PORTFOLIO
-----------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE
3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05
----------------- -----------------
Increase (decrease) in net assets:
Operations:
Net investment income .................................. $ 11,452,604 $ 16,824,977
Net realized gain (loss) on investments, futures,
options, swap and swaption contracts and foreign
currency related transactions ......................... (6,026,646) (356,534)
Net unrealized appreciation/depreciation on
investments, futures, options, swap and swaption
contracts and foreign currency related
transactions .......................................... (9,533,441) (9,642,384)
------------- -------------
Net increase (decrease) in net assets resulting from
operations ............................................ (4,107,483) 6,826,059
------------- -------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ........................................ (199,939) (511,763)
Institutional Class .................................... - -
Service Class .......................................... (4,474,725) (7,849,415)
Investor A Class ....................................... (5,217,806) (7,517,673)
Investor B Class ....................................... (633,942) (1,517,239)
Investor C Class ....................................... (522,107) (976,151)
------------- -------------
Total distributions from net investment income ......... (11,048,519) (18,372,241)
------------- -------------
Capital:
BlackRock Class ........................................ - (22,490)
Service Class .......................................... - (344,955)
Investor A Class ....................................... - (330,376)
Investor B Class ....................................... - (66,677)
Investor C Class ....................................... - (42,899)
------------- -------------
Total distributions from capital ....................... - (807,397)
------------- -------------
Net realized gains:
BlackRock Class ........................................ - -
Institutional Class .................................... - -
Service Class .......................................... - -
Investor A Class ....................................... - -
Investor B Class ....................................... - -
Investor C Class ....................................... - -
------------- -------------
Total distributions from net realized gains ............ - -
------------- -------------
Total distributions to shareholders .................... (11,048,519) (19,179,638)
------------- -------------
Capital share transactions (Note D) ...................... 65,814,880 348,126,461
------------- -------------
Redemption fees .......................................... - 78
------------- -------------
Total increase (decrease) in net assets ................ 50,658,878 335,772,960
Net assets:
Beginning of period .................................... 543,825,003 208,052,043
------------- -------------
End of period .......................................... $ 594,483,881 $ 543,825,003
============= =============
End of period undistributed net investment income
(distributions in excess of net investment
income) ............................................... $ 619,661 $ 215,576
INFLATION PROTECTED GNMA
BOND PORTFOLIO PORTFOLIO
---------------------------------- ----------------------------------
FOR THE FOR THE
SIX MONTHS SIX MONTHS
ENDED FOR THE ENDED FOR THE
3/31/06 YEAR ENDED 3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05
---------------- ----------------- ----------------- ----------------
Increase (decrease) in net assets:
Operations:
Net investment income .................................. $ 928,199 $ 1,371,305 $ 3,967,480 $ 9,202,109
Net realized gain (loss) on investments, futures,
options, swap and swaption contracts and foreign
currency related transactions ......................... 337,085 680,377 (1,155,627) (613,452)
Net unrealized appreciation/depreciation on
investments, futures, options, swap and swaption
contracts and foreign currency related
transactions .......................................... (1,551,983) (210,175) (1,117,494) (4,070,712)
------------ ----------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations ............................................ (286,699) 1,841,507 1,694,359 4,517,945
------------ ----------- ------------- -------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ........................................ (882,020) (1,287,901) (335,309) (458,891)
Institutional Class .................................... (471,144) (167,696) (3,427,835) (5,481,541)
Service Class .......................................... (78) (23) (226,428) (229,895)
Investor A Class ....................................... (150,917) (140,624) (413,559) (618,625)
Investor B Class ....................................... (80,928) (40,615) (445,417) (711,108)
Investor C Class ....................................... (133,298) (66,562) (587,451) (998,790)
------------ ----------- ------------- -------------
Total distributions from net investment income ......... (1,718,385) (1,703,421) (5,435,999) (8,498,850)
------------ ----------- ------------- -------------
Capital:
BlackRock Class ........................................ - - - -
Service Class .......................................... - - - -
Investor A Class ....................................... - - - -
Investor B Class ....................................... - - - -
Investor C Class ....................................... - - - -
------------ ----------- ------------- -------------
Total distributions from capital ....................... - - - -
------------ ----------- ------------- -------------
Net realized gains:
BlackRock Class ........................................ (281,924) (245,658) - -
Institutional Class .................................... (170,004) (16,405) - -
Service Class .......................................... (26) (1) - -
Investor A Class ....................................... (49,045) (8,360) - -
Investor B Class ....................................... (31,301) (1,956) - -
Investor C Class ....................................... (49,018) (3,694) - -
------------ ----------- ------------- -------------
Total distributions from net realized gains ............ (581,318) (276,074) - -
------------ ----------- ------------- -------------
Total distributions to shareholders .................... (2,299,703) (1,979,495) (5,435,999) (8,498,850)
------------ ----------- ------------- -------------
Capital share transactions (Note D) ...................... 8,573,515 17,767,043 (17,292,188) (41,195,146)
------------ ----------- ------------- -------------
Redemption fees .......................................... - - - 1,692
------------ ----------- ------------- -------------
Total increase (decrease) in net assets ................ 5,987,113 17,629,055 (21,033,828) (45,174,359)
Net assets:
Beginning of period .................................... 38,552,753 20,923,698 202,386,846 247,561,205
------------ ----------- ------------- -------------
End of period .......................................... $ 44,539,866 $38,552,753 $ 181,353,018 $ 202,386,846
============ =========== ============= =============
End of period undistributed net investment income
(distributions in excess of net investment
income) ............................................... $ (629,250) $ 141,690 $ 356,590 $ 1,825,109
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
126
BLACKROCK FUNDS
MANAGED INTERNATIONAL HIGH YIELD
INCOME PORTFOLIO BOND PORTFOLIO BOND PORTFOLIO
- ------------------------------------- -------------------------------------- -------------------------------------
FOR THE FOR THE FOR THE
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED FOR THE ENDED FOR THE ENDED FOR THE
3/31/06 YEAR ENDED 3/31/06 YEAR ENDED 3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05
- ----------------- ----------------- ------------------ ----------------- ----------------- -----------------
$ 14,949,059 $ 32,017,033 $ 8,798,183 $ 16,094,755 $ 31,833,980 $ 61,613,791
(3,415,415) 2,768,613 (23,127,379) (6,326,188) (6,343,467) 25,349,009
(12,067,435) (14,738,671) (8,619,977) (18,209,605) 3,134,903 (27,127,973)
------------- ------------- -------------- -------------- ------------- -------------
(533,791) 20,046,975 (22,949,173) (8,441,038) 28,625,416 59,834,827
------------- ------------- -------------- -------------- ------------- -------------
- - (1,545,940) (3,836,007) (6,058,419) (10,447,236)
(14,043,889) (26,826,072) (4,268,488) (13,371,592) (6,136,332) (11,719,171)
(2,068,662) (3,120,883) (1,250,595) (4,647,433) (6,217,643) (9,855,000)
(613,443) (1,340,701) (2,184,611) (7,771,213) (9,496,785) (14,980,576)
(113,500) (251,998) (186,081) (772,214) (3,443,850) (6,797,925)
(22,754) (37,389) (587,166) (2,060,078) (1,577,997) (3,593,974)
------------- ------------- -------------- -------------- ------------- -------------
(16,862,248) (31,577,043) (10,022,881) (32,458,537) (32,931,026) (57,393,882)
------------- ------------- -------------- -------------- ------------- -------------
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
------------- ------------- -------------- -------------- ------------- -------------
- - - - - -
------------- ------------- -------------- -------------- ------------- -------------
- - - (31,979) (2,582,656) (2,217,477)
(3,040,738) (2,338,691) - (111,687) (2,881,584) (2,744,299)
(463,358) (263,605) - (45,846) (2,823,364) (2,126,281)
(138,959) (128,734) - (76,674) (4,542,282) (1,216,391)
(33,849) (32,026) - (9,510) (1,871,545) (1,516,927)
(6,487) (4,139) - (22,658) (845,010) (990,873)
------------- ------------- -------------- -------------- ------------- -------------
(3,683,391) (2,767,195) - (298,354) (15,546,441) (10,812,248)
------------- ------------- -------------- -------------- ------------- -------------
(20,545,639) (34,344,238) (10,022,881) (32,756,891) (48,477,467) (68,206,130)
------------- ------------- -------------- -------------- ------------- -------------
1,270,050 (49,835,255) (185,281,592) 435,410,598 40,315,647 296,865,467
------------- ------------- -------------- -------------- ------------- -------------
- - 11,793 49,151 16,474 26,956
------------- ------------- -------------- -------------- ------------- -------------
(19,809,380) (64,132,518) (218,241,853) 394,261,820 20,480,070 288,521,120
705,671,900 769,804,418 820,450,609 426,188,789 916,698,860 628,177,740
------------- ------------- -------------- -------------- ------------- -------------
$ 685,862,520 $ 705,671,900 $ 602,208,756 $ 820,450,609 $ 937,178,930 $ 916,698,860
============= ============= ============== ============== ============= =============
$ (168,830) $ 1,816,732 $ (45,080,325) $ (18,600,878) $ 2,754,892 $ 3,568,504
127
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN
ASSET (LOSS) ON
VALUE NET INVESTMENTS
BEGINNING INVESTMENT (BOTH REALIZED
OF PERIOD INCOME13 AND UNREALIZED)13
=========== ============ ===================
--------------
Enhanced Income Portfolio
--------------
BlackRock Class
10/1/05 through 3/31/0617 $ 9.86 $ 0.196 $ (0.02)
9/30/05 9.94 0.296 ( 0.08)
3/04/041 through 9/30/04 10.00 0.116 ( 0.05)
Institutional Class
10/1/05 through 3/31/0617 $ 9.86 $ 0.196 $ (0.04)
9/30/05 9.94 0.276 ( 0.07)
3/19/041 through 9/30/04 10.00 0.096 ( 0.05)
Service Class
10/1/05 through 3/31/0617 $ 9.70 $ 0.176 $ (0.02)
9/30/05 9.86 0.276 ( 0.11)
3/19/041 through 9/30/04 10.00 0.146 ( 0.08)
Investor A Class
10/1/05 through 3/31/0617 $ 9.85 $ 0.176 $ (0.04)
9/30/05 9.93 0.286 ( 0.12)
3/19/041 through 9/30/04 10.00 0.066 ( 0.07)
---------------
Low Duration Bond Portfolio
---------------
BlackRock Class
10/1/05 through 3/31/0617 $ 9.92 $ 0.186 $ (0.06)
9/30/05 10.09 0.326 ( 0.17)
9/30/04 10.23 0.236 ( 0.11)
9/30/0315 10.25 0.30 0.01
9/30/0215 10.20 0.42 0.13
9/30/0115 9.81 0.57 0.42
Institutional Class
10/1/05 through 3/31/0617 $ 9.93 $ 0.186 $ (0.07)
9/30/05 10.09 0.316 ( 0.17)
9/30/04 10.23 0.216 ( 0.11)
9/30/0315 10.25 0.26 0.03
9/30/0215 10.21 0.41 0.12
9/30/0115 9.82 0.56 0.41
Service Class
10/1/05 through 3/31/0617 $ 9.93 $ 0.166 $ (0.06)
9/30/05 10.09 0.286 ( 0.16)
9/30/04 10.23 0.196 ( 0.12)
9/30/0315 10.25 0.24 0.02
9/30/0215 10.21 0.38 0.12
9/30/0115 9.82 0.53 0.41
Investor A Class
10/1/05 through 3/31/0617 $ 9.93 $ 0.166 $ (0.06)
9/30/05 10.10 0.286 ( 0.17)
9/30/04 10.24 0.186 ( 0.12)
9/30/0315 10.26 0.21 0.04
9/30/0215 10.21 0.36 0.13
9/30/0115 9.82 0.52 0.41
Investor B Class
10/1/05 through 3/31/0617 $ 9.93 $ 0.136 $ (0.07)
9/30/05 10.09 0.216 ( 0.17)
9/30/04 10.23 0.106 ( 0.11)
9/30/0315 10.25 0.15 0.03
9/30/0215 10.21 0.29 0.12
9/30/0115 9.82 0.44 0.41
Investor C Class
10/1/05 through 3/31/0617 $ 9.93 $ 0.136 $ (0.07)
9/30/05 10.09 0.216 ( 0.17)
9/30/04 10.23 0.106 ( 0.11)
9/30/0315 10.25 0.15 0.03
9/30/0215 10.21 0.30 0.11
9/30/0115 9.82 0.44 0.41
NET
DISTRIBUTIONS DISTRIBUTIONS ASSET
FROM NET DISTRIBUTIONS FROM NET VALUE
INVESTMENT FROM REALIZED END OF
INCOME5 CAPITAL GAINS PERIOD
=============== =============== =============== ===========
--------------
Enhanced Income Portfolio
--------------
BlackRock Class
10/1/05 through 3/31/0617 $ (0.20) $ - $ - $ 9.83
9/30/05 ( 0.29) - - 9.86
3/04/041 through 9/30/04 ( 0.12) - - 9.94
Institutional Class
10/1/05 through 3/31/0617 $ (0.19) $ - $ - $ 9.82
9/30/05 ( 0.28) - - 9.86
3/19/041 through 9/30/04 ( 0.10) - - 9.94
Service Class
10/1/05 through 3/31/0617 $ (0.18) $ - $ - $ 9.67
9/30/05 ( 0.32) - - 9.70
3/19/041 through 9/30/04 ( 0.20) - - 9.86
Investor A Class
10/1/05 through 3/31/0617 $ (0.17) $ - $ - $ 9.81
9/30/05 ( 0.24) - - 9.85
3/19/041 through 9/30/04 ( 0.06) - - 9.93
---------------
Low Duration Bond Portfolio
---------------
BlackRock Class
10/1/05 through 3/31/0617 $ (0.21) $ - $ - $ 9.83
9/30/05 ( 0.32) - - 9.92
9/30/04 ( 0.21) - (0.04) 10.09
9/30/0315 ( 0.32) - (0.01) 10.23
9/30/0215 ( 0.45) - (0.05) 10.25
9/30/0115 ( 0.60) - - 10.20
Institutional Class
10/1/05 through 3/31/0617 $ (0.20) $ - $ - $ 9.84
9/30/05 ( 0.30) - - 9.93
9/30/04 ( 0.20) (0.01) (0.04) 10.09
9/30/0315 ( 0.30) - (0.01) 10.23
9/30/0215 ( 0.44) - (0.05) 10.25
9/30/0115 ( 0.58) - - 10.21
Service Class
10/1/05 through 3/31/0617 $ (0.19) $ - $ - $ 9.84
9/30/05 ( 0.28) - - 9.93
9/30/04 ( 0.17) (0.01) (0.04) 10.09
9/30/0315 ( 0.27) - (0.01) 10.23
9/30/0215 ( 0.41) - (0.05) 10.25
9/30/0115 ( 0.55) - - 10.21
Investor A Class
10/1/05 through 3/31/0617 $ (0.19) $ - $ - $ 9.84
9/30/05 ( 0.28) - - 9.93
9/30/04 ( 0.16) - (0.04) 10.10
9/30/0315 ( 0.26) - (0.01) 10.24
9/30/0215 ( 0.39) - (0.05) 10.26
9/30/0115 ( 0.54) - - 10.21
Investor B Class
10/1/05 through 3/31/0617 $ (0.15) $ - $ - $ 9.84
9/30/05 ( 0.20) - - 9.93
9/30/04 ( 0.09) (0.01) (0.04) 10.09
9/30/0315 ( 0.19) - (0.01) 10.23
9/30/0215 ( 0.32) - (0.05) 10.25
9/30/0115 ( 0.46) - - 10.21
Investor C Class
10/1/05 through 3/31/0617 $ (0.15) $ - $ - $ 9.84
9/30/05 ( 0.20) - - 9.93
9/30/04 ( 0.09) (0.01) (0.04) 10.09
9/30/0315 ( 0.19) - (0.01) 10.23
9/30/0215 ( 0.32) - (0.05) 10.25
9/30/0115 ( 0.46) - - 10.21
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
128
BLACKROCK FUNDS
RATIO OF NET
EXPENSES TO
NET AVERAGE NET
ASSETS RATIO OF NET ASSETS
END OF EXPENSES TO (EXCLUDING
TOTAL PERIOD AVERAGE NET INTEREST
RETURN (000) ASSETS EXPENSE)
======================= =========== ================== ==================
1.70%16 $ 27,076 0.30%2 0.30%2
2.15 23,641 0.32 0.30
0.5816 18,677 0.302,14 0.302,14
1.56%16 $ 31,055 0.38%2 0.38%2
2.05 32,646 0.41 0.40
0.4016 35,967 0.402,14 0.402,14
1.52%16 $ 49 0.73%2 0.73%2
1.66 49 0.74 0.71
0.6116 -18 0.712 0.712
1.36%3,16 $ 3 0.76%2 0.76%2
1.623 2 0.74 0.71
(0.12)3,16 -18 0.712 0.712
1.20%16 $ 551,805 0.40%2 0.40%2
1.497 543,043 0.40 0.40
1.18 772,355 0.40 0.40
2.98 625,363 0.40 0.40
5.58 281,844 0.40 0.40
10.38 114,205 0.99 0.40
1.13%16 $ 297,788 0.52%2 0.52%2
1.437 378,712 0.55 0.55
1.03 477,622 0.55 0.55
2.82 477,420 0.55 0.55
5.32 298,698 0.55 0.55
10.21 135,243 1.24 0.55
0.99%16 $ 364,929 0.80%2 0.80%2
1.177 377,470 0.81 0.81
0.73 345,733 0.84 0.84
2.52 248,426 0.85 0.85
5.01 120,857 0.85 0.85
9.88 42,909 1.41 0.85
0.99%3,16 $ 73,299 0.81%2 0.81%2
1.073,7 75,652 0.81 0.81
0.693 87,317 0.88 0.88
2.473 102,047 0.90 0.90
4.933 69,211 1.02 1.02
9.703 12,808 1.43 1.00
0.61%4,16 $ 37,470 1.56%2 1.56%2
0.414,7 45,942 1.56 1.56
( 0.06)4 66,253 1.63 1.63
1.704 83,937 1.65 1.65
4.054 53,087 1.77 1.77
8.894 20,485 2.28 1.76
0.61%4,16 $ 59,750 1.56%2 1.56%2
0.414,7 72,085 1.57 1.57
(0.06)4 124,548 1.63 1.63
1.704 198,234 1.65 1.65
4.054 118,851 1.77 1.77
8.894 9,282 1.99 1.72
RATIO OF NET
RATIO OF TOTAL INVESTMENT
EXPENSES INCOME
TO AVERAGE RATIO OF NET TO AVERAGE
NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
(EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
WAIVERS) ASSETS13 WAIVERS)13 RATE
================== =================== ================== ==========
0.70%2 3.95%2 3.55%2 59%
0.72 2.94 2.54 147
1.142,14 1.872,14 1.032,14 208
0.78%2 3.86%2 3.46%2 59%
0.83 2.74 2.32 147
1.262,14 1.772,14 0.912,14 208
1.12%2 3.59%2 3.20%2 59%
1.09 2.77 2.42 147
1.512 1.462 0.662 208
3.16%2 3.48%2 1.08%2 59%
1.19 2.77 2.32 147
1.612 1.462 0.562 208
0.69%2 3.75%2 3.46%2 44%
0.68 3.22 2.94 127
0.65 2.25 1.99 216
0.67 2.31 2.04 195
0.79 3.86 3.47 195
1.28 5.78 5.48 168
0.78%2 3.61%2 3.35%2 44%
0.80 3.07 2.82 127
0.78 2.09 1.86 216
0.80 2.28 2.03 195
0.81 3.76 3.50 195
1.52 5.64 5.36 168
1.06%2 3.34%2 3.08%2 44%
1.05 2.82 2.58 127
1.07 1.83 1.60 216
1.10 1.94 1.69 195
1.11 3.40 3.15 195
1.68 5.25 4.97 168
1.18%2 3.34%2 2.97%2 44%
1.15 2.81 2.47 127
1.27 1.74 1.35 216
1.20 1.91 1.61 195
1.27 3.18 2.93 195
1.70 4.91 4.64 168
1.85%2 2.58%2 2.29%2 44%
1.81 2.06 1.81 127
1.92 1.00 0.71 216
1.95 1.17 0.87 195
2.02 2.48 2.23 195
2.55 4.29 4.02 168
1.84%2 2.59%2 2.31%2 44%
1.81 2.06 1.82 127
1.93 0.98 0.69 216
1.95 1.16 0.86 195
2.00 2.30 2.05 195
2.26 4.04 3.77 168
129
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN
ASSET (LOSS) ON
VALUE NET INVESTMENTS
BEGINNING INVESTMENT (BOTH REALIZED
OF PERIOD INCOME13 AND UNREALIZED)13
=========== ============ ===================
---------------------
Intermediate Government Bond Portfolio
---------------------
Institutional Class
10/1/05 through 3/31/0617 $ 10.20 $ 0.206 $ (0.14)
9/30/05 10.45 0.396 ( 0.25)
9/30/04 10.63 0.386 ( 0.17)
9/30/0315 10.82 0.48 ( 0.15)
9/30/0215 10.55 0.55 0.26
9/30/0115 9.91 0.61 0.63
Service Class
10/1/05 through 3/31/0617 $ 10.19 $ 0.196 $ (0.15)
9/30/05 10.44 0.366 ( 0.25)
9/30/04 10.62 0.356 ( 0.17)
9/30/0315 10.81 0.45 ( 0.16)
9/30/0215 10.55 0.52 0.25
9/30/0115 9.91 0.58 0.63
Investor A Class
10/1/05 through 3/31/0617 $ 10.23 $ 0.186 $ (0.15)
9/30/05 10.47 0.356 ( 0.24)
9/30/04 10.65 0.336 ( 0.17)
9/30/0315 10.84 0.44 ( 0.16)
9/30/0215 10.57 0.51 0.25
9/30/0115 9.91 0.56 0.65
Investor B Class
10/1/05 through 3/31/0617 $ 10.20 $ 0.146 $ (0.14)
9/30/05 10.45 0.276 ( 0.24)
9/30/04 10.62 0.256 ( 0.16)
9/30/0315 10.82 0.34 ( 0.15)
9/30/0215 10.55 0.43 0.25
9/30/0115 9.91 0.49 0.63
Investor C Class
10/1/05 through 3/31/0617 $ 10.21 $ 0.146 $ (0.14)
9/30/05 10.46 0.276 ( 0.24)
9/30/04 10.63 0.266 ( 0.17)
9/30/0315 10.83 0.34 ( 0.15)
9/30/0215 10.55 0.42 0.27
9/30/0115 9.91 0.49 0.63
--------------
Intermediate Bond Portfolio
--------------
BlackRock Class
10/1/05 through 3/31/0617 $ 9.32 $ 0.186 $ (0.15)
9/30/05 9.57 0.356 ( 0.20)
9/30/04 9.89 0.356 ( 0.09)
9/30/0315 9.81 0.49 0.13
9/30/0215 9.72 0.55 0.18
9/30/0115 9.13 0.57 0.61
Institutional Class
10/1/05 through 3/31/0617 $ 9.32 $ 0.186 $ (0.15)
9/30/05 9.57 0.346 ( 0.20)
9/30/04 9.89 0.346 ( 0.10)
9/30/0315 9.81 0.47 0.14
9/30/0215 9.71 0.54 0.19
9/30/0115 9.13 0.57 0.59
Service Class
10/1/05 through 3/31/0617 $ 9.33 $ 0.176 $ (0.17)
9/30/05 9.57 0.316 ( 0.19)
9/30/04 9.89 0.316 ( 0.10)
9/30/0315 9.81 0.44 0.14
9/30/0215 9.71 0.52 0.18
9/30/0115 9.13 0.53 0.60
NET
DISTRIBUTIONS DISTRIBUTIONS ASSET
FROM NET DISTRIBUTIONS FROM NET VALUE
INVESTMENT FROM REALIZED END OF
INCOME5 CAPITAL GAINS PERIOD
=============== =============== =============== ============
---------------------
Intermediate Government
Bond Portfolio
---------------------
Institutional Class
10/1/05 through 3/31/0617 $ (0.19) $ - $ - $ 10.07
9/30/05 ( 0.26) (0.08) (0.05) 10.20
9/30/04 ( 0.39) - - 10.45
9/30/0315 ( 0.52) - - 10.63
9/30/0215 ( 0.54) - - 10.82
9/30/0115 ( 0.60) - - 10.55
Service Class
10/1/05 through 3/31/0617 $ (0.17) $ - $ - $ 10.06
9/30/05 ( 0.24) (0.07) (0.05) 10.19
9/30/04 ( 0.36) - - 10.44
9/30/0315 ( 0.48) - - 10.62
9/30/0215 ( 0.51) - - 10.81
9/30/0115 ( 0.57) - - 10.55
Investor A Class
10/1/05 through 3/31/0617 $ (0.17) $ - $ - $ 10.09
9/30/05 ( 0.23) (0.07) (0.05) 10.23
9/30/04 ( 0.34) - - 10.47
9/30/0315 ( 0.47) - - 10.65
9/30/0215 ( 0.49) - - 10.84
9/30/0115 ( 0.55) - - 10.57
Investor B Class
10/1/05 through 3/31/0617 $ (0.13) $ - $ - $ 10.07
9/30/05 ( 0.18) (0.05) (0.05) 10.20
9/30/04 ( 0.26) - - 10.45
9/30/0315 ( 0.39) - - 10.62
9/30/0215 ( 0.41) - - 10.82
9/30/0115 ( 0.48) - - 10.55
Investor C Class
10/1/05 through 3/31/0617 $ (0.13) $ - $ - $ 10.08
9/30/05 ( 0.18) (0.05) (0.05) 10.21
9/30/04 ( 0.26) - - 10.46
9/30/0315 ( 0.39) - - 10.63
9/30/0215 ( 0.41) - - 10.83
9/30/0115 ( 0.48) - - 10.55
--------------
Intermediate Bond Portfolio
--------------
BlackRock Class
10/1/05 through 3/31/0617 $ (0.21) $ - $ - $ 9.14
9/30/05 ( 0.32) - (0.08) 9.32
9/30/04 ( 0.36) - (0.22) 9.57
9/30/0315 ( 0.52) - (0.02) 9.89
9/30/0215 ( 0.54) - (0.10) 9.81
9/30/0115 ( 0.59) - - 9.72
Institutional Class
10/1/05 through 3/31/0617 $ (0.21) $ - $ - $ 9.14
9/30/05 ( 0.31) - (0.08) 9.32
9/30/04 ( 0.34) - (0.22) 9.57
9/30/0315 ( 0.51) - (0.02) 9.89
9/30/0215 ( 0.53) - (0.10) 9.81
9/30/0115 ( 0.58) - - 9.71
Service Class
10/1/05 through 3/31/0617 $ (0.19) $ - $ - $ 9.14
9/30/05 ( 0.28) - (0.08) 9.33
9/30/04 ( 0.31) - (0.22) 9.57
9/30/0315 ( 0.48) - (0.02) 9.89
9/30/0215 ( 0.50) - (0.10) 9.81
9/30/0115 ( 0.55) - - 9.71
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
130
BLACKROCK FUNDS
RATIO OF NET
NET EXPENSES TO
ASSETS RATIO OF NET AVERAGE NET
END OF EXPENSES TO ASSETS
TOTAL PERIOD AVERAGE NET (EXCLUDING
RETURN (000) ASSETS INTEREST EXPENSE)
======================= ============ ============== ===================
0.59%16 $ 199,479 0.60%2 0.60%2
1.38 214,980 0.60 0.60
2.01 236,212 0.60 0.60
3.09 230,609 0.60 0.60
7.97 281,983 0.60 0.60
12.90 309,383 1.33 0.60
0.44%16 $ 791 0.90%2 0.90%2
1.08 842 0.90 0.90
1.71 1,235 0.86 0.86
2.79 1,447 0.90 0.90
7.56 2,007 0.91 0.90
12.56 32,336 1.56 0.90
0.29%3,16 $ 307,523 1.00%2 1.00%2
1.073 345,132 0.99 0.99
1.543 43,500 1.05 1.05
2.603 54,693 1.07 1.07
7.463 52,507 1.08 1.07
12.583 14,033 1.64 1.04
0.00%4,16 $ 62,667 1.77%2 1.77%2
0.224 75,182 1.75 1.75
0.884 10,533 1.80 1.80
1.754 12,312 1.82 1.82
6.684 8,197 1.81 1.81
11.554 3,518 2.34 1.81
0.01%4,16 $ 16,352 1.77%2 1.77%2
0.224 20,154 1.75 1.75
0.884 14,194 1.80 1.80
1.754 18,028 1.82 1.82
6.774 7,389 1.81 1.81
11.554 1,677 2.24 1.77
0.37%7,16 $ 438,586 0.45%2 0.45%2
1.61 435,529 0.45 0.45
2.72 444,821 0.45 0.45
6.56 392,112 0.45 0.45
7.87 371,857 0.48 0.45
13.39 524,046 0.70 0.45
0.30%7,16 $ 290,952 0.56%2 0.56%2
1.46 316,522 0.60 0.60
2.57 332,460 0.60 0.60
6.40 371,079 0.61 0.60
7.82 378,616 0.63 0.60
13.11 502,749 0.95 0.60
0.05%7,16 $ 97,993 0.87%2 0.87%2
1.30 94,557 0.86 0.86
2.26 84,013 0.89 0.89
6.08 56,632 0.89 0.89
7.50 35,198 0.94 0.90
12.77 35,351 1.21 0.90
RATIO OF NET
RATIO OF TOTAL INVESTMENT
EXPENSES RATIO OF NET INCOME
TO AVERAGE INVESTMENT TO AVERAGE
NET ASSETS INCOME NET ASSETS PORTFOLIO
(EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
WAIVERS) ASSETS13 WAIVERS)13 RATE
================ ================ ============= ==========
0.84%2 4.01%2 3.77%2 62%
0.89 3.78 3.49 194
0.84 3.62 3.38 200
0.85 4.51 4.26 143
0.83 5.38 5.16 183
1.54 5.98 5.76 157
1.12%2 3.72%2 3.50%2 62%
1.14 3.48 3.24 194
1.08 3.38 3.16 200
1.15 4.22 3.97 143
1.12 5.34 5.12 183
1.78 5.66 5.44 157
1.23%2 3.61%2 3.38%2 62%
1.25 3.43 3.17 194
1.33 3.17 2.89 200
1.32 3.99 3.75 143
1.30 4.83 4.61 183
1.85 5.30 5.09 157
1.91%2 2.85%2 2.71%2 62%
1.90 2.69 2.54 194
1.98 2.43 2.25 200
2.06 3.22 2.97 143
2.04 4.00 3.78 183
2.56 4.68 4.47 157
1.91%2 2.85%2 2.71%2 62%
1.90 2.66 2.51 194
1.98 2.45 2.27 200
2.06 3.13 2.89 143
2.03 3.93 3.71 183
2.45 4.58 4.37 157
0.70%2 4.01%2 3.76%2 51%
0.70 3.75 3.50 194
0.69 3.67 3.43 216
0.69 4.92 4.68 220
0.81 5.80 5.48 239
0.92 6.08 5.86 250
0.79%2 3.90%2 3.67%2 51%
0.83 3.60 3.37 194
0.81 3.53 3.32 216
0.84 4.81 4.59 220
0.84 5.66 5.45 239
1.16 6.03 5.83 250
1.12%2 3.59%2 3.34%2 51%
1.08 3.34 3.12 194
1.10 3.23 3.02 216
1.11 4.44 4.22 220
1.15 5.36 5.15 239
1.41 5.70 5.49 250
131
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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 INCOME13 AND UNREALIZED)13 INCOME5 GAINS PERIOD
=========== ============ =================== =============== =============== ===========
---------------------
Intermediate Bond Portfolio (Continued)
---------------------
Investor A Class
10/1/05 through 3/31/0617 $ 9.32 $ 0.176 $ (0.16) $ (0.19) $ - $ 9.14
9/30/05 9.57 0.326 ( 0.20) ( 0.29) (0.08) 9.32
9/30/04 9.88 0.316 ( 0.09) ( 0.31) (0.22) 9.57
9/30/0315 9.81 0.43 0.14 ( 0.48) (0.02) 9.88
9/30/0215 9.71 0.49 0.19 ( 0.48) (0.10) 9.81
9/30/0115 9.12 0.52 0.61 ( 0.54) - 9.71
Investor B Class
10/1/05 through 3/31/0617 $ 9.32 $ 0.136 $ (0.15) $ (0.16) $ - $ 9.14
9/30/05 9.57 0.246 ( 0.20) ( 0.21) (0.08) 9.32
9/30/04 9.89 0.236 ( 0.09) ( 0.24) (0.22) 9.57
9/30/0315 9.81 0.36 0.14 ( 0.40) (0.02) 9.89
9/30/0215 9.72 0.43 0.17 ( 0.41) (0.10) 9.81
9/30/0115 9.13 0.45 0.61 ( 0.47) - 9.72
Investor C Class
10/1/05 through 3/31/0617 $ 9.33 $ 0.136 $ (0.15) $ (0.16) $ - $ 9.15
9/30/05 9.57 0.256 ( 0.20) ( 0.21) (0.08) 9.33
9/30/04 9.89 0.236 ( 0.09) ( 0.24) (0.22) 9.57
9/30/0315 9.82 0.35 0.14 ( 0.40) (0.02) 9.89
9/30/0215 9.72 0.42 0.19 ( 0.41) (0.10) 9.82
9/30/0115 9.14 0.45 0.60 ( 0.47) - 9.72
-----------------
Intermediate PLUS Bond Portfolio
-----------------
BlackRock Class
10/1/05 through 3/31/0617 $ 9.82 $ 0.216 $ (0.17) $ (0.21) $ - $ 9.65
9/30/05 10.01 0.376 ( 0.17) ( 0.38) (0.01) 9.82
8/18/041 through 9/30/04 10.00 0.106 ( 0.04) ( 0.05) - 10.01
Institutional Class
10/1/05 through 3/31/0617 $ 10.17 $ 0.206 $ (0.18) $ (0.20) $ - $ 9.99
9/30/05 10.06 0.316 ( 0.13) ( 0.06) (0.01) 10.17
8/18/041 through 9/30/04 10.00 0.066 - - - 10.06
Service Class
10/1/05 through 3/31/0617 $ 10.19 $ 0.166 $ (0.16) $ (0.12) $ - $ 10.07
9/30/0510 10.04 0.336 ( 0.17) - (0.01) 10.19
8/18/041 through 9/30/04 10.00 0.016 0.03 - - 10.04
Investor A Class
10/1/05 through 3/31/0617 $ 10.02 $ 0.196 $ (0.19) $ (0.19) $ - $ 9.83
9/30/05 10.06 0.336 ( 0.17) ( 0.19) (0.01) 10.02
8/18/041 through 9/30/04 10.00 0.066 - - - 10.06
Investor B Class
10/1/05 through 3/31/0617 $ 10.01 $ 0.156 $ (0.17) $ (0.15) $ - $ 9.84
9/30/05 10.06 0.236 ( 0.15) ( 0.12) (0.01) 10.01
8/18/041 through 9/30/04 10.00 0.066 - - - 10.06
Investor C Class
10/1/05 through 3/31/0617 $ 10.13 $ 0.186 $ (0.20) $ (0.10) $ - $ 10.01
9/30/05 10.06 0.196 ( 0.11) - (0.01) 10.13
8/18/041 through 9/30/04 10.00 0.066 - - - 10.06
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
132
BLACKROCK FUNDS
RATIO OF NET
EXPENSES TO
NET AVERAGE NET
ASSETS RATIO OF NET ASSETS
END OF EXPENSES TO (EXCLUDING
TOTAL PERIOD AVERAGE NET INTEREST
RETURN (000) ASSETS EXPENSE)
================================== ========== ================== ==================
0.16%3,7,16 $ 26,062 0.87%2 0.87%2
1.203 31,272 0.86 0.86
2.333 33,977 0.93 0.93
5.923 38,547 0.94 0.94
7.323 26,805 1.12 1.07
12.583 7,106 1.33 1.06
(0.22)%4,7,16 $ 9,449 1.64%2 1.64%2
0.444 10,594 1.61 1.61
1.464 14,106 1.68 1.68
5.244 12,850 1.69 1.69
6.414 6,291 1.86 1.81
11.874 2,933 2.05 1.80
( 0.22)%4,7,16 $ 8,792 1.61%2 1.61%2
0.544 9,204 1.61 1.61
1.464 14,334 1.67 1.67
5.134 13,046 1.68 1.68
6.524 3,950 1.85 1.80
11.744 885 2.11 1.81
0.41%16 $ 29,945 0.40%2 0.40%2
1.98 30,133 0.40 0.40
0.5716 25,918 0.402,14 0.402,14
0.23%16 $ 803 0.52%2 0.52%2
1.78 826 0.55 0.55
0.6016 -18 0.552 0.552
0.04%16 $ -18 0.81%2 0.81%2
1.58 -18 0.80 0.80
0.4016 -18 0.812 0.812
(0.01)%3,16 $ 45 0.80%2 0.80%2
1.603 20 0.80 0.80
0.603,16 -18 0.812 0.812
( 0.18)%4,16 $ 2 1.50%2 1.50%2
0.814 2 1.55 1.55
0.604,16 -18 1.562 1.562
(0.19)%4,16 $ -18 1.51%2 1.51%2
0.784 -18 1.55 1.55
0.604,16 -18 1.562 1.562
RATIO OF NET
RATIO OF TOTAL INVESTMENT
EXPENSES RATIO OF NET INCOME
TO AVERAGE INVESTMENT TO AVERAGE
NET ASSETS INCOME NET ASSETS PORTFOLIO
(EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
WAIVERS) ASSETS13 WAIVERS)13 RATE
================= ================== ================== ==========
1.19%2 3.59%2 3.27%2 51%
1.18 3.34 3.02 194
1.29 3.20 2.83 216
1.21 4.46 4.19 220
1.33 5.22 5.01 239
1.54 5.44 5.24 250
1.86%2 2.83%2 2.61%2 51%
1.83 2.59 2.37 194
1.94 2.45 2.18 216
1.96 3.67 3.40 220
2.07 4.45 4.24 239
2.25 4.67 4.47 250
1.83%2 2.84%2 2.62%2 51%
1.83 2.59 2.37 194
1.93 2.45 2.18 216
1.95 3.51 3.25 220
2.06 4.37 4.16 239
2.31 4.74 4.54 250
1.00%2 4.33%2 3.73%2 63%
1.04 3.72 3.08 217
3.402,14 3.912,14 0.912,14 114
1.06%2 4.07%2 3.53%2 63%
1.18 3.63 3.00 217
3.522 3.762 0.792 114
20.38%2 3.16%2 (16.41)%2 63%
1.42 3.37 2.75 217
3.772 3.502 0.542 114
1.44%2 3.87%2 3.23%2 63%
1.52 3.37 2.65 217
3.872 3.502 0.442 114
3.44%2 3.10%2 1.16%2 63%
2.17 2.62 2.00 217
4.522 2.752 ( 0.21)2 114
12.51%2 3.53%2 ( 7.47)%2 63%
2.17 2.62 2.00 217
4.522 2.752 ( 0.21)2 114
133
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN NET
ASSET NET (LOSS) ON DISTRIBUTIONS DISTRIBUTIONS ASSET
VALUE INVESTMENT INVESTMENTS FROM NET FROM NET VALUE
BEGINNING INCOME (BOTH REALIZED INVESTMENT REALIZED END OF
OF PERIOD (LOSS)13 AND UNREALIZED)13 INCOME5 GAINS PERIOD
=========== ============ =================== =============== =============== ===========
-----------------
Core Bond Total Return Portfolio
-----------------
BlackRock Class
10/1/05 through 3/31/0617 $ 9.64 $ 0.216 $ (0.19) $ (0.22) $ (0.05) $ 9.39
9/30/05 9.76 0.406 ( 0.11) ( 0.39) ( 0.02) 9.64
9/30/04 10.03 0.406 ( 0.06) ( 0.36) ( 0.25) 9.76
9/30/0315 10.02 0.45 0.16 ( 0.55) ( 0.05) 10.03
9/30/0215 9.98 0.54 0.20 ( 0.58) ( 0.12) 10.02
9/30/0115 9.36 0.58 0.62 ( 0.58) - 9.98
Institutional Class
10/1/05 through 3/31/0617 $ 9.62 $ 0.206 $ (0.19) $ (0.21) $ (0.05) $ 9.37
9/30/05 9.74 0.396 ( 0.12) ( 0.37) ( 0.02) 9.62
9/30/04 10.01 0.396 ( 0.04) ( 0.37) ( 0.25) 9.74
9/30/0315 10.00 0.44 0.16 ( 0.54) ( 0.05) 10.01
9/30/0215 9.98 0.53 0.18 ( 0.57) ( 0.12) 10.00
9/30/0115 9.36 0.57 0.62 ( 0.57) - 9.98
Service Class
10/1/05 through 3/31/0617 $ 9.62 $ 0.196 $ (0.19) $ (0.20) $ (0.05) $ 9.37
9/30/05 9.74 0.366 ( 0.11) ( 0.35) ( 0.02) 9.62
9/30/04 10.01 0.366 ( 0.04) ( 0.34) ( 0.25) 9.74
9/30/0315 9.99 0.42 0.16 ( 0.51) ( 0.05) 10.01
9/30/0215 9.98 0.52 0.15 ( 0.54) ( 0.12) 9.99
9/30/0115 9.36 0.54 0.62 ( 0.54) - 9.98
Investor A Class
10/1/05 through 3/31/0617 $ 9.63 $ 0.196 $ (0.19) $ (0.20) $ (0.05) $ 9.38
9/30/05 9.75 0.366 ( 0.11) ( 0.35) ( 0.02) 9.63
9/30/04 10.01 0.356 ( 0.02) ( 0.34) ( 0.25) 9.75
9/30/0315 10.00 0.40 0.16 ( 0.50) ( 0.05) 10.01
9/30/0215 9.99 0.47 0.18 ( 0.52) ( 0.12) 10.00
9/30/0115 9.36 0.53 0.62 ( 0.52) - 9.99
Investor B Class
10/1/05 through 3/31/0617 $ 9.62 $ 0.156 $ (0.19) $ (0.16) $ (0.05) $ 9.37
9/30/05 9.75 0.296 ( 0.13) ( 0.27) ( 0.02) 9.62
9/30/04 10.01 0.286 ( 0.02) ( 0.27) ( 0.25) 9.75
9/30/0315 10.00 0.33 0.16 ( 0.43) ( 0.05) 10.01
9/30/0215 9.98 0.41 0.18 ( 0.45) ( 0.12) 10.00
9/30/0115 9.35 0.46 0.62 ( 0.45) - 9.98
Investor C Class
10/1/05 through 3/31/0617 $ 9.63 $ 0.156 $ (0.18) $ (0.17) $ (0.05) $ 9.38
9/30/05 9.75 0.296 ( 0.12) ( 0.27) ( 0.02) 9.63
9/30/04 10.02 0.286 ( 0.03) ( 0.27) ( 0.25) 9.75
9/30/0315 10.01 0.33 0.16 ( 0.43) ( 0.05) 10.02
9/30/0215 9.99 0.42 0.17 ( 0.45) ( 0.12) 10.01
9/30/0115 9.35 0.46 0.63 ( 0.45) - 9.99
-----------------
Core PLUS Total Return Portfolio
-----------------
BlackRock Class
10/1/05 through 3/31/0617 $ 10.27 $ 0.226 $ (0.19) $ (0.23) $ (0.05) $ 10.02
9/30/05 10.34 0.416 ( 0.08) ( 0.40) - 10.27
9/30/04 10.46 0.386 ( 0.01) ( 0.36) ( 0.13) 10.34
9/30/0315 10.31 0.42 0.29 ( 0.50) ( 0.06) 10.46
12/07/011,15 through 9/30/02 10.00 0.40 0.32 ( 0.41) - 10.31
Institutional Class
10/1/05 through 3/31/0617 $ 10.21 $ 0.226 $ (0.19) $ (0.23) $ (0.05) $ 9.96
9/30/05 10.28 0.476 ( 0.16) ( 0.38) - 10.21
9/30/04 10.46 0.286 0.02 ( 0.35) ( 0.13) 10.28
9/30/0315 10.31 0.40 0.29 ( 0.48) ( 0.06) 10.46
12/07/011,15 through 9/30/02 10.00 0.24 0.47 ( 0.40) - 10.31
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
134
BLACKROCK FUNDS
RATIO OF NET
NET EXPENSES TO
ASSETS RATIO OF NET AVERAGE NET
END OF EXPENSES TO ASSETS
TOTAL PERIOD AVERAGE NET (EXCLUDING
RETURN (000) ASSETS INTEREST EXPENSE)
=========================== ============== ============== ===================
0.19%16 $ 1,509,489 0.40%2 0.40%2
2.96 1,543,861 0.40 0.40
3.83 1,400,826 0.40 0.40
6.33 1,035,461 0.40 0.40
7.74 763,736 0.46 0.40
13.21 530,153 0.47 0.40
0.12%16 $ 657,550 0.51%2 0.51%2
2.81 614,700 0.55 0.55
3.68 697,687 0.55 0.55
6.19 907,864 0.55 0.55
7.36 918,935 0.60 0.55
13.04 1,088,073 0.63 0.55
( 0.01)%16 $ 135,524 0.78%2 0.78%2
2.54 158,200 0.81 0.81
3.38 152,085 0.84 0.84
5.98 139,499 0.85 0.85
6.94 115,774 0.91 0.85
12.71 112,748 0.91 0.85
(0.02)%3,16 $ 229,189 0.81%2 0.81%2
2.543 214,196 0.81 0.81
3.443 132,561 0.88 0.88
5.813 113,190 0.90 0.90
6.753 90,460 1.08 1.02
12.633 22,123 1.07 1.02
( 0.41)%4,16 $ 43,359 1.59%2 1.59%2
1.674 49,389 1.56 1.56
2.664 56,758 1.63 1.63
5.034 70,550 1.65 1.65
6.064 56,047 1.83 1.76
11.694 36,314 1.81 1.75
(0.40)%4,16 $ 65,999 1.58%2 1.58%2
1.774 73,954 1.56 1.56
2.564 85,717 1.62 1.62
5.024 81,478 1.65 1.65
6.064 47,326 1.82 1.76
11.804 21,678 1.79 1.75
0.29%16 $ 344,951 0.40%2 0.40%2
3.21 326,033 0.40 0.40
3.65 285,096 0.40 0.40
7.00 224,248 0.40 0.40
7.3716 95,503 0.322 0.322
0.23%16 $ 3,910 0.46%2 0.46%2
3.08 -18 0.55 0.55
2.91 -18 0.55 0.55
6.84 -18 0.55 0.55
7.2116 -18 0.522 0.522
RATIO OF NET
RATIO OF TOTAL INVESTMENT
EXPENSES RATIO OF NET INCOME
TO AVERAGE INVESTMENT TO AVERAGE
NET ASSETS INCOME NET ASSETS PORTFOLIO
(EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
WAIVERS) ASSETS13 WAIVERS)13 RATE
================ ================ ============= ==========
0.63%2 4.40%2 4.17%2 131%
0.64 4.13 3.89 351
0.63 4.13 3.89 360
0.65 4.52 4.28 6598
0.79 5.48 5.14 359
0.72 6.04 5.80 304
0.73%2 4.29%2 4.07%2 131%
0.77 4.00 3.78 351
0.76 3.97 3.76 360
0.78 4.44 4.21 6598
0.82 5.36 5.14 359
0.85 5.91 5.68 304
0.99%2 4.02%2 3.81%2 131%
1.03 3.73 3.51 351
1.05 3.69 3.48 360
1.08 4.09 3.86 6598
1.13 5.07 4.85 359
1.13 5.56 5.34 304
1.13%2 3.98%2 3.66%2 131%
1.13 3.72 3.40 351
1.23 3.65 3.30 360
1.25 4.01 3.66 6598
1.30 4.89 4.67 359
1.28 5.34 5.13 304
1.80%2 3.22%2 3.01%2 131%
1.78 2.97 2.75 351
1.88 2.88 2.63 360
2.00 3.26 2.91 6598
2.04 4.14 3.92 359
2.02 4.62 4.41 304
1.79%2 3.23%2 3.02%2 131%
1.78 2.93 2.71 351
1.87 2.89 2.64 360
2.00 3.22 2.87 6598
2.04 4.14 3.92 359
2.00 4.57 4.36 304
0.71%2 4.39%2 4.08%2 121%
0.72 3.98 3.66 358
0.71 3.68 3.37 412
0.75 3.61 3.26 1,0219
0.722 3.942 3.542 330
0.71%2 4.49%2 4.24%2 121%
0.83 3.83 3.55 358
0.82 3.53 3.26 412
0.90 3.47 3.12 1,0219
0.932 3.802 3.382 330
135
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN
ASSET NET (LOSS) ON
VALUE INVESTMENT INVESTMENTS
BEGINNING INCOME (BOTH REALIZED
OF PERIOD (LOSS)13 AND UNREALIZED)13
=========== ============ ===================
------------------------
Core PLUS Total Return Portfolio (Continued)
------------------------
Service Class
10/1/05 through 3/31/0617 $ 10.33 $ 0.206 $ (0.19)
9/30/05 10.40 0.386 ( 0.09)
9/30/04 10.46 0.386 0.01
9/30/0315 10.31 0.37 0.29
12/07/011,15 through 9/30/02 10.00 0.23 0.48
Investor A Class
10/1/05 through 3/31/0617 $ 10.28 $ 0.206 $ (0.20)
9/30/05 10.35 0.366 ( 0.07)
9/30/04 10.46 0.336 -
9/30/0315 10.31 0.37 0.29
12/07/011,15 through 9/30/02 10.00 0.08 0.59
Investor B Class
10/1/05 through 3/31/0617 $ 10.27 $ 0.166 $ (0.19)
9/30/05 10.34 0.296 ( 0.08)
9/30/04 10.46 0.256 -
9/30/0315 10.31 0.29 0.29
12/07/011,15 through 9/30/02 10.00 0.43 0.21
Investor C Class
10/1/05 through 3/31/0617 $ 10.26 $ 0.166 $ (0.19)
9/30/05 10.33 0.286 ( 0.07)
9/30/04 10.46 0.276 ( 0.03)
9/30/0315 10.31 0.29 0.29
12/07/011,15 through 9/30/02 10.00 0.43 0.21
---------------
Government Income Portfolio
---------------
BlackRock Class
10/1/05 through 3/31/0617 $ 10.91 $ 0.246 $ (0.28)
9/30/05 11.18 0.486 ( 0.21)
9/30/04 11.34 0.476 ( 0.05)
2/10/031,15 through 9/30/03 11.27 0.606 ( 0.19)
Service Class
10/1/05 through 3/31/0617 $ 10.90 $ 0.226 $ (0.29)
10/27/041 through 09/30/05 11.21 0.406 ( 0.24)
Investor A Class
10/1/05 through 3/31/0617 $ 10.91 $ 0.226 $ (0.30)
9/30/05 11.18 0.436 ( 0.21)
9/30/04 11.33 0.406 ( 0.03)
9/30/0315 11.40 0.346 0.14
9/30/0215 10.99 0.456 0.74
9/30/0115 10.03 0.56 0.94
Investor B Class
10/1/05 through 3/31/0617 $ 10.91 $ 0.186 $ (0.30)
9/30/05 11.18 0.356 ( 0.21)
9/30/04 11.33 0.316 ( 0.03)
9/30/0315 11.40 0.306 0.10
9/30/0215 10.98 0.396 0.73
9/30/0115 10.03 0.48 0.93
Investor C Class
10/1/05 through 3/31/0617 $ 10.89 $ 0.186 $ (0.29)
9/30/05 11.16 0.356 ( 0.21)
9/30/04 11.31 0.316 ( 0.03)
9/30/0315 11.38 0.306 0.10
9/30/0215 10.97 0.366 0.75
9/30/0115 10.02 0.47 0.94
NET
DISTRIBUTIONS DISTRIBUTIONS ASSET
FROM NET DISTRIBUTIONS FROM NET VALUE
INVESTMENT FROM REALIZED END OF
INCOME5 CAPITAL GAINS PERIOD
=============== =============== =============== ============
------------------------
Core PLUS Total Return
Portfolio (Continued)
------------------------
Service Class
10/1/05 through 3/31/0617 $ (0.21) $ - $ (0.05) $ 10.08
9/30/05 ( 0.36) - - 10.33
9/30/04 ( 0.32) - ( 0.13) 10.40
9/30/0315 ( 0.45) - ( 0.06) 10.46
12/07/011,15 through 9/30/02 ( 0.40) - - 10.31
Investor A Class
10/1/05 through 3/31/0617 $ (0.21) $ - $ (0.05) $ 10.02
9/30/05 ( 0.36) - - 10.28
9/30/04 ( 0.31) - ( 0.13) 10.35
9/30/0315 ( 0.45) - ( 0.06) 10.46
12/07/011,15 through 9/30/02 ( 0.36) - - 10.31
Investor B Class
10/1/05 through 3/31/0617 $ (0.17) $ - $ (0.05) $ 10.02
9/30/05 ( 0.28) - - 10.27
9/30/04 ( 0.24) - ( 0.13) 10.34
9/30/0315 ( 0.37) - ( 0.06) 10.46
12/07/011,15 through 9/30/02 ( 0.33) - - 10.31
Investor C Class
10/1/05 through 3/31/0617 $ (0.17) $ - $ (0.05) $ 10.01
9/30/05 ( 0.28) - - 10.26
9/30/04 ( 0.24) - ( 0.13) 10.33
9/30/0315 ( 0.37) - ( 0.06) 10.46
12/07/011,15 through 9/30/02 ( 0.33) - - 10.31
---------------
Government Income Portfolio
---------------
BlackRock Class
10/1/05 through 3/31/0617 $ (0.24) $ - $ - $ 10.63
9/30/05 ( 0.52) (0.02) - 10.91
9/30/04 ( 0.42) - ( 0.16) 11.18
2/10/031,15 through 9/30/03 ( 0.34) - - 11.34
Service Class
10/1/05 through 3/31/0617 $ (0.21) $ - $ - $ 10.62
10/27/041 through 09/30/05 ( 0.45) (0.02) - 10.90
Investor A Class
10/1/05 through 3/31/0617 $ (0.21) $ - $ - $ 10.62
9/30/05 ( 0.47) (0.02) - 10.91
9/30/04 ( 0.36) - ( 0.16) 11.18
9/30/0315 ( 0.46) - ( 0.09) 11.33
9/30/0215 ( 0.51) - ( 0.27) 11.40
9/30/0115 ( 0.54) - - 10.99
Investor B Class
10/1/05 through 3/31/0617 $ (0.17) $ - $ - $ 10.62
9/30/05 ( 0.39) (0.02) - 10.91
9/30/04 ( 0.27) - ( 0.16) 11.18
9/30/0315 ( 0.38) - ( 0.09) 11.33
9/30/0215 ( 0.43) - ( 0.27) 11.40
9/30/0115 ( 0.46) - - 10.98
Investor C Class
10/1/05 through 3/31/0617 $ (0.17) $ - $ - $ 10.61
9/30/05 ( 0.39) (0.02) - 10.89
9/30/04 ( 0.27) - ( 0.16) 11.16
9/30/0315 ( 0.38) - ( 0.09) 11.31
9/30/0215 ( 0.43) - ( 0.27) 11.38
9/30/0115 ( 0.46) - - 10.97
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
136
BLACKROCK FUNDS
RATIO OF NET
NET EXPENSES TO
ASSETS RATIO OF NET AVERAGE NET
END OF EXPENSES TO ASSETS
TOTAL PERIOD AVERAGE NET (EXCLUDING
RETURN (000) ASSETS INTEREST EXPENSE)
=========================== ============ ============== ===================
0.08%16 $ -18 0.85%2 0.85%2
2.77 -18 0.80 0.80
3.78 29 0.78 0.78
6.53 -18 0.85 0.85
7.2216 -18 0.822 0.822
(0.02)%3,16 $ 103 0.85%2 0.85%2
2.793 88 0.80 0.80
3.253 9 0.86 0.86
6.473 8 0.90 0.90
6.883,16 2 0.992 0.992
( 0.30)%4,16 $ 139 1.59%2 1.59%2
2.024 137 1.56 1.56
2.384 103 1.63 1.63
5.684 80 1.65 1.65
6.464,16 -18 1.742 1.742
(0.30)%4,16 $ 74 1.59%2 1.59%2
2.024 53 1.55 1.56
2.284 -18 1.63 1.63
5.684 -18 1.65 1.65
6.464,16 -18 1.742 1.742
( 0.42)%16 $ 9,123 0.45%2 0.45%2
2.43 9,164 0.45 0.45
3.85 10,899 0.44 0.44
3.6816 3 0.292 0.292
(0.62)%16 $ 237,135 0.84%2 0.84%2
1.4616 212,963 0.852 0.852
(0.72)%3,16 $ 279,420 0.87%2 0.87%2
2.013 247,380 0.86 0.86
3.343 126,332 0.98 0.98
4.343 86,559 1.07 1.07
11.473 42,845 1.11 1.07
15.363 12,040 1.31 1.06
(1.10)%4,16 $ 36,311 1.66%2 1.66%2
1.254 42,479 1.61 1.61
2.574 44,786 1.73 1.73
3.564 53,897 1.82 1.82
10.744 48,240 1.87 1.82
14.414 29,936 2.10 1.82
(1.00)%4,16 $ 32,494 1.62%2 1.62%2
1.254 31,840 1.61 1.61
2.574 26,036 1.73 1.73
3.564 29,537 1.82 1.82
10.664 18,378 1.84 1.81
14.424 3,589 2.04 1.80
RATIO OF NET
RATIO OF TOTAL INVESTMENT
EXPENSES RATIO OF NET INCOME
TO AVERAGE INVESTMENT TO AVERAGE
NET ASSETS INCOME NET ASSETS PORTFOLIO
(EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
WAIVERS) ASSETS13 WAIVERS)13 RATE
================ ================ =============== ==========
13.87%2 3.91%2 (9.11)%2 121%
1.08 3.57 3.29 358
1.07 3.74 3.45 412
1.20 3.17 2.82 1,0219
1.232 3.502 3.082 330
1.28%2 3.97%2 3.54%2 121%
1.19 3.56 3.17 358
1.28 3.21 2.79 412
1.25 3.12 2.77 1,0219
1.402 3.332 2.912 330
1.90%2 3.20%2 2.89%2 121%
1.84 2.84 2.56 358
1.97 2.46 2.12 412
2.00 2.36 2.01 1,0219
2.152 2.582 2.162 330
1.87%2 3.18%2 2.90%2 121%
1.84 2.78 2.49 358
1.97 2.46 2.12 412
2.00 2.37 2.02 1,0219
2.152 2.582 2.162 330
0.74%2 4.52%2 4.23%2 305%
0.77 4.35 4.03 662
0.78 4.25 3.92 345
0.472 2.952 2.762 1,98110
1.09%2 4.13%2 3.88%2 305%
1.152 3.952 3.652 662
1.22%2 4.10%2 3.75%2 305%
1.26 3.92 3.52 662
1.38 3.63 3.23 345
1.34 3.05 2.78 1,98110
1.41 4.26 3.97 615
1.60 5.25 4.96 849
1.91%2 3.32%2 3.07%2 305%
1.90 3.20 2.91 662
2.03 2.81 2.51 345
2.09 2.62 2.35 1,98110
2.17 3.69 3.40 615
2.39 4.62 4.33 849
1.87%2 3.36%2 3.11%2 305%
1.90 3.19 2.90 662
2.03 2.81 2.51 345
2.09 2.61 2.34 1,98110
2.13 3.42 3.13 615
2.33 4.50 4.21 849
137
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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 INCOME13 AND UNREALIZED)13 INCOME5 GAINS PERIOD
=========== ============ =================== =============== =============== ===========
-----------------
Inflation Protected Bond Portfolio
-----------------
BlackRock Class
10/1/05 through 3/31/0617 $ 10.35 $ 0.246 $ (0.31) $ (0.40) $ (0.13) $ 9.75
9/30/05 10.38 0.416 0.19 ( 0.53) ( 0.10) 10.35
6/28/041 through 9/30/04 10.00 0.126 0.38 ( 0.12) - 10.38
Institutional Class
10/1/05 through 3/31/0617 $ 10.54 $ 0.186 $ (0.27) $ (0.39) $ (0.13) $ 9.93
9/30/05 10.54 0.426 0.18 ( 0.50) ( 0.10) 10.54
6/28/041 through 9/30/04 10.00 0.166 0.38 - - 10.54
Service Class
10/1/05 through 3/31/0617 $ 10.56 $ 0.186 $ (0.29) $ (0.38) $ (0.13) $ 9.94
9/30/05 10.39 0.436 0.14 ( 0.30) ( 0.10) 10.56
6/28/041 through 9/30/04 10.00 ( 0.02)6 0.41 - - 10.39
Investor A Class
10/1/05 through 3/31/0617 $ 10.47 $ 0.226 $ (0.32) $ (0.38) $ (0.13) $ 9.86
9/30/05 10.50 0.426 0.13 ( 0.48) ( 0.10) 10.47
6/28/041 through 9/30/04 10.00 0.016 0.51 ( 0.02) - 10.50
Investor B Class
10/1/05 through 3/31/0617 $ 10.48 $ 0.166 $ (0.28) $ (0.35) $ (0.13) $ 9.88
9/30/05 10.51 0.386 0.09 ( 0.40) ( 0.10) 10.48
6/28/041 through 9/30/04 10.00 ( 0.01)6 0.53 ( 0.01) - 10.51
Investor C Class
10/1/05 through 3/31/0617 $ 10.53 $ 0.176 $ (0.30) $ (0.35) $ (0.13) $ 9.92
9/30/05 10.55 0.366 0.12 ( 0.40) ( 0.10) 10.53
6/28/041 through 9/30/04 10.00 ( 0.01)6 0.56 - - 10.55
--------
GNMA Portfolio
--------
BlackRock Class
10/1/05 through 3/31/0617 $ 9.69 $ 0.226 $ (0.12) $ (0.29) $ - $ 9.50
9/30/05 9.87 0.446 ( 0.20) ( 0.42) - 9.69
9/30/04 10.02 0.486 ( 0.14) ( 0.49) - 9.87
12/19/021,15 through 9/30/03 10.27 0.41 ( 0.18) ( 0.48) - 10.02
Institutional Class
10/1/05 through 3/31/0617 $ 9.70 $ 0.216 $ (0.11) $ (0.29) $ - $ 9.51
9/30/05 9.88 0.436 ( 0.21) ( 0.40) - 9.70
9/30/04 10.02 0.476 ( 0.09) ( 0.52) - 9.88
9/30/0315 10.23 0.48 ( 0.08) ( 0.61) - 10.02
9/30/0215 10.28 0.61 0.18 ( 0.63) ( 0.21) 10.23
9/30/0115 9.70 0.63 0.58 ( 0.63) - 10.28
Service Class
10/1/05 through 3/31/0617 $ 9.69 $ 0.206 $ (0.12) $ (0.27) $ - $ 9.50
9/30/05 9.87 0.396 ( 0.19) ( 0.38) - 9.69
9/30/04 10.01 0.446 ( 0.08) ( 0.50) - 9.87
9/30/0315 10.23 0.50 ( 0.14) ( 0.58) - 10.01
9/30/0215 10.29 0.56 0.19 ( 0.60) ( 0.21) 10.23
9/30/0115 9.72 0.60 0.57 ( 0.60) - 10.29
Investor A Class
10/1/05 through 3/31/0617 $ 9.74 $ 0.206 $ (0.12) $ (0.27) $ - $ 9.55
9/30/05 9.92 0.416 ( 0.21) ( 0.38) - 9.74
9/30/04 10.06 0.436 ( 0.09) ( 0.48) - 9.92
9/30/0315 10.27 0.46 ( 0.11) ( 0.56) - 10.06
9/30/0215 10.32 0.54 0.20 ( 0.58) ( 0.21) 10.27
9/30/0115 9.71 0.58 0.61 ( 0.58) - 10.32
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
138
BLACKROCK FUNDS
RATIO OF NET
EXPENSES TO
NET AVERAGE NET
ASSETS RATIO OF NET ASSETS
END OF EXPENSES TO (EXCLUDING
TOTAL PERIOD AVERAGE NET INTEREST
RETURN (000) ASSETS EXPENSE)
============================ =========== ================== ==================
( 0.71)%16 $ 19,886 0.30%2 0.30%2
5.91 22,975 0.30 0.30
5.0516 20,763 0.302,14 0.302,14
(0.84)%16 $ 13,943 0.37%2 0.37%2
5.90 5,788 0.40 0.40
5.4016 -18 0.402 0.402
( 1.12)%16 $ 3 0.71%2 0.71%2
5.52 2 0.69 0.69
3.9016 -18 0.712 0.712
(1.00)%3,16 $ 4,058 0.70%2 0.70%2
5.423 3,994 0.69 0.69
5.213,16 93 0.712 0.712
( 1.26)%4,16 $ 2,630 1.43%2 1.43%2
4.624 2,045 1.44 1.44
5.214,16 61 1.442 1.442
(1.34)%4,16 $ 4,020 1.41%2 1.41%2
4.704 3,749 1.42 1.42
5.514,16 6 1.442 1.442
1.05%16 $ 11,314 0.45%2 0.45%2
2.44 10,915 0.45 0.45
4.02 10,659 0.50 0.45
2.3316 59,935 0.352 0.352
0.99%16 $ 108,889 0.56%2 0.56%2
2.28 121,571 0.61 0.60
3.97 151,558 0.66 0.60
4.00 172,358 0.64 0.60
8.03 183,328 0.95 0.60
12.84 117,528 1.34 0.60
0.85%16 $ 8,151 0.83%2 0.83%2
2.02 8,129 0.86 0.86
3.67 2,271 0.94 0.89
3.58 1,554 0.93 0.90
7.61 1,069 1.14 0.90
12.38 224 1.59 0.90
0.84%3,16 $ 14,121 0.86%2 0.86%2
2.013 15,288 0.86 0.86
3.503 18,080 1.05 0.99
3.503 18,978 1.11 1.07
7.503 13,620 1.36 1.07
12.743 3,672 1.81 1.07
RATIO OF NET
RATIO OF TOTAL INVESTMENT
EXPENSES RATIO OF NET INCOME
TO AVERAGE INVESTMENT TO AVERAGE
NET ASSETS INCOME NET ASSETS PORTFOLIO
(EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
WAIVERS) ASSETS13 WAIVERS)13 RATE
================== ================== ================== ==========
0.93%2 4.85%2 4.22%2 114%
0.97 4.01 3.34 419
2.612,14 4.292,14 1.982,14 96
0.95%2 3.56%2 2.98%2 114%
1.06 4.00 3.34 419
2.732 4.192 1.862 96
3.63%2 3.61%2 0.69%2 114%
1.29 3.71 3.11 419
2.982 3.882 1.612 96
1.39%2 4.27%2 3.58%2 114%
1.39 4.06 3.36 419
3.082 3.882 1.512 96
2.01%2 3.16%2 2.58%2 114%
2.07 3.65 3.02 419
3.732 3.152 0.862 96
1.99%2 3.32%2 2.74%2 114%
2.04 3.46 2.84 419
3.732 3.152 0.862 96
0.84%2 4.53%2 4.14%2 187%
0.85 4.53 4.13 521
0.83 4.85 4.51 228
0.612 3.322 3.052 1,36511
0.92%2 4.41%2 4.05%2 187%
0.97 4.40 4.04 521
0.97 4.74 4.43 228
0.95 4.89 4.58 1,36511
1.24 5.99 5.70 401
1.66 6.30 5.97 773
1.18%2 4.15%2 3.80%2 187%
1.23 3.97 3.60 521
1.25 4.45 4.13 228
1.25 4.70 4.39 1,36511
1.44 5.37 5.07 401
1.92 5.97 5.65 773
1.31%2 4.10%2 3.65%2 187%
1.32 4.13 3.67 521
1.46 4.34 3.93 228
1.42 4.27 3.96 1,36511
1.65 5.18 4.89 401
2.13 5.77 5.45 773
139
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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 INCOME13 AND UNREALIZED)13 INCOME5 GAINS PERIOD
=========== ============ =================== =============== =============== ===========
---------------
GNMA Portfolio (Continued)
---------------
Investor B Class
10/1/05 through 3/31/0617 $ 9.71 $ 0.166 $ (0.11) $ (0.24) $ - $ 9.52
9/30/05 9.89 0.336 ( 0.21) ( 0.30) - 9.71
9/30/04 10.03 0.366 ( 0.09) ( 0.41) - 9.89
9/30/0315 10.24 0.38 ( 0.11) ( 0.48) - 10.03
9/30/0215 10.29 0.47 0.19 ( 0.50) ( 0.21) 10.24
9/30/0115 9.71 0.51 0.58 ( 0.51) - 10.29
Investor C Class
10/1/05 through 3/31/0617 $ 9.70 $ 0.166 $ (0.11) $ (0.24) $ - $ 9.51
9/30/05 9.88 0.346 ( 0.22) ( 0.30) - 9.70
9/30/04 10.01 0.366 ( 0.08) ( 0.41) - 9.88
9/30/0315 10.23 0.38 ( 0.12) ( 0.48) - 10.01
9/30/0215 10.27 0.45 0.22 ( 0.50) ( 0.21) 10.23
9/30/0115 9.68 0.51 0.59 ( 0.51) - 10.27
-------------
Managed Income Portfolio
-------------
Institutional Class
10/1/05 through 3/31/0617 $ 10.20 $ 0.226 $ (0.22) $ (0.25) $ (0.05) $ 9.90
9/30/05 10.41 0.466 ( 0.18) ( 0.45) ( 0.04) 10.20
9/30/04 10.80 0.476 ( 0.10) ( 0.48) ( 0.28) 10.41
9/30/0315 10.71 0.55 0.17 ( 0.63) - 10.80
9/30/0215 10.60 0.60 0.10 ( 0.59) - 10.71
9/30/0115 9.92 0.61 0.68 ( 0.61) - 10.60
Service Class
10/1/05 through 3/31/0617 $ 10.20 $ 0.206 $ (0.22) $ (0.23) $ (0.05) $ 9.90
9/30/05 10.41 0.436 ( 0.18) ( 0.42) ( 0.04) 10.20
9/30/04 10.80 0.446 ( 0.10) ( 0.45) ( 0.28) 10.41
9/30/0315 10.71 0.54 0.15 ( 0.60) - 10.80
9/30/0215 10.60 0.57 0.10 ( 0.56) - 10.71
9/30/0115 9.92 0.58 0.68 ( 0.58) - 10.60
Investor A Class
10/1/05 through 3/31/0617 $ 10.21 $ 0.206 $ (0.23) $ (0.23) $ (0.05) $ 9.90
9/30/05 10.41 0.426 ( 0.17) ( 0.41) ( 0.04) 10.21
9/30/04 10.80 0.426 ( 0.10) ( 0.43) ( 0.28) 10.41
9/30/0315 10.71 0.49 0.18 ( 0.58) - 10.80
9/30/0215 10.60 0.53 0.12 ( 0.54) - 10.71
9/30/0115 9.92 0.56 0.68 ( 0.56) - 10.60
Investor B Class
10/1/05 through 3/31/0617 $ 10.21 $ 0.166 $ (0.23) $ (0.19) $ (0.05) $ 9.90
9/30/05 10.41 0.356 ( 0.17) ( 0.34) ( 0.04) 10.21
9/30/04 10.80 0.356 ( 0.11) ( 0.35) ( 0.28) 10.41
9/30/0315 10.71 0.41 0.18 ( 0.50) - 10.80
9/30/0215 10.60 0.46 0.11 ( 0.46) - 10.71
9/30/0115 9.92 0.49 0.68 ( 0.49) - 10.60
Investor C Class
10/1/05 through 3/31/0617 $ 10.18 $ 0.166 $ (0.22) $ (0.19) $ (0.05) $ 9.88
9/30/05 10.38 0.346 ( 0.16) ( 0.34) ( 0.04) 10.18
9/30/04 10.78 0.356 ( 0.12) ( 0.35) ( 0.28) 10.38
9/30/0315 10.68 0.41 0.19 ( 0.50) - 10.78
9/30/0215 10.57 0.46 0.11 ( 0.46) - 10.68
9/30/0115 9.91 0.49 0.66 ( 0.49) - 10.57
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
140
BLACKROCK FUNDS
RATIO OF NET RATIO OF NET
EXPENSES TO RATIO OF TOTAL INVESTMENT
NET AVERAGE NET EXPENSES RATIO OF NET INCOME
ASSETS RATIO OF NET ASSETS TO AVERAGE INVESTMENT TO AVERAGE
END OF EXPENSES TO (EXCLUDING NET ASSETS INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET INTEREST (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS EXPENSE) WAIVERS) ASSETS13 WAIVERS)13 RATE
=========================== ============ ============== ============= ================ ================ ============== ==========
0.46%4,16 $ 16,856 1.63%2 1.63%2 1.98%2 3.35%2 3.00%2 187%
1.254 19,792 1.62 1.61 1.97 3.40 3.05 521
2.744 25,439 1.80 1.74 2.11 3.62 3.31 228
2.744 32,486 1.85 1.82 2.16 3.56 3.25 1,36511
6.724 23,928 2.07 1.80 2.36 4.44 4.15 401
11.484 4,936 2.53 1.77 2.83 4.67 4.36 773
0.46%4,16 $ 22,022 1.63%2 1.63%2 1.99%2 3.37%2 3.01%2 187%
1.264 26,691 1.62 1.61 1.98 3.44 3.08 521
2.854 39,542 1.80 1.74 2.11 3.62 3.31 228
2.644 51,109 1.85 1.82 2.16 3.55 3.24 1,36511
6.844 36,220 1.94 1.79 2.23 4.13 3.84 401
11.624 1,225 2.48 1.75 2.79 4.54 4.23 773
( 0.01)%16 $ 554,439 0.65%2 0.65%2 0.79%2 4.37%2 4.23%2 115%
2.76 587,061 0.65 0.65 0.83 4.45 4.27 252
3.60 644,083 0.65 0.65 0.81 4.50 4.34 284
6.91 810,452 0.65 0.65 0.82 5.06 4.89 61312
6.82 924,211 0.75 0.65 0.90 5.63 5.50 290
13.39 1,042,238 1.07 0.65 1.19 5.99 5.87 262
(0.16)%16 $ 99,777 0.95%2 0.95%2 1.04%2 4.06%2 3.97%2 115%
2.45 81,337 0.95 0.95 1.08 4.13 4.00 252
3.29 80,253 0.95 0.95 1.11 4.21 4.05 284
6.58 92,336 0.95 0.95 1.13 4.74 4.56 61312
6.50 137,084 1.06 0.95 1.19 5.30 5.17 290
13.05 238,117 1.37 0.95 1.48 5.69 5.57 262
( 0.30)%3,16 $ 25,091 1.03%2 1.03%2 1.16%2 3.99%2 3.86%2 115%
2.453 29,462 1.05 1.05 1.18 4.06 3.93 252
3.133 35,462 1.10 1.10 1.30 4.06 3.86 284
6.413 49,870 1.12 1.12 1.30 4.57 4.40 61312
6.323 52,794 1.12 1.12 1.38 5.14 5.00 290
12.863 20,196 1.13 1.13 1.61 5.47 5.35 262
(0.69)%4,16 $ 5,394 1.82%2 1.82%2 1.87%2 3.21%2 3.16%2 115%
1.694 6,625 1.80 1.80 1.84 3.34 3.30 252
2.364 9,136 1.85 1.85 1.95 3.31 3.21 284
5.614 10,425 1.87 1.87 2.05 3.80 3.63 61312
5.534 9,582 1.99 1.87 2.11 4.43 4.30 290
12.034 7,981 2.21 1.87 2.33 4.71 4.60 262
( 0.58)%4,16 $ 1,161 1.79%2 1.79%2 1.82%2 3.25%2 3.22%2 115%
1.694 1,187 1.79 1.79 1.83 3.27 3.23 252
2.264 870 1.84 1.84 1.95 3.34 3.24 284
5.734 763 1.87 1.87 2.05 3.77 3.60 61312
5.544 554 2.00 1.87 2.14 4.44 4.30 290
11.844 345 2.03 1.86 2.14 4.60 4.49 262
141
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN
ASSET (LOSS) ON
VALUE NET INVESTMENTS
BEGINNING INVESTMENT (BOTH REALIZED
OF PERIOD INCOME13 AND UNREALIZED)13
=========== ============ ===================
--------------
International Bond Portfolio
--------------
BlackRock Class
10/1/05 through 3/31/0617 $ 11.13 $ 0.166 $ (0.44)
9/30/05 11.41 0.306 0.03
5/18/041 through 9/30/04 10.96 0.116 0.51
Institutional Class
10/1/05 through 3/31/0617 $ 11.13 $ 0.156 $ (0.43)
9/30/05 11.41 0.286 0.03
9/30/04 11.07 0.286 0.51
9/30/0315 10.54 0.296 0.81
9/30/0215 10.53 0.426 0.17
9/30/0115 10.69 0.55 0.68
Service Class
10/1/05 through 3/31/0617 $ 11.14 $ 0.146 $ (0.44)
9/30/05 11.42 0.266 0.02
9/30/04 11.08 0.256 0.50
9/30/0315 10.54 0.266 0.81
9/30/0215 10.53 0.376 0.19
9/30/0115 10.69 0.50 0.70
Investor A Class
10/1/05 through 3/31/0617 $ 11.14 $ 0.146 $ (0.44)
9/30/05 11.42 0.256 0.03
9/30/04 11.07 0.236 0.52
9/30/0315 10.54 0.246 0.81
9/30/0215 10.53 0.356 0.19
9/30/0115 10.69 0.47 0.71
Investor B Class
10/1/05 through 3/31/0617 $ 11.14 $ 0.096 $ (0.43)
9/30/05 11.42 0.176 0.02
9/30/04 11.07 0.156 0.51
9/30/0315 10.54 0.166 0.81
9/30/0215 10.53 0.276 0.19
9/30/0115 10.69 0.39 0.71
Investor C Class
10/1/05 through 3/31/0617 $ 11.17 $ 0.106 $ (0.44)
9/30/05 11.45 0.176 0.02
9/30/04 11.10 0.156 0.51
9/30/0315 10.56 0.156 0.83
9/30/0215 10.55 0.276 0.19
9/30/0115 10.69 0.39 0.73
-------------
High Yield Bond Portfolio
-------------
BlackRock Class
10/1/05 through 3/31/0617 $ 8.09 $ 0.306 $ (0.03)
9/30/05 8.14 0.646 0.05
9/30/04 7.74 0.626 0.37
9/30/0315 6.75 0.71 1.03
9/30/0215 7.39 0.85 ( 0.66)
9/30/0115 8.92 0.99 ( 1.45)
NET
DISTRIBUTIONS DISTRIBUTIONS ASSET
FROM NET DISTRIBUTIONS FROM NET VALUE
INVESTMENT FROM REALIZED END OF
INCOME5 CAPITAL GAINS PERIOD
=============== =============== =============== ============
--------------
International Bond
Portfolio
--------------
BlackRock Class
10/1/05 through 3/31/0617 $ (0.17) $ - $ - $ 10.68
9/30/05 ( 0.60) - ( 0.01) 11.13
5/18/041 through 9/30/04 ( 0.17) - - 11.41
Institutional Class
10/1/05 through 3/31/0617 $ (0.17) $ - $ - $ 10.68
9/30/05 ( 0.58) - ( 0.01) 11.13
9/30/04 ( 0.45) - - 11.41
9/30/0315 ( 0.33) (0.17) ( 0.07) 11.07
9/30/0215 ( 0.58) - - 10.54
9/30/0115 ( 1.39) - - 10.53
Service Class
10/1/05 through 3/31/0617 $ (0.15) $ - $ - $ 10.69
9/30/05 ( 0.55) - ( 0.01) 11.14
9/30/04 ( 0.41) - - 11.42
9/30/0315 ( 0.29) (0.17) ( 0.07) 11.08
9/30/0215 ( 0.55) - - 10.54
9/30/0115 ( 1.36) - - 10.53
Investor A Class
10/1/05 through 3/31/0617 $ (0.15) $ - $ - $ 10.69
9/30/05 ( 0.55) - ( 0.01) 11.14
9/30/04 ( 0.40) - - 11.42
9/30/0315 ( 0.28) (0.17) ( 0.07) 11.07
9/30/0215 ( 0.53) - - 10.54
9/30/0115 ( 1.34) - - 10.53
Investor B Class
10/1/05 through 3/31/0617 $ (0.11) $ - $ - $ 10.69
9/30/05 ( 0.46) - ( 0.01) 11.14
9/30/04 ( 0.31) - - 11.42
9/30/0315 ( 0.20) (0.17) ( 0.07) 11.07
9/30/0215 ( 0.45) - - 10.54
9/30/0115 ( 1.26) - - 10.53
Investor C Class
10/1/05 through 3/31/0617 $ (0.11) $ - $ - $ 10.72
9/30/05 ( 0.46) - ( 0.01) 11.17
9/30/04 ( 0.31) - - 11.45
9/30/0315 ( 0.20) (0.17) ( 0.07) 11.10
9/30/0215 ( 0.45) - - 10.56
9/30/0115 ( 1.26) - - 10.55
-------------
High Yield Bond Portfolio
-------------
BlackRock Class
10/1/05 through 3/31/0617 $ (0.31) $ - $ (0.14) $ 7.91
9/30/05 ( 0.60) - ( 0.14) 8.09
9/30/04 ( 0.59) - - 8.14
9/30/0315 ( 0.75) - - 7.74
9/30/0215 ( 0.83) - - 6.75
9/30/0115 ( 1.07) - - 7.39
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
142
BLACKROCK FUNDS
RATIO OF NET
EXPENSES TO
NET AVERAGE NET
ASSETS RATIO OF NET ASSETS
END OF EXPENSES TO (EXCLUDING
TOTAL PERIOD AVERAGE NET INTEREST
RETURN (000) ASSETS EXPENSE)
=================================== ============ ============== =============
( 2.49)%7,16 $ 101,788 0.78%2 0.78%2
2.627 98,721 0.78 0.78
5.7116 35,748 0.782 0.782
(2.56)%7,16 $ 219,725 0.90%2 0.90%2
2.467 346,746 0.94 0.94
7.20 133,544 0.94 0.94
10.78 64,038 0.94 0.94
5.79 35,425 1.05 0.90
12.30 73,636 2.43 0.88
( 2.69)%7,16 $ 74,979 1.17%2 1.17%2
2.217 107,402 1.19 1.19
6.897 80,024 1.23 1.23
10.55 48,584 1.24 1.24
5.47 27,131 1.30 1.20
11.97 11,045 2.74 1.20
(2.69)%3,7,16 $ 135,722 1.20%2 1.20%2
2.213,7 182,321 1.18 1.18
6.843,7 123,145 1.31 1.31
10.273 74,821 1.41 1.41
5.293 39,727 1.47 1.37
11.793 16,827 2.88 1.36
( 3.07)%3,7,16 $ 16,862 1.97%2 1.97%2
1.454,7 19,705 1.93 1.93
6.044,7 16,780 2.06 2.06
9.454 13,087 2.16 2.16
4.514 11,470 2.25 2.11
10.964 7,393 3.63 2.10
(3.05)%4,7,16 $ 53,134 1.94%2 1.94%2
1.454,7 65,555 1.93 1.93
6.034,7 36,947 2.04 2.04
9.534 17,777 2.15 2.15
4.504 8,427 2.23 2.11
11.154 4,182 3.64 2.10
3.52%7,16 $ 177,133 0.56%2 0.55%2
8.697 169,532 0.55 0.55
13.20 126,976 0.55 0.55
27.17 57,207 0.61 0.55
2.15 32,240 0.73 0.55
( 5.52) 27,766 0.84 0.55
RATIO OF NET
RATIO OF TOTAL INVESTMENT
EXPENSES RATIO OF NET INCOME
TO AVERAGE INVESTMENT TO AVERAGE
NET ASSETS INCOME NET ASSETS PORTFOLIO
(EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
WAIVERS) ASSETS13 WAIVERS)13 RATE
================ ================ ============== ==========
0.83%2 2.90%2 2.85%2 80%
0.83 2.59 2.54 164
0.892 2.582 2.472 240
0.93%2 2.79%2 2.76%2 80%
0.95 2.43 2.42 164
0.96 2.44 2.41 240
0.94 2.69 2.69 209
1.05 3.89 3.89 206
2.43 5.54 5.54 111
1.21%2 2.52%2 2.48%2 80%
1.20 2.19 2.18 164
1.25 2.18 2.15 240
1.24 2.41 2.41 209
1.30 3.55 3.55 206
2.74 5.08 5.08 111
1.36%2 2.52%2 2.36%2 80%
1.29 2.17 2.06 164
1.43 2.06 1.93 240
1.41 2.21 2.21 209
1.47 3.36 3.36 206
2.88 4.85 4.85 111
2.00%2 1.73%2 1.70%2 80%
1.95 1.43 1.41 164
2.09 1.32 1.29 240
2.16 1.51 1.51 209
2.25 2.64 2.64 206
3.63 4.17 4.17 111
1.97%2 1.77%2 1.74%2 80%
1.94 1.42 1.41 164
2.07 1.32 1.29 240
2.15 1.44 1.44 209
2.23 2.62 2.62 206
3.64 4.20 4.20 111
0.75%2 7.58%2 7.39%2 52%
0.77 7.91 7.69 129
0.73 7.71 7.53 172
0.77 9.83 9.67 212
0.89 11.15 11.01 301
1.10 5.54 5.29 331
143
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONCLUDED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN
ASSET (LOSS) ON
VALUE NET INVESTMENTS
BEGINNING INVESTMENT (BOTH REALIZED
OF PERIOD INCOME13 AND UNREALIZED)13
=========== ============ ===================
-------------------
High Yield Bond Portfolio (Continued)
-------------------
Institutional Class
10/1/05 through 3/31/0617 $ 8.09 $ 0.306 $ (0.03)
9/30/05 8.14 0.636 0.04
9/30/04 7.74 0.616 0.37
9/30/0315 6.75 0.73 1.00
9/30/0215 7.39 0.82 ( 0.64)
9/30/0115 8.92 0.94 ( 1.41)
Service Class
10/1/05 through 3/31/0617 $ 8.09 $ 0.286 $ (0.03)
9/30/05 8.14 0.616 0.04
9/30/04 7.74 0.596 0.37
9/30/0315 6.75 0.73 0.98
9/30/0215 7.39 0.86 ( 0.71)
9/30/0115 8.92 0.88 ( 1.38)
Investor A Class
10/1/05 through 3/31/0617 $ 8.09 $ 0.286 $ (0.03)
9/30/05 8.14 0.606 0.05
9/30/04 7.73 0.586 0.38
9/30/0315 6.75 0.73 0.96
9/30/0215 7.40 0.82 ( 0.69)
9/30/0115 8.92 0.90 ( 1.40)
Investor B Class
10/1/05 through 3/31/0617 $ 8.09 $ 0.266 $ (0.04)
9/30/05 8.14 0.556 0.04
9/30/04 7.73 0.526 0.38
9/30/0315 6.75 0.65 0.98
9/30/0215 7.39 0.74 ( 0.66)
9/30/0115 8.91 0.83 ( 1.40)
Investor C Class
10/1/05 through 3/31/0617 $ 8.10 $ 0.266 $ (0.05)
9/30/05 8.15 0.556 0.04
9/30/04 7.74 0.526 0.38
9/30/0315 6.75 0.67 0.97
9/30/0215 7.40 0.76 ( 0.69)
9/30/0115 8.92 0.83 ( 1.40)
NET
DISTRIBUTIONS DISTRIBUTIONS ASSET
FROM NET DISTRIBUTIONS FROM NET VALUE
INVESTMENT FROM REALIZED END OF
INCOME5 CAPITAL GAINS PERIOD
=============== =============== =============== ===========
-------------------
High Yield Bond Portfolio
(Continued)
-------------------
Institutional Class
10/1/05 through 3/31/0617 $ (0.31) $- $ (0.14) $ 7.91
9/30/05 ( 0.58) - ( 0.14) 8.09
9/30/04 ( 0.58) - - 8.14
9/30/0315 ( 0.74) - - 7.74
9/30/0215 ( 0.82) - - 6.75
9/30/0115 ( 1.06) - - 7.39
Service Class
10/1/05 through 3/31/0617 $ (0.29) $- $ (0.14) $ 7.91
9/30/05 ( 0.56) - ( 0.14) 8.09
9/30/04 ( 0.56) - - 8.14
9/30/0315 ( 0.72) - - 7.74
9/30/0215 ( 0.79) - - 6.75
9/30/0115 ( 1.03) - - 7.39
Investor A Class
10/1/05 through 3/31/0617 $ (0.29) $- $ (0.14) $ 7.91
9/30/05 ( 0.56) - ( 0.14) 8.09
9/30/04 ( 0.55) - - 8.14
9/30/0315 ( 0.71) - - 7.73
9/30/0215 ( 0.78) - - 6.75
9/30/0115 ( 1.02) - - 7.40
Investor B Class
10/1/05 through 3/31/0617 $ (0.26) $- $ (0.14) $ 7.91
9/30/05 ( 0.50) - ( 0.14) 8.09
9/30/04 ( 0.49) - - 8.14
9/30/0315 ( 0.65) - - 7.73
9/30/0215 ( 0.72) - - 6.75
9/30/0115 ( 0.95) - - 7.39
Investor C Class
10/1/05 through 3/31/0617 $ (0.26) $- $ (0.14) $ 7.91
9/30/05 ( 0.50) - ( 0.14) 8.10
9/30/04 ( 0.49) - - 8.15
9/30/0315 ( 0.65) - - 7.74
9/30/0215 ( 0.72) - - 6.75
9/30/0115 ( 0.95) - - 7.40
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 Certain prior year amounts were reclassified to conform to current year
presentation (Note C).
6 Calculated using the average shares outstanding method.
7 Redemption fee of 2.00% is reflected in total return calculations.
8 Includes dollar roll transactions, excluding these transactions the
portfolio turnover would have been 257%.
9 Includes dollar roll transactions, excluding these transactions the
portfolio turnover would have been 319%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
144
BLACKROCK FUNDS
RATIO OF NET
EXPENSES TO
NET AVERAGE NET
ASSETS RATIO OF NET ASSETS
END OF EXPENSES TO (EXCLUDING
TOTAL PERIOD AVERAGE NET INTEREST
RETURN (000) ASSETS EXPENSE)
============================== ============ ============== =============
3.45%7,16 $ 158,690 0.67%2 0.67%2
8.537 165,805 0.70 0.70
13.037 162,166 0.70 0.70
26.98 170,902 0.76 0.70
2.00 94,065 0.87 0.70
( 5.66) 95,663 1.06 0.70
3.31%7,16 $ 193,868 0.92%2 0.92%2
8.247 158,083 0.96 0.96
12.717 112,004 0.99 0.99
26.61 85,247 1.06 1.00
1.69 29,344 1.17 1.00
(5.95) 9 1.36 1.00
3.30%3,7,16 $ 262,249 0.97%2 0.96%2
8.243,7 262,920 0.96 0.96
12.703,7 72,806 1.10 1.09
26.253 82,391 1.22 1.17
1.383 18,932 1.33 1.17
( 5.98)3 8,980 1.52 1.17
2.92%4,7,16 $ 97,357 1.72%2 1.71%2
7.444,7 110,420 1.71 1.71
11.874,7 92,243 1.85 1.84
25.344 107,078 1.98 1.92
0.754 57,612 2.09 1.92
(6.71)4 49,786 2.27 1.91
2.79%4,7,16 $ 47,882 1.72%2 1.71%2
7.444,7 49,939 1.72 1.72
11.864,7 61,983 1.85 1.85
25.484 73,246 1.97 1.92
0.614 21,939 2.08 1.91
( 6.70)4 11,319 2.25 1.91
RATIO OF NET
RATIO OF TOTAL INVESTMENT
EXPENSES RATIO OF NET INCOME
TO AVERAGE INVESTMENT TO AVERAGE
NET ASSETS INCOME NET ASSETS PORTFOLIO
(EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
WAIVERS) ASSETS13 WAIVERS)13 RATE
================ ================ ============== ==========
0.85%2 7.47%2 7.29%2 52%
0.89 7.75 7.56 129
0.85 7.63 7.48 172
0.90 9.63 9.49 212
1.01 10.94 10.80 301
1.22 11.22 11.06 331
1.08%2 7.21%2 7.05%2 52%
1.14 7.51 7.33 129
1.14 7.30 7.16 172
1.20 9.31 9.17 212
1.34 11.37 11.20 301
1.52 11.82 11.66 331
1.26%2 7.18%2 6.89%2 52%
1.25 7.41 7.12 129
1.34 7.29 7.05 172
1.36 8.81 8.68 212
1.48 10.42 10.28 301
1.68 10.55 10.39 331
1.91%2 6.46%2 6.27%2 52%
1.89 6.74 6.56 129
1.99 6.49 6.35 172
2.12 8.39 8.25 212
2.23 9.81 9.66 301
2.43 10.01 9.85 331
1.90%2 6.44%2 6.26%2 52%
1.89 6.77 6.60 129
1.99 6.50 6.35 172
2.11 8.14 8.00 212
2.23 9.73 9.59 301
2.41 9.63 9.47 331
10 Includes dollar roll transactions, excluding these transactions the
portfolio turnover would have been
371%.
11 Includes dollar roll transactions, excluding these transactions the
portfolio turnover would have been 268%.
12 Includes dollar roll transactions, excluding these transactions the
portfolio turnover would have been 206%.
13 Refer to Section C of the Notes to Financial Statements.
14 Non-annualized ratios were previously disclosed as annualized. Ratios
updated to reflect annualization.
15 Audited by other auditors.
16 Not Annualized.
17 Unaudited.
18 Net assets end of period are less than $1,000.
145
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(A) Organization
BlackRock FundsSM (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 51 portfolios, 13 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: BlackRock, Institutional,
Service, Hilliard Lyons, Investor A, Investor B and Investor C. 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, mostly due to differences in
distribution and service fees. As of March 31, 2006, no Hilliard Lyons Shares
were outstanding.
Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts with its vendors and others that provide for general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund.
However, based on experience, the Fund considers the risk of loss from such
claims to be remote.
(B) Fund Reorganization
On January 31, 2005, BlackRock, Inc., the parent of BlackRock Advisors,
Inc. ("BlackRock"), a wholly owned subsidiary of BlackRock, Inc., acquired SSRM
Holdings, Inc., the parent of State Street Research & Management Company
("SSRM"), the investment adviser to the former State Street Research mutual
funds.
On January 31, 2005, the BlackRock Intermediate Government Bond Portfolio
acquired all of the assets and certain stated liabilities of the State Street
Research Government Income Fund. The reorganization was pursuant to an
Agreement and Plan of Reorganization, which was approved by the State Street
Research shareholders on January 25, 2005. Under the Agreement and Plan of
Reorganization, 28,802,131 Class A Shares, 1,440,271 Class B Shares and 8,786
Class R Shares of the State Street Research Government Income Fund were
exchanged for 34,230,267, 1,704,773 and 10,444 Investor A Class Shares,
respectively, of the BlackRock Intermediate Government Bond Portfolio;
6,655,830 Class B(1) Shares of the State Street Research Government Income Fund
were exchanged for 7,860,023 Investor B Class shares of the BlackRock
Intermediate Government Bond Portfolio; 1,118,423 Class C Shares of the State
Street Research Government Income Fund were exchanged for 1,326,873 Investor C
Class Shares of the BlackRock Intermediate Government Bond Portfolio; and
506,641 Class S Shares of the State Street Research Government Income Fund were
exchanged for 603,030 Institutional Shares of the BlackRock Intermediate
Government Bond Portfolio. The assets of the State Street Research Government
Income Fund, which consisted of securities and related receivables less
liabilities, were converted on a tax-free basis. Upon the reorganization of
such funds on January 31, 2005, the value of the BlackRock Intermediate
Government Bond Portfolio's net assets (including $474,664,383 in net assets of
the State Street Research Government Income Fund, including $2,522,392 of
unrealized depreciation, undistributed net investment income of $68,232 and
undistributed net realized loss on investments of ($21,212,995), which was
classified as paid-in-capital) was $771,988,963 before the open of business.
On January 31, 2005, the BlackRock High Yield Bond Portfolio acquired all
of the assets and certain stated liabilities of the State Street Research High
Income Fund. The reorganization was pursuant to an Agreement and Plan of
Reorganization, which was approved by the State Street Research shareholders on
January 25, 2005. Under the Agreement and Plan of Reorganization, 58,203,330
Class A Shares and 8,812,212 Class B Shares of the State Street Research High
Income Fund were exchanged for 24,943,276 and 3,736,993 Investor A Class
Shares, respectively, of the BlackRock High Yield Bond Portfolio; 10,782,618
Class B(1) Shares of the State Street Research High Income Fund were exchanged
for 4,562,480 Investor B Class Shares of the BlackRock High Yield Bond
Portfolio; 2,998,505 Class C Shares of the State Street Research High Income
Fund were exchanged for 1,274,746 Investor C Class Shares of the BlackRock High
Yield Bond Portfolio; and 1,179,029 Class S Shares of the State Street Research
High Income Fund were exchanged for 499,336 Institutional Shares of the
BlackRock High Yield Bond Portfolio. The assets of the State Street Research
High Income Fund, which consisted of securities and related receivables less
liabilities, were converted on a tax-free basis. Upon the reorganization of
such funds on January 31, 2005, the value of the BlackRock High Yield Bond
Portfolio's net assets (including $288,908,495 in net assets of the State
Street Research High Income Fund, including $1,371,468 of unrealized
appreciation, undistributed net investment loss of ($41,660) and undistributed
net realized loss on investments of ($450,012,483), which was classified as
paid-in-capital) was $944,088,761 before the open of business.
147
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
On April 25, 2005, the BlackRock Core Bond Total Return Portfolio acquired
all of the assets and certain stated liabilities of the CIGNA Investment
Securities Fund. The reorganization was pursuant to an Agreement and Plan of
Reorganization, which was approved by the CIGNA Investment Securities Fund
shareholders on April 15, 2005. Under the Agreement and Plan of Reorganization,
4,792,215 Class A Shares of the CIGNA Investment Securities Fund were exchanged
for 9,164,715 Investor A Class Shares of the BlackRock Core Bond Total Return
Portfolio. The assets of the CIGNA Investment Securities Fund, which consisted
of securities and related receivables less liabilities, were converted on a
tax-free basis. Upon the reorganization of such funds on April 25, 2005, the
value of the BlackRock Core Bond Total Return Portfolio's net assets (including
$88,882,541 in net assets of the CIGNA Investment Securities Fund, including
$873,954 of unrealized appreciation, undistributed net investment loss of
($21,863) and undistributed net realized loss on investments of ($1,612,651),
which was classified as paid-in-capital) was $2,662,804,984 before the open of
business.
(C) 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.
Investment Valuation - Valuation of investments held by each Portfolio is
as follows: fixed income investments are valued by using market quotations or
prices provided by market makers; a portion of the fixed income investments are
valued utilizing one or more pricing services approved by the Board of Trustees
(the "Board"); an option or futures contract is valued at the last sales price
prior to 4:00 p.m. (Eastern time), as quoted on the principal exchange or board
of trade on which such option or futures contract is traded, or in the absence
of a sale, the mean between the last bid and asked prices prior to 4:00 p.m.
(Eastern time); the amortized cost method of valuation will be used with
respect to debt securities with sixty days or less remaining to maturity unless
the investment adviser and/or sub-adviser under the supervision of the Board
determines that such method does not represent fair value. Any assets which are
denominated in a non-U.S. currency are translated into U.S. dollars at the
prevailing market rates. In the event that application of these methods of
valuation results in a price for an investment which is deemed not to be
representative of the market value of such investment, the investment will be
valued by, under the direction of or in accordance with a method approved by
the Board as reflecting fair value ("Fair Value Assets"). The investment
adviser and/or sub-adviser will submit its recommendations regarding the
valuation and/or valuation methodologies for Fair Value Assets to a valuation
committee. Such valuation committee may accept, modify or reject any
recommendations. The pricing of all Fair Value Assets shall be subsequently
reported to the Board.
When determining the price for a Fair Value Asset, the investment adviser
and/or sub-adviser shall seek to determine the price that the Portfolio might
reasonably expect to receive from the current sale of that asset in an
arm's-length transaction. Fair value determinations shall be based upon all
available factors that the adviser and/or sub-adviser deems relevant.
Securities denominated in currencies other than U.S. dollars are subject
to changes in value due to fluctuations in exchange rates.
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) 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.
Foreign Currency Translation - The books and records of the Portfolios are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(I) Market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) Purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The Portfolios isolate that portion of gains and losses on investment
securities which is due to changes in the foreign exchange rates from that
which is due to changes in market prices of such securities.
The Portfolios report certain foreign currency related transactions as
components of realized and unrealized gains for financial reporting purposes,
whereas such components are treated as ordinary income for federal income tax
purposes.
148
BLACKROCK FUNDS
Forward Foreign Currency Contracts - Certain Portfolios may enter into
forward foreign currency contracts as a hedge against either specific
transactions or Portfolio positions. These contracts are adjusted by the daily
forward exchange rate of the underlying currency and any gains or losses are
recorded as unrealized until the contract settlement date. Such contracts,
which protect the value of the Portfolio's investment securities against a
decline in the value of currency, do not eliminate fluctuations in the
underlying prices of the securities. They simply establish an exchange rate at
a future date. Also, although such contracts tend to minimize the risk of loss
due to a decline in the value of a hedged currency, at the same time they tend
to limit any potential gain that might be realized should the value of such
foreign currency increase. Risks may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of their
contracts and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
The aggregate principal amounts of the contracts are not recorded as the
Portfolios intend to settle the contracts prior to delivery. Under the terms of
foreign currency contracts open at March 31, 2006, the Portfolios are obligated
to deliver or receive currency in exchange for U.S. dollars as indicated below:
VALUE AT NET UNREALIZED
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, FOREIGN EXCHANGE
DATE AMOUNT SOLD AMOUNT 2006 GAIN/(LOSS)
- ------------ ---------------- ----------------------------- -------------- -------------- -----------------
Low Duration Bond
04/06/06 13,891,239 Euro ........................ $16,843,129 $16,840,254 $ 2,875
04/12/06 20,672,844 New Zealand Dollar .......... 14,047,198 12,715,090 1,332,108
----------- ----------- ----------
$30,890,327 $29,555,344 $1,334,983
=========== =========== ==========
Intermediate PLUS Bond
04/06/06 269,417 Euro ........................ $ 325,597 $ 326,613 $ (1,016)
04/12/06 496,447 New Zealand Dollar .......... 337,336 305,346 31,990
------------- ------------- ------------
$ 662,933 $ 631,959 $ 30,974
============= ============= ============
Core Bond Total Return
04/06/06 24,831,523 Euro ........................ $30,065,329 $30,103,085 $ (37,756)
04/12/06 27,955,977 New Zealand Dollar .......... 18,996,086 17,194,670 1,801,416
------------- ------------- ------------
$ 49,061,415 $ 47,297,755 $1,763,660
============= ============= ============
Core PLUS Total Return
04/06/06 3,207,260 Euro ........................ $ 3,882,958 $ 3,888,139 $ (5,181)
04/12/06 10,450,285 Mexican Peso ................ 986,051 959,461 26,590
04/12/06 2,142,587 New Zealand Dollar .......... 1,455,888 1,317,825 138,063
------------- ------------- ------------
$ 6,324,897 $ 6,165,425 $ 159,472
============= ============= ============
Inflation Protected Bond
04/06/06 596,603 Euro ........................ $ 722,773 $ 723,258 $ (485)
============= ============= ============
Managed Income
04/06/06 6,238,605 Euro ........................ $ 7,553,654 $ 7,563,018 $ (9,364)
============= ============= ============
International Bond
04/06/06 41,673,000 Euro ........................ $50,178,678 $50,519,892 $ (341,214)
04/06/06 18,892,000 Singapore Dollar ............ 11,641,961 11,696,496 (54,535)
04/06/06 2,255,282,000 Japanese Yen ................ 19,316,363 19,178,439 137,924
04/10/06 12,440,477 British Pound ............... 21,843,962 21,616,176 227,786
04/11/06 2,890,000 Norwegian Krone ............. 436,299 441,261 (4,962)
04/11/06 475,000 Swiss Francs ................ 365,650 364,770 880
04/11/06 6,245,000 Swedish Krone ............... 800,308 802,490 (2,182)
04/12/06 36,749,440 Mexican Peso ................ 3,461,124 3,374,037 87,087
04/12/06 5,037,502,000 Japanese Yen ................ 43,162,030 42,876,254 285,776
04/12/06 18,929,735 New Zealand Dollar .......... 12,862,755 11,642,968 1,219,787
149
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
VALUE AT NET UNREALIZED
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, FOREIGN EXCHANGE
DATE AMOUNT SOLD AMOUNT 2006 GAIN/(LOSS)
- ------------ ------------- -------------------------- -------------- -------------- -----------------
International Bond (Continued)
04/12/06 119,126,000 Danish Krone ............. $ 19,123,127 $ 19,358,647 $ (235,520)
04/13/06 22,082,037 Canadian Dollar .......... 19,135,214 18,915,261 219,953
04/13/06 22,616,000 Polish Zloty ............. 7,044,585 6,990,887 53,698
------------ ------------ ----------
$209,372,056 $207,777,578 $1,594,478
============ ============ ==========
High Yield Bond
04/06/06 8,038,040 Euro ..................... $ 9,750,917 $ 9,744,461 $ 6,456
04/06/06 2,379,000 British Pound ............ 4,129,939 4,133,674 (3,735)
------------ ------------ ----------
$ 13,880,856 $ 13,878,135 $ 2,721
============ ============ ==========
NET
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT BOUGHT AMOUNT 2006 LOSS
- ------------ ------------ ----------------------------- -------------- -------------- ---------------
Low Duration Bond
04/06/06 9,945,000 Euro ........................ $12,090,719 $12,056,255 $ (34,464)
04/12/06 630,954 New Zealand Dollar .......... 430,626 388,076 (42,550)
----------- ----------- ------------
$12,521,345 $12,444,331 $ (77,014)
=========== =========== ============
Intermediate PLUS Bond
04/06/06 205,000 Euro ........................ $ 249,224 $ 248,520 $ (704)
04/12/06 383,795 New Zealand Dollar .......... 261,940 236,058 (25,882)
----------- ----------- ------------
$ 511,164 $ 484,578 $ (26,586)
=========== =========== ============
Core Bond Total Return
04/06/06 17,540,000 Euro ........................ $21,323,614 $21,263,622 $ (59,992)
04/12/06 14,851,829 New Zealand Dollar .......... 10,136,373 9,134,802 (1,001,571)
----------- ----------- ------------
$31,459,987 $30,398,424 $ (1,061,563)
=========== =========== ============
Core PLUS Total Return
04/06/06 2,220,000 Euro ........................ $ 2,698,884 $ 2,691,291 $ (7,593)
04/12/06 6,094,356 Mexican Peso ................ 559,860 559,535 (325)
----------- ----------- ------------
$ 3,258,744 $ 3,250,826 $ (7,918)
=========== =========== ============
Inflation Protected Bond
04/06/06 348,000 Euro ........................ $ 423,026 $ 421,877 $ (1,149)
04/10/06 943 British Pound ............... 1,670 1,639 (31)
----------- ----------- ------------
$ 424,696 $ 423,516 $ (1,180)
=========== =========== ============
Managed Income
04/06/06 4,575,000 Euro ........................ $ 5,561,890 $ 5,546,241 $ (15,649)
=========== =========== ============
150
BLACKROCK FUNDS
NET
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT BOUGHT AMOUNT 2006 LOSS
- ------------ ---------------- ----------------------------- --------------- --------------- ---------------
International Bond
04/06/06 89,557,239 Euro ........................ $108,069,315 $108,569,626 $ 500,311
04/06/06 13,924,000 Singapore Dollar ............ 8,570,198 8,619,073 48,875
04/06/06 2,255,282,000 Japanese Yen ................ 19,538,985 19,178,439 (360,546)
04/07/06 2,968,760 Australian Dollar ........... 2,225,976 2,125,063 (100,913)
04/10/06 5,117,183 British Pound ............... 8,939,188 8,891,455 (47,733)
04/11/06 13,968,456 Norwegian Krone ............. 2,095,577 2,132,782 37,205
04/11/06 7,922,653 Swiss Francs ................ 6,272,979 6,084,088 (188,891)
04/11/06 46,152,779 Swedish Krone ............... 6,045,345 5,930,686 (114,659)
04/12/06 27,520,494 Mexican Peso ................ 2,528,179 2,526,710 (1,469)
04/12/06 254,466 New Zealand Dollar .......... 163,155 156,512 (6,643)
04/12/06 37,291,461 Danish Krone ................ 6,158,788 6,060,073 (98,715)
04/12/06 17,349,493,843 Japanese Yen ................ 151,911,175 147,668,688 (4,242,487)
04/13/06 18,142,980 Canadian Dollar ............. 15,711,949 15,541,103 (170,846)
04/13/06 1,545,742 Polish Zloty ................ 498,626 477,808 (20,818)
05/08/06 2,255,282,000 Japanese Yen ................ 19,400,275 19,267,062 (133,213)
------------ ------------ ------------
$358,129,710 $353,229,168 $ (4,900,542)
============ ============ ============
Swap Agreements - The Portfolios may invest in swap agreements for the
purpose of hedging against changes in interest rates or foreign currencies.
Swap agreements involve the exchange by the Portfolios with another party of
their respective commitments to pay or receive interest or a specified amount
of a currency (e.g., an exchange of floating rate payments for fixed rate
payments) with respect to a notional amount of principal. Swaps are marked to
market daily based upon quotations from market makers and the change, if any,
is recorded as an unrealized gain or loss in the Statements of Operations. Net
payments of interest are recorded as realized gain or loss. Entering into these
agreements involves, to varying degrees, elements of credit and market risk in
excess of the amounts recognized on the Statements of Assets and Liabilities.
Such risks involve the possibility that there will be no liquid market for
these agreements, that the counter-party to the agreement may default on its
obligation to perform and that there may be unfavorable changes in the
fluctuation of interest and/or exchange rates.
At March 31, 2006, the following Portfolios had swap agreements
outstanding:
Interest Interest Unrealized
Termination Receivable Payable Notional amount Appreciation
Portfolio Counter-party Date Rate Rate (Local Currency) (Depreciation)
Enhanced Income Deutsche Bank 10/30/07 N/A1 4.90%2 $ 1,900,000 $ 7,315
Deutsche Bank 10/25/10 4.74% 4.62%3 1,300,000 (13,260)
Goldmans Sachs 02/07/11 4.71%3 5.05% 2,300,000 23,605
Low Duration Bond Deutsche Bank 02/10/07 2.68% 4.72%3 80,300,000 (1,968,956)
Goldman Sachs 09/27/07 4.38% 4.96%3 65,300,000 (850,412)
Deutsche Bank 10/30/07 N/A1 4.90%2 51,400,000 197,890
Deutsche Bank 03/06/08 6.93% 4.53%3 117,300,000 429,318
Deutsche Bank 10/14/15 4.92% 4.58%3 12,900,000 (272,835)
Barclays Bank 02/06/16 4.71%3 5.08% 28,200,000 642,960
Deutsche Bank 03/06/16 5.19% 4.84%3 700,000 (11,004)
Intermediate Government Deutsche Bank 02/10/07 2.68% 4.72%3 12,800,000 (313,856)
Bond Union Bank of Switzerland 04/22/07 4.61%3 3.04% 24,000,000 435,600
Deutsche Bank 08/02/07 4.39% 4.68%3 29,200,000 (343,100)
Deutsche Bank 08/17/07 4.44% 4.75%3 40,900,000 (456,035)
Goldman Sachs 09/27/07 4.38% 4.96%3 11,600,000 (151,069)
Union Bank of Switzerland 09/27/08 4.42% 4.96%3 3,300,000 (65,472)
Morgan Stanley 07/01/10 4.17% 4.53%3 32,600,000 (1,037,658)
Deutsche Bank 11/07/10 5.00% 4.71%3 7,700,000 8,239
JP Morgan Chase 05/26/15 4.78%3 4.50% 4,900,000 254,653
Morgan Stanley 07/01/15 4.53%3 4.39% 17,000,000 1,038,360
Morgan Stanley 07/01/15 4.53%3 4.39% 21,000,000 1,136,835
151
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Interest Interest Unrealized
Termination Receivable Payable Notional amount Appreciation
Portfolio Counter-party Date Rate Rate (Local Currency) (Depreciation)
Intermediate Bond Union Bank of Switzerland 04/22/07 4.61%3 3.04% $ 76,000,000 $ 1,379,400
Deutsche Bank 08/02/07 4.39% 4.68%3 38,800,000 (455,900)
Goldman Sachs 09/27/07 4.38% 4.96%3 95,100,000 (1,238,502)
Union Bank of Switzerland 09/27/08 4.42% 4.96%3 7,400,000 (146,816)
Morgan Stanley 06/17/10 4.31% 4.92%3 15,900,000 (420,555)
Union Bank of Switzerland 09/27/10 4.51% 4.96%3 24,600,000 (767,520)
Deutsche Bank 11/07/10 5.00% 4.71%3 10,300,000 11,021
Merrill Lynch 07/22/14 4.60%3 4.93% 15,300,000 428,128
Goldman Sachs 10/01/14 4.53%3 4.51% 16,100,000 753,595
JP Morgan Chase 05/26/15 4.78%3 4.50% 6,400,000 332,608
Morgan Stanley 07/01/15 4.53%3 4.39% 22,000,000 1,343,760
Morgan Stanley 08/02/15 4.73% 4.68%3 7,700,000 (367,675)
Intermediate PLUS Bond Deutsche Bank 08/02/07 4.39% 4.68%3 1,100,000 (12,925)
Deutsche Bank 08/17/07 4.44% 4.75%3 2,000,000 (22,300)
Union Bank of Switzerland 09/27/10 4.51% 4.96%3 1,200,000 (37,440)
Deutsche Bank 11/07/10 5.00% 4.71%3 400,000 428
JP Morgan Chase 04/08/12 4.55%3 4.72% 700,000 13,363
Union Bank of Switzerland 11/26/14 4.78%3 4.58% 1,000,000 43,320
JP Morgan Chase 05/26/15 4.78%3 4.50% 200,000 10,394
Core Bond Total Return Morgan Stanley 06/14/06 3.22% 4.90%3 114,465,000 402,917
Morgan Stanley 06/17/06 3.21% 4.49%3 84,600,000 268,182
Deutsche Bank 08/02/07 4.39% 4.68%3 111,900,000 (1,314,825)
Deutsche Bank 08/17/07 4.44% 4.75%3 162,400,000 (1,810,760)
Union Bank of Switzerland 09/27/08 4.42% 4.96%3 29,700,000 (589,248)
Morgan Stanley 06/17/10 4.31% 4.92%3 40,000,000 (1,058,000)
Merrill Lynch 07/15/10 4.37% 4.60%3 64,480,000 (2,278,723)
Deutsche Bank 11/07/10 5.00% 4.71%3 32,200,000 34,454
Citibank 03/24/11 5.17% 4.95%3 15,500,000 (92,380)
Goldman Sachs 04/22/14 4.61%3 4.89% 30,000,000 529,277
Citibank 06/10/14 4.88%3 5.24% 29,000,000 (147,320)
Merrill Lynch 07/22/14 4.60%3 4.93% 41,100,000 1,150,068
Goldman Sachs 10/01/14 4.53%3 4.51% 10,200,000 477,433
Merrill Lynch 03/17/15 4.92%3 4.90% 53,400,000 1,766,354
JP Morgan Chase 05/26/15 4.78%3 4.50% 18,400,000 956,248
Union Bank of Switzerland 12/07/15 5.94% 4.85%3 14,900,000 844,532
Citibank 12/23/15 6.67% 7.37%4 7,850,000 NZD 183,489
Merrill Lynch 10/27/19 4.78% 4.64%3 5,100,000 (258,895)
Core PLUS Total Return Morgan Stanley 06/14/06 3.22% 4.90%3 10,855,000 38,210
Morgan Stanley 06/17/06 3.21% 4.49%3 8,000,000 25,360
Deutsche Bank 08/02/07 4.39% 4.68%3 16,100,000 (189,175)
Union Bank of Switzerland 09/27/08 4.42% 4.96%3 2,300,000 (45,632)
Morgan Stanley 06/17/10 4.31% 4.92%3 5,300,000 (140,185)
Merrill Lynch 07/15/10 4.37% 4.60%3 8,205,000 (289,965)
Union Bank of Switzerland 09/27/10 4.51% 4.96%3 5,600,000 (174,720)
Deutsche Bank 11/07/10 5.00% 4.71%3 4,000,000 4,280
Citibank 03/24/11 5.17% 4.95%3 4,500,000 (26,820)
Goldman Sachs 04/22/14 4.61%3 4.89% 8,000,000 141,140
Merrill Lynch 07/22/14 4.60%3 4.93% 4,900,000 137,113
Merrill Lynch 03/17/15 4.92%3 4.90% 6,200,000 205,082
Deutsche Bank 04/01/15 4.53%3 5.03% 3,500,000 85,365
JP Morgan Chase 05/26/15 4.78%3 4.50% 2,400,000 124,728
Morgan Stanley 08/02/15 4.73% 4.68%3 4,700,000 (224,425)
Union Bank of Switzerland 12/07/15 5.94% 4.85%3 1,400,000 79,352
Merrill Lynch 12/07/15 4.85%3 5.13% 4,000,000 26,880
Citibank 12/23/15 6.67% 7.37%4 7,850,000 NZD 46,749
Merrill Lynch 10/27/19 4.78% 4.64%3 600,000 (30,458)
152
BLACKROCK FUNDS
Termination
Portfolio Counter-party Date
Government Income Morgan Stanley 06/14/06
Morgan Stanley 06/17/06
Union Bank of Switzerland 04/16/07
Deutsche Bank 08/02/07
Deutsche Bank 01/17/08
Deutsche Bank 04/18/08
Barclays Bank 03/10/09
Deutsche Bank 03/23/10
Morgan Stanley 06/17/10
Union Bank of Switzerland 08/16/10
Union Bank of Switzerland 09/27/10
Deutsche Bank 01/09/11
Merrill Lynch 07/22/14
Morgan Stanley 10/01/14
Union Bank of Switzerland 11/26/14
Union Bank of Switzerland 03/21/15
Deutsche Bank 03/24/15
Deutsche Bank 03/29/15
Morgan Stanley 07/11/15
Morgan Stanley 08/02/15
Deutsche Bank 11/10/15
Deutsche Bank 01/17/16
Deutsche Bank 01/17/16
Barclays Bank 03/10/16
Inflation Protected Bond Goldman Sachs 11/07/10
JP Morgan Chase 05/26/15
Citibank 12/23/15
GNMA Morgan Stanley 06/14/06
Morgan Stanley 06/17/06
Union Bank of Switzerland 04/16/07
Deutsche Bank 08/02/07
Deutsche Bank 01/17/08
Deutsche Bank 04/18/08
Barclays Bank 03/10/09
Deutsche Bank 03/23/10
Union Bank of Switzerland 08/16/10
Union Bank of Switzerland 09/27/10
Deutsche Bank 01/09/11
Merrill Lynch 07/22/14
Morgan Stanley 10/01/14
Morgan Stanley 07/11/15
Morgan Stanley 08/02/15
Deutsche Bank 10/28/15
Deutsche Bank 11/10/15
Deutsche Bank 01/17/16
Barclays Bank 03/10/16
Managed Income Morgan Stanley 06/14/06
Morgan Stanley 06/17/06
Union Bank of Switzerland 04/16/07
Deutsche Bank 08/02/07
Deutsche Bank 08/17/07
Merrill Lynch 07/15/10
Union Bank of Switzerland 09/27/10
Goldman Sachs 10/04/10
Deutsche Bank 11/07/10
Goldman Sachs 04/22/14
Citibank 06/10/14
Merrill Lynch 07/22/14
Merrill Lynch 03/17/15
Union Bank of Switzerland 03/21/15
JP Morgan Chase 05/26/15
Morgan Stanley 08/02/15
Union Bank of Switzerland 12/07/15
Merrill Lynch 12/07/15
Merrill Lynch 12/23/15
Merrill Lynch 10/27/19
Interest Interest Unrealized
Receivable Payable Notional amount Appreciation
Portfolio Rate Rate (Local Currency) (Depreciation)
Government Income 3.22% 4.90%3 $ 8,190,000 $ 28,829
3.21% 4.49%3 6,100,000 19,337
4.60%3 3.00% 10,000,000 185,100
4.39% 4.68%3 22,500,000 (264,375)
4.60%3 4.83% 34,700,000 244,635
4.82%5 N/A6 65,900,000 (563,445)
5.19% 4.90%3 85,900,000 (140,876)
4.94%3 4.60% 34,100,000 825,561
4.31% 4.92%3 5,900,000 (156,055)
4.75%3 4.56% 7,400,000 208,754
4.51% 4.96%3 1,500,000 (46,800)
4.78% 4.55%3 31,200,000 (662,376)
4.60%3 4.93% 3,300,000 92,341
4.53%3 4.52% 3,400,000 196,180
4.78%3 4.58% 50,000,000 2,166,000
4.88% 4.93%3 6,000,000 (209,400)
5.08% 4.94%3 11,100,000 (233,877)
5.11% 4.96%3 11,000,000 (206,910)
4.44% 4.56%3 4,000,000 (273,760)
4.73% 4.68%3 3,100,000 (148,025)
4.72%3 5.10% 36,800,000 302,128
4.94% 4.60%3 6,200,000 (209,684)
4.85% 4.60%3 37,500,000 (1,517,250)
4.90%3 5.28% 28,900,000 238,714
Inflation Protected Bond 5.03% 4.71%3 500,000 1,315
4.78%3 4.50% 300,000 15,591
6.67% 7.37%4 450,000 NZD 10,518
GNMA 3.22% 4.90%3 16,185,000 56,971
3.21% 4.49%3 12,000,000 38,040
4.60%3 3.00% 15,000,000 277,650
4.39% 4.68%3 9,200,000 (108,100)
4.60%3 4.83% 38,400,000 270,720
4.82%5 N/A6 41,000,000 (350,550)
5.19% 4.90%3 26,900,000 (44,116)
4.94%3 4.60% 17,100,000 413,992
4.75%3 4.56% 4,900,000 138,229
4.51% 4.96%3 3,000,000 (93,600)
4.78% 4.55%3 24,500,000 (512,279)
4.60%3 4.93% 4,300,000 120,323
4.53%3 4.52% 4,100,000 236,570
4.44% 4.56%3 1,800,000 (123,192)
4.73% 4.68%3 4,100,000 (195,775)
5.06% 4.64%3 6,600,000 (68,112)
4.72%3 5.10% 6,800,000 55,828
4.94% 4.60%3 2,200,000 (74,404)
4.90%3 5.28% 21,500,000 148,590
Managed Income 3.22% 4.90%3 46,345,000 163,134
3.21% 4.49%3 34,200,000 108,414
4.60%3 3.00 % 50,000,000 925,500
4.39% 4.68%3 30,700,000 (360,725)
4.44% 4.75%3 11,400,000 (127,110)
4.37% 4.60%3 17,020,000 (601,487)
4.51% 4.96%3 2,300,000 (71,760)
4.66% 4.54%3 37,000,000 (491,404)
5.00% 4.71%3 8,400,000 8,988
4.61%3 4.89% 20,000,000 352,851
4.88%3 5.24% 9,500,000 (48,260)
4.60%3 4.93% 13,100,000 366,567
4.92%3 4.90% 17,000,000 562,322
4.88% 4.93%3 10,000,000 (349,000)
4.78%3 4.50% 4,900,000 254,653
4.73% 4.68%3 12,500,000 (596,875)
5.94% 4.85%3 5,900,000 334,412
4.85%3 5.13% 8,500,000 57,120
6.65% 7.37%4 6,800,000 NZD 158,945
4.78% 4.64%3 1,600,000 (81,222)
153
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Interest Interest Unrealized
Termination Receivable Payable Notional amount Appreciation
Portfolio Counter-party Date Rate Rate (Local Currency) (Depreciation)
International Bond Morgan Stanley 06/14/06 3.22% 4.90%3 $ 11,050,000 $ 38,896
Morgan Stanley 06/17/06 3.21% 4.49%3 8,200,000 25,994
Deutsche Bank 04/01/07 4.28% 4.53%3 20,000,000 (193,600)
Citibank 03/20/08 6.91% 7.41%4 103,000,000 NZD 241,580
Morgan Stanley 07/01/10 4.17% 4.53%3 36,900,000 (1,174,527)
Morgan Stanley 08/26/10 2.15%7 2.84% 135,000,000 SEK 315,118
Merrill Lynch 09/29/10 2.24%7 2.86% 90,000,000 SEK 202,486
Deutsche Bank 12/13/10 2.22%7 3.39% 125,000,000 SEK 67,889
Goldman Sachs 01/04/11 2.83%8 2.86% 29,000,000 EUR 974,766
Goldman Sachs 02/23/11 2.11%7 3.31% 200,000,000 SEK 432,946
Deutsche Bank 08/02/12 6.42% 7.50%4 3,100,000 NZD 553
Morgan Stanley 02/17/14 4.75%3 4.41% 4,100,000 248,296
Deutsche Bank 04/01/15 4.53%3 5.03% 11,000,000 268,290
Morgan Stanley 07/01/15 4.53%3 4.39% 20,500,000 1,246,810
Citibank 03/21/16 7.41%4 6.60% 10,000,000 NZD (289,188)
High Yield Bond Citibank 12/20/09 3.75% N/A9 6,000,000 151,181
Citibank 03/20/10 4.74% N/A10 6,000,000 391,102
Bank of America 06/20/10 N/A11 3.60% 4,850,000 (176,270)
Bank of America 06/20/10 N/A11 3.60% 4,850,000 (179,273)
Merrill Lynch 06/20/10 N/A12 0.99% 2,000,000 (27,176)
Merrill Lynch 06/20/10 1.90% N/A13 2,000,000 49,008
Goldman Sachs 12/20/10 N/A14 1.17% 1,000,000 (19,383)
JP Morgan Chase 12/20/10 N/A15 1.85% 3,000,000 (58,020)
Merrill Lynch 12/20/10 2.45% N/A16 3,000,000 72,912
Union Bank of Switzerland 12/20/10 N/A17 3.95% 3,500,000 (31,172)
Goldman Sachs 03/20/11 N/A18 3.25% 1,000,000 (1,340)
Merrill Lynch 03/20/11 N/A19 2.72% 3,000,000 (49,403)
Union Bank of Switzerland 03/20/11 N/A20 1.50% 1,000,000 (3,461)
1 Rate to be determined based on the 3 month LIBOR on 10/30/06.
2 Per the terms of the agreement, rate becomes effective 10/30/06.
3 Rate shown is based on the 3 month LIBOR as of the most recent payment date.
4 Rate shown is based on the 3 month BBA NZD LIBOR as of the most recent
payment date.
5 Per the terms of the agreement, rate becomes effective 04/18/06.
6 Rate to be determined based on the 3 month LIBOR on 04/18/06.
7 Rate shown is based on the 3 month STIBOR as of the most recent payment date.
8 Rate shown is based on the 6 month EURIBOR as of the most recent payment
date.
9 Rate to be determined upon notice of event of default by The Goodyear Tire &
Rubber Company on 7.857% bond issue maturing 08/15/2011.
10 Rate to be determined upon notice of event of default by Levi Strauss &
Company on 12.25% bond issue maturing 12/15/2012.
11 Rate to be determined upon notice of event of default by DJ CDX:NA.HY4.
12 Rate to be determined upon notice of event of default by Teco Energy, Inc.
on 7.20% bond issue maturing 05/01/2011.
13 Rate to be determined upon notice of event of default by CMS Energy
Corporation on 8.50% bond issue maturing 04/15/2011.
14 Rate to be determined upon notice of event of default by Teco Energy, Inc.
on 7.00% bond issue maturing 05/01/2012.
15 Rate to be determined upon notice of event of default by NRG Energy, Inc. on
8.00% bond issue maturing 12/15/2013.
16 Rate to be determined upon notice of event of default by Utilicorp Canada
Finance Corp. on 7.75% bond issue maturing 06/15/2011.
17 Rate to be determined upon notice of event of default by DJ CDX:NA.HY5.
18 Rate to be determined upon notice of event of default by Quebecor World
Capital Corporation on 6.13% bond issue maturing 11/15/2013.
19 Rate to be determined upon notice of event of default by Eastman Kodak
Company on 7.25% bond issue maturing 11/15/2013.
20 Rate to be determined upon notice of event of default by Universal
Corporation on 5.20% bond issue maturing 10/15/2013.
As a result of recent changes in GAAP, the Portfolio's have previously
reclassified periodic payments made under interest rate swap agreements,
previously included within interest income or expense, as a component of
realized gain (loss) in the Statement of Operations. For consistency, similar
reclassifications have been made to amounts appearing in the per share amounts
in prior years financial highlights. Net investment income ratios in the
financial highlights (from 2001-2003), have also been modified accordingly.
This reclassification had no effect on the Portfolio's net asset value, either
in total or per share, or their total increase (decrease) in net assets from
operations during any period. The effects of these reclassifications in the
financial highlights are as follows:
154
BLACKROCK FUNDS
LOW DURATION BOND
---------------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- --------------- ------------- ------------ ------------ -------------
Net Investment Income Ratio
9/30/2003 .................... -% (0.01)% (0.01)% (0.01)% (0.01)% (0.01)%
9/30/2002 .................... -% -% -% -% -% -%
9/30/2001 .................... -% -% (0.01)% (0.01)% -% (0.01)%
Net Investment Income per Share
9/30/2003 .................... $ - $ - $ - $ - $ - $ -
9/30/2002 .................... $ - $ - $ - $ - $ - $ -
9/30/2001 .................... $ - $ - $ - $ - $ - $ -
INTERMEDIATE GOVERNMENT BOND
----------------------------------------------------------------
INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
--------------- ----------- ------------ ------------ ------------
Net Investment Income Ratio
9/30/2003 .................... 0.05% 0.05% 0.05% 0.05% 0.05%
9/30/2002 .................... 0.12% 0.11% 0.12% 0.12% 0.12%
9/30/2001 .................... 0.01% 0.01% 0.01% 0.01% 0.01%
Net Investment Income per Share
9/30/2003 .................... $ - $ 0.01 $ 0.01 $ - $ -
9/30/2002 .................... $ 0.01 $ 0.01 $ 0.02 $ 0.02 $ 0.01
9/30/2001 .................... $ - $ - $ - $ 0.01 $ 0.01
INTERMEDIATE BOND
-----------------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
------------- --------------- ------------- ------------ ------------ -------------
Net Investment Income Ratio
9/30/2003 .................... ( 0.08)% ( 0.07)% ( 0.08)% ( 0.08)% ( 0.07)% ( 0.07)%
9/30/2002 .................... ( 0.02)% ( 0.02)% ( 0.02)% ( 0.02)% ( 0.02)% ( 0.02)%
9/30/2001 .................... 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%
Net Investment Income per Share
9/30/2003 .................... $ - $ (0.01) $ (0.01) $ (0.01) $ (0.01) $ (0.01)
9/30/2002 .................... $ (0.01) $ (0.01) $ - $ (0.01) $ - $ -
9/30/2001 .................... $ - $ 0.01 $ - $ 0.01 $ - $ -
CORE BOND TOTAL RETURN
--------------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
------------- --------------- ------------ ------------ ------------ -----------
Net Investment Income Ratio
9/30/2003 .................... 0.02% 0.01% 0.01% 0.01% 0.02% 0.01%
9/30/2002 .................... ( 0.10)% ( 0.10)% (0.10)% ( 0.10)% (0.10)% (0.10)%
9/30/2001 .................... 0.02% 0.01% 0.01% 0.01% 0.02% 0.01%
Net Investment Income per Share
9/30/2003 .................... $ - $ - $ - $ - $ - $ -
9/30/2002 .................... $ (0.01) $ (0.01) $ - $ (0.01) $ - $ -
9/30/2001 .................... $ - $ - $ - $ 0.01 $ - $ -
CORE PLUS TOTAL RETURN
-----------------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
------------- --------------- ------------- ------------ ------------ -------------
Net Investment Income Ratio
9/30/2003 .................... (0.01)% (0.01)% (0.01)% (0.01)% (0.01)% (0.01)%
Net Investment Income per Share
9/30/2003 .................... $ - $ - $ - $ - $ - $ -
155
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
GOVERNMENT INCOME
--------------------------------------------------
BLACKROCK INVESTOR A INVESTOR B INVESTOR C
----------- ------------ ------------ ------------
Net Investment Income Ratio
9/30/2003 .................... 0.07% 0.07% 0.07% 0.07%
9/30/2002 .................... -% 0.20% 0.20% 0.21%
9/30/2001 .................... -% 0.09% 0.10% 0.09%
Net Investment Income per Share
9/30/2003 .................... $ 0.01 $ 0.01 $ 0.01 $ 0.01
9/30/2002 .................... $ - $ 0.02 $ 0.02 $ 0.02
9/30/2001 .................... $ - $ 0.01 $ 0.01 $ -
GNMA
------------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- --------------- ------------ ------------ ------------ -----------
Net Investment Income Ratio
9/30/2003 .................... 0.11% 0.12% 0.11% 0.12% 0.12% 0.11%
9/30/2002 .................... -% 0.37% 0.36% 0.37% 0.37% 0.36%
9/30/2001 .................... -% ( 0.10)% ( 0.10)% ( 0.10)% ( 0.10)% ( 0.10)%
Net Investment Income per Share
9/30/2003 .................... $ - $ 0.02 $ 0.01 $ 0.01 $ 0.01 $ 0.01
9/30/2002 .................... $ - $ 0.02 $ 0.01 $ 0.03 $ 0.02 $ 0.01
9/30/2001 .................... $ - $ (0.01) $ (0.01) $ (0.01) $ - $ -
MANAGED INCOME
------------------------------------------------------------------
INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
--------------- ------------- ------------ ------------ ------------
Net Investment Income Ratio
9/30/2003 .................... ( 0.03)% ( 0.03)% ( 0.03)% ( 0.02)% ( 0.02)%
9/30/2002 .................... ( 0.04)% ( 0.04)% ( 0.04)% ( 0.04)% ( 0.05)%
9/30/2001 .................... 0.01% 0.01% 0.01% 0.01% 0.01%
Net Investment Income per Share
9/30/2003 .................... $ - $ - $ - $ - $ -
9/30/2002 .................... $ (0.01) $ (0.01) $ (0.01) $ (0.01) $ (0.01)
9/30/2001 .................... $ - $ - $ - $ - $ -
Investment Transactions and Investment Income - Investment transactions
are accounted for on the trade date. The cost of investments sold and the
related gain or loss thereon is determined by use of the specific
identification method, generally first in first out, for both financial
reporting and federal income tax purposes. Interest income is recorded on the
accrual basis. Discounts and premiums on debt securities are accreted or
amortized, respectively, for book and tax purposes using the effective
yield-to-maturity method over the term of the instrument. Dividends are
recorded on the ex-dividend date. Paydown gains and losses on mortgage and
asset-backed securities are presented as an adjustment to interest income.
Repurchase Agreements - Money market instruments may be purchased from
banks and non-bank dealers subject to the seller's agreement to repurchase them
at an agreed upon date and price. Collateral for repurchase agreements may have
longer maturities than the maximum permissible remaining maturity of portfolio
investments. The seller is required on a daily basis to maintain the value of
the securities subject to the agreement at not less than the repurchase price.
The agreements are conditioned upon the collateral being deposited under the
Federal Reserve book-entry system or held in a separate account by the
Portfolio's custodian or an authorized securities depository.
Some countries in which the Portfolios invest require governmental
approval for the repatriation of investment income, capital or the proceeds of
sales of securities by foreign investors. In addition, if there is
deterioration in a country's balance of payments or for other reasons, a
country may impose temporary restrictions on foreign capital remittances
abroad.
Reverse Repurchase Agreements - The Portfolios may enter into reverse
repurchase agreements with qualified third party brokers-dealers as determined
by and under the direction of the Board. Interest on the value of the reverse
156
BLACKROCK FUNDS
repurchase agreements issued and outstanding is based upon competitive market
rates at the time of issuance and is included within the related liability on
the statement of assets and liabilities. At the time the Portfolios enter into
a reverse repurchase agreement, it identifies for segregation certain liquid
securities having a value not less than the repurchase price, including accrued
interest, of the reverse repurchase agreement.
Futures Transactions - The Portfolios use futures and options on futures
contracts typically as a substitute for taking a position in the underlying
asset and/or as part of a strategy designed to reduce exposure to other risks,
such as interest rate or currency risk. The Portfolio may also use these
instruments for leverage. These futures contracts obligate a Portfolio, at
maturity, to take or make delivery of securities, the cash value of a
securities index or a stated quantity of a foreign currency. Upon entering into
a futures contract, the Portfolios are required to deposit cash or pledge
securities as 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 Portfolios each day (daily variation margin) and are
recorded as cumulative unrealized gains or losses until the contracts are
closed. When the contracts are closed, the Portfolios record a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transaction and the Portfolios' 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 market, resulting in an inability to liquidate 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.
Stripped Mortgage Backed Securities - The Portfolios may invest in
stripped mortgage-backed securities issued by the U.S. Government, its agencies
and instrumentalities. Stripped mortgage-backed securities are usually
structured with two classes that receive different proportions of the interest
and principal distributions on a pool of mortgage assets. In certain cases, one
class will receive all of the interest (the interest-only or "IO" class), while
the other class will receive all of the principal (the principal-only or "PO"
class). The yield to maturity on IOs is sensitive to the rate of principal
repayments (including pre-payments) on the related underlying mortgage assets,
and principal pre-payments may have a material effect on yield to maturity. If
the underlying mortgage assets experience greater than anticipated pre-payments
of principal, a Portfolio may not fully recoup its initial investment in IOs.
Such securities will be considered liquid only if so determined in accordance
with guidelines established by the Board. The Portfolios also may invest in
stripped mortgage-backed securities that are privately issued. These securities
will be considered illiquid for purposes of each Portfolio's limit on illiquid
securities.
Investing in Government Sponsored Enterprises - The Portfolios invest in
securities issued by the Federal Home Loan Mortgage Corporation ("Freddie Mac")
and similar United States Government sponsored entities such as Federal
National Mortgage Association ("Fannie Mae") and the Federal Home Loan Banks
("FHLB's"). Freddie Mac, Fannie Mae and FHLB's, although chartered and
sponsored by Congress, are not funded by Congressional appropriations and the
debt and mortgage-backed securities issued by Freddie Mac, Fannie Mae and
FHLB's are neither guaranteed nor insured by the United States Government.
Option Writing/Purchasing - The Portfolios may write or purchase financial
options contracts for the purpose of hedging or earning additional income,
which may be deemed speculative. When the Portfolios write or purchase an
option, an amount equal to the premium received or paid by the Portfolios 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
Portfolios 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 Portfolios have realized a gain or a loss on investment
transactions. The Portfolios as writers 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.
Swaptions Writing - The Portfolios may write swaption contracts to manage
exposure to fluctuations in interest rates and to enhance portfolio yield.
Swaption contracts wirtten by the Portfolios represent an option that gives the
purchaser the right, but not the obligation, to enter into a previously agreed
upon swap contract on a future date. If a written call swaption is exercised,
the writer will enter a swap and is obligated to pay the fixed rate and receive
a floating rate in exchange. If a written put swaption is exercised, the writer
will enter a swap and is obligated to pay the floating rate and receive a fixed
rate in exchange. Swaptions are marked to market daily based upon quotations
from market makers.
157
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
When a Portfolio writes a swaption, the premium received is recorded as a
liability and is subsequently adjusted to the current market value of the
swaption. Changes in the value of the swaption are reported as unrealized gains
or losses in the Statements of Assets and Liabilities or Schedule of
Investments. Gain or loss is recognized when the swaption contract expires or
is closed. Premiums received from writing swaptions that expire or are
exercised are treated by the Portfolio as realized gains from investments. The
difference between the premium and the amount paid on effecting a closing
purchase transaction is also treated as a realized gain, or if the premium is
less than the amount paid for the closing purchase, as a realized loss.
Entering into a swaption contract involves, to varying degrees, the
elements of credit, market and interest rate risk, associated with both option
contracts and swap contracts. To reduce credit risk from potential counterparty
default, the Portfolios enter into swaption contracts with counterparties whose
creditworthiness has been evaluated by BlackRock. The Portfolios bear the
market risk arising from any change in index values or interest rates.
Written or purchased option and swaption transactions entered into during
the six months ended March 31, 2006 are as follows:
INTERMEDIATE
ENHANCED INCOME LOW DURATION BOND GOVERNMENT BOND
------------------------- ---------------------------- ----------------------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS PREMIUM CONTRACTS PREMIUM CONTRACTS PREMIUM
----------- ----------- ----------- -------------- ----------- --------------
Balance at 9/30/05 ......... - $ - - $ - 4,880 $ 2,316,820
Purchased .................. 10 10,157 27,018 4,942,990 3,380 1,889,010
Written .................... 610 18,865 16,146 510,426 334 172,324
Expired .................... - - - - - -
Closed ..................... 10 1,470 13,542 1,017,957 2,276 1,130,930
--- -------- ------ ----------- ----- -----------
Balance at 3/31/06 ......... 590 $ 10,178 2,670 $ 3,414,607 442 $ 530,796
=== ======== ====== =========== ===== ===========
INTERMEDIATE INTERMEDIATE CORE BOND
BOND PLUS BOND TOTAL RETURN
---------------------------- -------------------------- -----------------------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS PREMIUM CONTRACTS PREMIUM CONTRACTS PREMIUM
----------- -------------- ----------- ------------ ----------- ---------------
Balance at 9/30/05 ......... 7,760 $ 3,745,770 220 $ 106,900 36,963 $ 15,473,746
Purchased .................. 4,740 2,632,190 160 89,160 14,640 8,143,459
Written .................... 466 240,125 12 6,312 1,460 754,818
Expired .................... - - - - - -
Closed ..................... 2,974 1,477,895 84 41,738 500 272,038
----- ----------- --- --------- ------ ------------
Balance at 3/31/06 ......... 512 $ 124,190 12 $ 17,686 23,283 $ 7,813,067
===== =========== === ========= ====== ============
CORE PLUS INFLATION
TOTAL RETURN GOVERNMENT INCOME PROTECTED BOND
---------------------------- -------------------------- --------------------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS PREMIUM CONTRACTS PREMIUM CONTRACTS PREMIUM
----------- -------------- ----------- ------------ ----------- ------------
Balance at 9/30/05 ......... 4,883 $ 2,032,676 718 $ 449,984 501 $ 197,735
Purchased .................. 1,900 1,053,270 188 31,142 324 48,030
Written .................... 178 91,741 5,612 2,246,751 306 71,906
Expired .................... - - 251 41,578 72 11,013
Closed ..................... 56 30,332 5,063 2,116,761 68 75,545
----- ----------- ----- ---------- --- ---------
Balance at 3/31/06 ......... 3,105 $ 1,040,815 1,330 $ 590,410 487 $ 157,079
===== =========== ===== ========== === =========
GNMA MANAGED INCOME INTERNATIONAL BOND
-------------------------- ---------------------------- ----------------------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS PREMIUM CONTRACTS PREMIUM CONTRACTS PREMIUM
----------- ------------ ----------- -------------- ----------- --------------
Balance at 9/30/05 ......... 410 $ 230,727 10,334 $ 4,347,478 7,760 $ 3,275,520
Purchased .................. 71 11,761 3,840 2,139,840 4,098 2,062,993
Written .................... 1,976 791,115 374 192,840 - -
Expired .................... 95 15,737 - - - -
Closed ..................... 1,776 745,916 124 67,165 2,460 1,216,470
----- --------- ------ ----------- ----- -----------
Balance at 3/31/06 ......... 634 $ 279,902 6,744 $ 2,333,313 1,202 $ 3,943
===== ========= ====== =========== ===== ===========
158
BLACKROCK FUNDS
HIGH YIELD BOND
-------------------------
NUMBER OF
CONTRACTS PREMIUM
----------- -----------
Balance at 9/30/05 ......... 119 $ 89,553
Purchased .................. - -
Written .................... 6,061 560,268
Expired .................... 4,092 433,519
Closed ..................... - -
----- ---------
Balance at 3/31/06 ......... 2,088 $ 216,302
===== =========
TBA Purchase Commitments - The Portfolios may enter into to be announced
("TBA") commitments to purchase or sell securities for a fixed price at a
future date. TBA commitments are considered securities in themselves, and
involve a risk of loss if the value of the security to be purchased or sold
declines or increases prior to settlement date, which is in addition to the
risk of decline in the value of a Portfolios' other assets. Unsettled TBA
commitments are valued at the current market value of the underlying
securities, according to the procedures described under "Security Valuation".
Mortgage Dollar Rolls - The Portfolios may enter into mortgage dollar
rolls (principally using TBA commitments) in which the Portfolios sell mortgage
securities for delivery in the current month and simultaneously contracts to
repurchase similar, but not identical, securities at an agreed-upon price on a
fixed date. The Portfolios account for such dollar rolls as purchases and sales
and receive compensation, in either "fee" or "drop", as consideration for
entering into the commitment to repurchase. A Portfolio must maintain liquid
securities having a value not less than the repurchase price (including accrued
interest) for such dollar rolls. The market value of the securities that a
Portfolio is required to purchase may decline below the agreed upon repurchase
price of those securities.
In a "fee" roll, the compensation is recorded as deferred income and
amortized to income over the roll period. In a "drop" roll, the compensation is
paid via a lower price for the security upon its repurchase. The counterparty
receives all principal and interest payments, including prepayments, made in
respect of a security subject to such a contract while it is the holder.
Mortgage dollar rolls may be renewed with a new purchase and repurchase price
and a cash settlement made on settlement date without physical delivery of the
securities subject to the contract. A Portfolio engages in dollar rolls for the
purpose of enhancing its yield, principally by earning a negotiated fee.
Financing Transactions - The Portfolios may enter into financing
transactions consisting of the sales by a Portfolio of securities together with
a commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, a Portfolio's right to repurchase the security may be
restricted. The value of the security may change over the term of the financing
transaction.
Inflation-indexed Bonds - Inflation-indexed bonds are fixed income
securities whose principal value is periodically adjusted according to the rate
of inflation. If the index measuring inflation falls, the principal value of
inflation-indexed bonds will be adjusted downward, and consequently the
interest payable on these securities (calculated with respect to a smaller
principal amount) will be reduced. Repayment of the original bond principal
upon maturity (as adjusted for inflation) is guaranteed in the case of U.S.
Treasury inflation-indexed bonds. For bonds that do not provide a similar
guarantee, the adjusted principal value of the bond repaid at maturity may be
less than the original principal.
Bridge Debt Commitments - At March 31, 2006, the High Yield Bond Portfolio
had $65,541 in commitments outstanding to fund high yield bridge debt. The High
Yield Bond Portfolio is entitled to a fee upon the expiration of the commitment
period, generally within six months of the initial commitment date. The bridge
debt terms approximate market rates at the time the commitment is entered into.
Securities Lending - Through an agreement with PFPC Trust Company, the
Portfolios may lend portfolio securities to certain brokers, dealers or other
financial institutions that pay the Portfolios a negotiated fee. Prior to the
close of each business day, loans of U.S. securities are secured by collateral
equal to at least 102% of the market value of the securities on loan. Loans of
foreign securities are secured by collateral equal to at least 105% of the
market value of securities on loan. However, due to market fluctuations, the
value of the securities lent may exceed the value of the collateral. On the
next business day, the collateral is adjusted based on the prior day's market
fluctuations and the current day's lending activity. Cash collateral received
in connection with the securities lending is invested in short-term
159
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
investments by the lending agent. The lending agent has hired BlackRock Capital
Management, Inc. ("BCM"), a wholly-owned subsidiary of BlackRock, Inc., and
pays BCM to provide advisory services with respect to the collateral of all of
the clients of its securities lending program. The lending agent may invest
such collateral in short-term investments, including the Institutional Money
Market Trust (the "Trust"), an affiliate of the Fund, a portfolio of money
market securities, or high-quality, short-term instruments with a maturity date
not to exceed 397 days. The securities lending income included in the
accompanying Statements of Operations is principally derived from investments
in the Trust and accordingly represents income earned from an affiliate. BCM
serves as investment adviser to the Trust but receives no fees from the Trust
for these services. Administrative and accounting services are provided by PFPC
Inc. ("PFPC"), an indirect wholly-owned subsidiary of The PNC Financial
Services Group, Inc. PFPC is paid a fee from the Trust at an annual rate not to
exceed 0.10% of the Trust's average daily net assets.
At March 31, 2006, the market value of securities on loan, cash collateral
invested in the Trust and total value of collateral held in connection with
securities lending is summarized as follows:
MARKET VALUE MARKET VALUE OF TOTAL MARKET
OF SECURITIES CASH COLLATERAL VALUE OF
ON LOAN INVESTED IN THE TRUST COLLATERAL RECEIVED
--------------- ----------------------- --------------------
Intermediate Bond ......... $ 2,765,000 $ 2,912,000 $ 2,912,000
Managed Income ............ 748,563 768,500 768,500
High Yield Bond ........... 62,517,105 65,324,004 65,337,286
In the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("generally accepted accounting principles") requires the use of management
estimates. Actual results could differ from these estimates and such
differences could be material.
Transfers In-Kind - During the year ended September 30, 2005 and six
months ended March 31, 2006, there were no transfers In-kinds.
Other - Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses are prorated to
the Portfolios on the basis of relative net assets. Class-specific expenses are
borne by that class. Differences in net expense ratios between classes of a
Portfolio are due to class-specific expenses and waivers. Income, other
expenses and realized and unrealized gains and losses of a Portfolio are
allocated to the respective class on the basis of the relative net assets each
day.
160
BLACKROCK FUNDS
(D) Agreements and Other Transactions with Affiliates and Related Parties
Pursuant to an Investment Advisory Agreement, BlackRock serves as
investment adviser to the Portfolios. BlackRock Financial Management, Inc.,
("BFM"), a wholly-owned subsidiary of BlackRock, Inc., 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 payable monthly, at the following annual rates, based on each
Portfolio's average daily net assets:
EACH PORTFOLIO
EXCEPT THE ENHANCED INCOME,
INTERNATIONAL BOND, INFLATION INTERNATIONAL BOND INFLATION PROTECTED
PROTECTED BOND & GNMA & GNMA BOND
------------------------------- -------------------- --------------------
INVESTMENT INVESTMENT INVESTMENT
AVERAGE DAILY NET ASSETS ADVISORY FEE ADVISORY FEE ADVISORY FEE
- ------------------------------- ------------------------------- -------------------- --------------------
first $1 billion .500% .550% .400%
$1 billion-$2 billion .450 .500 .375
$2 billion-$3 billion .425 .475 .350
greater than $3 billion .400 .450 .325
The investment advisory fee for the Enhanced Income Portfolio is 0.40%.
BlackRock pays BFM fees for its sub-advisory services.
PFPC Trust Company, an indirect subsidiary of The PNC Financial Services
Group, Inc., serves as custodian for each of the Fund's Portfolios. PFPC Inc.
("PFPC"), an indirect wholly-owned subsidiary of The PNC Financial Services
Group, Inc. serves as transfer agent and dividend disbursing agent. The
custodian and the transfer agent have agreed to voluntarily waive a portion of
their fees during the period.
Shares of each class of each Portfolio of the Fund bear their pro rata
portion of all operating expenses paid by the Portfolio, except transfer agency
fees, certain administrative/servicing fees and amounts payable under the
Fund's Amended and Restated Distribution and Service Plan.
Prior to February 1, 2006, the BlackRock Shares bore a transfer agent fee
at an annual rate not to exceed 0.005% of the average daily net assets plus per
account fees and disbursements. Institutional, Service, Investor A, Investor B,
and Investor C Share classes each bore a transfer agent fee at an annual rate
not to exceed .018% of the annual average net assets of such respective classes
plus per account fees and disbursements. Certain other transfer agency fees
were allocated on relative net assets of each class of each Portfolio.
Effective February 1, 2006, each class of each Portfolio bears the costs
of transfer agent fees associated with such respective classes. Transfer agency
fees borne by each class of each Portfolio are comprised of those fees charged
by the transfer agent for issuing and redeeming shares of each class of each
Portfolio, all shareholder communications including shareholder reports,
dividend and distribution notices, proxy materials for its meetings to
shareholders and maintenance of shareholder accounts; networking and
recordkeeping/shareholder services fees; and reimbursements to BlackRock for
costs related to the Fund's investor service center.
PFPC 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. Prior to February 1, 2006 the fee was paid at the
following annual rates: 0.085% of the first $500 million, 0.075% of the next
$500 million and 0.065% of assets in excess of $1 billion. In addition, each of
the share classes, except for the BlackRock Class, was charged an
administration fee based on the following percentage of average daily net
assets of each respective class: 0.145% of the first $500 million, 0.135% of
the next $500 million and 0.125% of assets in excess of $1 billion. The
BlackRock Class was charged an administration fee of 0.035% of the first $500
million, 0.025% of the next $500 million and 0.015% of assets in excess of $1
billion. Effective February 1, 2006, the administration fee is paid at the
following annual rates: 0.075% of the first $500 million, 0.065% of the next
$500 million and 0.055% of assets in excess of $1 billion. In addition, each of
the share classes is charged an administration fee based on the following
percentage of average daily net assets of each respective class: 0.025% of the
first $500 million, 0.015% of the next $500 million and 0.005% of assets in
excess of $1 billion. In addition, PFPC and BlackRock may, at their discretion,
voluntarily waive all or any portion of their administration fees for any
Portfolio or share class.
161
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
For the six months ended March 31, 2006, the following shows the various
types of class specific expenses borne directly by each class of each Portfolio
and any associated waivers of those expenses.
SHARE CLASSES
ADMINISTRATION FEES ---------------------------------------
BLACKROCK INSTITUTIONAL SERVICE
----------- --------------- -----------
Enhanced Income ...................... $ 3,931 $ 17,377 $ 29
Low Duration Bond .................... 84,154 181,794 196,996
Intermediate Government Bond ......... - 111,006 438
Intermediate Bond .................... 66,439 163,195 49,755
Intermediate PLUS Bond ............... 4,754 425 -
Core Bond Total Return ............... 166,077 324,090 79,340
Core PLUS Total Return ............... 53,058 387 -
Government Income .................... 1,448 - 117,020
Inflation Protected Bond ............. 3,398 6,254 1
GNMA ................................. 1,755 62,047 4,231
Managed Income ....................... - 301,287 46,183
International Bond ................... 15,268 149,693 47,777
High Yield Bond ...................... 24,367 84,481 85,013
SHARE CLASSES
ADMINISTRATION FEES --------------------------------------------------
INVESTOR A INVESTOR B INVESTOR C TOTAL
------------ ------------ ------------ -----------
Enhanced Income ...................... $ 1 $ - $ - $ 21,338
Low Duration Bond .................... 42,855 22,829 36,112 564,740
Intermediate Government Bond ......... 175,256 37,841 10,053 334,594
Intermediate Bond .................... 14,665 5,408 4,696 304,158
Intermediate PLUS Bond ............... 15 1 - 5,195
Core Bond Total Return ............... 112,731 24,974 36,991 744,203
Core PLUS Total Return ............... 44 73 30 53,592
Government Income .................... 137,437 21,465 17,207 294,577
Inflation Protected Bond ............. 2,121 1,264 2,086 15,124
GNMA ................................. 7,846 9,860 13,047 98,786
Managed Income ....................... 14,636 3,309 643 366,058
International Bond ................... 84,037 9,852 30,547 337,174
High Yield Bond ...................... 135,085 55,490 25,226 409,662
SHARE CLASSES
ADMINISTRATION FEES WAIVED --------------------------------------
BLACKROCK INSTITUTIONAL SERVICE
----------- --------------- ----------
Enhanced Income ...................... $ 3,931 $ 6,370 $ 1
Low Duration Bond .................... 84,154 9,676 -
Intermediate Government Bond ......... - 111,006 303
Intermediate Bond .................... 66,439 8,831 3,888
Intermediate PLUS Bond ............... 4,754 - -
Core Bond Total Return ............... 166,077 15,391 -
Core PLUS Total Return ............... 53,058 - -
Government Income .................... 1,448 - -
Inflation Protected Bond ............. 3,398 683 -
GNMA ................................. 1,755 3,220 -
Managed Income ....................... - 300,412 27,623
International Bond ................... 11,248 - -
High Yield Bond ...................... 24,367 4,198 -
SHARE CLASSES
ADMINISTRATION FEES WAIVED ----------------------------------------------------
INVESTOR A INVESTOR B INVESTOR C TOTAL
------------ ------------ ------------ -------------
Enhanced Income ...................... $ - $ - $ - $ 10,302
Low Duration Bond .................... 3,177 1,578 2,516 101,101
Intermediate Government Bond ......... - 2,642 387 114,338
Intermediate Bond .................... - 183 - 79,341
Intermediate PLUS Bond ............... - - - 4,754*
Core Bond Total Return ............... 7,614 - - 189,082
Core PLUS Total Return ............... 4 6 3 53,071
Government Income .................... - - - 1,448
Inflation Protected Bond ............. - - - 4,081*
GNMA ................................. - - - 4,975
Managed Income ....................... - 227 - 328,262
International Bond ................... 5,661 - - 16,909
High Yield Bond ...................... 10,451 4,027 1,887 44,930
* Additionally, a fund level administration waiver was incurred in the amount
of $8,834 on Intermediate PLUS Bond Portfolio and $12,558 on Inflation
Protected Bond Portfolio.
SHARE CLASSES
TRANSFER AGENT FEES ---------------------------------------
BLACKROCK INSTITUTIONAL SERVICE
----------- --------------- -----------
Enhanced Income ...................... $ 1,170 $ 3,049 $ 25
Low Duration Bond .................... 49,002 44,220 105,204
Intermediate Government Bond ......... - 28,227 235
Intermediate Bond .................... 23,251 32,594 53,232
Intermediate PLUS Bond ............... 1,028 79 9
Core Bond Total Return ............... 87,792 66,923 21,614
Core PLUS Total Return ............... 17,899 35 8
Government Income .................... 597 - 52,393
Inflation Protected Bond ............. 1,346 1,452 28
GNMA ................................. 725 13,371 1,352
Managed Income ....................... - 58,140 13,652
International Bond ................... 10,376 49,079 27,741
High Yield Bond ...................... 11,651 23,220 22,495
SHARE CLASSES
TRANSFER AGENT FEES -------------------------------------------------
INVESTOR A INVESTOR B INVESTOR C TOTAL
------------ ------------ ------------ ----------
Enhanced Income ...................... $ 25 $ - $ - $ 4,269
Low Duration Bond .................... 30,579 17,776 24,705 271,486
Intermediate Government Bond ......... 101,143 31,446 7,591 168,642
Intermediate Bond .................... 10,107 4,528 2,869 126,581
Intermediate PLUS Bond ............... 11 15 5 1,147
Core Bond Total Return ............... 77,918 19,647 25,185 299,079
Core PLUS Total Return ............... 73 83 37 18,135
Government Income .................... 102,785 21,482 11,670 188,927
Inflation Protected Bond ............. 1,223 627 689 5,365
GNMA ................................. 4,848 6,863 8,787 35,946
Managed Income ....................... 5,507 2,638 291 80,228
International Bond ................... 87,123 9,611 19,726 203,656
High Yield Bond ...................... 122,507 42,190 18,048 240,111
162
BLACKROCK FUNDS
SHARE CLASSES
TRANSFER AGENT FEES WAIVED --------------------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
----------- --------------- --------- ------------ ------------ ------------ ---------
Enhanced Income ...................... $ 59 $ - $ 2 $ 2 $ - $ - $ 63
Low Duration Bond .................... 3,245 - - 2,655 826 1,180 7,906
Intermediate Government Bond ......... - 885 - - 858 - 1,743
Intermediate Bond .................... 1,357 - 649 - 2 - 2,008
Intermediate PLUS Bond ............... 119 - 2 - - 1 122
Core Bond Total Return ............... 4,779 - - - - - 4,779
Core PLUS Total Return ............... 1 - 1 6 4 - 12
Government Income .................... 59 - - - - - 59
Inflation Protected Bond ............. 59 - 15 - - - 74
GNMA ................................. 59 - - - - - 59
Managed Income ....................... - - - - 20 - 20
International Bond ................... - - - 9,027 - - 9,027
High Yield Bond ...................... 531 - - 13,275 3,186 688 17,680
SHARE CLASSES
TRANSFER AGENT FEES REIMBURSED --------------------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
----------- --------------- --------- ------------ ------------ ------------ ---------
Enhanced Income ...................... $ 129 $ - $ 4 $ 21 $ - $ - $ 154
Low Duration Bond .................... 17,785 - - 745 3,030 1,861 23,421
Intermediate Government Bond ......... - 4,758 82 - - - 4,840
Intermediate Bond .................... 2,887 - 12,803 - - - 15,690
Intermediate PLUS Bond ............... 229 - 8 - 12 5 254
Core Bond Total Return ............... 10,923 - - - - - 10,923
Core PLUS Total Return ............... 2,551 - 7 14 10 1 2,583
Government Income .................... 79 - - - - - 79
Inflation Protected Bond ............. 186 - 12 - - - 198
GNMA ................................. 95 - - - - - 95
International Bond ................... - - - 11,990 - - 11,990
High Yield Bond ...................... 1,674 - - 14,836 2,632 - 19,142
SHARE CLASSES
SHAREHOLDER SERVICE FEES --------------------------------------------------------------------
SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
---------- ------------ ------------ ------------ ----------
Enhanced Income ...................... $ 67 $ 3 $ - $ - $ 70
Low Duration Bond .................... 462,549 100,179 52,420 83,079 698,227
Intermediate Government Bond ......... 1,015 406,862 87,094 23,039 518,010
Intermediate Bond .................... 117,763 34,103 12,563 10,998 175,427
Intermediate PLUS Bond ............... - 39 2 - 41
Core Bond Total Return ............... 182,122 269,284 57,900 85,987 595,293
Core PLUS Total Return ............... - 111 172 76 359
Government Income .................... 280,105 328,894 49,739 40,640 699,378
Inflation Protected Bond ............. 2 4,953 3,042 4,946 12,943
GNMA ................................. 10,001 18,328 22,786 30,029 81,144
Managed Income ....................... 111,958 33,941 7,586 1,504 154,989
International Bond ................... 108,248 191,737 22,797 70,575 393,357
High Yield Bond ...................... 207,506 318,812 128,975 59,118 714,411
163
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SHARE CLASSES
DISTRIBUTION FEES -------------------------------------------------------
INVESTOR A INVESTOR B INVESTOR C TOTAL
------------ ------------ ------------ ----------
Enhanced Income ...................... $ 2 $ - $ - $ 2
Low Duration Bond .................... 39,929 157,262 249,239 446,430
Intermediate Government Bond ......... 162,912 261,325 69,117 493,354
Intermediate Bond .................... 13,625 37,688 32,995 84,308
Intermediate PLUS Bond ............... 15 8 - 23
Core Bond Total Return ............... 107,903 173,718 257,964 539,585
Core PLUS Total Return ............... 44 514 229 787
Government Income .................... 131,746 149,217 121,917 402,880
Inflation Protected Bond ............. 1,974 9,138 14,837 25,949
GNMA ................................. 7,322 68,362 90,082 165,766
Managed Income ....................... 13,555 22,760 4,515 40,830
International Bond ................... 76,311 68,401 211,787 356,499
High Yield Bond ...................... 127,765 387,005 177,488 692,258
SHARE CLASSES
DISTRIBUTION FEES WAIVED ---------------
INVESTOR A
---------------
Enhanced Income ...................... $ 2
Low Duration Bond .................... 39,929
Intermediate Government Bond ......... 162,912
Intermediate Bond .................... 13,625
Intermediate PLUS Bond ............... 15
Core Bond Total Return ............... 107,903
Core PLUS Total Return ............... 44
Government Income .................... 131,746
Inflation Protected Bond ............. 1,974
GNMA ................................. 7,322
Managed Income ....................... 13,555
International Bond ................... 76,311
High Yield Bond ...................... 127,765
In the interest of limiting the expenses of the Portfolios, BlackRock and
the Fund have entered into a series of annual expense limitation agreements.
The agreements set a limit on certain of the operating expenses of each
Portfolio for the next year and require BlackRock to waive or reimburse fees or
expenses if these operating expenses exceed that limit. These expense limits
apply to the aggregate expenses incurred on a share class (excluding: interest,
taxes, brokerage commissions and other extraordinary expenses).
At March 31, 2006, the amounts receivable from BlackRock for each
Portfolio with reimbursements was as follows:
Enhanced Income ...................... $ 56
Low Duration Bond .................... 12,825
Intermediate Government Bond ......... 2,540
Intermediate Bond .................... 8,121
Intermediate PLUS Bond ............... 134
Core Bond Total Return ............... 5,739
Core PLUS Total Return ............... 1,359
Government Income .................... 41
Inflation Protected Bond ............. 104
GNMA ................................. 50
International Bond ................... 7,872
High Yield Bond ...................... 9,909
164
BLACKROCK FUNDS
BlackRock has contractually agreed to waive or reimburse fees or expenses
until February 1, 2007, in order to limit expenses as follows. This agreement
is reviewed annually by the Fund's Board.
SHARE CLASSES
---------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- --------------- --------- ------------ ------------ -----------
Enhanced Income ...................... 0.30% 0.40% 0.75% 0.80% NA NA
Low Duration Bond .................... 0.40% 0.55% 0.85% 0.81% 1.56% 1.56%
Intermediate Government Bond ......... NA 0.60% 0.90% 1.07% 1.82% 1.82%
Intermediate Bond .................... 0.45% 0.60% 0.90% 0.95% 1.70% 1.70%
Intermediate PLUS Bond ............... 0.40% 0.55% 0.85% 0.90% 1.65% 1.65%
Core Bond Total Return ............... 0.40% 0.55% 0.85% 0.81% 1.65% 1.65%
Core PLUS Total Return ............... 0.40% 0.55% 0.85% 0.90% 1.65% 1.65%
Government Income .................... 0.45% NA 0.90% 1.07% 1.82% 1.82%
Inflation Protected Bond ............. 0.30% 0.40% 0.75% 0.85% 1.60% 1.60%
GNMA ................................. 0.45% 0.60% 0.90% 1.07% 1.82% 1.82%
Managed Income ....................... NA 0.65% 0.95% 1.12% 1.87% 1.87%
International Bond ................... 0.78% 1.03% 1.33% 1.19% 2.25% 2.25%
High Yield Bond ...................... 0.55% 0.70% 1.00% 0.96% 1.71% 1.71%
If in the following two years the operating expenses of a share class that
previously received a waiver or reimbursement from BlackRock are less than the
expense limit for that share class, the share class is required to repay
BlackRock up to the amount of fees waived or expenses reimbursed under the
agreement if: (1) the Portfolio of which the share class is a part 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 at the previous quarterly meeting.
Under terms of the Agreement and Plan of Reorganization of the State
Street Government Income Fund and the State Street High Income Fund, fees
waived by BlackRock through February 1, 2007, on the Institutional, Investor A,
Investor B, and Investor C Share classes of the Intermediate Government Bond
Portfolio and the High Yield Bond Portfolio are not subject to future
recoupment by BlackRock.
At March 31, 2006, the amounts subject to possible future reimbursement
under the expense limitation agreement were as follows:
TOTAL WAIVERS
EXPIRING EXPIRING EXPIRING SUBJECT TO
JANUARY 31, 2007 JANUARY 31, 2008 JANUARY 31, 2009 REIMBURSEMENT
------------------ ------------------ ------------------ ---------------
Enhanced Income .................. $ 271,986 $ 237,516 $ 27,252 $ 536,754
Low Duration Bond ................ 4,373,486 3,977,877 432,165 8,783,528
Intermediate Bond ................ 2,070,723 2,101,789 224,547 4,397,059
Intermediate PLUS Bond ........... 146,763 178,282 22,734 347,779
Core Bond Total Return ........... 5,428,876 5,856,434 654,954 11,940,264
Core PLUS Total Return ........... 941,716 1,116,993 148,489 2,207,198
Government Income ................ 363,760 787,864 68,746 1,220,370
Inflation Protected Bond ......... 182,698 256,149 19,864 458,711
GNMA ............................. 696,440 661,884 42,835 1,401,159
Managed Income ................... 1,236,727 1,200,201 21,682 2,458,610
International Bond ............... 26,818 55,064 26,678 108,560
165
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The following waivers previously incurred on the portfolios which were
subject to recoupment by BlackRock expired on January 31, 2006:
Low Duration Bond .............. $ 3,619,537
Intermediate Bond .............. 1,750,280
Core Bond Total Return ......... 5,029,818
Core PLUS Total Return ......... 606,696
Government Income .............. 361,714
GNMA ........................... 830,940
Managed Income ................. 1,600,137
International Bond ............. 16,453
Pursuant to the Fund's Amended and Restated Distribution and Service Plan
(the "Plan"), the Portfolio may pay BlackRock Distributors, Inc. (the
"Distributor") and/or BlackRock or any other affiliate of The PNC Financial
Services Group, Inc. fees for distribution and sales support services.
Currently, only Investor A Shares, Investor B Shares and Investor C Shares bear
the expense of distribution fees under the Plan. In addition, the Portfolio may
pay brokers, dealers, financial institutions and industry professionals
(including The PNC Financial Services Group, Inc. and its affiliates) ("service
organizations") fees for the provision of personal services to shareholders.
BlackRock may receive some of the service fees paid by the Portfolio in return
for providing services to shareholders. Currently, only Investor A Shares,
Investor B Shares, Investor C Shares and Service Shares bear the expense of
service fees under the Plan.
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.
Class Specific Fee Arrangements
Portfolio Share Classes
BlackRock Institutional Service
Contractual Actual Contractual Actual Contractual Actual
Fees Fees(4) Fees Fees(4) Fees(1) Fees(4)
Enhanced Income None None None None 0.25% 0.25%
Low Duration Bond None None None None 0.25% 0.25%
Intermediate Government Bond N/A N/A None None 0.25% 0.25%
Intermediate Bond None None None None 0.25% 0.25%
Intermediate PLUS Bond None None None None 0.25% 0.25%
Core Bond Total Return None None None None 0.25% 0.25%
Core PLUS Total Return None None None None 0.25% 0.25%
Government Income None None N/A N/A 0.25% 0.25%
Inflation Protected Bond None None None None 0.25% 0.25%
GNMA None None None None 0.25% 0.25%
Managed Income N/A N/A None None 0.25% 0.25%
International Bond None None None None 0.25% 0.25%
High Yield Bond None None None None 0.25% 0.25%
Portfolio Share Classes
Investor A Investor B Investor C
Contractual Actual Contractual Actual Contractual Actual
Fees(2) Fees(4) Fees(3) Fees(4) Fees(3) Fees(4)
Enhanced Income 0.35% 0.25% N/A N/A N/A N/A
Low Duration Bond 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
Intermediate Government Bond 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
Intermediate Bond 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
Intermediate PLUS Bond 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
Core Bond Total Return 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
Core PLUS Total Return 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
Government Income 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
Inflation Protected Bond 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
GNMA 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
Managed Income 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
International Bond 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
High Yield Bond 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
(1) - The maximum annual contractual fees are comprised of a 0.25% service fee.
(2) - The maximum annual contractual fees are comprised of a 0.10% distribution
fee and a 0.25% service fee.
(3) - The maximum annual contractual fees are comprised of a 0.75% distribution
fee and a 0.25% service fee.
(4) - The actual fees are for the six months ended March 31, 2006.
BlackRock maintains a call center which is responsible for providing
certain shareholder services to the BlackRock Funds, such as responding to
shareholder inquiries and processing transactions based upon instructions from
shareholders with respect to the subscription and redemption of Fund shares.
For the six months ended March 31, 2006, the following amounts have been
accrued by each Portfolio to reimburse BlackRock for costs incurred running the
call center, which are a component of the transfer agent fees in the
accompanying Statements of Operations.
166
BLACKROCK FUNDS
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
----------- --------------- --------- ------------ ------------ ------------ ----------
Enhanced Income .................. $ 635 $ 893 $ 5 $ 2 $ - $ - $ 1,535
Low Duration Bond ................ 22,031 13,616 15,384 5,431 2,358 3,597 62,417
Intermediate Government Bond ..... - 10,706 39 24,631 6,962 1,602 43,940
Intermediate Bond ................ 13,421 10,370 3,443 1,376 486 383 29,479
Intermediate PLUS Bond ........... 293 10 1 2 2 1 309
Core Bond Total Return ........... 50,636 20,276 5,823 11,311 2,306 2,936 93,288
Core PLUS Total Return ........... 9,751 - 1 9 8 2 9,771
Government Income ................ 364 - 8,633 12,022 2,609 2,030 25,658
Inflation Protected Bond ......... 791 390 15 248 134 185 1,763
GNMA ............................. 444 4,594 341 938 1,140 1,301 8,758
Managed Income ................... - 18,525 2,888 1,170 305 65 22,953
International Bond ............... 5,233 15,763 5,543 16,621 1,714 4,339 49,213
High Yield Bond .................. 7,440 8,234 8,430 25,011 8,031 3,316 60,462
As of March 31, 2006, affiliated payables were as follows:
PNC BANK
PFPC(1) BLACKROCK(2) AFFILIATES(3)
---------- -------------- --------------
Enhanced Income ...................... $ 5,680 $ 7,582 $ 11
Low Duration Bond .................... 99,073 455,767 178,323
Intermediate Government Bond ......... 145,703 304,024 135,008
Intermediate Bond .................... 53,609 303,284 41,739
Intermediate PLUS Bond ............... 8,557 2,362 11
Core Bond Total Return ............... 171,420 805,755 170,744
Core PLUS Total Return ............... 28,909 102,334 205
Government Income .................... 61,891 202,279 168,797
Inflation Protected .................. 9,051 6,541 6,486
GNMA ................................. 21,963 67,008 38,228
Managed Income ....................... 52,758 332,761 32,044
International Bond ................... 123,055 343,549 105,951
High Yield Bond ...................... 160,309 410,249 218,600
(1) - payables to PFPC are for Accounting, Administration, Custody and Transfer
Agent services provided as of March 31, 2006.
(2) - payables to BlackRock are for Advisory and Administration services
provided as of March 31, 2006, and for amounts due BlackRock for costs
incurred related to the BlackRock Funds Call Center.
(3) - payables to PNC Bank affiliates are for distribution and sales support
services as described under the Plan. The total payable on behalf of the
Fund, as of March 31, 2006, was $5,632,572, a portion of which is paid to
service organizations, including other PNC Bank affiliates.
167
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(E) Purchases and Sales of Securities
For the six months ended March 31, 2006, purchases and sales of
securities, other than short-term investments, dollar rolls and U.S. government
securities, were as follows:
PURCHASES SALES
---------------- ----------------
Enhanced Income ...................... $ 34,065,548 $ 20,224,816
Low Duration Bond .................... 664,164,435 660,559,480
Intermediate Government Bond ......... 339,297,962 116,551,497
Intermediate Bond .................... 206,001,361 118,992,873
Intermediate PLUS Bond ............... 12,723,951 5,385,768
Core Bond Total Return ............... 2,627,261,857 2,012,819,998
Core PLUS Total Return ............... 317,527,509 233,237,081
Government Income .................... 1,232,726,636 1,131,975,869
Inflation Protected Bond ............. - 1,746,825
GNMA ................................. 172,397,413 186,066,963
Managed Income ....................... 586,986,456 477,304,355
International Bond ................... 481,514,969 488,893,846
High Yield Bond ...................... 420,181,042 481,177,532
For the six months ended March 31, 2006, purchases and sales of U.S.
government securities were as follows:
PURCHASES SALES
---------------- ----------------
Enhanced Income ...................... $ 16,396,251 $ 13,418,966
Low Duration Bond .................... 62,739,993 286,924,898
Intermediate Government Bond ......... 165,026,864 382,266,474
Intermediate Bond .................... 303,379,023 409,212,718
Intermediate PLUS Bond ............... 17,007,088 17,870,939
Core Bond Total Return ............... 1,458,712,291 1,616,190,357
Core PLUS Total Return ............... 207,082,399 200,563,164
Government Income .................... 521,284,904 320,166,452
Inflation Protected Bond ............. 60,530,720 48,113,634
GNMA ................................. 80,614,535 71,496,882
Managed Income ....................... 396,831,042 459,312,637
International Bond ................... 62,521,555 73,609,022
168
BLACKROCK FUNDS
(F) Capital Shares
Transactions in capital shares for each period were as follows:
ENHANCED INCOME
------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
---------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
--------------- ---------------- ----------------- ---------------
Shares sold:
BlackRock Class ........................ 380,358 $ 3,744,004 2,557,797 $ 25,360,401
Institutional Class .................... 1,578,118 15,521,804 4,696,240 46,518,977
Service Class .......................... 3,342 32,342 4,995 48,742
Investor A Class ....................... 31 301 226 2,230
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 8,096 79,618 27,096 268,396
Institutional Class .................... 86 841 201 1,987
Service Class .......................... 5 46 4 43
Investor A Class ....................... 4 44 3 30
Shares redeemed:
BlackRock Class ........................ (29,901) (293,930) (2,066,288) (20,475,433)
Institutional Class .................... (1,727,488) (16,977,446) (5,002,721) (49,546,947)
Service Class .......................... (3,264) (31,578) (4) (39)
---------- ------------- ------------ -------------
Net increase .............................. 209,387 $ 2,076,046 217,549 $ 2,178,387
========== ============= ============ =============
LOW DURATION BOND
------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
--------------------------------- -------------------------------------
SHARES VALUE SHARES VALUE
--------------- ----------------- ---------------- -------------------
Shares sold:
BlackRock Class ............................. 7,423,902 $ 73,304,726 23,677,584 $ 237,200,862
Institutional Class ......................... 3,332,353 32,908,909 13,140,496 131,840,889
Service Class ............................... 6,075,091 59,992,636 15,491,086 155,287,978
Investor A Class ............................ 2,494,740 24,658,676 3,372,366 33,802,475
Investor B Class ............................ 146,234 1,444,623 305,370 3,060,506
Investor C Class ............................ 578,886 5,713,039 1,111,687 11,134,000
Shares issued in reinvestment of dividends:
BlackRock Class ............................. 902,433 8,897,738 1,577,075 15,770,232
Institutional Class ......................... 54,494 537,740 89,590 896,842
Service Class ............................... 699,646 6,903,371 1,015,873 10,161,607
Investor A Class ............................ 131,162 1,294,544 180,216 1,803,602
Investor B Class ............................ 37,553 370,509 55,823 558,285
Investor C Class ............................ 42,442 418,563 72,317 723,217
Shares redeemed:
BlackRock Class ............................. (6,935,756) (68,491,999) (47,103,065) (471,633,795)
Institutional Class ......................... (11,265,261) (111,239,605) (22,415,014) (224,670,022)
Service Class ............................... (7,703,514) (76,076,929) (12,747,828) (127,637,535)
Investor A Class ............................ (2,795,680) (27,588,271) (4,584,912) (45,968,058)
Investor B Class ............................ (1,002,627) (9,899,126) (2,299,034) (23,042,304)
Investor C Class ............................ (1,809,359) (17,857,769) (6,267,123) (62,832,733)
----------- -------------- ----------- ---------------
Net decrease ................................... (9,593,261) $ (94,708,625) (35,327,493) $ (353,543,952)
=========== ============== =========== ===============
169
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
INTERMEDIATE GOVERNMENT BOND
-------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
------------------------------------ ----------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ --------------- ----------------
Shares issued from the reorganization:(1)
Institutional Class .................... - $ - 603,030 $ 6,247,476
Investor A Class ....................... - - 35,945,484 373,247,336
Investor B Class ....................... - - 7,860,023 81,415,016
Investor C Class ....................... - - 1,326,873 13,754,555
Shares sold:
Institutional Class .................... 1,435,768 14,562,214 4,935,111 50,660,534
Service Class .......................... 27,910 283,772 53,163 551,290
Investor A Class ....................... 1,037,944 10,420,235 2,301,849 23,697,849
Investor B Class ....................... 90,221 915,203 305,328 4,572,462
Investor C Class ....................... 95,640 969,954 166,254 3,465,591
Shares issued in reinvestment of dividends:
Institutional Class .................... 61,667 624,659 209,245 2,162,681
Service Class .......................... 678 6,861 1,790 18,467
Investor A Class ....................... 311,983 3,167,258 504,455 5,201,764
Investor B Class ....................... 70,574 714,979 140,188 1,443,361
Investor C Class ....................... 12,144 123,044 25,817 266,289
Shares redeemed:
Institutional Class .................... (2,754,499) (27,915,631) (7,281,755) (75,223,527)
Service Class .......................... (32,591) (331,336) (90,576) (933,270)
Investor A Class ....................... (4,624,695) (46,864,651) (9,159,278) (94,649,944)
Investor B Class ....................... (1,305,084) (13,228,920) (1,944,875) (20,013,613)
Investor C Class ....................... (458,722) (4,655,242) (902,590) (9,324,007)
---------- -------------- ---------- -------------
Net increase (decrease) ................... (6,031,062) $ (61,207,601) 34,999,536 $ 366,560,310
========== ============== ========== =============
(1) See Note (B).
170
BLACKROCK FUNDS
INTERMEDIATE BOND
-------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
----------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
--------------- ----------------- ---------------- ----------------
Shares sold:
BlackRock Class ........................ 7,913,517 $ 73,126,927 10,943,920 $ 103,766,106
Institutional Class .................... 5,271,966 48,698,485 7,910,204 74,474,551
Service Class .......................... 2,139,915 19,750,409 4,061,951 38,342,245
Investor A Class ....................... 573,464 5,293,838 1,146,433 10,812,049
Investor B Class ....................... 64,760 597,282 168,492 1,587,038
Investor C Class ....................... 148,108 1,366,987 167,224 1,575,377
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 722,486 6,661,705 1,503,241 14,177,881
Institutional Class .................... 71,687 660,538 240,047 2,268,072
Service Class .......................... 210,421 1,940,638 367,148 3,460,910
Investor A Class ....................... 53,996 498,006 111,485 1,051,081
Investor B Class ....................... 9,053 83,513 17,501 165,066
Investor C Class ....................... 7,550 69,703 14,516 137,001
Shares redeemed:
BlackRock Class ........................ (7,356,504) (68,150,946) (12,225,385) (115,777,289)
Institutional Class .................... (7,458,746) (68,853,517) (8,948,280) (84,224,943)
Service Class .......................... (1,769,130) (16,343,541) (3,068,291) (28,892,569)
Investor A Class ....................... (1,129,848) (10,452,746) (1,454,381) (13,699,059)
Investor B Class ....................... (176,190) (1,625,849) (523,981) (4,940,189)
Investor C Class ....................... (180,871) (1,673,943) (692,275) (6,522,781)
---------- ------------- ----------- --------------
Net decrease .............................. (884,366) $ (8,352,511) (260,431) $ (2,239,453)
========== ============= =========== ==============
INTERMEDIATE PLUS BOND
---------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 09/30/05
--------------------------- ---------------------------------
SHARES VALUE SHARES VALUE
------------ ------------ --------------- ---------------
Shares sold:
BlackRock Class ........................ 42,053 $ 410,062 2,918,957 $ 28,908,265
Institutional Class .................... 3,284 33,000 81,163 829,560
Investor A Class ....................... 2,491 24,600 1,927 19,367
Investor B Class ....................... - - 187 1,879
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 48,096 467,632 82,753 820,654
Institutional Class .................... - - - 1
Investor A Class ....................... 61 603 37 373
Investor B Class ....................... 3 30 1 14
Shares redeemed:
BlackRock Class ........................ (54,141) (527,459) (2,532,276) (25,073,039)
Institutional Class .................... (4,110) (41,590) (30) (300)
------- ---------- ---------- -------------
Net increase .............................. 37,737 $ 366,878 552,719 $ 5,506,774
======= ========== ========== =============
171
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
CORE BOND TOTAL RETURN
-----------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
---------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
---------------- ----------------- ---------------- -----------------
Proceeds from the CIGNA Merger(1)
Investor A Class ............................ - $ - 9,164,716 $ 88,882,541
Shares sold:
BlackRock Class ............................. 12,551,516 119,691,587 72,943,333 710,880,147
Institutional Class ......................... 12,754,233 120,972,865 14,121,667 137,024,604
Service Class ............................... 1,610,589 15,299,100 3,124,016 30,340,448
Investor A Class ............................ 6,166,207 58,502,498 7,182,115 68,960,212
Investor B Class ............................ 346,207 3,287,809 838,821 8,145,914
Investor C Class ............................ 731,009 6,938,187 1,440,182 14,007,464
Shares issued in reinvestment of dividends:
BlackRock Class ............................. 3,445,703 32,756,326 5,151,864 50,150,246
Institutional Class ......................... 436,750 4,142,768 325,876 3,169,280
Service Class ............................... 314,404 2,981,425 393,907 3,828,505
Investor A Class ............................ 464,423 4,408,422 564,587 5,487,417
Investor B Class ............................ 46,878 444,099 66,679 647,871
Investor C Class ............................ 27,465 260,755 38,229 371,797
Shares redeemed:
BlackRock Class ............................. (15,420,117) (146,405,914) (61,453,820) (598,016,374)
Institutional Class ......................... (6,934,412) (65,820,268) (22,164,275) (215,691,754)
Service Class ............................... (3,911,011) (37,228,498) (2,684,772) (26,080,827)
Investor A Class ............................ (4,444,658) (42,210,284) (8,261,374) (80,230,420)
Investor B Class ............................ (900,633) (8,555,179) (1,596,836) (15,512,697)
Investor C Class ............................ (1,403,731) (13,349,591) (2,584,498) (25,136,361)
----------- -------------- ----------- --------------
Net increase ................................... 5,880,822 $ 56,116,107 16,610,417 $ 161,228,013
=========== ============== =========== ==============
(1) See Note (B).
172
BLACKROCK FUNDS
CORE PLUS TOTAL RETURN
---------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
------------- --------------- ---------------- ----------------
Shares sold:
BlackRock Class ........................ 2,772,506 $ 28,128,472 20,067,484 $ 207,899,062
Institutional Class .................... 396,201 3,994,424 51 524
Investor A Class ....................... 6,866 69,535 8,153 84,401
Investor B Class ....................... 1,152 11,757 4,032 41,806
Investor C Class ....................... 2,514 25,434 5,489 57,000
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 785,444 7,956,287 1,082,570 11,199,468
Institutional Class .................... 77 770 1 6
Service Class .......................... - - 80 834
Investor A Class ....................... 207 2,097 111 1,147
Investor B Class ....................... 282 2,860 229 2,372
Investor C Class ....................... 111 1,125 62 636
Shares redeemed:
BlackRock Class ........................ (862,832) (8,733,638) (16,967,035) (175,591,962)
Institutional Class .................... (3,876) (38,789) (51) (527)
Service Class .......................... - - (2,885) (29,944)
Investor A Class ....................... (5,277) (53,538) (597) (6,181)
Investor B Class ....................... (871) (8,876) (937) (9,743)
Investor C Class ....................... (347) (3,523) (443) (4,595)
--------- ------------ ----------- --------------
Net increase .............................. 3,092,157 $ 31,354,397 4,196,314 $ 43,644,304
========= ============ =========== ==============
GOVERNMENT INCOME
----------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
--------------------------------- ----------------------------------
SHARES VALUE SHARES VALUE
--------------- --------------- --------------- ----------------
Shares sold:
BlackRock Class ........................ - $ - - $ 1
Service Class .......................... 3,073,527 33,125,659 20,018,360 224,095,636
Investor A Class ....................... 7,024,219 75,799,335 15,705,001 173,372,996
Investor B Class ....................... 320,853 3,462,602 1,054,848 11,666,233
Investor C Class ....................... 517,308 5,570,552 1,196,333 13,196,771
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 18,559 199,939 48,339 534,250
Service Class .......................... 414,706 4,462,981 241,137 2,654,457
Investor A Class ....................... 329,705 3,551,703 471,025 5,201,492
Investor B Class ....................... 34,984 376,873 76,964 850,428
Investor C Class ....................... 26,707 287,197 51,223 564,964
Shares redeemed:
BlackRock Class ........................ - - (183,175) (2,002,148)
Service Class .......................... (691,061) (7,435,943) (720,236) (7,931,475)
Investor A Class ....................... (3,733,378) (40,266,682) (4,798,560) (53,075,253)
Investor B Class ....................... (832,273) (8,972,326) (1,243,847) (13,757,205)
Investor C Class ....................... (404,437) (4,347,010) (656,734) (7,244,686)
---------- ------------- ---------- -------------
Net increase .............................. 6,099,419 $ 65,814,880 31,260,678 $ 348,126,461
========== ============= ========== =============
173
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
INFLATION PROTECTED BOND
----------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
------------------------------ -------------------------------
SHARES VALUE SHARES VALUE
------------ --------------- ------------- ---------------
Shares sold:
BlackRock Class ........................ 6,849 $ 68,922 1,114,622 $ 11,640,391
Institutional Class .................... 1,079,262 11,082,403 619,259 6,536,438
Service Class .......................... 127 1,305 143 1,498
Investor A Class ....................... 168,332 1,697,122 592,223 6,211,445
Investor B Class ....................... 84,438 861,800 217,150 2,273,598
Investor C Class ....................... 107,295 1,095,315 375,454 3,950,746
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 17,603 175,787 6,148 63,843
Institutional Class .................... 18,348 186,355 7,358 77,671
Service Class .......................... 10 99 2 24
Investor A Class ....................... 13,702 138,702 12,079 126,662
Investor B Class ....................... 7,376 74,747 2,444 25,643
Investor C Class ....................... 9,462 96,363 4,464 47,091
Shares redeemed:
BlackRock Class ........................ (204,799) (2,037,777) (900,905) (9,381,838)
Institutional Class .................... (242,146) (2,438,687) (77,288) (816,190)
Investor A Class ....................... (152,105) (1,534,269) (231,656) (2,415,819)
Investor B Class ....................... (20,618) (208,786) (30,328) (316,726)
Investor C Class ....................... (67,660) (685,886) (24,467) (257,434)
--------- ------------ --------- ------------
Net increase .............................. 825,476 $ 8,573,515 1,686,702 $ 17,767,043
========= ============ ========= ============
GNMA
---------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
------------------------------------ ------------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ --------------- ------------------
Shares sold:
BlackRock Class ........................ 31,153 $ 300,000 112 $ 1,100
Institutional Class .................... 629,366 6,056,665 1,224,881 12,039,086
Service Class .......................... 135,401 1,300,485 797,088 7,867,549
Investor A Class ....................... 273,123 2,635,847 479,134 4,725,445
Investor B Class ....................... 71,307 684,591 130,958 1,290,150
Investor C Class ....................... 61,406 587,975 315,345 3,095,297
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 34,927 335,303 46,832 458,892
Institutional Class .................... 5,423 52,155 6,790 66,675
Service Class .......................... 4,766 45,805 6,106 59,880
Investor A Class ....................... 32,719 315,735 41,656 410,176
Investor B Class ....................... 30,013 288,784 40,105 393,684
Investor C Class ....................... 16,898 162,350 25,500 250,129
Shares redeemed:
BlackRock Class ........................ (1,653) (15,799) (464) (4,588)
Institutional Class .................... (1,720,311) (16,539,824) (4,038,772) (39,726,163)
Service Class .......................... (121,275) (1,165,113) (194,386) (1,902,805)
Investor A Class ....................... (396,788) (3,831,348) (773,584) (7,638,274)
Investor B Class ....................... (369,275) (3,556,569) (705,005) (6,925,054)
Investor C Class ....................... (514,612) (4,949,230) (1,593,289) (15,656,325)
---------- -------------- ---------- --------------
Net decrease .............................. (1,797,412) $ (17,292,188) (4,190,993) $ (41,195,146)
========== ============== ========== ==============
174
BLACKROCK FUNDS
MANAGED INCOME
------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
--------------------------------- ------------------------------------
SHARES VALUE SHARES VALUE
--------------- --------------- --------------- ------------------
Shares sold:
Institutional Class .................... 4,257,230 $ 42,763,075 4,721,056 $ 48,808,111
Service Class .......................... 3,211,139 32,278,615 4,378,267 45,218,402
Investor A Class ....................... 183,327 1,841,942 620,512 6,408,922
Investor B Class ....................... 37,697 379,239 135,723 1,402,256
Investor C Class ....................... 13,303 133,819 41,170 426,350
Shares issued in reinvestment of dividends:
Institutional Class .................... 272,901 2,742,113 243,639 2,523,415
Service Class .......................... 167,310 1,678,454 184,693 1,906,988
Investor A Class ....................... 68,610 689,090 136,893 1,415,011
Investor B Class ....................... 6,990 70,198 13,039 134,801
Investor C Class ....................... 804 8,045 1,097 11,310
Shares redeemed:
Institutional Class .................... (6,056,273) (60,830,381) (9,318,309) (96,359,348)
Service Class .......................... (1,270,641) (12,774,957) (4,302,614) (44,536,765)
Investor A Class ....................... (604,744) (6,080,832) (1,277,114) (13,200,211)
Investor B Class ....................... (149,029) (1,496,946) (377,402) (3,896,421)
Investor C Class ....................... (13,116) (131,424) (9,506) (98,076)
---------- ------------- ---------- --------------
Net increase (decrease) ................... 125,508 $ 1,270,050 (4,808,856) $ (49,835,255)
========== ============= ========== ==============
INTERNATIONAL BOND
-------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
------------------------------------- ---------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------- --------------- ---------------
Shares sold:
BlackRock Class ........................ 3,559,542 $ 38,564,967 8,425,996 $ 99,741,689
Institutional Class .................... 3,554,165 38,455,195 25,836,761 307,795,012
Service Class .......................... 1,949,102 20,953,986 5,793,762 68,495,942
Investor A Class ....................... 1,752,730 18,906,704 10,809,908 128,016,737
Investor B Class ....................... 110,035 1,192,956 687,467 8,202,390
Investor C Class ....................... 719,425 7,785,419 3,605,149 42,794,722
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 70,001 751,446 227,780 2,679,636
Institutional Class .................... 91,201 980,796 267,437 3,147,143
Service Class .......................... 110,420 1,188,573 383,524 4,526,581
Investor A Class ....................... 168,015 1,807,995 541,901 6,399,493
Investor B Class ....................... 12,157 130,837 43,122 510,377
Investor C Class ....................... 32,679 352,523 115,886 1,369,607
Shares redeemed:
BlackRock Class ........................ (2,965,778) (31,906,942) (2,918,326) (33,604,277)
Institutional Class .................... (14,222,111) (152,608,741) (6,661,800) (78,194,908)
Service Class .......................... (4,684,708) (50,231,214) (3,546,075) (41,217,400)
Investor A Class ....................... (5,587,833) (60,297,799) (5,773,239) (67,619,357)
Investor B Class ....................... (313,235) (3,375,495) (431,547) (5,024,195)
Investor C Class ....................... (1,662,964) (17,932,798) (1,080,369) (12,608,594)
----------- --------------- ---------- -------------
Net increase (decrease) ................... (17,307,157) $ (185,281,592) 36,327,337 $ 435,410,598
=========== =============== ========== =============
175
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
HIGH YIELD BOND
-----------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
---------------------------------- ----------------------------------
SHARES VALUE SHARES VALUE
--------------- ---------------- --------------- ----------------
Shares issued from the reorganization:(1)
Institutional Class .................... - $ - 499,336 $ 4,119,515
Investor A Class ....................... - - 28,680,269 236,635,082
Investor B Class ....................... - - 4,562,480 37,633,102
Investor C Class ....................... - - 1,274,746 10,520,796
Shares sold:
BlackRock Class ........................ 4,306,799 33,999,284 7,315,006 59,096,944
Institutional Class .................... 3,943,920 31,308,959 7,571,836 65,363,033
Service Class .......................... 11,528,288 91,028,711 9,805,652 79,698,157
Investor A Class ....................... 3,747,123 29,655,570 3,642,531 34,582,933
Investor B Class ....................... 617,622 4,888,464 1,252,655 10,272,635
Investor C Class ....................... 693,216 5,492,955 1,027,665 10,387,994
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 996,056 7,874,527 1,426,346 11,649,664
Institutional Class .................... 348,472 2,746,908 375,742 3,087,049
Service Class .......................... 611,979 4,827,962 411,312 3,347,060
Investor A Class ....................... 1,244,333 9,832,090 1,267,862 10,294,391
Investor B Class ....................... 454,406 3,589,932 549,068 4,479,462
Investor C Class ....................... 169,294 1,338,072 253,565 2,075,165
Shares redeemed:
BlackRock Class ........................ (3,854,507) (30,957,994) (3,386,198) (27,517,060)
Institutional Class .................... (4,716,382) (37,446,772) (7,873,773) (64,362,195)
Service Class .......................... (7,160,451) (56,716,056) (4,437,678) (35,963,148)
Investor A Class ....................... (4,318,928) (34,304,232) (10,042,859) (81,611,317)
Investor B Class ....................... (2,406,990) (19,071,192) (4,047,039) (44,405,828)
Investor C Class ....................... (979,102) (7,771,541) (3,996,445) (32,517,967)
---------- ------------- ----------- -------------
Net increase .............................. 5,225,148 $ 40,315,647 36,132,079 $ 296,865,467
========== ============= =========== =============
(1) See Note (B).
On March 31, 2006, one shareholder held approximately 93% of the
outstanding shares of the Enhanced Income Portfolio, two shareholders held
approximately 40% of the outstanding shares of the Low Duration Bond Portfolio,
two shareholders held approximately 40% of the outstanding shares of the
Intermediate Government Portfolio, four shareholders held approximately 63% of
the outstanding shares of the Intermediate Bond Portfolio, four shareholders
held 95% of the Intermediate PLUS Portfolio, one shareholder held approximately
29% of the outstanding shares of the Core Bond Total Return Portfolio, five
shareholders held approximately 66% of the outstanding shares of the Core PLUS
Total Return Portfolio, three shareholders held approximately 59% of the
outstanding shares of the Government Income Portfolio, two shareholders held
approximately 69% of the outstanding shares of the Inflation Protected
Portfolio, three shareholders held approximately 71% of the outstanding shares
of the GNMA Portfolio, two shareholders held approximately 88% of the
outstanding shares of the Managed Income Portfolio, two shareholders held
approximately 22% of the outstanding shares of the International Bond Portfolio
and two shareholders held approximately 23% of the outstanding shares of the
High Yield Bond Portfolio. Some of the shareholders are comprised of omnibus
accounts, which are held on behalf of several individual shareholders.
176
BLACKROCK FUNDS
(G) Federal Tax Information
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.
Dividends from net investment income and distributions from net realized
capital gains are determined in accordance with U.S. federal income tax
regulations, which may differ from those amounts determined under generally
accepted accounting principles.
The estimated tax character of distributions paid during the year ended
September 30, 2005, was as follows:
ORDINARY TAX RETURN LONG-TERM TOTAL
INCOME OF CAPITAL CAPITAL GAIN DISTRIBUTIONS
-------------- ------------ -------------- --------------
Enhanced Income ......................
9/30/05 ............................. $ 1,677,786 $ - $ - $ 1,677,786
Low Duration Bond ....................
9/30/05 ............................. 49,855,929 - - 49,855,929
Intermediate Government Bond .........
9/30/05 ............................. 13,795,146 3,929,278 1,396,396 19,120,820
Intermediate Bond ....................
9/30/05 ............................. 30,447,058 - 7,337,926 37,784,984
Intermediate PLUS Bond ...............
9/30/05 ............................. 1,007,615 - 7,371 1,014,986
Core Bond Total Return ...............
9/30/05 ............................. 99,908,300 - 4,346,486 104,254,786
Core PLUS Total Return ...............
9/30/05 ............................. 13,253,887 - - 13,253,887
Government Income ....................
9/30/05 ............................. 18,372,241 807,397 - 19,179,638
Inflation Protected Bond .............
9/30/05 ............................. 1,977,061 - 2,434 1,979,495
GNMA .................................
9/30/05 ............................. 8,498,850 - - 8,498,850
Managed Income .......................
9/30/05 ............................. 31,584,376 - 2,759,862 34,344,238
International Bond ...................
9/30/05 ............................. 31,309,603 - 1,447,289 32,756,892
High Yield Bond ......................
9/30/05 ............................. 67,406,689 - 799,441 68,206,130
At September 30, 2005, the Portfolios had capital loss carryforwards
available to offset future realized capital gains through the indicated
expiration dates:
EXPIRING SEPTEMBER 30
------------------------------------------
2007 2009 2010
------------- ------------- --------------
Enhanced Income ...................... $ - $ - $ -
Low Duration Bond .................... - - -
Intermediate Government Bond ......... 6,551,479 2,367,580 -
Intermediate PLUS Bond ............... - - -
Government Income .................... - - -
GNMA ................................. - - 603,989
High Yield Bond ...................... - - 60,670,785
EXPIRING SEPTEMBER 30
--------------------------------------------------------
2011 2012 2013 TOTAL
------------- ------------ -------------- --------------
Enhanced Income ...................... $ - $ 240,751 $ 71,246 $ 311,997
Low Duration Bond .................... - 440,690 11,041,413 11,482,103
Intermediate Government Bond ......... 9,601,882 34,783 - 18,555,724
Intermediate PLUS Bond ............... - - 9,328 9,328
Government Income .................... - 74,687 1,723,107 1,797,794
GNMA ................................. 1,576,264 2,473,978 2,063,521 6,717,752
High Yield Bond ...................... - - - 60,670,785
177
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
(H) Market Risk
The securities exchanges of certain foreign markets are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. Consequently, acquisition and disposition of securities by the
Portfolios may be inhibited.
178
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED)
(A) Board of Trustees' Consideration of the Advisory Agreements. The Board of
Trustees (the "Board") of BlackRock Funds (the "Fund"), including a
majority of the non-interested Trustees of the Fund (the "Independent
Trustees"), unanimously approved the renewal of the investment advisory
and sub-advisory agreements (the "Advisory Agreements") with respect to
the Taxable Bond Portfolios of the Fund (each, a "Portfolio"), at an
in-person meeting of the Board held on February 28, 2006. In connection
with its consideration of the Advisory Agreements, the Board met with
personnel from the investment adviser and sub-adviser to the Portfolios,
including BlackRock Advisors, Inc. and BlackRock Financial Management,
Inc. (collectively, "BlackRock"), at an in-person meeting of the Board
held on February 7, 2006. The Board reviewed materials that it received in
advance of that meeting, including (i) fee information and expense ratios
for retail and institutional share classes of each Portfolio in comparison
to fee information and expense ratios for peer funds of such Portfolio;
(ii) information about the investment performance of each Portfolio in
comparison to the investment performance for peer funds of such Portfolio;
(iii) BlackRock's economic outlook for the Portfolios and its general
investment outlook for the markets; (iv) information on the profitability
of BlackRock and its affiliates with respect to each Portfolio, including
details regarding the methodology used to calculate such profitability;
(v) information regarding fees paid to service providers that are
BlackRock affiliates; and (vi) information regarding compliance records
and regulatory matters relating to BlackRock and the Fund. In approving
the Advisory Agreements, the Board, including all of the Independent
Trustees, considered each of the matters discussed below in executive
sessions held at the February 7 and February 28 meetings, during which
counsel to the Independent Trustees was present.
Nature, Extent and Quality of Services. The Board received and considered
various information and data regarding the nature, extent and quality of
services provided by BlackRock to each of the Portfolios under the Advisory
Agreements during the past year. The Board reviewed BlackRock's investment
philosophy and process used to manage each of the Portfolios, as well as a
description of its capabilities, personnel and services. The Board
considered the scope of services provided by BlackRock to each of the
Portfolios under the Advisory Agreements relative to services typically
provided by third parties to comparable mutual funds, and considered
BlackRock's in-house research capabilities as well as other resources
available to its personnel. The Board noted that the standard of care
applicable under the Advisory Agreements was comparable to that generally
found in investment advisory agreements of their nature. The Board
considered the legal and compliance programs of each of the Fund and
BlackRock, as well as the integrity of the systems in place to ensure
implementation of such programs and the records of each of the Fund and
BlackRock with regard to these matters. The Board also considered
information relating to the qualifications, backgrounds and
responsibilities of BlackRock's investment professionals and other
personnel who provide services to each Portfolio under the applicable
Advisory Agreement, and took into account the time and attention devoted by
BlackRock senior management to each of the Portfolios. The Board also
considered BlackRock's general business reputation and overall financial
resources and concluded that BlackRock would be able to meet any reasonably
foreseeable obligation under the Advisory Agreements.
Following consideration of this information, the Board, including all of
the Independent Trustees, concluded that the nature, extent and quality of
the services provided by BlackRock to each Portfolio under the applicable
Advisory Agreement were consistent with the Portfolio's operational
requirements and reasonable in terms of approving the renewal of such
Advisory Agreement.
Advisory Fees. The Board received and considered statistical information
regarding the fees and expense ratios of retail and institutional share
classes of each Portfolio. The Board compared the advisory fees, both
before (contractual) and after (actual) any fee waivers and expense
reimbursements, and total
179
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
expenses of each Portfolio, against the fees and total expenses of the
Portfolio's peers selected by Lipper, Inc. ("Lipper"), an independent
provider of investment company data. The Board was provided with a
description of the methodology used by Lipper to determine the peers for
each Portfolio. For each Portfolio, the Investor A Class and Institutional
Class (BlackRock Class with respect to the Core PLUS Total Return,
Government Income and Intermediate PLUS Bond Portfolios) were used to
represent such Portfolio's share classes for purposes of the Lipper survey,
as Lipper differentiated between retail and institutional funds in
selecting peers.
In considering the fee and expense data provided by Lipper, the Board
noted that:
o Except for the Investor A Class of the Core PLUS Total Return and
Intermediate Government Bond Portfolios, the Institutional Class of
the Inflation Protected Bond Portfolio, the BlackRock Class of the
Government Income Portfolio and each of the Core Bond Total Return,
GNMA, Intermediate Bond, Intermediate PLUS Bond, Low Duration Bond
and Managed Income Portfolios, each Portfolio had contractual
advisory fees and expenses that were equal to or lower than the
median for its peers; and
o Except for the Institutional Class of the International Bond
Portfolio and each of the Intermediate Bond and Managed Income
Portfolios, each Portfolio had actual advisory fees and expenses that
were equal to or lower than the median for its peers.
However, the Board took into consideration the fact that:
o with respect to the Institutional (or BlackRock) Class of the GNMA,
Government Income, Inflation Protected Bond and Managed Income
Portfolios and the Investor A Class of the Core PLUS Total Return,
GNMA, Intermediate Government Bond, Intermediate PLUS Bond and
Managed Income Portfolios, the difference by which such Portfolios'
contractual advisory fees were higher than the median for their
respective peers was not significant;
o with respect to the Institutional (or BlackRock) Class of the Core
Bond Total Return, Intermediate PLUS Bond and Low Duration Bond
Portfolios and the Investor A Class of the Core Bond Total Return and
Low Duration Bond Portfolios, although the contractual advisory fee
of each such Portfolio was higher than the median for its peers,
after taking into account fee waivers, the actual advisory fee of
each such Portfolio was equal to or lower than the median for its
peers;
o with respect to the Institutional Class of the Intermediate Bond
Portfolio, although the contractual advisory fee of each such
Portfolio was higher than the median for its peers, its actual total
expenses were equal to or lower than the median; and
o with respect to the Investor A Class of the Intermediate Bond
Portfolio, although the contractual advisory fee of such Portfolio
was higher than the median for its peers, after taking into account
fee waivers, the actual management (advisory plus administration) fee
of such Portfolio was equal to or lower than the median for its
peers.
In addition to Lipper data, the Board also took into account the complexity
of the investment management of each Portfolio relative to its peers. The
Board was also provided with comparative information about services
rendered and fee rates offered to other similar clients advised by
BlackRock, including closed-end investment companies and separate accounts.
180
BLACKROCK FUNDS
Following consideration of this information, the Board, including all of
the Independent Trustees, concluded that the contractual fees to be paid to
BlackRock pursuant to the Advisory Agreements are fair and reasonable in
light of the services being provided.
Fund Performance. The Board received and considered information about each
Portfolio's one-, three- and five-year (as applicable) investment
performance for the period ended November 30, 2005, in comparison to the
performance peers selected by Lipper. The Board was provided with a
description of the methodology used by Lipper to select the peers. In
addition, the Board reviewed BlackRock's market outlook and discussed other
factors relevant to the performance of the Portfolios.
In considering the performance data provided by Lipper, the Board noted
that for each Portfolio that had existed for more than five years, except
for the Institutional (or BlackRock) Class of each of the Intermediate
Government Bond, International Bond and Low Duration Bond Portfolios and
the Investor A Class of the Core Bond Total Return, Intermediate Government
Bond, International Bond, Low Duration Bond and Managed Income Portfolios,
each Portfolio had investment performance during at least two of the
one-year, three-year and five-year periods that were at least equal to or
above the median for the Portfolio's peers. The Board discussed the
performance issues of these Portfolios with BlackRock, and was satisfied
that appropriate measures were being taken to address them.
Profitability. The Board considered the level of BlackRock's and its
affiliates' profits in respect of their relationship with each of the
Portfolios. This consideration included a broad review of BlackRock's
methodology in allocating its costs to the management of each Portfolio.
The Board considered the profits realized by BlackRock and its affiliates
in connection with the operation of each Portfolio and whether the amount
of profit is a fair profit relative to their relationship with the
Portfolio. The Board also considered BlackRock's profit margins in
comparison with available industry data. The Board, including all of the
Independent Trustees, concluded that BlackRock's profitability with respect
to the Portfolios is reasonable relative to the services provided.
Economies of Scale. The Board considered whether there have been economies
of scale in respect of the management of each Portfolio, whether each
Portfolio has appropriately benefited from any economies of scale, and
whether there is potential for realization of any further economies of
scale. The Board noted that economies of scale were passed on to the
shareholders in the form of breakpoints to the advisory fee rate of certain
of the Portfolios. The Board also considered the fee waivers and expense
reimbursement arrangements by BlackRock for each of the Portfolios. The
Board, including all of the Independent Trustees, determined that the
advisory fee structure was reasonable and that no changes were currently
necessary to realize any economies of scale.
Other Benefits to BlackRock. The Board also took into account other
ancillary benefits that BlackRock may derive from its relationship with
each of the Portfolios, such as BlackRock's ability to leverage its
investment professionals that manage other portfolios, an increase in
BlackRock's profile in the broker-dealer community, and the engagement of
BlackRock's affiliates as service providers to the Portfolios, including
for administrative, transfer agency, distribution and custodial services.
The Board, including all of the Independent Trustees, concluded that these
ancillary benefits that BlackRock and its affiliates could receive with
regard to providing investment advisory and other services to the
Portfolios were consistent with those generally available to other mutual
fund sponsors.
181
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED) (CONCLUDED)
No single factor was considered in isolation or to be determinative in the
Board's decision to approve the renewal of the Advisory Agreements. Rather,
the Board concluded, in light of a weighing and balancing of all factors
considered, that it was in the best interests of each Portfolio to approve
the continuation of the Advisory Agreements, including the fees to be
charged for services thereunder.
(B) The Fund's Audit Committee approved engaging Deloitte & Touche LLP as the
independent registered public accounting firm to audit the Fund's financial
statements for fiscal year 2006. On November 29, 2005, a majority of the
Fund's Board of Trustees, including a majority of the independent Trustees,
approved the appointment of Deloitte & Touche LLP as the Fund's independent
registered public accounting firm for the Fund's fiscal 2005 audit subject
to the right of the Fund, by a majority vote of the shareholders at any
meeting called for that purpose, to terminate the appointment without
penalty.
(C) As previously disclosed, BlackRock has received subpoenas from various
federal and state governmental and regulatory authorities and various
information requests from the Securities and Exchange Commission in
connection with ongoing industry-wide investigations of mutual fund
matters.
(D) BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill Lynch") announced
on February 15, 2006 that they had reached an agreement to combine Merrill
Lynch's investment management business, Merrill Lynch Investment Managers,
with BlackRock, Inc. to create a new independent company. Merrill Lynch
will have a 49.8% economic interest and a 45% voting interest in the
combined company and The PNC Financial Services Group, Inc. ("PNC"), which
currently holds a majority interest in BlackRock, Inc., will have
approximately a 34% economic and voting interest. The new company will
operate under the BlackRock name and be governed by a board of directors
with a majority of independent members. Each of Merrill Lynch and PNC has
agreed that it will vote all of its shares on all matters in accordance
with the recommendation of BlackRock's board in order to assure its
independence. Completion of the transaction is subject to various
regulatory approvals, client consents, approval by BlackRock, Inc.
shareholders and customary conditions.
(E) The amounts estimated to be paid by the Fund to the Chief Compliance
Officer (CCO) and certain of its staff for the six months ended March 31,
2006, are $255,572.
182
BLACKROCK FUNDS
Investment Adviser
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Sub-Adviser
BlackRock Financial Management, Inc.
New York, New York 10022
Custodian
PFPC Trust Company
Philadelphia, Pennsylvania 19153
Co-Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware 19809
Co-Administrator
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Distributor
BlackRock Distributors, Inc.
King of Prussia, Pennsylvania 19406
Counsel
Simpson Thacher & Bartlett LLP
New York, New York 10017
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Philadelphia, Pennsylvania 19103
The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it is intended to reduce expenses and
eliminate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be combined
with those for other members of your household, please contact the Fund at
(800) 441-7762.
The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Trustees. A
description of the policies and procedures that BlackRock and its affiliates
use to determine how to vote proxies relating to portfolio securities is
available without charge, upon request, by calling (800) 441-7762, or on the
website of the Securities and Exchange Commission (the "Commission") at
http://www.sec.gov.
Information on how proxies relating to the Fund's voting securities were voted
(if any) by BlackRock during the most recent 12-month period ended June 30th is
available, upon request and without charge, by calling (800) 441-7762 or on the
website of the Commission at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings for the first and
third quarters of its fiscal year with the Commission on
Form N-Q. The Fund's Form N-Q is available on the Commission's website at
http://www.sec.gov and may be reviewed and copied at the Commission's Public
Reference Room in Washington, D.C. Information regarding the operation of the
Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's
Form N-Q may also be obtained upon request, without charge, by calling (800)
441-7762.
This report is for shareholder information. This is not a prospectus intended
for the purchase or sale of Fund shares.
BLACKROCK FUNDS
FUND SPECTRUM
BlackRock Funds is a leading mutual fund company that currently has assets of
approximately $27 billion in the following portfolios, which are 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.
STOCK PORTFOLIOS
- --------------------------------------
Investment Trust Small Cap Core Equity
Large Cap Value Equity Small Cap Growth Equity
Large Cap Growth Equity Global Science & Technology Opportunities
Dividend AchieversTM Global Resources
Legacy All-Cap Global Resources
Mid-Cap Value Equity Health Sciences
Mid-Cap Growth Equity U.S. Opportunities
Aurora Global Opportunities
Small/Mid-Cap Growth International Opportunities
Small Cap Value Equity Index Equity
STOCK & BOND PORTFOLIOS
- --------------------------------------
Asset Allocation
BOND PORTFOLIOS
- --------------------------------------
Enhanced Income Government Income
Low Duration Bond Inflation Protected Bond
Intermediate Government Bond GNMA
Intermediate Bond Managed Income
Intermediate PLUS Bond International Bond
Core Bond Total Return High Yield Bond
Core PLUS Total Return
TAX-FREE BOND PORTFOLIOS
- --------------------------------------
UltraShort Municipal Ohio Tax-Free Income
Tax-Free Income Delaware Tax-Free Income
Pennsylvania Tax-Free Income Kentucky Tax-Free Income
New Jersey Tax-Free Income
MONEY MARKET PORTFOLIOS
- --------------------------------------
Money Market North Carolina Municipal Money Market
U.S. Treasury Money Market Ohio Municipal Money Market
Municipal Money Market Pennsylvania Municipal Money Market
New Jersey Municipal Money Market Virginia Municipal Money Market
SHAREHOLDER PRIVILEGES
ACCOUNT INFORMATION
Call us at 1-800-441-7762 to get information about your account balances,
recent transactions and share prices.
You can also reach us on the web at www.blackrock.com.
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 $50 or more from their BlackRock portfolios, as
long as their account is at least $10,000.
RETIREMENT PLANS
Shareholders may make investments in conjunction with Traditional, Rollover,
Roth, Coverdell and Simple IRA's.
ADDITIONAL INFORMATION ABOUT THE BLACKROCK FUNDS
For additional reports or additional information, as well as more current
information about portfolio holdings and characteristics, BlackRock Fund
shareholders and prospective investors may call 1-800-441-7762.
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.
[GRAPHIC OMITTED]
BND-SEMI1 3/06
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED
INCOME LIQUIDITYREAL ESTATE BlackRock Funds
Tax-Free Bond Portfolios
Semi-Annual Report
March 31, 2006 (Unaudited)
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BLACKROCK FUNDS
TAX-FREE BOND PORTFOLIOS
*UltraShort Municipal
*Tax-Free Income
*Pennsylvania Tax-Free Income
*New Jersey Tax-Free Income
*Ohio Tax-Free Income
*Delaware Tax-Free Income
*Kentucky Tax-Free Income
TABLE OF CONTENTS
Shareholder Letter..........................................................1
Portfolio Summaries
UltraShort Municipal....................................................2-3
Tax-Free Income.........................................................4-5
Pennsylvania Tax-Free Income............................................6-7
New Jersey Tax-Free Income..............................................8-9
Ohio Tax-Free Income..................................................10-11
Delaware Tax-Free Income..............................................12-13
Kentucky Tax-Free Income..............................................14-15
Note on Performance Information..........................................16
Schedule of Investments................................................7-34
Key to Investment Abbreviations..........................................35
Portfolio Financial Statements
Statements of Assets and Liabilities..................................36-37
Statements of Operations.................................................38
Statements of Changes in Net Assets...................................40-41
Financial Highlights..................................................42-51
Notes to Financial Statements.........................................52-64
Additional Information................................................65-68
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 generally receive any nonpublic personal information
relating to its shareholders who purchase shares through their broker-dealers.
However, in certain limited circumstances, BlackRock receives a limited amount
of nonpublic personal information from broker-dealers in connection with
monitoring for inappropriate trading activity. 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.
BLACKROCK FUNDS
March 31, 2006
Dear Shareholder:
You may be aware that on February 15, 2006, we announced that BlackRock
and Merrill Lynch Investment Managers (MLIM) intended to unite to create a new
independent asset management company.
We believe this combination of asset management strength will benefit our
investors. BlackRock is one of the largest publicly traded investment
management firms in the United States, with approximately $463 billion in
assets under management and over 1,800 employees. We manage assets on behalf of
institutional and individual investors worldwide through a variety of equity,
fixed income, cash management and alternative investment products. MLIM is also
a leading investment management organization, with over $576 billion in assets
under management globally and over 2,700 employees in 17 countries. It offers
over 100 investment strategies in vehicles ranging from mutual funds to
institutional portfolios.
At the completion of the transaction, which is expected at the end of the
third quarter of this year, the combined firm will be a top-ten investment
manager worldwide, with more than $1 trillion in assets under management. The
combined company will provide a wider selection of high-quality investment
solutions across a range of asset classes and investment styles. BlackRock and
MLIM possess complementary capabilities that together create a well-rounded
organization, uniting some of the finest money managers in the industry. At the
same time, the firms share similar values and beliefs - focused on delivering
excellence to clients, they both make investment performance their most
important mission. In short, the combination reinforces our commitment to
shareholders.
As a shareholder in one or more BlackRock-advised mutual funds, you will
receive proxy materials in the coming weeks in connection with this
transaction. After you receive this information, do not hesitate to contact
your financial advisor should you have any questions or concerns.
As always, we thank you for entrusting us with your investment assets, and
we look forward to continuing to serve your investment needs with even greater
strength and scale.
Sincerely,
[GRAPHIC OMITTED]
Anne F. Ackerley
Managing Director
BlackRock Advisors, Inc.
Data, including assets under management, are as of March 31, 2006.
1
ULTRASHORT MUNICIPAL PORTFOLIO
Total Net Assets (3/31/06): $31.5 million
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management. The Portfolio invests primarily in bonds issued
by or on behalf of states, possessions and territories of the United States,
their political subdivisions and their agencies and authorities (and related
tax-exempt derivative securities), the interest on which is exempt from regular
Federal income tax ("municipal securities"). These municipal securities may not
be exempt from the Federal Alternative Minimum Tax. The Portfolio normally
invests at least 80% of its assets in municipal securities, including both
general obligation and revenue bonds, from a diverse range of issuers.
Recent Portfolio Management Activity:
o All share classes outperformed the Lipper Peer Group (Short Municipal
Debt Funds) for the semi-annual period.
o During the semi-annual period, in aggregate within the U.S., states
have experienced strong revenue growth, which has created a solid fundamental
environment for the municipal market. Increased revenues have contributed to a
reduction in issuance of new debt, which has improved market technicals. With
demand high, municipals outperformed most taxable sectors before adjusting for
any tax benefit during the period.
o Recent economic acceleration has provided nearly all states with
increased revenues well above fiscal year projections, leading to the most
financial flexibility seen in the last five years. State budgets are more
balanced today, and many have begun to rebuild reserves. Steady economic
growth, increased corporate profits, a solid real estate market, and stock
market gains have all been important drivers of strong revenue. Looking ahead,
state financial projections are cautiously optimistic.
o Municipal new issue supply during the fourth quarter of 2005 was the
second highest on record, as a total of $99 billion was issued during the
fourth quarter, representing a 10% increase over the same period in 2004.
During the first quarter of 2006, however, as expected, there was a decline in
the pace of municipal bond issuance. With improving tax revenues, states have
less of a need to borrow externally for cash flow purposes, which resulted in a
29% decline in new issue supply during the quarter.
o In a world where most market yield curves are relatively flat, the
municipal curve is positively sloped by close to 100 basis points. The positive
slope has shifted demand for municipal bonds further out the maturity spectrum,
both for municipal-only buyers as well as for alternative/crossover types.
o During the semi-annual period, the Portfolio continued to maintain a
focus on short duration assets with a duration that averaged between 4 and 6
months during the first half of the period, and between 2 and 6 months during
the second half of the period. A focus on cash and cash equivalent assets has
been beneficial to the Portfolio as the short municipal yield curve has
continued to rise along with the Treasury curve. We intend to maintain the
current course and look to extend once we believe that the Fed is nearing or at
the end of its policy of incremental Fed Funds rate increases.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ULTRASHORT
MUNICIPAL PORTFOLIO,
THE LEHMAN BROTHERS 1 YEAR MUNICIPAL BOND INDEX AND THE LIPPER SHORT MUNICIPAL
DEBT FUNDS
FROM INCEPTION.
[GRAPHIC OMITTED]
Lehman Brothers 1 Year Municipal Lipper Short Municipal Debt
Institutional Investor A Bond Index Funds
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/19/2004 10,000 9,699 10,000 10,000
03/31/2004 9,982 9,673 10,001 9,989
06/30/2004 9,937 9,664 9,971 9,916
09/30/2004 9,991 9,703 10,047 10,017
12/31/2004 10,026 9,723 10,049 10,039
03/31/2005 10,042 9,734 10,048 10,023
06/30/2005 10,104 9,783 10,122 10,096
09/30/2005 10,144 9,824 10,163 10,137
12/31/2005 10,205 9,869 10,200 10,184
03/31/2006 10,272 9,923 10,246 10,235
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
From
1 Year Inception
------------ ------------
BlackRock Class 2.38% 1.50%
Institutional Class 2.30% 1.39%
Service Class 1.96% 1.02%
Investor A Class (Load Adjusted) (1.13)% (0.29)%
Investor A Class (NAV) 1.94% 1.19%
THE PERFORMANCE OF THE LEHMAN BROTHERS 1 YEAR MUNICIPAL BOND INDEX (THE
"BENCHMARK") IS PRESENTED FOR COMPARATIVE PURPOSES IN RESPONSE TO REQUIREMENTS
OF THE SECURITIES AND EXCHANGE COMMISSION. HOWEVER, BLACKROCK BELIEVES THAT
DIFFERENCES BETWEEN THE WAYS IN WHICH THE PORTFOLIO IS MANAGED AND THE
BENCHMARK IS CONSTRUCTED MAY MAKE COMPARISONS BETWEEN THE PORTFOLIO AND
BENCHMARK PERFORMANCE LESS MEANINGFUL TO INVESTORS. THEREFORE, THE PERFORMANCE
OF THE LIPPER SHORT MUNICIPAL DEBT FUNDS IS ALSO PRESENTED.
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: BLACKROCK SHARES, 3/3/04; INSTITUTIONAL SHARES,
3/19/04; SERVICE SHARES, 3/19/04; AND INVESTOR A SHARES, 3/19/04. SEE "NOTE ON
PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER INFORMATION ON HOW PERFORMANCE
DATA WAS CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
2
ULTRASHORT MUNICIPAL PORTFOLIO
FUND PROFILE
Credit Quality (% of
Municipal Bonds)1
AAA 4.9%
AA 37.0
A 26.0
BBB 21.9
Unrated 10.2
-----
Total 100.0%
=====
Largest State
Concentration (% of
portfolio, excluding
money market investments)
California 16.0%
Pennsylvania 11.9
Kentucky 10.6
Virginia 9.6
Florida 6.3
Ohio 5.7
Washington 5.0
Texas 5.0
Colorado 4.7
Michigan 4.0
----
Total 78.8%
====
Portfolio Statistics
Average maturity (years) 0.20
Modified Duration2 0.19
1 Using the highest of Standard & Poor's ("S&P's") or Moody's Investors
Service ("Moody's") ratings.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Modified duration assumes that cash flows remain
constant as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
---------------------------------------------------------------
BlackRock Institutional Service Investor
Class Class Class A Class
--------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,013.00 1,012.60 1,010.50 1,010.10
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 1.76 2.16 3.76 3.76
Hypothetical Expenses
(5% return before expenses)
---------------------------------------------------------------
BlackRock Institutional Service Investor
Class Class Class A Class
--------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,023.23 1,022.83 1,021.21 1,021.21
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 1.77 2.17 3.79 3.79
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.35%, 0.43%, 0.75%, and 0.75% for the BlackRock, Institutional,
Service and Investor A share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
3
TAX-FREE INCOME PORTFOLIO
Total Net Assets (3/31/06): $379.3 million
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management. The Portfolio invests primarily in bonds issued
by or on behalf of states, possessions and territories of the United States,
their political subdivisions and their agencies and authorities (and related
tax-exempt derivative securities), the interest on which the Portfolio manager
believes is exempt from Federal income tax, including the Federal Alternative
Minimum Tax ("municipal securities"). The Portfolio normally invests at least
80% of its assets in municipal securities, including both general obligation
and revenue bonds, from a diverse range of issuers. The Portfolio emphasizes
securities in the ten to twenty year maturity range.
Recent Portfolio Management Activity:
o All share classes of the Portfolio underperformed the Lipper Peer Group
(General Municipal Debt Funds) for the semi-annual period.
o During the semi-annual period, in aggregate within the U.S., states
have experienced strong revenue growth, which has created a solid fundamental
environment for the municipal market. Increased revenues have contributed to a
reduction in issuance of new debt, which has improved market technicals. With
demand high, municipals outperformed most taxable sectors before adjusting for
any tax benefit during the period.
o Recent economic acceleration has provided nearly all states with
increased revenues well above fiscal year projections, leading to the most
financial flexibility seen in the last five years. State budgets are more
balanced today, and many have begun to rebuild reserves. Steady economic
growth, increased corporate profits, a solid real estate market, and stock
market gains have all been important drivers of strong revenue. Looking ahead,
state financial projections are cautiously optimistic.
o Municipal new issue supply during the fourth quarter of 2005 was the
second highest on record, as a total of $99 billion was issued during the
fourth quarter, representing a 10% increase over the same period in 2004.
During the first quarter of 2006, however, as expected, there was a decline in
the pace of municipal bond issuance. With improving tax revenues, states have
less of a need to borrow externally for cash flow purposes, which resulted in a
29% decline in new issue supply during the quarter.
o In a world where most market yield curves are relatively flat, the
municipal curve is positively sloped by close to 100 basis points. The positive
slope has shifted demand for municipal bonds further out the maturity spectrum,
both for municipal-only buyers as well as for alternative/crossover types.
o During the semi-annual period, the municipal yield curve flattened.
This was the driving force behind the Portfolio's return. During the first half
of the period, the Portfolio held a significant amount of securities in the 7-
to 15-year portion of the curve, which detracted from performance. The
Portfolio maintained an emphasis on higher coupon callable securities. We also
had significant holdings of shorter duration, high book income positions. In
the second half of the period, the Portfolio was overweight the 10-year bucket
and underweight the 15- and 20-year buckets compared to the index. While we
have been transitioning the focus significantly toward total return and away
from the income bias, we did not move far enough during the period toward this
goal to offset the curve positioning. We currently intend to continue this
transition during the second quarter of 2006.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE TAX-FREE INCOME
PORTFOLIO,
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX AND THE LIPPER GENERAL MUNICIPAL DEBT
FUNDS
FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A Lehman Brothers Municipal Bond Index Lipper General Municipal Debt Funds
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,598 10,000 10,000
06/30/1996 10,093 9,676 10,077 10,052
09/30/1996 10,362 9,922 10,309 10,282
12/31/1996 10,662 10,198 10,571 10,529
03/31/1997 10,653 10,177 10,547 10,479
06/30/1997 11,037 10,532 10,910 10,846
09/30/1997 11,408 10,872 11,239 11,183
12/31/1997 11,742 11,178 11,544 11,497
03/31/1998 11,897 11,311 11,677 11,608
06/30/1998 12,070 11,462 11,854 11,762
09/30/1998 12,418 11,779 12,219 12,104
12/31/1998 12,496 11,839 12,292 12,115
03/31/1999 12,561 11,887 12,401 12,176
06/30/1999 12,342 11,666 12,182 11,898
09/30/1999 12,209 11,527 12,133 11,729
12/31/1999 11,976 11,293 12,038 11,543
03/31/2000 12,319 11,603 12,391 11,874
06/30/2000 12,477 11,739 12,579 12,001
09/30/2000 12,796 12,024 12,882 12,279
12/31/2000 13,287 12,472 13,446 12,805
03/31/2001 13,546 12,700 13,744 13,054
06/30/2001 13,664 12,784 13,834 13,120
09/30/2001 14,051 13,143 14,222 13,456
12/31/2001 13,922 13,007 14,135 13,309
03/31/2002 14,054 13,103 14,268 13,416
06/30/2002 14,414 13,435 14,791 13,869
09/30/2002 14,765 13,746 15,493 14,477
12/31/2002 14,757 13,722 15,493 14,420
03/31/2003 14,760 13,709 15,679 14,517
06/30/2003 15,283 14,179 16,084 14,900
09/30/2003 15,266 14,146 16,097 14,894
12/31/2003 15,451 14,301 16,317 15,113
03/31/2004 15,608 14,430 16,599 15,329
06/30/2004 15,322 14,148 16,206 14,968
09/30/2004 15,794 14,585 16,837 15,502
12/31/2004 16,029 14,779 17,048 15,689
03/31/2005 16,078 14,815 17,042 15,662
06/30/2005 16,347 15,053 17,541 16,088
09/30/2005 16,295 14,995 17,519 16,063
12/31/2005 16,348 15,034 17,647 16,167
03/31/2006 16,324 15,016 17,691 16,209
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------------ ---------- ---------- ----------
BlackRock Class 1.67% 3.53% 3.87% 5.06%
Institutional Class 1.53% 3.42% 3.80% 5.02%
Service Class 1.25% 3.10% 3.49% 4.71%
Investor A Class (Load Adjusted) (2.69)% 1.70% 2.56% 4.15%
Investor A Class (NAV) 1.35% 3.08% 3.41% 4.58%
Investor B Class (Load Adjusted) (3.88)% 1.19% 2.27% 3.81%
Investor B Class (NAV) 0.50% 2.28% 2.62% 3.81%
Investor C Class (Load Adjusted) (0.47)% 2.28% 2.62% 3.81%
Investor C Class (NAV) 0.51% 2.28% 2.62% 3.81%
THE PERFORMANCE OF THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "BENCHMARK")
IS PRESENTED FOR COMPARATIVE PURPOSES IN RESPONSE TO REQUIREMENTS OF THE
SECURITIES AND EXCHANGE COMMISSION. HOWEVER, BLACKROCK BELIEVES THAT
DIFFERENCES BETWEEN THE WAYS IN WHICH THE PORTFOLIO IS MANAGED AND THE
BENCHMARK IS CONSTRUCTED MAY MAKE COMPARISONS BETWEEN THE PORTFOLIO AND
BENCHMARK PERFORMANCE LESS MEANINGFUL TO INVESTORS. THEREFORE, THE PERFORMANCE
OF THE LIPPER GENERAL MUNICIPAL DEBT FUNDS IS ALSO PRESENTED.
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, INVESTOR
C SHARES, 2/28/97 AND BLACKROCK SHARES, 12/22/03. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 16 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
4
TAX-FREE INCOME PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 68.4%
AA 20.5
A 4.1
BBB 6.5
Unrated 0.5
-----
Total 100.0%
=====
Largest State
Concentration (% of
long-term investments)
New Jersey 11.5%
Washington 6.5
Texas 6.2
Ohio 6.0
Illinois 5.6
California 5.4
New York 5.0
Maryland 4.8
Florida 4.4
Virginia 4.3
----
Total 59.7%
====
Portfolio Statistics
Average maturity (years) 6.95
Modified Duration2 6.36
1 Using the higher of S&P's or Moody's ratings.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Modified duration assumes that cash flows remain
constant as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,003.40 1,001.80 1,000.40 1,001.40 996.70 996.70
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.25 2.79 4.34 4.19 7.96 7.82
Hypothetical Expenses
(5% return before expenses)
-----------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor Investor Investor
Class Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,022.73 1,022.17 1,020.61 1,020.76 1,016.92 1,017.07
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 2.27 2.83 4.39 4.24 8.08 7.93
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.45%, 0.56%, 0.87%, 0.84%, 1.60%, and 1.57% for the BlackRock,
Institutional, Service, Investor A, B and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period).
5
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
Total Net Assets (3/31/06): $657.0 million
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management. The Portfolio invests primarily in bonds issued
by or on behalf of states, possessions and territories of the United States,
their political subdivisions and their agencies or authorities (and related
tax-exempt derivative securities), the interest on which the Portfolio manager
believes is exempt from Federal income tax (including the Federal Alternative
Minimum Tax) and Pennsylvania state income tax ("municipal securities"). The
Portfolio normally invests at least 80% of its assets in municipal securities,
including both general obligation and revenue bonds, from a diverse range of
issuers (including issuers located outside of Pennsylvania). The Portfolio
emphasizes municipal securities in the ten to twenty year maturity range.
Recent Portfolio Management Activity:
o All share classes of the Portfolio underperformed the Lipper Peer Group
(Pennsylvania Municipal Debt Funds) for the semi-annual period.
o During the semi-annual period, in aggregate within the U.S., states
have experienced strong revenue growth, which has created a solid fundamental
environment for the municipal market. Increased revenues have contributed to a
reduction in issuance of new debt, which has improved market technicals. With
demand high, municipals outperformed most taxable sectors before adjusting for
any tax benefit during the period.
o Recent economic acceleration has provided nearly all states with
increased revenues well above fiscal year projections, leading to the most
financial flexibility seen in the last five years. State budgets are more
balanced today, and many have begun to rebuild reserves. Steady economic
growth, increased corporate profits, a solid real estate market, and stock
market gains have all been important drivers of strong revenue. Looking ahead,
state financial projections are cautiously optimistic.
o Municipal new issue supply during the fourth quarter of 2005 was the
second highest on record, as a total of $99 billion was issued during the
fourth quarter, representing a 10% increase over the same period in 2004.
During the first quarter of 2006, however, as expected, there was a decline in
the pace of municipal bond issuance. With improving tax revenues, states have
less of a need to borrow externally for cash flow purposes, which resulted in a
29% decline in new issue supply during the quarter.
o In a world where most market yield curves are relatively flat, the
municipal curve is positively sloped by close to 100 basis points. The positive
slope has shifted demand for municipal bonds further out the maturity spectrum,
both for municipal-only buyers as well as for alternative/crossover types.
o During the semi-annual period, the municipal yield curve flattened.
During the first half of the period, the Portfolio held a significant amount of
securities in the 7- to 15-year portion of the curve, which detracted from
performance. The Portfolio maintained an emphasis on higher coupon callable
securities. We also had significant holdings of shorter duration, high book
income positions. In the second half of the period, the Portfolio's underweight
in the 20-year portion was the main contributor to the underperformance. While
we have been transitioning the focus significantly toward total return and away
from the income bias, we did not move far enough during the period toward this
goal to offset the curve positioning. We currently intend to continue this
transition during the second quarter of 2006.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PA TAX-FREE INCOME
PORTFOLIO,
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX AND THE LIPPER PENNSYLVANIA MUNICIPAL
DEBT FUNDS
FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A Lehman Brothers Municipal Bond Index Lipper Pennsylvania Municipal Debt Funds
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,602 10,000 10,000
06/30/1996 10,089 9,677 10,077 10,069
09/30/1996 10,321 9,888 10,309 10,302
12/31/1996 10,584 10,129 10,571 10,537
03/31/1997 10,545 10,080 10,547 10,500
06/30/1997 10,868 10,378 10,910 10,846
09/30/1997 11,191 10,674 11,239 11,164
12/31/1997 11,505 10,962 11,544 11,473
03/31/1998 11,645 11,083 11,677 11,588
06/30/1998 11,831 11,248 11,854 11,747
09/30/1998 12,143 11,533 12,219 12,041
12/31/1998 12,208 11,581 12,292 12,052
03/31/1999 12,306 11,662 12,401 12,124
06/30/1999 12,102 11,456 12,182 11,895
09/30/1999 12,044 11,388 12,133 11,705
12/31/1999 11,928 11,266 12,038 11,492
03/31/2000 12,231 11,540 12,391 11,800
06/30/2000 12,408 11,693 12,579 11,922
09/30/2000 12,707 11,961 12,882 12,216
12/31/2000 13,117 12,332 13,446 12,686
03/31/2001 13,414 12,585 13,744 12,917
06/30/2001 13,455 12,609 13,834 13,003
09/30/2001 13,805 12,935 14,222 13,374
12/31/2001 13,736 12,842 14,135 13,259
03/31/2002 13,844 12,928 14,268 13,357
06/30/2002 14,306 13,357 14,791 13,798
09/30/2002 14,707 13,715 15,493 14,402
12/31/2002 14,740 13,718 15,493 14,360
03/31/2003 14,880 13,845 15,679 14,499
06/30/2003 15,255 14,164 16,084 14,859
09/30/2003 15,172 14,070 16,097 14,837
12/31/2003 15,365 14,233 16,317 15,051
03/31/2004 15,463 14,320 16,599 15,256
06/30/2004 15,194 14,054 16,206 14,887
09/30/2004 15,600 14,414 16,837 15,387
12/31/2004 15,777 14,564 17,048 15,586
03/31/2005 15,778 14,537 17,042 15,591
06/30/2005 16,020 14,759 17,541 16,000
09/30/2005 15,975 14,703 17,519 15,978
12/31/2005 16,070 14,776 17,647 16,070
03/31/2006 16,066 14,759 17,691 16,120
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------------ ---------- ---------- ----------
Institutional Class 1.83% 2.59% 3.67% 4.86%
Service Class 1.52% 2.28% 3.37% 4.53%
Investor A Class (Load Adjusted) (2.54)% 0.76% 2.40% 3.97%
Investor A Class (NAV) 1.53% 2.16% 3.24% 4.39%
Investor B Class (Load Adjusted) (3.59)% 0.36% 2.16% 3.65%
Investor B Class (NAV) 0.77% 1.43% 2.50% 3.65%
Investor C Class (Load Adjusted) (0.20)% 1.43% 2.48% 3.67%
Investor C Class (NAV) 0.77% 1.43% 2.48% 3.67%
THE PERFORMANCE OF THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "BENCHMARK")
IS PRESENTED FOR COMPARATIVE PURPOSES IN RESPONSE TO REQUIREMENTS OF THE
SECURITIES AND EXCHANGE COMMISSION. HOWEVER, BLACKROCK BELIEVES THAT
DIFFERENCES BETWEEN THE WAYS IN WHICH THE PORTFOLIO IS MANAGED AND THE
BENCHMARK IS CONSTRUCTED MAY MAKE COMPARISONS BETWEEN THE PORTFOLIO AND
BENCHMARK PERFORMANCE LESS MEANINGFUL TO INVESTORS. THEREFORE, THE PERFORMANCE
OF THE LIPPER PENNSYLVANIA MUNICIPAL DEBT FUNDS IS ALSO PRESENTED.
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 16 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
6
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 77.0%
AA 10.2
A 8.8
BBB 3.9
Unrated 0.1
-----
Total 100.0%
=====
Portfolio Statistics
Average maturity (years) 5.35
Modified Duration2 4.94
1 Using the higher of S&P's or Moody's ratings.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Modified duration assumes that cash flows remain
constant as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,005.70 1,004.20 1,003.80 1,000.00 1,000.00
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.00 4.50 4.90 8.63 8.58
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,021.97 1,020.46 1,020.05 1,016.27 1,016.32
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.03 4.54 4.95 8.73 8.68
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.60%, 0.90%, 0.98%, 1.73%, and 1.72% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
7
NEW JERSEY TAX-FREE INCOME PORTFOLIO
Total Net Assets (3/31/06): $166.8 million
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management. The Portfolio invests primarily in bonds issued
by or on behalf of states, possessions and territories of the United States,
their political subdivisions and their agencies or authorities (and related
tax-exempt derivative securities), the interest on which the Portfolio manager
believes is exempt from Federal income tax (including the Federal Alternative
Minimum Tax) and New Jersey state income tax ("municipal securities"). The
Portfolio normally invests at least 80% of its assets in municipal securities,
including both general obligation and revenue bonds, from a diverse range of
issuers. The Portfolio emphasizes securities in the ten to twenty year maturity
range.
Recent Portfolio Management Activity:
o All share classes of the Portfolio underperformed the Lipper Peer Group
(New Jersey Municipal Debt Funds) for the semi-annual period.
o During the semi-annual period, in aggregate within the U.S., states
have experienced strong revenue growth, which has created a solid fundamental
environment for the municipal market. Increased revenues have contributed to a
reduction in issuance of new debt, which has improved market technicals. With
demand high, municipals outperformed most taxable sectors before adjusting for
any tax benefit during the period.
o Recent economic acceleration has provided nearly all states with
increased revenues well above fiscal year projections, leading to the most
financial flexibility seen in the last five years. State budgets are more
balanced today, and many have begun to rebuild reserves. Steady economic
growth, increased corporate profits, a solid real estate market, and stock
market gains have all been important drivers of strong revenue. Looking ahead,
state financial projections are cautiously optimistic.
o Municipal new issue supply during the fourth quarter of 2005 was the
second highest on record, as a total of $99 billion was issued during the
fourth quarter, representing a 10% increase over the same period in 2004.
During the first quarter of 2006, however, as expected, there was a decline in
the pace of municipal bond issuance. With improving tax revenues, states have
less of a need to borrow externally for cash flow purposes, which resulted in a
29% decline in new issue supply during the quarter.
o In a world where most market yield curves are relatively flat, the
municipal curve is positively sloped by close to 100 basis points. The positive
slope has shifted demand for municipal bonds further out the maturity spectrum,
both for municipal-only buyers as well as for alternative/crossover types.
o During the semi-annual period, the municipal yield curve flattened.
This was the driving force behind the Portfolio's return. During the first half
of the period, the Portfolio held a significant amount of securities in the 7-
to 15-year portion of the curve, which detracted from performance. The
Portfolio maintained an emphasis on higher coupon callable securities. We also
had significant holdings of shorter duration, high book income positions. In
the second half of the period, the Portfolio's underweight in the 25-year and
longer portions and overweight in the 3- and 5-year portions were contributors
to the underperformance. While we have been transitioning the focus
significantly toward total return and away from the income bias, we did not
move far enough during the period toward this goal to offset the curve
positioning. We currently intend to continue this transition during the second
quarter of 2006.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NJ TAX-FREE INCOME
PORTFOLIO,
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX AND THE LIPPER NEW JERSEY MUNICIPAL
DEBT FUNDS
FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Service Investor A
- - - - - - - - - -
03/31/1996 10,000 9,601
06/30/1996 10,028 9,623
09/30/1996 10,203 9,787
12/31/1996 10,457 10,028
03/31/1997 10,429 9,997
06/30/1997 10,721 10,272
09/30/1997 11,030 10,564
12/31/1997 11,321 10,838
03/31/1998 11,414 10,923
06/30/1998 11,581 11,078
09/30/1998 11,944 11,420
12/31/1998 11,997 11,466
03/31/1999 12,036 11,498
06/30/1999 11,789 11,258
09/30/1999 11,747 11,213
12/31/1999 11,663 11,128
03/31/2000 11,896 11,345
06/30/2000 12,067 11,503
09/30/2000 12,316 11,736
12/31/2000 12,796 12,188
03/31/2001 13,096 12,468
06/30/2001 13,165 12,518
09/30/2001 13,516 12,858
12/31/2001 13,360 12,704
03/31/2002 13,564 12,882
06/30/2002 14,031 13,331
09/30/2002 14,481 13,741
12/31/2002 14,493 13,758
03/31/2003 14,637 13,877
06/30/2003 15,003 14,231
09/30/2003 14,892 14,119
12/31/2003 15,079 14,279
03/31/2004 15,269 14,453
06/30/2004 14,935 14,142
09/30/2004 15,456 14,631
12/31/2004 15,652 14,813
03/31/2005 15,621 14,767
06/30/2005 15,955 15,093
09/30/2005 15,870 15,008
12/31/2005 15,923 15,055
03/31/2006 15,919 15,049
Lehman Brothers Municipal Bond Index Lipper New Jersey Municipal Debt Funds
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 10,000
06/30/1996 10,077 10,069
09/30/1996 10,309 10,290
12/31/1996 10,571 10,524
03/31/1997 10,547 10,496
06/30/1997 10,910 10,816
09/30/1997 11,239 11,130
12/31/1997 11,544 11,423
03/31/1998 11,677 11,528
06/30/1998 11,854 11,686
09/30/1998 12,219 12,031
12/31/1998 12,292 12,073
03/31/1999 12,401 12,139
06/30/1999 12,182 11,898
09/30/1999 12,133 11,732
12/31/1999 12,038 11,539
03/31/2000 12,391 11,828
06/30/2000 12,579 11,971
09/30/2000 12,882 12,251
12/31/2000 13,446 12,769
03/31/2001 13,744 13,044
06/30/2001 13,834 13,143
09/30/2001 14,222 13,405
12/31/2001 14,135 13,292
03/31/2002 14,268 13,430
06/30/2002 14,791 13,869
09/30/2002 15,493 14,377
12/31/2002 15,493 14,368
03/31/2003 15,679 14,447
06/30/2003 16,084 14,822
09/30/2003 16,097 14,798
12/31/2003 16,317 15,034
03/31/2004 16,599 15,232
06/30/2004 16,206 14,856
09/30/2004 16,837 15,373
12/31/2004 17,048 15,581
03/31/2005 17,042 15,603
06/30/2005 17,541 16,018
09/30/2005 17,519 15,989
12/31/2005 17,647 16,083
03/31/2006 17,691 16,133
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------------ ---------- ---------- ----------
Institutional Class 2.30% 3.15% 4.29% 5.01%
Service Class 1.91% 2.84% 3.98% 4.76%
Investor A Class (Load Adjusted) (2.15)% 1.34% 2.99% 4.17%
Investor A Class (NAV) 1.91% 2.74% 3.83% 4.60%
Investor B Class(Load Adjusted) (3.35)% 0.89% 2.71% 3.84%
Investor B Class (NAV) 1.05% 1.97% 3.06% 3.84%
Investor C Class(Load Adjusted) 0.07% 1.93% 3.05% 3.85%
Investor C Class (NAV) 1.04% 1.93% 3.05% 3.85%
THE PERFORMANCE OF THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "BENCHMARK")
IS PRESENTED FOR COMPARATIVE PURPOSES IN RESPONSE TO REQUIREMENTS OF THE
SECURITIES AND EXCHANGE COMMISSION. HOWEVER, BLACKROCK BELIEVES THAT
DIFFERENCES BETWEEN THE WAYS IN WHICH THE PORTFOLIO IS MANAGED AND THE
BENCHMARK IS CONSTRUCTED MAY MAKE COMPARISONS BETWEEN THE PORTFOLIO AND
BENCHMARK PERFORMANCE LESS MEANINGFUL TO INVESTORS. THEREFORE, THE PERFORMANCE
OF THE LIPPER NEW JERSEY MUNICIPAL DEBT FUNDS IS ALSO PRESENTED.
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 16 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH* ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
8
NEW JERSEY TAX-FREE INCOME PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 64.6%
AA 13.9
A 6.7
BBB 12.8
Unrated 2.0
-----
Total 100.0%
=====
Portfolio Statistics
Average maturity (years) 6.42
Modified Duration2 5.99
1 Using the higher of S&P's or Moody's ratings.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Modified duration assumes that cash flows remain
constant as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,004.60 1,003.10 1,002.70 998.90 998.80
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.00 4.49 4.79 8.62 8.72
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,021.97 1,020.46 1,020.15 1,016.27 1,016.16
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.03 4.54 4.85 8.73 8.84
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.60%, 0.90%, 0.96%, 1.73%, and 1.75% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
9
OHIO TAX-FREE INCOME PORTFOLIO
Total Net Assets (3/31/06): $123.7 million
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management. The Portfolio invests primarily in bonds issued
by or on behalf of states, possessions and territories of the United States,
their political subdivisions and their agencies or authorities (and related
tax-exempt derivative securities), the interest on which the Portfolio manager
believes is exempt from Federal income tax (including the Federal Alternative
Minimum Tax) and Ohio state income tax ("municipal securities"). The Portfolio
normally invests at least 80% of its assets in municipal securities, including
both general obligation and revenue bonds, from a diverse range of issuers
(including issuers located outside of Ohio). The Portfolio emphasizes municipal
securities in the ten to twenty year maturity range.
Recent Portfolio Management Activity:
o All share classes of the Portfolio underperformed the Lipper Peer Group
(Ohio Municipal Debt Funds) for the semi-annual period.
o During the semi-annual period, in aggregate within the U.S., states
have experienced strong revenue growth, which has created a solid fundamental
environment for the municipal market. Increased revenues have contributed to a
reduction in issuance of new debt, which has improved market technicals. With
demand high, municipals outperformed most taxable sectors before adjusting for
any tax benefit during the period.
o Recent economic acceleration has provided nearly all states with
increased revenues well above fiscal year projections, leading to the most
financial flexibility seen in the last five years. State budgets are more
balanced today, and many have begun to rebuild reserves. Steady economic
growth, increased corporate profits, a solid real estate market, and stock
market gains have all been important drivers of strong revenue. Looking ahead,
state financial projections are cautiously optimistic.
o Municipal new issue supply during the fourth quarter of 2005 was the
second highest on record, as a total of $99 billion was issued during the
fourth quarter, representing a 10% increase over the same period in 2004.
During the first quarter of 2006, however, as expected, there was a decline in
the pace of municipal bond issuance. With improving tax revenues, states have
less of a need to borrow externally for cash flow purposes, which resulted in a
29% decline in new issue supply during the quarter.
o In a world where most market yield curves are relatively flat, the
municipal curve is positively sloped by close to 100 basis points. The positive
slope has shifted demand for municipal bonds further out the maturity spectrum,
both for municipal-only buyers as well as for alternative/crossover types.
o During the semi-annual period, the municipal yield curve flattened.
This was the driving force behind the Portfolio's return. During the first half
of the period, the Portfolio held a significant amount of securities in the 7-
to 15-year portion of the curve, which detracted from performance. The
Portfolio maintained an emphasis on higher coupon callable securities. We also
had significant holdings of shorter duration, high book income positions. In
the second half of the period, the Portfolio was underweight the 20-year
portion and had a modest overweight in the 10-year portion, contributing to the
underperformance. While we have been transitioning the focus significantly
toward total return and away from the income bias, we did not move far enough
during the period toward this goal to offset the curve positioning. We
currently intend to continue this transition during the second quarter of 2006.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE OH TAX-FREE INCOME
PORTFOLIO,
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX AND THE LIPPER OHIO MUNICIPAL DEBT
FUNDS
FOR THE PAST TEN YEARS.
[GRAPHIC OMITTED]
Institutional Investor A Lehman Brothers Municipal Bond Index Lipper Ohio Municipal Debt Funds
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
03/31/1996 10,000 9,600 10,000 10,000
06/30/1996 10,085 9,670 10,077 10,073
09/30/1996 10,326 9,889 10,309 10,301
12/31/1996 10,586 10,127 10,571 10,542
03/31/1997 10,558 10,088 10,547 10,503
06/30/1997 10,885 10,388 10,910 10,827
09/30/1997 11,207 10,683 11,239 11,125
12/31/1997 11,503 10,952 11,544 11,414
03/31/1998 11,608 11,040 11,677 11,521
06/30/1998 11,793 11,202 11,854 11,669
09/30/1998 12,167 11,544 12,219 11,984
12/31/1998 12,234 11,594 12,292 12,024
03/31/1999 12,320 11,662 12,401 12,100
06/30/1999 12,027 11,371 12,182 11,875
09/30/1999 11,998 11,330 12,133 11,735
12/31/1999 11,864 11,190 12,038 11,558
03/31/2000 12,196 11,490 12,391 11,875
06/30/2000 12,375 11,657 12,579 12,012
09/30/2000 12,660 11,900 12,882 12,285
12/31/2000 13,192 12,386 13,446 12,779
03/31/2001 13,547 12,704 13,744 13,025
06/30/2001 13,639 12,775 13,834 13,078
09/30/2001 14,105 13,196 14,222 13,398
12/31/2001 13,965 13,051 14,135 13,310
03/31/2002 14,131 13,190 14,268 13,417
06/30/2002 14,706 13,710 14,791 13,844
09/30/2002 15,290 14,238 15,493 14,434
12/31/2002 15,274 14,194 15,493 14,385
03/31/2003 15,425 14,331 15,679 14,520
06/30/2003 15,832 14,692 16,084 14,895
09/30/2003 15,716 14,567 16,097 14,844
12/31/2003 15,929 14,747 16,317 15,044
03/31/2004 16,126 14,912 16,599 15,237
06/30/2004 15,996 14,774 16,206 14,880
09/30/2004 16,474 15,200 16,837 15,409
12/31/2004 16,638 15,337 17,048 15,590
03/31/2005 16,651 15,347 17,042 15,547
06/30/2005 16,959 15,601 17,541 15,954
09/30/2005 16,893 15,525 17,519 15,890
12/31/2005 16,988 15,596 17,647 15,975
03/31/2006 16,983 15,593 17,691 15,988
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------------ ---------- ---------- ----------
Institutional Class 2.00% 3.26% 4.62% 5.44%
Service Class 1.69% 3.01% 4.35% 5.14%
Investor A Class (Load Adjusted) (2.47)% 1.47% 3.34% 4.54%
Investor A Class (NAV) 1.61% 2.85% 4.18% 4.97%
Investor B Class (Load Adjusted) (3.54)% 1.00% 3.06% 4.19%
Investor B Class (NAV) 0.84% 2.08% 3.41% 4.19%
Investor C Class (Load Adjusted) (0.13)% 2.08% 3.41% 4.19%
Investor C Class (NAV) 0.84% 2.08% 3.41% 4.19%
THE PERFORMANCE OF THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "BENCHMARK")
IS PRESENTED FOR COMPARATIVE PURPOSES IN RESPONSE TO REQUIREMENTS OF THE
SECURITIES AND EXCHANGE COMMISSION. HOWEVER, BLACKROCK BELIEVES THAT
DIFFERENCES BETWEEN THE WAYS IN WHICH THE PORTFOLIO IS MANAGED AND THE
BENCHMARK IS CONSTRUCTED MAY MAKE COMPARISONS BETWEEN THE PORTFOLIO AND
BENCHMARK PERFORMANCE LESS MEANINGFUL TO INVESTORS. THEREFORE, THE PERFORMANCE
OF THE LIPPER OHIO MUNICIPAL DEBT FUNDS IS ALSO PRESENTED.
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 16 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH\^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
10
OHIO TAX-FREE INCOME PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 76.5%
AA 12.7
A 3.8
BBB 7.0
-----
Total 100.0%
=====
Portfolio Statistics
Average maturity (years) 5.27
Modified Duration2 5.15
1 Using the higher of S&P's or Moody's ratings.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Modified duration assumes that cash flows remain
constant as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,005.30 1,004.70 1,004.40 1,000.50 999.60
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.00 4.50 4.75 8.63 8.52
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,021.97 1,020.46 1,020.20 1,016.27 1,016.37
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.03 4.54 4.80 8.73 8.63
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.60%, 0.90%, 0.95%, 1.73%, and 1.71% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
11
DELAWARE TAX-FREE INCOME PORTFOLIO
Total Net Assets (3/31/06): $69.2 million
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management. The Portfolio invests primarily in bonds issued
by or on behalf of states, possessions and territories of the United States,
their political subdivisions and their agencies or authorities (and related
tax-exempt derivative securities), the interest on which the Portfolio manager
believes is exempt from Federal income tax (including the Federal Alternative
Minimum Tax) and Delaware state income tax ("municipal securities"). The
Portfolio normally invests at least 80% of its assets in municipal securities,
including both general obligation and revenue bonds, from a diverse range of
issuers (including issuers located outside of Delaware). The Portfolio
emphasizes municipal securities in the ten to twenty year maturity range.
Recent Portfolio Management Activity:
o All share classes of the Portfolio underperformed the Lipper Peer Group
(Other States Municipal Debt Funds) for the semi-annual period.
o During the semi-annual period, in aggregate within the U.S., states
have experienced strong revenue growth, which has created a solid fundamental
environment for the municipal market. Increased revenues have contributed to a
reduction in issuance of new debt, which has improved market technicals. With
demand high, municipals outperformed most taxable sectors before adjusting for
any tax benefit during the period.
o Recent economic acceleration has provided nearly all states with
increased revenues well above fiscal year projections, leading to the most
financial flexibility seen in the last five years. State budgets are more
balanced today, and many have begun to rebuild reserves. Steady economic
growth, increased corporate profits, a solid real estate market, and stock
market gains have all been important drivers of strong revenue. Looking ahead,
state financial projections are cautiously optimistic.
o Municipal new issue supply during the fourth quarter of 2005 was the
second highest on record, as a total of $99 billion was issued during the
fourth quarter, representing a 10% increase over the same period in 2004.
During the first quarter of 2006, however, as expected, there was a decline in
the pace of municipal bond issuance. With improving tax revenues, states have
less of a need to borrow externally for cash flow purposes, which resulted in a
29% decline in new issue supply during the quarter.
o In a world where most market yield curves are relatively flat, the
municipal curve is positively sloped by close to 100 basis points. The positive
slope has shifted demand for municipal bonds further out the maturity spectrum,
both for municipal-only buyers as well as for alternative/crossover types.
o During the semi-annual period, the municipal yield curve flattened.
This was the driving force behind the Portfolio's return. During the first half
of the period, the Portfolio held a significant amount of securities in the 7-
to 15-year portion of the curve, which detracted from performance. The
Portfolio maintained an emphasis on higher coupon callable securities. We also
had significant holdings of shorter duration, high book income positions. In
the second half of the period, the Portfolio was overweight the 7- and 10-year
buckets and underweight the 15- and 20-year buckets compared to the Lehman
index. While we have been transitioning the focus significantly toward total
return and away from the income bias, we did not move far enough during the
period toward this goal to offset the curve positioning. We currently intend to
continue this transition during the second quarter of 2006.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE DE TAX-FREE INCOME
PORTFOLIO,
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX AND THE LIPPER OTHER STATES MUNICIPAL
DEBT FUNDS
SINCE INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A Lehman Brothers Municipal Bond Index** Lipper Other States Municipal Debt Funds
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
05/11/1998 10,000 9,597 10,000 10,000
06/30/1998 10,165 9,749 10,039 10,156
09/30/1998 10,516 10,074 10,348 10,439
12/31/1998 10,582 10,125 10,410 10,463
03/31/1999 10,673 10,200 10,502 10,528
06/30/1999 10,436 9,962 10,317 10,329
09/30/1999 10,400 9,916 10,275 10,191
12/31/1999 10,332 9,839 10,195 10,038
03/31/2000 10,612 10,094 10,494 10,302
06/30/2000 10,758 10,222 10,653 10,415
09/30/2000 10,972 10,413 10,910 10,665
12/31/2000 11,384 10,791 11,387 11,101
03/31/2001 11,638 11,019 11,640 11,300
06/30/2001 11,686 11,052 11,716 11,356
09/30/2001 12,087 11,418 12,044 11,649
12/31/2001 11,933 11,258 11,971 11,575
03/31/2002 12,059 11,364 12,084 11,656
06/30/2002 12,564 11,827 12,526 12,031
09/30/2002 13,145 12,359 13,121 12,521
12/31/2002 13,085 12,277 13,121 12,472
03/31/2003 13,187 12,370 13,279 12,574
06/30/2003 13,586 12,730 13,621 12,858
09/30/2003 13,490 12,625 13,632 12,834
12/31/2003 13,654 12,775 13,818 12,998
03/31/2004 13,783 12,881 14,057 13,127
06/30/2004 13,448 12,553 13,725 12,879
09/30/2004 14,005 13,047 14,259 13,268
12/31/2004 14,139 13,172 14,437 13,395
03/31/2005 14,078 13,101 14,432 13,368
06/30/2005 14,398 13,386 14,855 13,643
09/30/2005 14,308 13,289 14,837 13,632
12/31/2005 14,347 13,299 14,945 13,714
03/31/2006 14,298 13,255 14,982 13,771
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
------------ ---------- ---------- ---------------
Institutional Class 1.56% 2.73% 4.20% 4.64%
Service Class 1.26% 2.43% 3.89% 4.33%
Investor A Class (Load Adjusted) (2.92)% 0.94% 2.92% 3.64%
Investor A Class (NAV) 1.17% 2.33% 3.76% 4.18%
Investor B Class (Load Adjusted) (3.96)% 0.49% 2.65% 3.40%
Investor B Class (NAV) 0.41% 1.57% 2.99% 3.40%
Investor C Class (Load Adjusted) (0.46)% 1.57% 2.99% 3.40%
Investor C Class (NAV) 0.52% 1.57% 2.99% 3.40%
** THE PERFORMANCE FOR THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IN THE CHART
STARTS ON JUNE 1, 1998.
THE PERFORMANCE OF THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "BENCHMARK")
IS PRESENTED FOR COMPARATIVE PURPOSES IN RESPONSE TO REQUIREMENTS OF THE
SECURITIES AND EXCHANGE COMMISSION. HOWEVER, BLACKROCK BELIEVES THAT
DIFFERENCES BETWEEN THE WAYS IN WHICH THE PORTFOLIO IS MANAGED AND THE
BENCHMARK IS CONSTRUCTED MAY MAKE COMPARISONS BETWEEN THE PORTFOLIO AND
BENCHMARK PERFORMANCE LESS MEANINGFUL TO INVESTORS. THEREFORE, THE PERFORMANCE
OF THE LIPPER OTHER STATES MUNICIPAL DEBT FUNDS IS ALSO PRESENTED.
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO ON
05/11/98. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH \^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
12
DELAWARE TAX-FREE INCOME PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 63.0%
AA 4.2
A 20.6
BBB 12.2
-----
Total 100.0%
=====
Portfolio Statistics
Average maturity (years) 5.93
Modified Duration2 7.18
1 Using the higher of S&P's or Moody's ratings.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Modified duration assumes that cash flows remain
constant as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
---------------------------------------------------------------
Institutional Investor Investor Investor
Class A Class B Class C Class
--------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 999.30 997.40 993.70 993.70
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.44 5.23 8.90 8.90
Hypothetical Expenses
(5% return before expenses)
---------------------------------------------------------------
Institutional Investor Investor Investor
Class A Class B Class C Class
--------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,021.52 1,019.70 1,015.96 1,015.96
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.48 5.30 9.04 9.04
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.69%, 1.05%, 1.79%, and 1.79% for the Institutional, Investor A, B
and C share classes, respectively, multiplied by the average account value over
the period, multiplied by 182/365 (to reflect the one-half year period).
13
KENTUCKY TAX-FREE INCOME PORTFOLIO
Total Net Assets (3/31/06): $70.5 million
Investment Approach:
Seeks to maximize total return, consistent with income generation and
prudent investment management. The Portfolio invests primarily in bonds issued
by or on behalf of states, possessions and territories of the United States,
their political subdivisions and their agencies or authorities (and related
tax-exempt derivative securities), the interest on which the Portfolio manager
believes is exempt from Federal income tax (including the Federal Alternative
Minimum Tax) and Kentucky state income tax ("municipal securities"). The
Portfolio normally invests at least 80% of its assets in municipal securities,
including both general obligation and revenue bonds, from a diverse range of
issuers (including issuers located outside of Kentucky). The Portfolio
emphasizes municipal securities in the ten to twenty year maturity range.
Recent Portfolio Management Activity:
o All share classes of the Portfolio underperformed the Lipper Peer Group
(Kentucky Municipal Debt Funds) for the semi-annual period.
o During the semi-annual period, in aggregate within the U.S., states
have experienced strong revenue growth, which has created a solid fundamental
environment for the municipal market. Increased revenues have contributed to a
reduction in issuance of new debt, which has improved market technicals. With
demand high, municipals outperformed most taxable sectors before adjusting for
any tax benefit during the period.
o Recent economic acceleration has provided nearly all states with
increased revenues well above fiscal year projections, leading to the most
financial flexibility seen in the last five years. State budgets are more
balanced today, and many have begun to rebuild reserves. Steady economic
growth, increased corporate profits, a solid real estate market, and stock
market gains have all been important drivers of strong revenue. Looking ahead,
state financial projections are cautiously optimistic.
o Municipal new issue supply during the fourth quarter of 2005 was the
second highest on record, as a total of $99 billion was issued during the
fourth quarter, representing a 10% increase over the same period in 2004.
During the first quarter of 2006, however, as expected, there was a decline in
the pace of municipal bond issuance. With improving tax revenues, states have
less of a need to borrow externally for cash flow purposes, which resulted in a
29% decline in new issue supply during the quarter.
o In a world where most market yield curves are relatively flat, the
municipal curve is positively sloped by close to 100 basis points. The positive
slope has shifted demand for municipal bonds further out the maturity spectrum,
both for municipal-only buyers as well as for alternative/crossover types.
o During the semi-annual period, the municipal yield curve flattened.
This was the driving force behind the Portfolio's return. During the first half
of the period, the Portfolio held a significant amount of securities in the 7-
to 15-year portion of the curve, which detracted from performance. The
Portfolio maintained an emphasis on higher coupon callable securities. We also
had significant holdings of shorter duration, high book income positions. In
the second half of the period, the Portfolio's underweight in the weakest
performing sector of the curve, the 7- and 10-year portions, helped the
Portfolio have better relative performance vs. the peer group. While we have
been transitioning the focus significantly toward total return and away from
the income bias, we did not move far enough during the period toward this goal
to offset the curve positioning. We currently intend to continue this
transition during the second quarter of 2006.
o In January 2006, the Kentucky Court of Appeals in Davis vs. Kentucky
found that the Kentucky State tax on out-of-state municipal bond income was
unconstitutional as a violation of the Commerce Clause since income from
in-state bonds is not taxed. If this ruling is left intact, the implication is
that the special treatment afforded to most states' own municipal debt versus
out-of-state debt could disappear over time. It is widely expected that the
State will appeal this decision to the Kentucky Supreme Court. While it is
still too early to predict the outcome, this case has significant implications
for the relative value among municipal bonds in the long run. If the ruling is
left intact, it would likely encourage similar challenges in other states
nationwide.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE KY TAX-FREE
INCOME PORTFOLIO,
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX AND THE LIPPER KENTUCKY MUNICIPAL DEBT
FUNDS
SINCE INCEPTION.
[GRAPHIC OMITTED]
Institutional Investor A Lehman Brothers Municipal Bond Index** Lipper Kentucky Municipal Debt Funds
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
05/11/1998 10,000 9,597 10,000 10,000
06/30/1998 10,176 9,759 10,039 10,153
09/30/1998 10,495 10,053 10,348 10,416
12/31/1998 10,552 10,096 10,410 10,446
03/31/1999 10,609 10,139 10,502 10,508
06/30/1999 10,414 9,941 10,317 10,335
09/30/1999 10,366 9,883 10,275 10,227
12/31/1999 10,297 9,806 10,195 10,105
03/31/2000 10,500 9,988 10,494 10,332
06/30/2000 10,629 10,110 10,653 10,411
09/30/2000 10,849 10,296 10,910 10,631
12/31/2000 11,199 10,616 11,387 10,999
03/31/2001 11,469 10,859 11,640 11,194
06/30/2001 11,548 10,921 11,716 11,262
09/30/2001 11,815 11,161 12,044 11,502
12/31/2001 11,692 11,031 11,971 11,431
03/31/2002 11,868 11,173 12,084 11,542
06/30/2002 12,208 11,491 12,526 11,884
09/30/2002 12,453 11,708 13,121 12,268
12/31/2002 12,490 11,729 13,121 12,276
03/31/2003 12,600 11,819 13,279 12,397
06/30/2003 12,915 12,088 13,621 12,693
09/30/2003 12,872 12,045 13,632 12,674
12/31/2003 13,037 12,173 13,818 12,845
03/31/2004 13,197 12,321 14,057 13,024
06/30/2004 12,977 12,101 13,725 12,770
09/30/2004 13,387 12,471 14,259 13,196
12/31/2004 13,609 12,665 14,437 13,347
03/31/2005 13,638 12,679 14,432 13,333
06/30/2005 13,849 12,863 14,855 13,644
09/30/2005 13,836 12,839 14,837 13,603
12/31/2005 13,895 12,881 14,945 13,681
03/31/2006 13,896 12,870 14,982 13,685
FOR PERIOD ENDING MARCH 31, 2006
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
------------ ---------- ---------- ---------------
Institutional Class 2.00% 3.35% 3.94% 4.27%
Service Class 1.69% 3.01% 3.62% 3.96%
Investor A Class (Load Adjusted) (2.50)% 1.52% 2.64% 3.26%
Investor A Class (NAV) 1.61% 2.92% 3.48% 3.80%
Investor B Class (Load Adjusted) (3.57)% 1.05% 2.36% 3.03%
Investor B Class (NAV) 0.85% 2.15% 2.71% 3.03%
Investor C Class (Load Adjusted) (0.14)% 2.14% 2.70% 3.05%
Investor C Class (NAV) 0.85% 2.14% 2.70% 3.05%
** THE PERFORMANCE OF THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IN THE CHART
STARTS ON JUNE 1, 1998.
THE PERFORMANCE OF THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "BENCHMARK")
IS PRESENTED FOR COMPARATIVE PURPOSES IN RESPONSE TO REQUIREMENTS OF THE
SECURITIES AND EXCHANGE COMMISSION. HOWEVER, BLACKROCK BELIEVES THAT
DIFFERENCES BETWEEN THE WAYS IN WHICH THE PORTFOLIO IS MANAGED AND THE
BENCHMARK IS CONSTRUCTED MAY MAKE COMPARISONS BETWEEN THE PORTFOLIO AND
BENCHMARK PERFORMANCE LESS MEANINGFUL TO INVESTORS. THEREFORE, THE PERFORMANCE
OF THE LIPPER KENTUCKY MUNICIPAL DEBT FUNDS IS ALSO PRESENTED.
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO ON
05/11/98. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING IMPORTANT
INFORMATION ON THE LINE GRAPH \^ ABOVE.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.
14
KENTUCKY TAX-FREE INCOME PORTFOLIO
FUND PROFILE
Credit Quality (% of
long-term investments)1
AAA 59.8%
AA 18.2
A 1.6
BBB 20.4
-----
Total 100.0%
=====
Portfolio Statistics
Average maturity (years) 4.70
Modified Duration2 5.12
1 Using the higher of S&P's or Moody's ratings.
2 Duration measures a Portfolio's price risk. Each year of duration represents
an expected 1% change in the net asset value of the fund for every 1%
change in interest rates. Modified duration assumes that cash flows remain
constant as interest rates change.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) where
applicable; and (2) ongoing costs, including advisory fees, distribution
(12b-1) and service fees, where applicable; and other Portfolio expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period October 1, 2005 to March 31, 2006.
The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.
The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
Actual Expenses
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,004.30 1,002.80 1,002.40 999.80 999.70
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.40 4.89 5.19 8.92 8.72
Hypothetical Expenses
(5% return before expenses)
-------------------------------------------------------------------------------
Institutional Service Investor Investor Investor
Class Class A Class B Class C Class
--------------- --------------- --------------- --------------- ---------------
Beginning Account
Value (10/01/05) $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Ending Account Value
(3/31/06) 1,021.57 1,020.05 1,019.75 1,015.96 1,016.16
Expenses Incurred
During Period
(10/01/05 -
3/31/06) 3.43 4.95 5.25 9.04 8.84
For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.68%, 0.98%, 1.04%, 1.79%, and 1.75% for the Institutional, Service,
Investor A, B and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half
year period).
15
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/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. Additionally, the performance information above does not
reflect accounting adjustments required under accounting principles generally
accepted in the United States of America and as a result there may be variances
between what is reported within this section and that reported in the total
return calculation in the Financial Highlights.
Performance information is restated to reflect the current maximum
front-end sales charge (in the case of Investor A Shares) or the maximum
contingent deferred sales charge (in the case of Investor B and Investor C
Shares), and assumes the reinvestment of dividends and distributions. The
maximum front-end sales charges for Investor A Shares are as follows:
UltraShort Municipal - 3.00% and 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 - 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 and reimbursements
that subsidize and reduce the total operating expenses of each Portfolio. The
Portfolios' returns would have been lower if there were not such waivers and
reimbursements. BlackRock Advisors, Inc. is under no obligation to waive or
continue waiving its fees after February 1, 2007. 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.
The performance information for the Lipper Short Municipal Debt Funds,
Lipper General Municipal Debt Funds, Lipper Pennsylvania Municipal Debt Funds,
Lipper New Jersey Municipal Debt Funds, Lipper Ohio Municipal Debt Funds,
Lipper Other States Municipal Debt Funds and Lipper Kentucky Municipal Debt
Funds represents the average of the total returns reported by all of the mutual
funds designated by Lipper, Inc. as falling into the respective category. These
total returns are reported net of expenses and other fees that the Securities
and Exchange Commission requires to be reflected in a mutual fund's
performance.
\^ The performance shown in the line graph is that of Institutional Shares and
Investor A Shares of the Portfolios. The actual performance of Investor B,
Investor C and Service Shares is lower than the performance of Institutional
Shares because Investor B, Investor C and Service Shares have higher
expenses than Institutional Shares. Excluding the effects of sales charges,
the actual performance of Investor B and Investor C Shares is lower than the
performance of Investor A Shares because Investor B and Investor C Shares
have higher expenses than Investor A Shares. Purchasers of Investor A Shares
generally pay a front-end sales charge, while purchasers of Investor B and
Investor C Shares may pay a contingent deferred sales charge (depending on
how long they hold their shares) when they sell their shares.
* The performance shown in the line graph is that of Service Shares and
Investor A Shares of the Portfolios. The actual performance of Investor B
and Investor C Shares is lower than the performance of Service Shares
because Investor B and Investor C Shares have higher expenses than Service
Shares. Excluding the effects of sales charges, the actual performance of
Investor B and Investor C Shares is lower than the performance of Investor A
Shares because Investor B and Investor C Shares have higher expenses than
Investor A Shares. Purchasers of Investor A Shares generally pay a front-end
sales charge, while purchasers of Investor B and Investor C Shares may pay a
contingent deferred sales charge (depending on how long they hold their
shares) when they sell their shares.
16
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ULTRASHORT MUNICIPAL PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS - 101.4%
California - 16.2%
California Poll. Ctl. Fin. Auth.
Solid Waste Disp. Rev.,
Republic Svcs., Inc. Prj., Ser.
03 VRDN
3.40%(b) 04/06/06 $2,000 $2,000,000
California Poll. Ctl. Fing. Auth.
Solid Waste Disp. Rev.,
Republic Svcs., Inc. Prj., Ser.
06 VRDN
3.40%(b) 04/06/06 1,100 1,100,000
California Statewide Cmntys.,
Dev. Auth. Multi-Fam. Rev.,
Hsg-Oakwood Apts Prj., Ser.
00 VRDN
3.47%(b) 04/21/06 2,000 2,000,000
==========
5,100,000
----------
Colorado - 4.7%
Colorado Hsg. & Fin. Auth., Ser.
05 1B-4 AMT
2.80% 07/05/06 1,500 1,497,097
----------
Florida - 6.3%
Putnam Cnty. Poll. Ctrl. Rev., Ser.
04 VRDN
3.43%(b) 09/15/06 2,000 2,000,000
----------
Indiana - 3.2%
Indiana St., Dev. Fin. Auth. Indl.
Dev. Rev., Republic Svcs., Inc.
Prj., Ser. 05 VRDN
3.53%(b) 04/05/06 1,000 1,000,000
----------
Kentucky - 10.8%
Kentucky Econ. Dev. Fin. Auth.,
Ser. 04 VRDN
3.45%(b) 04/06/06 1,900 1,900,000
Kentucky Hsg. Corp. Sgl. Fam.
Mtg. Rev., Ser. 06 VRDN
3.26%(b)(c) 04/03/06 300 300,000
Pulaski Cnty. Solid Waste Disp.
Rev., National Rural Utilities
Eastern Kentucky Power Prj.,
Ser. 93B VRDN
3.42%(b) 08/15/06 1,200 1,200,000
==========
3,400,000
----------
Maryland - 3.2%
Maryland St. Cmnty. Dev. Admin.,
Dept. Hsg. & Cmnty. Dev.,
NTS-Residential, Ser. 06D
3.40% 03/07/07 1,000 998,620
----------
Michigan - 4.0%
Michigan St. Strategic Oblig.
Rev., Kay Screen Printing Ltd.
Prj., Ser. 05 VRDN
3.50%(b) 04/06/06 300 300,000
Oakland Cnty. Econ. Dev. Corp.
Ltd. Oblig. Rev., Exhibit
Enterprises, Inc. Prj., Ser. 04
AMT VRDN
3.34%(b) 04/06/06 965 965,000
==========
1,265,000
----------
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Minnesota - 1.7%
Minneapolis & St. Paul Met.
Arpts. Comm. Arpt. Rev., Ser.
99B AMT
5.50% 01/01/10 $ 500 $ 525,590
----------
Multi-State - 0.9%
Charter Mac Equity Issuer Tr.
Rev., Ser. 04 AMT VRDN
3.30%(b)(c) 04/21/06 300 300,000
----------
New Mexico - 3.2%
Farmington Poll. Ctrl. Rev., Pub.
Svcs. San Juan Prj., Ser. 03B
VRDN
2.10%(b) 10/01/06 1,000 1,000,000
----------
North Carolina - 3.2%
Charlotte Wtr. & Swr. Sys., Ser.
05
2.90% 04/26/06 1,000 999,647
----------
Ohio - 5.7%
Clipper Tax-Exempt Cert. Tr., Ser.
04-9 VRDN
3.32%(b)(c) 04/06/06 1,808 1,808,000
----------
Pennsylvania - 12.0%
Harrisburg Auth. Sch. Rev.,
Harrisburg Prj., Ser. 03 VRDN
3.17%(b) 04/06/06 2,800 2,800,000
Pennsylvania St. Higher Edl. Fac.
Auth. Rev., Univ. of Scranton
Prj., Ser. 06C VRDN
3.50%(b) 05/01/06 1,000 1,000,000
==========
3,800,000
----------
South Carolina - 3.2%
Greenwood Cnty. Exempt Fac.
Ind. Rev., Fuji Photo Film Prj.,
Ser. 04 VRDN
3.35%(b) 04/06/06 800 800,000
South Carolina St., Hsg. Fin. &
Dev. Auth. Multi-Fam. Rev.,
Rental Hsg.-Arrington Place
Apt. Prj., Ser. 01 VRDN
3.28%(b) 04/05/06 200 200,000
==========
1,000,000
----------
Texas - 5.1%
Brazos Hbr. Ind. Dev. Corp.
Environmental Facs. Rev.,
ConocoPhillips Co. Prj., Ser. 05
VRDN
2.98%(b) 08/01/06 1,200 1,196,556
Houston Hsg. Fin. Corp. Rev.,
Ser. 04 PT-2101 AMT VRDN
3.30%(b)(c) 04/03/06 400 400,000
==========
1,596,556
----------
Virginia - 9.7%
Fairfax Cnty., Pub. Import, Ser.
01A
4.25% 06/01/08 1,050 1,065,519
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ULTRASHORT MUNICIPAL PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- --------- -------------
MUNICIPAL BONDS (Continued)
Virginia (Continued)
Virginia St. Hsg. Dev. Auth., Ser.
98 VRDN
2.90%(b) 04/04/06 $2,000 $2,000,000
==========
3,065,519
----------
Washington - 5.1%
Energy Northwest Washington
Rev., Wind Prj., Ser. 01A
4.55% 07/01/06 1,600 1,603,633
----------
West Virginia - 3.2%
West Virginia St., Hsg. Dev. Fd.,
Hsg. Fin., Ser. 06B VRDN
3.67%(b) 11/01/06 1,000 999,110
----------
TOTAL MUNICIPAL BONDS
(Cost $32,006,839) 31,958,772
----------
NUMBER
OF SHARES
----------
MONEY MARKET FUND - 0.8%
Wilmington Trust Tax-Free Money
Market Fund
(Cost $233,956) 233,956 233,956
-------
TOTAL INVESTMENTS IN SECURITIES -
102.2%
(Cost $32,240,795(a)) 32,192,728
LIABILITIES IN EXCESS OF
OTHER ASSETS - (2.2)% (686,355)
----------
NET ASSETS - 100.0% $31,506,373
===========
- -------------------
(a) Also cost for federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 0
Gross unrealized depreciation (48,067)
--------
$(48,067)
========
(b) For purposes of amortized cost valuation, the maturity date of this
instrument is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted. Rate shown is rate as of March 31, 2006.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 8.9% of its net assets, with a current market value
of $2,808,000, in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
MUNICIPAL BONDS - 97.1%
Alabama - 3.3%
Alabama Rev., Priv. Coll. &
Tuskegee Univ. Prj., Ser. 96A
5.90% 09/01/16 $1,000 $1,029,650
Alabama St. Pub. Sch. & Coll.
Auth. Cap. Imp. Rev., Ser. 99C
5.75% 07/01/18 3,000 3,223,020
Jefferson Cnty. Swr. Rev., Ref.
Warrants, Ser. 03B-8
5.25% 02/01/13 7,725 8,113,954
==========
12,366,624
----------
Alaska - 0.7%
Alaska Ind. Dev. & Expt. Auth.
Revolving Fd. Rev., Ser. 97A
AMT
6.00% 04/01/07 2,500 2,555,075
----------
California - 5.4%
California St. Econ. Recovery
GO, Ser. 04A
5.25% 07/01/13 7,500 8,122,950
California St. GO, Ser. 90
6.50% 11/01/06 340 345,736
Foothill Eastern Corridor Agcy.
Toll Rd. Rev., Ser. 99
5.75% 01/15/40 8,500 8,615,515
Los Altos Sch. Dist. Cap. Apprec.
GO, Ser. 01B
5.87%(b) 08/01/21 3,380 1,535,635
Sacramento Mun. Util. Dist. Elec.
Rev., Ser. 92C
5.75%(c) 11/15/09 430 430,671
Stockton-East Wtr. Dist. Rev.,
Ser. 02B
6.12%(b) 04/01/28 4,495 1,270,197
==========
20,320,704
----------
District of Columbia - 0.0%
District of Columbia GO, Ser.
93A-1
6.00%(c) 06/01/11 50 55,301
----------
Florida - 4.4%
Florida St. Bd. of Ed. Cap. Outlay
GO, Ser. 00D
5.75% 06/01/22 7,800 8,408,400
Florida St. Bd. of Ed., Ser. 05A
5.00% 01/01/16 5,000 5,374,650
Tampa Wtr. & Swr. Rev., Ser. 02
10/01/14-
6.00% 10/01/16 2,455 2,825,537
==========
16,608,587
----------
Georgia - 1.4%
Atlanta Arpt. Fac. Rev., Ser. 94A
6.50% 01/01/10 1,000 1,097,960
Cobb Cnty. & Marietta Wtr. Auth.
Rev., Ser. 02
5.50% 11/01/14 1,000 1,106,840
Forsyth Cnty. Sch. Dist. GO, Ser.
92
6.70% 07/01/12 1,000 1,106,430
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Georgia (Continued)
Fulton Cnty. Fac. Corp., Fulton
Cnty. Pub. Purp. Prj., Ser. 99
5.50% 11/01/18 $1,000 $1,054,970
Georgia Mun. Elec. Auth. Pwr.
Rev., Ser. 93B
5.70% 01/01/19 1,000 1,113,670
==========
5,479,870
----------
Hawaii - 4.2%
Hawaii St. Hbr. Cap. Imp. Rev.,
Ser. 97 AMT
5.50% 07/01/27 3,750 3,815,212
Hawaii St. Hwy. Rev., Ser 05B
5.00% 07/01/16 6,495 6,919,838
Hawaii St. Rev., Ser. 05DG
5.00% 07/01/17 5,000 5,303,350
==========
16,038,400
----------
Illinois - 5.6%
Chicago O'Hare Intl. Arpt. Rev.,
Gen. Arpt. Third Lien, Ser. 05B
5.25% 01/01/15 7,720 8,348,408
Chicago Wtr. Rev., Ser. 97
5.50%(c) 11/01/07 8,885 9,315,567
5.50% 11/01/22 1,020 1,067,501
Cook Cnty. GO, Ser. 96
5.88%(c) 11/15/06 2,000 2,049,200
Illinois Hsg. Dev. Auth. Rev.,
Multi-Fam. Prj., Ser. 94-5
6.65% 09/01/14 265 266,084
==========
21,046,760
----------
Kentucky - 1.4%
Kentucky St. Property & Bldgs.
Comm. Rev., No. 84 Prj., Ser.
05
5.00% 08/01/18 5,000 5,396,450
----------
Louisiana - 0.6%
Orleans Rev., Levee Dist. Pub.
Imp. Prj., Ser. 86
5.95% 11/01/15 2,035 2,094,076
----------
Maryland - 4.8%
Howard Cnty. Cons. Pub. Impt.
Prj., GO, Ser. 04A
5.00% 08/15/19 6,695 7,324,263
Maryland St. & Loc. Facs. First
Lein GO, Ser. B
5.25% 02/15/11 5,000 5,353,150
Maryland St. Cap. Impt., Ser. 05A
5.25% 02/15/14 5,000 5,453,000
Maryland St. Hlth. & Hgr. Edl.
Fac. Auth. Rev., Ser. 94D
VRDN
3.16%(d) 04/06/06 70 70,000
==========
18,200,413
----------
Massachusetts - 1.7%
Massachusetts St. GO, Ser. 04B
5.25% 08/01/15 5,000 5,449,550
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
------------ ------------------ -------------------
MUNICIPAL BONDS (Continued)
Massachusetts (Continued)
Massachusetts St. Hlth. & Edl.
Facs. Auth. Rev.,
Newton-Wellesley Hosp. Prj.,
Ser. 97G
6.12% 07/01/15 $ 1,000 $1,047,890
==========
6,497,440
----------
Michigan - 3.3%
Detroit City Sch. Dist., Sch. Bldg.
& Site Impt. Unltd. GO, Ser.
05A
5.00% 05/01/21 5,000 5,248,950
Huron Vy. Sch. Dist. GO, Ser. 96
5.88%(c) 05/01/07 2,000 2,048,440
Michigan Mun. Bd. Auth. Rev.,
Clean Wtr. St. Revolving Fd.,
Ser. 05
5.00% 10/01/20 5,000 5,298,300
==========
12,595,690
----------
Minnesota - 2.1%
Minnesota Pub. Facs. Auth. Wtr.
Poll. Ctl. Rev., Ser. 05C
5.00% 03/01/17 7,500 8,081,625
----------
Missouri - 0.4%
Missouri St. Env. Imp. & Energy
Res. Auth. Wtr. Poll. Rev.,
Drinking Wtr. Prj., Ser. 02B
5.25% 07/01/11 1,540 1,652,651
----------
Montana - 1.4%
Montana St. Dept. Transn. Rev.,
Grant Antic Nts. Hwy. 93
Constr. Prj., Ser. 05
5.25% 06/01/16 5,000 5,462,900
----------
Multi-State - 4.6%
Charter Mac Equity Issue Tr., Ser.
99
6.62%(e) 06/30/09 3,000 3,193,440
Charter Mac Equity Issue Tr., Ser.
00
7.60%(e) 11/30/10 9,000 10,066,680
MuniMae Tax-Exempt Bond
Subs., LLC, Ser. 00
6.88%(e) 06/30/09 4,000 4,287,760
==========
17,547,880
----------
Nebraska - 0.3%
Omaha Pub. Pwr. Dist. Elec.
Rev., Ser. 92B
6.15% 02/01/12 1,000 1,091,620
----------
Nevada - 1.9%
Clark Cnty. Arpt. Rev., Ser. 04A-1
5.50% 07/01/15 1,780 1,915,227
Clark Cnty. Sch. Dist., Ser. 04A
5.00% 06/15/16 5,000 5,292,400
==========
7,207,627
----------
New Jersey - 11.4%
New Jersey Econ. Dev. Auth.
Rev., Seeing Eye, Inc. Prj., Ser.
05
5.00% 12/01/24 8,340 8,713,298
PAR
MATURITY (000) VALUE
------------ ------------------ -------------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
New Jersey St. Edl. Facs. Auth.
Rev., Higher Ed. Cap. Impt.,
Ser. A
5.00% 09/01/14 $ 5,000 $5,357,450
New Jersey St. GO, Ser. 05L
07/15/15-
5.25% 07/15/16 10,000 10,912,550
New Jersey St. Tpke. Auth. Rev.,
Ser. 00A
5.75%(c) 01/01/10 2,820 3,023,012
5.75% 01/01/16 1,180 1,264,948
New Jersey St. Trans. Tr. Fd.
Auth. Trans. Sys. Rev., Ser.
00A
6.00%(c) 06/15/10 10,000 10,881,300
Port Auth. New York & New
Jersey SO, JFK Intl. Arpt.
Term. Prj., Ser. 97-6 AMT
6.25% 12/01/09 2,680 2,899,117
==========
43,051,675
----------
New York - 5.0%
New York City GO, Ser. 03I
5.75%(c) 03/01/13 520 577,725
5.75% 03/01/19 4,480 4,909,184
New York City Transitional Fin.
Auth. Rev., Ser. 02A
5.25% 11/01/11 3,300 3,543,309
Tobacco Settlement Fin. Corp.
Rev., Ser. 03A-1
5.50% 06/01/14 6,075 6,367,997
Triborough Brdg. & Tunl. Auth.
Rev., Ser. 05B-2 VRDN
3.16%(d) 04/06/06 3,400 3,400,000
==========
18,798,215
----------
North Carolina - 2.7%
North Carolina Mun. Pwr. Agcy.
Rev., Catawba Elec. Prj., Ser.
92A
6.00% 01/01/10 300 323,868
North Carolina St. Hwy. GO, Ser.
04
5.00% 05/01/15 9,325 9,975,885
==========
10,299,753
----------
Ohio - 6.0%
Cleveland-Cuyahoga Cnty. Port
Auth. Rev., Ser. 97 AMT
6.00%(c) 03/01/07 370 377,163
Greene Cnty. Swr. Sys. Rev.,
Govt. Enterprise Prj., Ser. 05
5.00% 12/01/17 3,500 3,737,370
Ohio St. Common Sch. GO, Ser.
A
5.00% 09/15/12 5,850 6,234,052
5.00% 09/15/13 5,000 5,338,950
Ohio St. Higher Ed. GO, Ser. 05C
5.00% 08/01/12 6,525 6,945,928
==========
22,633,463
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Oregon - 0.9%
Clackamas Cnty. Unltd. GO, Sch.
Dist. No. 62 Oregon City, Ser.
00C
5.50%(c) 06/15/10 $ 3,185 $ 3,404,383
-----------
Pennsylvania - 3.5%
Beaver Cnty. GO, Ser. 96A
5.75%(c) 10/01/06 1,000 1,011,290
Central Bucks Sch. Dist. GO, Ser.
02A
5.00% 05/15/20 3,000 3,126,390
Delaware Cnty. Auth. Rev., Mercy
Hlth. Corp. Prj., Ser. 96
5.75% 12/15/20 2,400 2,484,960
Philadelphia Ind. Dev. Auth. Arpt.
Fac. Rev., Aero Philadelphia
LLC Prj., Ser. 99 AMT
5.25% 01/01/09 400 401,584
Philadelphia Ind. Dev. Auth. Rev.,
PGH Dev. Corp. Prj., Ser. 93
5.25% 07/01/17 1,935 1,939,218
Philadelphia Sch. Dist. GO, Ser.
99C
5.75% 03/01/10 4,000 4,292,480
===========
13,255,922
-----------
Puerto Rico - 1.1%
Puerto Rico Elec. Pwr. Auth.
Rev., Ser. 94S
7.00% 07/01/06 1,000 1,007,850
Puerto Rico Pub. Fin. Corp.
Cmwlth. Approp. Rev., Ser. 02E
5.50%(c) 02/01/12 2,990 3,251,446
===========
4,259,296
-----------
Rhode Island - 0.7%
Rhode Island Depositors Econ.
Protection Corp. SO, Ser. 93
5.62% 08/01/09 515 527,072
5.62%(c) 08/01/09 190 201,020
Rhode Island St. Health & Edl.
Bldg. Corp. Rev., Hosp.
Fing.-Lifespan Prj., Ser. 97
5.80%(c) 05/15/16 2,000 2,080,120
===========
2,808,212
-----------
South Carolina - 1.4%
South Carolina St. Unltd. GO, St.
Univ.-Resh. Infra., Ser. 05A
5.00% 11/01/13 5,000 5,357,450
-----------
Texas - 6.1%
Brazos River Auth. Poll. Ctrl.
Rev., Texas Util. Elec. Co. Prj.,
Ser. 95C AMT
5.55%(c) 04/01/08 5,000 5,266,750
Dallas Ind. Dev. Corp. Rev.,
CR/PL, Inc. Prj., Ser. 87 AMT
7.50% 08/01/17 1,350 1,362,987
Grand Prairie Indpt. Sch. Dist.
GO, Ser. 00A
5.80%(c) 08/15/11 4,925 5,405,926
Texas Wtr. Fin. Assist. GO, Ser.
00
5.75% 08/01/22 3,445 3,693,212
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Texas (Continued)
Travis Cnty. Hlth. Fac. Dev. Corp.
Rev., Ascension Hlth. Credit
Prj., Ser. 99A
5.88%(c) 11/15/09 $ 1,980 $ 2,141,588
University Tex., Univ. Fing. Sys.
Rev., Ser. B
5.25% 08/15/15 5,000 5,443,050
===========
23,313,513
-----------
Utah - 0.0%
Salt Lake City Hosp. Rev., Ser.
88A
8.12%(c) 05/15/15 100 119,304
-----------
Virginia - 4.2%
Pocahontas Pkwy. Toll Rd. Rev.,
Ser. 98B
5.85%(b) 08/15/23 14,300 5,246,241
Virginia St. GO, Ser. 05A
5.00% 06/01/19 5,000 5,336,450
Virginia St. Pub. Sch. Auth. Rev.,
Sch. Prj., Ser. 05B
5.25% 08/01/16 5,000 5,462,050
===========
16,044,741
-----------
Washington - 6.5%
King Cnty. Unltd. GO, Sch. Dist.
No. 414 Lake Washington, Ser.
00
5.75% 12/01/10 500 543,215
Pierce Cnty. Unltd. GO, Sch. Dist.
No. 416 White River, Ser. 00
6.00% 12/01/13 5,345 5,851,653
Washington St. GO, Ser. 00B
6.00% 01/01/25 14,000 15,103,620
Washington St. Pub. Pwr. Sply.
Sys. Rev., Nuclear Prj. No. 3,
Ser. 96A
6.00% 07/01/06 3,000 3,017,100
===========
24,515,588
-----------
West Virginia - 0.1%
West Virginia Pub. Energy Auth.
Rev., Morgantown Energy
Assoc. Prj., Ser. 90A AMT
5.05% 07/01/08 280 282,932
-----------
TOTAL MUNICIPAL BONDS
(Cost $359,653,520)
368,444,140
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- --------- -------------
TENDER OBLIGATION MUNICIPAL BONDS - 1.9%
Pennsylvania - 0.6%
Delaware Vy. Regl. Fin. Auth.
Govt. RITES PA-1041 Rev.,
Ser. 02B
07/01/32 $1,000 $2,262,800
----------
Puerto Rico - 1.3%
Puerto Rico Cmwlth. Infra. Fin.
Auth. Spec. RITES PA-782
Rev., Ser. 01G
10/01/40 3,985 5,099,206
----------
TOTAL TENDER OBLIGATION MUNICIPAL
BONDS
(Cost $5,997,325) 7,362,006
----------
MORTGAGE PASS-THROUGHS - 0.0%
Government National Mortgage
Association
6.00%
(Cost $4,447) 11/15/31 4 4,340
----------
NUMBER
OF SHARES
----------
MONEY MARKET FUND - 0.1%
Wilmington Trust Tax-Free Money
Market Fund
(Cost $276,154) 276,154 276,154
------------
TOTAL INVESTMENTS IN
SECURITIES - 99.1%
(Cost $365,931,445(a)) 376,086,639
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.9% 3,226,266
------------
NET ASSETS - 100.0% $379,312,905
============
- -------------------
(a) Cost for federal income tax purposes is $365,933,945. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $12,085,116
Gross unrealized depreciation (1,932,422)
-----------
$10,152,694
===========
(b) The rate shown is the effective yield on the zero coupon bonds at the time
of purchase.
(c) This bond is prerefunded. U.S. government securities, held in escrow,
are used to pay interest on this security, as well as refund the bond in
full at date indicated, typically at a premium to par.
(d) For purposes of amortized cost valuation, the maturity date of this
instrument is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted. Rate shown is rate as of March 31, 2006.
(e) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 4.6% of its net assets, with a current market value
of $17,547,880, in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS - 95.6%
Massachusetts - 0.6%
Massachusetts St. Hlth. & Ed.
Facs. Auth. Rev., Harvard Univ.
Prj., Ser. 99R VRDN
2.92%(b) 04/03/06 $ 3,800 $3,800,000
----------
Multi-State - 8.1%
Charter Mac Equity Issue Tr., Ser.
99
6.62%(c) 06/30/09 25,000 26,612,000
Charter Mac Equity Issue Tr., Ser.
00
7.60%(c) 11/30/10 10,000 11,185,200
MuniMae Tax-Exempt Bond
Subs., LLC, Ser. 00
6.88%(c) 06/30/09 4,000 4,287,760
7.75%(c) 11/01/10 10,000 11,145,600
==========
53,230,560
----------
Pennsylvania - 76.1%
Allegheny Cnty. Hosp. Dev. Auth.
Rev., Hlth. Ctr. Univ. of
Pittsburgh Med. Ctr. Prj., Ser.
97B
6.00% 07/01/25 7,000 8,351,630
Allegheny Cnty. Hosp. Dev. Auth.
Rev., Ser. 95A
6.00%(d) 09/01/07 5,000 5,166,300
6.20%(d) 09/01/07 1,000 1,035,980
Allegheny Cnty. Unltd. GO, Ser.
05C
5.25% 11/01/14 10,355 11,247,083
5.00% 11/01/16 11,880 12,654,695
5.00% 11/01/21 5,875 6,179,971
Beaver Cnty. Hosp. Auth. Rev.,
Ser. 96A
5.80%(d) 10/01/06 5,830 5,897,220
Berks Cnty. GO, Ser. 98
5.38% 11/15/28 6,685 6,873,717
Central Bucks Sch. Dist. GO, Ser.
02A
5.00% 05/15/20 4,570 4,762,534
Dauphin Cnty. Gen. Auth. Hlth.
Sys. Rev., Pinnacle Hlth. Sys.
Prj., Ser. 97
5.50%(d) 05/15/07 1,715 1,767,548
5.50% 05/15/17 1,785 1,836,337
Dauphin Cnty. Gen. Auth. Hosp.
Rev., Hapsco Western
Pennsylvania Hosp. Prj., Ser.
92
6.25% 07/01/16 1,000 1,125,380
Delaware Cnty. Auth. Arpt. Fac.
Rev., UTD Parcel Svc. Prj.,
Ser. 85 VRDN
3.14%(b) 04/03/06 1,070 1,070,000
Delaware Cnty. Auth. Coll. Rev.,
Haverford Coll. Prj., Ser. 00
5.75% 11/15/25 6,795 7,356,471
Delaware Cnty. Auth. Hosp. Rev.,
Ser. 95
5.50% 08/15/15 6,480 6,584,846
Delaware Cnty. Auth. Rev., Mercy
Hlth. Corp. Prj., Ser. 96
5.75% 12/15/20 3,735 3,867,219
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Delaware Cnty. Ind. Dev. Auth.
Poll. Ctl. Rev., Ser. 04 VRDN
3.17%(b) 04/03/06 $ 975 $ 975,000
Delaware Cnty. Ind. Dev. Auth.
Rev., Ser. 99 AMT
6.00% 06/01/29 3,400 3,637,864
Delaware Cnty. Mem. Hosp. Auth.
Rev., Ser. 95
5.50% 08/15/19 3,000 3,048,540
Delaware River Port Auth.
Pennsylvania & New Jersey
Rev., Port Dist. Prj., Ser. 99B
5.70% 01/01/22 8,930 9,522,059
Delaware River Port Auth.
Pennsylvania & New Jersey
Rev., Ser. 99
5.75% 01/01/16 8,000 8,544,160
Delaware Vy. Regl. Fin. Auth.
Govt. Rev., Ser. 96A
5.90% 04/15/16 2,540 2,545,461
Delaware Vy. Regl. Fin. Auth.
Govt. Rev., Ser. 97B
5.60% 07/01/17 2,000 2,214,600
Dover Area Sch. Dist. GO, Ser.
96
5.75%(d) 04/01/06 2,445 2,445,000
Indiana Cnty. Ind. Dev. Auth. Poll.
Ctrl. Rev., New York St. Elec. &
Gas Corp. Prj., Ser. 95A
6.00% 06/01/06 1,000 1,003,680
Kennett Cons. Sch. Dist. GO,
Ser. 02A
5.50% 02/15/14 1,245 1,354,523
Lancaster Cnty. Hosp. Auth. Rev.,
Hlth. Ctr. Masonic Homes Prj.,
Ser. 94
5.30% 11/15/08 500 505,610
Lancaster Swr. Auth. Sply. SO,
Ser. 98
5.25% 04/01/21 8,480 8,480,000
Lehigh Cnty. Gen. Purp. Auth.
Rev., Kidspeace Oblig. Prj.,
Ser. 98
5.70% 11/01/09 2,460 2,589,470
Lehigh Cnty. Gen. Purp. Auth.
Rev., Vy. Hosp. Prj., Ser. 97A
VRDN
3.15%(b) 04/03/06 4,005 4,005,000
Luzerne Cnty. Flood Prot. Auth.
Gtd. Rev., Ser. 96
5.60%(d) 07/15/06 4,720 4,748,698
Lycoming Cnty. Auth. Hosp. Rev.,
Divine Providence Hosp. Prj.,
Ser. 95
5.38% 11/15/10 6,480 6,623,078
McKeesport Area Sch. Dist. GO,
Ser. 96A
5.75%(d) 10/01/06 1,750 1,769,757
Methacton Sch. Dist. Auth. Rev.,
Ser. 78
6.50%(d) 10/01/06 475 481,959
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Montgomery Cnty. Hgr. Ed. &
Hlth. Auth. Coll. Rev., Beaver
Coll. Prj., Ser. 96
5.75% 04/01/12 $ 1,690 $1,723,800
Montgomery Cnty. Hgr. Ed. &
Hlth. Auth. Rev., Holy
Redeemer Hosp. Prj., Ser. 97A
5.25% 10/01/27 9,000 9,256,410
Montgomery Cnty. Hgr. Ed. &
Hlth. Auth. Rev., Pottstown
Hlth. Care Corp. Prj., Ser. 98
5.00%(d) 01/01/09 6,235 6,511,959
Northeastern Hosp. & Ed. Auth.
Rev., Luzerne Cnty. Coll. Prj.,
Ser. 97
5.15% 08/15/16 3,245 3,314,540
Northeastern Hosp. & Ed. Auth.
Rev., Wyoming Vy. Hlth. Care
Prj., Ser. 94A
6.50% 01/01/07 1,000 1,011,650
Northgate Sch. Auth. Bldg. Rev.,
Ser. 78
6.38% 02/15/07 825 844,552
Pennsbury Sch. Dist. GO, Ser. 02
01/15/18-
5.50% 01/15/19 4,625 5,002,509
Pennsylvania Con. Ctr. Auth.
Rev., Ser. 89A
6.70% 09/01/16 1,000 1,154,780
Pennsylvania Hgr. Ed. Assistance
Agcy. Rev., Capital Acquisition
Prj., Ser. 00
5.88%(d) 12/15/10 16,400 17,915,852
Pennsylvania Hsg. Fin. Agcy.
Rev., Multi-Fam. Prj., Ser. 92
8.10% 07/01/13 545 545,894
Pennsylvania Hsg. Fin. Agcy.
Rev., Ser. 98 AMT
5.50%(e) 04/01/30 13,155 3,641,830
Pennsylvania Hsg. Fin. Agcy.
Rev., Sgl. Fam. Mtg. Prj., Ser.
99-66A AMT
5.65% 04/01/29 9,545 9,667,844
Pennsylvania Infra. Investment
Auth. Rev., Pennvest Ln. Pool
Prj., Ser. 94
6.00% 09/01/06 1,930 1,949,918
Pennsylvania Intergovtl. Coop.
Auth. Spec. Tax Rev., City of
Philadelphia Fdg. Prj., Ser. 96
5.60% 06/15/12 1,000 1,003,880
06/15/16-
5.50% 06/15/20 10,500 10,538,745
Pennsylvania St. Dept. Gen.
Svcs. COP, Ser. 01
05/01/14-
5.00% 11/01/14 5,560 5,809,644
05/01/15-
5.25% 05/01/16 7,740 8,222,744
Pennsylvania St. GO, Ser. 04
07/01/16-
5.38% 07/01/17 28,000 31,015,310
Pennsylvania St. Hgr. Ed. Assist.
Agcy. Stud. Ln. Rev., Ser. 94A
VRDN
3.20%(b) 04/05/06 1,700 1,700,000
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Pennsylvania St. Hgr. Ed. Fac.
Auth. Coll. & Univ. Rev.,
Lafayette Coll. Prj., Ser. 00
6.00% 05/01/30 $ 155 $ 167,081
Pennsylvania St. Hgr. Ed. Fac.
Auth. Coll. & Univ. Rev.,
Trustees Univ. Prj., Ser. 98
5.50% 07/15/38 9,500 9,897,100
Pennsylvania St. Hgr. Ed. Fac.
Auth. Rev., Drexel Univ. Prj.,
Ser. 03B VRDN
3.17%(b) 04/06/06 3,940 3,940,000
Pennsylvania St. Ind. Dev. Auth.
Rev., Econ. Dev. Prj., Ser. 02
5.50% 07/01/16 8,000 8,746,560
Pennsylvania St. Tpke. Comm.
Rev., Ser. 01
5.50% 12/01/13 5,000 5,517,850
Pennsylvania St. Univ. Rev., Ser.
05A
5.00% 09/01/29 5,500 5,738,810
Pennsylvania St. Unltd. GO, Ser.
05
5.50% 01/01/14 15,395 16,918,027
Philadelphia Gas Works Rev.,
Ser. 94
5.25% 08/01/24 2,900 2,918,676
Philadelphia Gas Works Rev.,
Ser. 01
08/01/14-
5.50% 08/01/18 7,415 8,027,924
Philadelphia GO, Ser. 94
5.90% 11/15/09 980 991,290
Philadelphia Hosp. & Hgr. Ed.
Fac. Auth. Hosp. Rev.,
Childrens Hosp. Prj., Ser. 05
VRDN
3.14%(b) 04/03/06 1,000 1,000,000
Philadelphia Hosp. & Hgr. Ed.
Fac. Auth. Hosp. Rev.,
Frankford Hosp. Prj., Ser. 95
5.50% 01/01/07 1,235 1,253,710
5.60% 01/01/08 1,245 1,263,999
Philadelphia Hosp. & Hgr. Ed.
Fac. Auth. Hosp. Rev.,
Nazareth Hosp. Franciscan
Prj., Ser. 96B
5.00%(d) 07/01/06 4,590 4,698,553
Philadelphia Ind. Dev. Auth. Rev.,
American Coll. of Physicians
Prj., Ser. 00
06/15/20-
5.50% 06/15/25 14,685 15,610,310
Philadelphia Ind. Dev. Auth. Rev.,
Girard Estate Coal Mining Prj.,
Ser. 96
5.38% 11/15/12 3,945 3,988,947
5.50% 11/15/16 1,650 1,668,612
Philadelphia Ind. Dev. Auth. Rev.,
PGH Dev. Corp. Prj., Ser. 93
5.50% 07/01/10 1,035 1,036,304
Philadelphia Pk. Auth. Rev., Arpt.
Pk. Prj., Ser. 99
5.62% 09/01/18 4,430 4,699,964
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Philadelphia Pk. Auth. Rev., Ser.
97
5.40% 09/01/15 $ 5,900 $ 6,070,628
Philadelphia Pk. Auth. Rev., Ser.
99
09/01/13-
5.62% 09/01/17 5,885 6,263,389
Philadelphia Sch. Dist. GO, Ser.
95A
6.25% 09/01/06 2,255 2,279,512
Philadelphia Sch. Dist. GO, Ser.
99C
5.75% 03/01/10 11,000 11,804,320
Philadelphia Sch. Dist. GO, Ser.
00A
02/01/12-
5.75% 02/01/13 10,215 11,122,092
Philadelphia Wtr. & Waste Wtr.
Rev., Ser. 93
5.50% 06/15/07 6,780 6,929,702
Philadelphia Wtr. & Waste Wtr.
Rev., Ser. 05A
5.00% 07/01/28 6,000 6,242,760
Pottstown Borough Auth. Swr.
Rev., Ser. 96
5.50% 11/01/16 1,360 1,375,001
Riverside Sch. Dist. GO, Ser. 00
5.50%(d) 10/15/10 3,300 3,529,878
South Fork Mun. Auth. Hosp.
Rev., Good Samaritan Med.
Ctr. Prj., Ser. 96B
5.38% 07/01/16 4,000 4,094,680
Southeastern Pennsylvania
Trans. Auth. Rev., Ser. 97
5.55% 03/01/13 3,500 3,628,870
5.38% 03/01/17 6,270 6,491,206
Springford Sch. Dist. GO, Ser. 97
5.15% 02/01/18 10,010 10,136,922
Washington Cnty. Auth. Rev., Ser.
99
6.15% 12/01/29 6,340 6,750,325
Washington Cnty. Ind. Dev. Auth.
Poll. Ctrl. Rev., West Penn
Pwr. Co. Prj., Ser. 95G
6.05% 04/01/14 2,500 2,528,075
West Chester Area Sch. Dist.
Unltd. GO, Ser. 06A
05/15/16-
5.00% 05/15/22 30,160 32,026,216
West Mifflin Sanit. Swr. Mun.
Auth. Swr. Rev., Ser. 96
5.70%(d) 08/01/06 1,445 1,455,664
Williamsport Area Sch. Dist. Auth.
Rev., Ser. 78
6.00% 03/01/07 60 61,296
Wilson Sch. Dist. GO, Ser. 97
5.50%(d) 05/15/07 8,015 8,183,475
===========
500,160,979
-----------
Puerto Rico - 10.8%
Puerto Rico Cmwlth. GO, Ser.
01A
5.50% 07/01/20 13,690 15,503,104
Puerto Rico Cmwlth. GO, Ser. 02
5.50% 07/01/12 20,000 21,859,800
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Puerto Rico (Continued)
Puerto Rico Cmwlth. Pub. Impt.
GO, Ser. 01A
5.50% 07/01/16 $11,830 $13,171,285
Puerto Rico Mun. Fin. Agy. Rev.,
Ser. 99
5.50% 08/01/18 6,500 6,940,830
Puerto Rico Pub. Fin. Corp.
Cmwlth. Approp. Rev., Ser. 02E
5.50%(d) 02/01/12 9,340 10,156,690
5.50% 08/01/29 3,160 3,315,124
===========
70,946,833
-----------
TOTAL MUNICIPAL BONDS
(Cost $604,498,042) 628,138,372
-----------
TENDER OBLIGATION MUNICIPAL BONDS - 3.2%
Pennsylvania - 2.7%
Delaware River Port Auth.
Pennsylvania & New Jersey
RITES Rev., Ser. 99
01/01/22 10,000 12,663,600
Delaware Vy. Regl. Fin. Auth.
Govt. RITES PA-1041 Rev.,
Ser. 02A
07/01/32 2,000 4,525,600
===========
17,189,200
-----------
Puerto Rico - 0.5%
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00A
10/01/16 400 520,784
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00B
10/01/17 500 658,640
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00C
10/01/18 500 655,200
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00D
10/01/19 690 901,802
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00E
10/01/20 250 325,880
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00F
10/01/24 250 320,350
===========
3,382,656
-----------
TOTAL TENDER OBLIGATION MUNICIPAL
BONDS
(Cost $15,603,152)
20,571,856
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ---------------
MONEY MARKET FUND - 0.2%
Wilmington Trust Tax-Free Money
Market Fund
(Cost $1,363,717) 1,363,717 $ 1,363,717
------------
TOTAL INVESTMENTS IN
SECURITIES - 99.0%
(Cost $621,464,911(a)) 650,073,945
OTHER ASSETS IN EXCESS OF
LIABILITIES - 1.0% 6,878,368
------------
NET ASSETS - 100.0% $656,952,313
============
- -------------------
(a) Cost for federal income tax purposes is $621,603,494. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $30,420,823
Gross unrealized depreciation (1,950,372)
-----------
$28,470,451
===========
(b) For purposes of amortized cost valuation, the maturity date of this
instrument is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted. Rate shown is rate as of March 31, 2006.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 8.1% of its net assets, with a current market value
of $53,230,560, in securities restricted as to resale.
(d) This bond is prerefunded. U.S. government securities, held in escrow, are
used to pay interest on this security, as well as refund the bond in
full at date indicated, typically at a premium to par.
(e) The rate shown is the effective yield on the zero coupon bonds at the time
of purchase.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NEW JERSEY TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
MUNICIPAL BONDS - 92.1%
Delaware - 0.6%
Delaware River & Bay Auth. Rev.,
Ser. 05
5.00% 01/01/28 $ 1,000 $1,040,130
----------
Multi-State - 7.2%
Charter Mac Equity Issue Tr., Ser.
99
6.62%(b) 06/30/09 1,000 1,064,480
Charter Mac Equity Issue Tr., Ser.
00
7.60%(b) 11/30/10 4,000 4,474,080
MuniMae Tax-Exempt Bond
Subs., LLC, Ser. 00
6.88%(b) 06/30/09 4,000 4,287,760
7.75%(b) 11/01/10 2,000 2,229,120
==========
12,055,440
----------
New Jersey - 73.7%
Garden St. Preservation Tr. Cap.
Apprec. Rev., Ser. 03B
5.17%(c) 11/01/24 10,000 4,219,800
Hopatcong Boro. GO, Ser. 03
5.75% 08/01/33 2,300 2,542,397
Knowlton Twp. Bd. of Ed. GO,
Ser. 91
6.60% 08/15/11 169 191,572
Middlesex Cnty. Imp. Auth. Rev.,
Heldrich Center Hotel Prj., Ser.
05A
01/01/15-
5.00% 01/01/20 2,000 2,011,780
Middlesex Cnty. Imp. Auth. Rev.,
Monroe Twp. Prj., Ser. 96
5.80% 09/15/13 1,725 1,758,413
Middlesex Cnty. Imp. Auth. Rev.,
New Brunswick Apts. Rental
Hsg. Prj., Ser. 02 AMT
5.15% 02/01/24 3,000 3,049,920
New Jersey Econ. Dev. Auth.
Lease Rev., Ser. 00
6.00% 06/01/21 4,780 5,182,380
New Jersey Econ. Dev. Auth.
Rev., Cigarette Tax Prj., Ser. 04
5.75% 06/15/34 3,615 3,800,558
New Jersey Econ. Dev. Auth.
Rev., Kapkowski Rd. Landfill
Prj., Ser. 02
6.50% 04/01/28 2,500 2,947,975
New Jersey Econ. Dev. Auth.
Rev., Motor Vehicle Comm.
Prj., Ser. 03A
3.52%(c) 07/01/12 4,000 3,099,640
New Jersey Econ. Dev. Auth.
Rev., Performing Arts Ctr. Prj.,
Ser. 96C
5.75% 06/15/08 4,440 4,524,227
New Jersey Econ. Dev. Auth.
Rev., Sch. Fac. Const. Prj.,
Ser. 03F
5.25% 06/15/13 5,000 5,332,350
New Jersey Econ. Dev. Auth.
Rev., Seeing Eye, Inc. Prj., Ser.
05
5.00% 12/01/24 6,500 6,790,940
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
New Jersey Econ. Dev. Auth.
Rev., Ser. 99
6.20% 12/01/09 $ 3,000 $3,301,110
New Jersey Econ. Dev. Auth.
Rev., St. Barnabas Med. Ctr.
Prj., Ser. 97A
5.63%(c) 07/01/23 4,000 1,786,720
New Jersey Econ. Dev. Auth.
Solid Waste Rev., Waste
Management New Jersey Prj.,
Ser. 04A AMT
5.30% 06/01/15 1,000 1,049,870
New Jersey Edl. Auth. Rev.,
Rowan Coll. Prj., Ser. 96E
5.88%(d) 07/01/06 2,185 2,219,479
New Jersey Hlth. Care Fac. Fin.
Auth. Rev., Kennedy Hlth. Sys.
Prj., Ser. 01
5.50% 07/01/21 2,000 2,103,700
5.62% 07/01/31 455 478,187
New Jersey Hlth. Care Fac. Fin.
Auth. Rev., Robert Wood
Johnson Univ. Prj., Ser. 96C
5.75% 07/01/07 2,595 2,633,614
New Jersey Sports & Expo. Auth.
Rev., Ser. 00A
5.50% 03/01/20 5,000 5,275,900
New Jersey St. Edl. Fac. Auth.
Rev., Institute of Tech. Prj., Ser.
04B
5.00% 07/01/16 4,150 4,395,265
New Jersey St. Edl. Facs. Auth.
Rev., Fairleigh Dickinson Univ.
Prj., Ser. 02D
5.25% 07/01/32 3,000 3,053,970
New Jersey St. GO, Ser. 00
5.75% 05/01/12 2,500 2,752,100
New Jersey St. GO, Ser. 01H
5.25% 07/01/14 3,000 3,243,330
New Jersey St. Hsg. & Mtg. Fin.
Agcy. Rev., Ser. 00B
6.25% 11/01/26 1,435 1,501,986
New Jersey St. Hwy. Auth. Rev.,
Garden St. Pkwy. Prj., Ser. 92
6.20% 01/01/10 750 798,405
New Jersey St. Tpke. Auth. Rev.,
Ser. 91C
6.50%(d) 01/01/16 4,000 4,626,381
New Jersey St. Trans. Tr. Fd.
Admin. Grant Rev., Ser. 00A
6.12%(d) 09/15/09 2,500 2,690,125
New Jersey St. Trans. Tr. Fd.
Auth. Trans. Sys. Rev., Ser.
99A
5.75% 06/15/20 2,820 3,173,966
New Jersey St. Trans. Tr. Fd.
Auth. Trans. Sys. Rev., Ser.
00A
6.00%(d) 06/15/10 2,500 2,720,325
New Jersey St. Trans. Tr. Fd.
Auth. Trans. Sys. Rev., Ser.
01B
6.00%(d) 12/15/11 2,500 2,783,150
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NEW JERSEY TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
New Jersey St. Unltd. GO, Ser.
05N
5.50% 07/15/17 $3,000 $ 3,353,010
New Jersey St. Waste Wtr.
Trtmnt. Rev., Ser. 96C
6.25% 05/15/06 3,455 3,465,400
North Hudson Swr. Auth. Rev.,
Ser. 01A
5.41%(c) 08/01/21 5,000 2,479,600
Port Auth. New York & New
Jersey SO, JFK Intl. Arpt.
Term. Prj., Ser. 97-6 AMT
6.25% 12/01/09 7,000 7,572,320
5.75% 12/01/22 2,000 2,094,200
Summit Cnty. GO, Ser. 01
5.25% 06/01/14 1,145 1,251,199
Union Cnty. Indl. Poll. Ctrl. Rev.,
Exxon Mobil Corp. Prj., Ser. 89
VRDN
2.82%(e) 04/03/06 6,600 6,600,000
===========
122,855,264
-----------
Puerto Rico - 10.6%
Puerto Rico Cmwlth. Hwy. &
Trans. Auth. Rev., Ser. 00B
6.00%(d) 07/01/10 3,000 3,286,470
Puerto Rico Cmwlth. Hwy. &
Trans. Auth. Rev., Ser. 00C
6.00% 07/01/29 2,000 2,190,980
Puerto Rico Cmwlth. Hwy. &
Trans. Auth. Rev., Ser. 02D
5.38% 07/01/36 1,000 1,086,690
Puerto Rico Cmwlth. Pub. Imp.
GO, Ser. 01
5.50% 07/01/19 5,000 5,665,500
Puerto Rico Pub. Fin. Corp.
Cmwlth. Approp. Rev., Ser. 02E
5.50%(d) 02/01/12 3,740 4,067,026
5.50% 08/01/29 1,260 1,321,853
===========
17,618,519
-----------
TOTAL MUNICIPAL BONDS
(Cost $147,148,574) 153,569,353
-----------
TENDER OBLIGATION MUNICIPAL BONDS - 6.9%
New Jersey - 3.6%
Delaware River Port Auth.
Pennsylvania & New Jersey
RITES PA-611 Rev., Ser. 00
01/01/26 5,000 5,982,650
-----------
Puerto Rico - 3.3%
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, PA-569 Rev.,
Ser. 99
07/01/12 2,000 2,199,500
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00A
10/01/16 400 520,784
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00B
10/01/17 500 658,640
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00C
10/01/18 500 655,200
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
TENDER OBLIGATION MUNICIPAL BONDS (Continued)
Puerto Rico (Continued)
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00D
10/01/19 $ 650 $ 849,524
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00E
10/01/20 250 325,880
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00F
10/01/24 250 320,350
===========
5,529,878
-----------
TOTAL TENDER OBLIGATION MUNICIPAL
BONDS
(Cost $9,137,635)
11,512,528
-----------
NUMBER
OF SHARES
----------
MONEY MARKET FUND - 0.5%
Wilmington Trust Tax-Free Money
Market Fund
(Cost $917,152) 917,152 917,152
-------
TOTAL INVESTMENTS IN
SECURITIES - 99.5%
(Cost $157,203,361(a)) 165,999,033
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.5% 824,167
-----------
NET ASSETS - 100.0% $166,823,200
============
- -------------------
(a) Also cost for federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $9,794,179
Gross unrealized depreciation (998,507)
----------
$8,795,672
==========
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 7.2% of its net assets, with a current market value
of $12,055,440, in securities restricted as to resale.
(c) The rate shown is the effective yield on the zero coupon bonds at the
time of purchase.
(d) This bond is prerefunded. U.S. government securities, held in escrow, are
used to pay interest on this security, as well as refund the bond in
full at date indicated, typically at a premium to par.
(e) For purposes of amortized cost valuation, the maturity date of this
instrument is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted. Rate shown is rate as of March 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
OHIO TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS - 86.6%
Multi-State - 5.3%
Charter Mac Equity Issue Tr., Ser.
99
6.62%(b) 06/30/09 $1,000 $1,064,480
Charter Mac Equity Issue Tr., Ser.
00
7.60%(b) 11/30/10 1,000 1,118,520
MuniMae Tax-Exempt Bond
Subs., LLC, Ser. 00
6.88%(b) 06/30/09 2,000 2,143,880
7.75%(b) 11/01/10 2,000 2,229,120
==========
6,556,000
----------
Ohio - 73.4%
Akron GO, Ser. 01
5.50% 12/01/21 1,000 1,084,260
Akron Swr. Sys. Rev., Ser. 96
5.88% 12/01/16 500 512,820
Brunswick GO, Ser. 94
6.30% 12/01/14 195 197,773
Butler Cnty. Trans. Imp. Dist.
Rev., Ser. 97A
6.00% 04/01/11 600 638,934
Cleveland COP, Cleveland
Stadium Prj., Ser. 97
5.25% 11/15/10 2,500 2,614,325
Cleveland Pkg. Fac. Rev., Ser. 96
6.00% 09/15/06 1,275 1,288,885
Cleveland St. Univ. Gen.
Receipts Rev., Ser. 04
5.00% 06/01/34 3,000 3,111,660
Cleveland-Cuyahoga Cnty. Port
Auth. Rev., Ser. 97 AMT
6.00%(c) 03/01/07 245 249,743
Columbus GO, Ser. 86
7.38% 07/01/06 1,000 1,008,970
Columbus GO, Ser. 02
5.00% 06/15/09 2,975 3,121,400
Cuyahoga Cnty. Multi-Fam. Rev.,
Ser. 02 AMT
5.35% 09/20/27 1,000 1,021,800
Fairfield City Sch. Dist. GO, Ser.
94
7.45% 12/01/14 1,000 1,197,880
Greater Cleveland Regl. Trans.
Auth. Cap. Imp. Rev., Ser. 01A
5.12% 12/01/21 1,000 1,068,390
Greater Cleveland Regl. Trans.
Auth. GO, Ser. 96
6.25% 12/01/06 2,935 2,986,509
Hamilton Cnty. Sales Tax Rev.,
Ser. 01B
5.25% 12/01/32 5,000 5,219,850
Hamilton Cnty. Swr. Sys. Rev.,
Ser. 05B
5.00% 12/01/16 2,720 2,917,907
Jackson Loc. Sch. Dist. Rev.,
Stark & Summit Cntys.
Construction & Imp. Prj., Ser.
04
5.00% 12/01/33 2,105 2,181,875
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Kent St. Univ. Gen. Receipts
Rev., Ser. 01 VRDN
3.17%(d) 04/05/06 $1,000 $1,000,000
Lakota Loc. Sch. Dist. GO, Ser.
05
5.00% 12/01/16 2,115 2,275,888
Marysville Sch. Dist. GO, Ser. 98
6.00%(c) 12/01/10 1,910 2,111,429
Mason City Sch. Dist. GO, Ser.
01
5.38% 12/01/18 3,000 3,243,030
Mason City Sch. Dist. GO, Ser.
05
5.00% 12/01/15 3,000 3,225,720
New Albany Cmnty. Auth. Fac.
Rev., Ser. 01B
5.12% 10/01/21 2,750 2,889,397
North Royalton City Sch. Dist.
GO, Ser. 94
6.62% 12/01/06 50 50,997
Northwestern Sch. Dist. Rev.,
Wayne & Ashland Cntys. Prj.,
Ser. 94
7.20% 12/01/10 300 330,843
Ohio Hsg. Fin. Agcy. Rev., Wind
River Prj., Ser. 94A AMT
5.55% 11/01/18 300 307,392
Ohio St. Bldg. Auth. Data Ctr.
Rev., Ser. 93A
5.90% 10/01/07 450 464,805
Ohio St. Comm. Sch. Capital
Fac. Rev., Ser. 94A
5.75%(c) 06/15/09 1,000 1,061,170
Ohio St. Env. Imp. Rev., USX
Corp. Prj., Ser. 99
5.62% 05/01/29 1,000 1,050,240
Ohio St. Hgr. Ed. Fac. Rev.,
Denison Univ. Prj., Ser. 01
5.12% 11/01/21 3,000 3,163,110
Ohio St. Infra. Impt. GO, Ser. 97
5.35% 08/01/14 3,380 3,697,619
Ohio St. Major New St. Rev., Ser.
05
5.00% 12/15/14 3,660 3,926,338
Ohio St. Univ. GO, Ser. 02A
5.25% 12/01/18 3,290 3,512,207
Ohio St. Wtr. Dev. Auth. Poll. Ctrl.
Fac. Rev., Republic Steel Prj.,
Ser. 95
6.38% 06/01/07 835 849,337
Ohio St. Wtr. Dev. Auth. Poll. Ctrl.
Rev., Ser. 02
5.25% 06/01/12 3,415 3,682,394
Ohio St. Wtr. Dev. Auth. Rev.,
Fresh Water. Imp. Prj., Ser. 04
5.00% 12/01/34 3,000 3,101,280
Ohio St. Wtr. Dev. Auth. Rev.,
Steel-Cargill North Star Broken
Hill Prj., Ser. 95 AMT
6.30% 09/01/20 500 510,900
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
OHIO TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Pickerington Loc. Sch. Dist. Fac.
Construction & Imp. Rev., Ser.
01
5.25% 12/01/20 $1,000 $ 1,074,700
Scioto Cnty. Rev., Marine Term.
Norfolk Southern Corp. Prj.,
Ser. 98
5.30%(e) 08/15/13 3,000 3,063,300
Springboro Wtr. Sys. Rev., Ser.
98
5.00% 12/01/18 2,500 2,577,250
Toledo GO, Ser. 96
6.00% 12/01/06 500 507,970
Trotwood-Madison City Sch. Dist.
GO, Ser. 02
5.00% 12/01/30 2,000 2,066,140
Univ. of Cincinnati Rev., Ser. 01A
5.00% 06/01/31 2,000 2,059,640
Univ. of Toledo Rev., Ser. 02
5.25% 06/01/18 1,195 1,259,351
Warren City Sch. Dist. GO, Ser.
04
5.00% 12/01/31 2,500 2,594,775
West Muskingum Loc. Sch. Dist.,
Sch. Fac. Constr. & Imp. GO,
Ser. 03
5.00% 12/01/24 3,000 3,133,590
Westlake GO, Ser. 96
6.40% 12/01/08 1,560 1,614,834
===========
90,828,627
-----------
Puerto Rico - 7.9%
Puerto Rico Cmwlth. GO, Ser. 02
5.50% 07/01/11 5,000 5,419,800
Puerto Rico Pub. Fin. Corp.
Cmwlth. Approp. Rev., Ser. 02E
5.50%(c) 02/01/12 2,990 3,251,446
5.50% 08/01/29 1,010 1,059,581
===========
9,730,827
-----------
TOTAL MUNICIPAL BONDS
(Cost $103,071,223) 107,115,454
-----------
TENDER OBLIGATION MUNICIPAL BONDS - 10.7%
Puerto Rico - 10.7%
Puerto Rico Cmwlth. Hwy. &
Trans. Auth. RITES Rev., Ser.
98
07/01/18 5,000 5,494,850
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00A
10/01/16 400 520,784
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00B
10/01/17 500 658,640
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00C
10/01/18 500 655,200
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00D
10/01/19 650 849,524
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00E
10/01/20 250 325,880
PAR
MATURITY (000) VALUE
---------- ------------------ -------------------
TENDER OBLIGATION MUNICIPAL BONDS (Continued)
Puerto Rico (Continued)
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00F
10/01/24 $ 250 $ 320,350
Puerto Rico Pub. Bldgs. Auth.
RITES PA-577 Rev., Ser. 99
07/01/27 4,000 4,380,760
===========
TOTAL TENDER OBLIGATION MUNICIPAL
BONDS
(Cost $10,636,952)
13,205,988
-----------
NUMBER
OF SHARES
-----------
MONEY MARKET FUND - 1.4%
Wilmington Trust Tax-Free Money
Market Fund
(Cost $1,790,091) 1,790,091 1,790,091
---------
TOTAL INVESTMENTS IN
SECURITIES - 98.7%
(Cost $115,498,266(a)) 122,111,533
OTHER ASSETS IN EXCESS OF
LIABILITIES - 1.3% 1,560,038
-----------
NET ASSETS - 100.0% $123,671,571
============
- -------------------
(a) Also cost for federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $6,787,995
Gross unrealized depreciation (174,728)
----------
$6,613,267
==========
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 5.3% of its net assets, with a current market value
of $6,556,000, in securities restricted as to resale.
(c) This bond is prerefunded. U.S. government securities, held in escrow,
are used to pay interest on this security, as well as refund the bond in
full at date indicated, typically at a premium to par.
(d) For purposes of amortized cost valuation, the maturity date of this
instrument is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted. Rate shown is rate as of March 31, 2006.
(e) Rates shown are the rates as of March 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
DELAWARE TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
------------ ------------------ -------------------
MUNICIPAL BONDS - 77.6%
Delaware - 68.0%
Delaware River & Bay Auth. Rev.,
Ser. 03
5.25% 01/01/13 $1,000 $1,079,260
Delaware St. Econ. Dev. Auth.
Poll. Ctrl. Rev., Delmarva Pwr.
Prj., Ser. 02B
5.20% 02/01/19 1,000 1,055,870
Delaware St. Econ. Dev. Auth.
Rev., Del. Tech. Pk. Univ. Del.
Prj., Ser. 00
6.00% 02/01/21 1,000 1,088,040
Delaware St. Econ. Dev. Auth.
Rev., Delmarva Pwr. Prj., Ser.
00 AMT
5.65% 07/01/28 3,850 4,008,273
Delaware St. Econ. Dev. Auth.
Rev., First Mtg. Gilpin ACA CBI
Prj., Ser. 98
5.62% 07/01/19 2,000 2,059,760
Delaware St. Econ. Dev. Auth.
Rev., United Wtr. Delaware,
Inc. Prj., Ser. 95 AMT
6.20% 06/01/25 2,000 2,028,980
Delaware St. Econ. Dev. Auth.
Rev., Wtr. Dev. Prj., Ser. 92B
6.45% 12/01/07 1,165 1,214,769
Delaware St. GO, Ser. 03A
5.00% 01/01/10 1,000 1,048,510
Delaware St. GO, Ser. 03B
5.00% 07/01/11 1,600 1,702,064
Delaware St. GO, Ser. 04A
5.00% 01/01/09 2,000 2,073,360
Delaware St. Hlth. Fac. Auth.
Rev., Beebe Med. Ctr. Prj., Ser.
04A
5.50% 06/01/24 1,000 1,047,400
Delaware St. Hlth. Fac. Auth.
Rev., Catholic Hlth. East Prj.,
Ser. 03D
5.12% 11/15/24 1,750 1,791,422
5.25% 11/15/28 2,225 2,286,655
Delaware St. Hlth. Fac. Auth.
Rev., Christiana Care Hlth.
Svcs. Prj., Ser. 03
5.25% 10/01/12 3,000 3,217,770
Delaware St. Hsg. Auth. Rev.,
Multi-Fam. Mtg. Prj., Ser. 92C
7.38% 01/01/15 1,420 1,419,659
Delaware St. Hsg. Auth. Rev.,
Multi-Fam. Mtg. Prj., Ser. 01A
5.40% 07/01/24 2,835 2,873,669
Delaware St. Hsg. Auth. Rev., Sr.
Sgl. Fam. Mtg. Prj., Ser. 00
AMT
5.90% 07/01/20 1,165 1,201,814
Delaware St. Hsg. Auth. Rev., Sr.
Sgl. Fam. Mtg. Prj., Ser. 02A
AMT
5.40% 01/01/34 755 763,849
Delaware St. Trans. Auth. Trans.
Sys. Rev., Ser. 97
5.00% 07/01/08 1,000 1,026,450
Delaware Trans. Auth. Trans.
Sys. Rev., Ser. 05
5.00% 07/01/12 1,500 1,595,625
PAR
MATURITY (000) VALUE
------------ ------------------ -------------------
MUNICIPAL BONDS (Continued)
Delaware (Continued)
Kent Cnty. Stud. Hsg. Rev.,
Delaware St. Univ. Prj., Ser.
04A
07/01/25-
5.00% 07/01/30 $2,100 $2,116,379
New Castle Cnty. GO, Ser. 02A
5.25% 10/01/12 1,745 1,896,606
New Castle Cnty. GO, Ser. 04
5.00% 10/01/20 1,500 1,584,315
Sussex Cnty. GO, Ser. 03
5.00% 10/15/08 1,000 1,033,530
Wilmington GO, Ser. 02
5.38% 06/01/17 1,500 1,613,160
Wilmington GO, Ser. 06A
5.00%(b) 10/01/18 1,000 1,070,810
Wilmington Pk. Auth. Gtd. Pk.
Rev., Ser. 02
09/15/14-
5.25% 09/15/15 2,965 3,226,850
==========
47,124,849
----------
Multi-State - 9.5%
Charter Mac Equity Issue Tr., Ser.
99
6.62%(c) 06/30/09 1,000 1,064,480
Charter Mac Equity Issue Tr., Ser.
00
7.60%(c) 11/30/10 1,000 1,118,520
MuniMae Tax-Exempt Bond
Subs., LLC, Ser. 00
6.88%(c) 06/30/09 2,000 2,143,880
7.75%(c) 11/01/10 2,000 2,229,120
==========
6,556,000
----------
Puerto Rico - 0.1%
Puerto Rico Pub. Fin. Corp.
Cmwlth. Approp. Rev., Ser. 98A
5.38% 06/01/14 50 54,815
----------
TOTAL MUNICIPAL BONDS
(Cost $52,709,554)
53,735,664
----------
TENDER OBLIGATION MUNICIPAL BONDS - 21.0%
Puerto Rico - 21.0%
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00A
10/01/16 400 520,784
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00B
10/01/17 500 658,640
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00C
10/01/18 500 655,200
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00D
10/01/19 650 849,524
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00E
10/01/20 250 325,880
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00F
10/01/24 250 320,350
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
DELAWARE TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- --------- -------------
TENDER OBLIGATION MUNICIPAL BONDS (Continued)
Puerto Rico (Continued)
Puerto Rico Pub. Fin. Corp.
RITES Rev., Ser. 98
06/01/12 $5,000 $6,038,200
Puerto Rico Pub. Fin. Corp.
RITES Rev., Ser. 99
06/01/14 4,025 5,132,278
==========
TOTAL TENDER OBLIGATION MUNICIPAL
BONDS
(Cost $12,224,087) 14,500,856
----------
NUMBER
OF SHARES
----------
MONEY MARKET FUND - 0.2%
Wilmington Trust Tax-Free Money
Market Fund
(Cost $164,203) 164,203 164,203
-------
TOTAL INVESTMENTS IN
SECURITIES - 98.8%
(Cost $65,097,845(a)) 68,400,723
OTHER ASSETS IN EXCESS OF
LIABILITIES - 1.2% 843,538
----------
NET ASSETS - 100.0% $69,244,261
===========
- -------------------
(a) Cost for federal income tax purposes is $65,160,785. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $3,691,934
Gross unrealized depreciation (451,996)
----------
$3,239,938
==========
(b) Rates shown are the rates as of March 31, 2006.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 9.5% of its net assets, with a current market value
of $6,556,000, in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
KENTUCKY TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
MUNICIPAL BONDS - 91.5%
Kentucky - 65.1%
Boone Cnty. Sch. Dist. Fin. Corp.
Sch. Bldg. Rev., Ser. 00B
5.38% 08/01/20 $2,500 $2,646,925
Bowling Green Sch. Dist. Fin.
Corp. Rev., Ser. 00
01/01/18-
5.75% 01/01/20 2,185 2,340,238
Frankfort Elec. & Wtr. Plant Bd.
Rev., Ser. 99
5.60%(b) 12/01/19 1,045 1,117,314
Grayson Cnty. Sch. Dist. Fin.
Corp. Sch. Bldg. Rev., Ser. 95B
5.95%(c) 01/01/08 430 434,902
Hardin Cnty. Sch. Dist. Fin. Corp.
Sch. Bldg. Rev., Ser. 00
5.50% 02/01/16 1,675 1,797,878
Hopkins Cnty. GO, Detention
Fac. Prj., Ser. 00
5.75% 02/01/10 1,800 1,947,942
Jefferson Cnty. Sch. Dist. Fin.
Corp. Sch. Bldg. Rev., Ser. 99A
5.25% 01/01/14 2,000 2,108,320
Kenton Cnty. Arpt. Bd. Arpt. Rev.,
Cincinnati Northern Kentucky
Prj., Ser. 97A AMT
6.30% 03/01/15 1,000 1,039,410
Kentucky Econ. Dev. Fin. Auth.
Hlth. Sys. Rev., Norton
Healthcare, Inc. Prj., Ser. 00A
6.62% 10/01/28 1,750 1,898,365
Kentucky Hsg. Corp. Hsg. Rev.,
Ser. 01F AMT
5.45% 01/01/32 2,990 3,062,567
Kentucky St. Econ. Dev. Fin.
Auth. Hosp. Fac. Rev., Ser.
97C VRDN
3.19%(d) 04/05/06 50 50,000
Kentucky St. Property & Bldg.
Comm. Rev., Prj. 65, Ser. 00
5.95%(c) 02/01/10 2,325 2,512,302
Kentucky St. Property & Bldg.
Comm. Rev., Prj. 85, Ser. 05
5.00% 08/01/15 1,000 1,073,100
Kentucky St. Tpke. Auth. Econ.
Dev. Rev., Revitalization Prj.,
Ser. 95
6.50% 07/01/08 3,000 3,186,000
Kentucky St. Tpke. Auth. Econ.
Dev. Rev., Revitalization Prj.,
Ser. 01A
5.50% 07/01/15 1,000 1,110,760
Lexington-Fayette Urban Cnty.
Govt. GO, Ser. 00A
5.75% 02/01/20 1,500 1,611,615
Lexington-Fayette Urban Cnty.
Govt. Swr. Sys. Rev., Ser. 01A
07/01/20-
5.00% 07/01/21 3,775 3,954,015
Louisville & Jefferson Cnty. Met.
Swr. & Drain Sys. Rev., Ser.
97A
6.25% 05/15/07 1,015 1,054,311
PAR
MATURITY (000) VALUE
--------------------- ------------------ -------------------
MUNICIPAL BONDS (Continued)
Kentucky (Continued)
Louisville & Jefferson Cnty. Met.
Swr. & Drain Sys. Rev., Ser.
99A
5.75% 05/15/33 $3,750 $4,032,412
Louisville & Jefferson Cnty. Regl.
Arpt. Auth. Arpt. Sys. Rev., Ser.
01A AMT
5.75% 07/01/15 1,755 1,893,136
Louisville & Jefferson Cnty. Regl.
Arpt. Auth. Spec. Fac. Rev.,
Ser. 99 AMT
5.50% 03/01/19 4,285 4,328,193
Louisville Wtrwks. Brd. Wtr. Sys.
Rev., Louisville Wtr. Co. Prj.,
Ser. 00
5.25% 11/15/16 2,590 2,740,764
==========
45,940,469
----------
Multi-State - 11.0%
Charter Mac Equity Issue Tr., Ser.
99
6.62%(e) 06/30/09 1,000 1,064,480
Charter Mac Equity Issue Tr., Ser.
00
7.60%(e) 11/30/10 4,000 4,474,080
MuniMae Tax-Exempt Bond
Subs., LLC, Ser. 00
7.75%(e) 11/01/10 2,000 2,229,120
==========
7,767,680
----------
Puerto Rico - 15.4%
Puerto Rico Cmwlth. Hwy. &
Trans. Auth. Rev., Ser. 00C
6.00% 07/01/29 5,000 5,477,450
Puerto Rico Pub. Fin. Corp.
Cmwlth. Approp. Rev., Ser. 02E
5.50%(c) 02/01/12 3,740 4,067,026
5.50% 08/01/29 1,260 1,321,853
==========
10,866,329
----------
TOTAL MUNICIPAL BONDS
(Cost $60,190,487) 64,574,478
----------
TENDER OBLIGATION MUNICIPAL BONDS - 6.8%
Puerto Rico - 6.8%
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00A
10/01/16 400 520,784
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00B
10/01/17 500 658,640
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00C
10/01/18 500 655,200
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00D
10/01/19 650 849,524
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00E
10/01/20 250 325,880
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
KENTUCKY TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2006 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- -------- ------------
TENDER OBLIGATION MUNICIPAL BONDS (Continued)
Puerto Rico (Continued)
Puerto Rico Cmwlth. Infra. Fin.
Auth. SO RITES, Ser. 00F
10/01/24 $ 250 $ 320,350
Puerto Rico Cmwlth. Infra. Fin.
Auth. Spec. RITES PA-569
Rev., Ser. 99
07/01/12 1,335 1,468,166
=========
TOTAL TENDER OBLIGATION MUNICIPAL
BONDS
(Cost $3,939,079) 4,798,544
---------
NUMBER
OF SHARES
----------
MONEY MARKET FUND - 0.6%
Wilmington Trust Tax-Free Money
Market Fund
(Cost $398,118) 398,118 398,118
-------
TOTAL INVESTMENTS IN SECURITIES - 98.9%
(Cost $64,527,684(a)) 69,771,140
OTHER ASSETS IN EXCESS OF
LIABILITIES - 1.1% 771,582
----------
NET ASSETS - 100.0% $70,542,722
===========
- -------------------
(a) Cost for federal income tax purposes is $64,555,401. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $5,216,170
Gross unrealized depreciation (431)
----------
$5,215,739
==========
(b) Rates shown are the rates as of March 31, 2006.
(c) This bond is prerefunded. U.S. government securities, held in escrow,
are used to pay interest on this security, as well as refund the bond in
full at date indicated, typically at a premium to par.
(d) For purposes of amortized cost valuation, the maturity date of this
instrument is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted. Rate shown is rate as of March 31, 2006.
(e) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. As of March 31, 2006,
the Portfolio held 11.0% of its net assets, with a current market value
of $7,767,680, in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34
BLACKROCK FUNDS
Key to Investment Abbreviations
AMT Alternative Minimum Tax
COP Certificates of Participation
GO General Obligations
RITES Residual Interest Tax-Exempt Security
SO Special Obligations
VRDN Variable Rate Demand Notes
35
STATEMENTS OF ASSETS AND LIABILITIES
AS OF MARCH 31, 2006(UNAUDITED)
PENNSYLVANIA
ULTRASHORT TAX-FREE TAX-FREE
MUNICIPAL INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ---------------- ----------------
ASSETS
36
Investments at value1 ........................ $ 32,192,728 $ 376,086,639 $ 650,073,945
Interest receivable .......................... 180,695 5,158,678 9,154,100
Receivable from adviser ...................... 154 929 3,183
Capital shares sold receivable ............... 25,036 15,597 695,163
Prepaid expenses ............................. 9,739 43,738 18,859
Futures margin receivable .................... - 3,936 6,888
------------ ------------- -------------
TOTAL ASSETS ............................... 32,408,352 381,309,517 659,952,138
------------ ------------- -------------
LIABILITIES
Capital shares redeemed payable .............. 850,000 728,069 153,034
Distributions payable ........................ 21,676 1,006,742 2,366,166
Advisory fees payable ........................ 3,309 101,152 271,597
Administration fees payable .................. 2,339 30,867 41,266
Custodian fee payable ........................ 1,003 4,799 7,726
Transfer agent fees payable .................. 1,273 17,102 20,284
Distribution fees payable .................... - 4,636 7,510
Other accrued expenses payable ............... 22,379 103,245 132,242
------------ ------------- -------------
TOTAL LIABILITIES .......................... 901,979 1,996,612 2,999,825
------------ ------------- -------------
NET ASSETS .................................... $ 31,506,373 $ 379,312,905 $ 656,952,313
============ ============= =============
1Cost of Investments .......................... $ 32,240,795 $ 365,931,445 $ 621,464,911
============ ============= =============
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital Paid in .............................. $ 31,683,652 $ 390,636,509 $ 670,938,324
End of period undistributed net investment
income (distributions in excess of net
investment income or accumulated net
investment loss) ............................ (312) 957,903 (1,107,275)
Accumulated net realized loss on
investment transactions and futures ......... (128,900) (22,436,701) (41,487,771)
Net unrealized appreciation (depreciation)
on investment transactions and futures ...... (48,067) 10,155,194 28,609,035
------------ ------------- -------------
$ 31,506,373 $ 379,312,905 $ 656,952,313
============ ============= =============
STATEMENTS OF ASSETS AND LIABILITIES
AS OF MARCH 31, 2006(UNAUDITED)
NEW JERSEY DELAWARE KENTUCKY
TAX-FREE OHIO TAX-FREE TAX-FREE
INCOME TAX-FREE INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ---------------- --------------- ---------------
ASSETS
36
Investments at value1 ........................ $ 165,999,033 $ 122,111,533 $ 68,400,723 $ 69,771,140
Interest receivable .......................... 2,314,444 2,004,585 1,249,621 1,035,743
Receivable from adviser ...................... 913 1,009 884 260
Capital shares sold receivable ............... 175,940 178,626 63,481 11,273
Prepaid expenses ............................. 11,655 8,663 10,689 11,851
Futures margin receivable .................... 1,722 1,353 738 738
------------- ------------- ------------ ------------
TOTAL ASSETS ............................... 168,503,707 124,305,769 69,726,136 70,831,005
------------- ------------- ------------ ------------
LIABILITIES
Capital shares redeemed payable .............. 1,003,040 74,638 188,916 25,758
Distributions payable ........................ 524,795 443,091 206,380 193,756
Advisory fees payable ........................ 68,028 48,229 28,162 26,733
Administration fees payable .................. 11,067 8,313 5,566 6,023
Custodian fee payable ........................ 4,986 3,739 44 698
Transfer agent fees payable .................. 9,213 6,377 5,569 3,522
Distribution fees payable .................... 7,823 10,258 11,585 2,196
Other accrued expenses payable ............... 51,555 39,554 35,653 29,596
------------- ------------- ------------ ------------
TOTAL LIABILITIES .......................... 1,680,507 634,199 481,875 288,282
------------- ------------- ------------ ------------
NET ASSETS .................................... $ 166,823,200 $ 123,671,570 $ 69,244,261 $ 70,542,723
============= ============= ============ ============
1Cost of Investments .......................... $ 157,203,361 $ 115,498,266 $ 65,097,845 $ 64,527,684
============= ============= ============ ============
AT MARCH 31, 2006, NET ASSETS
CONSISTED OF:
Capital Paid in .............................. $ 166,154,518 $ 121,400,073 $ 68,946,797 $ 69,283,357
End of period undistributed net investment
income (distributions in excess of net
investment income or accumulated net
investment loss) ............................ (60,620) (339,431) (147,523) 958,746
Accumulated net realized loss on
investment transactions and futures ......... (8,066,370) (4,002,338) (2,857,891) (4,942,837)
Net unrealized appreciation (depreciation)
on investment transactions and futures ...... 8,795,672 6,613,267 3,302,878 5,243,456
------------- ------------- ------------ ------------
$ 166,823,200 $ 123,671,571 $ 69,244,261 $ 70,542,722
============= ============= ============ ============
BLACKROCK FUNDS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
PENNSYLVANIA
ULTRASHORT TAX-FREE TAX-FREE
MUNICIPAL INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
------------------ ---------------- -----------------
BlackRock Shares:
37
Net Assets ................................ $22,351,257 $ 81,256,751 $ -
Shares outstanding ........................ 2,250,784 7,531,999 -
Net Asset Value offering and redemption
price per share .......................... $ 9.93 $ 10.79 $ -
Institutional Shares:
Net Assets ................................ $ 9,154,149 $280,311,340 $ 612,412,829
Shares outstanding ........................ 922,607 25,974,710 59,973,142
Net Asset Value offering and redemption
price per share .......................... $ 9.92 $ 10.79 $ 10.21
Service Shares:
Net Assets ................................ $ 102 $ 1,428,957 $ 4,546,599
Shares outstanding ........................ 10 132,544 445,636
Net Asset Value offering and redemption
price per share .......................... $ 10.09(a) $ 10.78 $ 10.20
Investor A Shares:
Net Assets ................................ $ 865 $ 9,195,047 $ 28,815,287
Shares outstanding ........................ 86 851,786 2,823,008
Net Asset Value ........................... $ 10.08(b) $ 10.80 $ 10.21
Maximum Sales Charge ...................... 3.00% 4.00% 4.00%
Maximum offering price per share .......... $ 10.39 $ 11.25 $ 10.64
Investor B Shares:
Net Assets ................................ $ - $ 4,425,275 $ 9,524,554
Shares outstanding ........................ - 409,991 938,972
Net Asset Value offering and redemption
price per share (maximum contingent
deferred sales charge of 4.50%) .......... $ - $ 10.79 $ 10.14
Investor C Shares:
Net Assets ................................ $ - $ 2,695,535 $ 1,653,044
Shares outstanding ........................ - 249,754 162,542
Net Asset Value offering and redemption
price per share (maximum contingent
deferred sales charge of 1.00%) .......... $ - $ 10.79 $ 10.17
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
NEW JERSEY DELAWARE KENTUCKY
TAX-FREE OHIO TAX-FREE TAX-FREE
INCOME TAX-FREE INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ---------------- ---------------- ----------------
BlackRock Shares:
37
Net Assets ................................ $ - $ - $ - $ -
Shares outstanding ........................ - - - -
Net Asset Value offering and redemption
price per share .......................... $ - $ - $ - $ -
Institutional Shares:
Net Assets ................................ $ 133,237,502 $ 99,514,659 $ 40,000,722 $ 60,779,519
Shares outstanding ........................ 11,751,776 9,527,539 4,122,097 6,361,052
Net Asset Value offering and redemption
price per share .......................... $ 11.34 $ 10.44 $ 9.70 $ 9.55
Service Shares:
Net Assets ................................ $ 14,182,723 $ 973,244 $ - $ 256,407
Shares outstanding ........................ 1,250,838 93,075 - 26,819
Net Asset Value offering and redemption
price per share .......................... $ 11.34 $ 10.46 $ - $ 9.56
Investor A Shares:
Net Assets ................................ $ 7,494,384 $ 7,118,942 $ 11,603,191 $ 6,136,908
Shares outstanding ........................ 660,975 681,475 1,195,055 642,301
Net Asset Value ........................... $ 11.34 $ 10.45 $ 9.71 $ 9.55
Maximum Sales Charge ...................... 4.00% 4.00% 4.00% 4.00%
Maximum offering price per share .......... $ 11.81 $ 10.89 $ 10.11 $ 9.95
Investor B Shares:
Net Assets ................................ $ 10,318,643 $ 8,398,003 $ 6,644,226 $ 2,444,916
Shares outstanding ........................ 909,927 803,806 684,139 255,848
Net Asset Value offering and redemption
price per share (maximum contingent
deferred sales charge of 4.50%) .......... $ 11.34 $ 10.45 $ 9.71 $ 9.56
Investor C Shares:
Net Assets ................................ $ 1,589,948 $ 7,666,723 $ 10,996,122 $ 924,972
Shares outstanding ........................ 139,932 733,415 1,132,545 96,553
Net Asset Value offering and redemption
price per share (maximum contingent
deferred sales charge of 1.00%) .......... $ 11.36 $ 10.45 $ 9.71 $ 9.58
(a) Exact net assets and shares outstanding at March 31, 2006 were $102.17 and
10.123, respectively.
(b) Exact net assets and shares outstanding at March 31, 2006 were $864.93 and
85.77, respectively.
BLACKROCK FUNDS
BLACKROCK FUNDS
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2006(UNAUDITED)
PENNSYLVANIA
ULTRASHORT TAX-FREE TAX-FREE
MUNICIPAL INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
------------ -------------- ----------------
Investment income:
Interest ................................ $ 525,895 $ 9,438,322 $ 17,297,037
--------- ------------ -------------
Expenses:
Investment advisery fee ................. 80,669 978,506 1,649,497
Administration fee ...................... 14,716 160,094 261,671
Administration fee - class specific ..... 9,471 177,268 344,484
Custodian fee ........................... 3,344 22,917 30,019
Transfer agent fee ...................... 1,618 20,346 31,850
Transfer agent fee - class specific ..... 1,483 28,116 52,197
Shareholder servicing fees - class
specific ............................... 1 22,323 59,833
Distribution fees - class specific ...... - 31,748 64,519
Legal and audit fees .................... 13,901 38,558 59,132
Printing fee ............................ 3,032 32,140 50,250
Registration fees and expenses .......... 20,304 28,895 11,546
Trustees' fees .......................... 719 7,354 11,987
Other ................................... 780 19,102 25,342
--------- ------------ -------------
Total expenses ........................ 150,038 1,567,367 2,652,327
--------- ------------ -------------
Less investment advisery
fees waived ......................... (74,575) (431,587) (183,944)
Less administration fees waived....... (2,248) - -
Less administration fees waived -
class specific ...................... (6,056) (19,434) (322,014)
Less distribution fees waived -
class specific ...................... - (4,478) (14,640)
Less transfer agent fees waived....... - (2,848) (5,256)
Less transfer agent fees waived -
class specific ...................... (13) (354) (2,092)
Less transfer agent fees
reimbursed - class specific ......... (294) (1,766) (6,011)
Less custodian fees waived ........... (237) (1,802) (2,195)
--------- ------------ -------------
Net expenses .......................... 66,615 1,105,098 2,116,175
--------- ------------ -------------
Net investment income .................... 459,280 8,333,224 15,180,862
--------- ------------ -------------
Realized and unrealized gain (loss) on
investments:
Net realized gain (loss) from:
Investment transactions ................ (67,834) 116,590 4,701,203
Futures contracts ...................... - 32,637 (80,279)
--------- ------------ -------------
(67,834) 149,227 4,620,924
--------- ------------ -------------
Change in unrealized appreciation/
depreciation from:
Investments ............................ 59,137 (7,499,568) (16,304,430)
--------- ------------ -------------
Net loss on investments .................. (8,697) (7,350,341) (11,683,506)
--------- ------------ -------------
Net increase (decrease) in net assets
resulting from operations ............... $ 450,583 $ 982,883 $ 3,497,356
========= ============ =============
NEW JERSEY OHIO DELAWARE KENTUCKY
TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME INCOME INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- --------------
Investment income:
Interest ................................ $ 4,405,537 $ 3,185,911 $ 1,916,683 $ 2,071,179
------------ ------------ ------------ ------------
Expenses:
Investment advisery fee ................. 421,434 309,536 205,543 208,476
Administration fee ...................... 68,891 50,617 30,602 31,061
Administration fee - class specific ..... 89,204 65,751 40,321 41,095
Custodian fee ........................... 11,150 8,340 7,397 6,566
Transfer agent fee ...................... 13,683 7,837 5,614 3,842
Transfer agent fee - class specific ..... 15,992 11,499 8,375 6,448
Shareholder servicing fees - class
specific ............................... 42,639 30,440 38,979 12,889
Distribution fees - class specific ...... 49,397 63,894 76,975 17,436
Legal and audit fees .................... 22,661 19,129 18,396 15,660
Printing fee ............................ 13,528 9,982 7,306 6,446
Registration fees and expenses .......... 8,924 7,655 5,982 7,315
Trustees' fees .......................... 3,123 2,226 1,464 1,462
Other ................................... 8,864 7,737 5,479 5,044
------------ ------------ ------------ ------------
Total expenses ........................ 769,490 594,643 452,433 363,740
------------ ------------ ------------ ------------
Less investment advisery
fees waived ......................... (74,148) (57,489) (35,711) (35,729)
Less administration fees waived....... - - - -
Less administration fees waived -
class specific ...................... (76,574) (53,307) (22,514) (33,229)
Less distribution fees waived -
class specific ...................... (3,753) (3,717) (6,331) (3,115)
Less transfer agent fees waived....... (1,834) (1,157) (795) (637)
Less transfer agent fees waived -
class specific ...................... (878) (472) (236) (67)
Less transfer agent fees
reimbursed - class specific ......... (1,733) (1,898) (1,779) (485)
Less custodian fees waived ........... (696) (561) (523) (351)
------------ ------------ ------------ ------------
Net expenses .......................... 609,874 476,042 384,544 290,127
------------ ------------ ------------ ------------
Net investment income .................... 3,795,663 2,709,869 1,532,139 1,781,052
------------ ------------ ------------ ------------
Realized and unrealized gain (loss) on
investments:
Net realized gain (loss) from:
Investment transactions ................ (359,165) (139,020) (192,298) 28,042
Futures contracts ...................... (20,426) (15,540) (8,632) (8,632)
------------ ------------ ------------ ------------
(379,591) (154,560) (200,930) 19,410
------------ ------------ ------------ ------------
Change in unrealized appreciation/
depreciation from:
Investments ............................ (2,763,424) (1,972,607) (1,528,915) (1,493,004)
------------ ------------ ------------ ------------
Net loss on investments .................. (3,143,015) (2,127,167) (1,729,845) (1,473,594)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ............... $ 652,648 $ 582,702 $ (197,706) $ 307,458
============ ============ ============ ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
ULTRASHORT
MUNICIPAL TAX-FREE
PORTFOLIO INCOME PORTFOLIO
---------------------------------- -----------------------------------
FOR THE FOR THE
SIX MONTHS SIX MONTHS
ENDED FOR THE ENDED FOR THE
3/31/06 YEAR ENDED 3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05
------------------ --------------- ----------------- -----------------
Increase (decrease) in net assets:
Operations:
Net investment income .................................. $ 459,280 $ 770,909 $ 8,333,224 $ 17,990,457
Net realized gain (loss) on investments, futures
contracts ............................................. (67,834) (26,601) 149,227 (1,404,901)
Net unrealized appreciation/depreciation on
investments, futures contracts ........................ 59,137 (40,862) (7,499,568) (3,267,536)
------------ ------------ ------------- -------------
Net increase (decrease) in net assets resulting from
operations ............................................ 450,583 703,446 982,883 13,318,020
------------ ------------ ------------- -------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ........................................ (334,647) (568,745) (1,839,518) (4,340,396)
Institutional Class .................................... (124,934) (202,128) (6,110,845) (12,460,254)
Service Class .......................................... (1) - (31,048) (96,764)
Investor A Class ....................................... (10) (36) (178,159) (341,312)
Investor B Class ....................................... - - (74,897) (163,810)
Investor C Class ....................................... - - (41,187) (76,008)
------------ ------------ ------------- -------------
Total distributions from net investment income ......... (459,592) (770,909) (8,275,654) (17,478,544)
------------ ------------ ------------- -------------
Capital share transactions (Note E) ...................... (11,370,456) (3,250,004) (13,101,345) (23,943,492)
------------ ------------ ------------- -------------
Redemption fees .......................................... - - - -
------------ ------------ ------------- -------------
Total increase (decrease) in net assets ................ (11,379,465) (3,317,467) (20,394,116) (28,104,016)
Net assets:
Beginning of period .................................... 42,885,838 46,203,305 399,707,020 427,811,036
------------ ------------ ------------- -------------
End of period .......................................... $ 31,506,373 $ 42,885,838 $ 379,312,904 $ 399,707,020
============ ============ ============= =============
End of period undistributed net investment
income (distributions in excess of net investment
income) ............................................... $ (312) $ - $ 957,903 $ 900,332
PENNSYLVANIA TAX-FREE
INCOME PORTFOLIO
-----------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE
3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05
----------------- -----------------
Increase (decrease) in net assets:
Operations:
Net investment income .................................. $ 15,180,862 $ 31,432,563
Net realized gain (loss) on investments, futures
contracts ............................................. 4,620,924 (2,049,036)
Net unrealized appreciation/depreciation on
investments, futures contracts ........................ (16,304,430) (13,727,508)
------------- -------------
Net increase (decrease) in net assets resulting from
operations ............................................ 3,497,356 15,656,019
------------- -------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ........................................ - -
Institutional Class .................................... (15,423,752) (30,597,699)
Service Class .......................................... (110,033) (240,170)
Investor A Class ....................................... (681,884) (1,460,868)
Investor B Class ....................................... (226,468) (633,056)
Investor C Class ....................................... (34,150) (68,761)
------------- -------------
Total distributions from net investment income ......... (16,476,287) (33,000,554)
------------- -------------
Capital share transactions (Note E) ...................... 9,603,906 (12,059,182)
------------- -------------
Redemption fees .......................................... (5,418) -
------------- -------------
Total increase (decrease) in net assets ................ (3,380,443) (29,403,717)
Net assets:
Beginning of period .................................... 660,332,756 689,736,473
------------- -------------
End of period .......................................... $ 656,952,313 $ 660,332,756
============= =============
End of period undistributed net investment
income (distributions in excess of net investment
income) ............................................... $ (1,107,275) $ 188,150
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
40
BLACKROCK FUNDS
NEW JERSEY TAX-FREE OHIO TAX-FREE
INCOME PORTFOLIO INCOME PORTFOLIO
- ----------------------------------- -----------------------------------
FOR THE FOR THE
SIX MONTHS SIX MONTHS
ENDED FOR THE ENDED FOR THE
3/31/06 YEAR ENDED 3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05
- ----------------- ----------------- ----------------- -----------------
$ 3,795,663 $ 7,989,169 $ 2,709,869 $ 5,317,678
(379,591) (321,902) (154,560) (622,461)
(2,763,424) (2,468,409) (1,972,607) (1,848,448)
------------- ------------- ------------- -------------
652,648 5,198,858 582,702 2,846,769
------------- ------------- ------------- -------------
- - - -
(2,979,734) (6,311,762) (2,420,985) (4,763,333)
(298,505) (628,369) (19,088) (33,600)
(151,961) (259,210) (167,887) (287,220)
(171,652) (362,564) (164,718) (359,459)
(27,968) (94,449) (133,684) (225,923)
------------- ------------- ------------- -------------
(3,629,820) (7,656,354) (2,906,362) (5,669,535)
------------- ------------- ------------- -------------
(2,927,594) (13,800,815) (601,494) 11,255,221
------------- ------------- ------------- -------------
- - - -
------------- ------------- ------------- -------------
(5,904,766) (16,258,311) (2,925,154) 8,432,455
172,727,966 188,986,277 126,596,725 118,164,270
------------- ------------- ------------- -------------
$ 166,823,200 $ 172,727,966 $ 123,671,571 $ 126,596,725
============= ============= ============= =============
$ (60,620) $ (226,463) $ (339,431) $ (142,938)
DELAWARE TAX-FREE KENTUCKY TAX-FREE
INCOME PORTFOLIO INCOME PORTFOLIO
- --------------------------------- --------------------------------
FOR THE FOR THE
SIX MONTHS SIX MONTHS
ENDED FOR THE ENDED FOR THE
3/31/06 YEAR ENDED 3/31/06 YEAR ENDED
(UNAUDITED) 9/30/05 (UNAUDITED) 9/30/05
- ---------------- ---------------- --------------- ----------------
$ 1,532,139 $ 3,454,754 $ 1,781,052 $ 3,902,919
(200,930) (273,045) 19,410 199,434
(1,528,915) (1,533,887) (1,493,004) (1,343,782)
------------- ------------ ------------- ------------
(197,706) 1,647,822 307,458 2,758,571
------------- ------------ ------------- ------------
- - - -
(943,920) (2,228,062) (1,238,965) (2,743,762)
- - (4,400) (8,278)
(252,698) (530,720) (106,198) (187,856)
(115,238) (252,824) (38,377) (100,374)
(188,479) (431,096) (12,179) (35,193)
------------- ------------ ------------- ------------
(1,500,335) (3,442,702) (1,400,119) (3,075,463)
------------- ------------ ------------- ------------
(11,077,293) (6,637,756) (10,693,317) (6,928,937)
------------- ------------ ------------- ------------
- - - -
------------- ------------ ------------- ------------
(12,775,334) (8,432,636) (11,785,978) (7,245,829)
82,019,595 90,452,231 82,328,700 89,574,529
------------- ------------ ------------- ------------
$ 69,244,261 $ 82,019,595 $ 70,542,722 $ 82,328,700
============= ============ ============= ============
$ (147,523) $ (179,327) $ 958,746 $ 577,813
41
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN NET
ASSET (LOSS) ON DISTRIBUTIONS ASSET
VALUE NET INVESTMENTS FROM NET VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT END OF
OF PERIOD INCOME AND UNREALIZED) INCOME PERIOD
=========== ============ ================= =============== ===========
----------------
UltraShort Municipal Portfolio
----------------
BlackRock Class
10/1/05 through 3/31/0612 $ 9.93 $ 0.137 $ -8 $ (0.13) $ 9.93
9/30/05 9.95 0.187 ( 0.02) ( 0.18) 9.93
3/03/041 through 9/30/04 10.00 0.077 ( 0.05) ( 0.07) 9.95
Institutional Class
10/1/05 through 3/31/0612 $ 9.92 $ 0.127 $ -8 $ (0.12) $ 9.92
9/30/05 9.94 0.177 ( 0.02) ( 0.17) 9.92
3/19/041 through 9/30/04 10.00 0.057 ( 0.06) ( 0.05) 9.94
Service Class
10/1/05 through 3/31/0612 $ 10.06 $ 0.117 $ -8 $ (0.08) $ 10.09
9/30/05 9.94 0.267 ( 0.14) -8 10.06
3/19/041 through 9/30/04 10.00 0.037 ( 0.07) ( 0.02) 9.94
Investor A Class
10/1/05 through 3/31/0612 $ 10.09 $ 0.107 $ -8 $ (0.11) $ 10.08
9/30/05 9.98 0.177 ( 0.05) ( 0.01) 10.09
3/19/041 through 9/30/04 10.00 0.077 ( 0.07) ( 0.02) 9.98
-------------
Tax-Free Income Portfolio
-------------
BlackRock Class
10/1/05 through 3/31/0612 $ 10.99 $ 0.247 $ (0.20) $ (0.24) $ 10.79
9/30/05 11.11 0.497 ( 0.17) ( 0.44) 10.99
12/22/031 through 9/30/04 11.22 0.377 ( 0.10) ( 0.38) 11.11
Institutional Class
10/1/05 through 3/31/0612 $ 11.00 $ 0.237 $ (0.21) $ (0.23) $ 10.79
9/30/05 11.11 0.477 ( 0.12) ( 0.46) 11.00
9/30/04 11.22 0.487 ( 0.10) ( 0.49) 11.11
9/30/0310 11.38 0.54 ( 0.17) ( 0.53) 11.22
9/30/0210 11.38 0.57 ( 0.01) ( 0.56) 11.38
9/30/0110 10.92 0.57 0.48 ( 0.59) 11.38
Service Class
10/1/05 through 3/31/0612 $ 10.99 $ 0.227 $ (0.22) $ (0.21) $ 10.78
9/30/05 11.10 0.447 ( 0.12) ( 0.43) 10.99
9/30/04 11.21 0.457 ( 0.10) ( 0.46) 11.10
9/30/0310 11.38 0.49 ( 0.16) ( 0.50) 11.21
9/30/0210 11.38 0.55 ( 0.02) ( 0.53) 11.38
9/30/0110 10.92 0.54 0.47 ( 0.55) 11.38
Investor A Class
10/1/05 through 3/31/0612 $ 11.00 $ 0.227 $ (0.21) $ (0.21) $ 10.80
9/30/05 11.12 0.447 ( 0.13) ( 0.43) 11.00
9/30/04 11.22 0.447 ( 0.10) ( 0.44) 11.12
9/30/0310 11.38 0.48 ( 0.16) ( 0.48) 11.22
9/30/0210 11.38 0.52 ( 0.01) ( 0.51) 11.38
9/30/0110 10.92 0.52 0.48 ( 0.54) 11.38
Investor B Class
10/1/05 through 3/31/0612 $ 11.00 $ 0.187 $ (0.22) $ (0.17) $ 10.79
9/30/05 11.11 0.367 ( 0.12) ( 0.35) 11.00
9/30/04 11.22 0.367 ( 0.11) ( 0.36) 11.11
9/30/0310 11.38 0.40 ( 0.16) ( 0.40) 11.22
9/30/0210 11.38 0.43 ( 0.01) ( 0.42) 11.38
9/30/0110 10.92 0.42 0.49 ( 0.45) 11.38
Investor C Class
10/1/05 through 3/31/0612 $ 11.00 $ 0.177 $ (0.21) $ (0.17) $ 10.79
9/30/05 11.12 0.367 ( 0.13) ( 0.35) 11.00
9/30/04 11.21 0.357 ( 0.08) ( 0.36) 11.12
9/30/0310 11.38 0.41 ( 0.18) ( 0.40) 11.21
9/30/0210 11.38 0.43 ( 0.01) ( 0.42) 11.38
9/30/0110 10.93 0.41 0.49 ( 0.45) 11.38
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF INVESTMENT INCOME
ASSETS RATIO OF NET TOTAL EXPENSES TO RATIO OF NET TO AVERAGE
END OF EXPENSES TO AVERAGE NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
======================= ========== ============== ==================== =================== ================== ==========
1.30%9 $ 22,351 0.35%2 0.82%2 2.58%2 2.11%2 98%
1.64 32,439 0.35 0.79 1.81 1.37 89
0.169 32,027 0.352 0.922 1.142 0.572 14
1.26%9 $ 9,154 0.43%2 0.89%2 2.51%2 2.05%2 98%
1.54 10,446 0.45 0.91 1.68 1.22 89
(0.09)9 14,176 0.452 1.042 0.962 0.372 14
1.05%9 $ -11 0.75%2 19.82%2 1.85%2 (17.22)%2 98%
1.23 -11 0.68 1.30 2.59 1.97 89
( 0.34)9 -11 0.752 1.332 0.662 0.082 14
1.01%3,9 $ 1 0.75%2 3.22%2 2.19%2 ( 0.28)%2 98%
1.253 1 0.71 1.24 1.74 1.21 89
0.043,9 -11 0.802 1.382 0.612 0.032 14
0.34%9 $ 81,257 0.45%2 0.71%2 4.38%2 4.12%2 65%
3.23 85,552 0.45 0.71 4.39 4.13 91
2.469 100,489 0.452 0.692 4.342 4.102 73
0.18%9 $ 280,311 0.56%2 0.79%2 4.26%2 4.03%2 65%
3.17 295,737 0.60 0.83 4.24 4.01 91
3.46 308,122 0.60 0.82 4.34 4.12 73
3.40 334,685 0.60 0.83 4.80 4.57 76
5.08 360,392 0.60 0.81 5.10 4.89 47
9.81 351,551 0.60 0.81 5.06 4.85 38
0.04%9 $ 1,429 0.87%2 1.25%2 3.96%2 3.58%2 65%
2.91 2,312 0.86 1.08 3.99 3.77 91
3.16 2,702 0.86 1.08 4.09 3.87 73
2.99 2,971 0.90 1.13 4.46 4.23 76
4.77 3,103 0.90 1.11 4.81 4.60 47
9.49 3,651 0.90 1.11 4.77 4.55 38
0.14%3,9 $ 9,195 0.84%2 1.16%2 3.99%2 3.67%2 65%
2.813 8,965 0.86 1.18 3.99 3.67 91
3.103 7,711 1.00 1.31 3.95 3.64 73
2.913 8,573 1.07 1.30 4.31 4.08 76
4.593 8,179 1.07 1.29 4.62 4.41 47
9.303 7,309 1.07 1.28 4.61 4.39 38
( 0.33)%4,9 $ 4,425 1.60%2 1.82%2 3.23%2 3.01%2 65%
2.144 4,839 1.61 1.84 3.24 3.01 91
2.244 5,869 1.75 1.97 3.21 2.99 73
2.144 7,161 1.82 2.05 3.57 3.34 76
3.814 6,211 1.82 2.03 3.87 3.66 47
8.494 4,884 1.81 2.02 3.82 3.60 38
(0.33)%4,9 $ 2,696 1.57%2 1.80%2 3.22%2 2.99%2 65%
2.054 2,303 1.62 1.85 3.26 3.03 91
2.334 2,918 1.73 1.95 3.17 2.96 73
2.054 2,559 1.82 2.05 3.59 3.36 76
3.814 2,857 1.82 2.03 3.89 3.68 47
8.394 2,604 1.81 2.02 3.80 3.59 38
43
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN NET
ASSET (LOSS) ON DISTRIBUTIONS ASSET
VALUE NET INVESTMENTS FROM NET VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT END OF
OF PERIOD INCOME AND UNREALIZED) INCOME PERIOD
=========== ============ ================= =============== ============
--------------------
Pennsylvania Tax-Free Income Portfolio
--------------------
Institutional Class
10/1/05 through 3/31/0612 $ 10.41 $ 0.247 $ (0.18) $ (0.26) $ 10.21
9/30/05 10.68 0.507 ( 0.25) ( 0.52) 10.41
9/30/04 10.90 0.517 ( 0.21) ( 0.52) 10.68
9/30/0310 11.06 0.53 ( 0.19) ( 0.50) 10.90
9/30/0210 10.89 0.53 0.16 ( 0.52) 11.06
9/30/0110 10.56 0.55 0.34 ( 0.56) 10.89
Service Class
10/1/05 through 3/31/0612 $ 10.40 $ 0.227 $ (0.18) $ (0.24) $ 10.20
9/30/05 10.67 0.477 ( 0.25) ( 0.49) 10.40
9/30/04 10.89 0.487 ( 0.21) ( 0.49) 10.67
9/30/0310 11.05 0.49 ( 0.18) ( 0.47) 10.89
9/30/0210 10.88 0.50 0.16 ( 0.49) 11.05
9/30/0110 10.55 0.52 0.34 ( 0.53) 10.88
Investor A Class
10/1/05 through 3/31/0612 $ 10.41 $ 0.227 $ (0.18) $ (0.24) $ 10.21
9/30/05 10.68 0.467 ( 0.25) ( 0.48) 10.41
9/30/04 10.89 0.467 ( 0.20) ( 0.47) 10.68
9/30/0310 11.06 0.48 ( 0.20) ( 0.45) 10.89
9/30/0210 10.89 0.48 0.16 ( 0.47) 11.06
9/30/0110 10.56 0.49 0.35 ( 0.51) 10.89
Investor B Class
10/1/05 through 3/31/0612 $ 10.34 $ 0.187 $ (0.18) $ (0.20) $ 10.14
9/30/05 10.61 0.387 ( 0.25) ( 0.40) 10.34
9/30/04 10.82 0.397 ( 0.21) ( 0.39) 10.61
9/30/0310 10.98 0.40 ( 0.19) ( 0.37) 10.82
9/30/0210 10.81 0.40 0.16 ( 0.39) 10.98
9/30/0110 10.48 0.42 0.34 ( 0.43) 10.81
Investor C Class
10/1/05 through 3/31/0612 $ 10.37 $ 0.187 $ (0.18) $ (0.20) $ 10.17
9/30/05 10.64 0.387 ( 0.25) ( 0.40) 10.37
9/30/04 10.85 0.397 ( 0.21) ( 0.39) 10.64
9/30/0310 11.01 0.39 ( 0.18) ( 0.37) 10.85
9/30/0210 10.84 0.41 0.15 ( 0.39) 11.01
9/30/0110 10.51 0.41 0.35 ( 0.43) 10.84
-------------------
New Jersey Tax-Free Income Portfol io
-------------------
Institutional Class
10/1/05 through 3/31/0612 $ 11.54 $ 0.267 $ (0.21) $ (0.25) $ 11.34
9/30/05 11.70 0.537 ( 0.18) ( 0.51) 11.54
9/30/04 11.80 0.537 ( 0.06) ( 0.57) 11.70
9/30/0310 12.10 0.62 ( 0.29) ( 0.63) 11.80
9/30/0210 11.83 0.61 0.28 ( 0.62) 12.10
9/30/0110 11.31 0.60 0.52 ( 0.60) 11.83
Service Class
10/1/05 through 3/31/0612 $ 11.54 $ 0.257 $ (0.21) $ (0.24) $ 11.34
9/30/05 11.70 0.497 ( 0.18) ( 0.47) 11.54
9/30/04 11.80 0.507 ( 0.07) ( 0.53) 11.70
9/30/0310 12.10 0.58 ( 0.29) ( 0.59) 11.80
9/30/0210 11.83 0.58 0.28 ( 0.59) 12.10
9/30/0110 11.31 0.57 0.51 ( 0.56) 11.83
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF INVESTMENT INCOME
ASSETS RATIO OF NET TOTAL EXPENSES TO RATIO OF NET TO AVERAGE
END OF EXPENSES TO AVERAGE NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
==================== =========== ============== ==================== =================== ================== ==========
0.57%9 $612,413 0.60%2 0.76%2 4.64%2 4.48%2 46%
2.41 610,550 0.60 0.81 4.71 4.50 13
2.82 628,714 0.60 0.80 4.76 4.56 2
3.16 752,199 0.60 0.80 4.80 4.60 3
6.53 890,070 0.60 0.79 4.90 4.71 22
8.65 903,225 0.60 0.79 5.10 4.91 13
0.42%9 $ 4,547 0.90%2 1.07%2 4.35%2 4.18%2 46%
2.10 4,727 0.90 1.11 4.41 4.20 13
2.51 5,733 0.90 1.10 4.48 4.28 2
2.86 6,118 0.90 1.11 4.51 4.30 3
6.22 6,005 0.90 1.09 4.62 4.43 22
8.33 6,911 0.90 1.09 4.81 4.62 13
0.38%3,9 $ 28,815 0.98%2 1.14%2 4.27%2 4.11%2 46%
2.003 29,875 1.00 1.17 4.32 4.15 13
2.443 33,769 1.05 1.29 4.32 4.09 2
2.593 35,874 1.08 1.28 4.34 4.13 3
6.043 37,344 1.08 1.27 4.44 4.25 22
8.143 39,306 1.07 1.26 4.62 4.43 13
0.00%4,9 $ 9,525 1.73%2 1.82%2 3.58%2 3.49%2 46%
1.254 13,408 1.76 1.82 3.60 3.54 13
1.694 19,604 1.75 1.89 3.66 3.52 2
1.934 24,795 1.82 2.03 3.63 3.42 3
5.284 28,346 1.82 2.02 3.72 3.53 22
7.404 26,062 1.82 2.01 3.90 3.72 13
0.00%4,9 $ 1,653 1.72%2 1.80%2 3.55%2 3.47%2 46%
1.244 1,773 1.75 1.82 3.59 3.52 13
1.694 1,916 1.80 1.94 3.60 3.46 2
1.924 1,974 1.82 2.03 3.61 3.40 3
5.274 1,615 1.81 2.00 3.69 3.50 22
7.384 875 1.81 2.00 3.84 3.66 13
0.46%9 $133,238 0.60%2 0.80%2 4.63%2 4.43%2 8%
2.99 137,256 0.60 0.84 4.51 4.27 17
4.10 151,808 0.60 0.83 4.54 4.31 15
2.80 124,713 0.60 0.83 5.17 4.94 22
7.82 128,553 0.60 0.82 5.20 4.98 14
10.07 129,635 0.60 0.82 5.12 4.90 28
0.31%9 $ 14,183 0.90%2 1.08%2 4.33%2 4.15%2 8%
2.68 14,839 0.90 1.09 4.21 4.02 17
3.79 15,940 0.90 1.11 4.27 4.06 15
2.50 16,534 0.90 1.13 4.87 4.64 22
7.49 17,506 0.90 1.12 4.89 4.67 14
9.75 16,530 0.90 1.12 4.82 4.60 28
45
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN NET
ASSET (LOSS) ON DISTRIBUTIONS ASSET
VALUE NET INVESTMENTS FROM NET VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT END OF
OF PERIOD INCOME AND UNREALIZED) INCOME PERIOD
=========== ============ ================= =============== ============
--------------------------
New Jersey Tax-Free Income Portfolio (Continued)
--------------------------
Investor A Class
10/1/05 through 3/31/0612 $ 11.54 $ 0.247 $ (0.21) $ (0.23) $ 11.34
9/30/05 11.70 0.487 ( 0.18) ( 0.46) 11.54
9/30/04 11.80 0.487 ( 0.06) ( 0.52) 11.70
9/30/0310 12.10 0.56 ( 0.29) ( 0.57) 11.80
9/30/0210 11.83 0.55 0.29 ( 0.57) 12.10
9/30/0110 11.31 0.53 0.53 ( 0.54) 11.83
Investor B Class
10/1/05 through 3/31/0612 $ 11.54 $ 0.207 $ (0.21) $ (0.19) $ 11.34
9/30/05 11.70 0.397 ( 0.18) ( 0.37) 11.54
9/30/04 11.80 0.397 ( 0.06) ( 0.43) 11.70
9/30/0310 12.10 0.47 ( 0.29) ( 0.48) 11.80
9/30/0210 11.83 0.46 0.29 ( 0.48) 12.10
9/30/0110 11.31 0.43 0.54 ( 0.45) 11.83
Investor C Class
10/1/05 through 3/31/0612 $ 11.56 $ 0.207 $ (0.21) $ (0.19) $ 11.36
9/30/05 11.72 0.407 ( 0.19) ( 0.37) 11.56
9/30/04 11.82 0.397 ( 0.06) ( 0.43) 11.72
9/30/0310 12.13 0.46 ( 0.29) ( 0.48) 11.82
9/30/025,10 11.85 0.45 0.31 ( 0.48) 12.13
2/6/0110 through 9/30/01 11.70 0.29 0.15 ( 0.29) 11.85
----------------
Ohio Tax-Free Income Portfolio
----------------
Institutional Class
10/1/05 through 3/31/0612 $ 10.64 $ 0.247 $ (0.18) $ (0.26) $ 10.44
9/30/05 10.88 0.487 ( 0.21) ( 0.51) 10.64
9/30/04 10.87 0.547 ( 0.03) ( 0.50) 10.88
9/30/0310 11.09 0.52 ( 0.22) ( 0.52) 10.87
9/30/0210 10.80 0.52 0.35 ( 0.58) 11.09
9/30/0110 10.22 0.57 0.57 ( 0.56) 10.80
Service Class
10/1/05 through 3/31/0612 $ 10.65 $ 0.227 $ (0.17) $ (0.24) $ 10.46
9/30/05 10.89 0.457 ( 0.21) ( 0.48) 10.65
9/30/04 10.87 0.517 ( 0.02) ( 0.47) 10.89
9/30/0310 11.09 0.52 ( 0.26) ( 0.48) 10.87
9/30/0210 10.80 0.48 0.36 ( 0.55) 11.09
9/30/0110 10.22 0.54 0.57 ( 0.53) 10.80
Investor A Class
10/1/05 through 3/31/0612 $ 10.64 $ 0.227 $ (0.17) $ (0.24) $ 10.45
9/30/05 10.88 0.447 ( 0.21) ( 0.47) 10.64
9/30/04 10.87 0.497 ( 0.03) ( 0.45) 10.88
9/30/0310 11.09 0.46 ( 0.21) ( 0.47) 10.87
9/30/0210 10.80 0.46 0.36 ( 0.53) 11.09
9/30/0110 10.22 0.52 0.57 ( 0.51) 10.80
Investor B Class
10/1/05 through 3/31/0612 $ 10.64 $ 0.187 $ (0.17) $ (0.20) $ 10.45
9/30/05 10.88 0.367 ( 0.21) ( 0.39) 10.64
9/30/04 10.87 0.417 ( 0.03) ( 0.37) 10.88
9/30/0310 11.09 0.39 ( 0.23) ( 0.38) 10.87
9/30/0210 10.80 0.39 0.35 ( 0.45) 11.09
9/30/0110 10.22 0.42 0.59 ( 0.43) 10.80
Investor C Class
10/1/05 through 3/31/0612 $ 10.65 $ 0.187 $ (0.18) $ (0.20) $ 10.45
9/30/05 10.89 0.367 ( 0.21) ( 0.39) 10.65
9/30/04 10.87 0.417 ( 0.02) ( 0.37) 10.89
9/30/0310 11.09 0.40 ( 0.24) ( 0.38) 10.87
9/30/0210 10.80 0.39 0.35 ( 0.45) 11.09
9/30/0110 10.22 0.41 0.60 ( 0.43) 10.80
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
46
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF INVESTMENT INCOME
ASSETS RATIO OF NET TOTAL EXPENSES TO RATIO OF NET TO AVERAGE
END OF EXPENSES TO AVERAGE NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
======================= ========== ============== ==================== =================== ================== ==========
0.27%3,9 $ 7,494 0.96%2 1.17%2 4.26%2 4.05%2 8%
2.583 7,729 0.99 1.19 4.11 3.91 17
3.633 6,193 1.05 1.31 4.12 3.86 15
2.323 5,995 1.08 1.30 4.70 4.48 22
7.313 5,812 1.07 1.29 4.66 4.44 14
9.563 3,207 1.07 1.29 4.64 4.42 28
(0.11)%4,9 $ 10,319 1.73%2 1.82%2 3.51%2 3.42%2 8%
1.814 10,891 1.75 1.85 3.36 3.26 17
2.854 11,696 1.80 1.97 3.37 3.20 15
1.554 12,411 1.82 2.04 3.93 3.71 22
6.524 9,066 1.81 2.03 3.92 3.71 14
8.754 5,707 1.79 2.01 3.85 3.64 28
( 0.12)%4,9 $ 1,590 1.75%2 1.84%2 3.49%2 3.40%2 8%
1.814 2,013 1.76 1.86 3.37 3.27 17
2.854 3,350 1.78 1.94 3.31 3.15 15
1.474 1,877 1.82 2.04 3.91 3.69 22
6.594 1,106 1.80 2.01 3.75 3.54 14
3.804,9 157 1.782 2.002 3.822 3.622 28
0.53%9 $ 99,515 0.60%2 0.80%2 4.55%2 4.35%2 16%
2.55 100,501 0.60 0.85 4.47 4.22 10
4.82 96,730 0.60 0.84 4.97 4.73 6
2.79 97,589 0.60 0.83 4.78 4.55 18
8.40 96,974 0.60 0.81 4.93 4.71 28
11.41 92,047 0.60 0.84 5.42 5.18 19
0.47%9 $ 973 0.90%2 1.05%2 4.23%2 4.08%2 16%
2.24 736 0.90 1.10 4.16 3.96 10
4.60 700 0.81 1.02 4.74 4.52 6
2.48 727 0.90 1.12 4.58 4.36 18
8.08 205 0.90 1.12 4.59 4.37 28
11.08 40 0.89 1.13 5.13 4.89 19
0.44%3,9 $ 7,119 0.95%2 1.18%2 4.19%2 3.96%2 16%
2.143 8,873 0.99 1.20 4.05 3.84 10
4.343 5,043 1.07 1.34 4.56 4.29 6
2.313 7,494 1.08 1.31 4.32 4.09 18
7.903 15,587 1.06 1.28 4.37 4.16 28
10.893 3,674 1.07 1.31 4.97 4.73 19
0.05%4,9 $ 8,398 1.73%2 1.83%2 3.42%2 3.32%2 16%
1.384 9,424 1.75 1.85 3.32 3.22 10
3.574 10,280 1.79 1.97 3.78 3.60 6
1.544 10,453 1.82 2.05 3.55 3.32 18
7.104 8,740 1.81 2.03 3.65 3.44 28
10.084 4,277 1.80 2.04 4.20 3.97 19
( 0.04)%4,9 $ 7,667 1.71%2 1.81%2 3.42%2 3.32%2 16%
1.384 7,063 1.74 1.84 3.30 3.20 10
3.664 5,411 1.77 1.95 3.80 3.62 6
1.544 5,740 1.82 2.05 3.55 3.32 18
7.094 3,632 1.80 2.01 3.60 3.39 28
10.084 1,496 1.80 2.04 4.05 3.82 19
47
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN NET
ASSET (LOSS) ON DISTRIBUTIONS ASSET
VALUE NET INVESTMENTS FROM NET VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT END OF
OF PERIOD INCOME AND UNREALIZED) INCOME PERIOD
=========== ============ ================= =============== ===========
------------------
Delaware Tax-Free Income Portfolio
------------------
Institutional Class
10/1/05 through 3/31/0612 $ 9.92 $ 0.227 $ (0.23) $ (0.21) $ 9.70
9/30/05 10.13 0.437 ( 0.21) ( 0.43) 9.92
9/30/04 10.23 0.477 ( 0.08) ( 0.49) 10.13
9/30/0310 10.54 0.52 ( 0.27) ( 0.56) 10.23
9/30/0210 10.20 0.55 0.31 ( 0.52) 10.54
9/30/0110 9.68 0.50 0.46 ( 0.44) 10.20
Service Class
10/1/0110 through 5/2/02 $ 10.20 $ 0.297 $ (0.09) $ (0.28) $ 10.12
9/30/0110 9.68 0.48 0.45 ( 0.41) 10.20
Investor A Class
10/1/05 through 3/31/0612 $ 9.93 $ 0.207 $ (0.23) $ (0.19) $ 9.71
9/30/05 10.13 0.397 ( 0.20) ( 0.39) 9.93
9/30/04 10.24 0.427 ( 0.09) ( 0.44) 10.13
9/30/0310 10.54 0.45 ( 0.24) ( 0.51) 10.24
9/30/0210 10.20 0.49 0.32 ( 0.47) 10.54
9/30/0110 9.68 0.45 0.47 ( 0.40) 10.20
Investor B Class
10/1/05 through 3/31/0612 $ 9.93 $ 0.167 $ (0.22) $ (0.16) $ 9.71
9/30/05 10.14 0.317 ( 0.21) ( 0.31) 9.93
9/30/04 10.24 0.357 ( 0.08) ( 0.37) 10.14
9/30/0310 10.54 0.37 ( 0.23) ( 0.44) 10.24
9/30/0210 10.20 0.42 0.32 ( 0.40) 10.54
9/30/0110 9.68 0.37 0.47 ( 0.32) 10.20
Investor C Class
10/1/05 through 3/31/0612 $ 9.93 $ 0.167 $ (0.22) $ (0.16) $ 9.71
9/30/05 10.13 0.317 ( 0.20) ( 0.31) 9.93
9/30/04 10.24 0.357 ( 0.09) ( 0.37) 10.13
9/30/0310 10.54 0.37 ( 0.23) ( 0.44) 10.24
9/30/0210 10.20 0.38 0.36 ( 0.40) 10.54
9/30/0110 9.68 0.36 0.48 ( 0.32) 10.20
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF INVESTMENT INCOME
ASSETS RATIO OF NET TOTAL EXPENSES TO RATIO OF NET TO AVERAGE
END OF EXPENSES TO AVERAGE NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
======================== ========== ============== ==================== =================== ================== ==========
( 0.07)%9 $40,001 0.69%2 0.89%2 4.43%2 4.23%2 6%
2.16 46,782 0.70 0.92 4.24 4.02 10
3.92 54,451 0.70 0.89 4.61 4.42 3
2.53 54,512 0.70 0.90 5.06 4.86 34
8.75 71,516 0.70 0.89 5.40 5.22 17
10.16 79,535 0.70 0.90 4.99 4.79 14
1.95%9 $ -6 1.00%2 1.17%2 5.32%2 5.14%2 17%
9.83 -11 0.87 1.02 4.83 4.68 14
( 0.26)%3,9 $11,603 1.05%2 1.25%2 4.07%2 3.87%2 6%
1.853 14,421 1.09 1.26 3.86 3.69 10
3.353 12,895 1.14 1.40 4.16 3.90 3
2.153 8,634 1.17 1.36 4.48 4.30 34
8.253 5,106 1.18 1.36 4.90 4.71 17
9.653 4,304 1.17 1.37 4.53 4.34 14
(0.63)%4,9 $ 6,644 1.79%2 1.92%2 3.35%2 3.22%2 6%
0.994 7,524 1.84 1.92 3.10 3.02 10
2.684 8,606 1.89 2.02 3.42 3.29 3
1.384 8,528 1.92 2.09 3.70 3.52 34
7.454 3,130 1.92 2.11 4.14 3.96 17
8.844 2,505 1.91 2.11 3.79 3.60 14
( 0.63)%4,9 $10,996 1.79%2 1.92%2 3.35%2 3.22%2 6%
1.104 13,293 1.85 1.92 3.11 3.04 10
2.584 14,500 1.89 2.02 3.43 3.30 3
1.384 14,529 1.91 2.08 3.56 3.40 34
7.454 3,149 1.90 2.09 3.96 3.77 17
8.844 638 1.92 2.12 3.78 3.59 14
49
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONCLUDED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN NET
ASSET (LOSS) ON DISTRIBUTIONS ASSET
VALUE NET INVESTMENTS FROM NET VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT END OF
OF PERIOD INCOME AND UNREALIZED) INCOME PERIOD
=========== ============ ================= =============== ===========
------------------
Kentucky Tax-Free Income Portfolio
------------------
Institutional Class
10/1/05 through 3/31/0612 $ 9.69 $ 0.237 $ (0.19) $ (0.18) $ 9.55
9/30/05 9.73 0.467 ( 0.14) ( 0.36) 9.69
9/30/04 9.77 0.457 ( 0.07) ( 0.42) 9.73
9/30/0310 9.99 0.48 ( 0.20) ( 0.50) 9.77
9/30/0210 9.94 0.49 0.07 ( 0.51) 9.99
9/30/0110 9.60 0.50 0.34 ( 0.50) 9.94
Service Class
10/1/05 through 3/31/0612 $ 9.70 $ 0.217 $ (0.18) $ (0.17) $ 9.56
9/30/05 9.74 0.437 ( 0.14) ( 0.33) 9.70
9/30/04 9.78 0.437 ( 0.08) ( 0.39) 9.74
9/30/0310 9.99 0.45 ( 0.19) ( 0.47) 9.78
9/30/0210 9.95 0.46 0.06 ( 0.48) 9.99
9/30/0110 9.60 0.47 0.35 ( 0.47) 9.95
Investor A Class
10/1/05 through 3/31/0612 $ 9.69 $ 0.217 $ (0.19) $ (0.16) $ 9.55
9/30/05 9.73 0.427 ( 0.14) ( 0.32) 9.69
9/30/04 9.77 0.417 ( 0.07) ( 0.38) 9.73
9/30/0310 9.99 0.44 ( 0.20) ( 0.46) 9.77
9/30/0210 9.94 0.44 0.07 ( 0.46) 9.99
9/30/0110 9.60 0.45 0.34 ( 0.45) 9.94
Investor B Class
10/1/05 through 3/31/0612 $ 9.69 $ 0.187 $ (0.18) $ (0.13)7 $ 9.56
9/30/05 9.73 0.357 ( 0.14) ( 0.25) 9.69
9/30/04 9.77 0.337 ( 0.07) ( 0.30) 9.73
9/30/0310 9.99 0.36 ( 0.20) ( 0.38) 9.77
9/30/0210 9.94 0.37 0.07 ( 0.39) 9.99
9/30/0110 9.60 0.37 0.35 ( 0.38) 9.94
Investor C Class
10/1/05 through 3/31/0612 $ 9.71 $ 0.187 $ (0.18) $ (0.13) $ 9.58
9/30/05 9.76 0.357 ( 0.15) ( 0.25) 9.71
9/30/04 9.79 0.337 ( 0.06) ( 0.30) 9.76
9/30/0310 10.02 0.36 ( 0.21) ( 0.38) 9.79
9/30/0210 9.97 0.37 0.07 ( 0.39) 10.02
9/30/0110 9.62 0.37 0.36 ( 0.38) 9.97
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.
6 There were no Service shares outstanding as of September 30, 2002.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF INVESTMENT INCOME
ASSETS RATIO OF NET TOTAL EXPENSES TO RATIO OF NET TO AVERAGE
END OF EXPENSES TO AVERAGE NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
======================= ========== ============== ==================== =================== ================== ==========
0.43%9 $ 60,780 0.68%2 0.88%2 4.78%2 4.58%2 4%
3.35 71,188 0.70 0.91 4.69 4.48 4
4.01 78,549 0.70 0.89 4.61 4.42 8
2.95 115,104 0.70 0.88 4.94 4.76 37
5.82 135,938 0.70 0.87 4.99 4.81 12
8.91 146,620 0.70 0.86 5.09 4.93 32
0.28%9 $ 256 0.98%2 1.15%2 4.48%2 4.31%2 4%
3.04 248 1.00 1.17 4.38 4.21 4
3.69 247 1.00 1.17 4.40 4.22 8
2.74 103 1.00 1.18 4.57 4.39 37
5.40 92 1.00 1.17 4.69 4.52 12
8.69 91 1.00 1.16 4.79 4.63 32
0.24%3,9 $ 6,137 1.04%2 1.23%2 4.44%2 4.25%2 4%
2.953 6,377 1.09 1.26 4.28 4.11 4
3.533 5,482 1.15 1.36 4.19 3.97 8
2.463 4,701 1.17 1.35 4.42 4.24 37
5.333 3,612 1.18 1.35 4.52 4.35 12
8.403 3,214 1.17 1.33 4.64 4.47 32
(0.02)%4,9 $ 2,445 1.79%2 1.93%2 3.70%2 3.56%2 4%
2.184 3,578 1.85 1.92 3.55 3.48 4
2.764 3,897 1.89 2.02 3.44 3.31 8
1.704 3,795 1.92 2.09 3.64 3.46 37
4.554 2,311 1.91 2.08 3.71 3.54 12
7.604 978 1.89 2.05 3.79 3.62 32
( 0.03)%4,9 $ 925 1.75%2 1.88%2 3.67%2 3.54%2 4%
2.074 938 1.86 1.92 3.55 3.49 4
2.864 1,399 1.88 2.00 3.43 3.31 8
1.594 1,179 1.92 2.10 3.69 3.50 37
4.534 1,036 1.90 2.08 3.61 3.44 12
7.694 236 1.91 2.07 3.75 3.57 32
7 Calculated using the average shares outstanding method.
8 Less than $(.01) per share.
9 Not Annualized.
10 Audited by other auditors.
11 Less than $1,000.
12 Unaudited.
51
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(A) Organization
BlackRock FundsSM (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 51 registered portfolios, seven 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: BlackRock, Institutional,
Service, Hilliard Lyons, Investor A, Investor B and Investor C. 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, mostly due to differences in
distribution and service fees. As of March 31, 2006, no Hilliard Lyons Shares
were outstanding.
Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts with its vendors and others that provide for general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund.
However, based on experience, the Fund considers the risk of loss from such
claims to be remote.
(B) 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.
Investment Valuation - Valuation of investments held by each Portfolio is
as follows: fixed income investments are valued by using market quotations or
prices provided by market makers; a portion of the fixed income investments are
valued utilizing one or more pricing services approved by the Board of Trustees
(the "Board"); an option or futures contract is valued at the last sales price
prior to 4:00 p.m. (Eastern time), as quoted on the principal exchange or board
of trade on which such option or futures contract is traded, or in the absence
of a sale, the mean between the last bid and asked prices prior to 4:00 p.m.
(Eastern time); the amortized cost method of valuation will be used with
respect to debt obligations with sixty days or less remaining to maturity
unless the investment adviser and/or sub-adviser under the supervision of the
Board determines that such method does not represent fair value. In the event
that application of these methods of valuation results in a price for an
investment which is deemed not to be representative of the market value of such
investment, the investment will be valued by, under the direction of, or in
accordance with a method approved by the Board as reflecting fair value ("Fair
Value Assets"). The investment adviser and/or sub-adviser will submit its
recommendations regarding the valuation and/or valuation methodologies for Fair
Value Assets to a valuation committee. Such valuation committee may accept,
modify or reject any recommendations. The pricing of all Fair Value Assets
shall be subsequently reported to the Board.
When determining the price for a Fair Value Asset, the investment adviser
and/or sub-adviser shall seek to determine the price that the Portfolio might
reasonably expect to receive from the current sale of that asset in an
arm's-length transaction. Fair value determinations shall be based upon all
available factors that the adviser and/or subadviser deems relevant.
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) 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.
Swap Agreements - The Portfolios may invest in swap agreements for the
purpose of hedging against changes in interest rates. Swap agreements involve
the exchange by the Portfolios with another party of their respective
commitments to pay or receive interest (e.g., an exchange of floating rate
payments for fixed rate payments) with respect to a notional amount of
principal. Swaps are marked to market daily based upon quotations from market
makers and the change, if any, is recorded as an unrealized gain or loss in the
Statements of Operations. Net payments of interest are recorded as interest
income or expense. Entering into these agreements involves, to varying degrees,
elements of credit and market risk in excess of the amounts recognized on the
Schedule of Investments. Such risks involve the possibility that there will be
no liquid market for these agreements, that the counter-party to the agreement
may default on its obligation to perform and that there may be unfavorable
change in the fluctuation of interest and/or exchange rates. There were no swap
agreements held by the Portfolios at March 31, 2006.
52
BLACKROCK FUNDS
As a result of changes in GAAP, the Portfolio's have previously
reclassified periodic payments made under interest rate swap agreements,
previously included within interest income or expense, as a component of
realized gain (loss) in the Statements of Operations. For consistency, similar
reclassifications have been made to amounts appearing in the per share amounts
in prior years financial highlights. Prior year net investment income ratios
in the financial highlights have also been modified accordingly. This
reclassification had no effect on the Portfolio's net asset value, either in
total or per share, or their total increase (decrease) in net assets from
operations during any period. The effects of these reclassifications in the
financial highlights are as follows:
TAX-FREE INCOME
---------------------------------------------------------------
INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
--------------- --------- ------------ ------------ -----------
Net Investment Income Ratio
9/30/2002 ........................... 0.08% 0.07% 0.07% 0.07% 0.07%
Net Investment Income per Share
9/30/2002 ........................... $ 0.00 $ 0.01 $ 0.00 $ 0.00 $ 0.00
PENNSYLVANIA TAX-FREE INCOME
---------------------------------------------------------------
INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
--------------- --------- ------------ ------------ -----------
Net Investment Income Ratio
9/30/2002 ........................... 0.06% 0.06% 0.06% 0.07% 0.07%
Net Investment Income per Share
9/30/2002 ........................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.01
NEW JERSEY TAX-FREE INCOME
---------------------------------------------------------------
INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
--------------- --------- ------------ ------------ -----------
Net Investment Income Ratio
9/30/2002 ........................... 0.06% 0.05% 0.05% 0.05% 0.05%
Net Investment Income per Share
9/30/2002 ........................... $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.01
OHIO TAX-FREE INCOME
---------------------------------------------------------------
INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
--------------- --------- ------------ ------------ -----------
Net Investment Income Ratio
9/30/2002 ........................... 0.04% 0.05% 0.05% 0.05% 0.05%
Net Investment Income per Share
9/30/2002 ........................... $ 0.00 $ 0.01 $ 0.00 $ 0.01 $ 0.01
DELAWARE TAX-FREE INCOME
---------------------------------------------------------------
INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
--------------- --------- ------------ ------------ -----------
Net Investment Income Ratio
9/30/2002 ........................... 0.06% 0.06% 0.05% 0.06% 0.05%
Net Investment Income per Share
9/30/2002 ........................... $ 0.00 $ 0.00 $ 0.01 $ 0.01 $ 0.00
KENTUCKY TAX-FREE INCOME
---------------------------------------------------------------
INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
--------------- --------- ------------ ------------ -----------
Net Investment Income Ratio
9/30/2002 ........................... 0.05% 0.06% 0.06% 0.06% 0.06%
Net Investment Income per Share
9/30/2002 ........................... $ 0.00 $ 0.00 $ 0.00 $ 0.01 $ 0.01
53
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Investment Transactions and Investment Income - Investment transactions
are accounted for on the trade date. The cost of investments sold and the
related gain or loss is determined by use of the specific identification
method, generally first-in first-out, for both financial reporting and federal
income tax purposes. Interest income is recorded on the accrual basis.
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.
Futures Transactions - The Portfolios may invest in financial futures
contracts for the purpose of hedging their existing portfolio securities, or
securities that the Portfolios intend to purchase, against fluctuations in
value caused by changes in prevailing market interest rates or for leverage.
Upon entering into a futures contract, a Portfolio is required to deposit cash
or pledge securities as 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 cumulative 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 market, resulting in an inability to
liquidate 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 held by the Portfolios at March 31, 2006.
Tender Option Bonds - A tender option bond is a synthetic floating or
variable rate security issued when long term bonds are purchased in the primary
or secondary market and are then deposited into a trust. Custodial receipts are
then issued to investors, such as the Portfolios, evidencing ownership
interests in the trust. The remarketing agent for the trust sets a floating or
variable rate on typically a weekly basis. The creation of tender option bond
trusts fulfills two objectives which municipal securities are deposited into
the trusts: (i) the creation of the P-floats, the terms of which mimic, in
certain respects, the variable rate demand securities issued in the primary
municipal securities market, and (ii) the creation of a residual interest,
which establishes an economically leveraged position in the municipal
securities. Tender option bonds may be considered to be derivatives.
Derivatives involve special risks, including possible default by the other
party to the transaction, illiquidity and, to the extent the adviser's view as
to certain market movements is incorrect, the risk that the use of derivatives
could result in significantly greater losses than if they had not been used.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("generally accepted accounting principles") requires the use of management
estimates. Actual results could differ from these estimates and such
differences could be material.
Other - Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses are prorated to
the Portfolios on the basis of relative net assets. Class-specific expenses are
borne by that class. Differences in net expense ratios between classes of a
Portfolio are due to class-specific expenses and waivers. Income, other
expenses and realized and unrealized gains and losses of a Portfolio are
allocated to the respective class on the basis of the relative net assets each
day.
(C) Agreements and Other 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"), serves as sub-adviser for all of the Portfolios. BlackRock, Inc. is an
indirect majority-owned subsidiary of The PNC Financial Services Group, Inc.
54
BLACKROCK FUNDS
For its advisory services, BlackRock is entitled to receive fees, computed
daily and payable monthly, at the following annual rates, based on each
Portfolio's average daily net assets:
TAX-FREE INCOME, PENNSYLVANIA TAX-FREE
INCOME, DELAWARE TAX-FREE
NEW JERSEY TAX-FREE INCOME INCOME AND KENTUCKY
AND OHIO TAX-FREE INCOME PORTFOLIOS TAX-FREE INCOME PORTFOLIOS
--------------------------------------- ---------------------------
INVESTMENT INVESTMENT
AVERAGE DAILY NET ASSETS ADVISORY FEE ADVISORY FEE
- ------------------------------- --------------------------------------- ---------------------------
first $1 billion 0.500% 0.550%
$1 billion - $2 billion 0.450 0.500
$2 billion - $3 billion 0.425 0.475
greater than $3 billion 0.400 0.450
The investment advisory fee for the UltraShort Municipal Portfolio is
0.45% of average daily net assets.
BlackRock pays BFM a fee for its sub-advisory services.
PFPC Trust Company, an indirect subsidiary of The PNC Financial Services
Group, Inc., serves as custodian for each of the Fund's Portfolios. PFPC Inc.
("PFPC"), an indirect wholly-owned subsidiary of The PNC Financial Services
Group, Inc., serves as transfer agent and dividend disbursing agent. The
custodian and the transfer agent have voluntarily agreed to waive a portion of
their fees during the period.
Shares of each class of each Portfolio of the Fund bear their prorata
portion of all operating expenses paid by a Portfolio, except transfer agency
fees, certain administrative/Servicing fees and amounts payable under the
Fund's Amended and Restated Distribution and Service Plan.
Prior to February 1, 2006, the BlackRock shares bore a transfer agent fee
at an annual rate not to exceed 0.005% of the average daily net assets plus per
account fees and disbursements. Institutional, Service, Investor A, Investor B
and Investor C share classes each bore a transfer agent fee at an annual rate
not to exceed 0.018% of the annual average net assets of such respective
classes plus per account fees and disbursements. Certain other transfer agency
fees were allocated on relative net assets of each class of each portfolio.
Effective February 1, 2006, each class of each Portfolio bears the costs
of transfer agent fees associated with such respective classes. Transfer agency
fees borne by each class of each Portfolio are comprised of those fees charged
by the Transfer Agent for issuing and redeeming shares of each class of each
Portfolio, all shareholder communications including shareholder reports,
dividend and distribution notices, proxy materials for its meetings to
shareholders and maintenance of shareholder accounts; networking and
recordkeeping/shareholder services fees; and reimbursements to BlackRock for
costs related to the Fund's investor service center.
PFPC 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. Prior to February 1, 2006, the fee was paid at the
following annual rates: 0.085% of the first $500 million, 0.075% of the next
$500 million and 0.065% of assets in excess of $1 billion. In addition, each of
the share classes, except for the BlackRock Class, was charged an
administration fee based on the following percentage of average daily net
assets of each respective class: 0.145% of the first $500 million, 0.135% of
the next $500 million and 0.125% of assets in excess of $1 billion. The
BlackRock Class was charged an administration fee of 0.035% of the first $500
million, 0.025% of the next $500 million and 0.015% of assets in excess of $1
billion. Effective February 1, 2006, the combined administration fee is paid at
the following annual rates: 0.075% of the first $500 million, 0.065% of the
next $500 million and 0.055% of assets in excess of $1 billion. In addition,
each of the classes, is charged an administration fee based on the following
percentage of average daily net assets of each respective class: 0.035% of the
first $500 million, 0.025% of the next $500 million and 0.015% of assets in
excess of $1 billion. In addition, PFPC and BlackRock may have, at their
discretion, voluntarily waived all or any portion of their administration fees
for any Portfolio or share class.
55
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
For the six months ended March 31, 2006, the following shows the various
types of class-specific expenses borne directly by each class of each Portfolio
and any associated waivers of those expenses.
SHARE CLASSES
ADMINISTRATION FEES ----------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
----------- --------------- --------- ------------ ------------ ------------ ----------
UltraShort Municipal ................. $ 4,197 $ 5,274 $ - $ - $ - $ - $ 9,471
Tax-Free Income ...................... 13,401 154,393 862 4,753 2,523 1,336 177,268
Pennsylvania Tax-Free Income ......... - 319,062 2,475 15,614 6,381 952 344,484
New Jersey Tax-Free Income ........... - 71,026 7,701 3,991 5,554 932 89,204
Ohio Tax-Free Income ................. - 52,771 425 4,039 4,761 3,755 65,751
Delaware Tax-Free Income ............. - 23,235 - 6,917 3,834 6,335 40,321
Kentucky Tax-Free Income ............. - 35,511 134 3,331 1,633 486 41,095
SHARE CLASSES
ADMINISTRATION FEES WAIVED ----------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- --------------- --------- ------------ ------------ ------------
UltraShort Municipal ................. $ 4,195 $ 1,861 $ - $ - $ - $ -
Tax-Free Income ...................... 13,403 5,972 59 - - -
Pennsylvania Tax-Free Income ......... - 319,063 2,470 - 416 65
New Jersey Tax-Free Income ........... - 71,025 5,242 307 - -
Ohio Tax-Free Income ................. - 52,771 247 289 - -
Delaware Tax-Free Income ............. - 21,531 - 256 281 446
Kentucky Tax-Free Income ............. - 33,013 80 - 98 38
ADMINISTRATION FEES WAIVED
TOTAL
-------------
UltraShort Municipal ................. $ 6,056*
Tax-Free Income ...................... 19,434
Pennsylvania Tax-Free Income ......... 322,014
New Jersey Tax-Free Income ........... 76,574
Ohio Tax-Free Income ................. 53,307
Delaware Tax-Free Income ............. 22,514
Kentucky Tax-Free Income ............. 33,229
* Portfolio also had a fund level administration fee waiver of $2,248.
SHARE CLASSES
TRANSFER AGENT FEES ----------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
----------- --------------- --------- ------------ ------------ ------------ ----------
UltraShort Municipal ................. $ 758 $ 707 $ 9 $ 9 $ - $ - $ 1,483
Tax-Free Income ...................... 2,361 21,029 1,759 1,512 1,038 417 28,116
Pennsylvania Tax-Free Income ......... - 43,650 641 4,889 2,683 334 52,197
New Jersey Tax-Free Income ........... - 9,583 3,093 1,181 1,741 394 15,992
Ohio Tax-Free Income ................. - 7,542 84 1,358 1,544 971 11,499
Delaware Tax-Free Income ............. - 3,350 - 1,726 1,399 1,900 8,375
Kentucky Tax-Free Income ............. - 4,923 47 675 653 150 6,448
SHARE CLASSES
TRANSFER AGENT FEES WAIVED ----------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
----------- --------------- --------- ------------ ------------ ------------ --------
UltraShort Municipal .............. $ 13 $ - $ - $ - $ - $ - $ 13
Tax-Free Income ................... 295 - 59 - - - 354
Pennsylvania Tax-Free Income ...... - 1,888 59 - 118 27 2,092
New Jersey Tax-Free Income ........ - 413 354 111 - - 878
Ohio Tax-Free Income .............. - 354 - 118 - - 472
Delaware Tax-Free Income .......... - - - - 118 118 236
Kentucky Tax-Free Income .......... - - - - 59 8 67
SHARE CLASSES
TRANSFER AGENT FEES REIMBURSED ----------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
----------- --------------- --------- ------------ ------------ ------------ --------
UltraShort Municipal ............... $ 276 $ - $ 9 $ 9 $ - $ - $ 294
Tax-Free Income .................... 634 - 1,132 - - - 1,766
Pennsylvania Tax-Free Income ....... - 4,534 132 - 1,243 102 6,011
New Jersey Tax-Free Income ......... - 1,037 693 3 - - 1,733
Ohio Tax-Free Income ............... - 1,133 - 765 - - 1,898
Delaware Tax-Free Income ........... - - - - 840 939 1,779
Kentucky Tax-Free Income ........... - - - - 401 84 485
56
BLACKROCK FUNDS
SHARE CLASSES
SHAREHOLDER SERVICE FEES ------------------------------------------------------
SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
--------- ------------ ------------ ------------ ---------
UltraShort Municipal ................. $ - $ 1 $ - $ - $ 1
Tax-Free Income ...................... 1,971 11,270 5,868 3,214 22,323
Pennsylvania Tax-Free Income ......... 6,784 36,587 14,279 2,183 59,833
New Jersey Tax-Free Income ........... 18,079 9,347 13,073 2,140 42,639
Ohio Tax-Free Income ................. 1,037 9,343 11,078 8,982 30,440
Delaware Tax-Free Income ............. - 15,435 8,929 14,615 38,979
Kentucky Tax-Free Income ............. 317 7,798 3,625 1,149 12,889
SHARE CLASSES
DISTRIBUTION FEES ------------------------------------------
INVESTOR A INVESTOR B INVESTOR C TOTAL
------------ ------------ ------------ ----------
Tax-Free Income ...................... $ 4,504 $17,603 $ 9,641 $31,748
Pennsylvania Tax-Free Income ......... 14,640 43,330 6,549 64,519
New Jersey Tax-Free Income ........... 3,753 39,219 6,425 49,397
Ohio Tax-Free Income ................. 3,717 33,234 26,943 63,894
Delaware Tax-Free Income ............. 6,331 26,800 43,844 76,975
Kentucky Tax-Free Income ............. 3,115 10,876 3,445 17,436
SHARE CLASS
DISTRIBUTION FEES WAIVED -------------
INVESTOR A TOTAL
------------- ----------
Tax-Free Income ...................... $ 4,478 $ 4,478
Pennsylvania Tax-Free Income ......... 14,640 14,640
New Jersey Tax-Free Income ........... 3,753 3,753
Ohio Tax-Free Income ................. 3,717 3,717
Delaware Tax-Free Income ............. 6,331 6,331
Kentucky Tax-Free Income ............. 3,115 3,115
In the interest of limiting the expenses of the Portfolios, BlackRock and
the Fund have entered into a series of annual expense limitation agreements.
The agreements set a limit on certain 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 the
aggregate expenses incurred on a share class (excluding: interest, taxes,
brokerage commissions and other extraordinary expenses).
At March 31, 2006, the receivable from BlackRock in each portfolio was as
follows.
UltraShort Municipal ................. $ 154
Tax-Free Income ...................... 929
Pennsylvania Tax-Free Income ......... 3,183
New Jersey Tax-Free Income ........... 913
Ohio Tax-Free Income ................. 1,009
Delaware Tax-Free Income ............. 884
Kentucky Tax-Free Income ............. 260
57
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
BlackRock has contractually agreed to waive or reimburse fees or expenses
until February 1, 2007, in order to limit expenses as follows. This agreement
is reviewed annually by the Fund's Board.
SHARE CLASSES
---------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- --------------- --------- ------------ ------------ -----------
UltraShort Municipal ................. 0.35% 0.45% 0.75% 0.80% NA NA
Tax-Free Income ...................... 0.45% 0.60% 0.90% 1.07% 1.82% 1.82%
Pennsylvania Tax-Free Income ......... NA 0.60% 0.90% 1.07% 1.65% 1.65%
New Jersey Tax-Free Income ........... NA 0.60% 0.90% 1.07% 1.82% 1.82%
Ohio Tax-Free Income ................. NA 0.60% 0.90% 0.85% 1.82% 1.82%
Delaware Tax-Free Income ............. NA 0.70% NA 0.95% 1.65% 1.65%
Kentucky Tax-Free Income ............. NA 0.65% 1.00% 0.95% 1.60% 1.60%
If in the following two years the operating expenses of a share class
that previously received a waiver or reimbursement from BlackRock are less than
the expense limit for that share class, the share class is required to repay
BlackRock up to the amount of fees waived or expenses reimbursed under the
agreement if: (1) the Portfolio of which the share class is a part 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 at the previous quarterly meeting.
At March 31, 2006, the amounts subject to possible future reimbursement
under the expense limitation agreement are as follows:
EXPIRING EXPIRING EXPIRING TOTAL WAIVERS SUBJECT
JANUARY 31, 2007 JANUARY 31, 2008 JANUARY 31, 2009 TO REIMBURSEMENT
------------------ ------------------ ------------------ ----------------------
UltraShort Municipal ................. $ 269,648 $ 185,476 $ 17,471 $ 472,595
Tax-Free Income ...................... 983,261 936,352 66,447 1,986,060
Pennsylvania Tax-Free Income ......... 1,357,799 1,284,255 53,012 2,695,066
New Jersey Tax-Free Income ........... 406,182 377,050 18,927 802,159
Ohio Tax-Free Income ................. 259,458 259,109 15,301 533,868
Delaware Tax-Free Income ............. 138,237 107,843 10,882 256,962
Kentucky Tax-Free Income ............. 171,865 162,538 12,785 347,188
The following waivers previously incurred on the portfolios which were
subject to recoupment by BlackRock expired on January 31, 2006:
Tax-Free Income ....................... $ 623,251
Pennsylvania Tax-Free Income. ......... 1,383,044
New Jersey Tax-Free Income ............ 278,302
Ohio Tax-Free Income .................. 174,280
Delaware Tax-Free Income .............. 91,563
Kentucky Tax-Free Income .............. 138,922
Pursuant to the Fund's Amended and Restated Distribution and Service Plan
(the "Plan"), the Fund may pay BlackRock Distributors, Inc. (the "Distributor")
and/or BlackRock or any other affiliate of The PNC Financial Services Group,
Inc., fees for distribution and sales support services. Currently, only
Investor A Shares, Investor B Shares, and Investor C Shares bear the expense of
distribution fees under the Plan. In addition, the Fund may pay brokers,
dealers, financial institutions and industry professionals (including The PNC
Financial Services Group, Inc. and its affiliates) ("service organizations")
fees for the provision of personal services to shareholders. BlackRock may
receive some of the service fees paid by the Fund in return for providing
services to shareholders. Currently, only Service Shares, Investor A Shares,
Investor B Shares and Investor C Shares bear the expense of service fees under
the Plan.
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.
58
BLACKROCK FUNDS
Class-Specific Fee Arrangements
Portfolio Share Classes
BlackRock Institutional Service
Contractual Actual Contractual Actual Contractual Actual
Fees Fees(4) Fees Fees(4) Fees(1) Fees(4)
UltraShort Municipal None None None None 0.25% 0.25%
Tax-Free Income None None None None 0.25% 0.25%
Pennsylvania Tax-Free Income N/A N/A None None 0.25% 0.25%
New Jersey Tax-Free Income N/A N/A None None 0.25% 0.25%
Ohio Tax-Free Income N/A N/A None None 0.25% 0.25%
Delaware Tax-Free Income N/A N/A None None 0.25% N/A
Kentucky Tax-Free Income N/A N/A None None 0.25% 0.25%
Portfolio Share Classes
Investor A Investor B Investor C
Contractual Actual Contractual Actual Contractual Actual
Fees(2) Fees(4) Fees(3) Fees(4) Fees(3) Fees(4)
UltraShort Municipal 0.35% 0.25% N/A N/A N/A N/A
Tax-Free Income 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
Pennsylvania Tax-Free Income 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
New Jersey Tax-Free Income 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
Ohio Tax-Free Income 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
Delaware Tax-Free Income 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
Kentucky Tax-Free Income 0.35% 0.25% 1.00% 1.00% 1.00% 1.00%
(1) - the maximum annual contractual fees are comprised of a .25% service fee.
(2) - the maximum annual contractual fees are comprised of a .10% distribution
fee and a .25% service fee.
(3) - the maximum annual contractual fees are comprised of a .75% distribution
fee and a .25% service fee.
(4) - the actual fees are for the six months ended March 31, 2006.
BlackRock maintains a call center which is responsible for providing
certain shareholder services to the BlackRock Funds, such as responding to
shareholder inquiries and processing transactions based upon instructions from
shareholders with respect to the subscription and redemption of Fund shares.
During the period October 1, 2005 through March 31, 2006, the following amounts
have been accrued by each portfolio to reimburse BlackRock for costs incurred
running the call center, which are a component of the Transfer Agent fees in
the accompanying Statements of Operations.
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C TOTAL
----------- --------------- --------- ------------ ------------ ------------ ----------
UltraShort Municipal ................. $ 905 $ 308 $ - $ - $ - $ - $ 1,213
Tax-Free Income ...................... 2,796 9,525 110 377 199 99 13,106
Pennsylvania Tax-Free Income ......... - 18,458 184 1,153 457 76 20,328
New Jersey Tax-Free Income ........... - 4,588 807 352 447 79 6,273
Ohio Tax-Free Income ................. - 3,311 29 347 389 269 4,345
Delaware Tax-Free Income ............. - 1,635 - 618 357 522 3,132
Kentucky Tax-Free Income ............. - 2,258 11 243 156 35 2,703
As of March 31, 2006, affiliated payables were as follows:
PNC BANK
PFPC(1) BLACKROCK(2) AFFILIATES(3)
--------- -------------- --------------
UltraShort Municipal ................. $ 2,556 $ 5,270 $ -
Tax-Free Income ...................... 23,177 128,517 8,399
Pennsylvania Tax-Free Income ......... 38,371 299,945 16,882
New Jersey Tax-Free Income ........... 12,868 77,288 14,943
Ohio Tax-Free Income ................. 8,745 54,849 15,442
Delaware Tax-Free Income ............. 5,954 33,547 17,645
Kentucky Tax-Free Income ............. 5,455 32,277 4,203
(1) - payables to PFPC are for Accounting, Administration, Custody and Transfer
Agent services provided.
(2) - payables to BlackRock are for Advisory and Administration services
provided and for amounts due BlackRock for costs incurred related to the
BlackRock Funds call center.
(3) - payables to PNC affiliates are for distribution and sales support
services as described under the Plan. The total payable on behalf of the
Fund was $5,632,572, a portion of which is paid to service organizations,
including other PNC Bank affiliates.
59
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(D) Purchases and Sales of Securities
For the six months ended March 31, 2006, purchases and sales of
securities, other than short-term and U.S. government securities, were as
follows:
PURCHASES SALES
--------------- ---------------
UltraShort Municipal ................. $ 34,898,923 $ 41,971,606
Tax-Free Income ...................... 254,023,322 286,505,243
Pennsylvania Tax-Free Income ......... 300,507,614 312,494,359
New Jersey Tax-Free Income ........... 13,513,240 15,859,106
Ohio Tax-Free Income ................. 18,816,188 20,208,448
Delaware Tax-Free Income ............. 4,296,490 16,811,704
Kentucky Tax-Free Income ............. 2,916,874 12,710,593
(E) Capital Shares
Transactions in capital shares for each period were as follows:
ULTRASHORT MUNICIPAL
----------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
-------------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
----------------- ------------------ --------------- -----------------
Shares sold:
BlackRock Class ........................ 584,089 $ 5,800,000 2,236,236 $ 22,229,904
Institutional Class .................... 250,060 2,480,592 531,983 5,283,813
Service Class .......................... 2 20 - -
Investor A Class ....................... 444 4,479 4,970 50,016
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 33,295 330,614 59,428 590,642
Institutional Class .................... 1,291 12,804 1,684 16,722
Service Class .......................... - 1 - -
Investor A Class ....................... 1 10 3 26
Shares redeemed:
BlackRock Class ........................ (1,632,652) (16,210,720) (2,249,340) (22,360,127)
Institutional Class .................... (381,427) (3,783,742) (907,432) (9,011,740)
Service Class .......................... (2) (20) - -
Investor A Class ....................... (445) (4,494) (4,897) (49,260)
---------- -------------- ---------- -------------
Net decrease .............................. (1,145,344) $ (11,370,456) (327,365) $ (3,250,004)
========== ============== ========== =============
60
BLACKROCK FUNDS
TAX-FREE INCOME
---------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
------------------------------------ ------------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ --------------- ------------------
Shares sold:
BlackRock Class ........................ 13,460 $ 146,316 224,255 $ 2,503,094
Institutional Class .................... 2,852,099 31,031,233 3,591,390 39,912,181
Service Class .......................... 1,946 21,226 52,330 581,800
Investor A Class ....................... 118,749 1,293,196 597,804 6,639,654
Investor B Class ....................... 65,439 711,239 54,741 608,534
Investor C Class ....................... 73,213 799,271 60,412 671,999
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 164,143 1,785,252 386,166 4,293,119
Institutional Class .................... 7,094 77,181 13,010 144,802
Service Class .......................... 1,830 19,882 5,756 63,944
Investor A Class ....................... 11,442 124,530 18,237 203,038
Investor B Class ....................... 3,543 38,549 6,196 68,962
Investor C Class ....................... 1,922 20,907 3,130 34,844
Shares redeemed:
BlackRock Class ........................ (427,178) (4,657,549) (1,876,330) (20,731,399)
Institutional Class .................... (3,777,209) (41,149,265) (4,444,782) (49,461,550)
Service Class .......................... (81,613) (890,346) (91,144) (1,012,587)
Investor A Class ....................... (93,333) (1,017,368) (494,809) (5,504,634)
Investor B Class ....................... (98,919) (1,078,062) (149,127) (1,658,868)
Investor C Class ....................... (34,752) (377,537) (116,657) (1,300,425)
---------- -------------- ---------- --------------
Net decrease .............................. (1,198,124) $ (13,101,345) (2,159,422) $ (23,943,492)
========== ============== ========== ==============
PENNSYLVANIA TAX-FREE INCOME
------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
--------------------------------- ------------------------------------
SHARES VALUE SHARES VALUE
--------------- --------------- --------------- ------------------
Shares sold:
Institutional Class .................... 7,020,891 $ 72,513,378 8,822,824 $ 93,341,728
Service Class .......................... 15,863 163,368 48,976 517,224
Investor A Class ....................... 243,754 2,512,284 348,356 3,686,712
Investor B Class ....................... 1,299 13,298 34,768 366,250
Investor C Class ....................... 26,735 273,838 34,135 357,808
Shares issued in reinvestment of dividends:
Institutional Class .................... 59,287 610,843 97,496 1,030,731
Service Class .......................... 5,153 53,034 12,728 134,722
Investor A Class ....................... 57,107 588,050 106,902 1,130,750
Investor B Class ....................... 19,619 200,796 45,852 482,072
Investor C Class ....................... 1,948 19,983 3,826 40,313
Shares redeemed:
Institutional Class .................... (5,740,757) (59,195,926) (9,131,240) (96,572,101)
Service Class .......................... (29,781) (307,034) (144,415) (1,530,324)
Investor A Class ....................... (348,199) (3,586,740) (747,020) (7,903,793)
Investor B Class ....................... (378,333) (3,874,354) (631,808) (6,644,992)
Investor C Class ....................... (37,099) (380,912) (47,135) (496,282)
---------- ------------- ---------- --------------
Net increase (decrease) ................... 917,487 $ 9,603,906 (1,145,755) $ (12,059,182)
========== ============= ========== ==============
61
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NEW JERSEY TAX-FREE INCOME
--------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
----------------------------------- ------------------------------------
SHARES VALUE SHARES VALUE
--------------- ----------------- --------------- ------------------
Shares sold:
Institutional Class .................... 1,089,203 $ 12,463,491 1,537,821 $ 17,984,593
Service Class .......................... 5,792 65,918 29,258 343,064
Investor A Class ....................... 53,753 614,896 237,446 2,775,458
Investor B Class ....................... 41,774 477,535 42,331 494,772
Investor C Class ....................... 19,595 224,355 40,719 476,873
Shares issued in reinvestment of dividends:
Institutional Class .................... 3,946 45,070 5,921 69,071
Service Class .......................... 16,589 189,499 35,652 416,398
Investor A Class ....................... 10,220 116,716 16,564 193,299
Investor B Class ....................... 11,864 135,516 21,648 252,755
Investor C Class ....................... 1,530 17,508 5,243 61,375
Shares redeemed:
Institutional Class .................... (1,239,341) (14,150,393) (2,623,161) (30,654,400)
Service Class .......................... (57,769) (660,955) (141,208) (1,651,138)
Investor A Class ....................... (73,021) (832,345) (113,443) (1,322,639)
Investor B Class ....................... (87,732) (1,002,029) (119,681) (1,402,303)
Investor C Class ....................... (55,314) (632,376) (157,599) (1,837,993)
---------- ------------- ---------- --------------
Net decrease .............................. (258,911) $ (2,927,594) (1,182,489) $ (13,800,815)
========== ============= ========== ==============
OHIO TAX-FREE INCOME
----------------------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
------------------------------ -------------------------------
SHARES VALUE SHARES VALUE
------------- -------------- ------------- ---------------
Shares sold:
Institutional Class .................... 609,157 $ 6,427,858 1,340,116 $ 14,494,665
Service Class .......................... 39,538 417,526 11,495 124,427
Investor A Class ....................... 43,748 461,774 412,979 4,460,886
Investor B Class ....................... 45,229 477,690 78,964 854,690
Investor C Class ....................... 154,881 1,633,104 267,788 2,898,539
Shares issued in reinvestment of dividends:
Institutional Class .................... 3,097 32,639 8,467 91,428
Service Class .......................... 1,591 16,768 2,768 29,918
Investor A Class ....................... 11,865 124,968 20,430 220,359
Investor B Class ....................... 2,907 30,627 6,538 70,609
Investor C Class ....................... 1,570 16,543 2,565 27,698
Shares redeemed:
Institutional Class .................... (529,001) (5,581,566) (792,870) (8,549,796)
Service Class .......................... (17,105) (180,574) (9,486) (101,664)
Investor A Class ....................... (207,860) (2,198,984) (62,962) (679,488)
Investor B Class ....................... (129,748) (1,369,508) (144,619) (1,562,181)
Investor C Class ....................... (86,333) (910,359) (103,937) (1,124,869)
-------- ------------ --------- ------------
Net increase (decrease) ................... (56,464) $ (601,494) 1,038,236 $ 11,255,221
======== ============ ========= ============
62
BLACKROCK FUNDS
DELAWARE TAX-FREE INCOME
-------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
------------------------------------ ----------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ --------------- ----------------
Shares sold:
Institutional Class .................... 525,353 $ 5,157,744 986,401 $ 9,946,873
Investor A Class ....................... 47,465 465,841 271,815 2,745,395
Investor B Class ....................... 13,105 128,764 55,487 559,640
Investor C Class ....................... 73,270 718,065 139,825 1,408,625
Shares issued in reinvestment of dividends:
Institutional Class .................... 1,491 14,604 4,948 49,774
Investor A Class ....................... 14,610 143,204 27,261 274,272
Investor B Class ....................... 2,740 26,862 5,775 58,131
Investor C Class ....................... 2,653 26,006 5,281 53,146
Shares redeemed:
Institutional Class .................... (1,118,589) (10,976,567) (1,653,128) (16,614,334)
Investor A Class ....................... (319,288) (3,133,426) (119,168) (1,197,713)
Investor B Class ....................... (89,376) (876,952) (152,705) (1,536,227)
Investor C Class ....................... (282,355) (2,771,438) (237,132) (2,385,338)
---------- -------------- ---------- -------------
Net decrease .............................. (1,128,921) $ (11,077,293) (665,340) $ (6,637,756)
========== ============== ========== =============
KENTUCKY TAX-FREE INCOME
---------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
3/31/06 9/30/05
-------------------------------------- ----------------------------------
SHARES VALUE SHARES VALUE
----------------- ------------------ --------------- ----------------
Shares sold:
Institutional Class .................... 267,529 $ 2,573,084 565,644 $ 5,528,249
Service Class .......................... 928 8,923 1,020 9,900
Investor A Class ....................... 31,649 304,479 195,578 1,909,210
Investor B Class ....................... 5,885 56,514 13,530 132,160
Investor C Class ....................... 739 7,126 64,488 629,892
Shares issued in reinvestment of dividends:
Institutional Class .................... 3,528 33,922 2,871 27,988
Service Class .......................... 298 2,871 581 5,672
Investor A Class ....................... 8,094 77,823 13,383 130,544
Investor B Class ....................... 3,654 35,132 8,118 79,206
Investor C Class ....................... 440 4,241 2,641 25,845
Shares redeemed:
Institutional Class .................... (1,254,056) (12,069,769) (1,296,495) (12,649,723)
Service Class .......................... (1) (12) (1,382) (13,451)
Investor A Class ....................... (55,456) (533,755) (114,460) (1,115,126)
Investor B Class ....................... (122,794) (1,182,495) (53,030) (517,295)
Investor C Class ....................... (1,183) (11,401) (113,998) (1,112,008)
------------ -------------- ---------- -------------
Net decrease .............................. (1,110,746) $ (10,693,317) (711,511) $ (6,928,937)
============ ============== ========== =============
On March 31, 2006, five shareholders held approximately 85% of the
UltraShort Municipal Portfolio, three shareholders held approximately 86% of
the Tax-Free Income Portfolio, one shareholder held approximately 87% of the
Pennsylvania Tax-Free Income Portfolio, one shareholder held approximately 78%
of the New Jersey Tax-Free Income Portfolio, one shareholder held approximately
74% of the Ohio Tax-Free Income Portfolio, three shareholders held
approximately 75% of the Delaware Tax-Free Income Portfolio and one shareholder
held approximately 80% of the
63
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
Kentucky Tax-Free Income Portfolio. Some of the shareholders are comprised of
omnibus accounts, which are held on behalf of several individual shareholders.
(F) Federal Tax Information
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.
Dividends from net investment income and distributions from net realized
capital gains are determined in accordance with U.S. Federal income tax
regulations, which may differ from those amounts determined under accounting
principles generally accepted in the United States. Due to tax
reclassifications, a portion of the distributions during the six months ended
March 31, 2006 may be redesignated as return of capital at fiscal year end.
The tax character of distributions paid during the year ended September
30, 2005 were as follows:
TAX-FREE ORDINARY TOTAL
INCOME INCOME DISTRIBUTIONS
------------- ---------- --------------
UltraShort Municipal
9/30/05 ................... $ 770,909 $- $ 770,909
Tax-Free Income
9/30/05 ................... 17,478,544 - 17,478,544
Pennsylvania Tax-Free Income
9/30/05 ................... 33,000,554 - 33,000,554
New Jersey Tax-Free Income
9/30/05 ................... 7,656,354 - 7,656,354
Ohio Tax-Free Income
9/30/05 ................... 5,669,535 - 5,669,535
Delaware Tax-Free Income
9/30/05 ................... 3,442,702 - 3,442,702
Kentucky Tax-Free Income
9/30/05 ................... 3,075,463 - 3,075,463
At September 30, 2005, the Portfolios had capital loss carryforwards
available to offset future realized capital gains through the indicated
expiration dates:
EXPIRING SEPTEMBER 30
-------------------------------------------------------------------------------------
2008 2009 2010 2011 2012 2013
------------- ------------- ------------- -------------- ------------- --------------
UltraShort Municipal ................. $ - $ - $ - $ - $ 32,641 $ -
Tax-Free Income ...................... 3,717,571 1,756,215 - 3,984,021 6,841,418 5,736,698
Pennsylvania Tax-Free Income ......... 3,981,394 7,641,061 8,626,794 15,329,699 - 10,121,753
New Jersey Tax-Free Income ........... 733,444 2,652,175 162,686 2,530,579 883,300 724,595
Ohio Tax-Free Income ................. 41,989 - - 1,883,560 825,006 783,368
Delaware Tax-Free Income ............. 83,140 - - 1,312,264 493,468 623,721
Kentucky Tax-Free Income ............. 805,091 1,556,368 129,603 2,443,468 - -
TOTAL
--------------
UltraShort Municipal ................. $ 32,641
Tax-Free Income ...................... 22,035,923
Pennsylvania Tax-Free Income ......... 45,700,701
New Jersey Tax-Free Income ........... 7,686,779
Ohio Tax-Free Income ................. 3,533,923
Delaware Tax-Free Income ............. 2,512,593
Kentucky Tax-Free Income ............. 4,934,530
(G) Concentration of Credit Risk
The Portfolios concentrate their investments in securities issued by state
agencies, other governmental entities and U.S. territories. The Portfolios are
more susceptible to adverse financial, social, environmental, economic,
regulatory and political factors that may affect these states, which could
seriously affect the ability of these states and their municipal subdivisions
to meet continuing obligations for principal and interest payments, than if the
Portfolios were not concentrated in securities issued by state agencies, other
governmental entities and U.S. territories.
64
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED)
(A) Board of Trustees' Consideration of the Advisory Agreements. The Board of
Trustees (the "Board") of BlackRock Funds (the "Fund"), including a
majority of the non-interested Trustees of the Fund (the "Independent
Trustees"), unanimously approved the renewal of the investment advisory
and sub-advisory agreements (the "Advisory Agreements") with respect to
the Tax-Free Bond Portfolios of the Fund (each, a "Portfolio"), at an
in-person meeting of the Board held on February 28, 2006. In connection
with its consideration of the Advisory Agreements, the Board met with
personnel from the investment adviser and sub-adviser to the Portfolios,
including BlackRock Advisors, Inc. and BlackRock Financial Management,
Inc. (collectively, "BlackRock"), at an in-person meeting of the Board
held on February 7, 2006. The Board reviewed materials that it received
in advance of that meeting, including (i) fee information and expense
ratios for retail and institutional share classes of each Portfolio in
comparison to fee information and expense ratios for peer funds of such
Portfolio; (ii) information about the investment performance of each
Portfolio in comparison to the investment performance for peer funds of
such Portfolio; (iii) BlackRock's economic outlook for the Portfolios and
its general investment outlook for the markets; (iv) information on the
profitability of BlackRock and its affiliates with respect to each
Portfolio, including details regarding the methodology used to calculate
such profitability; (v) information regarding fees paid to service
providers that are BlackRock affiliates; and (vi) information regarding
compliance records and regulatory matters relating to BlackRock and the
Fund. In approving the Advisory Agreements, the Board, including all of
the Independent Trustees, considered each of the matters discussed below
in executive sessions held at the February 7 and February 28 meetings,
during which counsel to the Independent Trustees was present.
Nature, Extent and Quality of Services. The Board received and considered
various information and data regarding the nature, extent and quality of
services provided by BlackRock to each of the Portfolios under the Advisory
Agreements during the past year. The Board reviewed BlackRock's investment
philosophy and process used to manage each of the Portfolios, as well as a
description of its capabilities, personnel and services. The Board
considered the scope of services provided by BlackRock to each of the
Portfolios under the Advisory Agreements relative to services typically
provided by third parties to comparable mutual funds, and considered
BlackRock's in-house research capabilities as well as other resources
available to its personnel. The Board noted that the standard of care
applicable under the Advisory Agreements was comparable to that generally
found in investment advisory agreements of their nature. The Board
considered the legal and compliance programs of each of the Fund and
BlackRock, as well as the integrity of the systems in place to ensure
implementation of such programs and the records of each of the Fund and
BlackRock with regard to these matters. The Board also considered
information relating to the qualifications, backgrounds and
responsibilities of BlackRock's investment professionals and other
personnel who provide services to each Portfolio under the applicable
Advisory Agreement, and took into account the time and attention devoted by
BlackRock senior management to each of the Portfolios. The Board also
considered BlackRock's general business reputation and overall financial
resources and concluded that BlackRock would be able to meet any reasonably
foreseeable obligation under the Advisory Agreements.
Following consideration of this information, the Board, including all of
the Independent Trustees, concluded that the nature, extent and quality of
the services provided by BlackRock to each Portfolio under the applicable
Advisory Agreement were consistent with the Portfolio's operational
requirements and reasonable in terms of approving the renewal of such
Advisory Agreement.
65
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
Advisory Fees. The Board received and considered statistical information
regarding the fees and expense ratios of retail and institutional share
classes of each Portfolio. The Board compared the advisory fees, both
before (contractual) and after (actual) any fee waivers and expense
reimbursements, and total expenses of each Portfolio, against the fees and
total expenses of the Portfolio's peers selected by Lipper, Inc.
("Lipper"), an independent provider of investment company data. The Board
was provided with a description of the methodology used by Lipper to
determine the peers of each Portfolio. For each Portfolio, the Investor A
Class and Institutional Class were used to represent such Portfolio's share
classes for purposes of the Lipper survey, as Lipper differentiated between
retail and institutional funds in selecting peers.
In considering the fee and expense data provided by Lipper, the Board
noted that:
o except for the Institutional Class of each of the Pennsylvania
Tax-Free Income and Tax-Free Income Portfolios, each Portfolio had
contractual advisory fees and expenses that were equal to or lower
than that the median for its peers; and
o except for the Delaware Tax-Free Income Portfolio, each Portfolio
had actual advisory fees and expenses that were equal to or lower
than the median for its peers.
However, the Board took into consideration the fact that with respect to
the Institutional Class of the Pennsylvania Tax-Free Income and Tax-Free
Income Portfolios, the difference by which such Portfolios' contractual
advisory fees were higher than the median for their respective peers was
not significant.
In addition to Lipper data, the Board also took into account the complexity
of the investment management of each Portfolio relative to its peers. The
Board was also provided with comparative information about services
rendered and fee rates offered to other similar clients advised by
BlackRock, including closed-end investment companies and separate accounts.
Following consideration of this information, the Board, including all of
the Independent Trustees, concluded that the contractual fees to be paid to
BlackRock pursuant to the Advisory Agreements are fair and reasonable in
light of the services being provided.
Fund Performance. The Board received and considered information about each
Portfolio's one-, three- and five-year (as applicable) investment
performance for the period ended November 30, 2005, in comparison to the
performance of its peers selected by Lipper. The Board was provided with a
description of the methodology used by Lipper to select the peers. In
addition, the Board reviewed BlackRock's market outlook and discussed other
factors relevant to the performance of the Portfolios.
In considering the performance data provided by Lipper, the Board noted
that for each Portfolio that had existed for more than five years, except
for each of the Delaware Tax-Free Income, Kentucky Tax-Free Income,
Pennsylvania Tax-Free Income and Tax-Free Income Portfolios and the
Investor A Class of the New Jersey Tax-Free Income and Ohio Tax-Free Income
Portfolios, each Portfolio had investment performance during at least two
of the one-year, three-year and five-year periods that were at least equal
to or above the median for the Portfolio's peers. The Board discussed the
performance issues of these Portfolios with BlackRock, and was satisfied
that appropriate measures were being taken to address them.
Profitability. The Board considered the level of BlackRock's and its
affiliates' profits in respect of their relationship with each of the
Portfolios. This consideration included a broad review of BlackRock's
methodology in allocating its costs to the management of each Portfolio.
The Board considered the profits realized by BlackRock and its affiliates
in connection with the operation of each Portfolio and whether the amount
of profit is a fair profit relative to their relationship with the
Portfolio. The Board also
66
BLACKROCK FUNDS
considered BlackRock's profit margins in comparison with available industry
data. The Board, including all of the Independent Trustees, concluded that
BlackRock's profitability with respect to the Portfolios is reasonable
relative to the services provided.
Economies of Scale. The Board considered whether there have been economies
of scale in respect of the management of each Portfolio, whether each
Portfolio has appropriately benefited from any economies of scale, and
whether there is potential for realization of any further economies of
scale. The Board noted that economies of scale were passed on to the
shareholders in the form of breakpoints to the advisory fee rate of certain
of the Portfolios. The Board also considered the fee waivers and expense
reimbursement arrangements by BlackRock for each of the Portfolios. The
Board, including all of the Independent Trustees, determined that the
advisory fee structure was reasonable and that no changes were currently
necessary to realize any economies of scale.
Other Benefits to BlackRock. The Board also took into account other
ancillary benefits that BlackRock may derive from its relationship with
each of the Portfolios, such as BlackRock's ability to leverage its
investment professionals that manage other portfolios, an increase in
BlackRock's profile in the broker-dealer community, and the engagement of
BlackRock's affiliates as service providers to the Portfolios, including
for administrative, transfer agency, distribution and custodial services.
The Board, including all of the Independent Trustees, concluded that these
ancillary benefits that BlackRock and its affiliates could receive with
regard to providing investment advisory and other services to the
Portfolios were consistent with those generally available to other mutual
fund sponsors.
No single factor was considered in isolation or to be determinative in the
Board's decision to approve the renewal of the Advisory Agreements.
Rather, the Board concluded, in light of a weighing and balancing of all
factors considered, that it was in the best interests of each Portfolio to
approve the continuation of the Advisory Agreements, including the fees to
be charged for services thereunder.
(B) The Fund's Audit Committee approved engaging Deloitte & Touche LLP as the
independent registered public accounting firm to audit the Fund's financial
statements for fiscal year 2006. On November 29, 2005, a majority of the
Fund's Board of Trustees, including a majority of the independent Trustees,
approved the appointment of Deloitte & Touche LLP as the Fund's independent
registered public accounting firm for the Fund's fiscal 2006 audit subject
to the right of the Fund, by a majority vote of the shareholders at any
meeting called for that purpose, to terminate the appointment without
penalty.
(C) As previously disclosed, BlackRock has received subpoenas from various
federal and state governmental and regulatory authorities and various
information requests from the Securities and Exchange Commission in
connection with ongoing industry-wide investigations of mutual fund
matters.
(D) BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill Lynch") announced
on February 15, 2006 that they had reached an agreement to combine Merrill
Lynch's investment management business, Merrill Lynch Investment Managers,
with BlackRock, Inc. to create a new independent company. Merrill Lynch
will have a 49.8% economic interest and a 45% voting interest in the
combined company and The PNC Financial Services Group, Inc. ("PNC"), which
currently holds a majority interest in BlackRock, Inc., will have
approximately a 34% economic and voting interest. The new company will
operate under the BlackRock name and be governed by a board of directors
with a majority of independent members. Each of Merrill Lynch and PNC has
agreed that it will vote all of its shares on all matters in accordance
with the recommendation of
67
BLACKROCK FUNDS
ADDITIONAL INFORMATION (UNAUDITED) (CONCLUDED)
BlackRock's board in order to assure its independence. Completion of the
transaction is subject to various regulatory approvals, client consents,
approval by BlackRock, Inc. shareholders and customary conditions.
(E) The amounts estimated to be paid by the Fund to the Chief Compliance
Officer (CCO) and certain of his staff for the six months ended March 31,
2006, are $255,572.
68
BLACKROCK FUNDS
Investment Adviser
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Sub-Adviser
BlackRock Financial Management, Inc.
New York, New York 10022
Custodian
PFPC Trust Company
Philadelphia, Pennsylvania 19153
Co-Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware 19809
Distributor
BlackRock Distributors, Inc.
King of Prussia, Pennsylvania 19406
Co-Administrator
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Counsel
Simpson Thacher & Bartlett LLP
New York, New York 10017
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Philadelphia, Pennsylvania 19103
The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it is intended to reduce expenses and
eliminate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be combined
with those for other members of your household, please contact the Fund at
(800) 441-7762.
The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Trustees. A
description of the policies and procedures that BlackRock and its affiliates
use to determine how to vote proxies relating to portfolio securities is
available without charge, upon request, by calling (800) 441-7762, or on the
website of the Securities and Exchange Commission (the "Commission") at
http://www.sec.gov.
Information on how proxies relating to the Fund's voting securities were voted
(if any) by BlackRock during the most recent 12-month period ended June 30th is
available, upon request and without charge, by calling (800) 441-7762 or on the
website of the Commission at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings for the first and
third quarters of its fiscal year with the Commission on Form N-Q. The Fund's
Form N-Q is available on the Commission's website at http://www.sec.gov and may
be reviewed and copied at the Commission's Public Reference Room in Washington,
D.C. Information regarding the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The Fund's Form N-Q may also be obtained
upon request, without charge, by calling (800) 441-7762.
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Fund shares.
BLACKROCK FUNDS
FUND SPECTRUM
BlackRock Funds is a leading mutual fund company that currently has assets of
approximately $27 billion in the following portfolios, which are 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.
STOCK PORTFOLIOS
- --------------------------------------
Investment Trust Small Cap Core Equity
Large Cap Value Equity Small Cap Growth Equity
Large Cap Growth Equity Global Science & Technology Opportunities
Dividend AchieversTM Global Resources
Legacy All-Cap Global Resources
Mid-Cap Value Equity Health Sciences
Mid-Cap Growth Equity U.S. Opportunities
Aurora Global Opportunities
Small/Mid-Cap Growth International Opportunities
Small Cap Value Equity Index Equity
STOCK & BOND PORTFOLIOS
- --------------------------------------
Asset Allocation
BOND PORTFOLIOS
- --------------------------------------
Enhanced Income Government Income
Low Duration Bond Inflation Protected Bond
Intermediate Government Bond GNMA
Intermediate Bond Managed Income
Intermediate PLUS Bond International Bond
Core Bond Total Return High Yield Bond
Core PLUS Total Return
TAX-FREE BOND PORTFOLIOS
- --------------------------------------
UltraShort Municipal Ohio Tax-Free Income
Tax-Free Income Delaware Tax-Free Income
Pennsylvania Tax-Free Income Kentucky Tax-Free Income
New Jersey Tax-Free Income
MONEY MARKET PORTFOLIOS
- --------------------------------------
Money Market North Carolina Municipal Money Market
U.S. Treasury Money Market Ohio Municipal Money Market
Municipal Money Market Pennsylvania Municipal Money Market
New Jersey Municipal Money Market Virginia Municipal Money Market
SHAREHOLDER PRIVILEGES
ACCOUNT INFORMATION
Call us at 1-800-441-7762 to get information about your account balances,
recent transactions and share prices. You can also reach us on the web at
www.blackrock.com.
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 $50 or more from their BlackRock portfolios, as
long as their account is at least $10,000.
RETIREMENT PLANS
Shareholders may make investments in conjunction with Traditional, Rollover,
Roth, Coverdell and Simple IRA's.
ADDITIONAL INFORMATION ABOUT THE BLACKROCK FUNDS
For additional reports or additional information, as well as more current
information about portfolio holdings and characteristics, BlackRock Fund
shareholders and prospective investors may call 1-800-441-7762.
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.
[GRAPHIC OMITTED]
BND-SEMI2 3/06
Not applicable for semi-annual reports.
| Item 3. | Audit Committee Financial Expert. |
Not applicable for semi-annual reports.
| Item 4. | Principal Accountant Fees and Services. |
Not applicable for semi-annual reports.
| Item 5. | Audit Committee of Listed registrants. |
Not applicable.
| Item 6. | Schedule of Investments. |
The Registrant’s Schedule of Investments is included as part of the Report to Shareholders filed under Item 1 of this form.
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
| Item 10. | Submission of Matters to a Vote of Security Holders. |
The Registrant’s Nominating Committee will consider nominees to the Board of Trustees recommended by shareholders when a vacancy becomes available. Shareholders who wish to recommend a nominee should send nominations which include biographical information and sets forth the qualifications of the proposed nominee to the Registrant’s Secretary. There have been no material changes to these procedures.
| Item 11. | Controls and Procedures. |
| | (a) | The Registrant’s principal executive officer and principal financial officer have evaluated the Registrant’s disclosure controls and procedures within 90 days of this filing and have concluded, as of that date, that the Registrant’s disclosure controls and procedures were reasonably designed to ensure that information required to be disclosed by the Registrant in this Form N-CSR was recorded, processed, summarized, and reported within the required time periods and that information required to be disclosed by the Registrant in this Form N-CSR was accumulated and communicated to the Registrant’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. |
| | (b) | There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
| | |
(a)(1) | | Not applicable. |
| |
(a)(2) | | Separate certifications of Principal Executive and Financial Officers pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 furnished as EX-99.CERT. |
| |
(a)(3) | | Not applicable. |
| |
(b) | | Certification of Principal Executive and Financial Officers pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 furnished as EX-99.906 CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | |
(Registrant) | | BlackRock FundsSM |
| |
By (Signature and Title) | | /s/ Henry Gabbay |
| | Henry Gabbay, President and Principal Executive Officer |
Date June 5, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| | |
| |
By (Signature and Title) | | /s/ Henry Gabbay |
| | Henry Gabbay, President and Principal Executive Officer |
Date June 5, 2006
| | |
|
| |
By (Signature and Title) | | /s/ William C. McGinley |
| | William C. McGinley, Treasurer and Principal Financial Officer |
Date June 2, 2006
