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
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BlackRock Funds/SM/
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(Exact name of registrant as specified in charter)
100 Bellevue Parkway
Wilmington, Delaware 19809
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(Address of principal executive offices) (Zip code)
Brian Kindelan, Esq.
BlackRock Advisors, Inc.
100 Bellevue Parkway
Wilmington, Delaware 19809
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(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 441-7762
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Date of fiscal year end: September 30, 2004
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Date of reporting period: March 31, 2004
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. (S) 3507.
Item 1. Reports to Stockholders.
The Report to Shareholders is attached herewith.
FIXED INCOME LIQUIDITY EQUITIES ALTERNATIVES BLACKROCK SOLUTIONS
BlackRock Funds
Equity Portfolios
Semi-Annual Report to Shareholders
March 31, 2004 (Unaudited)
[GRAPHIC]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE BlackRock
BLACKROCK FUNDS
EQUITY PORTFOLIOS
* Large Cap Value Equity * Small Cap Core Equity * International
* Large Cap Growth Equity * Small Cap Growth Equity Opportunities
* Mid-Cap Value Equity * U.S. Opportunities * Asia Pacific Equity
* Mid-Cap Growth Equity * Global Science & Technology * Select Equity
* Small Cap Value Equity Opportunities * Index Equity
* European Equity * Balanced
* International Equity
TABLE OF CONTENTS
Shareholder Letter..........................................................1
Portfolio Summaries
Large Cap Value Equity....................................................2
Large Cap Growth Equity...................................................3
Mid-Cap Value Equity......................................................4
Mid-Cap Growth Equity.....................................................5
Small Cap Value Equity....................................................6
Small Cap Core Equity.....................................................7
Small Cap Growth Equity...................................................8
U.S. Opportunities........................................................9
Global Science & Technology Opportunities................................10
European Equity..........................................................11
International Equity.....................................................12
International Opportunities..............................................13
Asia Pacific Equity......................................................14
Select Equity............................................................15
Index Equity.............................................................16
Balanced.................................................................17
Note on Performance Information..........................................18
International Opportunities Balanced.....................................19
Statement of Net Assets/Schedule of Investments.........................19-60
Balanced Statement of Assets and Liabilities.............................60
Portfolio Financial Statements
Statements of Operations..............................................62-64
Statements of Changes in Net Assets...................................66-71
Financial Highlights..................................................72-91
Notes to Financial Statements..........................................92-116
Additional Information....................................................117
DFA Investment Trust Company Annual Report............................119-139
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PRIVACY PRINCIPLES OF BLACKROCK FUNDS
BlackRock Funds is committed to maintaining the privacy of its shareholders and
to safeguarding their nonpublic personal information. The following information
is provided to help you understand what personal information BlackRock Funds
collects, how we protect that information, and why in certain cases we may share
such information with select other parties.
BlackRock Funds does not receive any nonpublic personal information relating to
its shareholders who purchase shares through their broker-dealers. In the case
of shareholders who are record owners of BlackRock Funds, BlackRock Funds
receives nonpublic personal information on account applications or other forms.
With respect to these shareholders, BlackRock Funds also has access to specific
information regarding their transactions in BlackRock Funds.
BlackRock Funds does not disclose any nonpublic personal information about its
shareholders or former shareholders' to anyone, expect as permitted by law or as
is necessary in order to service our shareholders' accounts (for example, to a
transfer agent).
BlackRock Funds restricts access to nonpublic personal information about its
shareholders to BlackRock employees with a legitimate business need for the
information. BlackRock Funds maintains physical, electronic and procedural
safeguards designed to protect the nonpublic personal information of our
shareholders.
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BLACKROCK FUNDS
March 31, 2004
Dear Shareholder:
We are pleased to present the Semi-Annual Report to Shareholders of the
BlackRock Funds' Equity Portfolios for the six-months ended March 31, 2004. The
Semi-Annual Report includes important information on each Portfolio, and is
organized as follows:
o Portfolio Summary - discusses recent portfolio management activity and
highlights total returns.
o Statement of Net Assets (or Schedule of Investments/Statement of Assets and
Liabilities) - lists portfolio holdings and includes each holding's market
value and number of shares as of March 31, 2004. The Statement of Net Assets
also contains the net asset value for each share class of a Portfolio. If
your Portfolio has a Schedule of Investments, then the net asset value for
each share class may be found in the Statement of Assets and Liabilities.
o Statement of Operations - displays the components of each Portfolio's
investment income and provides a detailed look at each Portfolio's expenses.
The Statement of Operations also lists the aggregate change in value of a
Portfolio's securities due to market fluctuations and security sales.
o Statement of Changes in Net Assets - compares Portfolio information from the
prior period to the current period. Specifically, it details shareholder
distributions by share class, aggregate realized gains and losses, and the
change in net assets from the beginning of the period to the end of the
period.
o Financial Highlights - include each Portfolio's expense ratios, net asset
values, total returns, distributions per share, and turnover ratios for the
current period and the last five years or since inception.
o Notes to Financial Statements - provide additional information on fees, a
summary of significant accounting policies, a list of affiliated
transactions, and a summary of purchases and sales of securities.
In addition to these items, a summary of shareholder privileges is listed on the
inside back cover of the report. Here, shareholders can find information on how
to access account balances, recent transactions, and share prices. It also
includes a summary of the Fund's various investment plans.
We hope you find the report informative, and we thank you for making
BlackRock part of your investment strategy.
Sincerely,
/s/ Anne Ackerley
Anne Ackerley
Managing Director
BlackRock Advisors,Inc.
1
LARGE CAP VALUE EQUITY PORTFOLIO
Total Net Assets (3/31/04): $282.6 million
Performance Benchmark
Russell 1000 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 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 Value Index.
Recent Portfolio Management Activity
o The Portfolio's Institutional class shares outperformed the benchmark
for the semi-annual period. The other share classes underperformed the
benchmark.
o During the first half of the period, the U.S. equity market experienced
a modest early pullback and then came roaring back. Many investors were
encouraged by the wave of corporate earnings announcements and positive
economic news. This confidence continued into the second half of the period and
was reflected in very strong flows into various equity asset classes over the
course of the first six weeks of the year. From the middle of February through
March, however, confidence wavered as concern mounted over both the anemic U.S.
employment figures and renewed concerns about terrorism. During this period,
there was a clear movement away from the more volatile, higher risk stocks and
sectors that had powered much of the 2003 returns.
o The first half of the period was generally difficult for the Large Cap
Value Equity Portfolio with all share classes underperforming the benchmark.
The large cap value model was essentially flat, providing little to no help in
identifying outperforming stocks. As a group, valuation factors were
predictive, but the negative power from the earnings expectation side of the
model neutralized the valuation strength. Forecast earnings-to-price was the
strongest factor for the period, and cash flow-to-price, book-to-price, return
on equity, and all of our earnings expectation factors were flat or negative.
From a sector relative perspective, positive performance came from consumer
cyclicals, consumer non-cyclicals, and energy. Healthcare and technology proved
to be the most difficult for the model, producing very negative relative
performance. In addition, the Portfolio was on the wrong side of the Bank of
America/Fleet Boston Financial merger announcement, costing the Portfolio
relative performance. Holding Louisiana Pacific Corp, Fortune Brands,
Nordstrom, and Centex Corp in overweight positions contributed positively to
relative performance. Underweight positions in Hewlett Packard, Lucent
Technologies, Exxon, and Honeywell International as well as an overweight
position in Merck & Co hurt relative performance.
o During the second half of the period, the model was quite predictive
with particular strength coming from the valuation factors (primarily forecast
earnings-to-price and book-to-price) and all share classes of the Portfolio
posted strong relative performance. The earnings expectation factors of the
model gained considerable traction with the factors measuring earning surprises
and upward earnings revisions showing noticeable improvement. From a sector
perspective, the model was predictive across most sectors leading to relative
outperformance from ten of the thirteen sectors. The strongest sectors included
financials, basic materials, consumer services, and non-cyclicals. The
technology sector showed marked improvement over the quarter with strong
relative returns in March. Some stocks in the Portfolio that helped drive the
strong performance for the quarter included Bank One, Capital One Financial,
Louisiana Pacific, Gtech Holdings, and Energizer Holdings.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE LARGE CAP VALUE
EQUITY PORTFOLIO AND THE RUSSELL 1000 VALUE INDEX FOR THE PAST TEN YEARS.
[LINE CHART]
Institutional Investor A Russell 1000 Value Index
------------- ---------- ------------------------
03/31/1994 $ 10,000 $ 9,547 $ 10,000
06/30/1994 10,147 9,670 10,062
09/30/1994 10,530 10,036 10,319
12/31/1994 10,508 10,005 10,156
03/31/1995 11,412 10,855 11,121
06/30/1995 12,313 11,699 12,118
09/30/1995 13,239 12,566 13,177
12/31/1995 14,172 13,437 14,051
03/31/1996 14,976 14,183 14,847
06/30/1996 15,490 14,660 15,102
09/30/1996 16,021 15,146 15,541
12/31/1996 17,601 16,635 17,092
03/31/1997 17,895 16,884 17,530
06/30/1997 20,350 19,169 20,114
09/30/1997 22,054 20,752 22,117
12/31/1997 22,643 21,296 23,105
03/31/1998 25,487 23,931 25,798
06/30/1998 25,104 23,548 25,913
09/30/1998 21,553 20,206 22,911
12/31/1998 25,017 23,418 26,716
03/31/1999 25,301 23,661 27,099
06/30/1999 28,189 26,322 30,154
09/30/1999 24,868 23,206 27,201
12/31/1999 25,927 24,186 28,681
03/31/2000 25,546 23,788 28,818
06/30/2000 24,368 22,665 27,468
09/30/2000 26,420 24,532 29,628
12/31/2000 28,513 26,463 30,694
03/31/2001 26,840 24,858 28,897
06/30/2001 27,623 25,573 30,307
09/30/2001 24,247 22,413 26,988
12/31/2001 25,727 23,750 28,978
03/31/2002 25,614 23,622 30,163
06/30/2002 21,451 19,755 27,594
09/30/2002 17,601 16,205 22,414
12/31/2002 19,564 17,972 24,481
03/31/2003 18,507 16,981 23,290
06/30/2003 21,505 19,727 27,313
09/30/2003 21,812 19,985 27,877
12/31/2003 24,606 22,499 31,832
03/31/2004 25,677 23,453 32,797
FOR PERIOD ENDING MARCH 31, 2004
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Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------ ------- ------- -------
Institutional Class 38.74% (1.47)% 0.30% 9.89%
Service Class 38.37% (1.76)% (0.01)% 9.57%
Investor A Class (Load Adjusted) 31.95% (3.42)% (1.09)% 8.90%
Investor A Class (NAV) 38.11% (1.92)% (0.18)% 9.40%
Investor B Class (Load Adjusted) 32.65% (3.76)% (1.24)% 8.73%
Investor B Class (NAV) 37.15% (2.64)% (0.92)% 8.73%
Investor C Class (Load Adjusted) 36.11% (2.64)% (0.90)% 8.73%
Investor C Class (NAV) 37.11% (2.64)% (0.90)% 8.73%
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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 18
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
LARGE CAP GROWTH EQUITY PORTFOLIO
Total Net Assets (3/31/04): $111.6 million
Performance Benchmark
Russell 1000 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 capitalizatons equal to those within
the universe of Russell 1000 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
Growth Index.
Recent Portfolio Management Activity
o All share classes of the Portfolio outperformed the benchmark for the
semi-annual period.
o During the first half of the period, the U.S. equity market experienced
a modest early pullback and then came roaring back. Many investors were
encouraged by the wave of corporate earnings announcements and positive
economic news. This confidence continued into the second half of the period and
was reflected in the very strong flows into various equity asset classes over
the course of the first six weeks of the year. From the middle of February
through March, however, confidence wavered as concern mounted over both the
anemic U.S. employment figures and renewed concerns about terrorism. During
this period, there was a clear movement away from the more volatile, higher
risk stocks and sectors that had powered much of the 2003 returns.
o In the first half of the period, the large cap growth model continued
to improve from the difficult performance experienced in mid-2003, and was
generally helpful in identifying outperforming stocks. However, the model was
nonpredicitve in the technology sector, leading to the Portfolio's relative
underperformance. Valuation factors were strong in most sectors, led by
forecast earnings-to-price and book-to-price. Earnings expectation factors were
flat for the period, as was price momentum. From a sector relative perspective,
about half of our sectors produced positive relative returns. Particularly
strong performance came from consumer cyclicals, healthcare, and
telecommunications. Holding Foot Locker, Barnes & Noble, Guidant, and Nextel in
overweight positions contributed positively to relative performance.
Underweight positions in Texas Instruments, QualComm, Applied Materials,
Oracle, and Yahoo all hurt relative performance.
o During the second half of the period, the model was quite predictive
with particular strength coming from the valuation factors (primarily cash
flow-to-price and forecast earnings-to-price). All share classes posted
particularly strong performance versus the benchmark. The earnings expectation
factors of the model gained considerable traction with the factors measuring
earning surprises and upward earnings revisions showing noticeable improvement.
The model was predictive across most sectors leading to relative outperformance
from ten of the thirteen sectors. The strongest sectors included financials,
consumer services, healthcare, and non-cyclicals. After struggling on a
relative basis over the last few quarters, the technology sector showed marked
improvement with good relative returns in March. Some stocks in the Portfolio
that helped drive the strong performance for the quarter include Legg Mason,
Mandalay Resort Group, Biogen IDEC, and Energizer.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE LARGE CAP GROWTH
EQUITY PORTFOLIO AND THE RUSSELL 1000 GROWTH INDEX FOR THE PAST TEN YEARS.
[LINE CHART]
Institutional Investor A Russell 1000 Growth Index
------------- ---------- -------------------------
03/31/1994 $ 10,000 $ 9,547 $ 10,000
06/30/1994 9,381 8,946 9,898
09/30/1994 9,855 9,390 10,659
12/31/1994 9,760 9,287 10,739
03/31/1995 10,647 10,123 11,761
06/30/1995 11,601 11,020 12,918
09/30/1995 12,799 12,137 14,090
12/31/1995 13,121 12,434 14,732
03/31/1996 13,952 13,211 15,523
06/30/1996 14,773 13,970 16,510
09/30/1996 15,190 14,344 17,105
12/31/1996 15,793 14,893 18,138
03/31/1997 15,693 14,793 18,236
06/30/1997 18,667 17,579 21,684
09/30/1997 20,307 19,104 23,314
12/31/1997 20,281 19,049 23,668
03/31/1998 23,696 22,224 27,255
06/30/1998 25,198 23,611 28,492
09/30/1998 22,695 21,236 25,903
12/31/1998 28,659 26,792 32,831
03/31/1999 30,920 28,867 34,918
06/30/1999 31,492 29,379 36,262
09/30/1999 30,743 28,649 34,932
12/31/1999 39,120 36,435 43,717
03/31/2000 41,414 38,505 46,832
06/30/2000 40,076 37,245 45,567
09/30/2000 37,782 35,040 43,117
12/31/2000 29,195 27,040 33,915
03/31/2001 21,191 19,605 26,827
06/30/2001 22,113 20,424 29,086
09/30/2001 16,783 15,496 23,440
12/31/2001 19,088 17,603 26,989
03/31/2002 18,572 17,098 26,291
06/30/2002 14,883 13,703 21,382
09/30/2002 12,375 11,370 18,165
12/31/2002 13,205 12,118 19,463
03/31/2003 13,021 11,927 19,255
06/30/2003 14,588 13,355 22,010
09/30/2003 15,086 13,790 22,871
12/31/2003 16,580 15,148 25,253
03/31/2004 16,986 15,496 25,451
FOR PERIOD ENDING MARCH 31, 2004
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Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
-------- --------- --------- ---------
Institutional Class 30.45% (7.11)% (11.29)% 5.44%
Service Class 30.12% (7.37)% (11.55)% 5.14%
Investor A Class (Load Adjusted) 24.13% (8.95)% (12.51)% 4.48%
Investor A Class (NAV) 29.93% (7.54)% (11.70)% 4.96%
Investor B Class (Load Adjusted) 24.30% (9.32)% (12.62)% 4.31%
Investor B Class (NAV) 28.80% (8.23)% (12.36)% 4.31%
Investor C Class (Load Adjusted) 28.04% (8.21)% (12.38)% 4.30%
Investor C Class (NAV) 29.04% (8.21)% (12.38)% 4.30%
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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 18
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.
3
MID-CAP VALUE EQUITY PORTFOLIO
Total Net Assets (3/31/04): $38.5 million
Performance Benchmark
Russell Midcap Value Index
Investment Approach
Seeks long-term capital appreciation by investing primarily in
mid-capitalization stocks 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.
mid-capitalization value companies (market capitalizations between $1 billion
and $10 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 The Portfolio's Institutional class shares outperformed the benchmark
for the semi-annual period. Service class shares were flat relative to the
benchmark and the other share classes underperformed the benchmark.
o For the first half of the period, all share classes of the Portfolio
underperformed the benchmark. This was primarily due to the Portfolio's
underexposure to the more speculative segment of the Russell Midcap Value
Index, which was the strongest performer for the period. Within the information
technology sector, the communication equipment, semiconductors & semiconductor
equipment and software industries led the sector gains. We had little or no
exposure to these industries given their fundamental characteristics and
earnings visibility prospects, and this hindered relative performance for the
quarter.
o The financial sector was one of the largest contributing sectors to the
Portfolio. Strong stock selection in the thrifts and mortgage finance and
insurance industries led the gains in this sector. Within thrifts and mortgage
finance, Countrywide Financial, GreenPoint Financial and Sovereign Bancorp all
benefited from the increase in consolidation activity within this industry.
Allmerica Financial, Max Re Capital, and Old Republic International all rose
significantly as these companies have experienced strong pricing leverage and
the insurance industry continues to demonstrate fundamental strength.
o Another area of relative strength for the Portfolio was the consumer
discretionary sector. It was also one of the best performing sectors in the
Index, and we witnessed strength across all industries within the sector.
Leisure equipment & products manufacturer Brunswick Corporation and household
durables company Black & Decker both posted impressive gains during the
quarter.
o During the second half of the period, all share classes of the
Portfolio outperformed the benchmark. Stock selection was the primary
contributor with positive appreciation within consumer discretionary, consumer
staples and industrials sectors. The greatest value added was derived by stock
selection within the specialty retail and hotels, restaurants and leisure
industries. The specialty retail industry was an area of strength within our
Portfolio, as the consumer continues to show strength in spending. Stocks
contributing positively to performance included Abercrombie & Fitch and J.C.
Penney. Stock selection in the hotels, restaurants and leisure industry was
another strong contributor to performance for the quarter as our gaming-related
holdings, Multimedia Games and WMS Industries greatly appreciated. Another area
of Portfolio strength was the consumer staples sector as our personal products
holdings posted positive returns.
o An area of portfolio weakness was our thrifts and mortgage finance
holdings of Sovereign Bancorp and Radian Group within the financial sector.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE MID-CAP VALUE EQUITY PORTFOLIO AND THE RUSSELL MIDCAP
VALUE INDEX FROM INCEPTION AND AT EACH SEMI-ANNUAL PERIOD END.
[LINE CHART]
Institutional Investor A Russell Midcap Value Index
------------- ---------- --------------------------
12/27/1996 $ 10,000 $ 9,551 $ 10,000
12/31/1996 10,000 9,551 9,930
03/31/1997 10,084 9,618 10,099
06/30/1997 11,383 10,839 11,371
09/30/1997 12,911 12,274 12,822
12/31/1997 12,857 12,220 13,343
03/31/1998 14,289 13,560 14,676
06/30/1998 13,476 12,766 14,299
09/30/1998 11,144 10,549 12,347
12/31/1998 12,670 11,972 14,022
03/31/1999 11,997 11,330 13,585
06/30/1999 13,479 12,718 15,105
09/30/1999 12,001 11,302 13,498
12/31/1999 12,812 12,057 14,008
03/31/2000 13,179 12,383 14,149
06/30/2000 12,637 11,863 13,911
09/30/2000 13,765 12,904 15,254
12/31/2000 14,618 13,684 16,695
03/31/2001 13,549 12,673 16,105
06/30/2001 14,550 13,589 17,240
09/30/2001 12,624 11,777 15,249
12/31/2001 14,072 13,121 17,083
03/31/2002 15,131 14,079 18,432
06/30/2002 14,194 13,193 17,571
09/30/2002 11,630 10,809 14,416
12/31/2002 11,727 10,878 15,435
03/31/2003 11,318 10,485 14,809
06/30/2003 13,205 12,214 17,459
09/30/2003 13,565 12,540 18,496
12/31/2003 15,538 14,354 21,311
03/31/2004 16,506 15,222 22,450
FOR PERIOD ENDING MARCH 31, 2004
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Average Annual Total Return
1 Year 3 Year 5 Year From Inception
--------- -------- ------- ---------------
Institutional Class 45.84% 6.80% 6.59% 7.15%
Service Class 45.34% 6.45% 6.26% 6.81%
Investor A Class (Load Adjusted) 38.64% 4.69% 5.10% 5.96%
Investor A Class (NAV) 45.17% 6.30% 6.08% 6.63%
Investor B Class (Load Adjusted) 39.59% 4.43% 4.97% 5.90%
Investor B Class (NAV) 44.09% 5.49% 5.30% 5.90%
Investor C Class (Load Adjusted) 43.09% 5.49% 5.30% 5.90%
Investor C Class (NAV) 44.09% 5.49% 5.30% 5.90%
- --------------------------------------------------------------------------------
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 18 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
MID-CAP GROWTH EQUITY PORTFOLIO
Total Net Assets (3/31/04): $142.5 million
Performance Benchmark
Russell Midcap Growth Index
Investment Approach
Seeks long-term capital appreciation by investing in mid-capitalization
stocks that the portfolio management team believes have above-average earnings
growth potential. The Portfolio normally invests at least 80% of its net
assets in equity securities issued by U.S. mid-capitalization growth companies
(market capitalization between $1 billion and $10 billion). 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 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 outperformed the benchmark for the
semi-annual period.
o During the first half of the period, all share classes of the Portfolio
modestly underperformed the benchmark. Stock selection within the health care
sector, particularly the Portfolio's holdings in health care equipment and
supplies, and health care providers and services industries, was one of the
strongest contributors to performance. Laboratory Corp. of America and St.
Jude Medical appreciated strongly. Another area where stock selection was
strong was within the information technology sector. Holdings in the
information technology services, semiconductors and semiconductor equipment,
and software industries were particularly strong as Cognizant Technology
Solutions, National Semiconductor and Siebel Systems appreciated. The
Portfolio's overweight in energy was positive relative to the benchmark.
o One area of portfolio weakness occurred within the consumer staples
sector. Despite positive stock returns within the consumer staples sector, our
holdings within the sector underperformed those within the Index. Another area
where stock selection contributed negatively to performance was within the
consumer discretionary sector. Holdings within the leisure equipment and
products and household products industries, especially Abercrombie & Fitch and
LeapFrog Enterprises, lagged and contributed negatively to the impact of stock
selection. The Portfolio's overweight in the healthcare sector and underweight
in the materials sector also contributed negatively to performance.
o During the second half of the period, all share classes of the
Portfolio outperformed the benchmark. Stock selection within the information
technology sector, particularly within the communications equipment and
software industries, was one of the strongest contributors to performance.
Amdocs, Andrew Corp., Harris Corp. and Network Associates appreciated strongly.
Stock selection was also strong in the consumer discretionary sector. Holdings
in the specialty retail industry were particularly robust as Abercrombie &
Fitch appreciated significantly. In terms of sector selection, the Portfolio's
overweight in the energy and healthcare sectors also contributed positively to
performance
o An area of portfolio weakness occurred within the healthcare sector.
Security selection within the biotechnology and healthcare providers and
services industries contributed negatively to performance as Gilead Sciences,
Triad Hospitals, and Universal Health Services lagged. The Portfolio's lack of
holdings in the telecommunications services sector also contributed negatively
to performance.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MID-CAP
GROWTH EQUITY PORTFOLIO AND THE RUSSELL MIDCAP GROWTH INDEX FROM
INCEPTION AND AT EACH SEMI-ANNUAL PERIOD END.
[LINE CHART]
Institutional Investor A Russell Midcap Growth Index
boih ------------- ---------- ---------------------------
12/27/1996 $ 10,000 $ 9,551 $ 10,000
12/31/1996 10,040 9,589 10,009
03/31/1997 8,930 8,520 9,644
06/30/1997 10,570 10,067 11,063
09/30/1997 12,200 11,595 12,612
12/31/1997 11,521 10,946 12,265
03/31/1998 12,963 12,295 13,729
06/30/1998 13,135 12,449 13,721
09/30/1998 11,218 10,618 11,430
12/31/1998 14,093 13,316 14,456
03/31/1999 16,050 15,157 14,951
06/30/1999 18,058 17,026 16,508
09/30/1999 19,288 18,163 15,682
12/31/1999 31,151 29,306 21,874
03/31/2000 37,868 35,584 26,494
06/30/2000 34,322 32,191 24,531
09/30/2000 36,964 34,623 25,151
12/31/2000 27,667 25,887 19,305
03/31/2001 20,360 19,041 14,462
06/30/2001 20,852 19,457 16,802
09/30/2001 16,002 14,920 12,131
12/31/2001 18,865 17,563 15,414
03/31/2002 18,673 17,376 15,142
06/30/2002 15,660 14,546 12,377
09/30/2002 12,947 12,007 10,251
12/31/2002 13,481 12,486 11,191
03/31/2003 13,545 12,548 11,189
06/30/2003 15,810 14,608 13,288
09/30/2003 16,173 14,920 14,239
12/31/2003 18,074 16,668 15,971
03/31/2004 19,442 17,917 16,743
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
--------- --------- -------- ---------------
Institutional Class 43.53% (1.53)% 3.91% 9.59%
Service Class 43.02% (1.82)% 3.61% 9.27%
Investor A Class (Load Adjusted) 36.45% (3.50)% 2.46% 8.37%
Investor A Class (NAV) 42.79% (2.01)% 3.40% 9.05%
Investor B Class (Load Adjusted) 37.24% (3.87)% 2.47% 8.30%
Investor B Class (NAV) 41.74% (2.73)% 2.65% 8.30%
Investor C Class (Load Adjusted) 40.74% (2.69)% 2.66% 8.30%
Investor C Class (NAV) 41.74% (2.69)% 2.66% 8.30%
- --------------------------------------------------------------------------------
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 18 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.
5
SMALL CAP VALUE EQUITY PORTFOLIO
Total Net Assets (3/31/04): $143.4 million
Performance Benchmark
Russell 2000 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 The Portfolio's Institutional and Service class shares outperformed the
benchmark for the semi-annual period. The other share classes underperformed
the benchmark.
o During the first half of the period, all share classes of the Portfolio
under-performed the benchmark. This was primarily due to the Portfolio's
underexposure to the more speculative segment of the Russell 2000 Value Index,
which was the strongest performer during the quarter. Within the information
technology sector, the communication equipment, semiconductors & semiconductor
equipment and software industries led the sector gains. We had little or no
exposure to these industries given their fundamental characteristics and
earnings visibility prospects, and this hindered relative performance in the
quarter.
o The greatest area of strength occurred in the financial sector. Strong
stock selection in the insurance and thrifts and mortgage finance industries
led the gains in this sector. Allmerica Financial, Max Re Capital, and
Montpelier Re Holdings all rose significantly as these companies experienced
strong pricing leverage within the insurance industry that demonstrated
fundamental strength. Within thrifts and mortgage finance, W Holding Company
gained as management continues to build credibility. Sterling Financial
benefited from an acquisition of Kalamath First Bancorp and has been
successfully executing its transition from a thrift to a commercial bank. In
addition, our underweight in the REITs industry due to the lack of attractive
opportunities contributed to the Portfolio's relative performance.
o The consumer discretionary sector was our largest contributing sector
to the Portfolio during the fourth quarter. Many industries contributed to the
appreciation in this sector. Our investments in the hotels, restaurants and
leisure and media industries led the Portfolio higher, with our investments in
Wynn Resorts and Sinclair Broadcast Group the largest gainers in their
respective industries.
o During the second half of the period, all share classes of the
Portfolio outperformed the benchmark. The Portfolio's holdings in the consumer
discretionary sector contributed most significantly to performance on very
strong stock selection. Positive performance in the consumer discretionary
sector was broad-based across all industries, though stock selection was
particularly strong in the hotels, restaurants and leisure and specialty retail
industries. Extended Stay America led the gains. Wynn Resorts and Stage Stores
also contributed positively to performance. The Portfolio also experienced good
performance in the consumer staples sector, especially within the personal
products industry.
o While stock selection in the consumer staples and industrials sectors
also led the Portfolio higher during the quarter, these gains were slightly
offset by the performance of the healthcare sector. Specifically, our
investments in Beverly Enterprises and RehabCare Group detracted from the
Portfolio's performance. We have sold our positions in both holdings.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP VALUE
EQUITY PORTFOLIO AND THE RUSSELL 2000 VALUE INDEX FOR THE PAST TEN YEARS.
[LINE CHART]
Institutional Investor A Russell 2000 Value Index
------------- ---------- ------------------------
03/31/1994 $ 10,000 $ 9,550 $ 10,000
06/30/1994 9,810 9,355 9,822
09/30/1994 10,334 9,848 10,286
12/31/1994 10,142 9,662 9,981
03/31/1995 10,477 9,973 10,351
06/30/1995 11,086 10,536 11,259
09/30/1995 12,135 11,518 12,196
12/31/1995 12,488 11,847 12,551
03/31/1996 13,157 12,461 13,102
06/30/1996 13,610 12,866 13,637
09/30/1996 13,668 12,907 13,840
12/31/1996 14,969 14,139 15,233
03/31/1997 14,849 14,001 15,195
06/30/1997 17,609 16,588 17,489
09/30/1997 20,142 18,953 19,743
12/31/1997 20,319 19,093 20,075
03/31/1998 21,915 20,563 21,753
06/30/1998 20,765 19,461 20,968
09/30/1998 16,711 15,650 17,220
12/31/1998 19,056 17,829 18,784
03/31/1999 16,257 15,180 16,963
06/30/1999 19,070 17,784 19,771
09/30/1999 17,583 16,387 18,226
12/31/1999 18,132 16,877 18,506
03/31/2000 18,589 17,279 19,211
06/30/2000 18,888 17,547 19,586
09/30/2000 20,600 19,107 21,024
12/31/2000 21,824 20,244 22,728
03/31/2001 21,136 19,584 22,949
06/30/2001 23,602 21,840 25,620
09/30/2001 20,696 19,123 22,203
12/31/2001 23,095 21,315 25,915
03/31/2002 25,065 23,107 28,400
06/30/2002 23,598 21,739 27,798
09/30/2002 18,988 17,457 21,879
12/31/2002 19,260 17,695 22,957
03/31/2003 19,017 17,453 21,790
06/30/2003 22,796 20,896 26,742
09/30/2003 24,676 22,585 28,808
12/31/2003 28,493 26,046 33,523
03/31/2004 30,766 28,095 35,842
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
--------- --------- --------- ----------
Institutional Class 61.79% 13.33% 13.61% 11.89%
Service Class 61.27% 13.01% 13.29% 11.56%
Investor A Class (Load Adjusted) 53.74% 11.07% 12.07% 10.88%
Investor A Class (NAV) 60.97% 12.78% 13.10% 11.39%
Investor B Class (Load Adjusted) 55.35% 11.11% 11.98% 10.63%
Investor B Class (NAV) 59.85% 11.94% 12.23% 10.63%
Investor C Class (Load Adjusted) 58.79% 11.94% 12.24% 10.63%
Investor C Class (NAV) 59.79% 11.94% 12.24% 10.63%
- --------------------------------------------------------------------------------
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; AND
INVESTOR C SHARES, 10/1/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 18
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
SMALL CAP CORE EQUITY PORTFOLIO
Total Net Assets (3/31/04): $4.7 million
Performance Benchmark
Russell 2000 Index
Investment Approach
Seeks long-term capital appreciation by normally investing at least 80% of
its net 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 of the Portfolio outperformed the benchmark for the
semi-annual period.
o During the first half of the period, all share classes of the Portfolio
outperformed the benchmark primarily as a result of stock selection. While the
information technology sector was a key contributor to the quarter's results,
standouts such as Digitas, Fairchild Semiconductor International and CommScope
were in disparate sub-sectors. Healthcare was the next best sector in terms of
stock selection with healthcare service stocks leading the sector. VCA Antech,
TLC Vision Corp and Ventiv Health were significant contributors to performance.
The quarter's best sectors of performance were once again the information
technology and healthcare sectors. Data pointing to an economic recovery
combined with the market's willingness to invest in riskier growth profiles
were primary reasons for the strong sector results.
o One area of weakness during the first half of the period was in the
materials sector. Both stock selection and our sector underweight hurt
performance. The first half of the period saw a large rally in cyclical
stocks, including the basic material components like metals, paper and
chemicals.
o We sold some of the Portfolio's holdings during the first half of the
period, mostly due to those stocks hitting or exceeding our price targets.
Children's Place Retail was sold due to its higher risk/reward profile at
extended valuations. We also sold a few stocks where the investment case did
not unfold as expected. An example of this would be our sale of Hercules Inc.
o All share classes of the Portfolio also outperformed the benchmark
during the second half of the period. Positive stock selection was the primary
contributor to performance with sector selection neutral. The largest absolute
contribution to returns came from SkillSoft PLC, which is a top ten holding in
the Portfolio. The biggest area of relative strength came from the consumer
discretionary sector where the Portfolio outperformed its benchmark. Within
the sector, the strongest results came from the specialty retailers where same
store sales were especially strong. Stein Mart led the way with a large gain
in the quarter. The Portfolio also benefited from recent investments in casino
names, such as Ameristar Casinos.
o During the second half of the period, the Russell 2000 Index had the
best performance in energy, consumer discretionary and consumer staples while
energy, financials and consumer staples were the best performing sectors in the
Portfolio. The worst performing sector in the Index was telecommunication
services and the worst performance in the Portfolio was materials with flat
performance.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP CORE
EQUITY PORTFOLIO AND THE RUSSELL 2000 INDEX FROM INCEPTION AND AT EACH
SEMI-ANNUAL PERIOD END.
[LINE CHART]
Institutional Investor A Russell 2000 Index
------------- ---------- ------------------
01/02/2002 $ 10,000 $ 9,497 $ 10,000
03/31/2002 10,680 10,142 10,420
06/30/2002 10,010 9,506 9,550
09/30/2002 8,350 7,930 7,506
12/31/2002 8,900 8,452 7,968
03/31/2003 8,570 8,139 7,610
06/30/2003 10,750 10,209 9,392
09/30/2003 12,000 11,396 10,245
12/31/2003 14,009 13,285 11,733
03/31/2004 15,566 14,744 12,467
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year From Inception
---------- --------------
Institutional Class 81.63% 21.83%
Service Class 81.75% 21.86%
Investor A Class (Load Adjusted) 72.12% 18.91%
Investor A Class (NAV) 81.16% 21.69%
Investor B Class (Load Adjusted) 76.07% 20.28%
Investor B Class (NAV) 80.57% 21.51%
Investor C Class (Load Adjusted) 79.57% 21.51%
Investor C Class (NAV) 80.57% 21.51%
- --------------------------------------------------------------------------------
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 18 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.
7
SMALL CAP GROWTH EQUITY PORTFOLIO
Total Net Assets (3/31/04): $473.9 million
Performance Benchmark
Russell 2000 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 (market capitalization under $2 billion). 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 outperformed the benchmark for the
semi-annual period.
o During the first half of the period, all share classes of the Portfolio
strongly outperformed the benchmark. Positive stock selection was the primary
contributor to the Portfolio's performance as holdings within the consumer
discretionary, healthcare, industrials and information technology sectors
appreciated significantly. Stock selection in information technology was the
biggest contributor to performance. In particular, stock selection was strong
within the semiconductors and semiconductor equipment, Internet software and
services, and software industries. Digitas, FileNet, Mindspeed Technologies
and SonicWALL were the standout performers in these industries. Strong
security selection within the industrial, commercial services and supplies and
machinery industry sectors also added value to the Portfolio. Leading holdings
were Navigant Consulting, Terex, and Heidrick & Struggles International. Stock
picking within the healthcare sector also contributed positively to
performance. The Portfolio's overweight in both the industrials and the
materials sectors, which outperformed, resulted in a positive contribution to
the Portfolio.
o The Portfolio suffered from poor stock selection in the financial
sector. Positions in the capital markets industry lagged, specifically
National Financial Partners Group. Despite positive stock returns within the
energy sector, our holdings within the sector underperformed those within the
Index. For example, within the oil and gas industry, Remington Oil & Gas, Tom
Brown, and Ultra Petroleum Corp. contributed negatively to relative
performance, but contributed positively to overall performance. The
Portfolio's underweight in the financial sector negatively affected
performance.
o During the second half of the period, all share classes of the
Portfolio also outperformed the benchmark. Stock selection within the
healthcare sector benefited performance. Hologic, Inveresk Research Group,
TheraSense, and TLC Vision Corp. were the standout performers in the sector.
Strong stock selection within the industrial, commercial services and supplies,
aerospace and defense industry sectors also added value to the Portfolio. The
leading holdings were Invision Technologies, Resources Connection, and Sylvan
Learning Systems. Stock selection within information technology, especially
within the Internet software and services industry, also contributed positively
to performance. The Portfolio's overweight in the consumer discretionary
sector and underweight in the information technology sector positively affected
performance.
o One area of relative weakness for the Portfolio was stock selection
within the consumer discretionary sector. Our positions in the media industry
lagged, specifically Cumulus Media and Emmis Communications. The Portfolio's
overweight in the industrials sector, and underweight in the financials sector,
resulted in a negative contribution to the Portfolio.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP GROWTH
EQUITY PORTFOLIO AND THE RUSSELL 2000 GROWTH INDEX FOR THE PAST TEN YEARS.
[LINE CHART]
Institutional Investor A Russell 2000 Growth Index
------------- ---------- -------------------------
03/31/1994 $ 10,000 $ 9,553 $ 10,000
06/30/1994 9,299 8,874 9,372
09/30/1994 10,315 9,825 10,246
12/31/1994 11,147 10,612 10,171
03/31/1995 11,839 11,262 10,728
06/30/1995 13,385 12,718 11,793
09/30/1995 15,317 14,544 13,134
12/31/1995 16,447 15,534 13,328
03/31/1996 18,555 17,505 14,093
06/30/1996 21,244 20,019 14,917
09/30/1996 22,344 21,058 14,790
12/31/1996 21,640 20,370 14,829
03/31/1997 17,431 16,380 13,273
06/30/1997 21,224 19,931 15,604
09/30/1997 25,894 24,277 18,244
12/31/1997 23,632 22,131 16,749
03/31/1998 25,906 24,223 18,739
06/30/1998 24,925 23,287 17,662
09/30/1998 20,215 18,861 13,713
12/31/1998 25,375 23,639 16,956
03/31/1999 26,068 24,278 16,671
06/30/1999 27,234 25,335 19,130
09/30/1999 29,300 27,229 18,190
12/31/1999 43,762 40,633 24,264
03/31/2000 52,659 48,834 26,517
06/30/2000 47,703 44,126 24,562
09/30/2000 47,770 44,100 23,587
12/31/2000 37,939 35,009 18,822
03/31/2001 28,600 26,380 15,960
06/30/2001 30,766 28,336 18,828
09/30/2001 22,105 20,329 13,541
12/31/2001 24,910 22,870 17,084
03/31/2002 23,441 21,499 16,749
06/30/2002 20,184 18,483 14,121
09/30/2002 16,946 15,503 11,082
12/31/2002 18,094 16,527 11,914
03/31/2003 17,322 15,814 11,452
06/30/2003 21,446 19,561 14,217
09/30/2003 23,084 21,024 15,705
12/31/2003 28,092 25,558 17,697
03/31/2004 30,144 27,386 18,685
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
--------- ---------- ---------- ---------
Institutional Class 74.02% 1.77% 2.95% 11.67%
Service Class 73.48% 1.47% 2.68% 11.30%
Investor A Class (Load Adjusted) 65.34% (0.29)% 1.50% 10.60%
Investor A Class (NAV) 73.18% 1.25% 2.44% 11.11%
Investor B Class (Load Adjusted) 67.46% (0.63)% 1.49% 10.43%
Investor B Class (NAV) 71.96% 0.54% 1.73% 10.43%
Investor C Class (Load Adjusted) 71.09% 0.56% 1.75% 10.44%
Investor C Class (NAV) 72.09% 0.56% 1.75% 10.44%
- --------------------------------------------------------------------------------
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 18 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
U.S. OPPORTUNITIES PORTFOLIO
Total Net Assets (3/31/04): $111.0 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 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 During the first half of the period, all share classes of the Portfolio
outperformed the benchmark. The Portfolio's long-standing macro-strategy
positions and stock selection were the chief contributors to this
outperformance. Materials, particularly metals and mining, were the strongest
areas. Several factors contributed to this strength, including the weak
dollar, lack of capacity expansion and improving global demand. Overweights
and stock selection in capital goods, commercial services and transportation
all contributed significantly to performance. The Portfolio's allocation to
financials also contributed to relative outperformance. The Portfolio had no
exposure to REITs, which underperformed, and was overweight capital
markets-related companies like Ameritrade and E*Trade, which rose sharply.
o The Portfolio was also geared to energy and utilities services, which
were the weakest sectors relative to the benchmark. This position detracted
from performance.
o During the second half of the period, all share classes of the
Portfolio underperformed the benchmark as the industrial sector contributed
negatively to performance. The strong Institute for Supply Management (ISM)
readings in December 2003 and January 2004 led investors to sell these stocks
as they questioned the sustainability of the recent strength. The negative
investor sentiment, coupled with operating results that were below plan at
Chicago Bridge & Iron, General Cable and Rockwell Automation, led to the
relative underperformance of the sector.
o The information technology sector also contributed negatively to
performance. While the information technology sector should benefit from a
strong economy, the performance is expected to be purely cyclical. The
holdings in the sector were altered during the quarter to favor companies with
more visible upside to earnings.
o Financials and consumer discretionary shares contributed positively to
performance. Stock selection led to the relative outperformance. Strong gains
by T. Rowe Price and Provident Financial Group helped the Portfolio overcome
the lack of REIT exposure, which rebounded in the second half of the period.
REITs continue to be underweighted versus the benchmark due to valuation
concerns. The consumer discretionary segment was led by the strong performance
of casino and gaming stocks, including Station Casinos.
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 AND AT EACH
SEMI-ANNUAL PERIOD END.
[LINE CHART]
Institutional Investor A S&P/Citigroup EMI U.S.
------------- ---------- ----------------------
05/01/1998 $ 10,000 $ 9,497 $ 10,000
06/30/1998 10,950 10,399 9,518
09/30/1998 9,390 8,908 7,732
12/31/1998 13,030 12,346 9,126
03/31/1999 15,880 15,033 8,644
06/30/1999 20,950 19,810 9,896
09/30/1999 24,730 23,362 9,233
12/31/1999 41,897 39,519 11,106
03/31/2000 55,260 52,070 12,414
06/30/2000 53,197 50,079 11,970
09/30/2000 50,359 47,349 12,452
12/31/2000 38,649 36,289 11,544
03/31/2001 30,128 28,258 10,448
06/30/2001 36,305 34,009 11,892
09/30/2001 27,054 25,311 9,716
12/31/2001 33,256 31,085 11,524
03/31/2002 30,464 28,435 12,035
06/30/2002 25,578 23,840 11,073
09/30/2002 20,257 18,863 9,086
12/31/2002 20,381 18,951 9,694
03/31/2003 19,854 18,451 9,320
06/30/2003 23,732 22,014 11,232
09/30/2003 25,686 23,811 12,106
12/31/2003 30,122 27,890 13,845
03/31/2004 31,503 29,127 14,691
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
--------- -------- -------- --------------
Institutional Class 58.67% 1.50% 14.68% 21.41%
Service Class 57.97% 1.13% 14.29% 21.01%
Investor A Class (Load Adjusted) 49.96% (0.69)% 12.98% 19.81%
Investor A Class (NAV) 57.86% 1.01% 14.14% 20.86%
Investor B Class (Load Adjusted) 52.24% (0.89)% 13.07% 19.93%
Investor B Class (NAV) 56.74% 0.29% 13.31% 20.00%
Investor C Class (Load Adjusted) 55.79% 0.27% 13.30% 19.99%
Investor C Class (NAV) 56.79% 0.27% 13.30% 19.99%
- --------------------------------------------------------------------------------
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 18 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.
9
GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO
Total Net Assets (3/31/04): $36.1 million
Performance Benchmark
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 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 underperformed the Pacific Stock
Exchange Technology Index but outperformed the S&P 500(Reg. TM) Index for the
semi-annual period.
o During the first half of the period, all share classes of the Global
Science and Technology Opportunities Portfolio underperformed the S&P 500(Reg.
TM) Index and the Pacific Stock Exchange Technology Index. The information
technology sector narrowly outperformed the broader market as investors
continued to favor areas biased to cyclical earnings recovery. Investors did,
however, begin to take profits in December, particularly in sectors that
performed well. The Portfolio's substantial allocation to information
technology and solid stock selection were the primary drivers of performance.
o The Portfolio had a substantial overweight position within the
communications equipment segment where fundamentals began to improve after a
long period of consolidation. In addition, improved corporate spending
appeared to favor investments such as enterprise software. Siebel Systems
appreciated significantly during the first half of the period. The Portfolio's
healthcare exposure contributed negatively to performance as this defensive,
non-cyclical group underperformed the broader market. Strong stock selection
in the biotechnology industry offset select issues in the pharmaceutical
sector. The Portfolio's exposure to Asian equities was a minor drag on
performance as U.S. markets generated higher absolute returns.
o In late January, the Portfolio changed its benchmark to the Pacific
Stock Exchange Technology Index from the S&P 500(Reg. TM). The new benchmark
more adequately reflects the universe of securities in which the Portfolio will
invest.
o During the second half of the period, all share classes of the
Portfolio outperformed the new benchmark and the S&P 500(Reg. TM). The
Portfolio benefited from strong stock and industry selection during the
quarter. Specifically, our underweight in information technology,
semiconductor capital equipment and our overweight in healthcare and networking
and communications equipment segments all contributed to outperformance.
Portfolio holdings that outperformed during the quarter included Qualcomm,
Motorola, Nokia, National Semiconductor, Skyworks Solutions and Impax Labs.
The Portfolio exploited a short-term imbalance in memory chip supply by having
a substantial position in Taiwan-based Powerchip Semiconductor, which
significantly appreciated. The Portfolio's exposure to the Pacific Rim was
another key driver of performance, with Taiwan, South Korea and Japan all
posting strong results.
o There were several areas that detracted from performance within the
information technology sector. Specifically, the hard disk drive segment was
extremely challenging. Maxtor and Seagate were down significantly. Internet
software and information technology consulting underperformed due to isolated
stock specific issues.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GLOBAL SCIENCE &
TECHNOLOGY OPPORTUNITIES PORTFOLIO, THE PACIFIC STOCK EXCHANGE TECHNOLOGY
INDEX AND THE S&P 500(REG. TM) INDEX FROM INCEPTION AND AT EACH SEMI-ANNUAL
PERIOD END.
[LINE CHART]
Institutional Investor A Pacific Stock Exchange Technology Index S&P 500 (REG. TM) Index
------------- ---------- --------------------------------------- -----------------------
05/15/2000 $ 10,000 $ 9,497 $ 10,000 $ 10,000
06/30/2000 11,400 10,826 10,789 10,022
09/30/2000 12,490 11,842 10,178 9,925
12/31/2000 9,490 8,993 7,983 9,149
03/31/2001 6,190 5,859 6,494 8,064
06/30/2001 6,830 6,448 7,121 8,536
09/30/2001 4,410 4,160 5,077 7,283
12/31/2001 5,850 5,518 6,752 8,062
03/31/2002 5,680 5,347 6,732 8,084
06/30/2002 4,520 4,245 5,049 7,001
09/30/2002 3,600 3,381 3,795 5,791
12/31/2002 3,820 3,580 4,512 6,280
03/31/2003 3,660 3,428 4,497 6,082
06/30/2003 4,760 4,454 5,545 7,018
09/30/2003 5,470 5,109 6,084 7,204
12/31/2003 6,070 5,670 6,887 8,081
03/31/2004 6,270 5,840 7,059 8,218
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year From Inception
--------- -------- --------------
Institutional Class 71.31% 0.43% (11.34)%
Service Class 70.80% 0.11% (11.60)%
Investor A Class (Load Adjusted) 61.84% (1.78)% (12.95)%
Investor A Class (NAV) 70.36% (0.11)% (11.79)%
Investor B Class (Load Adjusted) 64.91% (1.99)% (13.11)%
Investor B Class (NAV) 69.41% (0.82)% (12.42)%
Investor C Class (Load Adjusted) 68.41% (0.82)% (12.42)%
Investor C Class (NAV) 69.41% (0.82)% (12.42)%
- --------------------------------------------------------------------------------
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 18 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE. ON JANUARY
28, 2004, THE COMPARATIVE INDEX CHANGED FROM THE S&P 500(REG. TM) INDEX TO THE
PACIFIC STOCK EXCHANGE TECHNOLOGY INDEX BECAUSE THE NEW INDEX MORE ADEQUATELY
REFLECTS THE UNIVERSE OF SECURITIES IN WHICH THE PORTFOLIO INVESTS.
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
EUROPEAN EQUITY PORTFOLIO
Total Net Assets (3/31/04): $4.3 million
Performance Benchmark
Morgan Stanley Capital International ("MSCI") Europe Index
Investment Approach
Seeks long-term capital appreciation by normally investing at least 80% of
its net assets in equity securities issued by European companies and generally
invests in stocks of European companies with market capitalizations of at least
$1 billion. The portfolio management team seeks to achieve consistent and
sustainable performance through various market cycles by emphasizing stock
selection.
Recent Portfolio Management Activity
o All share classes of the Portfolio underperformed the benchmark for the
semi-annual period.
o During the first half of the period, all share classes of the European
Equity Portfolio underperformed the benchmark. Underperformance was primarily
driven by weak stock selection in the month of October. Sector allocation was
broadly neutral.
o Most global equity markets ended 2003 in robust fashion, and the main
European indices achieved their highest levels for the year in the final
trading sessions of December. The widespread gains across Europe were all the
more impressive given the latest bout of weakness in the U.S. dollar. During
the quarter, the Euro touched a record high against the U.S. currency and broke
through the $1.26 level on the final day of the year.
o Stock selection in industrials was the most important positive
contributor to the Portfolio's performance. Although industrials only kept
pace with the market, a number of Portfolio holdings outperformed, such as
Siemens and St. Gobain. TPG and Atlas Copco also outperformed. These returns
helped to offset a negative return from our position in Securitas.
o Stock selection in information technology was negative with Nokia
lagging the market. The Portfolio's small underweight position in information
technology was only modestly beneficial. The underperformance was compounded
by a strong performance from SAP, the sector's second largest constituent,
which was not held in the Portfolio. Telecommunication services was overall
negative, with positive returns from Telefonica and Vodafone overshadowed by
the disappointing return of KPN.
o Stock selection within the financial sector was mixed, with BBVA, BNP
Paribas, Axa, and ING all outperforming. Their positive impact was more than
offset by negative returns from RAS, Deutsche Bank, Credit Suisse, and Royal
Bank of Scotland. The investment banks were notable laggards with sharp
declines in fixed income trading.
o During the second half of the period, all share classes of the
Portfolio underperformed the benchmark mostly due to the Portfolio's
underweights in information technology and utilities. Overall, negative
performers included Axa, Allianz, ING, Glaxo, Roche and Siemens. An overweight
in weak French positions, as well as poor stock selection in Germany,
contributed to the Portfolio's underperformance. Positives were noted in
Switzerland, principally the strong showing of ABB, and in Finland, where Nokia
rebounded from the first half of the period and contributed the lion's share of
the return. Other strong performers included Scottish & Newcastle, Altadis,
Reed Elsevier, Vivendi Universal and Statoil.
o The Portfolio reduced its exposure to banks in the second half of the
period, which was a notable change in its positioning.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE EUROPEAN EQUITY
PORTFOLIO AND THE MSCI EUROPE INDEX FROM INCEPTION AND AT EACH SEMI-ANNUAL
PERIOD END.
[LINE CHART]
Institutional Investor A MSCI Europe Index
------------- ---------- -----------------
06/23/2000 $ 10,000 $ 9,497 $ 10,000
06/30/2000 10,340 9,820 10,060
09/30/2000 9,510 9,022 9,325
12/31/2000 9,716 9,212 9,509
03/31/2001 8,383 7,939 8,031
06/30/2001 8,242 7,797 7,873
09/30/2001 7,230 6,838 6,920
12/31/2001 7,715 7,282 7,617
03/31/2002 7,623 7,185 7,609
06/30/2002 7,510 7,069 7,266
09/30/2002 5,643 5,312 5,607
12/31/2002 6,034 5,669 6,217
03/31/2003 5,364 5,022 5,644
06/30/2003 6,220 5,823 6,887
09/30/2003 6,241 5,843 7,156
12/31/2003 7,438 6,958 8,613
03/31/2004 7,448 6,958 8,689
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1Year 3 Year From Inception
--------- --------- --------------
Institutional Class 38.86% (3.86)% (7.52)%
Service Class 37.80% (4.33)% (7.97)%
Investor A Class (Load Adjusted) 31.71% (5.93)% (9.17)%
Investor A Class (NAV) 38.55% (4.30)% (7.92)%
Investor B Class (Load Adjusted) 33.01% (6.13)% (9.34)%
Investor B Class (NAV) 37.51% (5.02)% (8.62)%
Investor C Class (Load Adjusted) 36.89% (5.00)% (8.60)%
Investor C Class (NAV) 37.89% (5.00)% (8.60)%
- --------------------------------------------------------------------------------
THE INCEPTION DATE OF THE PORTFOLIO'S INSTITUTIONAL, SERVICE,INVESTOR
A, INVESTOR B, AND INVESTOR C SHARES WAS 6/23/00. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 18 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.
11
INTERNATIONAL EQUITY PORTFOLIO
Total Net Assets (3/31/04): $44.9 million
Performance Benchmark
Morgan Stanley Capital International Europe, Australia and Far East Index
("MSCI EAFE").
Investment Approach
Seeks long-term capital appreciation by normally investing at least 80% of
its net assets in equity securities of issuers located in countries included in
the MSCI EAFE. 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.
Recent Portfolio Management Activity
o All share classes of the Portfolio outperformed the benchmark for the
semi-annual period.+
o During the first half of the period, all share classes of the
International Equity Portfolio marginally underperformed the benchmark. The
primary detractor from performance was the Portfolio's underexposure to more
risky, smaller cap, economically sensitive stocks, which led Index performance
for the first half of the period.
o Strong performance by holdings within emerging markets such as Siam
Cement and Advanced Information Systems in Thailand somewhat offset this
negative performance. The Portfolio's holdings in commodity companies like
Suncor Energy and CVRD were also significant positive contributors to returns.
Within Europe, investor focus was also on undervalued, mid cap companies and as
a result strong gains in mmO2 and Lafarge aided performance.
o During the second half of the period, all share classes of the Portfolio
outperformed the benchmark. The investments that made the largest contributions
to performance came from several holdings, including mmO2, Ito Yokado, Mitsui
Fudosan and UFJ. Industrial holdings were also strong with Keppel Corp and ABB
posting double-digit returns. Investors became more focused on sustainable
returns rather than just high price momentum stocks during the quarter, which
was a factor that helped the Portfolio.
o Our overweight stance in emerging markets provided mixed results
overall, though our addition of Mobile Telesystems to the Portfolio proved a
notable positive. Our holdings in Thailand, however, suffered from sharp
profit taking following prior exceptional returns. In aggregate, country and
sector allocation had a modest effect on performance, with our excess returns
almost solely coming from stock selection.
o Overall, we focused the Portfolio on areas with stronger secular
themes, including an overweight in both the developed and emerging markets of
Asia. The Portfolio remains modestly underweight in Japan primarily due to a
cautious view on the impact of currency strength on this country's leading
exporters. That said, we are overweight in Japan's domestic sectors due to the
prospect for surprise in the pace of domestic economic activity.
o The Portfolio remained modestly biased towards sectors that have higher
economic sensitivity and hence our overweight stance in industrials, materials
and insurance. The Portfolio maintained a large underweight in consumer
staples and the highly valued technology sector.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INTERNATIONAL
EQUITY PORTFOLIO AND THE MSCI EAFE FOR THE PAST TEN YEARS.
[LINE CHART]
Institutional Investor A MSCI EAFE
------------- ---------- ----------
03/31/1994 $ 10,000 $ 9,503 $ 10,000
06/30/1994 10,038 9,525 10,511
09/30/1994 10,338 9,802 10,521
12/31/1994 9,911 9,388 10,414
03/31/1995 9,840 9,313 10,608
06/30/1995 10,196 9,637 10,685
09/30/1995 10,593 9,999 11,130
12/31/1995 10,897 10,290 11,581
03/31/1996 11,161 10,523 11,915
06/30/1996 11,664 10,982 12,104
09/30/1996 11,442 10,757 12,089
12/31/1996 11,826 11,111 12,281
03/31/1997 11,745 11,018 12,089
06/30/1997 13,019 12,192 13,658
09/30/1997 13,145 12,301 13,562
12/31/1997 12,443 11,623 12,500
03/31/1998 14,235 13,283 14,338
06/30/1998 14,337 13,344 14,491
09/30/1998 12,221 11,372 12,431
12/31/1998 14,365 13,367 14,999
03/31/1999 14,582 13,542 15,208
06/30/1999 15,222 14,094 15,594
09/30/1999 15,715 14,536 16,279
12/31/1999 18,832 17,394 19,044
03/31/2000 18,030 16,637 19,024
06/30/2000 17,261 15,910 18,270
09/30/2000 15,735 14,490 16,796
12/31/2000 15,175 13,946 16,346
03/31/2001 13,290 12,200 14,105
06/30/2001 12,940 11,835 13,958
09/30/2001 11,055 10,101 12,004
12/31/2001 11,750 10,725 12,841
03/31/2002 11,831 10,788 12,906
06/30/2002 11,791 10,738 12,632
09/30/2002 9,489 8,615 10,140
12/31/2002 9,665 8,780 10,794
03/31/2003 8,636 7,832 9,907
06/30/2003 10,112 9,159 11,816
09/30/2003 10,559 9,550 12,777
12/31/2003 12,325 11,130 14,959
03/31/2004 13,816 12,492 15,608
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return+
1 Year 3 Year 5 Year 10 Year
-------- -------- --------- ---------
Institutional Class 59.98% 1.30% (1.07)% 3.29%
Service Class 59.38% 0.99% (1.39)% 2.97%
Investor A Class (Load Adjusted) 51.43% (0.91)% (2.60)% 2.25%
Investor A Class (NAV) 59.49% 0.79% (1.60)% 2.77%
Investor B Class (Load Adjusted) 54.07% (0.99)% (2.49)% 2.14%
Investor B Class (NAV) 58.57% 0.18% (2.20)% 2.14%
Investor C Class (Load Adjusted) 57.83% 0.61% (1.97)% 2.26%
Investor C Class (NAV) 58.83% 0.61% (1.97)% 2.26%
- --------------------------------------------------------------------------------
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, 4/27/92; INVESTOR A
SHARES, 6/2/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 10/3/94; AND
INVESTOR C SHARES, 12/5/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 18
FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING
IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.
+PERFORMANCE INFORMATION REFLECTS A NON-RECURRING CONTRIBUTION OF $.47 PER
SHARE MADE IN FEBRUARY OF 2004. WITHOUT THIS CONTRIBUTION, THE PORTFOLIO'S
PERFORMANCE WOULD HAVE BEEN LOWER. FOR EXAMPLE, THE AVERAGE ANNUAL TOTAL RETURN
FOR THE 1, 3, 5 AND 10-YEAR PERIODS ENDED MARCH 31, 2004 WOULD HAVE BEEN
52.53%, -0.29%, -2.01% AND 2.79% FOR THE INSTITUTIONAL CLASS (NAV) AND 44.18%,
- -2.52%, -3.55% AND 1.75% FOR THE INVESTOR A CLASS (LOAD ADJUSTED).
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
INTERNATIONAL OPPORTUNITIES PORTFOLIO
Total Net Assets (3/31/04): $283.0 million
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 underperformed the benchmark for the
semi-annual period.
o During the first half of the period, all share classes of the Portfolio
outperformed the benchmark. The chief contributors to this outperformance were
our long-standing macro-strategy positions and stock selection. Materials,
industrials and a bias to secular growth trends in Asia Pacific were
prominently featured. Currency accounted for nearly half of the benchmark
return. Forward currency contracts purchased early in the period insulated the
Portfolio from the currency impact of being underweight continental Europe and
the U.K.
o All share classes of the Portfolio underperformed the benchmark during
the second half of the period. We attribute the underperformance almost wholly
to a healthy, mid-cycle correction in world equity markets. Basic materials
and technology stocks were among the poorest performers, while consumer
staples, energy, utilities and financials outperformed. Smaller cap companies
and those domiciled in emerging markets continued to outperform. Also notable,
the broad market in Japan rose significantly, easily the best performing major
market. Despite the cyclical bias of the Portfolio, industry allocation was a
small net positive.
o Size, book-to-price, and country factors all negatively impacted the
Portfolio. Regarding size, the nearly inverse relationship between size and
performance that has dominated equity markets for the past three years
continued. Book-to-price is a traditional value factor and it makes sense that
in a period of profit taking and consolidation that low book-to-price would be
influential. The Portfolio was overweight the emerging markets like India and
Thailand, and modestly overweight Japan, which negatively contributed to
performance. We attribute the relatively poor performance of India and
Thailand to profit taking and consolidation and nothing fundamental. Both
economies are presently strong and valuations are reasonable.
o What worked for the first part of the period, lagged in the second
part, and vice-versa - a straightforward, mid-cycle correction. Among the
anxieties that underpinned the consolidation were lackluster job growth in the
U.S. and a resurgence of geopolitical risks.
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
AND AT EACH SEMI-ANNUAL PERIOD END.
[LINE CHART]
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 10,028
12/31/1997 9,483 8,996 8,903
03/31/1998 11,384 10,788 10,354
06/30/1998 11,997 11,350 10,155
09/30/1998 9,614 9,092 8,571
12/31/1998 10,538 9,935 9,678
03/31/1999 10,764 10,127 9,839
06/30/1999 12,722 11,963 10,579
09/30/1999 14,601 13,702 11,062
12/31/1999 26,522 24,889 12,129
03/31/2000 33,056 30,958 12,410
06/30/2000 28,509 26,693 12,043
09/30/2000 28,037 26,213 11,362
12/31/2000 24,365 22,749 10,603
03/31/2001 21,041 19,625 9,577
06/30/2001 21,601 20,118 9,838
09/30/2001 18,501 17,205 8,284
12/31/2001 20,182 18,744 9,049
03/31/2002 22,684 21,046 9,623
06/30/2002 22,821 21,140 9,736
09/30/2002 18,961 17,546 8,039
12/31/2002 19,572 18,098 8,426
03/31/2003 18,812 17,370 8,058
06/30/2003 21,825 20,130 9,926
09/30/2003 24,850 22,890 11,264
12/31/2003 29,217 26,892 13,062
03/31/2004 30,974 28,478 14,340
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
-------- -------- -------- --------------
Institutional Class 64.65% 13.76% 23.54% 18.97%
Service Class 64.23% 13.39% 23.11% 18.60%
Investor A Class (Load Adjusted) 55.74% 11.29% 21.71% 17.44%
Investor A Class (NAV) 63.95% 13.21% 22.97% 18.38%
Investor B Class (Load Adjusted) 58.32% 11.47% 21.90% 17.54%
Investor B Class (NAV) 62.82% 12.41% 22.08% 17.54%
Investor C Class (Load Adjusted) 61.82% 12.41% 22.08% 17.54%
Investor C Class (NAV) 62.82% 12.41% 22.08% 17.54%
- --------------------------------------------------------------------------------
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 18 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.
13
ASIA PACIFIC EQUITY PORTFOLIO
Total Net Assets (3/31/04): $3.5 million
Performance Benchmark
Morgan Stanley Capital International ("MSCI") All Country Asia Pacific
Index
Investment Approach
Seeks long-term capital appreciation by normally investing at least 80% of
its net assets in equity securities issued by Asia Pacific region companies
with market capitalizations generally over $500 million whose earnings, the
portfolio management team believes, are in a strong growth trend or whose
stock, the management team believes, is undervalued.
Recent Portfolio Management Activity
o All share classes of the Portfolio outperformed the benchmark for the
semi-annual period. During the first half of the period, however, all share
classes of the Portfolio underperformed the MSCI All Country Asia Pacific
Index, which gained 10.9% in U.S. dollar terms. Country and sector allocation
were marginally negative. The Portfolio's overweight position in Taiwan and
underweight positions in Australia, New Zealand and China detracted from
performance, while the Portfolio's overweight in Thailand was the biggest
positive contributor to performance. The Portfolio's overweight position in
materials was positive, but overall, sector allocation was negative due to our
lack of exposure to energy and telecommunication services.
o Stock selection caused the Portfolio to underperform in the consumer
discretionary and information technology sectors, and outperform in
industrials, materials and utilities. In Japan, Namura Shipbuilding, Mitsubishi
Corporation and Asahi Kasei performed strongly. Korea's Honam Petrochemical
rose sharply as well. Within consumer discretionary, both Bridgestone and Denso
Corp underperformed, as weakness in the U.S. dollar hurt earnings. The
Taiwanese market lagged with technology notably weak. Hon Hai Precision fell,
after having a particularly strong prior period.
o The Portfolio maintained a significantly underweight position in
Australia while Asian emerging markets were increased. We added new holdings in
the financial sectors in Taiwan and Hong Kong, where deflationary pressures
disappeared and demand for credit returned. While the Portfolio maintained a
neutral position in Japan, we increased holdings that are more economically
sensitive to domestic demand, like Aiful and Kayaba.
o Over the second half of the period, all share classes of the Portfolio
posted positive relative performance with stock selection in Japan the primary
reason for excess return. Holdings in real estate, banks and retail stocks
gained significantly in U.S. dollar terms. Exposure to two smaller cap stocks,
Joint and Namura Shipbuilding proved successful. Country and sector allocation
were marginal contributors to return, with an overweight position in Thailand
and Hong Kong detracting from performance. An underweight position in Australia
and China added to returns. The overweight in consumer discretionary and the
underweight in consumer staples were negative factors. These were more than
offset by our lack of exposure to utilities and overweight in financials.
o The underweight in Australia has continued to be the funding vehicle
for overweighting the more cyclical markets of Asia. With our optimism of Asian
growth rates and stock valuations, we are not looking to change the sizeable
underweight position in Australia. The Portfolio's overweight position in
Japan's domestic sectors like real estate, construction and financials has been
a major contributor to returns. We believe, however, that some of the price
gains in these sectors were extreme, and we have been reducing this exposure.
This reduction is a tactical move and the Portfolio still has an overweight
position in domestic reflation sectors.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ASIA PACIFIC
EQUITY PORTFOLIO AND THE MSCI ALL COUNTRY ASIA PACIFIC INDEX FROM INCEPTION AND
AT EACH SEMI-ANNUAL PERIOD END.
[LINE CHART]
Institutional Investor A MSCI All Country Asia Pacific Index
------------- ---------- -----------------------------------
06/23/2000 $ 10,000 $ 9,497 $ 10,000
06/30/2000 10,190 9,687 10,111
09/30/2000 9,250 8,746 8,931
12/31/2000 8,239 7,776 7,748
03/31/2001 7,532 7,105 7,151
06/30/2001 7,593 7,105 7,204
09/30/2001 6,312 5,898 5,869
12/31/2001 6,456 5,995 6,126
03/31/2002 6,746 6,258 6,405
06/30/2002 6,891 6,384 6,545
09/30/2002 6,063 5,596 5,712
12/31/2002 5,904 5,450 5,598
03/31/2003 5,417 4,993 5,252
06/30/2003 6,131 5,635 5,992
09/30/2003 7,146 6,579 7,089
12/31/2003 7,889 7,245 7,858
03/31/2004 9,188 8,427 8,798
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year From Inception
-------- -------- --------------
Institutional Class 69.63% 6.85% (2.22)%
Service Class 69.80% 6.56% (2.43)%
Investor A Class (Load Adjusted) 60.34% 4.08% (4.44)%
Investor A Class (NAV) 68.78% 5.85% (3.12)%
Investor B Class (Load Adjusted) 63.43% 4.60% (4.06)%
Investor B Class (NAV) 67.93% 5.66% (3.30)%
Investor C Class (Load Adjusted) 66.94% 5.61% (3.30)%
Investor C Class (NAV) 67.94% 5.61% (3.30)%
- --------------------------------------------------------------------------------
THE INCEPTION DATE OF THE PORTFOLIO'S INSTITUTIONAL, SERVICE, INVESTOR A,
INVESTOR B, AND INVESTOR C SHARES WAS 6/23/00. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 18 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
SELECT EQUITY PORTFOLIO
Total Net Assets (3/31/04): $106.1 million
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 of the Portfolio outperformed the benchmark for the
semi-annual period.
o During the first half of the period, the U.S. equity market experienced
a modest early pullback and then came roaring back. Many investors were
encouraged by the wave of corporate earnings announcements and positive
economic news. This confidence continued into the second half of the period
but wavered in the middle of February through March as concern mounted over
both the anemic U.S. employment figures and renewed concerns about terrorism.
During this period, there was a clear movement away from the more volatile,
higher risk stocks and sectors that had powered much of the 2003 returns.
o In the first half of the period, all share classes of the Select Equity
Portfolio slightly underperformed the benchmark. The Select Equity model
continued to improve from the difficult performance experienced in mid-2003,
and was modestly helpful in identifying outperforming stocks from
underperforming stocks. The valuation factors were strong, led by forecast
earnings-to-price, cash flow-to-price and book-to-price. Overall, earnings
momentum factors were flat and all other factors were flat or slightly
negative. Approximately half of the Portfolio's sectors produced positive
relative returns. Particularly strong performance came from consumer cyclicals
and telecommunications. Healthcare and technology proved to be the most
difficult for the model, producing very negative relative performance. The
Portfolio was on the wrong side of the Bank of America/Fleet Boston Financial
merger announcement, costing the Portfolio relative performance. Holding
Louisiana Pacific Corp, Countrywide Financial, Nextel, and Nordstrom in
overweight positions contributed positively to relative performance.
Underweight positions in Lilly, Coca Cola, Hewlett Packard, and Yahoo, as well
as an overweight position in Merck hurt relative returns.
o The second half of the period was exceptionally strong for all share
classes of the Portfolio. The model was quite predictive, with particular
strength coming from the valuation factors (primarily forecast earnings-to-
price, cash flow-to-price and book-to-price). The earnings expectation factors
of the model gained considerable traction with the factors measuring earning
surprises and upward earnings revisions showing noticeable improvement. The
model was predictive across most sectors leading to relative outperformance
from ten of the thirteen sectors. The strongest sectors included financials,
non-cyclicals, basic materials, and industrials. After struggling on a relative
basis over the last few quarters, the technology sector showed marked
improvement with strong relative returns in March. Stocks in the Portfolio
that helped drive the strong performance for the quarter included Bank One,
Countrywide Financial, Tyson Foods, Louisiana Pacific, and Stanley Works.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SELECT EQUITY
PORTFOLIO AND THE S&P 500(REG. TM) INDEX FOR THE PAST TEN YEARS.
[LINE CHART]
Institutional Investor A S&P 500(REG. TM) Index
------------- ---------- ----------------------
03/31/1994 $ 10,000 $ 9,553 $ 10,000
06/30/1994 10,055 9,607 10,042
09/30/1994 10,430 9,946 10,533
12/31/1994 10,265 9,780 10,531
03/31/1995 11,214 10,675 11,557
06/30/1995 12,028 11,429 12,660
09/30/1995 12,908 12,262 13,666
12/31/1995 13,679 12,970 14,489
03/31/1996 14,375 13,615 15,267
06/30/1996 15,033 14,224 15,952
09/30/1996 15,469 14,620 16,445
12/31/1996 16,924 15,991 17,816
03/31/1997 17,370 16,396 18,294
06/30/1997 20,407 19,232 21,487
09/30/1997 22,043 20,753 23,097
12/31/1997 22,248 20,923 23,760
03/31/1998 25,317 23,787 27,074
06/30/1998 25,874 24,286 27,968
09/30/1998 22,940 21,504 25,186
12/31/1998 27,724 25,954 30,550
03/31/1999 28,959 27,099 32,072
06/30/1999 31,184 29,142 34,333
09/30/1999 29,126 27,191 32,189
12/31/1999 33,483 31,220 36,979
03/31/2000 34,028 31,715 37,827
06/30/2000 32,574 30,314 36,822
09/30/2000 31,498 29,268 36,466
12/31/2000 28,517 26,453 33,612
03/31/2001 23,897 22,140 29,627
06/30/2001 24,894 23,033 31,361
09/30/2001 20,382 18,852 26,758
12/31/2001 22,430 20,706 29,617
03/31/2002 21,560 19,897 29,699
06/30/2002 18,317 16,879 25,720
09/30/2002 15,400 14,181 21,277
12/31/2002 16,584 15,239 23,072
03/31/2003 16,071 14,763 22,345
06/30/2003 18,398 16,872 25,785
09/30/2003 18,911 17,314 26,468
12/31/2003 21,201 19,382 29,690
03/31/2004 22,072 20,170 30,193
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
-------- --------- --------- ---------
Institutional Class 37.34% (2.61)% (5.29)% 8.24%
Service Class 36.95% (2.93)% (5.59)% 7.91%
Investor A Class (Load Adjusted) 30.47% (4.54)% (6.60)% 7.27%
Investor A Class (NAV) 36.63% (3.06)% (5.73)% 7.76%
Investor B Class (Load Adjusted) 31.09% (4.93)% (6.74)% 7.10%
Investor B Class (NAV) 35.59% (3.79)% (6.45)% 7.10%
Investor C Class (Load Adjusted) 34.55% (3.80)% (6.45)% 7.10%
Investor C Class (NAV) 35.55% (3.80)% (6.45)% 7.10%
- --------------------------------------------------------------------------------
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 18 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.
15
INDEX EQUITY PORTFOLIO
Advisor to the Index Master Portfolio
Dimensional Fund Advisors Inc.
Total Net Assets (3/31/04): $1.6 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 total investment return. In pursuit of this goal, the
Portfolio invests all of its assets indirectly, through 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 using a passive investment style that
seeks to approximate the returns 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 The stock market rally that began in the spring of 2003 advanced into
December. Positive economic data, the capture of Saddam Hussein, and a notable
absence of bad news combined to keep investors upbeat through year-end. In
December alone, the S&P 500(Reg. TM) Index gained 5.2%. For the fourth quarter
of 2003, the S&P 500(Reg. TM) Index was up 12.2%.
o As prevailing opinion moved to cyclical recovery, industry groups and
sectors viewed as beneficiaries of global growth significantly outperformed.
The strongest industry groups in the fourth quarter of 2003 were metals (+45%);
autos (+40%); office electronics (+35%) and homebuilders (+34%). From a sector
standpoint, basic materials companies were the big winners in the fourth
quarter, gaining more than 20%. Defensive sectors, including healthcare,
consumer staples and utilities, all underperformed the market in the quarter
despite positive absolute gains.
o The outperformance of both smaller capitalization stocks and stocks
with higher volatility were other dominant themes in the market. These trends
held true in both the value and growth styles. In addition, value outperformed
growth across all capitalization ranges.
o During the second half of the period, a slip in investor confidence and
a moderation in growth expectations as a result of tepid labor market
statistics caused a sell-off in more economically sensitive groups and a move
into more defensive stocks. Information technology and materials, two of the
best performing sectors in 2003, fell 2.4% and 2.3% respectively during the
quarter. The best performing sectors during the first quarter of 2004 were
relatively defensive consumer staples (+5%); energy (+4%); utilities (+4%) and
telecommunications (+4%). For the quarter, the S&P 500(Reg. TM) Index returned
1.7%. Again, smaller cap stocks outperformed larger cap stocks, and value
stocks outperformed their growth counterparts.
o 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 six-months ended March 31, 2004, the S&P
500(Reg. TM) Index returned 14.1%. 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, Institutional, Service, Investor A, Investor B, and Investor
C class shares of the Portfolio posted total returns of 14.0%, 13.7%, 13.7%,
13.2% and 13.3%, respectively, for the semi-annual period.
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.
[LINE CHART]
Institutional Investor A S&P 500(REG. TM) Index
------------- ---------- ----------------------
03/31/1994 $ 10,000 $ 9,696 $ 10,000
06/30/1994 10,051 9,745 10,042
09/30/1994 10,514 10,183 10,533
12/31/1994 10,513 10,175 10,531
03/31/1995 11,521 11,122 11,557
06/30/1995 12,624 12,196 12,660
09/30/1995 13,595 13,113 13,666
12/31/1995 14,405 13,891 14,489
03/31/1996 15,147 14,582 15,267
06/30/1996 15,811 15,207 15,952
09/30/1996 16,289 15,645 16,445
12/31/1996 17,628 16,925 17,816
03/31/1997 18,086 17,344 18,294
06/30/1997 21,218 20,328 21,487
09/30/1997 22,801 21,823 23,097
12/31/1997 23,430 22,387 23,760
03/31/1998 26,688 25,463 27,074
06/30/1998 27,552 26,284 27,968
09/30/1998 24,833 23,650 25,186
12/31/1998 30,121 28,659 30,550
03/31/1999 31,568 30,005 32,072
06/30/1999 33,734 32,017 34,333
09/30/1999 31,628 29,974 32,189
12/31/1999 36,332 34,392 36,979
03/31/2000 37,156 35,114 37,827
06/30/2000 36,079 34,042 36,822
09/30/2000 35,772 33,699 36,466
12/31/2000 32,974 31,027 33,612
03/31/2001 29,058 27,284 29,627
06/30/2001 30,726 28,810 31,361
09/30/2001 26,194 24,536 26,758
12/31/2001 28,975 27,092 29,617
03/31/2002 29,035 27,104 29,699
06/30/2002 25,139 23,431 25,720
09/30/2002 20,784 19,353 21,277
12/31/2002 22,536 20,943 23,072
03/31/2003 21,815 20,246 22,345
06/30/2003 25,158 23,314 25,785
09/30/2003 25,813 23,884 26,468
12/31/2003 28,949 26,737 29,690
03/31/2004 29,426 27,143 30,193
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
-------- --------- --------- ---------
Institutional Class 34.89% 0.42% (1.40)% 11.40%
Service Class 34.33% (0.02)% (1.82)% 11.00%
Investor A Class (Load Adjusted) 30.06% (1.18)% (2.59)% 10.50%
Investor A Class (NAV) 34.07% (0.17)% (1.99)% 10.84%
Investor B Class (Load Adjusted) 28.68% (2.07)% (3.09)% 10.19%
Investor B Class (NAV) 33.18% (0.91)% (2.70)% 10.19%
Investor C Class (Load Adjusted) 32.11% (0.92)% (2.71)% 10.18%
Investor C Class (NAV) 33.11% (0.92)% (2.71)% 10.18%
- --------------------------------------------------------------------------------
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 18
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
BALANCED PORTFOLIO
Total Net Assets (3/31/04): $140.3 million
Performance Benchmark
Equity Portion: S&P 500(Reg. TM) Index
Fixed Income Portion: Lehman Brothers U.S. Aggregate Index
Investment Approach
Seeks to maximize total return, consistent with income generation and
prudent investment management, in a blend of equity and fixed income
securities. The portfolio management team for the equity portion 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. The Portfolio normally will maintain at
minimum a 25% allocation to fixed income securities. The fixed income portion
of the fund consists of a broad range of U.S. investment-grade bonds, including
U.S. Government bonds, mortgage-backed, asset-backed, and corporate debt
securities.
Recent Portfolio Management Activity
o All share classes of the Portfolio outperformed the benchmark for the
semi-annual period.
Equity
o In the first half of the period, the quantitative equity model was
modestly helpful in identifying outperforming stocks. Valuation factors were
strong. Earnings momentum factors were flat or slightly negative. Approximately
half of the sectors produced positive relative returns. Strong performance came
from consumer cyclicals and telecommunications. Healthcare and technology
proved to be the most difficult for the model, producing negative relative
returns. Overweight positions in Louisiana Pacific Corp, Countrywide Financial,
Nextel, and Nordstrom contributed positively to relative returns. Underweight
positions in Lilly, Coca Cola, Hewlett Packard and Yahoo, and an overweight in
Merck hurt relative performance.
o The second half of the period was exceptionally strong for all share
classes of the Portfolio. The model was quite predictive, with particular
strength coming from valuation factors. The model was also predictive across
most sectors leading to relative outperformance. The strongest sectors included
financials, non-cyclicals, basic materials, and industrials. The technology
sector showed marked improvement with strong relative returns in March. Stocks
that helped drive returns included Bank One, Countrywide Financial, Tyson
Foods, Louisiana Pacific and Stanley Works.
Fixed Income
o After initially rising in October due to stronger economic data,
interest rates fluctuated in an increasingly narrow range over the balance of
the fourth quarter. During the first quarter of 2004, additional employment
data dissappointments and renewed terrorism fears began to shake investor
confidence in the sustainability of the economic recovery and yields generally
fell. For the six-month period, 10-year Treasury yields fell 0.10%. By the
end of the period, the Fed Funds Target Rate had remained unchanged at 1.00%
for nine consecutive months.
o During the first half of the period, the Portfolio's yield curve
positioning had a negative impact on performance. The Portfolio's underweight
in the corporate and mortgage sectors also hurt performance while security
selection within these sectors helped returns. The Portfolio's overweight in
commercial mortgage-backed securites, as well as its allocation to non-dollar
contributed to performance.
o During the second half of the period, the Portfolio suffered from its
short duration versus the Index and its positioning in favor of a slight
decrease in yield differentials between the 10- and 20-year segments of the
yield curve. The Portfolio's underweight in the mortgage sector also detracted
from relative performance. Security selection within corporate and agency
issues was the most significant contributor to relative performance. The
Portfolio also benefited from its overweights in commercial mortgage-backed
securities and asset-backed securities.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE BALANCED PORTFOLIO
AND THE 65% S&P 500(REG. TM) INDEX /35% LEHMAN BROTHERS U.S. AGGREGATE INDEX FOR
THE PAST TEN YEARS.
[LINE CHART]
Institutional Investor A 65% S&P 500 (Reg. TM) Index, 35% Lehman Brothers U.S. Aggregate Index
------------- ---------- ---------------------------------------------------------------------
03/31/1994 $ 10,000 $ 9,552 $ 10,000
06/30/1994 9,884 9,439 9,992
09/30/1994 10,037 9,575 10,332
12/31/1994 10,004 9,534 10,346
03/31/1995 10,662 10,153 11,182
06/30/1995 11,463 10,904 12,114
09/30/1995 12,077 11,476 12,822
12/31/1995 12,775 12,128 13,516
03/31/1996 13,100 12,425 13,898
06/30/1996 13,494 12,785 14,331
09/30/1996 13,819 13,080 14,718
12/31/1996 14,755 13,953 15,671
03/31/1997 14,938 14,112 15,920
06/30/1997 16,867 15,920 17,911
09/30/1997 17,748 16,734 19,002
12/31/1997 18,270 17,209 19,562
03/31/1998 19,946 18,761 21,426
06/30/1998 20,639 19,390 22,066
09/30/1998 19,668 18,439 20,990
12/31/1998 22,286 20,889 23,858
03/31/1999 22,918 21,451 24,587
06/30/1999 23,623 22,081 25,635
09/30/1999 22,579 21,094 24,648
12/31/1999 24,742 23,095 26,985
03/31/2000 25,305 23,586 27,626
06/30/2000 24,718 23,011 27,315
09/30/2000 24,409 22,707 27,447
12/31/2000 23,229 21,569 26,439
03/31/2001 20,937 19,424 24,659
06/30/2001 21,557 19,976 25,658
09/30/2001 19,300 17,870 23,554
12/31/2001 20,567 19,021 25,187
03/31/2002 19,921 18,400 25,253
06/30/2002 18,432 17,001 23,329
09/30/2002 16,684 15,366 21,012
12/31/2002 17,650 16,237 22,315
03/31/2003 17,381 15,983 21,966
06/30/2003 19,288 17,705 24,335
09/30/2003 19,661 18,026 24,750
12/31/2003 21,292 19,501 26,717
03/31/2004 22,021 20,148 27,261
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
-------- --------- --------- ---------
Institutional Class 26.70% 1.70% (0.79)% 8.21%
Service Class 26.26% 1.39% (1.10)% 7.89%
Investor A Class (Load Adjusted) 20.36% (0.31)% (2.15)% 7.26%
Investor A Class (NAV) 26.06% 1.23% (1.25)% 7.75%
Investor B Class (Load Adjusted) 20.61% (0.65)% (2.30)% 6.99%
Investor B Class (NAV) 25.11% 0.49% (2.00)% 6.99%
Investor C Class (Load Adjusted) 24.22% 0.49% (2.00)% 6.99%
Investor C Class (NAV) 25.22% 0.49% (2.00)% 6.99%
- --------------------------------------------------------------------------------
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, 5/14/90; INSTITUTIONAL
SHARES, 5/1/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 10/3/94; AND
INVESTOR C SHARES, 12/20/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 18
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.
17
BLACKROCK FUNDS
NOTE ON PERFORMANCE INFORMATION
The performance information above includes information for each class of
each Portfolio since the commencement of operations of the Portfolio,rather
than the date such class was introduced.Performance information for each class
introduced after the commencement of operations of a Portfolio is therefore
based on the performance history of a predecessor class or predecessor classes.
If a class of shares in a Portfolio (the "Subsequent Class") has more than one
predecessor class, the performance data predating the introduction of the
Subsequent Class is based initially on the performance of the Portfolio's first
operational predecessor class (the "Initial Class"); thereafter, the
performance of the Subsequent Class is based upon the performance of any other
predecessor class or classes which were introduced after the Initial Class and
which had total operating expenses more similar to those of the Subsequent
Class. In the case of Investor A, Investor B, Investor C and Service Shares,
the performance information for periods prior to their introduction dates has
not been restated to reflect the shareholder servicing and processing and/or
distribution fees and certain other expenses borne by these share classes
which, if reflected, would reduce the performance quoted. Accordingly, the
performance information may be used in assessing each Portfolio's performance
history but does not reflect how the distinct classes would have performed on a
relative basis prior to the introduction of these classes, which would require
an adjustment to the ongoing expenses.
Performance information is restated to reflect the current maximum
front-end sales charge (in the case of Investor A Shares) or the maximum
contingent deferred sales charge (in the case of Investor B and Investor C
Shares), and assumes the reinvestment of dividends and distributions. The
maximum front-end sales charges for Investor A Shares are as follows:Large Cap
Value Equity, Large Cap Growth Equity, Mid-Cap Value Equity, Mid-Cap Growth
Equity, Small Cap Value Equity, Small Cap Growth Equity, Select Equity and
Balanced Portfolios - 4.50%; Small Cap Core Equity, U.S.Opportunities, Global
Science &Technology Opportunities, European Equity, International Equity,
International Opportunities and Asia Pacific Equity Portfolios - 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, 2005. 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.
18
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LARGE CAP VALUE EQUITY PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS - 99.4%
Aerospace - 2.3%
Alliant Techsystems, Inc.(b) 23,500 $ 1,278,400
Northrop Grumman Corp. 25,700 2,529,394
United Technologies Corp. 30,300 2,614,890
-----------
6,422,684
-----------
Banks - 15.1%
Bank of America Corp.(c) 100,500 8,138,489
Bank One Corp. 88,700 4,835,924
First Tennessee National Corp. 48,100 2,294,370
FleetBoston Financial Corp. 53,800 2,415,620
Greenpoint Financial Corp. 45,000 1,966,950
Huntington Bancshares, Inc. 79,200 1,757,448
J.P. Morgan Chase & Co., Inc. 179,100 7,513,245
National City Corp. 81,400 2,896,212
U.S. Bancorp 193,900 5,361,335
Wachovia Corp. 119,400 5,611,800
-----------
42,791,393
-----------
Beverages & Bottling - 0.8%
Coca-Cola Enterprises, Inc. 92,200 2,228,474
-----------
Broadcasting - 1.2%
Comcast Corp. - Class A(b) 60,500 1,738,770
Fox Entertainment Group, Inc. -
Class A(b) 45,800 1,241,180
-----------
2,979,950
-----------
Business Services - 1.2%
Cendant Corp.(c) 138,900 3,387,771
-----------
Chemicals - 1.8%
Cytec Industries, Inc. 70,700 2,514,799
RPM International, Inc. 162,400 2,686,096
-----------
5,200,895
-----------
Computer & Office Equipment - 3.7%
Hewlett-Packard Co. 190,600 4,353,304
International Business Machines
Corp. 67,600 6,208,384
-----------
10,561,688
-----------
Computer Software & Services - 1.1%
BMC Software, Inc.(b) 82,900 1,620,695
GTECH Holdings Corp.(c) 26,900 1,590,866
-----------
3,211,561
-----------
Construction - 1.2%
Centex Corp. 55,200 2,984,113
-----------
Electronics - 1.9%
Agilent Technologies, Inc.(b) 54,400 1,720,672
Jabil Circuit, Inc.(b) 53,600 1,577,448
L-3 Communications Holdings, Inc.(c) 35,300 2,099,644
-----------
5,397,764
-----------
Energy & Utilities - 5.5%
Constellation Energy Group, Inc. 76,200 3,044,190
Entergy Corp. 53,600 3,189,200
Exelon Corp. 51,410 3,540,607
PPL Corp.(c) 56,100 2,558,160
TXU Corp.(c) 98,700 2,828,742
-----------
15,160,899
-----------
Entertainment & Leisure - 3.3%
Caesars Entertainment, Inc.(b) 144,300 1,881,672
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS (Continued)
Entertainment & Leisure (Continued)
Time Warner, Inc.(b) 274,100 $ 4,621,326
The Walt Disney Co. 117,600 2,938,824
-----------
9,441,822
-----------
Finance - 10.8%
Capital One Financial Corp.(c) 24,900 1,878,208
Citigroup, Inc.(d) 265,100 13,705,670
Countrywide Financial Corp. 22,866 2,192,849
Freddie Mac 34,400 2,031,664
The Goldman Sachs Group, Inc. 23,800 2,483,530
Lehman Brothers Holdings, Inc. 19,600 1,624,252
MBNA Corp. 29,900 826,137
Merrill Lynch & Co., Inc. 77,640 4,624,238
Washington Mutual, Inc. 30,200 1,289,842
-----------
30,656,390
-----------
Food & Agriculture - 1.4%
Archer-Daniels-Midland Co. 132,000 2,226,840
Supervalu, Inc. 57,800 1,765,212
-----------
3,992,052
-----------
Insurance - 6.7%
ACE Ltd. 34,800 1,484,569
The Allstate Corp. 66,700 3,032,182
American International Group, Inc. 67,100 4,787,585
Fidelity National Financial, Inc. 48,672 1,927,410
John Hancock Financial Services,
Inc. 41,500 1,813,135
MetLife, Inc. 36,000 1,284,480
Prudential Financial, Inc. 64,200 2,874,876
W.R. Berkley Corp. 46,750 1,864,390
-----------
19,068,627
-----------
Machinery & Heavy Equipment - 0.9%
Deere & Co. 31,200 2,162,473
Eagle Materials, Inc. 1,272 74,857
Eagle Materials, Inc. - Class B 4,276 249,718
-----------
2,487,048
-----------
Manufacturing - 5.0%
American Standard Cos., Inc.(b) 18,600 2,115,750
The Black & Decker Corp. 23,300 1,326,702
Cooper Industries, Inc. 29,700 1,698,246
Eaton Corp. 28,900 1,623,891
Energizer Holdings, Inc.(b) 51,300 2,395,197
Fortune Brands, Inc. 28,400 2,176,292
The Sherwin-Williams Co.(c) 70,900 2,724,687
-----------
14,060,765
-----------
Medical & Medical Services - 0.8%
Coventry Health Care, Inc.(b) 53,950 2,283,704
-----------
Medical Instruments & Supplies - 0.6%
Becton, Dickinson & Co. 37,700 1,827,696
-----------
Metal & Mining - 0.7%
Alcoa, Inc. 60,900 2,112,621
-----------
Motor Vehicles - 1.7%
American Axle & Manufacturing
Holdings, Inc.(b) 52,400 1,930,940
General Motors Corp.(c) 61,700 2,906,070
-----------
4,837,010
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LARGE CAP VALUE EQUITY PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------ -------------
COMMON STOCKS (Continued)
Oil & Gas - 10.9%
Amerada Hess Corp. 25,500 $ 1,664,640
ChevronTexaco Corp. 56,000 4,915,680
ConocoPhillips 66,900 4,670,289
Exxon Mobil Corp. 301,900 12,556,021
Marathon Oil Corp. 61,300 2,063,971
Occidental Petroleum Corp. 58,700 2,703,135
Oneok, Inc. 101,400 2,286,570
------------
30,860,306
------------
Paper & Forest Products - 2.1%
Georgia Pacific Corp. 63,000 2,122,470
Kimberly-Clark Corp. 25,500 1,609,050
Louisiana-Pacific Corp. 90,300 2,329,740
------------
6,061,260
------------
Pharmaceuticals - 2.1%
Merck & Co., Inc. 135,100 5,970,069
------------
Publishing & Printing - 0.9%
The McGraw-Hill Cos., Inc. 32,800 2,497,392
------------
Railroad & Shipping - 0.8%
Burlington Northern Santa Fe Corp. 74,900 2,359,350
------------
Real Estate - 2.9%
General Growth Properties, Inc. 89,600 3,149,440
The Rouse Co. 40,500 2,170,800
Simon Property Group, Inc. 49,200 2,875,248
------------
8,195,488
------------
Restaurants - 0.9%
McDonald's Corp. 87,000 2,485,590
------------
Retail Merchandising - 2.2%
Borders Group, Inc. 63,400 1,505,116
Federated Department Stores, Inc. 45,300 2,448,465
Nordstrom, Inc. 54,900 2,190,510
------------
6,144,091
------------
Security Brokers & Dealers - 0.0%
Piper Jaffray Cos., Inc.(b) 65 3,520
------------
Semiconductors & Related Devices - 0.4%
Fairchild Semiconductor International,
Inc.(b) 48,700 1,170,261
------------
Soaps & Cosmetics - 0.8%
The Procter & Gamble Co. 22,100 2,317,848
------------
Telecommunications - 5.1%
BellSouth Corp.(d) 168,000 4,651,920
SBC Communications, Inc. 65,100 1,597,554
Sprint Corp. (Fon Group) 98,600 1,817,198
Verizon Communications, Inc. 171,100 6,251,994
------------
14,318,666
------------
Telephone Communications - 0.6%
Alltel Corp.(c) 33,000 1,646,370
------------
Tobacco - 1.7%
Altria Group, Inc. 90,400 4,922,280
------------
NUMBER
OF SHARES VALUE
------------ -------------
COMMON STOCKS (Continued)
Transportation - 0.3%
J.B. Hunt Transport Services, Inc.(b) 30,600 $ 862,002
------------
TOTAL COMMON STOCKS
(Cost $209,396,922)
280,909,420
------------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 5.3%
Canadian Imperial Bank
International, Certificate of
Deposit
1.04%(e) 04/29/04 $ 341 341,036
Chase Manhattan Bank, Time
Deposit
1.06%(e) 04/01/04 851 850,582
Foreningssparbanken AB,
Floating Rate Notes
1.05%(e) 04/19/04 1,917 1,916,813
Merrill Lynch Master Note,
Floating Rate Notes
1.19%(e) 04/01/04 1,117 1,116,614
Merrill Lynch, Medium Term Notes
1.19%(e) 04/01/04 124 124,125
Natexis Banques International,
Floating Rate Notes
1.11%(e) 04/01/04 445 445,073
1.16%(e) 04/01/04 375 374,765
Societe General, Floating Rate
Notes
1.14%(e) 04/01/04 1,284 1,284,417
Svenska Handelsbank, Certificate
of Deposit
1.39%(e) 10/27/04 607 607,263
Tannehill Capital, Commercial
Paper
1.04%(e) 04/19/04 2,246 2,245,506
Westdeutsche Landsbank
International, Floating Rate
Notes
1.06%(e) 04/12/04 113 112,563
1.06%(e) 04/23/04 1,320 1,319,997
1.06%(e) 04/29/04 321 321,127
Galileo Money Market Fund 538 537,723
Institutional Money Market Trust (e) 3,272 3,271,952
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $14,869,556) 14,869,556
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LARGE CAP VALUE EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
VALUE
---------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $224,266,478(a)) 104.7% $295,778,976
LIABILITIES IN EXCESS OF
OTHER ASSETS (4.7)% (13,202,298)
----- ------------
NET ASSETS (Applicable to
10,831,911 Institutional shares,
4,316,759 Service shares,
5,222,014 Investor A shares,
1,612,999 Investor B shares and
507,087 Investor C shares
outstanding) 100.0% $282,576,678
===== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($136,270,147/10,831,911) $12.58
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($54,390,010/4,316,759) $12.60
======
NET ASSET VALUE AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($65,712,573/5,222,014) $12.58
======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($12.58/0.955) $13.17
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($19,931,666/1,612,999) $12.36
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($6,272,282/507,087) $12.37
======
- -------------------
(a) Cost for Federal income tax purposes is $227,127,972. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $70,306,048
Gross unrealized depreciation (1,655,044)
-----------
$68,651,004
===========
(b) Non-income producing security.
(c) Total or partial securities on loan.
(d) Securities, or a portion thereof, pledged as collateral with a value of
$816,474 on 7 long S&P 500 futures contracts expiring June 2004. The
value of such contracts on March 31, 2004 was $281,225, with an
unrealized gain of $6,725.
(e) Securities purchased with the cash proceeds from securities loaned.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LARGE CAP GROWTH EQUITY PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS - 99.3%
Aerospace - 0.9%
United Technologies Corp. 11,600 $ 1,001,080
-----------
Banks - 0.6%
North Fork Bancorporation, Inc.(b) 15,800 668,656
-----------
Beverages & Bottling - 3.6%
Coca-Cola Enterprises, Inc. 38,700 935,379
Pepsi Bottling Group, Inc. 32,800 975,800
PepsiCo, Inc. 38,300 2,062,455
-----------
3,973,634
-----------
Broadcasting - 1.0%
Comcast Corp. - Class A(c) 21,800 626,532
Fox Entertainment Group, Inc. -
Class A(c) 17,700 479,670
-----------
1,106,202
-----------
Business Services - 1.5%
Alliance Data Systems Corp.(c) 26,200 879,010
Cendant Corp. 33,500 817,065
-----------
1,696,075
-----------
Computer & Office Equipment - 6.3%
Cisco Systems, Inc.(c) 102,800 2,417,856
Hewlett-Packard Co. 44,300 1,011,812
International Business Machines
Corp. 30,100 2,764,384
Lexmark International, Inc.(c) 9,600 883,200
-----------
7,077,252
-----------
Computer Software & Services - 12.8%
Adobe Systems, Inc. 16,700 658,481
Affiliated Computer Services, Inc. -
Class A(b)(c) 12,700 659,130
BMC Software, Inc.(c) 28,200 551,310
Checkfree Corp.(c) 30,400 895,584
Computer Sciences Corp.(b)(c) 21,500 867,095
EMC Corp.(c) 48,400 658,724
First Data Corp.(b) 14,000 590,240
GTECH Holdings Corp.(b) 19,500 1,153,230
Microsoft Corp. 192,900 4,816,713
Oracle Corp.(c) 46,200 554,862
Sandisk Corp.(c) 25,100 712,087
Storage Technology Corp.(c) 19,200 534,336
Symantec Corp.(b)(c) 25,300 1,171,390
VeriSign, Inc.(c) 27,200 451,248
-----------
14,274,430
-----------
Construction - 0.6%
Lennar Corp.(b) 11,600 626,748
-----------
Containers - 1.0%
Ball Corp. 16,300 1,104,814
-----------
Electronics - 10.2%
Broadcom Corp. - Class A(c) 19,700 771,649
General Electric Co.(d) 210,800 6,433,616
Intel Corp. 84,100 2,287,520
Jabil Circuit, Inc.(c) 24,100 709,263
L-3 Communications Holdings, Inc.(b) 19,900 1,183,652
-----------
11,385,700
-----------
Entertainment & Leisure - 1.1%
Mandalay Resort Group 14,100 807,366
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS (Continued)
Entertainment & Leisure (Continued)
Time Warner, Inc.(c) 25,800 $ 434,988
-----------
1,242,354
-----------
Finance - 5.2%
American Express Co. 10,300 534,055
Capital One Financial Corp.(b) 10,700 807,101
Citigroup, Inc. 17,500 904,750
Doral Financial Corp. 14,175 498,960
Freddie Mac 20,300 1,198,918
Legg Mason, Inc.(b) 10,700 992,746
MBNA Corp. 33,200 917,316
-----------
5,853,846
-----------
Food & Agriculture - 0.8%
Kellogg Co. 23,400 918,216
-----------
Insurance - 2.7%
American International Group, Inc. 24,100 1,719,535
The Progressive Corp. 8,500 744,600
W.R. Berkley Corp. 14,400 574,272
-----------
3,038,407
-----------
Manufacturing - 3.6%
3M Co. 7,400 605,838
American Standard Cos., Inc.(c) 9,800 1,114,750
The Black & Decker Corp. 12,100 688,974
Energizer Holdings, Inc.(c) 17,300 807,737
NIKE, Inc. - Class B 10,900 848,783
-----------
4,066,082
-----------
Measuring & Controlling Devices - 0.5%
Danaher Corp.(b) 5,600 522,872
-----------
Medical & Medical Services - 5.2%
Amgen, Inc.(c) 26,936 1,566,867
Anthem, Inc.(c) 7,841 710,708
Biogen Idec, Inc.(c) 6,200 344,720
Henry Schein, Inc.(c) 15,200 1,085,584
UnitedHealth Group, Inc. 22,574 1,454,670
WellPoint Health Networks, Inc.(c) 5,200 591,344
-----------
5,753,893
-----------
Medical Instruments & Supplies - 6.2%
Beckman Coulter, Inc. 18,300 998,082
Becton, Dickinson & Co. 25,900 1,255,632
Boston Scientific Corp.(c) 36,300 1,538,394
Johnson & Johnson 61,000 3,093,920
-----------
6,886,028
-----------
Oil & Gas - 1.2%
Halliburton Co.(b) 25,000 759,750
Pogo Producing Co. 12,300 564,201
-----------
1,323,951
-----------
Paper & Forest Products - 1.1%
Kimberly-Clark Corp. 18,700 1,179,970
-----------
Pharmaceuticals - 12.6%
Abbott Laboratories 30,500 1,253,550
Bristol-Myers Squibb Co. 20,600 499,138
Endo Pharmaceuticals Holdings,
Inc.(c) 27,000 659,340
Genentech, Inc.(b)(c) 7,600 804,232
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LARGE CAP GROWTH EQUITY PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Pharmaceuticals (Continued)
Merck & Co., Inc. 40,400 $ 1,785,276
Millennium Pharmaceuticals, Inc.(c) 43,800 740,220
Pfizer, Inc. 198,860 6,970,043
Watson Pharmaceuticals, Inc.(b)(c) 18,000 770,220
Wyeth 16,200 608,310
------------
14,090,329
------------
Publishing & Printing - 0.6%
The McGraw-Hill Cos., Inc. 9,400 715,716
------------
Railroad & Shipping - 0.4%
United Parcel Service, Inc. - Class B 6,800 474,912
------------
Restaurants - 0.9%
Wendy's International, Inc. 23,600 960,284
------------
Retail Merchandising - 9.4%
Borders Group, Inc. 51,500 1,222,609
Claire's Stores, Inc. 51,000 1,062,840
Coach, Inc.(c) 19,800 811,602
Costco Cos., Inc.(b)(c) 18,600 698,616
Foot Locker, Inc.(b) 45,300 1,168,740
The Home Depot, Inc. 40,200 1,501,872
Rent-A-Center, Inc.(c) 21,850 720,832
Wal-Mart Stores, Inc. 34,200 2,041,398
Zale Corp.(c) 20,500 1,261,775
------------
10,490,284
------------
Semiconductors & Related Devices - 4.0%
Applied Materials, Inc.(c) 36,800 786,784
Cypress Semiconductor Corp.(b)(c) 41,100 841,317
Fairchild Semiconductor International,
Inc.(c) 24,000 576,720
International Rectifier Corp.(c) 13,100 602,469
LSI Logic Corp.(c) 84,600 790,164
National Semiconductor Corp.(c) 19,200 853,056
------------
4,450,510
------------
Soaps & Cosmetics - 2.2%
The Procter & Gamble Co. 23,100 2,422,728
------------
Telecommunications - 1.8%
Nextel Communications, Inc. - Class
A(c) 30,100 744,373
QUALCOMM, Inc. 19,000 1,261,980
------------
2,006,353
------------
Tobacco - 0.6%
Altria Group, Inc. 12,600 686,070
------------
Transportation - 0.7%
J.B. Hunt Transport Services, Inc.(c) 29,100 819,747
------------
TOTAL COMMON STOCKS
(Cost $76,347,546) 110,817,143
------------
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- -------------
SHORT TERM INVESTMENTS - 9.8%
American Express Credit Corp.,
Floating Rate Notes
1.08%(e) 04/16/04 $ 631 $ 630,861
Canadian Imperial Bank International,
Certificate of Deposit
1.04%(e) 04/29/04 445 445,166
Canadian Imperial Bank International,
Floating Rate Notes
1.06%(e) 04/29/04 636 636,251
Chase Manhattan Bank, Time
Deposit
1.06%(e) 04/01/04 441 440,943
Foreningssparbanken AB, Floating
Rate Notes
1.05%(e) 04/19/04 167 167,406
General Electric Capital Corp.,
Floating Rate Notes
1.05%(e) 04/12/04 4 4,248
Merrill Lynch Master Note, Floating
Rate Notes
1.19%(e) 04/01/04 415 414,626
Merrill Lynch, Medium Term Notes
1.19%(e) 04/01/04 634 634,072
1.19%(e) 04/01/04 247 247,057
Morgan Stanley Dean Witter & Co.,
Floating Rate Notes
1.08%(e) 04/01/04 615 614,973
Natexis Banques International,
Floating Rate Notes
1.11%(e) 04/01/04 1,185 1,185,322
1.16%(e) 04/01/04 187 186,674
Societe General, Floating Rate Notes
1.14%(e) 04/01/04 1,314 1,313,741
Westdeutsche Landsbank
International, Floating Rate Notes
1.06%(e) 04/12/04 190 189,727
Galileo Money Market Fund 17 17,457
Institutional Money Market Trust(e) 3,761 3,760,810
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $10,889,334) 10,889,334
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LARGE CAP GROWTH EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
VALUE
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $87,236,880(a)) 109.1% $121,706,477
LIABILITIES IN EXCESS OF
OTHER ASSETS
(Including $10,871,877 of payable
upon return of securities loaned) (9.1)% (10,136,134)
----- ------------
NET ASSETS (Applicable to
3,838,884 Institutional shares,
3,843,063 Service shares,
2,675,781 Investor A shares,
1,814,654 Investor B shares and
334,589 Investor C shares
outstanding) 100.0% $111,570,343
===== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($35,371,696/3,838,884) $9.21
=====
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($34,686,340/3,843,063) $9.03
=====
NET ASSET VALUE AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($23,819,871/2,675,781) $8.90
=====
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($8.90/0.955) $9.32
=====
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($14,942,364/1,814,654) $8.23
=====
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($2,750,072/334,589) $8.22
=====
- -------------------
(a) Cost for Federal income tax purposes is $87,833,216. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $34,710,467
Gross unrealized depreciation (837,206)
-----------
$33,873,261
===========
(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
$5,551,588 on 2 long Nasdaq 100 futures contracts and 2 long S&P 500
futures contracts expiring June 2004. The value of such contracts on
March 31, 2004 was $850,750, with an unrealized gain of $750.
(e) Securities purchased with the cash proceeds from securities loaned.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MID-CAP VALUE EQUITY PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS - 96.7%
Banks - 6.5%
Banknorth Group, Inc. 11,400 $ 388,056
Charter One Financial, Inc. 25,100 887,536
First Tennessee National Corp. 8,100 386,370
Popular, Inc. 10,400 448,240
Sovereign Bancorp, Inc. 18,200 389,844
----------
2,500,046
----------
Beverages & Bottling - 3.3%
Constellation Brands, Inc. - Class
A(b) 11,900 381,990
Pepsi Bottling Group, Inc. 29,500 877,625
----------
1,259,615
----------
Business Services - 1.1%
Fluor Corp. 10,600 410,114
----------
Computer Software & Services - 4.0%
Ceridian Corp.(b) 16,700 329,157
GTECH Holdings Corp.(c) 6,900 408,066
Network Associates, Inc.(b) 26,300 473,400
Storage Technology Corp.(b) 11,300 314,479
----------
1,525,102
----------
Construction - 2.5%
Washington Group International,
Inc.(b) 27,700 1,014,097
----------
Electronics - 4.3%
Ametek, Inc. 16,400 420,496
Invision Technologies, Inc.(b) 11,600 576,172
Vishay Intertechnology, Inc.(b)(c) 30,000 640,200
----------
1,636,868
----------
Energy & Utilities - 5.7%
NiSource, Inc. 25,500 541,875
SCANA Corp. 11,500 406,525
TXU Corp.(c) 26,400 756,624
Wisconsin Energy Corp. 15,600 501,540
----------
2,206,564
----------
Entertainment & Leisure - 6.4%
Hilton Hotels Corp. 41,000 666,250
Penn National Gaming, Inc.(b) 15,700 451,689
Scientific Games Corp. - Class A(b) 23,100 432,432
WMS Industries, Inc.(b)(c) 29,100 902,100
----------
2,452,471
----------
Finance - 2.8%
Affiliated Managers Group, Inc.(b)(c) 10,800 589,464
The Bear Stearns Cos., Inc. 5,600 491,008
----------
1,080,472
----------
Food & Agriculture - 4.0%
Bunge Ltd. 22,600 908,972
NBTY, Inc.(b) 16,600 617,188
----------
1,526,160
----------
Insurance - 9.1%
Allmerica Financial Corp.(b) 22,700 784,285
Assurant, Inc.(b) 8,100 203,715
CNA Financial Corp.(b) 14,500 399,620
Everest RE Group Ltd. 8,900 760,416
Max Re Capital Ltd. 9,200 207,920
Radian Group, Inc. 8,500 362,100
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS (Continued)
Insurance (Continued)
RenaissanceRe Holdings Ltd. 14,900 $ 774,800
----------
3,492,856
----------
Machinery & Heavy Equipment - 2.2%
Axcelis Technologies, Inc.(b) 32,400 360,288
Kennametal, Inc. 11,400 470,478
----------
830,766
----------
Manufacturing - 11.7%
The Black & Decker Corp. 15,300 871,182
Brunswick Corp. 10,400 424,632
Crown Holdings, Inc.(b) 35,200 328,064
Eaton Corp. 8,000 449,520
ITT Industries, Inc. 8,800 671,704
Mattel, Inc. 25,900 477,596
Pentair, Inc. 11,800 696,200
Rinker Group Ltd. - ADR(c) 11,200 595,056
----------
4,513,954
----------
Medical & Medical Services - 1.3%
LifePoint Hospitals, Inc.(b) 6,300 203,742
Select Medical Corp. 18,000 300,600
----------
504,342
----------
Medical Instruments & Supplies - 2.7%
Fisher Scientific International, Inc.(b) 18,900 1,040,256
----------
Metal & Mining - 2.6%
Cleveland Cliffs, Inc.(b) 6,100 399,123
Peabody Energy Corp. 12,900 599,979
----------
999,102
----------
Motor Vehicles - 1.7%
PACCAR, Inc. 11,700 658,008
----------
Oil & Gas - 3.4%
Key Energy Services, Inc.(b) 48,000 528,000
Pioneer Natural Resources Co. 5,400 174,420
Talisman Energy, Inc. - ADR 10,400 613,288
----------
1,315,708
----------
Paper & Forest Products - 1.1%
Bowater, Inc. 9,800 427,574
----------
Personal Services - 0.8%
Service Corp. International(b) 41,400 309,258
----------
Pharmaceuticals - 2.3%
Elan Corp. PLC - ADR(b) 17,600 362,912
Valeant Pharmaceuticals Interna-
tional(c) 22,200 529,914
----------
892,826
----------
Publishing & Printing - 1.1%
Banta Corp. 9,200 425,868
----------
Restaurants - 1.1%
Darden Restaurants, Inc.(c) 16,700 413,993
----------
Retail Merchandising - 13.0%
Abercrombie & Fitch Co. - Class A 13,600 460,224
BJ's Wholesale Club, Inc.(b)(c) 15,300 389,385
Circuit City Stores, Inc. 32,900 371,770
Federated Department Stores, Inc. 10,100 545,905
Foot Locker, Inc. 17,200 443,760
J.C. Penney Co., Inc.(c) 14,800 514,744
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MID-CAP VALUE EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS (Continued)
Retail Merchandising (Continued)
Jarden Corp.(b) 18,000 $ 639,180
Polo Ralph Lauren Corp. 12,000 411,360
Regis Corp. 17,800 791,032
The Talbots, Inc. 11,900 425,782
-----------
4,993,142
-----------
Transportation - 2.0%
Laidlaw International, Inc.(b) 53,200 774,060
-----------
TOTAL COMMON STOCKS
(Cost $33,009,250) 37,203,222
-----------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 14.6%
American Express Credit Corp.,
Floating Rate Notes
1.06%(d) 04/22/04 $ 507 507,309
Chase Manhattan Bank, Time
Deposit
1.06%(d) 04/01/04 176 176,398
Natexis Banques International,
Floating Rate Notes
1.11%(d) 04/01/04 203 202,916
1.16%(d) 04/01/04 1,314 1,314,393
Societe General, Floating Rate Notes
1.37%(d) 04/01/04 405 404,679
Westdeutsche Landsbank
International, Floating Rate Notes
1.06%(d) 04/12/04 181 180,718
Galileo Money Market Fund 937 936,591
Institutional Money Market Trust(d) 1,898 1,897,897
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $5,620,901) 5,620,901
----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $38,630,151(a)) 111.3% 42,824,123
LIABILITIES IN EXCESS OF
OTHER ASSETS
(Including $4,684,310 of payable
upon return of securities loaned) (11.3)% (4,346,525)
----- ----------
NET ASSETS (Applicable to
1,415,223 Institutional shares,
312,170 Service shares, 332,978
Investor A shares, 611,037
Investor B shares and 190,639
Investor C shares outstanding) 100.0% $38,477,598
===== ===========
VALUE
-----------
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($19,293,302/1,415,223) $ 13.63
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($4,239,849/312,170) $ 13.58
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($4,496,486/332,978) $ 13.50
=======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($13.50/0.955) $ 14.14
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($7,963,391/611,037) $ 13.03
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($2,484,570/190,639) $ 13.03
=======
- -------------------
(a) Cost for Federal income tax purposes is $38,821,742. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $4,216,454
Gross unrealized depreciation (214,073)
----------
$4,002,381
==========
(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.
26
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MID-CAP GROWTH EQUITY PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS - 98.3%
Advertising - 1.9%
Lamar Advertising Co.(b)(c) 72,300 $ 2,907,906
-----------
Banks - 0.0%
Dime Bancorp, Inc. - Warrants
(expiring 11/22/05) 57,900 11,001
-----------
Broadcasting - 0.6%
Cablevision Systems New York
Group - Class A(b)(c) 37,200 851,136
-----------
Business Services - 6.5%
ChoicePoint, Inc.(c) 68,400 2,601,252
Fluor Corp.(b) 54,800 2,120,212
Manpower, Inc. 60,700 2,822,550
SEI Investments Co. 52,300 1,725,900
-----------
9,269,914
-----------
Computer Software & Services - 14.4%
BEA Systems, Inc.(b)(c) 102,700 1,310,452
The BISYS Group, Inc.(c) 279,196 4,679,325
Ceridian Corp.(c) 141,000 2,779,110
Cognizant Technology Solutions
Corp.(c) 21,900 990,975
DST Systems, Inc.(b)(c) 51,800 2,349,130
MicroStrategy, Inc. - Warrants
(expiring 06/24/07) 13 3
Network Associates, Inc.(b)(c) 230,600 4,150,800
Siebel Systems, Inc.(c) 147,200 1,694,272
Storage Technology Corp.(c) 92,300 2,568,709
-----------
20,522,776
-----------
Containers - 1.4%
Smurfit-Stone Container Corp.(c) 114,300 2,010,537
-----------
Electronics - 3.3%
Intersil Corp. - Class A(b) 84,800 1,890,192
Jabil Circuit, Inc.(c) 96,500 2,839,995
-----------
4,730,187
-----------
Entertainment & Leisure - 3.5%
Hilton Hotels Corp. 95,500 1,551,875
Leapfrog Enterprises, Inc.(b)(c) 26,100 505,035
Regal Entertainment Group - Class
A(b) 37,600 826,448
Station Casinos, Inc. 46,500 2,053,905
-----------
4,937,263
-----------
Food & Agriculture - 1.9%
Dean Foods Co.(c) 81,400 2,718,760
-----------
Insurance - 2.7%
Axis Capital Holdings Ltd. 11,600 342,780
Willis Group Holdings Ltd. 92,400 3,437,280
-----------
3,780,060
-----------
Manufacturing - 2.8%
Brunswick Corp. 68,000 2,776,440
Energizer Holdings, Inc.(c) 26,900 1,255,961
-----------
4,032,401
-----------
Medical & Medical Services - 8.2%
Anthem, Inc.(b)(c) 19,700 1,785,607
Laboratory Corp. of America
Holdings(c) 82,500 3,238,125
Omnicare, Inc.(b) 74,200 3,289,286
Triad Hospitals, Inc.(c) 47,975 1,478,590
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS (Continued)
Medical & Medical Services (Continued)
Universal Health Services, Inc. -
Class B 40,800 $ 1,879,656
-----------
11,671,264
-----------
Medical Instruments & Supplies - 10.6%
Alcon, Inc. 45,600 2,886,480
C.R. Bard, Inc. 31,500 3,075,660
St. Jude Medical, Inc.(c) 55,800 4,023,180
Varian Medical Systems, Inc.(c) 39,600 3,417,876
Zimmer Holdings, Inc.(b)(c) 23,700 1,748,586
-----------
15,151,782
-----------
Oil & Gas - 9.2%
BJ Services Co.(c) 47,200 2,042,345
ENSCO International, Inc. 42,800 1,205,676
GlobalSantaFe Corp. 3 83
Nabors Industries Ltd.(b)(c) 29,711 1,359,278
Patterson-UTI Energy, Inc.(c) 50,900 1,802,369
Pioneer Natural Resources Co. 107,100 3,459,330
Smith International, Inc.(b)(c) 32,600 1,744,426
Talisman Energy, Inc. - ADR 25,000 1,474,250
-----------
13,087,757
-----------
Paper & Forest Products - 0.6%
Pactiv Corp.(c) 37,900 843,275
-----------
Personal Services - 1.0%
Career Education Corp.(b)(c) 24,000 1,359,360
-----------
Pharmaceuticals - 7.9%
Allergan, Inc.(b) 23,500 1,977,760
AmerisourceBergen Corp.(b) 50,700 2,772,276
Celgene Corp.(b)(c) 37,900 1,805,935
Endo Pharmaceuticals Holdings,
Inc.(c) 39,900 974,358
Gilead Sciences, Inc.(c) 35,200 1,963,104
Shire Pharmaceuticals Group PLC -
ADR(c) 59,156 1,740,961
-----------
11,234,394
-----------
Restaurants - 3.0%
Brinker International, Inc.(b)(c) 74,200 2,814,406
Outback Steakhouse, Inc. 29,400 1,431,780
-----------
4,246,186
-----------
Retail Merchandising - 7.8%
Abercrombie & Fitch Co. - Class A 110,900 3,752,856
Dollar General Corp. 99,296 1,906,483
Limited Brands(b) 154,140 3,082,800
Staples, Inc.(c) 94,000 2,386,660
-----------
11,128,799
-----------
Semiconductors & Related Devices - 6.0%
AMIS Holdings, Inc.(c) 14,900 241,827
Fairchild Semiconductor International,
Inc.(c) 90,500 2,174,715
National Semiconductor Corp.(b)(c) 77,078 3,424,576
Novellus Systems, Inc.(b)(c) 31,000 985,490
NVIDIA Corp.(c) 30,000 794,700
Teradyne, Inc.(c) 37,600 896,008
-----------
8,517,316
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MID-CAP GROWTH EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Telecommunications - 4.4%
Amdocs Ltd.(b)(c) 103,200 $ 2,867,928
Andrew Corp.(b)(c) 78,900 1,380,750
Harris Corp. 40,600 1,965,446
------------
6,214,124
------------
Waste Management - 0.6%
Stericycle, Inc.(c) 17,700 847,122
------------
TOTAL COMMON STOCKS
(Cost $97,021,072) 140,073,320
------------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 23.8%
American Express Credit Corp.,
Floating Rate Notes
1.08%(d) 04/16/04 $ 87 87,189
Canadian Imperial Bank International,
Certificate of Deposit
1.04%(d) 04/29/04 5,339 5,339,101
Canadian Imperial Bank International,
Floating Rate Notes
1.06%(d) 04/29/04 83 83,426
Chase Manhattan Bank, Time
Deposit
1.06%(d) 04/01/04 997 996,510
Credit Lyonnais, Certificate of
Deposit
1.08%(d) 09/30/04 20 19,914
Foreningssparbanken AB, Floating
Rate Notes
1.05%(d) 04/19/04 373 373,136
General Electric Capital Corp.,
Floating Rate Notes
1.05%(d) 04/12/04 9 8,978
Irish Life U.S., Commercial Paper
1.05%(d) 04/14/04 53 53,152
Merrill Lynch, Medium Term Notes
1.19%(d) 04/01/04 2,010 2,009,973
Natexis Banques International,
Floating Rate Notes
1.11%(d) 04/01/04 4,304 4,303,994
Westdeutsche Landsbank
International, Certificate of Deposit
1.50%(d) 01/10/05 2,557 2,557,309
Westdeutsche Landsbank
International, Floating Rate Notes
1.06%(d) 04/12/04 29 29,499
1.06%(d) 04/29/04 1,378 1,378,063
Galileo Money Market Fund 2,890 2,890,477
Institutional Money Market Trust(d) 13,836 13,835,750
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $33,966,471) 33,966,471
----------
VALUE
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $130,987,543(a)) 122.1% $174,039,791
LIABILITIES IN EXCESS OF
OTHER ASSETS
(Including $31,075,994 of payable
upon return of securities loaned) (22.1)% (31,507,328)
----- ------------
NET ASSETS (Applicable to
5,312,601 Institutional shares,
1,493,028 Service shares,
3,519,262 Investor A shares,
4,707,151 Investor B shares and
1,647,626 Investor C shares
outstanding) 100.0% $142,532,463
===== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($48,371,179/5,312,601) $9.10
=====
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SERVICE SHARE
($13,152,850/1,493,028) $8.81
=====
NET ASSET VALUE AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($30,291,312/3,519,262) $8.61
=====
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($8.61/0.955) $9.00
=====
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($37,567,729/4,707,151) $7.98
=====
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($13,149,393/1,647,626) $7.98
=====
- -------------------
(a) Cost for Federal income tax purposes is $133,987,747. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $40,595,780
Gross unrealized depreciation (543,736)
-----------
$40,052,044
===========
(b) Total or partial securities on loan.
(c) Non-income producing security.
(d) Securities purchased with the cash proceeds from securities loaned.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
SMALL CAP VALUE EQUITY PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS - 98.9%
Aerospace - 0.3%
Herley Industries, Inc.(b) 24,200 $ 456,896
-----------
Banks - 6.9%
Chittenden Corp. 30,700 1,013,101
Gold Banc Corp. Inc. 75,800 1,235,540
Hudson United Bancorp 36,900 1,404,045
Oriental Financial Group, Inc. 34,900 1,111,565
Provident Bankshares Corp. 25,900 812,742
Sky Financial Group, Inc. 46,400 1,204,080
Sterling Financial Corp.(b) 49,500 1,826,055
Webster Financial Corp. 24,600 1,247,466
-----------
9,854,594
-----------
Broadcasting - 1.0%
Sinclair Broadcast Group, Inc. -
Class A(b) 98,300 1,228,750
-----------
Business Services - 5.3%
Handleman Co. 189,000 4,524,660
Kroll, Inc.(b)(c) 85,700 2,301,045
Viad Corp. 30,600 739,602
-----------
7,565,307
-----------
Chemicals - 0.4%
WD-40 Co. 17,000 595,000
-----------
Computer Software & Services - 1.3%
Inprise Corp.(b) 124,400 1,129,552
Pinnacle Systems, Inc.(b) 86,400 780,192
-----------
1,909,744
-----------
Construction - 4.9%
Champion Enterprises, Inc.(b) 89,500 948,700
Palm Harbor Homes, Inc.(b) 37,500 786,000
URS Corp.(b) 46,900 1,349,782
Washington Group International,
Inc.(b) 108,200 3,961,202
-----------
7,045,684
-----------
Electronics - 3.6%
EDO Corp. 83,800 2,017,904
Invision Technologies, Inc.(b) 33,500 1,663,945
Mentor Graphics Corp.(b)(c) 82,700 1,473,714
-----------
5,155,563
-----------
Energy & Utilities - 1.8%
Headwaters, Inc.(b) 54,800 1,403,976
Vectren Corp. 48,600 1,198,962
-----------
2,602,938
-----------
Entertainment & Leisure - 10.1%
Ameristar Casinos, Inc.(b) 60,800 2,051,939
Extended Stay America, Inc. 70,400 1,363,648
Hollywood Park, Inc.(b) 125,900 1,737,420
Kerzner International Ltd.(b)(c) 38,300 1,698,605
MTR Gaming Group, Inc.(b) 128,600 1,286,000
Multimedia Games, Inc.(b)(c) 84,000 2,078,160
Scientific Games Corp. - Class A(b) 60,800 1,138,176
WMS Industries, Inc.(b)(c) 102,700 3,183,700
-----------
14,537,648
-----------
Finance - 1.9%
Affiliated Managers Group, Inc.(b)(c) 27,000 1,473,660
Indymac Bancorp, Inc.(c) 33,100 1,201,199
-----------
2,674,859
-----------
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS (Continued)
Food & Agriculture - 5.5%
Chiquita Brands International, Inc.(b) 57,700 $ 1,203,045
Del Monte Foods Co.(b) 147,600 1,660,500
Flowers Foods, Inc. 32,800 860,672
NBTY, Inc.(b) 113,500 4,219,930
-----------
7,944,147
-----------
Insurance - 5.8%
Allmerica Financial Corp.(b) 120,100 4,149,455
Aspen Insurance Holdings Ltd. 27,600 710,700
Direct General Corp. 19,300 698,660
Hub International Ltd. 30,100 552,335
Max Re Capital Ltd. 72,000 1,627,200
Platinum Underwriters Holdings Ltd. 19,400 621,770
-----------
8,360,120
-----------
Machinery & Heavy Equipment - 3.3%
Axcelis Technologies, Inc.(b) 113,600 1,263,232
K2, Inc.(b) 69,000 1,106,070
Kennametal, Inc. 41,000 1,692,070
Thermo Fibertek, Inc.(b) 35,266 735,296
-----------
4,796,668
-----------
Manufacturing - 8.8%
Aptargroup, Inc. 29,800 1,144,320
Briggs & Stratton Corp. 44,700 3,015,909
Crown Holdings, Inc.(b) 141,200 1,315,984
Harsco Corp. 17,600 800,800
Kellwood Co. 46,200 1,813,350
Lennox International, Inc. 74,300 1,378,265
Quicksilver, Inc.(b) 64,800 1,415,880
Timken Co.(c) 72,800 1,691,144
-----------
12,575,652
-----------
Medical & Medical Services - 4.7%
Apria Healthcare Group, Inc.(b)(c) 50,800 1,520,952
LifePoint Hospitals, Inc.(b) 46,600 1,507,044
Magellan Health Services, Inc.(b) 46,300 1,301,030
Province Healthcare Co.(b) 85,100 1,353,090
Select Medical Corp. 63,700 1,063,790
-----------
6,745,906
-----------
Medical Instruments & Supplies - 2.4%
Ocular Sciences, Inc.(b) 70,369 2,051,256
STERIS Corp.(b) 45,900 1,184,220
-----------
3,235,476
-----------
Metal & Mining - 1.8%
Cleveland Cliffs, Inc.(b) 23,100 1,511,433
Massey Energy Co. 51,200 1,129,984
-----------
2,641,417
-----------
Oil & Gas - 6.7%
AGL Resources, Inc. 36,800 1,067,936
Airgas, Inc. 64,600 1,375,980
Evergreen Resources, Inc.(b) 50,100 1,720,935
Key Energy Services, Inc.(b) 119,000 1,309,000
Magnum Hunter Resources, Inc.(b) 213,200 2,161,848
Whiting Petroleum Corp.(b) 84,500 1,993,355
-----------
9,629,054
-----------
Paper & Forest Products - 0.5%
Caraustar Industries, Inc.(b) 59,900 697,835
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
SMALL CAP VALUE EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS (Continued)
Pharmaceuticals - 1.8%
Valeant Pharmaceuticals Interna-
tional(c) 108,800 $ 2,597,056
------------
Publishing & Printing - 4.3%
Banta Corp. 75,500 3,494,895
Journal Communications, Inc. - Class
A 73,700 1,474,000
Playboy Enterprises, Inc. - Class B(b) 81,500 1,142,630
------------
6,111,525
------------
Railroad & Shipping - 0.4%
Genesee & Wyoming, Inc. - Class
A(b) 24,300 600,210
------------
Real Estate - 0.8%
American Home Mortgage
Investment Corp. 42,000 1,209,600
------------
Retail Merchandising - 9.4%
BJ's Wholesale Club, Inc.(b)(c) 104,100 2,649,345
Jarden Corp.(b) 63,700 2,261,987
Regis Corp. 93,500 4,155,140
Stage Stores, Inc.(b) 75,000 2,901,750
Too, Inc.(b) 37,600 787,720
The Wet Seal, Inc. - Class A(b) 85,600 706,200
------------
13,462,142
------------
Semiconductors & Related Devices - 0.5%
Helix Technology Corp. 29,500 715,375
------------
Soaps & Cosmetics - 1.6%
NU Skin Enterprises, Inc. 114,500 2,307,175
------------
Telecommunications - 0.6%
General Communication, Inc. - Class
A(b) 101,900 927,290
------------
Textiles - 0.6%
Tommy Hilfiger Corp.(b) 52,000 884,000
------------
Transportation - 1.9%
Laidlaw International, Inc.(b) 143,200 2,083,560
Overnite Corp. 26,000 598,000
------------
2,681,560
------------
TOTAL COMMON STOCKS
(Cost $115,565,429) 141,749,191
------------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 14.7%
Chase Manhattan Bank, Time
Deposit
1.06%(d) 04/01/04 $ 354 354,102
Monumental Global Funding,
Commercial Paper
1.09%(d) 04/28/04 867 867,025
Natexis Banques International,
Floating Rate Notes
1.11%(d) 04/01/04 1,162 1,161,819
1.16%(d) 04/01/04 3,287 3,287,050
Westdeutsche Landsbank
International, Floating Rate Notes
1.06%(d) 04/12/04 74 74,233
Galileo Money Market Fund 1,355 1,355,029
PAR/SHARES
(000) VALUE
------------ -------------
SHORT TERM INVESTMENTS (Continued)
Institutional Money
Market Trust(d) 13,964 $ 13,964,173
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $21,063,431) 21,063,431
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $136,628,860(a)) 113.6% 162,812,622
LIABILITIES IN EXCESS OF
OTHER ASSETS
(Including $19,708,402 of payable
upon return of securities loaned) (13.6)% (19,441,252)
----- -----------
NET ASSETS (Applicable to
4,619,379 Institutional shares,
247,023 Service shares,
2,696,827 Investor A shares,
1,264,782 Investor B shares and
498,219 Investor C shares
outstanding) 100.0% $143,371,370
===== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($72,531,961/4,619,379) $15.70
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SERVICE SHARE
($3,847,642/247,023) $15.58
======
NET ASSET VALUE AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($41,804,691/2,696,827) $15.50
======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($15.50/0.955) $16.23
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($18,066,182/1,264,782) $14.28
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($7,120,894/498,219) $14.29
======
- -------------------
(a) Cost for Federal income tax purposes is $136,653,128. The
gross unrealized appreciation (depreciation) on a tax basis
is as follows:
Gross unrealized appreciation $27,219,183
Gross unrealized depreciation (1,059,689)
------------
$26,159,494
============
(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.
30
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
SMALL CAP CORE EQUITY PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ---------
COMMON STOCKS - 96.1%
Aerospace - 0.9%
Herley Industries, Inc.(b) 2,200 $ 41,536
--------
Air Transportation - 0.7%
EGL, Inc.(b) 1,800 32,328
--------
Banks - 4.6%
Fremont General Corp. 2,200 67,320
Oriental Financial Group, Inc. 1,200 38,220
Provident Bankshares Corp. 1,300 40,794
Sterling Financial Corp.(b) 790 29,143
WSFS Financial Corp. 750 37,628
--------
213,105
--------
Broadcasting - 2.9%
Alliance Atlantis Communications,
Inc.(b) 1,950 37,049
Cumulus Media, Inc. - Class A(b) 2,650 52,974
Gray Television, Inc. 3,050 44,591
--------
134,614
--------
Business Services - 8.0%
Arbitron, Inc.(b) 1,150 46,299
Aviall, Inc.(b) 3,000 45,600
Digitas, Inc.(b) 5,750 59,168
Heidrick & Struggles International,
Inc.(b) 1,550 37,092
Korn/Ferry International(b) 3,550 56,800
MPS Group, Inc.(b) 3,300 36,696
Navigant Consulting, Inc.(b) 4,450 90,024
--------
371,679
--------
Computer & Office Equipment - 1.0%
Answerthink Consulting Group,
Inc.(b) 5,900 45,548
--------
Computer Software & Services - 8.4%
EarthLink, Inc.(b) 3,200 28,352
Ingram Micro, Inc. - Class A(b) 2,100 38,010
Inprise Corp.(b) 3,900 35,412
Internet Security Systems, Inc.(b) 1,750 30,870
Modem Media, Inc.(b) 10,850 70,525
Pinnacle Systems, Inc.(b) 3,500 31,605
SkillSoft PLC - ADR(b) 7,950 102,555
TIBCO Software, Inc.(b) 5,800 47,386
--------
384,715
--------
Construction - 2.0%
Chicago Bridge & Iron Co. N.V. -
ADR 2,150 59,834
URS Corp.(b) 1,200 34,536
--------
94,370
--------
Electronics - 4.7%
CommScope, Inc.(b) 3,300 54,945
Cubic Corp. 1,600 41,600
EDO Corp. 850 20,468
Invision Technologies, Inc.(b) 1,200 59,604
TTM Technologies, Inc.(b) 2,900 35,728
--------
212,345
--------
Entertainment & Leisure - 7.1%
AMC Entertainment, Inc.(b) 2,350 36,072
Ameristar Casinos, Inc.(b) 2,100 70,874
Hollywood Park, Inc.(b) 3,300 45,540
Kerzner International Ltd.(b) 1,750 77,612
NUMBER
OF SHARES VALUE
----------- -----------
COMMON STOCKS (Continued)
Entertainment & Leisure (Continued)
Multimedia Games, Inc.(b) 2,300 $ 56,902
Scientific Games Corp. - Class A(b) 2,400 44,928
--------
331,928
--------
Finance - 1.0%
Jefferies Group, Inc. 1,300 45,929
--------
Food & Agriculture - 2.3%
Delta & Pine Land Co. 1,650 41,168
NBTY, Inc.(b) 1,800 66,924
--------
108,092
--------
Furniture - 1.6%
Aaron Rents, Inc. 2,725 67,825
--------
Insurance - 3.0%
Direct General Corp. 600 21,720
Max Re Capital Ltd. 2,650 59,890
PXRE Group Ltd. 2,150 60,071
--------
141,681
--------
Machinery & Heavy Equipment - 3.7%
Albany International Corp. - Class A 1,950 52,436
Axcelis Technologies, Inc.(b) 2,550 28,355
K2, Inc.(b) 2,800 44,884
Terex Corp.(b) 1,300 48,061
--------
173,736
--------
Manufacturing - 3.4%
Applied Films Corp.(b) 1,000 27,900
Aptargroup, Inc. 750 28,800
Lennox International, Inc. 2,850 52,868
Roper Industries, Inc. 1,050 50,662
--------
160,230
--------
Medical & Medical Services - 7.4%
Inveresk Research Group, Inc.(b) 2,750 78,156
Magellan Health Services, Inc.(b) 1,500 42,150
Province Healthcare Co.(b) 2,900 46,110
TLC Vision Corp.(b) 6,900 79,074
VCA Antech, Inc.(b) 2,750 97,982
--------
343,472
--------
Medical Instruments & Supplies - 4.4%
CTI Molecular Imaging, Inc.(b) 2,800 40,851
Edwards Lifesciences Corp.(b) 900 28,755
Hologic, Inc.(b) 3,350 67,838
STERIS Corp.(b) 1,750 45,150
Wright Medical Group, Inc.(b) 700 21,490
--------
204,084
--------
Metal & Mining - 0.9%
Massey Energy Co. 1,900 41,933
--------
Oil & Gas - 5.2%
Airgas, Inc. 2,200 46,860
Energen Corp. 650 26,812
Harvest Natural Resources, Inc.(b) 3,950 57,710
Magnum Hunter Resources, Inc.(b) 4,250 43,095
Range Resources Corp. 5,700 69,141
--------
243,618
--------
Personal Services - 1.7%
Sylvan Learning Systems, Inc.(b) 2,300 80,753
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
SMALL CAP CORE EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS (Continued)
Pharmaceuticals - 5.3%
Advancis Pharmaceutical Corp.(b) 4,450 $ 40,672
Angiotech Pharmaceuticals, Inc.(b) 2,800 68,348
Medicis Pharmaceutical Corp. - Class A 1,400 56,000
Nabi Biopharmaceuticals(b) 2,800 43,540
Valeant Pharmaceuticals International 1,650 39,386
----------
247,946
----------
Publishing & Printing - 1.4%
Banta Corp. 1,400 64,806
----------
Railroad & Shipping - 0.9%
Landstar System, Inc.(b) 1,000 40,940
----------
Real Estate - 1.2%
Health Care REIT, Inc. 1,400 56,840
----------
Retail Merchandising - 6.9%
Charming Shoppes, Inc. 6,850 53,362
Jarden Corp.(b) 1,300 46,162
Jos. A. Bank Clothiers, Inc.(b) 1,225 44,100
Mothers Work, Inc.(b) 750 19,988
Stage Stores, Inc.(b) 1,300 50,297
Stein Mart, Inc.(b) 3,850 53,130
Too, Inc.(b) 1,100 23,045
Yankee Candle Co.(b) 1,200 33,096
----------
323,180
----------
Semiconductors & Related Devices - 1.0%
Entegris, Inc.(b) 3,800 48,108
----------
Soaps & Cosmetics - 1.8%
NU Skin Enterprises, Inc. 4,200 84,630
----------
Telecommunications - 1.8%
Arris Group, Inc.(b) 3,850 35,420
General Communication, Inc. - Class
A(b) 5,550 50,505
----------
85,925
----------
Transportation - 0.9%
Laidlaw International, Inc.(b) 2,800 40,740
----------
TOTAL COMMON STOCKS
(Cost $3,725,808) 4,466,636
----------
SHORT TERM INVESTMENTS - 3.6%
Galileo Money Market Fund
(Cost $168,538) 168,538 168,538
----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $3,894,346(a)) 99.7% 4,635,174
OTHER ASSETS IN EXCESS OF
LIABILITIES 0.3% 15,492
----- ---------
NET ASSETS (Applicable to
117,113 Institutional shares, 10
Service shares, 106,840 Investor
A shares, 36,167 Investor B
shares and 42,637 Investor C
shares outstanding) 100.0% $4,650,666
===== ==========
VALUE
-----------
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($1,802,972/117,113) $ 15.40
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($156/10) $ 15.41
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($1,641,033/106,840) $ 15.36
=======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($15.36/0.950) $ 16.17
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($553,800/36,167) $ 15.31
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($652,705/42,637) $ 15.31
=======
- -------------------
(a) Cost for Federal income tax purposes is $3,896,172. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $767,118
Gross unrealized depreciation (28,116)
--------
$739,002
========
(b) Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
SMALL CAP GROWTH EQUITY PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS - 95.6%
Advertising - 0.5%
Catalina Marketing Corp.(b) 118,377 $ 2,295,330
-----------
Aerospace - 0.9%
Herley Industries, Inc.(b) 233,500 4,408,480
TIMCO Aviation Services, Inc.(b) 217 148
TIMCO Aviation Services, Inc. -
Warrants (expiring 02/28/07) 692 3
-----------
4,408,631
-----------
Air Transportation - 0.7%
Mesa Airlines, Inc.(b) 185,100 1,528,926
SkyWest, Inc. 56,942 1,095,564
-----------
2,624,490
-----------
Broadcasting - 4.1%
Cumulus Media, Inc. - Class A(b) 282,059 5,638,359
Emmis Communications Corp. -
Class A(b) 30,600 728,586
Gray Television, Inc. 179,258 2,620,752
Insight Communications Co., Inc.(b) 77,400 774,000
Sinclair Broadcast Group, Inc. -
Class A(b) 274,000 3,425,000
Spanish Broadcasting System, Inc. -
Class A(b) 611,400 6,389,130
-----------
19,575,827
-----------
Business Services - 11.8%
The Corporate Executive Board
Co.(c) 43,986 2,067,342
Digitas, Inc.(b) 848,400 8,730,036
Gartner, Inc. - Class A(b) 225,300 2,624,745
Heidrick & Struggles International,
Inc.(b) 322,334 7,713,453
Jacobs Engineering Group, Inc.(b) 81,300 3,625,980
Labor Ready, Inc.(b) 285,904 3,865,422
MPS Group, Inc.(b) 439,811 4,890,698
Navigant Consulting, Inc.(b) 509,300 10,303,139
NDCHealth Corp.(c) 118,940 3,229,221
Resources Connection, Inc.(b) 53,300 2,351,543
Tetra Tech, Inc.(b) 37,039 794,857
Watson Wyatt & Co. Holdings(b) 224,700 5,671,428
-----------
55,867,864
-----------
Chemicals - 1.7%
Agrium, Inc. 85,200 1,252,440
OM Group, Inc.(b)(c) 228,200 6,937,280
-----------
8,189,720
-----------
Computer & Office Equipment - 0.5%
Answerthink Consulting Group,
Inc.(b) 326,000 2,516,720
-----------
Computer Software & Services - 14.4%
The BISYS Group, Inc.(b) 254,998 4,273,766
Digitalnet Holding, Inc.(b) 214,800 4,381,920
FileNET Corp.(b)(c) 303,000 8,074,950
Inprise Corp.(b) 674,700 6,126,276
Iomega Corp.(b) 764,700 4,274,673
Keane, Inc.(b)(c) 71,700 1,128,558
Lawson Software, Inc.(b) 635,221 5,272,334
McDATA Corp. - Class A(b)(c) 1,024,578 7,213,029
MicroStrategy, Inc. - Warrants
(expiring 06/24/07) 638 160
Modem Media, Inc.(b) 805,400 5,235,100
Pinnacle Systems, Inc.(b) 278,656 2,516,264
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS (Continued)
Computer Software & Services (Continued)
RealNetworks, Inc.(b) 703,700 $ 4,222,200
Sapient Corp.(b) 392,300 2,365,569
SkillSoft PLC - ADR(b) 640,330 8,260,257
SonicWALL, Inc.(b) 483,900 4,316,388
Verity, Inc.(b) 52,300 714,941
-----------
68,376,385
-----------
Electronics - 3.0%
Advanced Energy Industries, Inc.(b) 125,661 2,562,228
Bookham Technology - ADR(b)(c) 1,178,361 2,568,827
Centillium Commuication, Inc.(b) 696,700 3,149,084
Invision Technologies, Inc.(b) 105,600 5,245,152
Power-One, Inc.(b)(c) 81,400 900,284
-----------
14,425,575
-----------
Entertainment & Leisure - 2.9%
Argosy Gaming Co.(b)(c) 51,406 1,827,483
Leapfrog Enterprises, Inc.(b)(c) 70,500 1,364,175
Multimedia Games, Inc.(b)(c) 217,200 5,373,528
Scientific Games Corp. - Class A(b) 284,400 5,323,968
-----------
13,889,154
-----------
Finance - 0.4%
Affiliated Managers Group, Inc.(b)(c) 37,500 2,046,750
-----------
Food & Agriculture - 2.0%
Panera Bread Co. - Class A(b)(c) 202,500 7,881,300
United Natural Foods, Inc.(b) 33,100 1,591,779
-----------
9,473,079
-----------
Insurance - 0.4%
Platinum Underwriters Holdings Ltd. 55,800 1,788,390
-----------
Machinery & Heavy Equipment - 2.7%
AGCO Corp.(b)(c) 128,500 2,661,235
Flowserve Corp.(b) 250,800 5,254,260
Joy Global, Inc. 76,300 2,141,741
Terex Corp.(b)(c) 78,800 2,913,236
-----------
12,970,472
-----------
Manufacturing - 1.5%
Actuant Corp. - Class A(b)(c) 43,200 1,694,736
Wilson Greatbatch Technologies,
Inc.(b) 144,800 5,253,344
-----------
6,948,080
-----------
Medical & Medical Services - 5.2%
Accredo Health, Inc.(b)(c) 69,300 2,640,329
Cryolife, Inc.(b) 600,000 2,724,359
Exact Sciences Corp.(b) 540,200 4,197,354
Henry Schein, Inc.(b) 21,800 1,556,956
Inveresk Research Group, Inc.(b) 263,700 7,494,354
Medical Resources, Inc.(b) 4,259 22
TLC Vision Corp.(b) 515,980 5,913,131
-----------
24,526,505
-----------
Medical Instruments & Supplies - 5.7%
Hologic, Inc.(b) 365,675 7,404,919
Mentor Corp.(c) 137,800 4,147,780
Respironics, Inc.(b) 77,300 4,175,746
Therasense, Inc.(b) 41,900 1,129,624
Visx, Inc.(b) 306,600 5,984,832
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
SMALL CAP GROWTH EQUITY PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Medical Instruments & Supplies (Continued)
Wright Medical Group, Inc.(b) 138,434 $ 4,249,924
------------
27,092,825
------------
Metal & Mining - 1.1%
Massey Energy Co. 134,400 2,966,208
Pioneer Drilling Co.(b) 400,000 2,176,364
------------
5,142,572
------------
Motor Vehicles - 1.1%
Wabash National Corp.(b)(c) 225,700 5,326,520
------------
Oil & Gas - 10.3%
Airgas, Inc. 334,500 7,124,850
Cheniere Energy, Inc.(b) 179,000 3,103,860
Forest Oil Corp.(b)(c) 152,100 3,840,525
Grant Prideco, Inc.(b) 214,700 3,327,850
Key Energy Services, Inc.(b) 554,775 6,102,525
Oceaneering International, Inc.(b) 166,000 5,054,700
Parker Drilling Co.(b) 1,310,051 5,462,913
Pride International, Inc.(b)(c) 111,100 1,895,366
Remington Oil & Gas Corp. - Class
B(b) 224,443 4,432,749
Tetra Technologies, Inc.(b) 142,000 3,710,460
Tom Brown, Inc.(b) 39,600 1,488,960
Whiting Petroleum Corp.(b) 130,300 3,073,777
------------
48,618,535
------------
Paper & Forest Products - 0.7%
Pope & Talbot, Inc. 204,800 3,520,512
------------
Personal Services - 2.5%
Education Management Corp.(b) 37,600 1,196,808
Sylvan Learning Systems, Inc.(b)(c) 303,800 10,666,418
------------
11,863,226
------------
Pharmaceuticals - 5.6%
Advancis Pharmaceutical Corp.(b) 284,700 2,602,158
Angiotech Pharmaceuticals, Inc.(b) 228,052 5,566,749
Medicis Pharmaceutical Corp. - Class
A(c) 174,040 6,961,600
Nabi Biopharmaceuticals(b) 305,000 4,742,750
Nektar Therapeutics(b) 191,900 4,141,202
Pharmaceutical Resources, Inc.(b) 21,563 1,226,072
Taro Pharmaceutical Industries
Ltd.(b) 20,414 1,183,808
------------
26,424,339
------------
Publishing & Printing - 1.1%
Playboy Enterprises, Inc. - Class B(b) 359,403 5,038,830
------------
Restaurants - 0.5%
CEC Entertainment, Inc.(b) 39,000 1,353,300
RARE Hospitality International,
Inc.(b) 41,650 1,155,788
------------
2,509,088
------------
Retail Merchandising - 6.9%
CSK Auto Corp.(b) 322,100 5,833,231
GameStop Corp.(b) 107,400 1,935,348
Hollywood Entertainment Corp.(b) 158,000 2,142,480
Linens 'n Things, Inc.(b)(c) 146,800 5,198,188
Pier 1 Imports, Inc. 109,500 2,595,150
Reebok International Ltd.(c) 60,500 2,501,675
Tuesday Morning Corp.(b) 76,352 2,631,090
West Marine, Inc.(b) 155,100 4,939,935
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Retail Merchandising (Continued)
Yankee Candle Co.(b) 172,000 $ 4,743,760
------------
32,520,857
------------
Semiconductors & Related Devices - 4.8%
Cirrus Logic, Inc.(b) 767,000 5,813,860
Micrel, Inc.(b) 261,900 3,496,365
Microsemi Corp.(b) 299,800 4,101,264
Mindspeed Technologies, Inc.(b) 788,800 5,150,864
MKS Instruments, Inc.(b) 80,534 1,933,621
Rudolph Technologies, Inc.(b) 64,900 1,215,577
Zoran Corp.(b) 69,800 1,211,728
------------
22,923,279
------------
Telecommunications - 1.2%
Anaren, Inc.(b) 118,300 1,866,774
Inet Technologies, Inc.(b) 17,800 220,898
Unova, Inc.(b) 158,000 3,414,380
------------
5,502,052
------------
Transportation - 1.4%
Laidlaw International, Inc.(b) 188,820 2,747,331
Werner Enterprises, Inc. 197,100 3,735,045
------------
6,482,376
------------
TOTAL COMMON STOCKS
(Cost $350,328,431)
452,887,983
------------
PAR
MATURITY (000)
---------- ---------
CORPORATE BONDS - 0.0%
Aerospace - 0.0%
TIMCO Aviation Services, Inc.
8.00%
(Cost $273) 01/02/07 $ 1 0
---------
SHORT TERM INVESTMENTS - 18.6%
American Express Credit Corp.,
Floating Rate Notes
1.08%(d) 04/16/04 1,816 1,816,051
Bank of America Corp., Floating Rate
Notes
1.05%(d) 04/01/04 5,751 5,751,398
Canadian Imperial Bank International,
Certificate of Deposit
1.04%(d) 04/29/04 973 972,876
Chase Manhattan Bank, Time
Deposit
1.06%(d) 04/01/04 2,846 2,846,009
Federal Home Loan Bank, Discount
Notes
0.97% 04/01/04 16,000 16,000,000
Foreningssparbanken AB, Floating
Rate Notes
1.05%(d) 04/19/04 259 258,754
Irish Life U.S., Commercial Paper
1.05%(d) 04/14/04 3,104 3,104,029
Merrill Lynch, Medium Term Notes
1.19%(d) 04/01/04 3,661 3,660,631
1.19%(d) 04/01/04 1,199 1,199,121
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
SMALL CAP GROWTH EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- -------------
SHORT TERM INVESTMENTS (Continued)
Natexis Banques International,
Floating Rate Notes
1.11%(d) 04/01/04 $ 903 $ 902,997
1.16%(d) 04/01/04 2,000 1,999,799
Societe General, Floating Rate Notes
1.14%(d) 04/01/04 8,866 8,865,976
Tannehill Capital, Asset Backed
Commercial Paper
1.04%(d) 04/19/04 992 992,143
Westdeutsche Landsbank
International, Floating Rate Notes
1.06%(d) 04/12/04 2,062 2,062,034
1.06%(d) 04/29/04 1,145 1,145,187
Galileo Money Market Fund 6,858 6,857,926
Institutional Money Market Trust(d) 29,778 29,777,689
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $88,212,620) 88,212,620
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $438,541,324(a)) 114.2% 541,100,603
LIABILITIES IN EXCESS OF
OTHER ASSETS
(Including $65,354,694 of payable
upon return of securities loaned) (14.2)% (67,237,987)
----- ------------
NET ASSETS (Applicable to
16,441,625 Institutional shares,
2,233,834 Service shares,
8,682,983 Investor A shares,
2,172,894 Investor B shares and
1,190,618 Investor C shares
outstanding) 100.0% $473,862,616
===== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE
($263,193,116/16,441,625) $16.01
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SERVICE SHARE
($34,333,182/2,233,834) $15.37
======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($130,112,321/8,682,983) $14.98
======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($14.98/0.955) $15.69
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($29,857,486/2,172,894) $13.74
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($16,366,511/1,190,618) $13.75
======
(a) Cost for Federal income tax purposes is $440,697,199. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $110,787,151
Gross unrealized depreciation (10,383,747)
------------
$100,403,404
============
(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.
35
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
U.S. OPPORTUNITIES PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS - 97.9%
Canada - 1.0%
Angiotech Pharmaceuticals, Inc.(b) 46,000 $1,122,860
----------
United Kingdom - 1.3%
Bookham Technology - ADR(b) 352,500 768,450
Shire Pharmaceuticals
Group PLC - ADR(b) 23,700 697,491
----------
1,465,941
----------
United States - 95.6%
Advertising - 0.6%
The Interpublic Group of Companies,
Inc.(b) 44,100 678,258
----------
Air Transportation - 0.6%
EGL, Inc.(b) 37,000 664,520
----------
Banks - 5.4%
City National Corp. 14,500 868,550
Colonial Bancgroup, Inc. 62,000 1,147,000
Compass Bancshares, Inc. 23,500 974,545
Franklin Bank Corp.(b) 33,500 622,765
MAF Bancorp, Inc. 12,000 521,520
New York Community Bancorp, Inc. 15,021 514,931
TCF Financial Corp. 14,000 714,980
Webster Financial Corp. 12,000 608,520
----------
5,972,811
----------
Broadcasting - 2.4%
Hearst-Argyle Television, Inc. 27,300 734,097
Media General, Inc. - Class A 8,000 538,240
Mediacom Communications Corp.(b) 90,000 721,800
UnitedGlobalCom, Inc.(b) 76,800 652,032
----------
2,646,169
----------
Business Services - 6.1%
Aquantive, Inc.(b) 62,300 598,080
Charles River Associates, Inc.(b) 11,900 390,153
Digitas, Inc.(b) 152,800 1,572,312
Forrester Research, Inc.(b) 22,100 418,795
Gartner, Inc. - Class A(b) 55,000 640,750
Global Payments, Inc. 12,800 577,024
Labor Ready, Inc.(b) 83,600 1,130,272
Manpower, Inc. 12,600 585,900
Navigant Consulting, Inc.(b) 40,800 825,384
----------
6,738,670
----------
Chemicals - 2.5%
Church & Dwight Co., Inc. 21,800 944,158
Georgia Gulf Corp. 21,500 648,225
NOVA Chemicals Corp. 29,400 737,646
Olin Corp. 27,200 485,520
----------
2,815,549
----------
Computer & Office Equipment - 0.7%
Pitney Bowes, Inc. 18,000 766,980
----------
Computer Software & Services - 4.6%
Computer Sciences Corp.(b) 12,500 504,125
Digitalnet Holding, Inc.(b) 30,000 612,000
DoubleClick, Inc.(b) 90,400 1,017,000
FileNET Corp.(b) 16,000 426,400
Interwoven, Inc.(b) 32,500 324,025
Lawson Software, Inc.(b) 74,000 614,200
RSA Security, Inc.(b) 37,800 710,262
NUMBER
OF SHARES VALUE
----------- -----------
COMMON STOCKS (Continued)
Computer Software & Services (Continued)
Symantec Corp.(b) 19,000 $ 879,700
----------
5,087,712
----------
Construction - 0.7%
Chicago Bridge & Iron Co. N.V. -
ADR 28,000 779,240
----------
Containers - 0.8%
Smurfit-Stone Container Corp.(b)
50,400 886,536
----------
Electronics - 3.2%
Amphenol Corp.(b) 37,000 1,098,900
Gemstar-TV Guide
International,
Inc.(b) 83,500 560,285
GrafTech International Ltd.(b) 44,000 657,800
Intersil Corp. - Class A 40,000 891,600
TTM Technologies, Inc.(b) 24,800 305,536
----------
3,514,121
----------
Energy & Utilities - 5.5%
Equitable Resources, Inc. 21,000 932,820
MDU Resources Group, Inc. 46,800 1,099,332
Pepco Holdings, Inc. 27,000 551,880
PPL Corp. 27,100 1,235,760
Sempra Energy 35,500 1,128,900
UGI Corp. 35,000 1,152,200
----------
6,100,892
----------
Entertainment & Leisure - 6.3%
Alliance Gaming Corp.(b) 26,600 854,658
Carmike Cinemas, Inc.(b) 19,800 737,967
Hilton Hotels Corp. 75,000 1,218,750
Hollywood Park, Inc.(b) 65,500 903,900
Penn National Gaming, Inc.(b) 19,500 561,015
Scientific Games Corp. - Class A(b) 63,500 1,188,720
Station Casinos, Inc. 35,600 1,572,452
----------
7,037,462
----------
Finance - 3.2%
Ameritrade Holding Corp.(b) 82,400 1,268,960
ASTA Funding, Inc. 46,600 887,730
Capital One Financial Corp. 11,500 867,445
CapitalSource, Inc.(b) 22,400 502,880
----------
3,527,015
----------
Food & Agriculture - 1.0%
Performance Food Group Co. (b) 19,000 652,650
Ralcorp Holdings, Inc.(b) 16,700 508,181
----------
1,160,831
----------
Insurance - 4.1%
American Equity Investment Life
Holding Co.(b) 37,600 483,160
Aspen Insurance Holdings Ltd.
26,200 674,650
Assurant, Inc.(b) 35,100 882,765
Bristol West Holdings, Inc.(b) 43,800 893,520
Endurance Specialty Holdings Ltd. 30,000 1,066,200
The PMI Group, Inc. 14,200 530,512
----------
4,530,807
----------
Machinery & Heavy
Equipment - 2.2%
Joy Global, Inc. 66,500 1,866,655
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
U.S. OPPORTUNITIES PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ----------
COMMON STOCKS (Continued)
Machinery & Heavy Equipment (Continued)
Thermo Fibertek, Inc.(b) 25,000 $ 521,250
----------
2,387,905
----------
Manufacturing - 3.2%
General Cable Corp.(b) 62,300 459,774
Kellwood Co. 14,900 584,825
Nordson Corp. 29,500 1,105,070
Parker-Hannifin Corp. 8,000 452,000
Rockwell Automation, Inc. 26,400 915,288
----------
3,516,957
----------
Medical & Medical Services - 4.5%
Alkermes, Inc.(b) 39,000 623,610
Antigenics, Inc.(b) 28,100 299,546
Arqule, Inc.(b) 150,000 891,000
Biomet, Inc. 15,000 575,400
Caremark Rx, Inc.(b) 23,500 781,375
Inveresk Research Group, Inc.(b) 40,900 1,162,378
Virologic, Inc.(b) 217,000 657,510
----------
4,990,819
----------
Medical Instruments & Supplies - 0.5%
Bioject Medical Technologies, Inc. -
Warrants (expiring 05/22/06) 15,000 150
Invitrogen Corp.(b) 8,000 573,520
----------
573,670
----------
Metal & Mining - 3.2%
Arch Coal, Inc. 12,500 392,375
Freeport-McMoRan Copper & Gold,
Inc. - Class B 15,400 601,986
Inco Ltd.(b) 18,000 623,340
Massey Energy Co. 30,900 681,963
Phelps Dodge Corp.(b) 9,000 734,940
United States Steel Corp. 15,000 559,050
----------
3,593,654
----------
Motor Vehicles - 1.4%
BorgWarner, Inc. 8,000 678,640
Navistar International Corp.(b) 18,500 848,225
----------
1,526,865
----------
Oil & Gas - 6.0%
Chesapeake Energy Corp. 40,000 536,000
ENSCO International, Inc. 24,000 676,080
GlobalSantaFe Corp. 28,100 780,337
Key Energy Services, Inc.(b) 62,600 688,600
Nabors Industries Ltd.(b) 18,500 846,375
National-Oilwell, Inc.(b) 28,400 803,152
Noble Energy, Inc. 24,700 1,163,370
Pioneer Natural Resources Co. 21,500 694,450
Valero Energy Corp. 7,500 449,700
----------
6,638,064
----------
Paper & Forest Products - 0.5%
Pope & Talbot, Inc. 34,000 584,460
----------
Pharmaceuticals - 5.0%
Andrx Corp.(b) 38,500 1,047,200
Celgene Corp.(b) 14,500 690,925
Corgentech, Inc.(b) 6,200 116,560
Dendreon Corp.(b) 21,300 283,290
Eyetech Pharmaceuticals(b) 24,000 796,800
IVAX Corp.(b) 23,000 523,710
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Pharmaceuticals (Continued)
Lexicon Genetics, Inc.(b) 50,000 $ 313,500
Neighborcare, Inc.(b) 25,000 606,250
Nitromed, Inc.(b) 69,600 553,320
Nuvelo, Inc.(b) 52,700 661,912
------------
5,593,467
------------
Publishing & Printing - 0.8%
Meredith Corp. 18,400 930,304
------------
Restaurants - 0.8%
CBRL Group, Inc.
23,000 911,720
------------
Retail Merchandising - 4.9%
Abercrombie & Fitch Co. - Class A 24,400 825,696
Albertson's, Inc. 20,000 443,000
AnnTaylor Stores Corp.(b) 27,500 1,177,000
Best Buy Co., Inc. 13,700 708,564
Cache, Inc.(b) 13,700 451,689
Genesco, Inc.(b) 38,500 892,430
Polo Ralph Lauren Corp. 26,200 898,136
------------
5,396,515
------------
Security Brokers & Dealers - 1.4%
T. Rowe Price Group, Inc. 28,200 1,518,006
------------
Semiconductors & Related
Devices - 5.6%
Agere Systems, Inc. - Class A(b) 198,000 635,580
Exar Corp.(b)
33,600 621,600
Fairchild Semiconductor International,
Inc.(b)
28,500 684,855
International Rectifier Corp.(b) 29,600 1,361,304
LAM Research Corp.(b) 31,600 796,636
Mindspeed Technologies, Inc.(b) 78,900 515,217
PMC-Sierra, Inc.(b) 37,000 627,890
Sigmatel, Inc.(b) 12,900 289,605
Silicon Storage Technology, Inc.(b) 49,900 645,706
------------
6,178,393
------------
Soaps & Cosmetics - 1.0%
Estee Lauder Cos., Inc. 25,400 1,126,236
------------
Telecommunications - 4.6%
Avaya, Inc.(b) 41,500 659,020
COLT Telecom Group PLC(b) 70,000 483,000
Comverse Technology, Inc.(b) 72,600 1,316,964
Nextel Partners, Inc. - Class A(b) 60,500 765,930
NII Holdings, Inc. - Class B(b) 21,900 767,157
Powerwave Technologies, Inc.(b) 55,000 429,000
Sprint Corp. (PCS Group)(b) 77,000 708,400
------------
5,129,471
------------
Transportation - 1.8%
CSX Corp. 24,600 745,134
Overnite Corp. 24,000 552,000
Trinity Industries, Inc. 26,100 725,580
------------
2,022,714
------------
Waste Management - 0.5%
Waste Connections, Inc.(b) 14,200 565,160
------------
106,091,953
------------
TOTAL COMMON STOCKS
(Cost $89,024,373) 108,680,754
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
U.S. OPPORTUNITIES PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
SHORT TERM INVESTMENTS - 2.4%
Galileo Money Market Fund
(Cost $2,651,199) 2,651,199 $ 2,651,199
-------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $91,675,572(a)) 100.3% 111,331,953
LIABILITIES IN EXCESS OF
OTHER ASSETS ( 0.3)% (304,816)
----- -----------
NET ASSETS (Applicable to
314,707 Institutional shares,
98,716 Service shares, 1,713,927
Investor A shares, 2,428,824
Investor B shares and 1,200,612
Investor C shares outstanding) 100.0% $111,027,137
===== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($6,391,013/314,707) $20.31
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($1,966,222/98,716) $19.92
======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($33,902,300/1,713,927) $19.78
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($19.78/0.950) $20.82
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($46,030,640/2,428,824) $18.95
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($22,736,962/1,200,612) $18.94
======
- -------------------
(a) Cost for Federal income tax purposes is $91,695,940. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $20,931,039
Gross unrealized depreciation (1,295,026)
-----------
$19,636,013
===========
(b) Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS - 96.0%
Canada - 1.8%
Angiotech Pharmaceuticals, Inc.(b) 15,600 $ 380,796
Biovail Corp.(b) 15,600 243,360
----------
624,156
----------
France - 0.7%
Flamel Technologies SA(b) 9,000 233,289
----------
Germany - 1.0%
SAP AG - ADR 9,600 377,376
----------
India - 1.2%
Satyam Computer Services Ltd. 57,800 390,702
----------
Italy - 0.4%
Tiscali SpA(b) 27,000 155,283
----------
Japan - 1.9%
Chugai Pharmaceutical Co. Ltd. 16,500 262,643
Nippon Electric Glass Co. Ltd. 18,500 432,114
----------
694,757
----------
South Korea - 5.4%
Samsung Electronics Co. Ltd. 1,900 947,970
Seoul Semiconductor Co. Ltd. 22,900 312,604
Testech, Inc.(b) 112,350 275,375
You Eal Electronics Co. Ltd. 14,000 430,459
----------
1,966,408
----------
Sweden - 0.8%
Biacore International AB 12,800 298,728
----------
Taiwan - 5.9%
AmTRAN Technology Co. Ltd. 177,000 157,393
Hon Hai Precision Industry Co. Ltd. 100,000 432,473
Lite-On Technology Corp. 229,935 254,010
Phoenix Precision Technology Corp.(b) 240,000 231,624
Quanta Computer, Inc. 157,500 368,058
Sampo Corp.(b) 400,000 165,706
Chi Mei Optoelectronics Corp.(b) 185,000 328,452
Powerchip Semiconductor Corp.(b) 213,800 206,338
----------
2,144,054
----------
United Kingdom - 1.7%
Bookham Technology - ADR(b) 141,500 308,470
Shire Pharmaceuticals Group PLC - ADR(b) 9,500 279,585
CSR PLC(b) 8,100 35,281
----------
623,336
----------
United States - 75.2%
Broadcasting - 2.2%
Mediacom Communications Corp.(b) 39,200 314,384
Sirius Satellite Radio, Inc.(b) 69,900 237,660
UnitedGlobalCom, Inc.(b) 29,200 247,908
----------
799,952
----------
Business Services - 4.1%
Accenture Ltd.(b) 20,800 515,840
Aquantive, Inc.(b) 47,400 455,040
Digitas, Inc.(b) 48,800 502,152
----------
1,473,032
----------
Computer & Office Equipment - 5.2%
Cisco Systems, Inc.(b) 50,800 1,194,816
Hewlett-Packard Co. 16,400 374,576
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS (Continued)
Computer & Office Equipment (Continued)
Maxtor Corp.(b) 37,900 $ 308,885
----------
1,878,277
----------
Computer Software & Services - 15.7%
Citrix Systems, Inc.(b) 12,200 263,764
DIGI International, Inc.(b) 25,699 253,649
EarthLink, Inc.(b) 19,400 171,884
Emulex Corp.(b) 16,700 355,543
Juniper Networks, Inc.(b) 13,500 351,135
Lawson Software, Inc.(b) 46,500 385,950
Microsoft Corp. 21,800 544,346
OpenTV Corp.(b) 79,200 255,816
Oracle Corp.(b) 28,600 343,486
Packeteer, Inc.(b) 26,000 343,200
SeaChange International, Inc.(b) 22,600 345,780
Seagate Technology(b) 17,300 279,049
Siebel Systems, Inc.(b) 37,900 436,229
SonicWALL, Inc.(b) 27,800 247,976
Symantec Corp.(b) 7,700 356,510
TIBCO Software, Inc.(b) 48,100 392,977
VeriSign, Inc.(b) 20,800 345,072
----------
5,672,366
----------
Electronics - 5.4%
Centillium Commuication, 62,700 283,404
Intel Corp. 27,600 750,720
Intersil Corp. - Class A 16,800 374,472
Maxim Integrated Products, Inc. 9,000 423,810
TTM Technologies, Inc.(b) 10,400 128,128
----------
1,960,534
----------
Manufacturing - 0.9%
General Cable Corp.(b) 45,400 335,052
----------
Measuring & Controlling
Devices - 0.9%
KLA-Tencor Corp.(b) 6,800 342,380
----------
Medical & Medical Services - 3.5%
Alkermes, Inc.(b) 13,500 215,865
Antigenics, Inc.(b) 9,800 104,468
Arqule, Inc.(b) 49,300 292,842
Inveresk Research Group, Inc.(b) 6,800 193,256
Virologic, Inc.(b) 152,500 462,075
----------
1,268,506
----------
Medical Instruments & Supplies - 2.0%
Aclara Biosciences, Inc.(b) 48,200 188,944
Invitrogen Corp.(b) 5,700 408,633
Kinetic Concepts, Inc.(b) 2,900 130,065
----------
727,642
----------
Pharmaceuticals - 10.7%
Amylin Pharmaceuticals, Inc.(b) 11,600 274,804
Andrx Corp.(b) 7,600 206,720
Celgene Corp.(b) 4,300 204,895
Corgentech, Inc.(b) 2,100 39,480
Dendreon Corp.(b) 7,300 97,090
Eyetech Pharmaceuticals(b) 8,000 265,600
Gilead Sciences, Inc.(b) 10,900 607,893
Guilford Pharmaceuticals,31,400 ) 31,400 227,022
ILEX Oncology, Inc.(b) 12,400 296,608
Lexicon Genetics, Inc. (b) 38,800 243,276
Medimmune, Inc.(b) 15,400 355,432
Nektar Therapeutics(b) 13,600 293,488
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
39
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -----------
COMMON STOCKS (Continued)
Pharmaceuticals (Continued)
Nitromed, Inc.(b) 44,200 $ 351,390
NPS Pharmaceuticals, Inc.(b) 6,600 188,430
Nuvelo, Inc.(b) 18,400 231,104
-----------
3,883,232
-----------
Semiconductors & Related Devices -
20.1%
Agere Systems, Inc. - Class A(b) 112,000 359,520
Amkor Technology, Inc.(b) 18,800 275,044
Applied Materials, Inc.(b) 34,200 731,196
ATMI, Inc.(b) 9,800 257,936
August Technology Corp.(b) 25,900 388,500
Brooks Automation, Inc.(b) 13,200 276,936
Caliper Life Sciences, Inc.(b) 30,900 211,665
Fairchild Semiconductor International, Inc.(b) 11,500 276,345
International Rectifier Corp.(b) 11,000 505,890
LAM Research Corp.(b) 15,400 388,234
Linear Technology Corp. 9,100 336,882
LTX Corp.(b) 24,900 375,990
MEMC Electronic Materials, Inc.(b) 41,200 376,980
MKS Instruments, Inc.(b) 16,400 393,764
National Semiconductor Corp.(b) 14,700 653,121
ON Semiconductor Corp.(b) 26,800 202,072
PMC-Sierra, Inc.(b) 16,600 281,702
Skyworks Solutions, Inc.(b) 28,500 332,310
Texas Instruments, Inc. 12,500 365,250
Varian Semiconductor Equipment Associates, Inc.(b) 6,800 285,600
-----------
7,274,937
-----------
Telecommunications - 4.3%
ADC Telecommunications, Inc.(b) 88,300 256,070
Avaya, Inc.(b) 12,300 195,324
Mastec, Inc.(b) 29,532 279,668
Motorola, Inc. 18,400 323,840
Somera Communications, Inc.(b) 81,300 125,202
Tekelec(b) 22,500 373,275
-----------
1,553,379
-----------
27,169,289
-----------
TOTAL COMMON STOCKS
(Cost $29,792,506) 34,677,378
-----------
SHORT TERM INVESTMENTS - 2.0%
Galileo Money Market Fund
(Cost $721,849) 721,849 721,849
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $30,514,354(a)) 98.0% 35,399,227
NUMBER OF
CONTRACTS VALUE
----------- ------------
OPTIONS - 0.0%
Call Options Written - 0.0%
NPS Pharmaceuticals, Inc., Strike
Price 35.00, Expires 05/22/04 (66) $ (2,640)
-----------
(Premiums received $5,498)
Put Options Purchased - 0.0%
NPS Pharmaceuticals, Inc., Strike
Price 25.00, Expires 04/27/04 66 2,310
-----------
(Cost $15,022)
TOTAL OPTIONS
(Cost $9,524) $ (330)
===========
OTHER ASSETS IN EXCESS OF
LIABILITIES 2.0% 724,468
----- -----------
NET ASSETS (Applicable to
421,359 Institutional shares,
19,084 Service shares, 2,078,113
Investor A shares, 2,754,888
Investor B shares and 686,147
Investor C shares outstanding) 100.0% $36,123,365
===== ===========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($2,640,520/ 421,359) $ 6.27
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($118,372/ 19,084) $ 6.20
======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($12,790,397/ 2,078,113) $ 6.15
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($6.15/ 0.950) $ 6.47
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($16,471,460/ 2,754,888) $ 5.98
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($4,102,616/ 686,147) $ 5.98
======
- -------------------
(a) Cost for Federal income tax purposes is
$30,571,630. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $6,189,640
Gross unrealized depreciation (1,362,043)
----------
$4,827,597
==========
(b) Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
EUROPEAN EQUITY PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS - 97.9%
Finland - 3.5%
Nokia OYJ 7,305 $ 149,738
----------
France - 17.0%
Axa 4,606 96,112
Carrefour SA 2,339 115,378
Compagnie de Saint-Gobain 1,619 81,792
Essilor International SA 1,609 97,856
Lafarge SA 1,114 90,148
Total Fina Elf SA 751 137,880
Vivendi Universal(b) 4,593 121,748
----------
740,914
----------
Germany - 7.3%
Allianz AG(c) 962 104,754
Deutsche Boerse AG 1,658 94,072
Siemens AG 1,560 115,159
----------
313,985
----------
Italy - 3.6%
Eni SpA 4,347 87,395
Riunione Adriatica di Sicurta SpA 3,719 66,496
----------
153,891
----------
Netherlands - 9.4%
ING Groep NV 4,018 88,286
Koninklijke Ahold NV(b) 9,656 79,029
Koninklijke KPN NV(b) 8,193 63,934
Reed Elsevier NV 9,343 123,312
TNT Post Group NV 2,458 51,713
----------
406,274
----------
Norway - 1.7%
Statoil ASA 5,987 73,030
----------
Spain - 6.8%
Altadis SA 2,407 72,912
Banco Bilbao Vizcaya Argentaria SA 7,334 97,067
Telefonica SA 8,293 125,454
----------
295,433
----------
Sweden - 2.3%
Atlas Copco AB - Class A 793 28,182
Securitas AB - Class B 4,860 70,245
----------
98,427
----------
Switzerland - 14.9%
ABB Ltd.(b) 17,240 101,656
Novartis AG 3,600 152,883
Roche Holding AG 1,548 151,214
Syngenta AG 1,246 90,879
UBS AG 1,995 148,186
----------
644,818
----------
United Kingdom - 31.4%
Abbey National PLC 7,690 64,306
BP PLC 25,473 213,480
British Sky Broadcasting Group PLC 7,518 93,749
Centrica PLC 24,580 103,111
Glaxosmithkline PLC 8,046 157,930
Kingfisher PLC 13,002 68,940
Royal Bank of Scotland Group PLC 5,915 180,241
Scottish & Newcastle PLC 10,151 77,516
Scottish & Southern Energy PLC 5,960 75,306
Unilever PLC 13,006 128,719
NUMBER
OF SHARES VALUE
----------- ----------
COMMON STOCKS (Continued)
United Kingdom (Continued)
Vodafone Group PLC 82,408 $ 194,998
----------
1,358,296
----------
TOTAL COMMON STOCKS
(Cost $3,343,098)
4,234,806
----------
TOTAL INVESTMENTS IN
SECURITIES
(Cost $3,343,098(a)) 97.9% 4,234,806
OTHER ASSETS IN EXCESS OF
LIABILITIES 2.1% 88,872
------ ----------
NET ASSETS (Applicable to
344,412 Institutional shares, 10
Service shares, 73,342 Investor A
shares, 166,700 Investor B
shares and 25,688 Investor C
shares outstanding) 100.0% $4,323,678
====== ==========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($2,449,878/344,412) $ 7.11
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($73/10) $ 7.04
======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($522,360/73,342) $ 7.12
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($7.12/0.950) $ 7.49
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($1,170,079/166,700) $ 7.02
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($181,288/25,688) $ 7.06
======
- -------------------
(a) Cost for Federal income tax purposes is $3,542,848. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $718,681
Gross unrealized depreciation (26,723)
--------
$691,958
========
(b) Non-income producing security.
(c) Total or partial securities on loan.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
41
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERNATIONAL EQUITY PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS - 93.1%
Australia - 3.3%
Lend Lease Corp. Ltd. 67,667 $ 528,487
Orica Ltd. 33,558 365,852
Promina Group Ltd. 143,763 407,195
WMC Resources Ltd. 49,000 191,536
----------
1,493,070
----------
Austria - 1.4%
Bank Austria Creditanstalt(b) 11,904 631,962
----------
Brazil - 1.9%
Companhia Vale do Rio Doce - ADR 8,069 442,988
Petroleo Brasileiro SA - ADR 13,481 398,229
----------
841,217
----------
Canada - 1.2%
Suncor Energy, Inc. 20,246 554,117
----------
Finland - 2.2%
Nokia OYJ 47,747 978,716
----------
France - 8.8%
Axa 29,751 620,803
Carrefour SA 11,925 588,234
Compagnie de Saint-Gobain 10,835 547,382
Essilor International SA 9,529 579,534
Lafarge SA 8,869 717,703
Vivendi Universal(b) 36,372 964,121
----------
4,017,777
----------
Germany - 2.9%
Allianz AG(c) 6,906 752,010
Deutsche Boerse AG 9,598 544,572
----------
1,296,582
----------
Greece - 2.2%
EFG Eurobank Ergasias 21,104 428,958
Greek Organization of Football
Prognostics 32,430 550,769
----------
979,727
----------
Hong Kong - 2.2%
Sun Hung Kai Properties Ltd. 40,000 365,802
Swire Pacific Ltd. - Class A 90,500 612,734
----------
978,536
----------
Indonesia - 0.8%
PT Indonesian Satellite Corp. 760,500 341,908
----------
Italy - 0.7%
Eni SpA 15,650 314,639
----------
Japan - 19.9%
Chugai Pharmaceutical Co. Ltd. 46,300 736,990
Daiwa House Industry Co. Ltd. 27,000 344,653
Dentsu, Inc. 72 220,080
Dentsu, Inc. (When Issued)(b) 72 214,543
East Japan Railway Co. 122 641,457
Ito-Yokado Co. Ltd. 14,000 637,862
Komatsu Ltd. 53,000 336,233
Kyocera Corp. 5,800 487,259
Marui Co. Ltd. 19,500 306,834
Matsushita Electric Industrial Co. Ltd. 37,000 571,884
Millea Holdings, Inc. 33 513,866
Mitsubishi Corp.(c) 49,000 579,324
Mitsubishi Tokyo Financial Group, Inc. 46 455,424
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS (Continued)
Japan (Continued)
Mitsui Fudosan Co. Ltd. 32,000 $ 402,634
NTT Docomo, Inc. 245 541,645
Obayashi Corp. 76,000 415,668
Tokyo Steel Manufacturing Co. Ltd 23,700 307,085
Toyota Motor Corp. 18,900 704,878
UFJ Holdings, Inc. 81 515,423
----------
8,933,742
----------
Netherlands - 3.9%
ING Groep NV 22,100 485,595
Koninklijke Ahold NV(b) 42,280 346,038
Reed Elsevier NV 44,295 584,620
TNT Post Group NV 16,012 336,870
----------
1,753,123
----------
Norway - 1.9%
Statoil ASA 68,498 835,542
----------
Russia - 1.3%
Mobile Telesystems - ADR 4,483 589,514
----------
Singapore - 1.7%
Keppel Corp. Ltd. 170,800 743,827
----------
South Korea - 2.0%
Kookmin Bank - ADR 10,393 420,501
Samsung Electronics Co. Ltd. 990 493,942
----------
914,443
----------
Spain - 3.6%
Altadis SA 11,227 340,090
Banco Bilbao Vizcaya Argentaria SA 35,958 475,911
Telefonica SA 51,540 779,681
----------
1,595,682
----------
Sweden - 1.1%
Securitas AB - Class B 33,988 491,254
----------
Switzerland - 9.2%
ABB Ltd.(b) 135,437 798,607
Roche Holding AG 15,139 1,478,826
Syngenta AG 11,314 825,207
UBS AG 14,728 1,093,977
----------
4,196,617
----------
Taiwan - 0.9%
Taishin Financial Holdings Co. Ltd. 385,000 386,753
----------
Thailand - 1.8%
Kasikornbank Public Co. Ltd.
(Foreign Shares)(b) 300,300 378,337
Siam Cement Public Co. Ltd.
(Foreign Shares) 67,017 426,425
----------
804,762
----------
United Kingdom - 18.2%
Abbey National PLC 43,071 360,172
BP PLC 141,014 1,181,790
British Sky Broadcasting Group PLC 43,057 536,917
Centrica PLC 241,566 1,013,351
Glaxosmithkline PLC 49,326 968,188
Kingfisher PLC 97,993 519,582
MMO2 PLC(b) 598,183 1,104,874
Royal Bank of Scotland Group PLC 36,178 1,102,408
Scottish & Newcastle PLC 99,568 760,333
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERNATIONAL EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS (Continued)
United Kingdom (Continued)
Scottish & Southern Energy PLC 49,791 $ 629,125
-----------
8,176,740
-----------
TOTAL COMMON STOCKS
(Cost $31,339,215) 41,850,250
-----------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 6.7%
Federal Home Loan Bank,
Discount Notes
0.97% 04/01/04 $2,000 $ 2,000,000
Institutional Money Market Trust(d) 994 994,500
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $2,994,500) 2,994,500
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $34,333,715(a)) 99.8% 44,844,750
OTHER ASSETS IN EXCESS OF
LIABILITIES 0.2% 80,528
----- -----------
NET ASSETS (Applicable to
2,117,088 Institutional shares,
535,461 Service shares,
1,403,970 Investor A shares,
310,371 Investor B shares and
159,479 Investor C shares
outstanding) 100.0% $44,925,278
===== ===========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($21,379,910/2,117,088) $ 10.10
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($5,321,338/535,461) $ 9.94
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($13,782,929/1,403,970) $ 9.82
=======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($9.82/0.950) $ 10.34
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($2,920,997/310,371) $ 9.41
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($1,520,104/159,479) $ 9.53
=======
(a) Cost for Federal income tax purposes is $35,639,981. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $9,426,064
Gross unrealized depreciation (221,295)
----------
$9,204,769
==========
(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.
43
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERNATIONAL OPPORTUNITIES PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
------------- -------------
COMMON STOCKS - 91.6%
Australia - 0.8%
WMC Resources Ltd. 579,500 $ 2,265,193
-----------
Austria - 2.0%
Andritz AG 31,100 1,438,166
Erste Bank der oesterreichischen
Sparkassen AG 14,100 2,110,478
VA Technologie AG(b) 44,700 2,013,241
-----------
5,561,885
-----------
Belgium - 1.7%
Delhaize Group 30,000 1,389,879
Umicore 54,516 3,322,921
-----------
4,712,800
-----------
Brazil - 1.1%
Companhia Energetica de Minas
Gerais- Cemig - ADR 56,700 989,415
Votorantim Celulose e Papel SA 29,236,736 2,027,235
-----------
3,016,650
-----------
Canada - 5.6%
Angiotech Pharmaceuticals, Inc.(b) 116,700 2,841,469
Canadian Natural Resources Ltd. 44,700 2,472,657
CI Fund Management, Inc. 127,500 1,464,904
Falconbridge Ltd. 101,400 2,662,594
Inco Ltd.(b) 45,600 1,565,857
Nexen, Inc. 56,300 2,189,028
Niko Resources Ltd. 7,672 189,720
Teck Cominco Ltd. 127,300 2,370,197
-----------
15,756,426
-----------
Finland - 0.7%
Metso Oyj 138,800 1,866,041
-----------
France - 3.9%
Christian Dior SA 14,500 958,660
Flamel Technologies SA(b) 41,200 1,067,945
Imerys SA 10,200 2,427,975
JC Decaux SA(b) 98,400 2,199,592
Neopost SA 35,000 1,884,754
SEB SA 22,408 2,872,153
-----------
11,411,079
-----------
Germany - 3.5%
Bilfinger Berger AG 55,600 1,970,536
Continental AG 52,000 2,046,157
Freenet.De AG(b) 23,200 2,186,172
MAN AG 38,700 1,379,187
ThyssenKrupp AG 126,900 2,357,914
-----------
9,939,966
-----------
Greece - 3.5%
Aareal Bank AG 69,900 2,310,701
Alpha Bank AE 111,800 3,443,001
Coca-Cola Hellenic Bottling Co. SA 92,500 2,366,665
Germanos SA 64,700 1,701,502
-----------
9,821,869
-----------
Hong Kong - 6.0%
China Merchants Holdings
International Co. Ltd. 765,700 1,076,153
China Resources Power Holdings
Co. Ltd.(b) 510,400 296,436
Cosco Pacific Ltd. 991,800 1,527,589
Dah Sing Financial Group 154,900 1,093,491
NUMBER
OF SHARES VALUE
------------- -------------
COMMON STOCKS (Continued)
Hong Kong (Continued)
Hang Lung Properties Ltd 1,166,000 $ 1,653,720
Harbin Power Equipment Co. Ltd. 6,304,800 1,679,154
Hysan Development Co. Ltd. 637,800 1,105,146
Industrial and Commercial Bank of
China (Asia) Ltd. 1,057,800 1,513,839
Lee & Man Paper Manufacturing
Ltd.(b) 579,200 564,993
New World Development Co. Ltd. 1,618,400 1,485,228
Ports Design Ltd.(b) 86,200 157,661
Sino Land Co. Ltd. 2,563,100 1,603,767
Tsingtao Brewery Co. Ltd. - Class H 1,395,700 1,549,564
Wing Hang Bank Ltd. 265,100 1,680,885
-----------
16,987,626
-----------
India - 5.0%
Aurobindo Pharmaceuticals Ltd. 49,200 427,186
Bharti Tele-Ventures Ltd.(b) 741,000 2,639,237
Cadila Healthcare Ltd. 47,400 495,833
Divi's Laboratories Ltd. 20,100 670,656
Grasim Industries Ltd. 83,600 2,059,098
Ipca Laboratories Ltd. 32,800 495,399
Kojam Finivest Ltd.(b) 7,750 0
Lupin Ltd. 30,362 454,521
Maruti Udyog Ltd.(b) 248,700 2,846,418
Matrix Laboratories Ltd. 12,424 404,810
Nicholas Piramal Ltd. 33,400 572,037
Satyam Computer Services Ltd. 284,600 1,923,770
Saw Pipes Ltd. 140,200 682,757
Torrent Pharmaceuticals Ltd. 46,900 351,858
-----------
14,023,580
-----------
Indonesia - 0.7%
PT Telekomunikasi Indonesia 2,914,100 2,382,052
-----------
Ireland - 1.1%
Depfa Bank PLC 19,900 3,130,238
-----------
Italy - 1.7%
Autostrada Torino-Milano SpA 87,500 1,215,069
Banco Popolare di Verona e Novara
SpA 67,700 1,101,516
Saipem SpA 253,500 2,523,349
-----------
4,839,934
-----------
Japan - 19.6%
Aica Kogyo Co. Ltd. 186,600 2,247,415
Asahi Diamond Industry Co. Ltd. 281,600 1,745,874
The Bank of Yokohama Ltd. 442,200 2,601,301
Daikyo, Inc.(b) 467,200 1,414,601
Daiwa House Industry Co. Ltd. 200 2,553
Fast Retailing Co. Ltd. 32,500 2,658,480
Goldgrest Co. Ltd 31,000 1,936,848
Haseko Corp.(b) 415,200 1,488,630
Japan Airlines System Corp.(b) 553,000 1,881,694
Joint Corp. 78,900 1,804,989
The Joyo Bank Ltd. 385,000 1,650,502
Nippon Electric Glass Co. Ltd. 131,700 3,076,186
Nippon Thompson Co. Ltd. 171,100 1,200,586
Nissan Shatai Co. Ltd. 325,000 1,964,964
Nitori Co. Ltd. 34,048 2,294,194
Nitto Denko Corp. 57,200 3,144,942
NOK Corp. 45,600 1,683,126
Orix Corp. 24,200 2,677,387
Pacific Metals Co. Ltd.(b) 397,800 2,217,754
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERNATIONAL OPPORTUNITIES PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Japan (Continued)
Sumitomo Heavy Industries Ltd.(b) 678,100 $ 1,929,328
Sumitomo Metal Mining Co. Ltd. 265,700 1,925,677
Suzuki Motor Corp. 116,600 1,814,537
Tokai Carbon Co. Ltd. 415,000 1,487,913
Tosoh Corp. 384,100 1,532,191
Toyo Radiator Co. Ltd. 345,000 1,790,742
Uniden Corp. 79,500 1,481,718
Yamada Denki Co. Ltd. 77,000 3,012,352
YASKAWA Electric Corp.(b) 323,200 2,684,143
------------
55,350,627
------------
Malaysia - 0.9%
Maxis Communications Berhad 1,000,000 2,421,053
------------
Netherlands - 3.8%
Euronext NV 139,800 4,166,134
Koninklijke Wessanen NV 71,300 984,850
Randstad Holding NV 132,389 3,530,418
Vedior NV 71,900 1,044,385
Versatel Telecom International NV(b) 435,000 1,021,026
------------
10,746,813
------------
Portugal - 1.6%
Brisa Auto Estradas de Portugal SA 192,200 1,310,873
PT Multimedia - Servicos de
Telecomunicacoes e Multimedia
SGPS SA(b) 143,900 3,184,849
------------
4,495,722
------------
South Korea - 2.3%
Hanjin Heavy Industries Co. Ltd. 385,700 1,540,849
Honam Petrochemical Corp. 25,400 1,030,224
Hyundai Development Co. 175,000 2,030,180
LG Chemical Ltd. 41,900 1,962,606
------------
6,563,859
------------
Spain - 2.9%
ACS, Actividades de Construccion y
Servicios SA 26,500 1,296,113
Grupo Ferrovial SA 46,100 1,872,349
Iberia Lineas Aereas de Espana SA 837,900 2,728,679
NH Hoteles SA(b) 207,700 2,189,970
------------
8,087,111
------------
Sweden - 1.8%
Alfa Laval AB 171,900 2,268,051
Lindex AB 74,400 1,923,806
Scania AB 31,100 948,510
------------
5,140,367
------------
Switzerland - 3.2%
Lonza Group AG(b) 20,400 1,041,055
Micronas Semiconductor Holding
AG(b) 38,700 1,829,838
PubliGroupe SA(b) 8,800 2,861,902
Sauer AG(b) 40,800 1,797,086
SGS Societe Generale de
Surveillance Holding SA 2,600 1,442,791
------------
8,972,672
------------
Taiwan - 3.3%
Chi Mei Optoelectronics Corp.(b) 1,285,000 2,281,411
China Motor Co. Ltd. 690,000 1,392,564
Powerchip Semiconductor Corp.(b) 2,436,000 2,350,980
Quanta Computer, Inc. 713,931 1,668,366
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Taiwan (Continued)
Taishin Financial Holdings Co. Ltd. 1,050,000 $ 1,054,781
Taiwan Styrene Monomer Corp. 711,000 602,030
------------
9,350,132
------------
Thailand - 1.7%
Advanced Info Service Public Co.
Ltd. 1,040,000 2,210,232
Banpu Public Co. Ltd.(b) 790,100 2,594,118
------------
4,804,350
------------
United Kingdom - 11.7%
Aegis Group PLC 1,281,400 2,284,387
Alliance Unichem PLC 144,728 1,544,073
AMEC PLC 392,300 2,236,883
Antofagasta PLC 87,500 1,664,415
Bookham Technology - ADR(b)(c) 776,200 1,692,116
Burberry Group PLC 417,700 2,738,682
Colt Telecom Group PLC(b) 1,133,300 1,937,051
CSR PLC(b) 58,300 253,939
Dairy Crest Group PLC 194,200 1,420,514
EMI Group PLC 622,500 3,174,792
Enterprise Inns PLC 287,300 3,228,830
Exel PLC 155,900 2,017,121
Hilton Group PLC 395,600 1,650,423
ICAP PLC 436,900 2,288,443
Severn Trent PLC 109,300 1,528,685
Taylor Nelson Sofres PLC 506,300 1,819,147
Trinity Mirror PLC 149,300 1,562,668
------------
33,042,169
------------
United States - 1.5%
Autoliv, Inc. 51,900 2,127,900
NII Holdings, Inc. - Class B(b)(c) 63,000 2,206,890
------------
4,334,790
------------
TOTAL COMMON STOCKS
(Cost $222,215,590)
259,025,004
------------
PREFERRED STOCKS - 0.6%
Brazil - 0.6%
Gerdau SA
(Cost $789,730) 77,100 1,784,044
------------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 7.5%
Chase Manhattan Bank, Time
Deposit
1.06%(d) 04/01/04 $ 87 87,405
Federal Home Loan Bank, Discount
Notes
0.97% 04/01/04 12,000 12,000,000
Societe General, Floating Rate Notes
1.14%(d) 04/01/04 2,181 2,180,595
Galileo Money Market Fund 6,312 6,312,184
Institutional Money Market Trust(d) 646 645,600
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $21,225,784) 21,225,784
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERNATIONAL OPPORTUNITIES PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
VALUE
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $244,231,104(a)) 99.7% $282,034,832
OTHER ASSETS IN EXCESS OF
LIABILITIES 0.3% 938,000
----- ------------
NET ASSETS (Applicable to
3,764,359 Institutional shares,
469,237 Service shares,
3,330,569 Investor A shares,
1,957,311 Investor B shares and
2,212,174 Investor C shares
outstanding) 100.0% $282,972,832
===== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE
($93,582,393/3,764,359) $ 24.86
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SERVICE SHARE
($11,433,146/469,237) $ 24.37
=======
NET ASSET VALUE AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($80,705,517/3,330,569) $ 24.23
=======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($24.23/0.950) $ 25.51
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($45,651,686/1,957,311) $ 23.32
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($51,600,090/2,212,174) $ 23.33
=======
- -------------------
(a) Cost for Federal income tax purposes is
$244,234,986. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $41,584,770
Gross unrealized depreciation (3,784,924)
-----------
$37,799,846
===========
(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.
46
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
ASIA PACIFIC EQUITY PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS - 94.2%
Australia - 7.5%
Broken Hill Proprietary Co. Ltd. 7,350 $ 68,795
Lend Lease Corp. Ltd. 5,200 40,613
Orica Ltd. 3,415 37,231
Promina Group Ltd. 16,800 47,583
Westpac Banking Corp. Ltd. 2,400 32,157
WMC Resources Ltd. 10,000 39,089
----------
265,468
----------
Hong Kong - 5.7%
BOC Hong Kong Holdings Ltd. 20,000 38,120
Cheung Kong (Holdings) Ltd. 4,000 33,628
Esprit Holdings Ltd. 7,000 29,381
Sun Hung Kai Properties Ltd. 3,000 27,435
Swire Pacific Ltd. - Class A 8,000 54,164
Yanzhou Coal Mining Co. Ltd. 18,000 19,984
----------
202,712
----------
India - 1.1%
Hindustan Petroleum Corp. Ltd. 3,400 39,749
----------
Indonesia - 1.6%
PT Bank Mandiri(b) 144,500 23,623
PT Indonesian Satellite Corp. 70,000 31,471
----------
55,094
----------
Japan - 60.1%
Aiful Corp. 500 51,281
Amada Co. Ltd. 10,000 64,401
Asahi Chemical Industry Co. Ltd. 10,000 58,730
Chugai Pharmaceutical Co. Ltd. 3,000 47,753
Daiwa House Industry Co. Ltd. 3,000 38,295
Dentsu, Inc. 7 21,397
Dentsu, Inc. (When Issued)(b) 7 20,858
East Japan Railway Co. 11 57,836
Fast Retailing Co. Ltd. 700 57,261
Geo Co. Ltd. 3 12,025
Geo Co. Ltd. (When Issued)(b) 3 11,736
Hitachi Ltd. 11,000 85,327
Joint Corp. 2,300 52,617
Kayaba Industry Co. Ltd. 7,000 26,712
Komatsu Ltd. 7,000 44,408
Konica Corp. 4,500 64,363
Kyocera Corp. 500 42,005
Marui Co. Ltd. 4,000 62,940
Matsushita Electric Industrial Co. Ltd. 5,000 77,282
Millea Holdings, Inc. 4 62,287
Mitsubishi Chemical Corp. 17,000 51,963
Mitsubishi Corp. 6,000 70,938
Mitsubishi Estate Co. Ltd. 3,000 40,688
Mitsubishi Tokyo Financial Group, Inc. 9 89,105
Mitsui Fudosan Co. Ltd. 3,000 37,747
Mizuho Financial Group, Inc. 8 34,450
NEC Corp. 7,000 57,596
Nissan Motor Co. Ltd. 6,000 67,189
Nomura Holdings, Inc. 6,000 109,290
Nomura Research Institute Ltd. 300 34,142
NSK Ltd. 9,000 44,379
NTT Docomo, Inc. 30 66,324
Obayashi Corp. 8,000 43,754
Sekisui House Ltd. 4,000 45,100
Sony Corp. 1,200 50,291
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS (Continued)
Japan (Continued)
The Sumitomo Trust and Banking
Co. Ltd. 8,000 $ 53,290
THK Co. Ltd. 1,700 33,580
Tokyo Steel Manufacturing Co. Ltd 3,200 41,463
Toyota Motor Corp. 3,300 123,074
UFJ Holdings, Inc. 5 31,816
Yamada Denki Co. Ltd. 1,000 39,121
----------
2,124,814
----------
Malaysia - 0.9%
Public Bank Berhad 36,000 33,347
----------
Singapore - 1.2%
Keppel Corp. Ltd. 9,700 42,243
----------
South Korea - 7.6%
Honam Petrochemical Corp. 900 36,504
Hyundai Mobis 280 12,821
KT & G Corp. 1,650 37,924
Samsung Electronics Co. Ltd. 280 139,701
Shinhan Financial Group Co. Ltd. 2,300 42,331
----------
269,281
----------
Taiwan - 5.3%
China Steel Corp. 42,000 43,466
Chinatrust Financial Holdings Co.
Ltd. 34,000 40,759
Hon Hai Precision Industry Co. Ltd. 11,600 50,167
Optimax Technology Corp. 3,000 10,879
Taishin Financial Holdings Co. Ltd. 43,000 43,196
----------
188,467
----------
Thailand - 3.2%
Advanced Info Service Public Co.
Ltd. (Foreign Shares) 13,900 29,541
Kasikornbank Public Co. Ltd.
(Foreign Shares)(b) 32,000 40,316
Siam Cement Public Co. Ltd.
(Foreign Shares) 5,970 37,987
----------
107,844
----------
TOTAL COMMON STOCKS
(Cost $2,510,229)
3,329,019
----------
SHORT TERM INVESTMENTS - 4.8%
Galileo Money Market Fund
(Cost $170,747) 170,747 170,747
----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $2,680,976(a)) 99.0% 3,499,766
OTHER ASSETS IN EXCESS OF LIABILITIES 1.0% 35,774
----- ----------
NET ASSETS (Applicable to 301,999
Institutional shares, 10 Service
shares, 32,121 Investor A shares,
44,649 Investor B shares and 24,093
Investor C shares outstanding) 100.0% $3,535,540
===== ==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
ASIA PACIFIC EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
VALUE
----------
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($2,668,930/301,999) $ 8.84
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($91/10) $ 8.79
======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($277,378/32,121) $ 8.64
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($8.64/0.950) $ 9.09
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($382,444/44,649) $ 8.57
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($206,697/24,093) $ 8.58
======
- -------------------
(a) Cost for Federal income tax purposes is $2,698,985. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $816,777
Gross unrealized depreciation (15,996)
--------
$800,781
========
(b) Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
SELECT EQUITY PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS - 98.7%
Aerospace - 1.5%
Northrop Grumman Corp. 9,000 $ 885,780
United Technologies Corp. 8,600 742,180
----------
1,627,960
----------
Banks - 7.4%
Bank of America Corp.(b) 22,000 1,781,560
Bank One Corp. 20,000 1,090,400
First Tennessee National Corp. 18,000 858,600
Greenpoint Financial Corp. 14,500 633,795
Huntington Bancshares, Inc. 23,000 510,370
J.P. Morgan Chase & Co., Inc. 21,000 880,950
National City Corp. 23,500 836,130
Wachovia Corp. 27,000 1,269,000
----------
7,860,805
----------
Beverages & Bottling - 2.5%
Coca-Cola Enterprises, Inc. 34,000 821,780
PepsiAmericas, Inc. 33,000 673,860
PepsiCo, Inc. 22,000 1,184,700
----------
2,680,340
----------
Broadcasting - 1.2%
Comcast Corp. - Class A(c) 23,000 661,020
Fox Entertainment Group, Inc. -
Class A(c) 21,000 569,100
----------
1,230,120
----------
Business Services - 0.9%
Cendant Corp. 39,000 951,210
----------
Chemicals - 0.5%
Engelhard Corp. 17,000 508,130
----------
Computer & Office Equipment - 5.4%
Cisco Systems, Inc.(c) 49,700 1,168,944
Hewlett-Packard Co. 54,300 1,240,212
International Business Machines
Corp. 28,000 2,571,520
Lexmark International, Inc.(c) 8,000 736,000
----------
5,716,676
----------
Computer Software & Services - 5.9%
Checkfree Corp.(c) 25,000 736,500
Computer Sciences Corp.(b)(c) 17,100 689,643
Microsoft Corp. 129,000 3,221,130
Oracle Corp.(c) 57,000 684,570
Symantec Corp.(b)(c) 19,000 879,700
----------
6,211,543
----------
Construction - 0.5%
Centex Corp. 9,000 486,540
----------
Electronics - 5.2%
Arrow Electronics, Inc.(c) 24,000 611,040
General Electric Co.(d) 88,000 2,685,760
Intel Corp. 37,700 1,025,440
Jabil Circuit, Inc.(c) 19,000 559,170
L-3 Communications Holdings, Inc.(b) 11,500 684,020
----------
5,565,430
----------
Energy & Utilities - 2.9%
Exelon Corp. 14,000 964,180
PPL Corp.(b) 24,000 1,094,400
TXU Corp.(b) 37,000 1,060,420
----------
3,119,000
----------
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS (Continued)
Entertainment & Leisure - 2.0%
MGM Mirage(c) 13,000 $ 589,420
Time Warner, Inc.(c) 37,000 623,820
The Walt Disney Co. 30,000 749,700
----------
1,962,940
----------
Finance - 7.9%
The Bear Stearns Cos., Inc. 6,000 526,080
Capital One Financial Corp.(b) 9,000 678,870
Citigroup, Inc. 66,000 3,412,200
Countrywide Financial Corp. 7,533 722,415
Freddie Mac 15,000 885,900
The Goldman Sachs Group, Inc. 6,000 626,100
MBNA Corp. 27,000 746,010
Merrill Lynch & Co., Inc. 14,000 833,840
----------
8,431,415
----------
Food & Agriculture - 1.7%
Archer-Daniels-Midland Co. 34,000 573,580
Supervalu, Inc. 18,000 549,720
Tyson Foods, Inc. - Class A 35,000 631,750
----------
1,755,050
----------
Insurance - 5.1%
ACE Ltd. 12,000 511,920
The Allstate Corp. 18,000 818,280
American International Group, Inc. 29,000 2,069,150
John Hancock Financial Services,
Inc. 11,000 480,590
Prudential Financial, Inc. 21,000 940,380
W.R. Berkley Corp. 14,500 578,260
----------
5,398,580
----------
Machinery & Heavy Equipment - 0.6%
Deere & Co. 8,700 602,998
Eagle Materials, Inc. 217 12,770
Eagle Materials, Inc. - Class B 730 42,632
----------
658,400
----------
Manufacturing - 6.9%
Brunswick Corp. 20,000 816,599
Eaton Corp. 15,500 870,945
Energizer Holdings, Inc.(c) 17,000 793,730
Fortune Brands, Inc. 10,000 766,300
NIKE, Inc. - Class B 10,500 817,635
The Sherwin-Williams Co.(b) 23,000 883,890
The Stanley Works 20,000 853,600
Tyco International Ltd. - ADR(b) 54,000 1,547,100
----------
7,349,799
----------
Medical & Medical Services - 2.4%
Amgen, Inc.(c) 16,000 930,720
Anthem, Inc.(b)(c) 9,000 815,760
UnitedHealth Group, Inc. 13,000 837,720
----------
2,584,200
----------
Medical Instruments & Supplies - 3.8%
Beckman Coulter, Inc. 14,000 763,560
Becton, Dickinson & Co. 14,000 678,720
Boston Scientific Corp.(c) 18,000 762,840
Johnson & Johnson 36,000 1,825,920
----------
4,031,040
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
49
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
SELECT EQUITY PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Metal & Mining - 0.5%
Alcoa, Inc. 16,000 $ 555,040
------------
Motor Vehicles - 0.9%
General Motors Corp.(b) 9,000 423,900
Lear Corp.(b) 8,600 532,856
------------
956,756
------------
Oil & Gas - 6.3%
Amerada Hess Corp. 8,700 567,936
ChevronTexaco Corp. 6,000 526,680
ConocoPhillips 25,000 1,745,250
Exxon Mobil Corp. 39,000 1,622,010
Newfield Exploration Co.(c) 17,000 814,810
Praxair, Inc. 12,000 445,440
Schlumberger Ltd. 15,000 957,750
------------
6,679,876
------------
Paper & Forest Products - 1.6%
Kimberly-Clark Corp. 13,000 820,300
Louisiana-Pacific Corp. 33,600 866,880
------------
1,687,180
------------
Pharmaceuticals - 6.5%
Abbott Laboratories 18,000 739,800
Merck & Co., Inc. 41,000 1,811,790
Pfizer, Inc. 100,000 3,505,000
Watson Pharmaceuticals, Inc.(b)(c) 20,000 855,800
------------
6,912,390
------------
Publishing & Printing - 0.8%
The McGraw-Hill Cos., Inc. 11,000 837,540
------------
Railroad & Shipping - 1.4%
Burlington Northern Santa Fe Corp. 23,000 724,500
United Parcel Service, Inc. - Class B 11,000 768,240
------------
1,492,740
------------
Real Estate - 0.4%
Simon Property Group, Inc. 6,900 403,236
------------
Restaurants - 0.8%
McDonald's Corp. 29,000 828,530
------------
Retail Merchandising - 6.4%
Borders Group, Inc. 37,000 878,380
Costco Cos., Inc.(c) 15,000 563,400
Federated Department Stores, Inc. 17,000 918,850
The Home Depot, Inc. 22,300 833,128
Limited Brands 44,700 894,000
The May Department Stores Co. 16,000 553,280
Nordstrom, Inc. 20,000 798,000
Wal-Mart Stores, Inc. 22,000 1,313,180
------------
6,752,218
------------
Semiconductors & Related Devices - 2.2%
Fairchild Semiconductor International,
Inc.(c) 23,000 552,690
LSI Logic Corp.(c) 72,000 672,480
Texas Instruments, Inc. 37,500 1,095,750
------------
2,320,920
------------
Soaps & Cosmetics - 0.7%
The Procter & Gamble Co. 7,000 734,160
------------
NUMBER
OF SHARES VALUE
----------- --------------
COMMON STOCKS (Continued)
Telecommunications - 4.2%
BellSouth Corp. 30,000 $ 830,700
Nextel Communications, Inc. - Class
A(c) 26,000 642,980
QUALCOMM, Inc. 15,000 996,300
Sprint Corp. (Fon Group) 31,000 571,330
Verizon Communications, Inc. 40,000 1,461,600
------------
4,502,910
------------
Tobacco - 1.2%
Altria Group, Inc. 24,000 1,306,800
------------
Transportation - 0.5%
Ryder Systems, Inc. 14,500 561,585
------------
TOTAL COMMON STOCKS
(Cost $75,125,385)
104,661,059
------------
PAR/SHARES
MATURITY (000)
---------- -----------
SHORT TERM INVESTMENTS - 9.9%
Canadian Imperial Bank International,
Certificate of Deposit
1.04%(e) 04/29/04 $ 487 $ 486,545
Chase Manhattan Bank, Time
Deposit
1.06%(e) 04/01/04 480 479,755
Foreningssparbanken AB, Floating
Rate Notes
1.05%(e) 04/19/04 419 418,516
Merrill Lynch Master Note, Floating
Rate Notes
1.19%(e) 04/01/04 808 807,765
Merrill Lynch, Medium Term Notes
1.19%(e) 04/01/04 412 411,915
Societe General, Floating Rate Notes
1.14%(e) 04/01/04 29 29,033
Svenska Handelsbank, Certificate of
Deposit
1.39%(e) 10/27/04 435 434,863
Tannehill Capital, Asset Back
Commercial Paper
1.04%(e) 04/19/04 835 835,165
Westdeutsche Landsbank
International, Certificate of Deposit
1.50%(e) 01/10/05 247 246,514
Westdeutsche Landsbank
International, Floating Rate Notes
1.06%(e) 04/12/04 1,068 1,068,279
Galileo Money Market Fund 2,017 2,016,642
Institutional Money Market Trust(e) 3,283 3,282,756
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $10,517,748) 10,517,748
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
SELECT EQUITY PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
VALUE
---------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $85,643,133(a)) 108.6% $115,178,807
LIABILITIES IN EXCESS OF
OTHER ASSETS
(Including $8,501,106 of payable
upon return of securities loaned) ( 8.6)% (9,103,870)
----- ------------
NET ASSETS (Applicable to
5,015,996 Institutional shares,
151,653 Service shares,
1,682,710 Investor A shares,
2,012,422 Investor B shares and
171,493 Investor C shares
outstanding) 100.0% $106,074,937
===== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE
($59,715,405/5,015,996) $ 11.90
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SERVICE SHARE
($1,810,238/151,653) $ 11.94
=======
NET ASSET VALUE AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($19,817,859/1,682,710) $ 11.78
=======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($11.78/0.955) $ 12.34
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($22,787,656/2,012,422) $ 11.32
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($1,943,779/171,493) $ 11.33
=======
- -------------------
(a) Cost for Federal income tax purposes is $86,817,431. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $28,839,006
Gross unrealized depreciation (477,630)
-----------
$28,361,376
===========
(b) Total or partial securities on loan.
(c) Non-income producing security.
(d) Securities, or a portion therof, pledged as collateral with a value of
$1,373,400 on 7 long S&P futures contracts expiring June 2004. The value
of such contracts on March 31, 2004 was $1,968,575, with an unrealized
gain of $27,475.
(e) Securities purchased with the cash proceeds from securities loaned.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
51
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INDEX EQUITY PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
VALUE
---------------
Investment in The U.S. Large Company
Series of The DFA Investment Trust
Company
(Cost $1,469,985,329) 100.1% $1,600,095,744
LIABILITIES IN EXCESS OF
OTHER ASSETS ( 0.1)% (2,262,715)
----- ----------
NET ASSETS (Applicable to
30,165,139 Institutional shares,
4,119,016 Service shares,
15,314,039 Investor A shares,
9,586,156 Investor B shares and
15,126,887 Investor C shares
outstanding) 100.0% $1,597,833,029
===== ==============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE
($654,979,943/30,165,139) $ 21.71
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SERVICE SHARE
($88,842,125/4,119,016) $ 21.57
=======
NET ASSET VALUE AND
REDEMPTION PRICE
PER INVESTOR A SHARE
($330,227,807/15,314,039) $ 21.56
=======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($21.56/0.970) $ 22.23
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($203,218,185/9,586,156) $ 21.20
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($320,564,969/15,126,887) $ 21.19
=======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS AND ACCOMPANYING FINANCIAL
STATEMENTS AND RELATED NOTES FOR THE DFA INVESTMENT TRUST COMPANY.
52
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BALANCED PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS - 64.6%
Aerospace - 1.0%
Northrop Grumman Corp. 8,100 $ 797,202
United Technologies Corp. 8,100 699,030
----------
1,496,232
----------
Banks - 4.8%
Bank of America Corp.(b) 20,100 1,627,698
Bank One Corp. 18,800 1,024,976
First Tennessee National Corp. 16,400 782,280
Greenpoint Financial Corp. 13,200 576,972
Huntington Bancshares, Inc. 21,200 470,428
J.P. Morgan Chase & Co., Inc. 19,400 813,830
National City Corp. 21,900 779,202
Wachovia Corp. 25,400 1,193,800
----------
7,269,186
----------
Beverages & Bottling - 1.7%
Coca-Cola Enterprises, Inc. 32,000 773,440
PepsiAmericas, Inc. 31,100 635,062
PepsiCo, Inc. 20,200 1,087,770
----------
2,496,272
----------
Broadcasting - 0.8%
Comcast Corp. - Class A(c) 21,100 606,414
Fox Entertainment Group, Inc. -
Class A(c) 19,500 528,450
----------
1,134,864
----------
Business Services - 0.6%
Cendant Corp. 36,600 892,674
----------
Chemicals - 0.3%
Engelhard Corp. 15,600 466,284
----------
Computer & Office Equipment - 3.5%
Cisco Systems, Inc.(c)(f) 46,298 1,088,929
Hewlett-Packard Co. 50,600 1,155,704
International Business Machines
Corp. 25,850 2,374,064
Lexmark International, Inc.(c) 7,700 708,400
----------
5,327,097
----------
Computer Software & Services - 3.8%
Checkfree Corp.(c) 23,800 701,148
Computer Sciences Corp.(b)(c) 15,400 621,082
Microsoft Corp. 120,700 3,013,879
Oracle Corp.(c) 52,100 625,721
Symantec Corp.(b)(c) 17,700 819,510
----------
5,781,340
----------
Construction - 0.3%
Centex Corp. 8,600 464,916
----------
Electronics - 3.4%
Arrow Electronics, Inc.(c) 22,300 567,758
General Electric Co. 81,300 2,481,276
Intel Corp. 35,100 954,720
Jabil Circuit, Inc.(c) 17,800 523,854
L-3 Communications Holdings, Inc.(b) 10,800 642,384
----------
5,169,992
----------
Energy & Utilities - 1.9%
Exelon Corp. 12,600 867,762
PPL Corp.(b) 21,700 989,520
TXU Corp.(b) 34,000 974,440
----------
2,831,722
----------
NUMBER
OF SHARES VALUE
----------- ------------
COMMON STOCKS (Continued)
Entertainment & Leisure - 1.2%
MGM Mirage(c) 12,100 $ 548,614
Time Warner, Inc.(c) 34,500 581,670
The Walt Disney Co. 27,800 694,722
----------
1,825,006
----------
Finance - 5.3%
The Bear Stearns Cos., Inc. 5,950 521,696
Capital One Financial Corp.(b) 8,600 648,698
Citigroup, Inc. 61,900 3,200,229
Countrywide Financial Corp. 7,100 680,890
Freddie Mac 14,000 826,840
The Goldman Sachs Group, Inc. 5,900 615,665
MBNA Corp. 25,000 690,750
Merrill Lynch & Co., Inc. 13,150 783,214
----------
7,967,982
----------
Food & Agriculture - 1.1%
Archer-Daniels-Midland Co. 30,400 512,848
Supervalu, Inc. 16,700 510,018
Tyson Foods, Inc. - Class A 32,600 588,430
----------
1,611,296
----------
Insurance - 3.4%
ACE Ltd. 11,100 473,526
The Allstate Corp. 17,200 781,912
American International Group, Inc. 27,000 1,926,450
John Hancock Financial Services,
Inc. 10,400 454,376
Prudential Financial, Inc. 19,900 891,122
W.R. Berkley Corp. 13,650 544,362
----------
5,071,748
----------
Machinery & Heavy Equipment - 0.4%
Deere & Co. 8,200 568,342
Eagle Materials, Inc. 208 12,241
Eagle Materials, Inc. - Class B 700 40,880
----------
621,463
----------
Manufacturing - 4.5%
Brunswick Corp. 19,000 775,770
Eaton Corp. 14,300 803,517
Energizer Holdings, Inc.(c) 15,500 723,695
Fortune Brands, Inc. 9,400 720,322
NIKE, Inc. - Class B 9,700 755,339
The Sherwin-Williams Co.(b) 20,600 791,658
The Stanley Works 18,800 802,384
Tyco International Ltd. - ADR 48,800 1,398,120
----------
6,770,805
----------
Medical & Medical Services - 1.6%
Amgen, Inc.(c) 14,800 860,916
Anthem, Inc.(b)(c) 8,200 743,248
UnitedHealth Group, Inc. 12,100 779,724
----------
2,383,888
----------
Medical Instruments & Supplies - 2.5%
Beckman Coulter, Inc. 13,350 728,109
Becton, Dickinson & Co. 13,200 639,936
Boston Scientific Corp.(c) 16,400 695,032
Johnson & Johnson 33,600 1,704,192
----------
3,767,269
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
53
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BALANCED PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS (Continued)
Metal & Mining - 0.3%
Alcoa, Inc. 14,600 $ 506,474
-----------
Motor Vehicles - 0.6%
General Motors Corp.(b) 8,600 405,060
Lear Corp.(b) 8,000 495,680
-----------
900,740
-----------
Oil & Gas - 4.2%
Amerada Hess Corp. 8,100 528,768
ChevronTexaco Corp. 5,700 500,346
ConocoPhillips 23,200 1,619,592
Exxon Mobil Corp. 36,600 1,522,194
Newfield Exploration Co.(c) 15,900 762,087
Praxair, Inc. 11,300 419,456
Schlumberger Ltd. 15,000 957,750
-----------
6,310,193
-----------
Paper & Forest Products - 1.1%
Kimberly-Clark Corp. 12,500 788,750
Louisiana-Pacific Corp. 31,300 807,540
-----------
1,596,290
-----------
Pharmaceuticals - 4.2%
Abbott Laboratories 16,700 686,370
Merck & Co., Inc. 36,600 1,617,354
Pfizer, Inc. 94,110 3,298,556
Watson Pharmaceuticals, Inc.(b)(c) 18,600 795,894
-----------
6,398,174
-----------
Publishing & Printing - 0.5%
The McGraw-Hill Cos., Inc. 10,000 761,400
-----------
Railroad & Shipping - 0.9%
Burlington Northern Santa Fe Corp. 21,500 677,250
United Parcel Service, Inc. - Class B 10,700 747,288
-----------
1,424,538
-----------
Real Estate - 0.2%
Simon Property Group, Inc. 6,400 374,016
-----------
Restaurants - 0.5%
McDonald's Corp. 26,000 742,820
-----------
Retail Merchandising - 4.2%
Borders Group, Inc. 34,600 821,404
Costco Cos., Inc.(b)(c) 14,300 537,108
Federated Department Stores, Inc. 16,300 881,015
The Home Depot, Inc. 20,800 777,088
Limited Brands 41,700 834,000
The May Department Stores Co. 15,400 532,532
Nordstrom, Inc. 19,000 758,100
Wal-Mart Stores, Inc. 20,500 1,223,645
-----------
6,364,892
-----------
Semiconductors & Related Devices - 1.4%
Fairchild Semiconductor International,
Inc.(c) 21,100 507,033
LSI Logic Corp.(c) 65,800 614,572
Texas Instruments, Inc. 34,900 1,019,778
-----------
2,141,383
-----------
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS (Continued)
Soaps & Cosmetics - 0.5%
The Procter & Gamble Co. 6,900 $ 723,672
-----------
Telecommunications - 2.8%
BellSouth Corp. 28,200 780,858
Nextel Communications, Inc. - Class
A(c) 25,300 625,669
QUALCOMM, Inc. 13,700 909,954
Sprint Corp. (Fon Group) 29,100 536,313
Verizon Communications, Inc. 36,700 1,341,018
-----------
4,193,812
-----------
Tobacco - 0.8%
Altria Group, Inc. 21,900 1,192,455
-----------
Transportation - 0.3%
Ryder Systems, Inc. 13,500 522,855
-----------
TOTAL COMMON STOCKS
(Cost $71,288,004)
97,503,750
-----------
PAR
MATURITY (000)
-------------- --------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 8.5%
Federal Home Loan Mortgage Corp.,
Unsecured Notes
3.50% 04/01/08 $ 200 $ 202,015
5.75% 04/15/08 200 222,986
3.88% 11/08-01/09 1,400 1,423,930
6.62% 09/15/09 150 174,831
4.12% 02/24/11 175 175,448
4.62% 05/28/13 150 149,653
Federal National Mortgage
Association, Unsecured Notes
1.75% 06/16/06 90 89,516
5.25% 04/15/07 470 510,640
6.62% 10/15/07 300 341,249
6.00% 05/15/08 625 702,562
3.75% 09/15/08 175 177,829
7.25% 01/15/10 375 450,832
7.12% 06/15/10 290 348,267
Resolution Funding Corp. Strip
Bonds
6.29%(d) 07/15/18 150 73,829
6.30%(d) 10/15/18 150 72,643
Small Business Administration
Participation Certificates, Series
97-20F, Class 1
7.20% 06/01/17 1,183 1,317,805
Small Business Investment Cos.
Pass-Through, Series 97-P10C,
Class 1
6.85% 08/01/07 584 639,518
U.S. Treasury Bonds
10.38% 11/15/12 295 377,104
8.12% 08/15/19 425 596,212
6.00% 02/15/26 220 255,062
6.75% 08/15/26 640 809,200
5.38% 02/15/31 1,200 1,308,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BALANCED PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (Continued)
U.S. Treasury Notes
1.50% 03/31/06 $ 25 $ 24,961
2.25% 02/15/07 525 529,471
2.62%(e) 03/15/09 975 967,992
4.88% 02/15/12 380 414,809
4.00% 02/15/14 520 526,825
-----------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $12,478,806) 12,883,189
-----------
MORTGAGE PASS-THROUGHS - 7.1%
Federal Home Loan Mortgage Corp.
6.00% 02/01/33 457 475,487
Federal Home Loan Mortgage Corp.
Gold
8.00% 08/08-08/27 71 76,933
6.00% 04/13-04/34 766 801,678
4.00% 05/01/18 96 95,125
7.50% 09/01/27 1 934
6.50% 01/29-04/34 274 287,492
5.50% 08/33-10/33 178 183,010
5.00% 04/15/34 500 502,344
Federal National Mortgage
Association
7.00% 08/08-10/32 561 597,840
6.50% 11/10-09/32 1,082 1,142,793
6.00% 09/11-11/32 143 159,295
5.50% 04/17-04/34 2,159 2,220,134
5.00% 03/18-04/34 2,385 2,426,143
4.00% 09/01/18 98 97,105
4.50% 09/18-04/19 525 526,290
7.50% 02/01/30 20 21,862
Government National Mortgage
Association
6.00% 10/23-06/32 641 672,782
6.50% 01/24-04/34 80 88,762
7.50% 11/29-12/29 10 10,373
7.00% 09/31-05/32 184 195,660
5.50% 08/15/33 94 97,249
MLCC Mortgage Investors, Inc.,
Series 95-C2 (IO)
10.40%(d) 06/15/21 4,591 86,075
-----------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $10,265,035) 10,765,366
-----------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 0.2%
Salomon Brothers Mortgage
Securities VI, Series 87-1 (IO)
7.00%(d) 02/17/17 95 21,035
Salomon Brothers Mortgage
Securities VI, Series 87-1 (PO)
7.00%(d) 02/17/17 106 98,275
Salomon Brothers Mortgage
Securities VI, Series 87-2 (IO)
6.00%(d) 03/06/17 76 17,625
Salomon Brothers Mortgage
Securities VI, Series 87-2 (PO)
6.00%(d) 03/06/17 76 68,703
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS (Continued)
Structured Asset Securities Corp.,
Series 96-CFL, Class X1 (IO)
5.05%(d) 02/25/28 $1,458 $ 87,500
-----------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $381,522)
293,138
-----------
COMMERCIAL MORTGAGE BACKED SECURITIES - 1.1%
Bank of America Alternative Loan
Trust, Series 03-5, Class 2A1
5.00% 07/25/18 366 373,013
Citicorp Mortgage Securities, Inc.,
Series 01-11, Class 2A
6.25% 07/25/16 102 102,508
Countrywide Alternative Loan Trust,
Series 04-2CB, Class 4A1
5.00% 02/15/19 197 199,473
Mastr Alternative Loans Trust, Series
04-4, Class 1A1
5.50% 04/25/34 200 207,250
Mortgage Capital Funding, Inc.,
Series 98-MC2, Class B
6.55% 06/18/30 295 332,116
Salomon Brothers Mortgage
Securities VII, Series 00-C1, Class
A2
7.52% 12/18/09 285 337,237
Washington Mutual Mortgage
Securities Corp., Series 02-MS12,
Class A
6.50% 05/25/32 34 34,229
-----------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $1,524,909)
1,585,826
-----------
ASSET BACKED SECURITIES - 1.8%
Citibank Credit Card Issuance Trust,
Series 03-A6, Class A6
2.90%(f) 05/17/10 250 249,961
Citibank Credit Card Issuance Trust,
Series 04-1, Class A1
2.53% 01/20/09 450 452,992
Discover Card Master Trust I, Series
99-5, Class A
1.27%(g) 12/18/06 425 425,143
Green Tree Financial Corp., Series
96-6, Class A6
7.95% 09/15/27 592 649,887
Green Tree Financial Corp., Series
96-7, Class A6
7.65% 10/15/27 573 627,574
Sears Credit Account Master Trust,
Series 02-5, Class A
1.47%(g) 11/05/05 375 376,875
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $2,692,221) 2,782,432
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BALANCED PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- ------------
CORPORATE BONDS - 6.1%
Aerospace - 0.3%
Lockheed Martin Corp., Senior
Debentures
8.50% 12/01/29 $ 85 $ 113,973
Northrop Grumman Corp.,
Debentures
7.88% 03/01/26 75 93,424
Raytheon Co., Unsecured Notes
4.85% 01/15/11 35 36,138
----------
243,535
----------
Banks - 1.1%
Bank of America Corp., Senior Notes
5.88% 02/15/09 45 50,214
4.38% 12/01/10 25 25,767
Bank of America Corp., Senior
Unsecured Notes
5.25% 02/01/07 25 26,978
Bank of America Corp., Subordinated
Notes
7.40% 01/15/11 130 156,043
Barclays Bank PLC, Capital
Securities
8.55%(g)(h) 09/29/49 150 188,474
Depfa ACS Bank, Senior Notes
3.62% 10/29/08 300 307,350
HBOs Treasury Services PLC,
Unsecured Notes
3.12%(h) 01/12/07 50 51,040
HSBC Bank USA, Subordinated
Notes
4.62% 04/01/14 100 99,494
J.P. Morgan Chase & Co., Senior
Unsecured Notes
5.35% 03/01/07 50 54,160
5.25% 05/30/07 25 26,997
3.62% 05/01/08 35 35,824
3.50% 03/15/09 60 60,387
J.P. Morgan Chase & Co.,
Subordinated Notes
6.75% 02/01/11 60 69,341
U.S. Bank NA, Senior Bank Notes
2.87% 02/01/07 250 252,290
U.S. Bancorp, Senior Unsecured
Notes
3.95% 08/23/07 15 15,628
Wachovia Corp., Unsecured Notes
3.62% 02/17/09 65 66,072
Wells Fargo & Co., Subordinated
Notes
7.80%(g) 06/15/10 50 53,467
Wells Fargo & Co., Unsecured
Notes(b)
3.50% 04/04/08 35 35,863
3.12% 04/01/09 75 74,635
----------
1,650,024
----------
Beverages & Bottling - 0.0%
Cadbury Schweppes PLC,
Unsecured Notes
5.12%(h) 10/01/13 25 25,866
----------
Chemicals - 0.1%
Dow Chemical Co., Debentures
7.38% 11/01/29 5 5,829
PAR
MATURITY (000) VALUE
---------- ---------- ------------
CORPORATE BONDS (Continued)
Chemicals (Continued)
Dow Chemical Co., Senior
Debentures
5.97% 01/15/09 $ 100 $ 110,521
Dow Chemical Co., Senior
Unsecured Notes
5.75% 12/15/08 95 104,455
----------
220,805
----------
Energy & Utilities - 0.1%
FirstEnergy Corp., Senior Unsecured
Notes
7.38% 11/15/31 30 33,272
Florida Power Corp., First Mortgage
Bonds
6.65% 07/15/11 100 115,722
Ontario Electricity Financial Corp.,
Senior Notes
6.10% 01/30/08 40 44,912
Southern California Edison Co.,
Unsecured Notes
5.75% 04/01/35 25 24,685
----------
218,591
----------
Entertainment & Leisure - 0.3%
Time Warner Cos., Inc., Senior
Debentures
7.57% 02/01/24 70 80,611
7.62% 04/15/31 120 140,392
7.70% 05/01/32 25 29,663
----------
250,666
----------
Finance - 2.3%
Anadarko Finance Co., Senior
Unsecured Notes
7.50% 05/01/31 20 24,330
ASIF Global Finance, Unsecured
Notes
3.85%(h) 11/26/07 25 25,859
3.90%(h) 10/22/08 255 263,053
The Bear Stearns Cos., Inc., Senior
Notes
7.00% 03/01/07 40 44,980
Citigroup, Inc., Senior Unsecured
Notes
3.50% 02/01/08 150 153,258
Citigroup, Inc., Subordinated Notes
7.25% 10/01/10 50 59,548
5.88% 02/22/33 150 154,172
6.00% 10/31/33 25 26,183
Conoco Global Funding Co., Senior
Unsecured Notes
6.35% 10/15/11 90 102,759
Credit Suisse First Boston USA, Inc.,
Senior Unsecured Notes
3.88% 01/15/09 60 61,404
6.12% 11/15/11 35 39,095
Devon Financing Corp., Senior
Unsecured Notes
7.88% 09/30/31 15 18,458
Diageo Finance BV, Unsecured
Notes
3.88% 04/01/11 20 19,833
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
56
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BALANCED PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- ------------
CORPORATE BONDS (Continued)
Finance (Continued)
EOP Operating LP, Unsecured Notes
4.75% 03/15/14 $ 60 $ 59,071
General Electric Capital Corp., Senior
Unsecured Notes
5.88% 02/15/12 175 194,203
6.00% 06/15/12 40 44,685
General Electric Capital Corp.,
Unsecured Notes
2.80% 01/15/07 470 471,410
General Motors Acceptance Corp.,
Senior Unsecured Notes
6.88% 09/15/11 100 108,439
Glaxosmithline Capital, Inc.,
Unsecured Notes
4.38% 04/15/14 40 39,829
Goldman Sachs Capital I, Capital
Securities
6.34% 02/15/34 70 71,104
The Goldman Sachs Group, Inc.,
Senior Notes
6.12% 02/15/33 45 46,399
The Goldman Sachs Group, Inc.,
Senior Unsecured Notes
7.35% 10/01/09 15 17,762
6.60% 01/15/12 55 63,033
The Goldman Sachs Group, Inc.,
Unsecured Notes
4.75% 07/15/13 30 29,997
Household Finance Corp., Notes
6.38% 11/27/12 25 28,251
Household Finance Corp., Senior
Notes
5.88% 02/01/09 80 88,656
Household Finance Corp., Senior
Unsecured Notes
6.38% 10/15/11 60 68,032
7.00% 05/15/12 75 88,012
7.62% 05/17/32 25 31,546
Household Finance Corp., Unsecured
Notes
4.12% 12/15/08 50 51,644
Lehman Brothers Holdings, Inc.,
Unsecured Notes
4.00% 01/22/08 65 67,492
Morgan Stanley, Senior Unsecured
Notes
5.80% 04/01/07 50 54,620
3.88% 01/15/09 160 163,214
6.75% 04/15/11 25 28,878
Morgan Stanley, Subordinated Notes
4.75% 04/01/14 150 147,319
Protective Life Secured Trust,
Secured Notes
3.70% 11/24/08 60 61,139
Qwest Capital Funding, Inc., Senior
Unsecured Notes
7.90% 08/15/10 30 26,700
SLM Corp., Unsecured Notes
5.00% 10/01/13 75 76,946
Sun Life of Canada Capital Trust,
Capital Securities
8.53%(h) 05/29/49 195 233,308
PAR
MATURITY (000) VALUE
---------- ---------- ------------
CORPORATE BONDS (Continued)
Finance (Continued)
Swedish Export Credit Corp.,
Unsecured Notes
2.88% 01/26/07 $ 75 $ 76,314
UBS Preferred Funding Trust I,
Capital Securities
8.62%(g) 10/29/49 60 75,708
----------
3,506,643
----------
Food & Agriculture - 0.2%
General Mills, Inc., Senior Unsecured
Notes
5.12% 02/15/07 65 69,428
Kellogg Co., Senior Unsecured Notes
6.60% 04/01/11 25 28,927
Kraft Foods, Inc., Senior Unsecured
Notes
5.62% 11/01/11 170 184,344
6.25% 06/01/12 50 56,060
----------
338,759
----------
Insurance - 0.0%
Fund American Cos., Inc., Senior
Notes
5.88% 05/15/13 5 5,251
Pacific Life Corp., Senior Notes
6.60%(h) 09/15/33 20 22,041
----------
27,292
----------
Manufacturing - 0.0%
General Electric Co., Senior Notes
5.00% 02/01/13 25 26,107
----------
Metal & Mining - 0.0%
Alcan, Inc., Unsecured Notes
6.12% 12/15/33 25 26,408
----------
Motor Vehicles - 0.1%
DaimlerChrysler North America
Holding Corp., Unsecured Notes
6.50% 11/15/13 200 216,311
----------
Oil & Gas - 0.4%
Anadarko Petroleum Corp., Senior
Unsecured Notes
5.38% 03/01/07 100 107,725
Conoco, Inc., Senior Unsecured
Notes
6.95% 04/15/29 130 151,522
Consolidated Natural Gas, Inc.,
Senior Notes
5.00% 03/01/14 75 77,010
Devon Energy Corp., Senior
Debentures
7.95% 04/15/32 25 30,977
Kinder Morgan Energy Partners LP,
Senior Unsecured Notes
7.30% 08/15/33 25 28,852
Suncor Energy, Inc., Bonds
5.95% 12/01/34 20 21,148
----------
417,234
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
57
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BALANCED PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
CORPORATE BONDS (Continued)
Pharmaceuticals - 0.0%
Bristol-Myers Squibb Co., Senior
Debentures
6.88% 08/01/47 $ 25 $ 29,159
Wyeth, Unsecured Notes
6.50% 02/01/34 30 31,771
-----------
60,930
-----------
Publishing & Printing - 0.0%
News America, Inc., Debentures
8.88% 04/26/23 25 32,833
News America, Inc., Senior
Debentures
7.75% 01/20/24 25 29,572
-----------
62,405
-----------
Retail Merchandising - 0.0%
Wal-Mart Stores, Inc., Unsecured
Notes
4.12% 02/15/11 30 30,462
-----------
Telecommunications - 0.6%
AT&T Broadband Corp., Unsecured
Notes
8.38% 03/15/13 70 86,931
Comcast Cable Communications
Corp., Senior Unsecured Notes
7.05% 03/15/33 25 27,779
New England Telephone & Telegraph
Co., Debentures
7.88% 11/15/29 25 30,687
SBC Communications, Inc., Senior
Unsecured Notes
5.88% 08/15/12 50 54,494
TCI Communications, Inc., Senior
Debentures
7.88% 08/13-02/26 67 79,414
TCI Communications, Inc., Senior
Notes
7.12% 02/15/28 50 55,532
Verizon New Jersey, Inc., Senior
Debentures
5.88% 01/17/12 205 223,200
Vodafone Group PLC, Senior
Unsecured Notes
7.75% 02/15/10 230 277,090
WorldCom, Inc., Senior Notes
6.95%(b)(c)(i) 08/15/28 175 59,500
WorldCom, Inc., Senior Unsecured
Notes
7.38%(c)(h)(i) 01/15/06 135 45,900
-----------
940,527
-----------
Yankee - 0.6%
British Telecommunications Group
PLC, Senior Unsecured Notes
8.88% 12/15/30 35 46,698
Canadian National Railway Co.,
Senior Notes
6.90% 07/15/28 95 112,307
Deutsche Telekom International
Finance BV, Senior Unsecured
Notes
8.50%(g) 06/15/10 25 30,659
8.75% 06/15/30 85 111,438
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
CORPORATE BONDS (Continued)
Yankee (Continued)
Province of Quebec, Debentures
7.00% 01/30/07 $ 185 $ 208,630
Province of Quebec, Unsecured
Notes
7.38% 04/09/26 25 31,254
Tyco International Group SA, Senior
Notes
6.38% 06/15/05 130 136,653
Tyco International Group SA, Senior
Unsecured Notes
6.12% 11/01/08 25 27,216
United Mexican States, Bonds
8.12% 12/30/19 180 213,750
-----------
918,605
-----------
TOTAL CORPORATE BONDS
(Cost $8,909,149) 9,181,170
-----------
TAXABLE MUNICIPAL BONDS - 0.1%
California Department of Water
Resources Revenue Bonds, Series
02, Class E
3.98%
(Cost $99,996) 05/01/05 100 102,245
-----------
SHORT TERM INVESTMENTS - 10.0%
Chase Manhattan Bank, Time
Deposit
1.06%(j) 04/01/04 349 348,827
Foreningssparbanken AB, Floating
Rate Notes
1.05%(j) 04/19/04 135 135,434
General Electric Capital Corp.,
Floating Rate Notes
1.05%(j) 04/12/04 673 673,344
Merrill Lynch Master Note, Floating
Rate Notes
1.19%(j) 04/01/04 616 615,569
Merrill Lynch, Medium Term Notes
1.19%(j) 04/01/04 530 529,790
1.19%(j) 04/01/04 29 29,312
Societe General, Floating Rate Notes
1.14%(j) 04/01/04 168 168,392
Svenska Handelsbanken AB,
Certificate of Deposit
1.39%(j) 10/27/04 14 14,495
Tannehill Capital, Asset Backed
Commercial Paper
1.04%(j) 04/19/04 748 748,018
U.S. Treasury Bills
0.92% 04/01/04 9,000 9,000,000
Westdeutsche Landsbank
International, Certificate of Deposit
1.50%(j) 01/10/05 10 9,784
Galileo Money Market Fund 362 361,584
Institutional Money Market Trust(j) 2,516 2,515,983
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $15,150,532) 15,150,532
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
58
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BALANCED PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------- -----------
REPURCHASE AGREEMENTS - 0.5%
Lehman Brothers, Inc.
0.88% 04/05/04 $388 $388,294
(Agreement dated 03/30/04 to be
repurchased at $388,350.
Collateralized by $295,000 U.S
Treasury Bonds 10.375% due
11/15/12. The value of the
collateral is $377,272.)
Lehman Brothers, Inc.
0.88% 04/08/04 27 27,375
(Agreement dated 03/29/04 to be
repurchased at $27,382.
Collateralized by $25,000 U.S.
Treasury Bonds 5.375% due
02/15/31. The value of the
collateral is $27,261.)
Lehman Brothers, Inc.
0.88% 04/08/04 28 27,844
(Agreement dated 03/25/04 to be
repurchased at $27,853.
Collateralized by $25,000 U.S.
Treasury Bonds 5.375% due
02/15/31. The value of the
collateral is $27,276.)
Lehman Brothers, Inc.
0.95% 04/08/04 298 297,638
(Agreement dated 03/19/04 to be
repurchased at $297,795.
Collateralized by $210,000 U.S.
Treasury Bonds 6.000% due
02/15/26 and $45,000 U.S.
Treasury Bonds due 02/15/31.
The value of the collateral is
$291,324.)
--------
TOTAL REPURCHASE AGREEMENTS
(Cost $741,150) 741,150
--------
TOTAL INVESTMENTS IN
SECURITIES - 100.0%
(Cost $123,531,324(a)) $150,988,798
============
NUMBER OF
CONTRACTS
---------------
OPTIONS - 0.0%
Call Options Written - 0.0%
May 30 Year Federal National
Mortgage Association 5.0%
mortgages, Strike Price 99.578125,
Expires 05/06/04 $ (30) $ (2,859)
Put Options Written - 0.0%
June 10 year U.S. Treasury Notes
futures, Strike Price 112, Expires
05/21/04 (9) (3,516)
September 30 year U.S. Treasury
Notes futures, Strike Price 108,
Expires 08/27/04 (1) (1,688)
Put Swaptions Written - 0.0%
Morgan Stanley, Strike Price 3.60,
Expires 11/01/04 (590)(k) (7,253)
Union Bank of Switzerland, Strike
Price 6.00, Expires 10/25/04 (120)(k) (9,768)
=========
TOTAL OPTIONS
(Premiums received $119,446) $ (25,084)
=========
(a) Cost for Federal income tax purposes is $124,290,073. The
gross unrealized appreciation (depreciation) on a tax basis is
as follows:
Gross unrealized appreciation $27,401,827
Gross unrealized depreciation (703,102)
-----------
$26,698,725
===========
(b) Total or partial securities on loan.
(c) Non-income producing security.
(d) Rates shown are the effective yields as of March 31, 2004.
(e) Securities, or a portion thereof, subject to financing transactions.
(f) Securities, or a portion thereof, pledged as collateral with a value of
$1,112,623 on 2 long S&P 500 futures contracts, 68 short U.S. Treasury
Notes futures contracts, and 25 long U.S. Treasury Bonds futures
contracts expiring June 2004. The value of such contracts on March 31,
2004 was $11,154,700, with an unrealized loss of $74,512.
(g) Rates shown are the rates as of March 31, 2004.
(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, 2004,
the fund held 0.6% of its net assets, with a market value of $855,541 in
securities restricted as to resale.
(i) Security in default.
(j) Securities purchased with the cash proceeds from securities loaned.
(k) Each swaption contract is equivalent to $10,000 in notional amount.
INVESTMENT ABBREVIATIONS
ADR American Depository Receipts
IO Interest Only
NVDR Non Voting Depository Receipts
PLC Public Limited Company
PO Principal Only
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
59
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
BALANCED PORTFOLIO
MARCH 31, 2004 (UNAUDITED)
ASSETS
Investments at value (Cost $123,531,324) - including
$5,647,517 of securities loaned (Note A) .......................... $150,988,798
Dividends receivable ............................................... 123,178
Interest receivable ................................................ 352,575
Interest receivable on interest rate swaps ......................... 2,778
Investments sold receivable ........................................ 8,633,583
Capital shares sold receivable ..................................... 115,802
Prepaid expenses ................................................... 36,747
Unrealized appreciation on interest rate swaps ..................... 19,238
Futures margin receivable .......................................... 3,229
------------
TOTAL ASSETS .................................................... 160,275,928
------------
LIABILITIES
Payable upon return of securities loaned ........................... 5,788,948
Investments purchased payable ...................................... 8,472,040
Capital shares redeemed payable .................................... 229,637
Advisory fees payable .............................................. 44,702
Administrative fees payable ........................................ 27,596
Transfer agent fees payable ........................................ 13,621
Other accrued expenses payable ..................................... 109,847
Interest payable on interest rate swaps ............................ 6,916
Payable for financing transactions ................................. 5,221,765
Options written, at fair value (Premiums received $13,386).......... 8,063
Swaptions written, at fair value (Premiums received $106,060)....... 17,021
Futures margin payable ............................................. 14,443
Unrealized depreciation on interest rate swaps ..................... 61,002
------------
TOTAL LIABILITIES ............................................... 20,015,601
------------
NET ASSETS (Applicable to 841,874 Institutional shares,
161,650 Service shares, 5,488,655 Investor A shares, 3,112,796
Investor B shares and 366,552 Investor C shares outstanding) ....... $140,260,327
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($11,894,399/841,874)....................... $14.13
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($2,281,545/161,650).............................. $14.11
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($77,420,051/5,488,655)........................ $14.11
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE ($14.11 0.955)........... $14.77
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($43,537,892/3,112,796)........................ $13.99
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($5,126,440/366,552)........................... $13.99
======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 2004 (UNAUDITED)
LARGE CAP LARGE CAP MID-CAP MID-CAP
VALUE GROWTH VALUE GROWTH SMALL CAP
EQUITY EQUITY EQUITY EQUITY VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ------------ ------------
Investment income:
Interest ................................... $ 5,380 $ 2,975 $ 1,137 $ 6,583 $ 5,384
Securities lending income .................. 11,127 6,391 3,941 20,242 12,291
Dividends .................................. 3,400,462 603,049 286,902 274,377 599,759
Foreign taxes withheld ..................... - - - - -
----------- ----------- ----------- ------------ ------------
Total investment income ................. 3,416,969 612,415 291,980 301,202 617,434
----------- ----------- ----------- ------------ ------------
Expenses:
Investment advisory fee .................... 823,458 339,490 168,986 567,716 390,996
Administration fee ......................... 127,262 52,467 17,955 60,320 60,427
Administration fee - class specific ........ 217,142 89,524 30,632 102,893 103,095
Custodian fee .............................. 41,697 27,240 7,156 13,827 16,964
Transfer agent fee ......................... 44,041 38,507 11,656 68,377 25,602
Transfer agent fee - class specific ........ 52,199 23,118 7,547 30,381 28,252
Shareholder servicing fees - class
specific ................................. 161,131 87,968 21,662 109,397 84,262
Shareholder processing fees - class
specific ................................. 114,830 65,081 14,504 69,998 51,820
Distribution fees - class specific ......... 128,328 81,051 39,919 202,298 109,162
Legal and audit ............................ 15,054 9,320 6,808 8,616 9,928
Printing ................................... 30,393 12,724 4,291 13,474 13,499
Registration fees and expenses ............. 21,537 16,850 17,118 22,419 18,850
Trustees' fees ............................. 3,908 1,661 533 1,678 1,662
Other ...................................... 5,422 2,275 2,699 4,940 4,766
----------- ----------- ----------- ------------ ------------
Total expenses .......................... 1,786,402 847,276 351,466 1,276,334 919,285
----------- ----------- ----------- ------------ ------------
Less investment advisory and
administration fees waived ............ (183,210) (99,563) (7,234) (2,040) -
Less administration fees waived -
class specific ........................ (7) (2) (1) (2,583) (1)
Less distribution fees waived -
class specific ........................ (32,923) (13,611) (2,073) (14,026) (20,174)
Less expenses reimbursed by
advisor ............................... - - - - -
----------- ----------- ----------- ------------ ------------
Net expenses ............................ 1,570,262 734,100 342,158 1,257,685 899,110
----------- ----------- ----------- ------------ ------------
Total expenses .......................... 1,570,262 734,100 342,158 1,257,685 899,110
----------- ----------- ----------- ------------ ------------
Net investment income (loss) ............... 1,846,707 (121,685) (50,178) (956,483) (281,676)
----------- ----------- ----------- ------------ ------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions (net of
foreign taxes) .......................... 26,608,804 17,299,980 7,138,796 7,992,071 21,449,368
Futures and options contracts ............ 194,724 57,739 - - -
Foreign currency related transactions..... - - - - -
----------- ----------- ----------- ------------ ------------
26,803,528 17,357,719 7,138,796 7,992,071 21,449,368
----------- ----------- ----------- ------------ ------------
Change in unrealized appreciation
(depreciation) from:
Investments (net of foreign taxes) ....... 20,205,245 (2,432,926) 1,129,439 18,454,363 9,695,555
Futures and options contracts ............ 107,636 70,685 - - -
Foreign currency related transactions..... - - - - -
----------- ----------- ----------- ------------ ------------
20,312,881 (2,362,241) 1,129,439 18,454,363 9,695,555
----------- ----------- ----------- ------------ ------------
Net gain on investments and foreign
currency transactions ...................... 47,116,409 14,995,478 8,268,235 26,446,434 31,144,923
----------- ----------- ----------- ------------ ------------
Net increase in net assets resulting from
operations ................................. $48,963,116 $14,873,793 $ 8,218,057 $ 25,489,951 $ 30,863,247
=========== =========== =========== ============ ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
62
BLACKROCK FUNDS
GLOBAL SCIENCE
SMALL CAP SMALL CAP & TECHNOLOGY EUROPEAN INTERNATIONAL INTERNATIONAL
CORE EQUITY GROWTH EQUITY U.S. OPPORTUNITIES OPPORTUNITIES EQUITY EQUITY OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------ ------------- ------------------- -------------- ----------- ------------- -------------
$ 344 $ 55,246 $ 6,890 $ 3,851 $ 160 $ 7,348 $ 47,008
- 36,520 - - - 737 12,092
6,054 200,232 314,213 48,681 34,172 535,608 1,320,794
- - - (3,839) (3,856) (37,020) (149,390)
--------- ------------- ------------ ----------- --------- ------------- -------------
6,398 291,998 321,103 48,693 30,476 506,673 1,230,504
--------- ------------- ------------ ----------- --------- ------------- -------------
14,806 1,119,941 599,538 168,396 21,100 328,200 1,072,446
1,259 173,082 46,328 15,904 1,993 37,196 91,158
2,146 294,554 79,027 27,132 3,400 63,759 155,363
6,401 42,073 14,796 12,934 25,143 69,948 98,478
761 61,800 73,632 36,186 1,949 15,191 61,915
411 75,601 30,151 10,396 915 14,401 44,602
1,776 231,370 126,770 43,156 2,550 30,968 171,193
1,066 147,994 76,240 25,927 1,530 22,474 104,189
2,385 222,737 272,221 86,898 5,930 21,114 322,287
6,055 16,897 9,918 5,886 6,049 7,357 12,575
130 34,053 10,564 3,645 519 12,389 16,682
6,306 20,176 20,004 15,792 13,961 16,917 20,677
15 4,082 1,261 441 61 1,533 1,904
1,623 9,521 5,305 3,699 3,620 7,600 14,510
--------- ------------- ------------ ----------- --------- ------------- -------------
45,140 2,453,881 1,365,755 456,392 88,720 649,047 2,187,979
--------- ------------- ------------ ----------- --------- ------------- -------------
(15,115) - (2,588) (27,325) (24,194) (59,980) (17,854)
(52) (1) - - - (7) -
(449) (60,601) (16,069) (6,370) (259) (6,409) (27,224)
(5,282) - - - (20,233) - -
--------- ------------- ------------ ----------- --------- ------------- -------------
24,242 2,393,279 1,347,098 422,697 44,034 582,651 2,142,901
--------- ------------- ------------ ----------- --------- ------------- -------------
24,242 2,393,279 1,347,098 422,697 44,034 582,651 2,142,901
--------- ------------- ------------ ----------- --------- ------------- -------------
(17,844) (2,101,281) (1,025,995) (374,004) (13,558) (75,978) (912,397)
--------- ------------- ------------ ----------- --------- ------------- -------------
120,877 50,374,991 16,109,473 5,241,050 405,279 26,994,429 25,919,417
- - - (18,200) - 774,243 -
- - - 16,840 447 (27,154) 3,706,947
--------- ------------- ------------ ----------- --------- ------------- -------------
120,877 50,374,991 16,109,473 5,239,690 405,726 27,741,518 29,626,364
--------- ------------- ------------ ----------- --------- ------------- -------------
537,129 51,340,264 6,111,768 (40,934) 434,242 (5,354,453) 14,325,885
- - - (9,855) - 41,278 -
- - - 1,247 (30) 12,447 (507,642)
--------- ------------- ------------ ----------- --------- ------------- -------------
537,129 51,340,264 6,111,768 (49,542) 434,212 (5,300,728) 13,818,243
--------- ------------- ------------ ----------- --------- ------------- -------------
658,006 101,715,255 22,221,241 5,190,148 839,938 22,440,790 43,444,607
--------- ------------- ------------ ----------- --------- ------------- -------------
$ 640,162 $ 99,613,974 $ 21,195,246 $ 4,816,144 $ 826,380 $ 22,364,812 $ 42,532,210
========= ============= ============ =========== ========= ============= =============
63
BLACKROCK FUNDS
STATEMENTS OF OPERATIONS (CONCLUDED)
FOR THE PERIOD ENDED MARCH 31, 2004 (UNAUDITED)
ASIA PACIFIC SELECT EQUITY INDEX EQUITY BALANCED
EQUITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------ --------------- ----------------- ----------------
Investment income:
Interest ....................................... $ 2,194 $ 3,282 $ - $ 1,094,848
Securities lending income ...................... - 3,913 - 3,479
Dividends ...................................... 21,110 893,255 - 859,567
Net investment income from master .............. - - 13,598,766 -
Foreign taxes withheld ......................... (1,697) - - -
--------- ------------ ------------- ------------
Total investment income ...................... 21,607 900,450 13,598,766 1,957,894
--------- ------------ ------------- ------------
Expenses:
Investment advisory fee ........................ 13,112 300,320 - 405,613
Administration fee ............................. 1,238 46,413 594,217 62,686
Administration fee - class specific ............ 2,113 79,185 1,150,369 106,934
Custodian fee .................................. 17,230 25,315 106 44,229
Transfer agent fee ............................. 375 34,981 138,275 42,830
Transfer agent fee - class specific ............ 444 20,902 333,534 41,312
Shareholder servicing fees - class specific..... 775 57,503 1,121,974 167,950
Shareholder processing fees - class
specific ...................................... 465 35,093 698,123 101,460
Distribution fees - class specific ............. 1,803 102,414 2,131,121 221,559
Legal and audit ................................ 6,305 9,103 61,790 12,598
Printing ....................................... 64 10,674 126,601 14,218
Registration fees and expenses ................. 14,014 16,071 29,377 17,987
Trustees' fees ................................. 29 1,313 18,348 1,809
Other .......................................... 5,043 5,506 31,419 9,712
--------- ------------ ------------- ------------
Total expenses excluding interest
expense ..................................... 63,010 744,793 6,435,254 1,250,897
--------- ------------ ------------- ------------
Interest expense ............................ - - - 39
--------- ------------ ------------- ------------
Total expenses ............................... 63,010 744,793 6,435,254 1,250,936
--------- ------------ ------------- ------------
Less investment advisory and
administration fees waived ................. (15,329) (99,882) (219,259) (103,579)
Less administration fees waived -
class specific ............................. - - (456,916) -
Less distribution fees waived - class
specific ................................... (79) (9,938) (146,948) (41,647)
Less expenses reimbursed by
advisor .................................... (23,426) - - -
--------- ------------ ------------- ------------
Net expenses ................................. 24,176 634,973 5,612,131 1,105,710
--------- ------------ ------------- ------------
Net investment income (loss) ................... (2,569) 265,477 7,986,635 852,184
--------- ------------ ------------- ------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions (net of foreign
taxes) ....................................... 237,410 11,108,183 (1,045,165) 9,685,562
Futures and options contracts ................. 3,014 227,080 5,022,371 255,087
Swap and swaption contracts ................... - - - (16,746)
Foreign currency related transactions ......... (5,685) - - -
--------- ------------ ------------- ------------
234,739 11,335,263 3,977,206 9,923,903
--------- ------------ ------------- ------------
Change in unrealized appreciation
(depreciation) from:
Investments (net of foreign taxes) ............ 507,231 5,019,400 186,723,274 5,683,423
Futures and options contracts ................. 3,846 40,395 787,445 (47,534)
Swap and swaption contracts ................... - - - 46,497
Foreign currency related transactions ......... 4,510 - - -
--------- ------------ ------------- ------------
515,587 5,059,795 187,510,719 5,682,386
--------- ------------ ------------- ------------
Net gain on investments and foreign currency
transactions ................................... 750,326 16,395,058 191,487,925 15,606,289
--------- ------------ ------------- ------------
Net increase in net assets resulting from
operations ..................................... $ 747,757 $ 16,660,535 $ 199,474,560 $ 16,458,473
========= ============ ============= ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
LARGE CAP LARGE CAP
VALUE EQUITY PORTFOLIO GROWTH EQUITY PORTFOLIO
----------------------------------- ------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
3/31/04 YEAR ENDED 3/31/04 YEAR ENDED
(UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
------------------ ---------------- ------------------ -----------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) .......................... $ 1,846,707 $ 4,489,510 $ (121,685) $ (211,419)
Net realized gain (loss) on investments,
futures and options .................................. 26,803,528 (27,226,586) 17,357,719 (1,180,978)
Net unrealized gain (loss) on investments,
futures and options .................................. 20,312,881 126,249,305 (2,362,241) 42,103,830
------------- -------------- ------------- --------------
Net increase in net assets resulting from operations .. 48,963,116 103,512,229 14,873,793 40,711,433
------------- -------------- ------------- --------------
Distributions to shareholders from:
Net investment income:
Institutional Class ................................... (1,104,251) (3,079,207) - -
Service Class ......................................... (357,163) (854,501) - -
Investor A Class ...................................... (375,559) (704,895) - -
Investor B Class ...................................... (41,500) (36,556) - -
Investor C Class ...................................... (12,789) (10,751) - -
------------- -------------- ------------- --------------
Total distributions from net investment income ........ (1,891,262) (4,685,910) - -
------------- -------------- ------------- --------------
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 ................... (1,891,262) (4,685,910) - -
------------- -------------- ------------- --------------
Capital share transactions .............................. (64,688,468) (401,555,023) (28,289,705) (198,447,545)
------------- -------------- ------------- --------------
Redemption fees ......................................... 2,571 - 32 2
------------- -------------- ------------- --------------
Total increase (decrease) in net assets ............... (17,614,043) (302,728,704) (13,415,880) (157,736,110)
Net assets:
Beginning of period ................................... 300,190,721 602,919,425 124,986,223 282,722,333
------------- -------------- ------------- --------------
End of period ......................................... $ 282,576,678 $ 300,190,721 $ 111,570,343 $ 124,986,223
============= ============== ============= ==============
End of period undistributed net investment income
(distributions in excess of net investment income
or accumulated net investment loss) .................. $ 2,693 $ 47,248 $ (121,685) $ -
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
66
BLACKROCK FUNDS
MID-CAP VALUE MID-CAP GROWTH SMALL CAP
EQUITY PORTFOLIO EQUITY PORTFOLIO VALUE EQUITY PORTFOLIO
- ------------------------------------ -------------------------------------- --------------------------------------
FOR THE FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
3/31/04 YEAR ENDED 3/31/04 YEAR ENDED 3/31/04 YEAR ENDED
(UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
- ------------------ --------------- ------------------ ----------------- ------------------ -----------------
$ (50,178) $ 194,772 $ (956,483) $ (1,436,712) $ (281,676) $ (292,599)
7,138,796 (671,268) 7,992,071 (11,966,597) 21,449,368 13,228,991
1,129,439 7,664,155 18,454,363 43,642,406 9,695,555 19,817,428
------------- ------------- ------------- ------------- ------------- -------------
8,218,057 7,187,659 25,489,951 30,239,097 30,863,247 32,753,820
------------- ------------- ------------- ------------- ------------- -------------
(164,502) - - - - -
(14,514) - - - - -
(15,354) - - - - -
- - - - - -
- - - - - -
------------- ------------- ------------- ------------- ------------- -------------
(194,370) - - - - -
------------- ------------- ------------- ------------- ------------- -------------
- (3,510,191) - - (8,168,630) (15,284,848)
- (867,345) - - (494,170) (1,810,143)
- (353,578) - - (4,743,664) (7,729,241)
- (545,894) - - (2,034,282) (2,156,019)
- (170,273) - - (807,811) (892,109)
------------- ------------- ------------- ------------- ------------- -------------
- (5,447,281) - - (16,248,557) (27,872,360)
------------- ------------- ------------- ------------- ------------- -------------
(194,370) (5,447,281) - - (16,248,557) (27,872,360)
------------- ------------- ------------- ------------- ------------- -------------
(12,238,808) (45,498,300) (16,206,828) (70,932,381) (3,934,254) (66,564,870)
------------- ------------- ------------- ------------- ------------- -------------
626 839 10,526 635 1,172 596
------------- ------------- ------------- ------------- ------------- -------------
(4,214,495) (43,757,083) 9,293,649 (40,692,649) 10,681,608 (61,682,814)
42,692,093 86,449,176 133,238,814 173,931,463 132,689,762 194,372,576
------------- ------------- ------------- ------------- ------------- -------------
$ 38,477,598 $ 42,692,093 $ 142,532,463 $ 133,238,814 $ 143,371,370 $ 132,689,762
============= ============= ============= ============= ============= =============
$ (50,250) $ 194,298 $ (956,483) $ - $ (281,676) $ -
67
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SMALL CAP
CORE EQUITY SMALL CAP
PORTFOLIO GROWTH EQUITY PORTFOLIO
-------------------------------- --------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
3/31/04 YEAR ENDED 3/31/04 YEAR ENDED
(UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
----------------- -------------- ----------------- --------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) .................................. $ (17,844) $ (6,028) $ (2,101,281) $ (3,154,899)
Net realized gain (loss) on investments, futures, options
and foreign currency related transactions .................... 120,877 150,011 50,374,991 10,949,272
Net unrealized gain (loss) on investments, futures, options
and foreign currency related transactions .................... 537,129 219,165 51,340,264 81,932,839
----------- ----------- ------------- -------------
Net increase in net assets resulting from operations .......... 640,162 363,148 99,613,974 89,727,212
----------- ----------- ------------- -------------
Distributions to shareholders from:
Net investment income:
Institutional Class ........................................... - - - -
Service Class ................................................. - - - -
Investor A Class .............................................. - - - -
Investor B Class .............................................. - - - -
----------- ----------- ------------- -------------
Total distributions from net investment income ................ - - - -
----------- ----------- ------------- -------------
Net realized gains:
Institutional Class ........................................... (16,091) - - -
Service Class ................................................. (1) - - -
Investor A Class .............................................. (9,184) - - -
Investor B Class .............................................. (2,549) - - -
Investor C Class .............................................. (1,706) - - -
------------ ----------- ------------- -------------
Total distributions from net realized gains ................... (29,531) - - -
------------ ----------- ------------- -------------
Total distributions to shareholders ........................... (29,531) - - -
------------ ----------- ------------- -------------
Capital share transactions ...................................... 2,791,146 47,000 47,696,521 (96,488,377)
------------ ----------- ------------- -------------
Redemption fees ................................................. 3,351 - 24,714 164,784
------------ ----------- ------------- -------------
Total increase (decrease) in net assets ....................... 3,405,128 410,148 147,335,209 (6,596,381)
Net assets:
Beginning of period ........................................... 1,245,538 835,390 326,527,407 333,123,788
------------ ----------- ------------- -------------
End of period ................................................. $ 4,650,666 $ 1,245,538 $ 473,862,616 $ 326,527,407
============ =========== ============= =============
End of period undistributed net investment income
(distributions in excess of net investment income or
accumulated net investment loss) ............................. $ (17,844) $ - $ (2,101,281) $ -
- ---------
/1/ Refer to Section B of the Notes to Financial Statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68
BLACKROCK FUNDS
GLOBAL SCIENCE &
U.S. OPPORTUNITIES TECHNOLOGY OPPORTUNITIES EUROPEAN INTERNATIONAL
PORTFOLIO PORTFOLIO EQUITY PORTFOLIO EQUITY PORTFOLIO
------------------------ -------------------------- ----------------------- -------------------------
FOR THE FOR THE FOR THE FOR THE
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED FOR THE ENDED FOR THE ENDED FOR THE ENDED FOR THE
3/31/04 YEAR ENDED 3/31/04 YEAR ENDED 3/31/04 YEAR ENDED 3/31/04 YEAR ENDED
(UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
----------------------- ------------- ---------- ------------ ------------- ----------- ------------
Increase (decrease)
in net assets:
Operations:
Net investment
income (loss) ........$ (1,025,995)$ (1,725,661)$ (374,004) $ (563,751) $ (13,558) $ 37,048 $ (75,978) $ 1,093,425
Net realized gain
(loss) on investments,
futures, options and
foreign currency
related transactions . 16,109,473 (2,544,978) 5,239,690 1,411,161 405,726 (1,973,689) 27,741,518 (40,615,693)
Net unrealized gain
(loss) on investments,
futures, options and
foreign currency
related transactions . 6,111,768 26,647,708 (49,542) 11,135,522 434,212 2,763,195 (5,300,728) 55,288,237
------------ ------------ ----------- ----------- ---------- ----------- ------------ ------------
Net increase in net
assets resulting
from operations ...... 21,195,246 22,377,069 4,816,144 11,982,932 826,380 826,554 22,364,812 15,765,969
------------ ------------ ----------- ----------- ---------- ----------- ------------ ------------
Distributions to
shareholders from:
Net investment income:
Institutional Class ... - - - - (38,512) (29,362) (787,345) -
Service Class ......... - - - - (1) - (144,003) -
Investor A Class ...... - - - - (6,124) - (89,783) -
Investor B Class ...... - - - - (6,068) - (2,473) -
------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------
Total distributions
from net investment
income ............... - - - - (50,705) (29,362) (1,023,604) -
------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------
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 ...... - - - - (50,705) (29,362) (1,023,604) -
------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------
Capital share
transactions ........... (9,103,332) (29,427,952) (3,697,921) (4,451,394) (1,885,819) (3,096,113) (96,936,608)/1/(205,867,299)
------------ ------------ ----------- ----------- ----------- ----------- ------------ --------------
Redemption fees ......... 447 - 301 - 1,786 153 81,120 130,499
------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------
Total increase
(decrease) in
net assets ........... 12,092,361 (7,050,883) 1,118,524 7,531,538 (1,108,358) (2,298,768) (75,514,280) (189,970,831)
Net assets:
Beginning of
period ............... 98,934,776 105,985,659 35,004,841 27,473,303 5,432,036 7,730,804 120,439,558 310,410,389
------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------
End of period .........$111,027,137 $ 98,934,776 $36,123,365 $35,004,841 $ 4,323,678 $ 5,432,036 $ 44,925,278 $120,439,558
============ ============ =========== =========== =========== =========== ============ ============
End of period
undistributed net
investment income
(distributions in
excess of net
investment income
or accumulated net
investment loss) .....$ (1,025,995) $ - $ (384,575) $ (10,570) $ (13,567) $ 50,696 $ (76,081) $ 1,023,501
69
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
INTERNATIONAL
OPPORTUNITIES ASIA PACIFIC
PORTFOLIO EQUITY PORTFOLIO
------------------------------------ ----------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
3/31/04 YEAR ENDED 3/31/04 YEAR ENDED
(UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
------------------ -------------- ----------------- -------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) .................................... $ (912,397) $ (115,152) $ (2,569) $ 10,544
Net realized gain (loss) on investments, futures, options, swap
and swaption contracts and foreign currency related
transactions ................................................... 29,626,364 1,658,159 234,739 (168,373)
Net unrealized gain on investments, futures, options, swap and
swaption contracts and foreign currency related transactions ... 13,818,243 34,517,739 515,587 507,963
------------- ------------- ----------- -----------
Net increase in net assets resulting from operations ............ 42,532,210 36,060,746 747,757 350,134
------------- ------------- ----------- -----------
Distributions to shareholders from:
Net investment income:
Institutional Class ............................................. (52,346) - (7,761) (1,649)
Service Class ................................................... (2,626) - (1) -
Investor A Class ................................................ (38,301) - (474) -
Investor B Class ................................................ (31,274) - (1,244) -
Investor C Class ................................................ (29,065) - (178) -
------------- ------------- ------------ -----------
Total distributions from net investment income .................. (153,612) - (9,658) (1,649)
------------- ------------- ------------ -----------
Capital share transactions ........................................ 84,725,881 (5,661,958) 262,015 362,449
------------- ------------- ------------ -----------
Redemption fees ................................................... 45,037 105,117 - -
------------- ------------- ------------ -----------
Total increase (decrease) in net assets ......................... 127,149,516 30,503,905 1,000,114 710,934
Net assets:
Beginning of period ............................................. 155,823,316 125,319,411 2,535,426 1,824,492
------------- ------------- ------------ -----------
End of period ................................................... $ 282,972,832 $ 155,823,316 $ 3,535,540 $ 2,535,426
============= ============= ============ ===========
End of period undistributed net investment income (distributions
in excess of net investment income or accumulated net
investment loss) ............................................... $ (1,421,709) $ (355,700) $ (11,822) $ 405
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70
BLACKROCK FUNDS
SELECT INDEX
EQUITY PORTFOLIO EQUITY PORTFOLIO BALANCED PORTFOLIO
- -------------------------------------- ---------------------------------------- -------------------------------------
FOR THE FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
3/31/04 YEAR ENDED 3/31/04 YEAR ENDED 3/31/04 YEAR ENDED
(UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
- ------------------ ----------------- ------------------ ------------------- ------------------ ----------------
$ 265,477 $ 893,591 $ 7,986,635 $ 15,441,682 $ 852,184 $ 3,232,765
11,335,263 11,723,087 3,977,206 (176,394,967) 9,923,903 3,864,015
5,059,795 17,874,054 187,510,719 463,518,151 5,682,386 18,836,686
------------- -------------- --------------- --------------- ------------- -------------
16,660,535 30,490,732 199,474,560 302,564,866 16,458,473 25,933,466
------------- -------------- --------------- --------------- ------------- -------------
(709,723) (1,248,052) (5,056,705) (10,205,877) (117,336) (488,552)
(17,360) - (495,164) (820,036) (19,173) (67,477)
(136,214) (212,107) (1,681,280) (2,855,488) (632,398) (2,236,825)
(30,018) - (312,062) (658,664) (175,447) (649,457)
(379) - (486,905) (1,015,680) (21,046) (73,797)
------------- -------------- --------------- --------------- ------------- -------------
(893,694) (1,460,159) (8,032,116) (15,555,745) (965,400) (3,516,108)
------------- -------------- --------------- --------------- ------------- -------------
(14,986,155) (111,251,132) (56,323,943) (297,723,651) (20,338,183) (66,041,145)
------------- -------------- --------------- --------------- ------------- -------------
1,008 - 6,270 - 6 -
------------- -------------- --------------- --------------- ------------- -------------
781,694 (82,220,559) 135,124,771 (10,714,530) (4,845,104) (43,623,787)
105,293,243 187,513,802 1,462,708,258 1,473,422,788 145,105,431 188,729,218
------------- -------------- --------------- --------------- ------------- -------------
$ 106,074,937 $ 105,293,243 $ 1,597,833,029 $ 1,462,708,258 $ 140,260,327 $ 145,105,431
============= ============== =============== =============== ============= =============
$ 265,197 $ 893,414 $ 641,996 $ 687,477 $ (3,465) $ 109,751
71
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS
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 CAPITAL END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME GAINS PERIOD
=========== =============== ================= =============== ================== ============
----------------------
Large Cap Value Equity
----------------------
Institutional Class
10/01/03 through 3/31/04 /21/ $ 10.77 $ 0.09 $ 1.81 $ (0.09) $ - $ 12.58
9/30/03 8.82 0.16 1.94 (0.15) - 10.77
9/30/02 12.60 0.10 (3.42) (0.09) (0.37) 8.82
9/30/01 15.13 0.14 (1.28) (0.14) (1.25) 12.60
9/30/00 15.75 0.16 0.79 (0.16) (1.41) 15.13
9/30/99 14.69 0.22 2.01 (0.22) (0.95) 15.75
Service Class
10/01/03 through 3/31/04 /21/ $ 10.79 $ 0.07 $ 1.81 $ (0.07) $ - $ 12.60
9/30/03 8.83 0.12 1.96 (0.12) - 10.79
9/30/02 12.61 0.06 (3.42) (0.05) (0.37) 8.83
9/30/01 15.13 0.10 (1.27) (0.10) (1.25) 12.61
9/30/00 15.75 0.11 0.79 (0.11) (1.41) 15.13
9/30/99 14.69 0.16 2.02 (0.17) (0.95) 15.75
Investor A Class
10/01/03 through 3/31/04 /21/ $ 10.78 $ 0.07 $ 1.80 $ (0.07) $ - $ 12.58
9/30/03 8.83 0.09 1.96 (0.10) - 10.78
9/30/02 12.59 0.02 (3.39) (0.02) (0.37) 8.83
9/30/01 15.11 0.07 (1.27) (0.07) (1.25) 12.59
9/30/00 15.74 0.10 0.77 (0.09) (1.41) 15.11
9/30/99 14.68 0.16 2.01 (0.16) (0.95) 15.74
Investor B Class
10/01/03 through 3/31/04 /21/ $ 10.58 $ 0.02 $ 1.79 $ (0.03) $ - $ 12.36
9/30/03 8.66 0.01 1.93 (0.02) - 10.58
9/30/02 12.43 (0.07) (3.33) - (0.37) 8.66
9/30/01 14.97 (0.03) (1.26) - (1.25) 12.43
9/30/00 15.61 (0.01) 0.77 - (1.40) 14.97
9/30/99 14.59 0.02 1.99 (0.04) (0.95) 15.61
Investor C Class
10/01/03 through 3/31/04 /21/ $ 10.59 $ 0.02 $ 1.79 $ (0.03) $ - $ 12.37
9/30/03 8.67 0.01 1.93 (0.02) - 10.59
9/30/02 12.44 (0.07) (3.33) - (0.37) 8.67
9/30/01 14.97 (0.03) (1.25) - (1.25) 12.44
9/30/00 15.61 0.01 0.75 - (1.40) 14.97
9/30/99 14.59 0.03 1.98 (0.04) (0.95) 15.61
-----------------------
Large Cap Growth Equity
-----------------------
Institutional Class
10/01/03 through 3/31/04 /21/ $ 8.18 $ 0.01 $ 1.02 $ - $ - $ 9.21
9/30/03 6.71 0.03 1.44 - - 8.18
9/30/02 9.10 (0.01) (2.38) - - 6.71
9/30/01 23.72 (0.02) (11.82) - (2.78) 9.10
9/30/00 22.57 (0.06) 4.83 - (3.62) 23.72
9/30/99 18.14 - 6.06 - (1.63) 22.57
Service Class
10/01/03 through 3/31/04 /21/ $ 8.03 $ (0.01) $ 1.01 $ - $ - $ 9.03
9/30/03 6.60 (0.01) 1.44 - - 8.03
9/30/02 8.99 (0.02) (2.37) - - 6.60
9/30/01 23.52 (0.05) (11.70) - (2.78) 8.99
9/30/00 22.47 (0.13) 4.80 - (3.62) 23.52
9/30/99 18.11 (0.07) 6.06 - (1.63) 22.47
Investor A Class
10/01/03 through 3/31/04 /21/ $ 7.92 $ (0.01) $ 0.99 $ - $ - $ 8.90
9/30/03 6.53 (0.02) 1.41 - - 7.92
9/30/02 8.90 (0.05) (2.32) - - 6.53
9/30/01 23.36 (0.09) (11.59) - (2.78) 8.90
9/30/00 22.37 (0.16) 4.77 - (3.62) 23.36
9/30/99 18.06 (0.09) 6.03 - (1.63) 22.37
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME
ASSETS RATIO OF EXPENSES TO AVERAGE RATIO OF NET TO AVERAGE
END OF NET EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
======================== ============ ================= ===================== =================== ================== ==========
17.72%/12/ $ 136,270 0.79%/2/ 0.91%/2/ 1.49%/2/ 1.37%/2/ 38%
23.93 151,602 0.79 0.91 1.27 1.15 150
(27.41) 369,792 0.79 0.84 0.72 0.68 128
(8.22) 1,345,903 0.79 0.80 1.00 0.99 114
6.24 1,821,839 0.78 0.78 1.11 1.11 121
15.38 1,909,445 0.78 0.78 1.37 1.37 42
17.49%/12/ $ 54,390 1.09%/2/ 1.21%/2/ 1.19%/2/ 1.07%/2/ 38%
23.60 62,080 1.09 1.21 0.98 0.87 150
(27.66) 133,903 1.09 1.15 0.45 0.40 128
(8.44) 254,166 1.09 1.10 0.69 0.69 114
5.91 337,993 1.08 1.08 0.82 0.82 121
15.03 374,907 1.08 1.08 1.07 1.07 42
17.35%/3,12/ $ 65,713 1.23%/2/ 1.45%/2/ 1.05%/2/ 0.83%/2/ 38%
23.32/3/ 63,733 1.26 1.38 0.83 0.71 150
(27.70)/3/ 76,044 1.27 1.32 0.22 0.17 128
(8.64)/3/ 57,672 1.27 1.27 0.53 0.52 114
5.71/3/ 56,689 1.23 1.23 0.66 0.66 121
14.85/3/ 61,657 1.19 1.19 0.96 0.96 42
17.07%/4,12/ $ 19,932 1.97%/2/ 2.10%/2/ 0.30%/2/ 0.18%/2/ 38%
22.42/4/ 17,634 2.01 2.13 0.09 (0.03) 150
(28.32)/4/ 17,312 2.01 2.07 (0.51) (0.56) 128
(9.36)/4/ 29,178 2.01 2.02 (0.23) (0.24) 114
4.93/4/ 31,208 2.00 2.00 (0.11) (0.11) 121
13.93/4/ 33,206 2.00 2.00 0.15 0.15 42
17.06%/4,12/ $ 6,272 1.97%/2/ 2.10%/2/ 0.30%/2/ 0.18%/2/ 38%
22.40/4/ 5,141 2.01 2.13 0.09 (0.03) 150
(28.29)/4/ 5,868 2.01 2.06 (0.50) (0.55) 128
(9.29)/4/ 9,738 2.01 2.02 (0.24) (0.25) 114
4.93/4/ 7,608 2.00 2.00 (0.13) (0.13) 121
13.93/4/ 4,172 2.00 2.00 0.15 0.15 42
12.59%/12/ $ 35,372 0.82%/2/ 0.98%/2/ 0.18%/2/ 0.01%/2/ 36%
21.91/12/ 36,685 0.82 0.93 0.19 0.08 90
(26.26) 100,521 0.82 0.87 (0.05) (0.09) 130
(55.58) 557,928 0.82 0.83 (0.11) (0.12) 164
22.90 1,263,796 0.80 0.80 (0.24) (0.24) 121
35.46 1,115,368 0.81 0.81 (0.01) (0.01) 60
12.45%/12/ $ 34,686 1.12%/2/ 1.28%/2/ (0.12)%/2/ (0.28)%/2/ 36%
21.67/12/ 43,625 1.12 1.22 (0.11) (0.22) 90
(26.59) 130,932 1.12 1.17 (0.30) (0.34) 130
(55.68) 158,367 1.12 1.13 (0.41) (0.42) 164
22.50 288,904 1.10 1.10 (0.54) (0.54) 121
35.10 248,901 1.11 1.11 (0.31) (0.31) 60
12.37%/3,12/ $ 23,820 1.26%/2/ 1.52%/2/ (0.27)%/2/ (0.53)%/2/ 36%
21.29/3,12/ 27,739 1.29 1.40 (0.27) (0.38) 90
(26.63)/3/ 34,513 1.29 1.34 (0.48) (0.52) 130
(55.78)/3/ 35,609 1.29 1.30 (0.59) (0.60) 164
22.31/3/ 87,375 1.25 1.25 (0.70) (0.70) 121
34.91/3/ 61,211 1.22 1.22 (0.42) (0.42) 60
73
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONCLUDED)
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 CAPITAL END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME GAINS PERIOD
=========== =============== ================= =============== ================== ===========
Investor B Class
10/01/03 through 3/31/04 /21/ $ 7.35 $ (0.04) $ 0.92 $ - $ - $ 8.23
9/30/03 6.11 (0.07) 1.31 - - 7.35
9/30/02 8.39 (0.12) (2.16) - - 6.11
9/30/01 22.34 (0.19) (10.98) - (2.78) 8.39
9/30/00 21.68 (0.28) 4.56 - (3.62) 22.34
9/30/99 17.68 (0.20) 5.83 - (1.63) 21.68
Investor C Class
10/01/03 through 3/31/04 /21/ $ 7.34 $ (0.04) $ 0.92 $ - $ - $ 8.22
9/30/03 6.10 (0.07) 1.31 - - 7.34
9/30/02 8.37 (0.13) (2.14) - - 6.10
9/30/01 22.31 (0.19) (10.97) - (2.78) 8.37
9/30/00 21.68 (0.25) 4.50 - (3.62) 22.31
9/30/99 17.68 (0.18) 5.81 - (1.63) 21.68
-----------
Mid-Cap Value Equity
-----------
Institutional Class
10/01/03 through 3/31/04 /21/ $ 11.30 $ 0.01 $ 2.41 $ (0.09) $ - $ 13.63
9/30/03 10.44 0.10 1.53 - (0.77) 11.30
9/30/02 11.34 0.01 (0.89) (0.02) - 10.44
9/30/01 12.66 0.08 (1.12) (0.07) (0.21) 11.34
9/30/00 11.35 0.08 1.56 (0.08) (0.25) 12.66
9/30/99 10.63 0.11 0.72 (0.11) - 11.35
Service Class
10/01/03 through 3/31/04 /21/ $ 11.22 $ - $ 2.40 $ (0.04) $ - $ 13.58
9/30/03 10.40 0.05 1.54 - (0.77) 11.22
9/30/02 11.32 (0.05) (0.87) - - 10.40
9/30/01 12.66 0.03 (1.11) (0.05) (0.21) 11.32
9/30/00 11.34 0.06 1.54 (0.03) (0.25) 12.66
9/30/99 10.62 0.07 0.73 (0.08) - 11.34
Investor A Class
10/01/03 through 3/31/04 /21/ $ 11.17 $ (0.02) $ 2.40 $ (0.05) $ - $ 13.50
9/30/03 10.38 0.02 1.54 - (0.77) 11.17
9/30/02 11.31 (0.06) (0.87) - - 10.38
9/30/01 12.64 0.03 (1.12) (0.03) (0.21) 11.31
9/30/00 11.33 0.02 1.56 (0.02) (0.25) 12.64
9/30/99 10.61 0.05 0.72 (0.05) - 11.33
Investor B Class
10/01/03 through 3/31/04 /21/ $ 10.78 $ (0.07) $ 2.32 $ - $ - $ 13.03
9/30/03 10.11 (0.05) 1.49 - (0.77) 10.78
9/30/02 11.10 (0.15) (0.84) - - 10.11
9/30/01 12.49 (0.06) (1.11) (0.01) (0.21) 11.10
9/30/00 11.26 (0.07) 1.55 - (0.25) 12.49
9/30/99 10.58 (0.04) 0.72 - - 11.26
Investor C Class
10/01/03 through 3/31/04 /21/ $ 10.78 $ (0.07) $ 2.32 $ - $ - $ 13.03
9/30/03 10.11 (0.06) 1.50 - (0.77) 10.78
9/30/02 11.10 (0.15) (0.84) - - 10.11
9/30/01 12.49 (0.06) (1.11) (0.01) (0.21) 11.10
9/30/00 11.26 (0.06) 1.54 - (0.25) 12.49
9/30/99 10.58 (0.03) 0.71 - - 11.26
------------
Mid-Cap Growth Equity
------------
Institutional Class
10/01/03 through 3/31/04 /21/ $ 7.57 $ (0.04) $ 1.57 $ - $ - $ 9.10
9/30/03 6.06 (0.05) 1.56 - - 7.57
9/30/02 7.49 (0.06)/20/ (1.37) - - 6.06
9/30/01 26.58 0.01 (11.62) - (7.48) 7.49
9/30/00 19.12 (0.08) 14.16 - (6.62) 26.58
9/30/99 11.12 (0.07) 8.07 - - 19.12
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
74
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME
ASSETS RATIO OF EXPENSES TO AVERAGE RATIO OF NET TO AVERAGE
END OF NET EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
======================= =========== ================= ===================== =================== ================== ==========
11.97%/4,12/ $ 14,942 2.00%/2/ 2.17%/2/ (1.01)%/2/ (1.17)%/2/ 36%
20.30/4,13/ 14,358 2.04 2.15 (1.01) (1.12) 90
(27.18)/4/ 14,332 2.04 2.09 (1.23) (1.28) 130
(56.08)/4/ 25,986 2.04 2.05 (1.33) (1.34) 164
21.37/4/ 65,977 2.01 2.01 (1.46) (1.46) 121
33.83/4/ 37,032 2.03 2.03 (1.23) (1.23) 60
11.99%/4,12/ $ 2,750 2.00%/2/ 2.17%/2/ (1.01)%/2/ (1.17)%/2/ 36%
20.33/4,13/ 2,579 2.04 2.15 (1.01) (1.12) 90
(27.12)/4/ 2,424 2.04 2.09 (1.23) (1.28) 130
(56.11)/4/ 4,711 2.04 2.05 (1.33) (1.34) 164
21.21/4/ 11,799 2.01 2.01 (1.47) (1.47) 121
33.83/4/ 4,181 2.03 2.03 (1.23) (1.23) 60
21.48%/12/ $ 19,294 1.26%/2/ 1.29%/2/ 0.14%/2/ 0.11%/2/ 133%
16.63/12/ 24,493 1.21 1.26 0.58 0.54 287
(7.79) 57,868 1.14 1.14 0.08 0.08 323
(8.29) 208,432 1.13 1.13 0.67 0.67 243
14.35 216,660 1.13 1.13 0.66 0.66 205
7.68 233,891 1.12 1.12 0.88 0.88 88
21.38%/12/ $ 4,240 1.56%/2/ 1.59%/2/ (0.17)%/2/ (0.20)%/2/ 133%
16.28/12/ 5,284 1.51 1.55 0.30 0.26 287
(8.13) 13,767 1.45 1.45 (0.28) (0.28) 323
(8.60) 26,046 1.44 1.44 0.36 0.36 243
14.45 18,373 1.42 1.42 0.34 0.34 205
7.29 40,852 1.42 1.42 0.58 0.58 88
21.30%/3,12/ $ 4,496 1.70%/2/ 1.83%/2/ (0.35)%/2/ (0.48)%/2/ 133%
(16.01)/3,12/ 3,841 1.69 1.73 0.19 0.16 287
(8.22)/3/ 5,141 1.63 1.63 (0.40) (0.40) 323
(8.73)/3/ 4,566 1.61 1.61 0.20 0.20 243
14.17/3/ 3,805 1.60 1.60 0.19 0.19 205
7.14/3/ 4,328 1.59 1.60 0.41 0.41 88
20.87%/4,12/ $ 7,963 2.45%/2/ 2.48%/2/ (1.09)%/2/ (1.13)%/2/ 133%
15.20/4,12/ 7,014 2.44 2.47 (0.50) (0.53) 287
(8.92)/4/ 7,411 2.37 2.37 (1.20) (1.20) 323
(9.45)/4/ 7,900 2.36 2.36 (0.55) (0.55) 243
13.35/4/ 4,871 2.34 2.34 (0.55) (0.55) 205
6.33/4/ 5,147 2.34 2.34 (0.34) (0.34) 88
20.87%/4,12/ $ 2,485 2.45%/2/ 2.48%/2/ (1.09)%/2/ (1.13)%/2/ 133%
15.20/4,12/ 2,060 2.44 2.47 (0.51) (0.54) 287
(8.92)/4/ 2,262 2.37 2.37 (1.20) (1.20) 323
(9.45)/4/ 2,697 2.36 2.36 (0.56) (0.56) 243
13.35/4/ 946 2.34 2.34 (0.58) (0.58) 205
6.33/4/ 420 2.34 2.34 (0.34) (0.34) 88
20.21%/12/ $ 48,371 1.23%/2/ 1.24%/2/ (0.80)%/2/ (0.82)%/2/ 14%
24.92/12/ 46,970 1.21 1.23 (0.52) (0.54) 168
(19.09) 77,693 1.14 1.14 (0.76) (0.76) 279
(56.71) 301,779 1.13 1.13 0.06 0.06 584
91.06 666,420 1.10 1.10 (0.37) (0.37) 425
71.94 361,901 1.11 1.12 (0.48) (0.49) 318
75
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 CAPITAL END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME/11/ GAINS PERIOD
=========== =============== ================= =============== ================== ===========
Service Class
10/01/03 through 3/31/04 /21/ $ 7.33 $ (0.05) $ 1.53 $ - $ - $ 8.81
9/30/03 5.89 (0.07) 1.51 - - 7.33
9/30/02 7.31 (0.11) (1.31) - - 5.89
9/30/01 26.19 (0.03) (11.37) - (7.48) 7.31
9/30/00 18.96 (0.19) 14.04 - (6.62) 26.19
9/30/99 11.06 (0.13) 8.03 - - 18.96
Investor A Class
10/01/03 through 3/31/04 /21/ $ 7.17 $ (0.05) $ 1.49 $ - $ - $ 8.61
9/30/03 5.77 (0.07) 1.47 - - 7.17
9/30/02 7.17 (0.11) (1.29) - - 5.77
9/30/01 25.92 (0.04) (11.23) - (7.48) 7.17
9/30/00 18.85 (0.13) 13.82 - (6.62) 25.92
9/30/99 11.02 (0.11) 7.94 - - 18.85
Investor B Class
10/01/03 through 3/31/04 /21/ $ 6.67 $ (0.08) $ 1.39 $ - $ - $ 7.98
9/30/03 5.41 (0.11) 1.37 - - 6.67
9/30/02 6.77 (0.16) (1.20) - - 5.41
9/30/01 25.12 (0.12) (10.75) - (7.48) 6.77
9/30/00 18.52 (0.22) 13.44 - (6.62) 25.12
9/30/99 10.90 (0.18) 7.80 - - 18.52
Investor C Class
10/01/03 through 3/31/04 /21/ $ 6.67 $ (0.08) $ 1.39 $ - $ - $ 7.98
9/30/03 5.41 (0.11) 1.37 - - 6.67
9/30/02 6.77 (0.18) (1.18) - - 5.41
9/30/01 25.10 (0.13) (10.72) - (7.48) 6.77
9/30/00 18.52 (0.21) 13.41 - (6.62) 25.10
9/30/99 10.90 (0.10) 7.72 - - 18.52
----------------------
Small Cap Value Equity
----------------------
Institutional Class
10/01/03 through 3/31/04 /21/ $ 14.17 $ - $ 3.32 $ - $ (1.79) $ 15.70
9/30/03 12.81 0.01 3.31 - (1.96) 14.17
9/30/02 16.18 - (1.02) (0.02) (2.33) 12.81
9/30/01 17.12 0.16 (0.11) (0.15) (0.84) 16.18
9/30/00 14.73 0.08 2.44 (0.13) - 17.12
9/30/99 14.89 0.12 0.67 (0.28) (0.67) 14.73
Service Class
10/01/03 through 3/31/04 /21/ $ 14.09 $ (0.03) $ 3.31 $ - $ (1.79) $ 15.58
9/30/03 12.77 (0.03) 3.31 - (1.96) 14.09
9/30/02 16.18 (0.04) (1.04) - (2.33) 12.77
9/30/01 17.10 0.10 (0.08) (0.10) (0.84) 16.18
9/30/00 14.71 - 2.47 (0.08) - 17.10
9/30/99 14.88 0.07 0.68 (0.25) (0.67) 14.71
Investor A Class
10/01/03 through 3/31/04 /21/ $ 14.04 $ (0.04) $ 3.29 $ - $ (1.79) $ 15.50
9/30/03 12.76 (0.05) 3.29 - (1.96) 14.04
9/30/02 16.18 (0.10) (0.99) - (2.33) 12.76
9/30/01 17.10 0.06 (0.07) (0.07) (0.84) 16.18
9/30/00 14.71 (0.02) 2.46 (0.05) - 17.10
9/30/99 14.88 0.03 0.69 (0.22) (0.67) 14.71
Investor B Class
10/01/03 through 3/31/04 /21/ $ 13.11 $ (0.08) $ 3.04 $ - $ (1.79) $ 14.28
9/30/03 12.11 (0.13) 3.09 - (1.96) 13.11
9/30/02 15.58 (0.20) (0.94) - (2.33) 12.11
9/30/01 16.56 (0.06) (0.07) (0.01) (0.84) 15.58
9/30/00 14.31 (0.23) 2.48 - - 16.56
9/30/99 14.53 (0.06) 0.66 (0.15) (0.67) 14.31
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
76
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME
ASSETS RATIO OF EXPENSES TO AVERAGE RATIO OF NET TO AVERAGE
END OF NET EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
======================== =========== ================= ===================== =================== ================== ==========
20.19%/12/ $ 13,153 1.53%/2/ 1.54%/2/ (1.11)%/2/ (1.12)%/2/ 14%
24.4512 14,115 1.51 1.53 (0.80) (0.83) 168
(19.43) 24,082 1.45 1.45 (1.07) (1.07) 279
(56.78) 37,691 1.44 1.44 (0.28) (0.28) 584
91.13 51,912 1.40 1.40 (0.69) (0.69) 425
71.43 46,639 1.41 1.42 (0.78) (0.79) 318
20.08%/3,12/ $ 30,291 1.68%/2/ 1.78%/2/ (1.25)%/2/ (1.35)%/2/ 14%
24.26/3,12/ 25,960 1.68 1.71 (0.96) (0.98) 168
(19.53)/3/ 26,242 1.62 1.62 (1.24) (1.24) 279
(56.91)/3/ 38,225 1.60 1.60 (0.38) (0.38) 584
90.62/3/ 83,152 1.57 1.57 (0.80) (0.80) 425
71.05/3/ 12,795 1.58 1.59 (0.95) (0.96) 318
19.64%/4,12/ $ 37,568 2.42%/2/ 2.43%/2/ (2.00)%/2/ (2.00)%/2/ 14%
23.29/4,12/ 33,982 2.43 2.45 (1.69) (1.71) 168
(20.09)/4/ 33,822 2.37 2.37 (1.98) (1.98) 279
(57.24)/4/ 51,186 2.35 2.35 (1.12) (1.12) 584
89.38/4/ 122,726 2.31 2.31 (1.53) (1.53) 425
69.91/4/ 12,698 2.33 2.34 (1.70) (1.71) 318
19.64%/4,12/ $ 13,149 2.42%/2/ 2.43%/2/ (2.00)%/2/ (2.00)%/2/ 14%
23.29/4,12/ 12,212 2.43 2.45 (1.69) (1.71) 168
(20.09)/4/ 12,092 2.37 2.37 (1.98) (1.98) 279
(57.19)/4/ 21,144 2.35 2.35 (1.10) (1.10) 584
89.23/4/ 61,542 2.30 2.30 (1.51) (1.51) 425
69.91/4/ 1,770 2.33 2.34 (1.70) (1.71) 318
24.68%/12/ $ 72,531 0.93%/2/ 0.93%/2/ (0.06)%/2/ (0.06)%/2/ 79%
29.96/12/ 69,641 0.91 0.94 0.09 0.06 240
(8.25) 122,732 0.88 0.89 0.00 (0.01) 260
0.47 367,167 0.87 0.87 0.87 0.87 184
17.15 470,830 0.86 0.86 0.79 0.79 168
5.22 519,388 0.86 0.86 0.88 0.88 48
24.53%/12/ $ 3,848 1.23%/2/ 1.23%/2/ (0.36)%/2/ (0.36)%/2/ 79%
29.70/12/ 4,139 1.21 1.24 (0.19) (0.22) 240
(8.64) 7,242 1.18 1.19 (0.24) (0.25) 260
0.28 47,095 1.17 1.17 0.56 0.56 184
16.80 50,980 1.16 1.16 0.49 0.49 168
4.88 66,728 1.16 1.16 0.58 0.58 48
24.40%/3,12/ $ 41,805 1.37%/2/ 1.47%/2/ (0.50)%/2/ (0.60)%/2/ 79%
29.37/3,12/ 38,052 1.38 1.41 (0.37) (0.40) 240
(8.71)/3/ 43,884 1.35 1.37 (0.62) (0.64) 260
0.09/3/ 28,195 1.34 1.34 0.38 0.38 184
16.60/3 25,719 1.32 1.32 0.31 0.31 168
4.71/3/ 31,843 1.30 1.30 0.44 0.44 48
23.88%/4,12/ $ 18,066 2.12%/2/ 2.12%/2/ (1.25)%/2/ (1.25)%/2/ 79%
28.52/4,12/ 15,019 2.13 2.16 (1.12) (1.15) 240
(9.46)/4/ 14,402 2.10 2.12 (1.32) (1.34) 260
(0.66)/4/ 16,599 2.09 2.09 (0.37) (0.37) 184
15.72/4/ 11,831 2.08 2.08 (0.43) (0.43) 168
3.93/4/ 19,000 2.08 2.08 (0.34) (0.34) 48
77
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN DISTRIBUTIONS NET
ASSET (LOSS) ON DISTRIBUTIONS FROM NET REDEMPTION ASSET
VALUE NET INVESTMENTS FROM NET DISTRIBUTIONS REALIZED FEES ADDED VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT FROM CAPITAL TO PAID-IN END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME/11/ CAPITAL GAINS CAPITAL PERIOD
========= ============= =============== ============ ============ ============== ========== ========
Investor C Class
10/01/03 through 3/31/04 /21/ $13.11 $(0.08) $ 3.05 $ - $ - $(1.79) $ - $14.29
9/30/03 12.12 (0.14) 3.09 - - (1.96) - 13.11
9/30/02 15.59 (0.20) (0.94) - - (2.33) - 12.12
9/30/01 16.57 (0.05) (0.08) (0.01) - (0.84) - 15.59
9/30/00 14.31 (0.28) 2.54 - - - - 16.57
9/30/99 14.53 (0.01) 0.61 (0.15) - (0.67) - 14.31
- ---------------------
Small Cap Core Equity
- ---------------------
Institutional Class
10/01/03 through 3/31/04 /21/ $11.99 $(0.06) $ 3.61 $ - $ - $(0.15) $ 0.01 $15.40
9/30/03 8.35 (0.06) 3.70 - - - - 11.99
1/2/021 through 9/30/02 10.00 (0.04) (1.61) - - - - 8.35
Service Class
10/01/03 through 3/31/04 /21/ $11.99 $(0.06) $ 3.62 $ - $ - $(0.15) $ 0.01 $15.41
9/30/03 8.35 - 3.64 - - - - 11.99
1/2/021 through 9/30/02 10.00 - (1.65) - - - - 8.35
Investor A Class
10/01/03 through 3/31/04 /21/ $11.99 $(0.06) $ 3.57 $ - $ - $(0.15) $ 0.01 $15.36
9/30/03 8.35 - 3.64 - - - - 11.99
1/2/021 through 9/30/02 10.00 - (1.65) - - - - 8.35
Investor B Class
10/01/03 through 3/31/04 /21/ $11.99 $(0.07) $ 3.53 $ - $ - $(0.15) $ 0.01 $15.31
9/30/03 8.35 - 3.64 - - - - 11.99
1/2/021 through 9/30/02 10.00 - (1.65) - - - - 8.35
Investor C Class
10/01/03 through 3/31/04 /21/ $11.99 $(0.06) $ 3.52 $ - $ - $(0.15) $ 0.01 $15.31
9/30/03 8.35 - 3.64 - - - - 11.99
1/2/021 through 9/30/02 10.00 - (1.65) - - - - 8.35
- -----------------------
Small Cap Growth Equity
- -----------------------
Institutional Class
10/01/03 through 3/31/04 /21/ $12.26 $(0.05) $ 3.80 $ - $ - $ - $ - $16.01
9/30/03 9.00 (0.09) 3.35 - - - - 12.26
9/30/02 11.74 (0.17) (2.57) - - - - 9.00
9/30/01 35.76 0.09 (15.38) (0.12) (0.10) (8.51) - 11.74
9/30/00 25.38 0.07 14.45 - - (4.14) - 35.76
9/30/99 17.50 (0.06) 7.94 - - - 25.38
Service Class
10/01/03 through 3/31/04 /21/ $11.79 $(0.07) $ 3.65 $ - $ - $ - $ - $15.37
9/30/03 8.67 (0.12) 3.24 - - - - 11.79
9/30/02 11.36 (0.19) (2.50) - - - - 8.67
9/30/01 34.91 0.03 (14.89) (0.08) (0.10) (8.51) - 11.36
9/30/00 24.93 (0.03) 14.15 - - (4.14) - 34.91
9/30/99 17.24 (0.13) 7.82 - - - - 24.93
Investor A Class
10/01/03 through 3/31/04 /21/ $11.51 $(0.08) $ 3.55 $ - $ - $ - $ - $14.98
9/30/03 8.48 (0.13) 3.16 - - - - 11.51
9/30/02 11.12 (0.14) (2.50) - - - - 8.48
9/30/01 34.47 (0.01) (14.65) (0.08) (0.10) (8.51) - 11.12
9/30/00 24.73 (0.06) 13.94 - - (4.14) - 34.47
9/30/99 17.12 (0.13) 7.74 - - - - 24.73
Investor B Class
10/01/03 through 3/31/04 /21/ $10.59 $(0.13) $ 3.28 $ - $ - $ - $ - $13.74
9/30/03 7.86 (0.19) 2.92 - - - - 10.59
9/30/02 10.39 (0.23) (2.30) - - - - 7.86
9/30/01 33.05 (0.12) (13.85) (0.08) (0.10) (8.51) - 10.39
9/30/00 23.97 (0.26) 13.48 - - (4.14) - 33.05
9/30/99 16.73 (0.33) 7.57 - - - - 23.97
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
78
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME
ASSETS RATIO OF EXPENSES TO AVERAGE RATIO OF NET TO AVERAGE
END OF NET EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
=============== ============ ================= =================== ================= ================== =========
23.95%/4,12/ $ 7,121 2.12%/2/ 2.12%/2/ (1.25)%/2/ (1.25)%/2/ 79%
28.42/4,12/ 5,839 2.13 2.16 (1.13) (1.15) 240
(9.45)/4/ 6,113 2.10 2.12 (1.32) (1.33) 260
(0.65)/4/ 7,051 2.09 2.09 (0.37) (0.37) 184
15.79/4/ 4,666 2.08 2.08 (0.43) (0.43) 168
3.93/4/ 9,162 2.08 2.08 (0.34) (0.34) 48
29.82%/15/ $ 1,803 1.30%/2/ 2.28%/2/ (0.86)%/2/ (1.84)%/2/ 32%
43.59 1,238 1.30 2.96 (0.62) (2.28) 218
(16.50) 835 1.30/2/ 2.532 (0.60)/2/ (1.83)/2/ 233
29.91%/16/ $ -- 1.60%/2/ 2.67%/2/ (1.07)%/2/ (2.14)%/2/ 32%
43.59 -- 1.60 3.26 (0.92) (2.58) 218
(16.50) -- 1.60/2/ 2.832 (0.90)/2/ (2.13)/2/ 233
29.49%/3,16/ $ 1,641 1.73%/2/ 2.87%/2/ (1.31)%/2/ (2.45)%/2/ 32%
43.59/3/ 7 1.77 3.43 (1.09) (2.75) 218
(16.50)/3/ -- 1.77/2/ 3.002 (1.07)/2/ (2.30)/2/ 233
29.07%/4,16/ $ 554 2.48%/2/ 3.58%/2/ (2.05)%/2/ (3.15)%/2/ 32%
43.59/4/ -- 2.52 4.18 (1.84) (3.50) 218
(16.50)/4/ -- 2.52/2/ 3.752 (1.82)/2/ (3.05)/2/ 233
29.07%/4,16/ $ 653 2.48%/2/ 3.65%/2/ (2.06)%/2/ (3.23)%/2/ 32%
43.59/4/ -- 2.52 4.18 (1.84) (3.50) 218
(16.50)/4/ -- 2.52/2/ 3.75/2/ (1.82)/2/ (3.05)/2/ 233
30.59%/12/ $ 263,194 0.90%/2/ 0.90%/2/ (0.75)%/2/ (0.75)%/2/ 46%
36.22/12/ 164,857 0.89 0.92 (0.75) (0.78) 167
(23.34) 176,858 0.85 0.87 (0.67) (0.69) 238
(53.73) 843,359 0.82 0.82 0.52 0.52 363
63.03 2,196,700 0.78 0.78 0.20 0.20 218
44.95 1,426,124 0.82 0.82 (0.25) (0.25) 176
30.37%/12/ $ 4,333 1.20%/2/ 1.20%/2/ (1.05)%/2/ (1.05)%/2/ 46%
35.99/12/ 23,466 1.19 1.22 (1.05) (1.08) 167
(23.68) 29,023 1.15 1.17 (0.97) (0.99) 238
(53.76) 141,001 1.11 1.11 0.20 0.20 363
62.51 315,647 1.08 1.08 (0.09) (0.09) 218
44.52 170,900 1.12 1.12 (0.55) (0.55) 176
30.15%/3,12/ $ 130,112 1.33%/2/ 1.43%/2/ (1.19)%/2/ (1.29)%/2/ 46%
35.73/3,12/ 102,642 1.37 1.40 (1.22) (1.25) 167
(23.74)/3/ 95,620 1.33 1.36 (1.14) (1.17) 238
(53.90)/3/ 85,211 1.29 1.29 0.02 0.02 363
61.96/3/ 175,112 1.23 1.23 (0.21) (0.21) 218
44.37/3/ 79,478 1.23 1.23 (0.66) (0.66) 176
29.75%/4,12/ $ 29,857 2.08%/2/ 2.08%/2/ (1.94)%/2/ (1.94)%/2/ 46%
34.73/4,12/ 24,167 2.11 2.14 (1.97) (2.00) 167
(24.35)/4/ 21,958 2.07 2.10 (1.89) (1.92) 238
(54.22)/4/ 37,351 2.03 2.03 (0.69) (0.69) 363
61.07/4/ 95,922 1.98 1.98 (0.96) (0.96) 218
43.28/4/ 44,109 2.00 2.00 (1.43) (1.43) 176
79
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN DISTRIBUTIONS NET
ASSET (LOSS) ON DISTRIBUTIONS FROM NET ASSET
VALUE NET INVESTMENTS FROM NET DISTRIBUTIONS REALIZED VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT FROM CAPITAL END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME11 CAPITAL GAINS PERIOD
=========== =============== =============== =========== ============= ============== ==========
Investor C Class
10/01/03 through 3/31/04 /21/ $ 10.60 $ (0.12) $ 3.27 $ - $ - $ - $ 13.75
9/30/03 7.86 (0.18) 2.92 - - - 10.60
9/30/02 10.39 (0.23) (2.30) - - - 7.86
9/30/01 33.05 (0.12) (13.85) (0.08) (0.10) (8.51) 10.39
9/30/00 23.97 (0.22) 13.44 - - (4.14) 33.05
9/30/99 16.73 (0.35) 7.59 - - - 23.97
-------------------
U. S. Opportunities
-------------------
Institutional Class
10/01/03 through 3/31/04 /21/ $ 16.56 $ (0.12) $ 3.87 $ - $ - $ - $ 20.31
9/30/03 13.06 (0.16) 3.66 - - - 16.56
9/30/02 17.76 (0.23)/20/ (4.06) (0.41) - - 13.06
9/30/01 45.41 0.04 (17.61) - - (10.08) 17.76
9/30/00 24.73 0.03 23.95 - - (3.30) 45.41
9/30/99 9.38 (0.06) 15.41 - - - 24.73
Service Class
10/01/03 through 3/31/04 /21/ $ 16.27 $ (0.12)/20/ $ 3.77 $ - $ - $ - $ 19.92
9/30/03 12.88 (0.19) 3.58 - - - 16.27
9/30/02 17.51 (0.51) (3.79) (0.33) - - 12.88
9/30/01 45.08 (0.05) (17.44) - - (10.08) 17.51
9/30/00 24.64 (0.07) 23.81 - - (3.30) 45.08
9/30/99 9.38 (0.07) 15.33 - - - 24.64
Investor A Class
10/01/03 through 3/31/04 /21/ $ 16.17 $ (0.14) $ 3.75 $ - $ - $ - $ 19.78
9/30/03 12.81 (0.21) 3.57 - - - 16.17
9/30/02 17.41 (0.42) (3.89) (0.29) - - 12.81
9/30/01 44.93 (0.09) (17.35) - - (10.08) 17.41
9/30/00 24.60 (0.17) 23.80 - - (3.30) 44.93
9/30/99 9.38 (0.11) 15.33 - - - 24.60
Investor B Class
10/01/03 through 3/31/04 /21/ $ 15.55 $ (0.21) $ 3.61 $ - $ - $ - $ 18.95
9/30/03 12.41 (0.32) 3.46 - - - 15.55
9/30/02 16.86 (0.54) (3.78) (0.13) - - 12.41
9/30/01 44.15 (0.28) (16.93) - - (10.08) 16.86
9/30/00 24.38 (0.45) 23.52 - - (3.30) 44.15
9/30/99 9.36 (0.18) 15.20 - - - 24.38
Investor C Class
10/01/03 through 3/31/04 /21/ $ 15.53 $ (0.21) $ 3.62 $ - $ - $ - $ 18.94
9/30/03 12.40 (0.32) 3.45 - - - 15.53
9/30/02 16.85 (0.55) (3.77) (0.13) - - 12.40
9/30/01 44.14 (0.29) (16.92) - - (10.08) 16.85
9/30/00 24.38 (0.44) 23.50 - - (3.30) 44.14
9/30/99 9.36 (0.16) 15.18 - - - 24.38
-----------------------------------------
Global Science & Technology Opportunities
-----------------------------------------
Institutional Class
10/01/03 through 3/31/04 /21/ $ 5.46 $ (0.04) $ 0.85 $ - $ - $ - $ 6.27
9/30/03 3.59 (0.05) 1.92 - - - 5.46
9/30/02 4.41 (0.06)/20/ (0.76) - - - 3.59
9/30/01 12.49 0.01 (8.09) - - - 4.41
5/15/001 through 9/30/00 10.00 (0.01) 2.50 - - - 12.49
Service Class
10/01/03 through 3/31/04 /21/ $ 5.41 $ (0.04) $ 0.83 $ - $ - $ - $ 6.20
9/30/03 3.57 (0.06)/20/ 1.90 - - - 5.41
9/30/02 4.39 (0.06)/20/ (0.76) - - - 3.57
9/30/01 12.47 - (8.08) - - - 4.39
5/15/00 /1/ through 9/30/00 10.00 (0.01) 2.48 - - - 12.47
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
80
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME
ASSETS RATIO OF EXPENSES TO AVERAGE RATIO OF NET TO AVERAGE
END OF NET EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
======================= =========== ================= ===================== =================== ================== ==========
29.72%/4,12/ $ 16,367 2.08%/2/ 2.08%/2/ (1.94)%/2/ (1.94)%/2/ 46%
34.86/4,12/ 11,396 2.11 2.14 (1.97) (2.00) 167
(24.35)/4/ 9,665 2.07 2.10 (1.89) (1.92) 238
(54.21)/4/ 18,170 2.03 2.03 (0.67) (0.67) 363
61.07/4/ 49,276 1.99 1.99 (0.92) (0.92) 218
43.28/4/ 13,541 2.05 2.05 (1.48) (1.48) 176
22.64%/12/ $ 6,391 1.59%/2/ 1.59%/2/ (1.00)%/2/ (1.00)%/2/ 61%
26.80 7,235 1.52 1.59 (0.87) (0.94) 248
(25.04) 10,867 1.45 1.49 (1.23) (1.27) 361
(46.34) 35,869 1.45 1.47 0.15 0.14 402
103.63 106,727 1.44 1.44 0.09 0.09 445
163.37 28,106 1.43 1.65 (0.72) (0.94) 346
22.43%/12/ $ 1,966 1.90%/2/ 1.91%/2/ (1.44)%/2/ (1.45)%/2/ 61%
26.32 421 1.83 1.89 (1.17) (1.24) 248
(25.26) 483 1.75 1.79 (1.51) (1.56) 361
(46.55) 1,059 1.75 1.77 (0.19) (0.21) 402
102.98 2,824 1.75 1.75 (0.20) (0.20) 445
162.41 690 1.73 1.92 (1.00) (1.19) 346
22.33%/3,12/ $ 33,902 2.03%/2/ 2.14%/2/ (1.44)%/2/ (1.55)%/2/ 61%
26.23/3/ 29,258 2.00 2.06 (1.34) (1.40) 248
(25.39)/3/ 28,733 1.92 1.97 (1.68) (1.73) 361
(46.61)/3/ 51,232 1.93 1.94 (0.30) (0.32) 402
102.68/3/ 151,588 1.91 1.91 (0.41) (0.41) 445
162.26/3/ 45,429 1.90 2.23 (1.17) (1.50) 346
21.87%/4,12/ $ 46,031 2.78%/2/ 2.79%/2/ (2.19)%/2/ (2.20)%/2/ 61%
25.30/4/ 41,259 2.74 2.81 (2.09) (2.15) 248
(25.92)/4/ 43,883 2.67 2.72 (2.43) (2.47) 361
(47.01)/4/ 79,401 2.67 2.69 (1.06) (1.08) 402
101.17/4/ 213,237 2.66 2.66 (1.14) (1.14) 445
160.19/4/ 53,476 2.65 3.01 (1.91) (2.27) 346
21.96%/4,12/ $ 22,737 2.78%/2/ 2.79%/2/ (2.19)%/2/ (2.20)%/2/ 61%
25.24/4/ 20,761 2.74 2.81 (2.09) (2.15) 248
(25.93)/4/ 22,020 2.67 2.72 (2.43) (2.48) 361
(47.02)/4/ 42,007 2.67 2.69 (1.02) (1.04) 402
101.12/4/ 133,540 2.65 2.65 (1.12) (1.12) 445
160.19/4/ 19,993 2.63 2.93 (1.91) (2.21) 346
14.84%/12/ $ 2,641 1.43%/2/ 1.57%/2/ (1.17)%/2/ (1.31)%/2/ 58%
52.09 2,821 1.35 1.63 (1.06) (1.34) 226
(18.59) 2,385 1.20 1.31 (1.00) (1.11) 587
(64.69) 7,189 1.20 1.45 0.14 (0.11) 748
24.90 21,383 1.20/2/ 2.19/2/ (0.21)/2/ (1.20)/2/ 175
14.60%/12/ $ 118 1.73%/2/ 1.88%/2/ (1.47)%/2/ (1.63)%/2/ 58%
51.54 108 1.67 1.88 (1.38) (1.59) 226
(18.68) 30 1.50 1.63 (1.30) (1.43) 587
(64.80) 19 1.50 1.73 0.00 (0.24) 748
24.70 17 1.50/2/ 2.49/2/ (0.51)/2/ (1.50)/2/ 175
81
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN NET
ASSET (LOSS) ON DISTRIBUTIONS DISTRIBUTIONS REDEMPTION ASSET
VALUE NET INVESTMENTS FROM NET FROM NET FEE ADDED VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT REALIZED CAPITAL TO PAID-IN END OF
OF PERIOD INCOME (LOSS AND UNREALIZED) INCOME11 GAINS CAPITAL PERIOD
========== ============= =============== ============ ================= ============ ======
Investor A Class
10/01/03 through 3/31/04 /21/ $ 5.38 $(0.05) $ 0.82 $ - $ - $ - $ 6.15
9/30/03 3.55 (0.07) 1.90 - - - 5.38
9/30/02 4.38 (0.09) (0.74) - - - 3.55
9/30/01 12.47 (0.03) (8.06) - - - 4.38
5/15/00 /1/ through 9/30/00 10.00 (0.02) 2.49 - - - 12.47
Investor B Class
10/01/03 through 3/31/04 /21/ $ 5.24 $(0.07) $ 0.81 $ - $ - $ - $ 5.98
9/30/03 3.49 (0.10) 1.85 - - - 5.24
9/30/02 4.33 (0.14) (0.70) - - - 3.49
9/30/01 12.44 (0.09) (8.02) - - - 4.33
5/15/00 /1/ through 9/30/00 10.00 (0.03) 2.47 - - - 12.44
Investor C Class
10/01/03 through 3/31/04 /21/ $ 5.24 $(0.07) $ 0.81 $ - $ - $ - $ 5.98
9/30/03 3.49 (0.10) 1.85 - - - 5.24
9/30/02 4.33 (0.15) (0.69) - - - 3.49
9/30/01 12.44 (0.10) (8.01) - - - 4.33
5/15/00 /1/ through 9/30/00 10.00 (0.03) 2.47 - - - 12.44
---------------
European Equity
---------------
Institutional Class
10/01/03 through 3/31/04 /21/ $ 6.05 $ 0.03 $ 1.14 $(0.11) $ - $ - $ 7.11
9/30/03 5.51 0.06 0.51 (0.03) - - 6.05
9/30/02 7.21 0.18 (1.71) (0.17) - - 5.51
9/30/01 9.51 0.04 (2.31) (0.01) (0.02) - 7.21
6/23/00 /1/ through 9/30/00 10.00 - (0.49) - - - 9.51
Service Class
10/01/03 through 3/31/04 /21/ $ 6.05 $(0.06) $ 1.17 $(0.12) $ - $ - $ 7.04
9/30/03 5.51 0.04 0.50 - - - 6.05
9/30/02 7.22 0.02/20/ (1.58) (0.15) - - 5.51
9/30/01 9.50 0.02 (2.30) - - - 7.22
6/23/00 /1/ through 9/30/00 10.00 (0.06) (0.44) - - - 9.50
Investor A Class
10/01/03 through 3/31/04 /21/ $ 6.05 $(0.02) $ 1.17 $(0.08) $ - $ - $ 7.12
9/30/03 5.50 0.04 0.51 - - - 6.05
9/30/02 7.20 0.15 (1.73) (0.12) - - 5.50
9/30/01 9.50 (0.02) (2.28) - - - 7.20
6/23/00 /1/ through 9/30/00 10.00 - (0.50) - - - 9.50
Investor B Class
10/01/03 through 3/31/04 /21/ $ 5.94 $(0.05) $ 1.16 $(0.03) $ - $ - $ 7.02
9/30/03 5.45 (0.01) 0.50 - - - 5.94
9/30/02 7.12 0.10 (1.70) (0.07) - - 5.45
9/30/01 9.48 (0.07) (2.29) - - - 7.12
6/23/00 /1/ through 9/30/00 10.00 (0.01) (0.51) - - - 9.48
Investor C Class
10/01/03 through 3/31/04 /21/ $ 5.95 $(0.03) $ 1.14 $ - $ - $ - $ 7.06
9/30/03 5.46 0.02 0.47 - - - 5.95
9/30/02 7.13 0.09 (1.69) (0.07) - - 5.46
9/30/01 9.48 (0.07) (2.28) - - - 7.13
6/23/00 /1/ through 9/30/00 10.00 (0.02) (0.50) - - - 9.48
--------------------
International Equity
--------------------
Institutional Class
10/01/03 through 3/31/04 /21/ $ 7.80 $(0.02) $ 2.39/22/ $(0.09) $ - $ 0.02 $10.10
9/30/03 7.01 0.07 0.71 - - 0.01 7.80
9/30/02 8.21 0.31 (1.46) - (0.05) - 7.01
9/30/01 13.92 0.06 (3.63) - (2.14) - 8.21
9/30/00 15.94 0.07 0.09 (0.05) (2.13) - 13.92
9/30/99 13.23 0.07 3.57 (0.13) (0.80) - 15.94
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
82
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME
ASSETS RATIO OF EXPENSES TO AVERAGE RATIO OF NET TO AVERAGE
END OF NET EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
======================= ============ ================= ===================== =================== ================== ==========
14.31%/3,12/ $ 12,790 1.86%/2/ 2.11%/2/ (1.60)%/2/ (1.85)%/2/ 58%
51.55/3/ 11,406 1.83 2.10 (1.53) (1.81) 226
(18.95)/3/ 9,104 1.67 1.79 (1.47) (1.59) 587
(64.88)/3/ 14,551 1.67 1.91 (0.36) (0.60) 748
24.70/3/ 41,474 1.67/2/ 2.66/2/ (0.68)/2/ (1.67)/2/ 175
14.12%/4,12/ $ 16,471 2.61%/2/ 2.76%/2/ (2.35)%/2/ (2.50)%/2/ 58%
50.14/4/ 16,646 2.57 2.85 (2.28) (2.55) 226
(19.40)/4/ 12,944 2.38 2.50 (2.18) (2.29) 587
(65.19)/4/ 22,062 2.42 2.65 (1.12) (1.35) 748
24.40/4/ 60,094 2.42/2/ 3.41/2/ (1.43)/2/ (2.42)/2/ 175
14.12%/4,12/ $ 4,103 2.61%/2/ 2.76%/2/ (2.35)%/2/ (2.50)%/2/ 58%
50.14/4/ 4,024 2.57 2.85 (2.28) (2.55) 226
(19.40)/4/ 3,010 2.59 2.72 (2.37) (2.50) 587
(65.19)/4/ 5,708 2.42 2.65 (1.09) (1.32) 748
24.40/4/ 13,057 2.42/2/ 3.41/2/ (1.43)/2/ (2.42)/2/ 175
19.35%/12/ $ 2,451 1.45%/2/ 2.48%/2/ (0.17)%/2/ (1.20)%/2/ 33%
10.40/12/ 3,534 1.45 3.15 0.90 (0.79) 192
(21.81) 5,212 1.45 1.83 2.46 2.08 88
(24.00) 5,687 1.45 2.41 0.19 (0.77) 218
(4.90) 4,848 1.45/2/ 6.12/2/ 0.08/2/ (4.59)/2/ 177
18.44%/12/ $ - 1.75%/2/ 2.78%/2/ (0.47)%/2/ (1.50)%/2/ 33%
9.80/12/ - 1.75 3.45 0.60 (1.09) 192
(22.12) - 1.75 2.11 0.30 (0.06) 88
(24.00) 64 1.60 2.69 1.31 0.22 218
(5.00) - 1.75/2/ 6.42 (0.22)/2/ (4.89)/2/ 177
19.08%/3,12/ $ 522 1.88%/2/ 3.01%/2/ (0.52)%/2/ (1.64)%/2/ 33%
10.00/3,12/ 492 1.91 3.62 0.54 (1.17) 192
(22.32)/3,12/ 547 1.92 2.28 2.25 1.89 88
(24.21)/3/ 959 1.92 2.86 (0.23) (1.17) 218
(5.00)/3/ 472 1.92/2/ 6.59/2/ (0.39)/2/ (5.06)/2/ 177
18.76%/4,12/ $ 1,170 2.63%/2/ 3.66%/2/ (1.30)%/2/ (2.33)%/2/ 33%
8.99/4,12/ 1,109 2.67 4.38 (0.22) (1.93) 192
(22.75)/4,12/ 1,416 2.65 3.01 1.36 1.00 88
(24.89)/4/ 2,060 2.65 3.56 (0.97) (1.87) 218
(5.20)/4/ 381 2.67/2/ 7.34/2/ (1.14)/2/ (5.81)/2/ 177
18.66%/4,12/ $ 181 2.63%/2/ 3.70%/2/ (1.40)%/2/ (2.47)%/2/ 33%
8.97/4,12/ 297 2.67 4.17 0.01 (1.48) 192
(22.72)/4,12/ 556 2.72 3.11 1.31 0.93 88
(24.79)/4/ 750 2.65 3.56 (0.94) (1.84) 218
(5.20)/4/ 101 2.67/2/ 7.34/2/ (1.14)/2/ (5.81)/2/ 177
30.85%/16/ $ 21,380 1.17%/2/ 1.29%/2/ (0.07)%/2/ (0.19)%/2/ 77%
11.27/18/ 83,521 1.11 1.18 0.67 0.60 132
(14.16) 228,086 1.06 1.12 3.14 3.08 275
(29.74) 410,744 1.06 1.07 0.46 0.45 306
0.12 1,109,017 1.06 1.07 0.35 0.34 153
28.59 1,116,766 1.04 1.04 0.55 0.55 62
83
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN NET
ASSET (LOSS) ON DISTRIBUTIONS DISTRIBUTIONS REDEMPTION ASSET
VALUE NET INVESTMENTS FROM NET FROM NET FEE ADDED VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT REALIZED CAPITAL TO PAID-IN END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME GAINS CAPITAL PERIOD
=========== ================ ================= =============== ================== ============ ========
Service Class
10/01/03 through 3/31/04 /21/ $ 7.66 $ 0.02 $ 2.30/22/ $ (0.06) - $ 0.02 $ 9.94
9/30/03 6.90 0.04 0.71 - - 0.01 7.66
9/30/02 8.12 0.21 (1.38) - (0.05) - 6.90
9/30/01 13.82 0.03 (3.59) - (2.14) - 8.12
9/30/00 15.84 0.04 0.08 (0.01) (2.13) - 13.82
9/30/99 13.15 (0.02) 3.59 (0.08) (0.80) - 15.84
Investor A Class
10/01/03 through 3/31/04 /21/ $ 7.56 $ - $ 2.30/22/ $ (0.06) $ - $ 0.02 $ 9.82
9/30/03 6.83 0.05 0.67 - - 0.01 7.56
9/30/02 8.04 0.20/20/ (1.36) - (0.05) - 6.83
9/30/01 13.76 0.01 (3.59) - (2.14) - 8.04
9/30/00 15.79 - 0.08 - (2.11) - 13.76
9/30/99 13.14 (0.05) 3.58 (0.08) (0.80) - 15.79
Investor B Class
10/01/03 through 3/31/04 /21/ $ 7.21 $ (0.03) $ 2.22/22/ $ (0.01) $ - $ 0.02 $ 9.41
9/30/03 6.56 (0.02) 0.66 - - 0.01 7.21
9/30/02 7.79 0.16 (1.34) - (0.05) - 6.56
9/30/01 13.45 (0.08) (3.44) - (2.14) - 7.79
9/30/00 15.55 (0.10) 0.08 - (2.08) - 13.45
9/30/99 12.94 (0.10) 3.51 - (0.80) - 15.55
Investor C Class
10/01/03 through 3/31/04 /21/ $ 7.30 $ (0.04) $ 2.25/22/ $ - $ - $ 0.02 $ 9.53
9/30/03 6.54 0.02 0.73 - - 0.01 7.30
9/30/02 7.80 0.05 (1.26) - (0.05) - 6.54
9/30/01 13.45 (0.06) (3.45) - (2.14) - 7.80
9/30/00 15.55 (0.06) 0.04 - (2.08) - 13.45
9/30/99 12.94 (0.02) 3.43 - (0.80) - 15.55
- ---------------------------
International Opportunities
- ---------------------------
Institutional Class
10/01/03 through 3/31/04 /21/ $ 19.96 $ (0.02) $ 4.94 $ (0.02) $ - $ - $ 24.86
9/30/03 15.22 - 4.73 - - 0.01 19.96
9/30/02 14.86 0.05 0.27 - - 0.04 15.22
9/30/01 22.54 0.30 (7.93) - (0.05) - 14.86
9/30/00 12.90 0.13 10.91 - (1.40) - 22.54
9/30/99 9.56 0.03 4.44 (0.02) (1.11) - 12.90
Service Class
10/01/03 through 3/31/04 /21/ $ 19.59 $ (0.07)/20/ $ 4.87 $ (0.02) $ - $ - $ 24.37
9/30/03 14.98 0.05 4.55 - - 0.01 19.59
9/30/02 14.66 (0.02) 0.30 - - 0.04 14.98
9/30/01 22.36 0.29 (7.94) - (0.05) - 14.66
9/30/00 12.84 0.08 10.84 - (1.40) - 22.36
9/30/99 9.56 0.02 4.39 (0.02) (1.11) - 12.84
Investor A Class
10/01/03 through 3/31/04 /21/ $ 19.49 $ (0.13)/20/ $ 4.89 $ (0.02) $ - $ - $ 24.23
9/30/03 14.94 0.01 4.53 - - 0.01 19.49
9/30/02 14.65 (0.03) 0.28 - - 0.04 14.94
9/30/01 22.34 0.13 (7.77) - (0.05) - 14.65
9/30/00 12.84 0.08 10.82 - (1.40) - 22.34
9/30/99 9.54 (0.01) 4.42 - (1.11) - 12.84
Investor B Class
10/01/03 through 3/31/04 /21/ $ 18.83 $ (0.14) $ 4.65 $ (0.02) $ - $ - $ 23.32
9/30/03 14.54 (0.12) 4.40 - - 0.01 18.83
9/30/02 14.37 (0.16) 0.29 - - 0.04 14.54
9/30/01 22.06 0.01 (7.65) - (0.05) - 14.37
9/30/00 12.78 (0.04) 10.72 - (1.40) - 22.06
9/30/99 9.48 (0.10) 4.51 - (1.11) - 12.78
Investor C Class
10/01/03 through 3/31/04 /21/ $ 18.84 $ (0.11) $ 4.62 $ (0.02) $ - $ - $ 23.33
9/30/03 14.54 (0.11)/20/ 4.40 - - 0.01 18.84
9/30/02 14.36 (0.15) 0.29 - - 0.04 14.54
9/30/01 22.06 0.01 (7.66) - (0.05) - 14.36
9/30/00 12.78 (0.04) 10.72 - (1.40) - 22.06
9/30/99 9.48 (0.03) 4.44 - (1.11) - 12.78
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
84
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME
ASSETS RATIO OF EXPENSES TO AVERAGE RATIO OF NET TO AVERAGE
END OF NET EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
======================== ========== ================= ===================== =================== ================== ==========
30.66%/16/ $ 5,321 1.47%/2/ 1.58%/2/ (0.43)%/2/ (0.54)%/2/ 77%
11.02/19/ 21,514 1.41 1.48 0.47 0.40 132
(14.57) 62,149 1.36 1.42 2.51 2.44 275
(29.91) 78,595 1.36 1.37 0.28 0.26 306
(0.15) 134,447 1.36 1.37 0.06 0.05 153
28.14 118,323 1.34 1.34 0.21 0.21 62
30.80%/3,16/ $ 13,783 1.60%/2/ 1.92%/2/ (0.18)%/2/ (0.50)%/2/ 77%
10.69/3,19/ 12,054 1.60 1.68 0.58 0.50 132
(14.59)/3,12/ 16,088 1.55 1.60 2.41 2.35 275
(30.24)/3/ 48,813 1.54 1.55 0.10 0.08 306
(0.32)/3/ 29,881 1.53 1.53 (0.08) (0.08) 153
27.82/3/ 33,106 1.48 1.48 0.23 0.23 62
30.64%/4,17/ $ 2,921 2.35%/2/ 2.58%/2/ (0.91)%/2/ (1.14)%/2/ 77%
9.91/4,19/ 2,411 2.35 2.43 (0.21) (0.29) 132
(15.31)/4,12/ 2,743 2.27 2.33 1.83 1.77 275
(30.53)/4/ 4,226 2.28 2.29 (0.73) (0.74) 306
(1.10)/4/ 8,399 2.28 2.29 (0.85) (0.86) 153
26.98/4/ 7,822 2.26 2.26 (0.66) (0.66) 62
30.55%/4,17/ $ 1,520 2.35%/2/ 2.60%/2/ (0.79)%/2/ (1.04)%/2/ 77%
11.62/4,19/ 939 2.34 2.42 0.17 0.09 132
(15.68)/4,12/ 1,344 2.31 2.37 0.50 0.44 275
(30.44)/4/ 2,105 2.27 2.28 (0.62) (0.64) 306
(1.10)/4/ 1,723 2.28 2.28 (0.71) (0.71) 153
26.98/4/ 1,018 2.26 2.26 (0.27) (0.27) 62
24.64%/14/ $ 93,582 1.45%/2/ 1.46%/2/ (0.32)%/2/ (0.33)%/2/ 70%
31.14/13/ 57,951 1.41 1.51 0.42 0.32 721
2.42 54,164 1.33 1.43 0.27 0.17 104
(33.93) 60,531 1.33 1.40 1.36 1.30 207
91.76 85,206 1.33 1.48 0.74 0.59 296
51.88 23,814 1.33 2.00 0.19 (0.48) 224
24.49%/14/ $ 11,433 1.75%/2/ 1.78%/2/ (0.37)%/2/ (0.39)%/2/ 70%
30.78/14/ 1,573 1.72 1.80 0.30 0.22 72
2.18 670 1.60 1.70 (0.17) (0.27) 104
(34.29) 500 1.63 1.84 1.50 1.29 207
91.21 457 1.63 1.69 0.60 0.54 296
51.14 - 1.63 2.30 (0.11) (0.78) 224
24.42%/3,13/ $ 80,706 1.88%/2/ 2.00%/2/ (0.70)%/2/ (0.82)%/2/ 70%
30.45/3,13/ 37,933 1.89 1.98 0.05 (0.04) 72
1.98/3,12/ 25,969 1.80 1.91 (0.17) (0.27) 104
(34.27)/3/ 28,781 1.80 1.89 0.80 0.72 207
91.04/3/ 40,545 1.79 1.85 0.45 0.39 296
50.71/3/ 1,092 1.80 2.47 (0.23) (0.90) 224
23.95%/4,13/ $ 45,652 2.63%/2/ 2.64%/2/ (1.53)%/2/ (1.54)%/2/ 70%
29.51/4,13/ 31,454 2.63 2.72 (0.74) (0.83) 72
1.18/4,12/ 25,917 2.54 2.64 (0.93) (1.03) 104
(34.71)/4/ 27,895 2.55 2.64 0.06 (0.03) 207
89.64/4/ 56,136 2.52 2.60 (0.27) (0.33) 296
49.83/4/ 2,208 2.55 3.22 (0.99) (1.66) 224
23.93%/4,14/ $ 51,600 2.63%/2/ 2.64%/2/ (1.47)%/2/ (1.49)%/2/ 70%
29.57/4,13/ 26,912 2.63 2.72 (0.71) (0.80) 72
1.25/4,12/ 18,599 2.55 2.66 (0.95) (1.05) 104
(34.71)/4/ 21,019 2.55 2.66 0.07 (0.03) 207
89.64/4/ 43,722 2.52 2.58 (0.27) (0.32) 296
49.83/4/ 1,019 2.55 3.22 (0.99) (1.66) 224
85
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET GAIN DISTRIBUTIONS NET
ASSET (LOSS) ON DISTRIBUTIONS FROM NET REDEMPTION ASSET
VALUE NET INVESTMENTS FROM NET DISTRIBUTIONS REALIZED FEES ADDED VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT FROM CAPITAL TO PAID-IN END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME CAPITAL GAINS CAPITAL PERIOD
=========== ============= ================ ============= ============= ============= ========== ======
- -------------------
Asia Pacific Equity
- -------------------
Institutional Class
10/01/03 through 3/31/04 /21/ $ 6.90 $ - $ 1.97 $(0.03) $ - $ - $ - $ 8.84
9/30/03 5.86 0.03 1.02 (0.01) - - - 6.90
9/30/02 6.16 (0.02) (0.23) (0.06) - - 0.01 5.86
9/30/01 9.24 0.01 (2.88) (0.01) - (0.20) - 6.16
6/23/00 /1/ through 9/30/00 10.00 0.02 (0.78) - - - - 9.24
Service Class
10/01/03 through 3/31/04 /21/ $ 6.90 $(0.03) $ 1.99 $0.07) $ - $ - $ - $ 8.79
9/30/03 5.86 0.03 1.02 0.01) - - - 6.90
9/30/02 6.16 (0.07) (0.24) - - - 0.01 5.86
9/30/01 9.20 (0.05) (2.78) 0.01) - (0.20) - 6.16
6/23/00 /1/ through 9/30/00 10.00 (0.02) (0.78) - - - - 9.20
Investor A Class
10/01/03 through 3/31/04 /21/ $ 6.76 $(0.03)/20/ $ 1.93 $(0.02) $ - $ - $ - $ 8.64
9/30/03 5.75 0.02/20/ 0.99 - - - - 6.76
9/30/02 6.06 (0.07) (0.25) - - - 0.01 5.75
9/30/01 9.20 (0.04) (2.89) (0.01) - (0.20) - 6.06
6/23/00 /1/ through 9/30/00 10.00 0.01 (0.81) - - - - 9.20
Investor B Class
10/01/03 through 3/31/04 /21/ $ 6.73 $(0.06) $ 1.92 $(0.02) $ - $ - $ - $ 8.57
9/30/03 5.77 0.02/20/ 0.94 - - - - 6.73
9/30/02 6.05 (0.09) (0.20) - - - 0.01 5.77
9/30/01 9.22 (0.06) (2.90) (0.01) - (0.20) - 6.05
6/23/00 /1/ through 9/30/00 10.00 - (0.78) - - - - 9.22
Investor C Class
10/01/03 through 3/31/04 /21/ $ 6.73 $(0.04)/20/ $ 1.91 $(0.02) $ - $ - $ - $ 8.58
9/30/03 5.77 (0.09)/20/ 1.05 - - - - 6.73
9/30/02 6.05 (0.25) (0.04) - - - 0.01 5.77
9/30/01 9.24 (0.08) (2.90) (0.01) - (0.20) - 6.05
6/23/00 /1/ through 9/30/00 10.00 - (0.76) - - - - 9.24
- -------------
Select Equity
- -------------
Institutional Class
10/01/03 through 3/31/04 /21/ $10.32 $ 0.05 $ 1.66 $(0.13) $ - $ - $ - $11.90
9/30/03 8.50 0.10/20/ 1.83 (0.11) - - - 10.32
9/30/02 11.25 0.11 (2.86) - - - - 8.50
9/30/01 20.77 0.06 (6.46) (0.05) (0.02) (3.05) - 11.25
9/30/00 20.77 0.07 1.61 (0.05) - (1.63) - 20.77
9/30/99 17.01 0.14 4.36 (0.13) - (0.61) - 20.77
Service Class
10/01/03 through 3/31/04 /21/ $10.33 $ 0.04 $ 1.66 $(0.09) $ - $ - $ - $11.94
9/30/03 8.44 0.10/20/ 1.79 - - - - 10.33
9/30/02 11.21 0.01/20/ (2.78) - - - - 8.44
9/30/01 20.73 0.01 (6.43) (0.03) (0.02) (3.05) - 11.21
9/30/00 20.76 0.01 1.61 (0.02) - (1.63) - 20.73
9/30/99 17.00 0.07 4.37 (0.07) - (0.61) - 20.76
Investor A Class
10/01/03 through 3/31/04 /21/ $10.18 $ 0.03 $ 1.64 $(0.07) $ - $ - $ - $11.78
9/30/03 8.41 0.06 1.79 (0.08) - - - 10.18
9/30/02 11.17 (0.01) (2.75) - - - - 8.41
9/30/01 20.69 (0.02) (6.42) (0.01) (0.02) (3.05) - 11.17
9/30/00 20.75 (0.02) 1.60 (0.01) - (1.63) - 20.69
9/30/99 17.00 0.05 4.36 (0.05) - (0.61) - 20.75
Investor B Class
10/01/03 through 3/31/04 /21/ $ 9.78 $(0.01) $ 1.56 $(0.01) $ - $ - $ - $11.32
9/30/03 8.06 (0.02)/20/ 1.74 - - - - 9.78
9/30/02 10.79 (0.10) (2.63) - - - - 8.06
9/30/01 20.21 (0.13) (6.22) - (0.02) (3.05) - 10.79
9/30/00 20.44 (0.18) 1.58 - - (1.63) - 20.21
9/30/99 16.85 (0.10) 4.30 - - (0.61) - 20.44
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
86
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME
ASSETS RATIO OF EXPENSES TO AVERAGE RATIO OF NET TO AVERAGE
END OF NET EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
======================== ============ ================= ===================== =================== ================== ==========
28.57% $ 2,670 1.45%/2/ 4.11%/2/ 0.01%/2/ (2.65)%/2/ 46%
17.86 2,077 1.45 5.32 0.59 (3.27) 123
(3.94)/12/ 1,756 1.45 5.64 (0.26) (4.45) 107
(31.69) 1,931 1.45 5.03 0.11 (3.46) 206
(7.60) 2,810 1.45/2/ 9.16/2/ 0.62/2/ (7.09)/2/ 145
28.70% $ - 1.75%/2/ 4.41%/2/ (0.31)%/2/ (2.95)%/2/ 46%
17.91 - 1.75 5.62 0.29 (3.57) 123
(4.87)/12/ - 1.75 8.73 (0.56) (6.90) 107
(31.38) - 1.75 4.59 (0.94) (3.76) 206
(8.00) - 1.75/2/ 9.46/2/ 0.322 (7.39)/2/ 145
28.23%/3/ $ 277 1.88%/2/ 4.61%/2/ (0.17)%/2/ (2.89)%/2/ 46%
17.57/3/ 98 1.93 6.34 0.36 (4.06) 123
(5.12)/3,12/ 52 1.92 3.05 (0.70) (1.83) 107
(32.50)/3/ 29 1.93 5.70 (0.39) (4.16) 206
(8.00)/3/ 35 1.92/2/ 9.63/2/ 0.152 (7.56)/2/ 145
27.76%/4/ $ 382 2.63%/2/ 5.31%/2/ (1.25)%/2/ (3.92)%/2/ 46%
16.64/4/ 351 2.67 6.76 0.41 (3.76) 123
(4.63)/4,12/ 15 2.65 6.57 (1.46) (5.38) 107
(32.75)/4/ 9 2.65 6.47 (0.85) (4.67) 206
(7.80)/4/ 10 2.67/2/ 10.38/2/ (0.60)/2/ (8.31)/2/ 145
27.76%/4/ $ 207 2.63%/2/ 5.18%/2/ (0.59)%/2/ (3.15)%/2/ 46%
16.64/4/ 10 2.61 8.42 (1.68) (7.49) 123
(4.63)/4,12/ 1 2.67 3.81 (0.82) (1.95) 107
(32.90)/4/ 2 2.66 6.32 (1.08) (4.73) 206
(7.60)/4/ 2 2.67/2/ 10.38/2/ (0.60)/2/ (8.31)/2/ 145
16.62%/12/ $ 59,715 0.81%/2/ 0.99%/2/ 0.84%/2/ 0.66%/2/ 41%
22.80 60,885 0.81 0.96 0.93 0.79 98
(24.44) 134,859 0.81 0.87 0.36 0.30 124
(35.29) 755,701 0.81 0.82 0.38 0.37 114
8.14 1,466,964 0.80 0.80 0.33 0.33 103
26.96 1,443,128 0.80 0.80 0.67 0.67 22
16.54%/12/ $ 1,810 1.11%/2/ 1.29%/2/ 0.54%/2/ 0.36%/2/ 41%
22.39 1,988 1.11 1.26 0.64 0.49 98
(24.71) 3,797 1.11 1.16 0.06 0.02 124
(35.49) 143,283 1.11 1.12 0.07 0.06 114
7.81 232,287 1.10 1.10 0.03 0.03 103
26.61 223,215 1.10 1.10 0.37 0.37 22
16.50%/3,12/ $ 19,818 1.25%/2/ 1.53%/2/ 0.40%/2/ 0.28%/2/ 41%
22.09/3/ 19,408 1.28 1.43 0.45 0.30 98
(24.71)/3/ 24,816 1.28 1.36 (0.04) (0.11) 124
(35.65)/3/ 37,267 1.28 1.30 (0.09) (0.10) 114
7.643 76,438 1.25 1.25 (0.11) (0.11) 103
26.443 66,646 1.21 1.21 0.26 0.26 22
15.90%/4,12/ $ 22,788 1.99%/2/ 2.18%/2/ (0.35)%/2/ (0.53)%/2/ 41%
21.34/4/ 21,182 2.03 2.18 (0.30) (0.45) 98
(25.30)/4/ 22,119 2.03 2.11 (0.78) (0.86) 124
(36.11)/4/ 40,403 2.03 2.05 (0.84) (0.85) 114
6.82/4/ 81,562 2.01 2.01 (0.87) (0.87) 103
25.38/4/ 66,854 2.02 2.02 (0.55) (0.55) 22
87
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 CAPITAL END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME GAINS PERIOD
=========== =============== ================= =============== ================== ===========
Investor C Class
10/01/03 through 3/31/04 /21/ $ 9.77 $ (0.01) $ 1.57 $ - $ - $ 11.33
9/30/03 8.06 (0.02)/20/ 1.73 - - 9.77
9/30/02 10.79 (0.11) (2.62) - - 8.06
9/30/01 20.20 (0.15) (6.19) (0.02) (3.05) 10.79
9/30/00 20.44 (0.16) 1.55 - (1.63) 20.20
9/30/99 16.85 (0.08) 4.28 - (0.61) 20.44
------------
Index Equity
------------
Institutional Class
10/01/03 through 3/31/04 /21/ $ 19.19 $ 0.17 $ 2.51 $ (0.16) $ - $ 21.71
9/30/03 15.69 0.30 3.48 (0.28) - 19.19
9/30/02 20.03 0.25 (4.34) (0.25) - 15.69
9/30/01 27.59 0.26 (7.63) (0.19) - 20.03
9/30/00 24.69 0.27 2.97 (0.18) (0.16) 27.59
9/30/99 19.65 0.27 5.10 (0.27) (0.06) 24.69
Service Class
10/01/03 through 3/31/04 /21/ $ 19.08 $ 0.11 $ 2.50 $ (0.12) $ - $ 21.57
9/30/03 15.62 0.21 3.47 (0.22) - 19.08
9/30/02 19.97 0.25 (4.41) (0.19) - 15.62
9/30/01 27.54 0.16 (7.61) (0.12) - 19.97
9/30/00 24.67 0.16 2.97 (0.10) (0.16) 27.54
9/30/99 19.64 0.19 5.10 (0.20) (0.06) 24.67
Investor A Class
10/01/03 through 3/31/04 /21/ $ 19.07 $ 0.10 $ 2.50 $ (0.11) $ - $ 21.56
9/30/03 15.62 0.18 3.46 (0.19) - 19.07
9/30/02 19.95 0.13 (4.31) (0.15) - 15.62
9/30/01 27.51 0.12 (7.60) (0.08) - 19.95
9/30/00 24.66 0.11 2.96 (0.06) (0.16) 27.51
9/30/99 19.64 0.17 5.10 (0.19) (0.06) 24.66
Investor B Class
10/01/03 through 3/31/04 /21/ $ 18.75 $ 0.02 $ 2.46 $ (0.03) $ - $ 21.20
9/30/03 15.35 0.04 3.42 (0.06) - 18.75
9/30/02 19.61 (0.01) (4.25) - - 15.35
9/30/01 27.15 (0.06) (7.48) - - 19.61
9/30/00 24.44 - 2.84 - (0.13) 27.15
9/30/99 19.52 (0.02) 5.05 (0.05) (0.06) 24.44
Investor C Class
10/01/03 through 3/31/04 /21/ $ 18.74 $ 0.02 $ 2.46 $ (0.03) $ - $ 21.19
9/30/03 15.35 0.04 3.41 (0.06) - 18.74
9/30/02 19.61 (0.01) (4.25) - - 15.35
9/30/01 27.15 (0.06) (7.48) - - 19.61
9/30/00 24.44 - 2.84 - (0.13) 27.15
9/30/99 19.52 - 5.03 (0.05) (0.06) 24.44
--------
Balanced
--------
Institutional Class
10/01/03 through 3/31/04 /21/ $ 12.73 $ 0.13 $ 1.41 $ (0.14) $ - $ 14.13
9/30/03 11.12 0.35 1.60 (0.34) - 12.73
9/30/02 13.28 0.58 (2.35) (0.39) - 11.12
9/30/01 20.16 0.35 (4.05) (0.37) (2.81) 13.28
9/30/00 19.75 0.48 1.10 (0.47) (0.70) 20.16
9/30/99 18.35 0.49 2.18 (0.48) (0.79) 19.75
Service Class
10/01/03 through 3/31/04 /21/ $ 12.72 $ 0.11 $ 1.40 $ (0.12) $ - $ 14.11
9/30/03 11.11 0.30 1.62 (0.31) - 12.72
9/30/02 13.26 0.27/20/ (2.07) (0.35) - 11.11
9/30/01 20.15 0.29 (4.04) (0.33) (2.81) 13.26
9/30/00 19.73 0.42 1.11 (0.41) (0.70) 20.15
9/30/99 18.34 0.42 2.18 (0.42) (0.79) 19.73
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
88
BLACKROCK FUNDS
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET NET EXPENSES TOTAL EXPENSES RATIO OF NET INCOME TO
ASSETS RATIO OF TO AVERAGE TO AVERAGE INVESTMENT AVERAGE
END OF NET EXPENSES NET ASSETS NET ASSETS INCOME TO NET ASSETS PORTFOLIO
TOTAL PERIOD TO AVERAGE (EXCLUDING (EXCLUDING AVERAGE (EXCLUDING TURNOVER
RETURN (000) NET ASSETS INTEREST EXPENSE) WAIVERS) NET ASSETS WAIVERS) RATE
============== ============ =================== =================== =================== ============== =============== ==========
15.99%/4,12/ $ 1,944 1.99%/2/ 1.99%/2/ 2.18%2 (0.34)%/2/ (0.53)%/2/ 41%
21.22/4/ 1,829 2.03 2.03 2.18 (0.25) (0.40) 98
(25.30)/4/ 1,923 2.03 2.03 2.11 (0.80) (0.87) 124
(36.07)/4/ 3,955 2.03 2.03 2.04 (0.09) (0.09) 114
6.77/4/ 11,108 2.01 2.01 2.01 (0.87) (0.87) 103
25.38/4/ 6,543 2.02 2.02 2.02 (0.55) (0.55) 22
14.00%/12/ $ 654,980 0.18%/2/,++ 0.18%/2/,++ 0.34%/2/,++ 1.58%/2/ 1.41%/2/ 2%/10/
24.20 618,249 0.18++ 0.18++ 0.37++ 1.63 1.44 109
(20.65) 741,161 0.18++ 0.18++ 0.33++ 1.35 1.20 68
(26.78) 557,845 0.18++ 0.18++ 0.33++ 1.11 0.96 87
13.10 665,743 0.18++ 0.18++ 0.33++ 0.98 0.83 86
27.36 507,841 0.22++ 0.22++ 0.33++ 1.14 1.04 55
13.72%/12/ $ 88,842 0.62%/2/,++ 0.62%/2/,++ 0.65%/2/,++ 1.14%/2/ 1.10%/2/ 2%/10/
23.68 72,505 0.61++ 0.61++ 0.67++ 1.19 1.13 109
(21.02) 63,468 0.61++ 0.61++ 0.67++ 0.87 0.81 68
(27.10) 292,389 0.61++ 0.61++ 0.63++ 0.68 0.66 87
12.66 378,997 0.59++ 0.59++ 0.63++ 0.57 0.54 86
26.96 354,283 0.56++ 0.56++ 0.63++ 0.80 0.74 55
13.65%/3,12/ $ 330,228 0.75%/2/,++ 0.75%/2/,++ 0.87%/2/,++ 1.00%/2/ 0.88%/2/ 2%/10/
23.41/3/ 281,505 0.79++ 0.79++ 0.85++ 1.01 0.96 109
(21.09)/3/ 222,736 0.79++ 0.79++ 0.78++ 0.72 0.72 68
(27.23)/3/ 76,363 0.79++ 0.79++ 0.81++ 0.50 0.48 87
12.43/3/ 93,935 0.78++ 0.78++ 0.81++ 0.38 0.35 86
26.74/3/ 85,174 0.75++ 0.75++ 0.81++ 0.62 0.56 55
13.24%/4,12/ $ 203,218 1.51%/2/,++ 1.51%/2/,++ 1.53%/2/,++ 0.25%/2/ 0.22%/2/ 2%/10/
22.59/4/ 192,614 1.54++ 1.54++ 1.59++ 0.27 0.21 109
(21.72)/4/ 175,100 1.53++ 1.53++ 1.55++ (0.04) (0.05) 68
(27.77)/4/ 262,027 1.53++ 1.53++ 1.55++ (0.25) (0.26) 87
11.61/4/ 360,792 1.51++ 1.51++ 1.54++ (0.35) (0.38) 86
25.78/4/ 302,071 1.49++ 1.49++ 1.55++ (0.13) (0.18) 55
13.25%/4,12/ $ 320,565 1.50%/2/,++ 1.50%/2/,++ 1.53%/2/,++ 0.25%/2/ 0.22%/2/ 2%/10/
22.52/4/ 297,835 1.54++ 1.54++ 1.59++ 0.27 0.21 109
(21.72)/4/ 270,958 1.53++ 1.53++ 1.55++ (0.04) (0.05) 68
(27.77)/4/ 382,356 1.53++ 1.53++ 1.55++ (0.25) (0.26) 87
11.61/4/ 530,586 1.53++ 1.53++ 1.56++ (0.37) (0.40) 86
25.78/4/ 391,152 1.51++ 1.51++ 1.55++ (0.15) (0.19) 55
12.09%/12/ $ 11,894 0.86%/2/ 0.86%/2/ 1.00%/2/ 1.80%/2/ 1.66%/2/ 70%
17.75 12,262 0.92 0.86 1.02 2.67 2.57 399
(13.62) 24,055 0.92 0.86 0.93 2.36 2.34 232
(20.83) 205,085 0.86 0.86 0.88 2.04 2.03 210
8.05 385,793 0.85 0.85 0.85 2.30 2.30 176
14.81 414,057 0.86 0.86 0.86 2.44 2.44 122
11.86%/12/ $ 2,282 1.16%/2/ 1.16%/2/ 1.30%/2/ 1.49%/2/ 1.35%/2/ 70%
17.41 2,205 1.22 1.16 1.32 2.32 2.22 399
(13.83) 3,379 1.21 1.16 1.26 2.00 1.96 232
(21.15) 147,535 1.16 1.16 1.18 1.93 1.91 210
7.78 197,633 1.15 1.15 1.15 2.00 2.00 176
14.49 219,018 1.16 1.16 1.16 2.14 2.14 122
89
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONCLUDED)
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 CAPITAL END OF
OF PERIOD INCOME (LOSS) AND UNREALIZED) INCOME GAINS PERIOD
=========== =============== ================= =============== ================== ===========
Investor A Class
10/01/03 through 3/31/04 /21/ $ 12.71 $ 0.09 $ 1.41 $ (0.10) $ - $ 14.11
9/30/03 11.10 0.27 1.62 (0.28) - 12.71
9/30/02 13.25 0.28 (2.10) (0.33) - 11.10
9/30/01 20.13 0.26 (4.03) (0.30) (2.81) 13.25
9/30/00 19.72 0.38 1.11 (0.38) (0.70) 20.13
9/30/99 18.33 0.41 2.18 (0.41) (0.79) 19.72
Investor B Class
10/01/03 through 3/31/04 /21/ $ 12.61 $ 0.05 $ 1.39 $ (0.06) $ - $ 13.99
9/30/03 11.01 0.18 1.62 (0.20) - 12.61
9/30/02 13.14 0.20 (2.10) (0.23) - 11.01
9/30/01 19.98 0.15 (4.00) (0.18) (2.81) 13.14
9/30/00 19.59 0.22 1.09 (0.22) (0.70) 19.98
9/30/99 18.22 0.24 2.18 (0.26) (0.79) 19.59
Investor C Class
10/01/03 through 3/31/04 /21/ $ 12.61 $ 0.05 $ 1.39 $ (0.06) $ - $ 13.99
9/30/03 11.01 0.18 1.62 (0.20) - 12.61
9/30/02 13.14 0.21 (2.11) (0.23) - 11.01
9/30/01 19.98 0.13 (3.98) (0.18) (2.81) 13.14
9/30/00 19.59 0.22 1.09 (0.22) (0.70) 19.98
9/30/99 18.22 0.23 2.19 (0.26) (0.79) 19.59
/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/ For a period 12/1/98 through 11/30/99.
/6/ For period 12/1/99 through 11/30/00.
/7/ For period 12/1/00 through 9/30/01.
/8/ For period 12/1/01 through 9/30/02.
/9/ For period 12/1/02 through 9/30/03.
/10/ For period 12/1/03 through 3/31/04.
/11/ Certain prior year amounts were reclassified to conform to current year
presentation.
/12/ Redemption fee of 2.00% is reflected in total return calculations.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
90
BLACKROCK FUNDS
RATIO OF RATIO OF RATIO OF NET
NET EXPENSES TOTAL INVESTMENT
NET TO AVERAGE EXPENSES RATIO OF NET INCOME
ASSETS RATIO OF NET ASSETS TO AVERAGE INVESTMENT TO AVERAGE
END OF NET EXPENSES (EXCLUDING NET ASSETS INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD TO AVERAGE INTEREST (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) NET ASSETS EXPENSE) WAIVERS) ASSETS WAIVERS) RATE
======================= =========== ============== ============== ============ ================ ============== ==========
11.86%/3,12/ $ 77,420 1.30%/2/ 1.30%/2/ 1.53%/2/ 1.36%/2/ 1.12%/2/ 70%
17.22/3/ 85,538 1.39 1.33 1.49 2.16 2.05 399
(14.01)/3/ 115,667 1.42 1.34 1.44 2.25 2.22 232
(21.26)/3/ 108,795 1.34 1.34 1.36 1.75 1.74 210
7.59/3/ 149,594 1.30 1.29 1.30 1.86 1.86 176
14.40/3/ 132,833 1.25 1.25 1.25 2.05 2.05 122
11.40%/4,12/ $ 43,538 2.04%/2/ 2.04%/2/ 2.18%/2/ 0.61%/2/ 0.47%/2/ 70%
16.42/4/ 40,432 2.13 2.08 2.23 1.40 1.29 399
(14.67)/4/ 40,717 2.16 2.08 2.19 1.48 1.45 232
(21.84)/4/ 67,732 2.08 2.09 2.10 1.01 1.00 210
6.72/4/ 102,530 2.07 2.07 2.07 1.09 1.09 176
13.46/4/ 96,253 2.07 2.07 2.07 1.23 1.23 122
11.40%/4,12/ $ 5,126 2.04%/2/ 2.04%/2/ 2.18%/2/ 0.61%/2/ 0.47%/2/ 70%
16.42/4/ 4,669 2.13 2.08 2.23 1.39 1.29 399
(14.67)/4/ 4,911 2.16 2.08 2.19 1.47 1.44 232
(21.84)/4/ 9,425 2.09 2.09 2.11 0.97 0.96 210
6.73/4/ 11,967 2.07 2.06 2.07 1.09 1.09 176
13.46/4/ 10,095 2.07 2.07 2.07 1.23 1.23 122
/13/ Redemption fee of 2.00% is reflected in total return calculations. The
impact to the return is 6 basis points.
/14/ Redemption fee of 2.00% is reflected in total return calculations. The
impact to the return is 7 basis points.
/15/ Redemption fee of 2.00% is reflected in total return calculations. The
impact to the return is 8 basis points.
/16/ Redemption fee of 2.00% is reflected in total return calculations. The
impact to the return is 9 basis points.
/17/ Redemption fee of 2.00% is reflected in total return calculations. The
impact to the return is 10 basis points.
/18/ Redemption fee of 2.00% is reflected in total return calculations. The
impact to the return is 14 basis points.
/19/ Redemption fee of 2.00% is reflected in total return calculations. The
impact to the return is 15 basis points.
/20/ Calculated using the average shares outstanding method.
/21/ Unaudited.
/22/ Refer to Section B of the Notes to Financial Statements.
++ Including expenses allocated from the U.S. Large Company Series of The
DFA Investment Trust Company of 0.06% for the six months ended 3/31/04
and for the years ended 9/30/99 through 9/30/03.
91
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS
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 44 registered portfolios, 16 of which are included in these
financial statements (the "Portfolios"). Each Portfolio is authorized to issue
an unlimited number of shares with a par value of $0.001. Each Portfolio of the
Fund may offer as many as seven classes of shares. Shares of all classes of a
Portfolio represent equal pro rata interests in such Portfolio, except that
each class bears different expenses, which reflect the difference in the range
of services provided to them. The following table provides a list of the
Portfolios included in this report along with a summary of their respective
class-specific fee arrangements as provided under the Fund's Amended and
Restated Distribution and Service Plan (the "Plan"). Fees are expressed as a
percentage of average daily net asset values of the respective classes.
Portfolio Share Classes
- ---------------------------- -------------------------------------------------
Institutional Service
----------------------- -----------------------
Contractual Actual Contractual Actual
Fees Fees (4) Fees (1) Fees (4)
----------- -------- ----------- --------
Large Cap Value Equity None None 0.30% 0.30%
Large Cap Growth Equity None None 0.30% 0.30%
Mid-Cap Value Equity None None 0.30% 0.30%
Mid-Cap Growth Equity None None 0.30% 0.30%
Small Cap Value Equity None None 0.30% 0.30%
Small Cap Core Equity None None 0.30% 0.30%
Small Cap Growth Equity None None 0.30% 0.30%
U.S. Opportunities None None 0.30% 0.30%
Global Science & Technology None None 0.30% 0.30%
Opportunities
European Equity None None 0.30% 0.30%
International Equity None None 0.30% 0.30%
International Opportunities None None 0.30% 0.30%
Asia Pacific Equity None None 0.30% 0.30%
Select Equity None None 0.30% 0.30%
Index Equity None None 0.30% 0.30%
Balanced None None 0.30% 0.30%
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)
----------- -------- ----------- -------- ----------- --------
Large Cap Value Equity 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Large Cap Growth Equity 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Mid-Cap Value Equity 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Mid-Cap Growth Equity 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Small Cap Value Equity 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Small Cap Core Equity 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Small Cap Growth Equity 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
U.S. Opportunities 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Global Science & Technology 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Opportunities
European Equity 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
International Equity 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
International Opportunities 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Asia Pacific Equity 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Select Equity 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Index Equity 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Balanced 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
(1) - the maximum annual contractual fees are comprised of a .15% service fee
and .15% shareholder processing fee.
(2) - the maximum annual contractual fees are comprised of a .10% distribution
fee, .25% service fee and .15% shareholder processing fee.
(3) - the maximum annual contractual fees are comprised of a .75% distribution
fee, .25% service fee and .15% shareholder processing fee.
(4) - the actual fees are as of March 31, 2004.
In addition, for the period 10/01/03 through 12/31/03, Institutional and
Service shares bore a Transfer Agent fee at an annual rate not to exceed .03%
and Investor A, Investor B and Investor C shares bore a Transfer Agent fee at
an annual rate not to exceed .10% of the average daily net assets of such
respective classes. Effective January 1, 2004, each of the Institutional,
Service, Investor A, Investor B and Investor C share classes bear a Transfer
Agent fee at an annual rate not to exceed .018% of the average daily net assets
of such respective classes.
The Index Equity Portfolio invests solely in The U.S. Large Company Series
(the "Series") of The DFA Investment Trust Company (the "DFA Trust"). 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 Index Equity Portfolio.
92
BLACKROCK FUNDS
(A) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with accounting principles generally
accepted in the United States of America requires the use of management
estimates. Actual results could differ from these estimates.
Security Valuation - Portfolio securities for which market quotations are
readily available are valued at market value, which is currently determined
using the last reported sales price, or the NASDAQ official closing price.
Portfolio securities that are primarily traded on foreign securities exchanges
are normally valued at the preceding closing values of such securities on their
respective exchanges. If no sales are reported, as in the case of some
securities traded over-the-counter, Portfolio securities are valued at the mean
between the last reported bid and asked prices, or on the basis of quotations
provided by a pricing service or dealer, which uses information with respect to
transactions on bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining value. Short-term obligations with maturities of 60 days or less
are valued at amortized cost, which approximates market value. 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). Securities for
which market quotations are not readily available are valued at fair value as
determined in accordance with procedures adopted by the Funds' Board of
Trustees. As of March 31, 2004, there was one security in the U.S.
Opportunities Portfolio with a total market value of $150 representing less
than .01% of the Portfolio's net assets, and three securities in the Small Cap
Growth Equity Portfolio with a total market value of $4,900,723 representing
1.03% of the Portfolio's net assets that were valued in accordance with such
procedures.
Valuation of other securities is as follows: fixed income securities are
valued by using market quotations, prices provided by market makers or
estimates of market values obtained from yield data relating to instruments or
securities with similar characteristics under the supervision of the Board of
Trustees; a portion of the fixed income securities are valued utilizing one or
more pricing services approved by the Board of Trustees; the amortized cost
method of valuation is used with respect to debt obligations with sixty days or
less remaining to maturity; and securities for which market quotations are not
readily available are valued at fair market value as determined in good faith
by or under the direction of the Fund's Board of Trustees. Any securities that
are denominated in a foreign currency are translated into U.S. dollars at the
prevailing foreign exchange rates.
The Index Equity Portfolio's investment reflects its proportionate
interest in the net assets of The U.S. Large Company Series of The DFA
Investment Trust Company.
Dividends to Shareholders - Dividends from net investment income, which
are recorded on the ex-dividend date, are declared and paid quarterly 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
93
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 2004, 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 SOLD AMOUNT 2004 LOSS
- ------------ ---------------- --------------------------------- ---------------- -------------- --------------
International Opportunities
04/15/04 2,500,000 Canadian Dollar ................. $ 1,866,898 $ 1,904,837 $ (37,939)
04/15/04 5,000,000 European Currency Unit .......... 6,090,300 6,148,749 (58,449)
04/15/04 350,000,000 Japanese Yen .................... 3,304,069 3,362,728 (58,659)
------------ ------------ ------------
$ 11,261,267 $ 11,416,314 $ (155,047)
============ ============= ============
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT BOUGHT AMOUNT 2004 GAIN/(LOSS)
-------- ----------- ---------------------------------- ------------ ------------- ------------
International Opportunities
04/15/04 11,500,000 Australian Dollar ............... $ 8,757,295 $ 8,760,483 $ 3,188
04/15/04 15,500,000 British Pound ................... 28,309,890 28,511,094 201,204
04/15/04 2,500,000 Canadian Dollar ................. 1,958,849 1,904,837 (54,012)
04/15/04 7,500,000 European Currency Unit .......... 9,190,770 9,223,122 32,352
04/15/04 350,000,000 Japanese Yen .................... 3,296,972 3,362,728 65,756
04/15/04 8,500,000 Swiss Franc ..................... 6,962,647 6,716,229 (246,418)
------------ ------------- ------------
$ 58,476,423 $ 58,478,493 $ 2,070
============ ============= ============
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 (i.e., 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 Statement of Operations. Net payments of interest are recorded as
interest income. Entering into these agreements involves, to varying degrees,
elements of credit and market risk in excess of the amounts recognized on the
Statement 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, 2004, the Balanced Portfolio had the following swap
agreements outstanding:
Unrealized
Interest Interest Notional Amount Appreciation
Portfolio Counter-party Termination Date Receivable Rate Payable Rate (U.S. Dollars) (Depreciation)
--------- ------------- ---------------- --------------- ------------ --------------- --------------
Balanced Deutsche Bank 08/14/06 1.12%/1/ 5.23% $ 1,550,000 $ (58,947)
Union Bank of Switzerland 08/14/06 2.64 1.12/1/ 1,500,000 19,238
Deutsche Bank 03/11/07 2.33 1.11/1/ 1,275,000 (2,055)
/1/ Rate shown is based on the 3 month LIBOR as of the most recent payment date.
Security 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
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
94
BLACKROCK FUNDS
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 Fund's
custodian or an authorized securities depository.
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 Fund's Board of Trustees. 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 Statement 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 fair
value caused by changes in prevailing market interest rates. The Portfolios
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. 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 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.
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 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 value of the
swaption. Changes in the value of the swaption are reported as unrealized gains
or
95
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
losses in the Statement of Assets and Liabilities or Statement of Net Assets.
Gain or loss is recognized when the swap-tion 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 in excess of the amounts
reported in the Statement of Assets and Liabilities, 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 approved by the Board of
Trustees. 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, 2004, are summarized as follows:
GLOBAL SCIENCE &
TECHNOLOGY
OPPORTUNITIES PORTFOLIO BALANCED PORTFOLIO
------------------------ -------------------------
NUMBER OF NUMBER OF
CONTRACTS PREMIUM CONTRACTS PREMIUM
----------- ------------ ----------- -------------
Balance at 09/30/03 ................ - $ - 17 $ 23,032
Written ............................ 532 27,724 842 159,533
Expired ............................ (400) (18,200) (7) (8,482)
Closed ............................. - - (102) (54,637)
Exercised .......................... - - - -
---- --------- ------ ---------
Balance at 03/31/04 ................ 132 $ 9,524 750 $ 119,446
==== ========= ====== =========
TBA Purchase Commitments - The Portfolios may enter into "TBA" (to be
announced) purchase commitments to purchase securities for a fixed price at a
future date. TBA purchase commitments are considered securities in them-selves,
and involve a risk of loss if the value of the security to be purchased
declines prior to settlement date, which risk is in addition to the risk of
decline in the value of the Portfolio's other assets. Unsettled TBA purchase
commitments are valued at the current market value of the underlying
securities, according to the procedures described under "Security Valuation"
above.
Mortgage Dollar Rolls - The Balanced Portfolio may enter into mortgage
dollar rolls (principally using TBA's) in which the Portfolio sells mortgage
securities for delivery in the current month and simultaneously contract 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 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 financial
transactions consisting of the 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, 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.
Securities Lending - Through the agreement with PFPC Trust Co., 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
at least equal to 102% of the market value of the securities on loan. Loans of
foreign securities are collateralized by collateral at least equal to 105% of
the market value
96
BLACKROCK FUNDS
on 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 securities lending is invested in short-term investments by the lending
agent. These may include the Institutional Money Market Trust (the "Trust"), a
portfolio of money market securities advised by BlackRock Capital Management,
Inc., or high-quality, short-term instruments with a maturity date not to
exceed 397 days. At March 31, 2004, 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
--------------- ----------------------- --------------------
Large Cap Value Equity Portfolio .............. $ 13,973,150 $ 3,271,952 $ 14,331,832
Large Cap Growth Equity Portfolio ............. 10,532,485 3,760,810 10,871,877
Mid-Cap Value Equity Portfolio ................ 4,531,238 1,897,897 4,684,310
Mid-Cap Growth Equity Portfolio ............... 30,155,035 13,835,750 31,075,994
Small Cap Value Equity Portfolio .............. 19,088,899 13,964,173 19,708,402
Small Cap Growth Equity Portfolio ............. 61,790,533 29,777,689 65,354,694
International Equity Portfolio ................ 968,173 994,500 994,500
International Opportunities Portfolio ......... 2,679,176 645,600 2,913,600
Select Equity Portfolio ....................... 8,234,632 3,282,756 8,501,106
Balanced Portfolio ............................ 5,647,517 2,515,983 5,788,948
BlackRock Capital Management, Inc., a wholly-owned subsidiary of
BlackRock, Inc., serves as investment adviser to the Trust, but receives no
fees for these services. Administrative and accounting services are provided by
PFPC Inc., 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.
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.
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 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.
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
Fund.
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, 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 DFA U.S. Large Company
Series Fund are allocated pro rata at the time of such determination.
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, such
as 12b-1 service fees, are borne by that class. 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. For the six
months ended March 31, 2004, the following shows the various types of
class-specific expenses borne directly by each class of each fund and any
associated waivers of those expenses.
97
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SHARE CLASSES
ADMINISTRATION FEES -------------------------------------------------------------------------
INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
--------------- ----------- ------------ ------------ -----------
Large Cap Value Equity .............. $ 106,140 $ 43,866 $ 48,838 $ 13,987 $ 4,311
Large Cap Growth Equity ............. 26,613 29,725 20,211 10,959 2,016
Mid-Cap Value Equity ................ 16,612 3,640 3,072 5,617 1,691
Mid-Cap Growth Equity ............... 35,229 10,535 20,790 26,744 9,595
Small Cap Value Equity .............. 53,003 3,052 29,926 12,267 4,847
Small Cap Core Equity ............... 1,117 - 656 188 185
Small Cap Growth Equity ............. 151,493 22,165 89,808 20,739 10,349
U.S. Opportunities .................. 5,329 430 23,814 33,062 16,392
Global Science & Technology
Opportunities ...................... 2,068 80 9,442 12,384 3,158
European Equity ..................... 1,921 - 384 867 228
International Equity ................ 42,034 9,408 9,502 1,974 841
International Opportunities ......... 54,646 3,562 40,207 28,928 28,020
Asia Pacific Equity ................. 1,662 - 117 268 66
Select Equity ....................... 45,262 1,429 14,660 16,399 1,435
Index Equity ........................ 475,517 60,268 231,643 149,624 233,317
Balanced ............................ 8,855 1,668 61,818 30,895 3,698
SHARE CLASSES
ADMINISTRATION FEES WAIVED ----------------------------------------------
INSTITUTIONAL SERVICE
--------------- -------------
Large Cap Value Equity .............. $ (1) $ (6)
Large Cap Growth Equity ............. - (2)
Mid-Cap Value Equity ................ - (1)
Mid-Cap Growth Equity ............... (2,215) (368)
Small Cap Value Equity .............. (1) -
Small Cap Core Equity ............... (52) -
Small Cap Growth Equity ............. - (1)
U.S. Opportunities .................. - -
Global Science & Technology
Opportunities ...................... - -
European Equity ..................... - -
International Equity ................ (1) (6)
International Opportunities ......... - -
Asia Pacific Equity ................. - -
Select Equity ....................... - -
Index Equity ........................ (455,130) (1,786)
Balanced ............................ - -
SHARE CLASSES
TRANSFER AGENT FEES -----------------------------------------------------------------------
INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
--------------- --------- ------------ ------------ -----------
Large Cap Value Equity .......... $ 17,725 $ 7,325 $ 19,886 $ 5,571 $ 1,692
Large Cap Growth Equity ......... 4,414 4,990 8,476 4,425 813
Mid-Cap Value Equity ............ 2,801 611 1,221 2,242 672
Mid-Cap Growth Equity ........... 5,816 1,752 8,258 10,689 3,866
Small Cap Value Equity .......... 8,773 510 12,186 4,868 1,915
Small Cap Core Equity ........... 180 - 155 41 35
Small Cap Growth Equity ......... 24,410 3,579 35,487 8,138 3,987
U.S. Opportunities .............. 884 67 9,417 13,212 6,571
Global Science & Technology
Opportunities .................. 345 13 3,750 5,016 1,272
98
BLACKROCK FUNDS
SHARE CLASSES
TRANSFER AGENT FEES -----------------------------------------------------------------------
INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
--------------- --------- ------------ ------------ -----------
European Equity ..................... $ 322 - $ 151 $ 348 $ 94
International Equity ................ 7,731 1,784 3,803 769 314
International Opportunities ......... 8,744 519 14,196 11,046 10,097
Asia Pacific Equity ................. 272 - 43 109 20
Select Equity ....................... 7,506 240 5,973 6,598 585
Index Equity ........................ 79,409 9,786 91,098 59,966 93,275
Balanced ............................ 1,469 276 25,638 12,441 1,488
SHARE CLASSES
SHAREHOLDER SERVICE FEES -----------------------------------------------------------------------
SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- ------------ ------------ -----------
Large Cap Value Equity .............. $ 45,379 $ 84,203 $ 24,116 $ 7,433
Large Cap Growth Equity ............. 30,750 34,845 18,895 3,478
Mid-Cap Value Equity ................ 3,765 5,297 9,685 2,915
Mid-Cap Growth Equity ............... 10,899 35,845 46,111 16,542
Small Cap Value Equity .............. 3,157 51,597 21,150 8,358
Small Cap Core Equity ............... - 1,132 325 319
Small Cap Growth Equity ............. 22,929 154,841 35,756 17,844
U.S. Opportunities .................. 445 41,059 57,004 28,262
Global Science & Technology
Opportunities ...................... 83 16,278 21,351 5,444
European Equity ..................... - 662 1,495 393
International Equity ................ 9,733 16,382 3,403 1,450
International Opportunities ......... 3,685 69,322 49,876 48,310
Asia Pacific Equity ................. - 201 461 113
Select Equity ....................... 1,478 25,276 28,275 2,474
Index Equity ........................ 62,347 399,384 257,971 402,272
Balanced ............................ 1,725 106,582 53,267 6,376
SHARE CLASSES
SHAREHOLDER PROCESSING FEES -----------------------------------------------------------------------
SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- ------------ ------------ -----------
Large Cap Value Equity .............. $ 45,379 $ 50,522 $ 14,469 $ 4,460
Large Cap Growth Equity ............. 30,750 20,908 11,337 2,086
Mid-Cap Value Equity ................ 3,765 3,179 5,811 1,749
Mid-Cap Growth Equity ............... 10,899 21,508 27,666 9,925
Small Cap Value Equity .............. 3,157 30,958 12,690 5,015
Small Cap Core Equity ............... - 679 195 192
Small Cap Growth Equity ............. 22,929 92,905 21,454 10,706
U.S. Opportunities .................. 445 24,636 34,202 16,957
Global Science & Technology
Opportunities ...................... 83 9,767 12,810 3,267
European Equity ..................... - 397 897 236
International Equity ................ 9,733 9,829 2,042 870
International Opportunities ......... 3,685 41,593 29,925 28,986
Asia Pacific Equity ................. - 121 277 67
Select Equity ....................... 1,478 15,166 16,965 1,484
Index Equity ........................ 62,347 239,630 154,783 241,363
Balanced ............................ 1,725 63,949 31,960 3,826
99
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SHARE CLASSES
DISTRIBUTION FEES -------------------------------------------------------
INVESTOR A INVESTOR B INVESTOR C
------------ ------------ ------------
Large Cap Value Equity .............. $ 33,682 $ 72,347 $ 22,299
Large Cap Growth Equity ............. 13,940 56,684 10,427
Mid-Cap Value Equity ................ 2,118 29,056 8,745
Mid-Cap Growth Equity ............... 14,339 138,332 49,627
Small Cap Value Equity .............. 20,639 63,450 25,073
Small Cap Core Equity ............... 453 973 959
Small Cap Growth Equity ............. 61,937 107,269 53,531
U.S. Opportunities .................. 16,424 171,012 84,785
Global Science & Technology
Opportunities ...................... 6,511 64,053 16,334
European Equity ..................... 265 4,484 1,181
International Equity ................ 6,553 10,209 4,352
International Opportunities ......... 27,729 149,627 144,931
Asia Pacific Equity ................. 81 1,383 339
Select Equity ....................... 10,166 84,824 7,424
Index Equity ........................ 150,392 773,914 1,206,815
Balanced ............................ 42,633 159,800 19,126
SHARE CLASSES
DISTRIBUTION FEES WAIVED -------------------------------
INVESTOR A
--------------
Large Cap Value Equity .............. $ (32,923)
Large Cap Growth Equity ............. (13,611)
Mid-Cap Value Equity ................ (2,073)
Mid-Cap Growth Equity ............... (14,026)
Small Cap Value Equity .............. (20,174)
Small Cap Core Equity ............... (449)
Small Cap Growth Equity ............. (60,601)
U.S. Opportunities .................. (16,069)
Global Science & Technology
Opportunities ...................... (6,370)
European Equity ..................... (259)
International Equity ................ (6,409)
International Opportunities ......... (27,224)
Asia Pacific Equity ................. (79)
Select Equity ....................... (9,938)
Index Equity ........................ (146,948)
Balanced ............................ (41,647)
(B) Transactions with Affiliates and Related Parties
Pursuant to an Investment Advisory Agreement, BlackRock Advisors, Inc.
("BlackRock"), a wholly-owned subsidiary of BlackRock, Inc., serves as
investment adviser for each of the Fund's Equity Portfolios, except for Index
Equity, European Equity and Asia Pacific Equity Portfolios. BlackRock Financial
Management, Inc. ("BFM"), a wholly-owned subsidiary of BlackRock, serves as the
sub-adviser for the Balanced Portfolio. BlackRock International, Ltd. ("BIL"),
an indirect wholly-owned subsidiary of BlackRock, serves as the investment
advisor for the European Equity and Asia Pacific Equity Portfolios and serves
as the sub-adviser for the International Equity and International Opportunities
Portfolios. BlackRock, Inc. is an indirect majority-owned subsidiary of The PNC
Financial Services Group, Inc.
For their advisory services, BlackRock and BIL (with respect to the
European Equity and Asia Pacific Equity Portfolios) are entitled to receive
fees at the following annual rates, computed daily and payable monthly, based
on each Portfolio's average daily net assets:
100
BLACKROCK FUNDS
Large Cap Value Equity, Large Cap Growth Equity, Small Cap Value Equity,
Small Cap Growth Equity, Select Equity, and Balanced Portfolios - .55% of the
first $1 billion, .50% of the next $1 billion, .475% of the next $1 billion and
..45% of net assets in excess of $3 billion.
Mid-Cap Value Equity and Mid-Cap Growth Equity - .80% of the first $1
billion, .70% of the next $1 billion, .675% of the next $1 billion and .625% of
net assets in excess of $3 billion.
U.S Opportunities Portfolio - 1.10% of the first $1 billion, 1.05% of the
next $1 billion, 1.025% of the next $1 billion and 1.00% of the net assets in
excess of $3 billion.
Global Science & Technology Opportunities, European Equity and Asia
Pacific Equity Portfolios - .90% of the first $1 billion, .85% of the next $1
billion, .80% of the next $1 billion and .75% of net assets in excess of $3
billion.
International Equity Portfolio - .75% of the first $1 billion, .70% of the
next $1 billion, .675% of the next $1 billion and .65% of net assets in excess
of $3 billion.
International Opportunities - 1.00% of the first $1 billion, .95% of the
next $1 billion, .90% of the next $1 billion and .85% of net assets in excess
of $3 billion.
Small Cap Core Equity - 1.00% of net assets.
For the six months ended March 31, 2004, advisory fees and waivers for
each portfolio were as follows:
GROSS NET
ADVISORY ADVISORY
FEE WAIVER FEE
------------ ------------ ------------
Large Cap Value Equity Portfolio ......................... $ 823,458 $ 183,210 $ 640,248
Large Cap Growth Equity Portfolio ........................ 339,490 99,563 239,927
Mid-Cap Value Equity Portfolio ........................... 168,986 7,234 161,752
Mid-Cap Growth Equity Portfolio .......................... 567,716 2,040 565,676
Small Cap Value Equity Portfolio ......................... 390,996 - 390,996
Small Cap Core Equity Portfolio .......................... 14,806 14,771 35
Small Cap Growth Equity Portfolio ........................ 1,119,941 - 1,119,941
U.S. Opportunities Portfolio ............................. 599,538 2,588 596,950
Global Science & Technology Opportunities Portfolio ...... 168,396 27,325 141,071
European Equity Portfolio ................................ 21,100 18,801 2,299
International Equity Portfolio ........................... 328,200 59,980 268,220
International Opportunities Portfolio .................... 1,072,446 17,854 1,054,592
Asia Pacific Equity Portfolio ............................ 13,112 11,978 1,134
Select Equity Portfolio .................................. 300,320 99,882 200,438
Balanced Portfolio ....................................... 405,613 103,579 302,034
In the interest of limiting the expenses of the Portfolios, BlackRock and
the Fund have entered into a series of annual expense limitation agreements
beginning February 1, 1999. BIL and the Fund have entered into a series of
annual expense limitation agreements beginning June 6, 2000, with respect to
the European Equity and Asia Pacific Portfolios. The agreements set a limit on
certain of the operating expenses of each Portfolio for the next year and
require BlackRock or BIL to waive or reimburse fees or expenses if these
operating expenses exceed that limit. Effective February 1, 2004, these expense
limits apply to the aggregate expenses incurred on a Share Class (excluding:
interest, taxes, brokerage commissions and other expenditures which are
capitalized in accordance with generally accepted accounting principles). Prior
to february 1, 2004, the expense limits applied to expenses charged on
Portfolio assets as a whole, but not expenses separately charged to the
different share classes of a portfolio.
If in the following two years the operating expenses of a Portfolio that
previously received a waiver or reimbursement from BlackRock or BIL are less
than the expense limit for that Portfolio, the Portfolio is required to repay
BlackRock or BIL 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 or BIL continues to be the Portfolio's investment adviser and (3) the
Board of Trustees of the Fund has approved the payments to BlackRock or BIL on
a quarterly basis.
101
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At March 31, 2004, the amounts subject to possible future reimbursement
under the expense limitation agreement are as follows:
TOTAL WAIVERS
EXPIRING EXPIRING EXPIRING SUBJECT TO
JANUARY 31, 2005 JANUARY 31, 2006 JANUARY 31, 2007 REIMBURSEMENT
------------------ ------------------ ------------------ ---------------
Large Cap Value Equity Portfolio ..... $ 610,816 $ 357,981 $ 64,297 $ 1,033,094
Large Cap Growth Equity Portfolio..... 274,930 154,813 40,181 469,924
Mid-Cap Value Equity Portfolio ....... 23,503 - 7,234 30,737
Mid-Cap Growth Equity Portfolio ...... 30,063 5,005 4,623 39,691
Small Cap Value Equity Portfolio ..... 86,157 - - 86,157
Small Cap Core Equity Portfolio ...... 13,541 12,634 14,446 40,621
Small Cap Growth Equity Portfolio..... 227,030 - 1 227,031
U.S. Opportunities Portfolio ......... 107,597 - 2,588 110,185
Global Science & Technology
Opportunities Portfolio ............. 101,278 23,534 22,990 147,802
European Equity Portfolio ............ 72,944 83,813 11,902 168,659
International Equity Portfolio ....... 113,051 114,674 37,087 264,812
International Opportunities
Portfolio ........................... 178,760 41,722 17,853 238,335
Asia Pacific Equity Portfolio ........ 73,882 57,210 10,537 141,629
Select Equity Portfolio .............. 310,818 169,360 38,258 518,436
Index Equity Portfolio ............... - - 237,809 237,809
Balanced Portfolio ................... 146,109 156,776 38,568 341,453
BlackRock pays BIL and BFM fees for their sub-advisory services.
PFPC Inc. ("PFPC"), an indirect subsidiary of The PNC Financial Services
Group, Inc., and BlackRock act as co-administrators for the Fund. For these
services, the co-administrators receive a combined administration fee computed
daily and payable monthly, based on a percentage of the average daily net
assets of each Portfolio, at the following annual rates: .085% of the first
$500 million, .075% of the next $500 million and .065% of assets in excess of
$1 billion. In addition, each of the classes is charged an administration fee
based on the following percentage of average daily net assets of each
respective class: .145% of the first $500 million, .135% of the next $500
million, and .125% of assets in excess of $1 billion. In addition, PFPC and
BlackRock may have, at their discretion, voluntarily waived all or any portion
of their administration fees for any Portfolio.
For the six months ended March 31, 2004, administration fees and waivers
for each Portfolio were as follows:
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
---------------- ---------- ---------------
Large Cap Value Equity Portfolio ........................ $ 344,404 $ 7 $ 344,397
Large Cap Growth Equity Portfolio ....................... 141,991 2 141,989
Mid-Cap Value Equity Portfolio .......................... 48,587 1 48,586
Mid-Cap Growth Equity Portfolio ......................... 163,213 2,583 160,630
Small Cap Value Equity Portfolio ........................ 163,522 1 163,521
Small Cap Core Equity Portfolio ......................... 3,405 396 3,009
Small Cap Growth Equity Portfolio ....................... 467,636 1 467,635
U.S. Opportunities Portfolio ............................ 125,355 - 125,355
Global Science & Technology Opportunities Portfolio ..... 43,036 - 43,036
European Equity Portfolio ............................... 5,393 5,393 -
International Equity Portfolio .......................... 100,955 7 100,948
International Opportunities Portfolio ................... 246,521 - 246,521
Asia Pacific Equity Portfolio ........................... 3,351 3,351 -
Select Equity Portfolio ................................. 125,598 - 125,598
Index Equity Portfolio .................................. 1,744,586 676,175 1,068,411
Balanced Portfolio ...................................... 169,620 - 169,620
102
BLACKROCK FUNDS
Prior to February 1, 1999, BlackRock may have, at its discretion, waived
all or any portion of its advisory fees for any Portfolio.
PFPC Trust Co., 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.
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 Advisers, Inc. ("BlackRock") or any other affiliate of PNC
Bank 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 BlackRock or
any other affiliate of PNC Bank fees for the provision of personal services to
shareholders and the processing and administration of shareholder accounts.
BlackRock, in turn, determines the amount of the service fee and shareholder
processing fee to be paid to brokers, dealers, financial institutions and
industry professionals (including PNC Bank and its affiliates) that provide
services to their customers who own shares of the Fund. BlackRock may retain a
significant portion of the share-holder processing fees and may retain some of
the service fees paid by the Fund. Currently, only Investor A Shares, Investor
B Shares, Investor C Shares and Service Shares bear the expense of service fees
and shareholder processing fees under the Plan. Refer to the fee table in the
"Notes to Financial Statements" for fee information.
As of the period ended March 31, 2004, affiliated payables were as
follows:
PNC BANK
PFPC(1) BLACKROCK(2) AFFILIATES(3)
----------- -------------- --------------
Large Cap Value Equity Portfolio ........................ $ 33,604 $ 137,692 $ 62,875
Large Cap Growth Equity Portfolio ....................... 20,257 43,564 35,086
Mid-Cap Value Equity Portfolio .......................... 5,824 26,058 13,113
Mid-Cap Growth Equity Portfolio ......................... 32,532 113,025 64,290
Small Cap Value Equity Portfolio ........................ 19,833 86,012 39,683
Small Cap Growth Equity Portfolio ....................... 61,794 282,175 97,595
Small Cap Core Equity Portfolio ......................... 1,973 - 1,680
U.S. Opportunities Portfolio ............................ 27,609 116,249 80,275
Global Science and Technology Opportunities Portfolio ... 17,087 12,237 25,662
European Equity Portfolio ............................... 10,651 - 1,636
International Equity Portfolio .......................... 27,611 13,098 13,109
International Opportunities Equity Portfolio ............ 68,552 247,264 120,122
Asia Pacific Equity Portfolio ........................... 8,864 - 582
Select Equity Portfolio ................................. 25,771 42,282 32,150
Index Equity Portfolio .................................. 133,895 95,671 657,868
Balanced Portfolio ...................................... 30,983 63,237 75,659
(1) - payables to PFPC are for Accounting, Administration, Custody and Transfer
Agent services provided as of March 31, 2004.
(2) - payables to BlackRock are for Advisory and Administration services
provided as of March 31, 2004.
(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, 2004, was $3,201,515, a porton of which is paid to
service organizations, including other PNC Bank affiliates.
BlackRock made a payment to the International Equity Portfolio of
$2,418,220 on February 27, 2004 representing the loss to the Portfolio
associated with certain frequent broker related transaction activity largely
occurring in the twelve-month period ended December 31, 2000. The payment
represented 0.2% of the Portfolio's average net assets in calendar year 2000
and 5.08% of the Portfolio's net assets on February 27, 2004 and had an impact
on the Portfolio of $0.47 per share.
103
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) Purchases and Sales of Securities
For the six months ended March 31, 2004, purchases and sales of
securities, other than short-term investments, dollar rolls and U.S. government
securities, were as follows:
PURCHASES SALES
---------------- ----------------
Large Cap Value Equity Portfolio ............................ $ 112,707,244 $ 177,422,446
Large Cap Growth Equity Portfolio ........................... 43,149,032 70,128,091
Mid-Cap Value Equity Portfolio .............................. 55,071,716 68,517,275
Mid-Cap Growth Equity Portfolio ............................. 19,965,774 37,233,037
Small Cap Value Equity Portfolio ............................ 110,033,923 126,099,253
Small Cap Core Equity Portfolio ............................. 3,472,677 885,342
Small Cap Growth Equity Portfolio ........................... 221,765,900 176,368,087
U.S. Opportunities Portfolio ................................ 65,105,552 74,584,920
Global Science & Technology Opportunities Portfolio ......... 20,643,479 23,677,509
European Equity Portfolio ................................... 1,502,194 3,437,594
International Equity Portfolio .............................. 63,600,880 142,284,726
International Opportunities Portfolio ....................... 214,529,932 140,913,968
Asia Pacific Equity Portfolio ............................... 1,457,598 1,301,372
Select Equity Portfolio ..................................... 43,930,136 59,848,682
Balanced Portfolio .......................................... 69,421,762 80,413,842
For the six months ended March 31, 2004, purchases and sales of U.S.
government securities were as follows:
PURCHASES SALES
--------------- --------------
Small Cap Growth Equity Portfolio ............. $ 24,993,463 $ 3,698,810
International Equity Portfolio ................ 16,994,978 9,497,251
International Opportunities Portfolio ......... 16,995,433 -
Balanced Portfolio ............................ 37,775,415 28,763,750
104
BLACKROCK FUNDS
(D) Capital Shares
Transactions in capital shares for each period were as follows:
LARGE CAP VALUE EQUITY PORTFOLIO
-----------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------------ --------------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ ---------------- -------------------
Shares sold:
Institutional Class ...................... 136,126 $ 1,646,265 3,240,434 $ 32,600,164
Service Class ............................ 234,010 2,770,384 2,412,581 23,128,752
Investor A Class ......................... 311,408 3,758,446 15,720,338 153,834,517
Investor B Class ......................... 102,266 1,201,890 150,055 1,488,845
Investor C Class ......................... 92,135 1,081,348 341,106 3,289,890
Shares issued in reinvestment of dividends:
Institutional Class ...................... 18,525 224,640 68,375 692,743
Service Class ............................ 28,933 350,913 81,996 837,562
Investor A Class ......................... 26,011 315,593 60,511 618,470
Investor B Class ......................... 2,444 29,082 2,443 25,868
Investor C Class ......................... 331 3,951 325 3,449
Shares redeemed:
Institutional Class ...................... (3,395,753) (40,401,163) (31,146,651) (309,049,186)
Service Class ............................ (1,700,447) (20,387,372) (11,902,499) (117,928,399)
Investor A Class ......................... (1,029,455) (12,582,001) (18,483,067) (181,349,877)
Investor B Class ......................... (157,864) (1,858,392) (484,506) (4,659,827)
Investor C Class ......................... (70,676) (842,052) (532,942) (5,087,994)
---------- -------------- ----------- ---------------
Net decrease .............................. (5,402,006) $ (64,688,468) (40,471,501) $ (401,555,023)
========== ============== =========== ===============
LARGE CAP GROWTH EQUITY PORTFOLIO
--------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
---------------------------------- ------------------------------------
SHARES VALUE SHARES VALUE
------------- -------------- -------------- ---------------
Shares sold:
Institutional Class ...................... 287,000 $ 2,610,560 1,197,575 $ 8,930,536
Service Class ............................ 573,796 4,968,350 2,826,351 20,523,510
Investor A Class ......................... 222,777 1,927,008 3,759,123 27,625,991
Investor B Class ......................... 94,550 763,676 188,606 1,308,926
Investor C Class ......................... 43,528 347,692 149,153 1,030,367
Shares redeemed:
Institutional Class ...................... (932,364) (8,325,971) (11,694,044) (87,824,058)
Service Class ............................ (2,166,322) (18,957,965) (17,217,920) (124,274,818)
Investor A Class ......................... (1,048,940) (9,273,665) (5,543,015) (40,528,446)
Investor B Class ......................... (232,187) (1,864,744) (583,492) (3,938,732)
Investor C Class ......................... (60,271) (484,646) (195,489) (1,300,821)
------------- -------------- -------------- ---------------
Net decrease .............................. (3,218,433) $ (28,289,705) (27,113,152) $ (198,447,545)
============= ============== ============== ===============
105
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MID-CAP VALUE EQUITY PORTFOLIO
---------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------------ ------------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ --------------- ------------------
Shares sold:
Institutional Class ...................... 22,839 $ 287,636 407,956 $ 4,171,195
Service Class ............................ 37,874 479,236 354,341 3,503,382
Investor A Class ......................... 32,367 409,782 352,927 3,631,868
Investor B Class ......................... 41,778 508,809 128,878 1,292,549
Investor C Class ......................... 28,265 344,160 61,335 593,036
Shares issued in reinvestment of dividends:
Institutional Class ...................... 4,167 52,509 285,972 2,828,265
Service Class ............................ 1,136 14,277 87,588 862,745
Investor A Class ......................... 1,115 13,943 31,320 307,563
Investor B Class ......................... - - 38,331 365,677
Investor C Class ......................... - - 7,099 67,723
Shares redeemed:
Institutional Class ...................... (780,146) (9,929,140) (4,070,716) (41,114,441)
Service Class ............................ (197,740) (2,520,093) (1,294,414) (13,141,520)
Investor A Class ......................... (44,272) (554,146) (535,756) (5,449,310)
Investor B Class ......................... (81,071) (994,715) (249,737) (2,438,054)
Investor C Class ......................... (28,646) (351,066) (101,121) (978,978)
-------- -------------- ---------- --------------
Net decrease .............................. (962,334) $ (12,238,808) (4,495,997) $ (45,498,300)
======== ============== ========== ==============
MID-CAP GROWTH EQUITY PORTFOLIO
------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
---------------------------------- ----------------------------------
SHARES VALUE SHARES VALUE
------------- -------------- ------------- --------------
Shares sold:
Institutional Class ...................... 720,539 $ 6,360,727 11,990,415 $ 76,914,117
Service Class ............................ 201,699 1,631,381 1,099,693 7,259,681
Investor A Class ......................... 372,179 3,031,955 14,096,827 85,022,085
Investor B Class ......................... 232,160 1,749,012 716,542 4,466,221
Investor C Class ......................... 86,052 631,408 364,293 2,166,396
Shares redeemed:
Institutional Class ...................... (1,616,723) (13,769,516) (18,600,646) (119,752,716)
Service Class ............................ (634,189) (5,297,797) (3,261,434) (20,780,159)
Investor A Class ......................... (474,987) (3,829,425) (15,022,266) (90,612,224)
Investor B Class ......................... (619,410) (4,674,146) (1,874,359) (11,125,906)
Investor C Class ......................... (269,228) (2,040,427) (769,364) (4,489,876)
------------- -------------- ------------- --------------
Net decrease .............................. (2,001,908) $ (16,206,828) (11,260,299) $ (70,932,381)
============= ============== ============= ==============
106
BLACKROCK FUNDS
SMALL CAP VALUE EQUITY PORTFOLIO
------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
---------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
--------------- ---------------- --------------- -----------------
Shares sold:
Institutional Class ...................... 230,242 $ 3,422,274 3,944,811 $ 46,350,668
Service Class ............................ 42,387 630,124 577,917 7,424,957
Investor A Class ......................... 260,693 3,900,395 8,259,359 100,775,276
Investor B Class ......................... 145,450 1,986,848 316,893 3,634,187
Investor C Class ......................... 96,747 1,323,679 180,810 2,008,295
Shares issued in reinvestment of dividends:
Institutional Class ...................... 478,137 6,837,365 1,133,758 12,709,428
Service Class ............................ 33,952 482,112 93,937 1,049,275
Investor A Class ......................... 309,674 4,375,692 525,274 5,856,804
Investor B Class ......................... 103,157 1,346,196 133,767 1,400,541
Investor C Class ......................... 29,702 387,903 37,741 395,145
Shares redeemed:
Institutional Class ...................... (1,002,986) (15,237,418) (9,747,842) (114,700,710)
Service Class ............................ (123,074) (1,840,842) (944,977) (10,853,006)
Investor A Class ......................... (583,751) (8,722,074) (9,513,889) (113,871,126)
Investor B Class ......................... (129,726) (1,802,778) (493,538) (5,622,067)
Investor C Class ......................... (73,460) (1,023,730) (277,861) (3,122,537)
---------- ------------- ---------- --------------
Net decrease .............................. (182,856) $ (3,934,254) (5,773,840) $ (66,564,870)
========== ============= ========== ==============
SMALL CAP CORE EQUITY PORTFOLIO
------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
----------------------------- ----------------------
SHARES VALUE SHARES VALUE
------------ -------------- -------- -----------
Shares sold:
Institutional Class ...................... 16,978 $ 242,309 3,226 $ 40,000
Service Class ............................ - - - -
Investor A Class ......................... 135,691 1,910,275 569 7,000
Investor B Class ......................... 37,028 519,344 - -
Investor C Class ......................... 42,545 605,793 - -
Shares issued in reinvestment of dividends:
Institutional Class ...................... 103 1,401 - -
Service Class ............................ - 1 - -
Investor A Class ......................... 649 8,857 - -
Investor B Class ......................... 188 2,550 - -
Investor C Class ......................... 82 1,114 - -
Shares redeemed:
Institutional Class ...................... (3,204) (47,576) - -
Service Class ............................ - - - -
Investor A Class ......................... (30,079) (437,928) - -
Investor B Class ......................... (1,059) (14,994) - -
Investor C Class ......................... - - - -
------- ---------- ----- --------
Net increase ........................... 198,922 $2,791,146 3,795 $ 47,000
======= ========== ===== ========
107
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SMALL CAP GROWTH EQUITY PORTFOLIO
------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------- ------------------------------------
SHARES VALUE SHARES VALUE
-------------- -------------- ---------------- -----------------
Shares sold:
Institutional Class ............ 4,964,518 $ 76,733,659 15,119,579 $ 146,717,197
Service Class .................. 651,148 9,360,659 822,670 8,273,163
Investor A Class ............... 1,719,955 23,533,863 30,151,339 272,707,262
Investor B Class ............... 207,382 2,722,271 339,176 3,070,849
Investor C Class ............... 257,112 3,321,235 212,894 2,033,597
Shares redeemed:
Institutional Class ............ (1,967,742) (28,923,270) (21,336,459) (204,727,307)
Service Class .................. (406,935) (5,862,180) (2,178,713) (20,447,745)
Investor A Class ............... (1,957,275) (27,275,130) (32,508,994) (293,644,669)
Investor B Class ............... (316,421) (4,103,956) (850,772) (7,314,402)
Investor C Class ............... (142,051) (1,810,630) (366,285) (3,156,322)
---------- ------------- ----------- --------------
Net increase (decrease) ......... 3,009,691 $ 47,696,521 (10,595,565) $ (96,488,377)
========== ============= =========== ==============
U.S. OPPORTUNITIES PORTFOLIO
------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------- ----------------------------------
SHARES VALUE SHARES VALUE
------------ ------------- ------------- --------------
Shares sold:
Institutional Class ............ 73,664 $ 1,413,040 1,322,689 $ 19,070,228
Service Class .................. 77,613 1,510,018 61,397 786,516
Investor A Class ............... 140,773 2,661,587 3,998,697 57,999,840
Investor B Class ............... 54,330 970,167 53,915 740,982
Investor C Class ............... 63,198 1,142,288 231,728 2,987,138
Shares redeemed:
Institutional Class ............ (195,859) (3,736,160) (1,717,933) (24,642,834)
Service Class .................. (4,800) (90,517) (72,961) (930,897)
Investor A Class ............... (236,663) (4,417,805) (4,432,489) (64,426,558)
Investor B Class ............... (279,639) (5,020,205) (936,669) (12,265,692)
Investor C Class ............... (199,175) (3,535,745) (671,356) (8,746,675)
--------- ------------- ---------- --------------
Net decrease .................... (506,558) $ (9,103,332) (2,162,982) $ (29,427,952)
========= ============= ========== ==============
108
BLACKROCK FUNDS
GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO
-----------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
--------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
------------- ----------------- --------------- -----------------
Shares sold:
Institutional Class ...................... 60,115 $ 355,796 144,352 $ 710,403
Service Class ............................ 4,537 29,200 12,501 69,100
Investor A Class ......................... 277,652 1,651,797 790,622 3,418,280
Investor B Class ......................... 129,679 784,795 291,119 1,349,139
Investor C Class ......................... 70,853 417,911 116,929 566,443
Shares redeemed:
Institutional Class ...................... (154,964) (916,218) (291,516) (1,200,643)
Service Class ............................ (5,443) (31,877) (1,008) (5,045)
Investor A Class ......................... (320,589) (1,926,065) (1,230,586) (5,222,922)
Investor B Class ......................... (549,470) (3,175,488) (822,694) (3,297,441)
Investor C Class ......................... (152,207) (887,772) (211,051) (838,708)
-------- ------------- ---------- -------------
Net decrease .............................. (639,837) $ (3,697,921) (1,201,332) $ (4,451,394)
======== ============= ========== =============
EUROPEAN EQUITY PORTFOLIO
----------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------ ----------------------------------
SHARES VALUE SHARES VALUE
----------- ------------- ------------- ---------------
Shares sold:
Institutional Class ...................... 12,584 $ 94,123 2,525 $ 14,550
Service Class ............................ - - - -
Investor A Class ......................... 14,017 103,510 14,275 80,237
Investor B Class ......................... 10,150 69,520 18,215 108,264
Investor C Class ......................... - - 1,899,236 10,684,170
Shares issued in reinvestment of dividends:
Institutional Class ...................... 177 1,222 1,215 7,121
Service Class ............................ - 1 - -
Investor A Class ......................... 790 5,452 - -
Investor B Class ......................... (62) (514) - -
Investor C Class ......................... (1,627) (11,491) - -
Shares redeemed:
Institutional Class ...................... (252,496) (1,625,681) (365,070) (2,126,465)
Service Class ............................ - - - -
Investor A Class ......................... (22,781) (157,116) (32,310) (187,030)
Investor B Class ......................... (30,113) (205,430) (91,303) (522,971)
Investor C Class ......................... (22,581) (159,415) (1,951,228) (11,153,989)
-------- ------------- ---------- -------------
Net decrease .............................. (291,942) $ (1,885,819) (504,445) $ (3,096,113)
======== ============= ========== =============
109
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INTERNATIONAL EQUITY PORTFOLIO
-----------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------------ --------------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ ---------------- -------------------
Shares sold:
Institutional Class ...................... 782,840 $ 8,230,057 9,618,776 $ 68,184,428
Service Class ............................ 234,311 2,215,756 2,596,540 18,212,051
Investor A Class ......................... 124,284 1,752,997 1,568,305 10,940,045
Investor B Class ......................... 25,424 376,798 44,012 294,243
Investor C Class ......................... 38,746 406,682 10,749,308 71,289,597
Shares issued in reinvestment of dividends:
Institutional Class ...................... 5,928 51,456 - -
Service Class ............................ 3,888 33,245 - -
Investor A Class ......................... 10,124 85,350 - -
Investor B Class ......................... 246 1,986 - -
Investor C Class ......................... - - - -
Shares redeemed:
Institutional Class ...................... (9,382,960) (85,168,900) (31,464,512) (222,969,612)
Service Class ............................ (2,511,730) (21,593,188) (8,792,033) (62,289,223)
Investor A Class ......................... (325,121) (2,840,449) (2,330,682) (16,331,169)
Investor B Class ......................... (49,475) (425,067) (127,942) (853,642)
Investor C Class ......................... (7,816) (63,331) (10,826,274) (72,344,017)
---------- -------------- ----------- ---------------
Net decrease .............................. (11,051,311) $ (96,936,608) (28,964,502) $ (205,867,299)
=========== ============== =========== ===============
INTERNATIONAL OPPORTUNITIES PORTFOLIO
--------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
---------------------------------- ------------------------------------
SHARES VALUE SHARES VALUE
------------- -------------- -------------- ---------------
Shares sold:
Institutional Class ...................... 1,127,851 $ 26,515,124 764,579 $ 12,682,119
Service Class ............................ 445,116 10,346,226 74,911 1,266,507
Investor A Class ......................... 1,694,828 39,016,769 1,612,494 26,197,040
Investor B Class ......................... 456,237 9,818,274 400,375 6,502,997
Investor C Class ......................... 980,084 21,451,171 2,438,484 38,405,785
Shares issued in reinvestment of dividends:
Institutional Class ...................... 1,323 29,679 - -
Service Class ............................ 114 2,497 - -
Investor A Class ......................... 1,347 29,462 - -
Investor B Class ......................... 975 20,582 - -
Investor C Class ......................... 737 15,558 - -
Shares redeemed:
Institutional Class ...................... (268,689) (6,141,360) (1,419,637) (22,932,388)
Service Class ............................ (56,283) (1,278,331) (39,316) (695,180)
Investor A Class ......................... (311,574) (7,038,711) (1,405,223) (22,938,271)
Investor B Class ......................... (169,921) (3,744,605) (512,651) (8,009,654)
Investor C Class ......................... (197,452) (4,316,454) (2,288,952) (36,140,913)
---------- -------------- ----------- ---------------
Net increase (decrease) ................... 3,704,693 $ 84,725,881 (374,936) $ (5,661,958)
========== ============== =========== ===============
110
BLACKROCK FUNDS
ASIA PACIFIC EQUITY PORTFOLIO
-----------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------------ --------------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ ---------------- -------------------
Shares sold:
Institutional Class ...................... 8,559 $ 63,505 80,101 $ 458,592
Service Class ............................ - - - -
Investor A Class ......................... 17,637 138,199 12,666 84,885
Investor B Class ......................... 4,953 37,268 50,792 321,254
Investor C Class ......................... 23,868 181,278 346,974 1,944,242
Shares issued in reinvestment of dividends:
Institutional Class ...................... 3 21 - -
Service Class ............................ - 1 - -
Investor A Class ......................... 67 474 - -
Investor B Class ......................... 65 457 - -
Investor C Class ......................... 13 89 - -
Shares redeemed:
Institutional Class ...................... (7,379) (54,755) (79,295) (461,138)
Service Class ............................ - - - -
Investor A Class ......................... (49) (378) (7,211) (41,243)
Investor B Class ......................... (12,500) (94,250) (1,211) (6,981)
Investor C Class ......................... (1,303) (9,894) (345,676) (1,937,162)
------- -------------- -------- ---------------
Net increase .............................. 33,934 $ 262,015 57,140 $ 362,449
======= ============== ======== ===============
SELECT EQUITY PORTFOLIO
--------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
---------------------------------- ------------------------------------
SHARES VALUE SHARES VALUE
------------- -------------- -------------- ---------------
Shares sold:
Institutional Class ...................... 163,242 $ 1,826,641 521,531 $ 4,865,325
Service Class ............................ 6,208 69,536 21,077 195,032
Investor A Class ......................... 82,304 937,628 1,459,269 13,743,445
Investor B Class ......................... 60,799 655,096 106,032 970,101
Investor C Class ......................... 25,166 266,323 389,772 3,398,309
Shares issued in reinvestment of dividends:
Institutional Class ...................... 13,607 152,539 24,966 230,189
Service Class ............................ 1,287 14,481 - -
Investor A Class ......................... 11,066 122,834 21,270 194,195
Investor B Class ......................... 2,456 26,280 - -
Investor C Class ......................... 18 197 - -
Shares redeemed:
Institutional Class ...................... (1,060,854) (12,129,012) (10,509,640) (98,572,330)
Service Class ............................ (48,313) (552,515) (278,591) (2,569,175)
Investor A Class ......................... (316,382) (3,575,360) (2,526,610) (23,804,985)
Investor B Class ......................... (217,666) (2,353,099) (684,156) (6,003,582)
Investor C Class ......................... (40,832) (447,724) (441,304) (3,897,656)
----------- -------------- ------------ ---------------
Net decrease .............................. (1,317,894) $ (14,986,155) (11,896,384) $ (111,251,132)
=========== ============== ============ ===============
111
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INDEX EQUITY PORTFOLIO
----------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
----------------------------------- --------------------------------------
SHARES VALUE SHARES VALUE
--------------- ----------------- ---------------- -------------------
Shares sold:
Institutional Class ...................... 2,074,265 $ 43,738,265 10,753,266 $ 188,083,555
Service Class ............................ 804,722 16,934,297 1,589,476 27,936,332
Investor A Class ......................... 6,320,176 132,690,758 14,775,471 260,644,245
Investor B Class ......................... 354,437 7,281,908 1,331,953 23,222,797
Investor C Class ......................... 1,055,586 21,644,526 2,586,777 44,810,145
Shares issued in reinvestment of dividends:
Institutional Class ...................... 112,790 2,397,289 296,627 5,262,591
Service Class ............................ 23,215 489,744 43,558 778,813
Investor A Class ......................... 77,443 1,633,087 155,655 2,770,630
Investor B Class ......................... 8,958 183,865 22,140 381,689
Investor C Class ......................... 9,078 186,334 22,224 382,928
Shares redeemed:
Institutional Class ...................... (4,231,152) (90,272,045) (26,070,177) (447,897,902)
Service Class ............................ (509,808) (10,729,432) (1,894,676) (33,113,285)
Investor A Class ......................... (5,843,413) (122,950,561) (14,435,136) (254,284,050)
Investor B Class ......................... (1,051,259) (21,726,225) (2,483,973) (42,178,613)
Investor C Class ......................... (1,827,604) (37,825,753) (4,370,115) (74,523,526)
---------- -------------- ----------- ---------------
Net decrease .............................. (2,622,566) $ (56,323,943) (17,676,930) $ (297,723,651)
========== ============== =========== ===============
BALANCED PORTFOLIO
-------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
-------------------------------- -----------------------------------------
SHARES VALUE SHARES VALUE
------------- -------------- -------------- --------------------
Shares sold:
Institutional Class ...................... 14,625 $ 204,356 105,145 $ 1,219,336
Service Class ............................ 1,785 24,346 24,229 288,213
Investor A Class ......................... 277,717 3,797,523 5,084,653 60,535,218
Investor B Class ......................... 214,978 2,908,742 449,738 5,428,904
Investor C Class ......................... 80,711 1,090,295 71,963 873,214
Shares issued in reinvestment of dividends:
Institutional Class ...................... 3,836 52,813 13,243 159,993
Service Class ............................ 1,223 16,800 4,839 58,244
Investor A Class ......................... 41,651 571,235 163,387 1,969,272
Investor B Class ......................... 10,037 136,462 42,794 510,817
Investor C Class ......................... 614 8,349 2,117 25,342
Shares redeemed:
Institutional Class ...................... (139,603) (1,903,807) (1,318,912) (15,829,300)
Service Class ............................ (14,720) (202,679) (159,926) (1,919,782)
Investor A Class ......................... (1,559,944) (21,569,842) (8,939,008) (106,005,605)
Investor B Class ......................... (319,206) (4,313,683) (982,764) (11,586,934)
Investor C Class ......................... (85,109) (1,159,093) (149,707) (1,768,077)
----------- -------------- ------------ ---------------
Net decrease .............................. (1,471,405) $ (20,338,183) (5,588,209) $ (66,041,145)
=========== ============== ============ ===============
112
BLACKROCK FUNDS
There is a 2% redemption fee on shares redeemed which have been held 90
days or less on the BlackRock Mid Cap Value Equity, Mid Cap Growth Equity,
Small Cap Value Equity, Small Cap Core Equity, Small Cap Growth Equity,
European Equity, International Equity, International Opportunities and Asia
Pacific Equity Portfolios. 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, 2004, two shareholders held approximately 50% of the
outstanding shares of the Large Cap Value Equity Portfolio, one shareholder
held approximately 46% of Large Cap Growth Equity Portfolio, one shareholder
held approximately 47% of the Mid-Cap Value Equity Portfolio, one shareholder
held approximately 26% of the Mid-Cap Growth Equity Portfolio, two shareholders
held approximately 54% of the Small Cap Value Equity Portfolio, one shareholder
held 33% of the Small Cap Core Equity Portfolio, three shareholders held
approximately 46% of the Small Cap Growth Equity Portfolio, two shareholders
held approximately 60% of the European Equity Portfolio, three shareholders
held approximately 45% of the International Equity Portfolio, one shareholders
held approximately 12% of the International Opportunities Portfolio, one
shareholder held approximately 75% of the Asia Pacific Equity Portfolio, one
shareholder held approximately 44% of the Select Equity Portfolio, two
shareholders held approximately 44% of the Index Equity Portfolio and one
shareholder held approximately 18% of the Balanced Portfolio. Some of the
shareholders are comprised of omnibus accounts, which are held on behalf of
several individual shareholders.
(E) At March 31, 2004, net assets consisted of:
LARGE CAP LARGE CAP MID-CAP MID-CAP
VALUE EQUITY GROWTH EQUITY VALUE EQUITY GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- --------------- ---------------- ------------------
Capital paid in .............................................. $ 291,603,191 $ 484,065,746 $ 29,490,069 $ 514,982,272
End of period undistributed net investment income
(distributions in excess of net investment income or
accumulated net investment loss) ............................ 2,693 (121,685) (50,250) (956,483)
Accumulated net realized gain (loss) on investment
transactions and futures contracts .......................... (80,548,453) (406,844,079) 4,843,807 (414,545,572)
Net unrealized appreciation on investment transactions
and futures contracts ....................................... 71,519,247 34,470,361 4,193,972 43,052,246
------------- ------------- --------------- --------------
$ 282,576,678 $ 111,570,343 $ 38,477,598 $ 142,532,463
============= ============= =============== ==============
SMALL CAP SMALL CAP SMALL CAP U.S.
VALUE EQUITY CORE EQUITY GROWTH EQUITY OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------------- --------------
Capital paid in .............................................. $ 100,769,095 $ 3,831,659 $ 1,074,020,312 $ 214,426,439
End of period accumulated net investment loss ................ (281,676) (17,844) (2,101,281) (1,025,995)
Accumulated net realized gain (loss) on investment
transactions ................................................ 16,700,168 96,024 (700,615,695) (122,029,689)
Net unrealized appreciation on investment transactions ....... 26,183,783 740,827 102,559,280 19,656,382
-------------- -------------- ------------------- --------------
$ 143,371,370 $ 4,650,666 $ 473,862,616 $ 111,027,137
============== ============== =================== ==============
113
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
GLOBAL SCIENCE
& TECHNOLOGY EUROPEAN INTERNATIONAL INTERNATIONAL
OPPORTUNITIES EQUITY EQUITY OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------------- ------------------- ----------------
Capital paid in ......................................... $ 110,847,602 $ 8,416,987 $ 265,081,133 $ 276,538,573
End of period undistributed net investment income
(distributions in excess of net investment income or
accumulated net investment loss) ....................... (384,575) (13,567) (76,081) (1,421,709)
Accumulated net realized loss on investment transactions,
futures and options contracts and foreign currency
related transactions ................................... (79,234,517) (4,974,442) (230,686,423) (29,207,502)
Net unrealized appreciation on investment transactions,
futures and options contracts and foreign currency
related transactions ................................... 4,894,855 894,700 10,606,649 37,063,470
------------- ------------- --------------- -------------
$ 36,123,365 $ 4,323,678 $ 44,925,278 $ 282,972,832
============= ============= =============== =============
ASIA PACIFIC SELECT INDEX
EQUITY EQUITY EQUITY BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------- --------------- -------------
Capital paid in ......................................... $ 3,877,473 $ 175,944,877 $ 1,535,753,579 $ 160,712,909
End of period undistributed net investment income
(distributions in excess of net investment income or
accumulated net investment loss) ....................... (11,822) 265,197 641,996 (3,465)
Accumulated net realized loss on investment transactions,
futures, options, swap contracts and foreign currency
related transactions ................................... (1,138,962) (99,698,312) (301,520,895) (47,885,415)
Net unrealized appreciation on investment transactions,
futures, options, swap contracts and foreign currency
related transactions ................................... 808,851 29,563,175 362,958,349 27,436,298
------------- ------------- --------------- -------------
$ 3,535,540 $ 106,074,937 $ 1,597,833,029 $ 140,260,327
============= ============= =============== =============
(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. 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 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 September 30, 2003, attributable to
realized foreign currency gains/(losses), foreign futures realized
gains/(losses), paydown adjustments and certain net operating losses which for
tax purposes, are not available to offset future income, were reclassified to
the following accounts:
114
BLACKROCK FUNDS
INCREASE INCREASE
(DECREASE) (DECREASE)
ACCUMULATED UNDISTRIBUTED
DECREASE NET REALIZED NET INVESTMENT
PAID IN-CAPITAL GAIN (LOSS) INCOME
----------------- -------------- ---------------
Large Cap Value Equity Portfolio ............................ $ - $ (28,367) $ 28,367
Large Cap Growth Equity Portfolio ........................... (211,419) - 211,419
Mid-Cap Value Equity Portfolio .............................. - 474 (474)
Mid-Cap Growth Equity Portfolio ............................. (1,436,712) - 1,436,712
Small Cap Value Equity Portfolio ............................ - (292,599) 292,599
Small Cap Core Equity Portfolio ............................. (6,028) - 6,028
Small Cap Growth Equity Portfolio ........................... (3,154,899) - 3,154,899
U.S. Opportunities Portfolio ................................ (1,725,661) - 1,725,661
Global Science & Technology Opportunities Portfolio ......... (566,163) 12,982 553,181
European Equity Portfolio ................................... - (13,687) 13,687
International Equity Portfolio .............................. - (136,777) 136,777
International Opportunities Portfolio ....................... (168,464) 151,146 17,318
Asia Pacific Equity Portfolio ............................... - 10,128 (10,128)
Balanced Portfolio .......................................... - (96,979) 96,979
These reclassifications had no effect on net assets or net asset value per
share.
The tax character of distributions paid during the last two fiscal years
were as follows:
TAX RETURN
ORDINARY LONG-TERM OF TOTAL
INCOME CAPITAL GAIN CAPITAL DISTRIBUTIONS
-------------- -------------- ----------- --------------
Large Cap Value Equity Portfolio
9/30/03 ....................... $ 4,685,910 $ - $ - $ 4,685,910
9/30/02 ....................... 7,518,336 47,792,224 - 55,310,560
Mid-Cap Value Equity Portfolio
9/30/03 ....................... - 5,447,281 - 5,447,281
9/30/02 ....................... 236,522 59,779 - 296,301
Small Cap Value Equity Portfolio
9/30/03 ....................... - 27,872,360 - 27,872,360
9/30/02 ....................... 10,468,011 50,390,006 - 60,858,017
U.S. Opportunities Portfolio
9/30/02 ....................... 2,470,070 - - 2,470,070
European Equity Portfolio
9/30/03 ....................... 29,362 - - 29,362
9/30/02 ....................... 184,997 - - 184,997
International Equity Portfolio
9/30/02 ....................... - 2,568,868 172,575 2,741,443
Asia Pacific Equity Portfolio
9/30/03 ....................... 1,649 - - 1,649
9/30/02 ....................... 18,649 - - 18,649
Select Equity Portfolio
9/30/03 ....................... 1,460,159 - - 1,460,159
Index Equity Portfolio*
11/30/02 ...................... 12,850,989 - - 12,850,989
11/30/01 ...................... 7,272,710 - - 7,272,710
Balanced Portfolio
9/30/03 ....................... 3,516,108 - - 3,516,108
9/30/02 ....................... 7,482,580 - - 7,482,580
* BlackRock Index Equity Portfolio has a tax year end of 11/30. Therefore,
these amounts are reflective of the 11/30/02 and 11/30/01 tax year.
115
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
As of September 30, 2003, the components of distributable
earnings/(accumulated losses) were as follows:
UNDISTRIBUTED UNDISTRIBUTED CAPITAL POST-
ORDINARY LONG-TERM LOSS OCTOBER
INCOME CAPITAL GAIN CARRYFORWARDS LOSSES
-------------- --------------- ------------------ ------------------
Large Cap Value Equity Portfolio ......................... $ 47,248 $ - $ (63,024,284) $ (41,008,514)
Large Cap Growth Equity Portfolio ........................ - - (423,479,166) -
Mid-Cap Value Equity Portfolio ........................... 194,298 - (2,154,621) -
Mid-Cap Growth Equity Portfolio .......................... - - (418,325,449) (307,651)
Small Cap Value Equity Portfolio ......................... 2,396,658 9,144,071 - -
Small Cap Core Equity Portfolio .......................... - 5,116 - -
Small Cap Growth Equity Portfolio ........................ - - (748,305,417) -
U.S. Opportunities Portfolio ............................. - - (137,278,144) (728,245)
Global Science & Technology Opportunities Portfolio ...... - - (83,420,777) (951,757)/1/
European Equity Portfolio ................................ 50,696 - (3,472,593) (1,605,130)
International Equity Portfolio ........................... 1,023,501 - (211,884,825) (39,129,459)
International Opportunities Portfolio .................... - - (58,833,771) -
Asia Pacific Equity Portfolio ............................ 9,650 - (1,244,716) (118,671)/1/
Select Equity Portfolio .................................. 893,414 - (109,558,912) -
Index Equity Portfolio/2/................................. 3,489,352 - (89,236,149) (30,374,449)
Balanced Portfolio ....................................... 109,751 - (56,883,635) -
/1/ Includes Post-October currency losses of $10,570 for BlackRock Global
Science and Technology Opportunities Portfolio and $9,245 for BlackRock
Asia Pacific Equity Portfolio.
/2/ BlackRock Index Equity Portfolio has a tax year end of 11/30. Therefore,
these amounts are reflective of the 11/30/02 tax year.
Post-October losses represent losses realized on investment transactions
from November 1, 2002 through September 30, 2003 that, in accordance with
Federal income tax regulations, the Portfolios defer and treat as having arisen
in the following fiscal year. For Federal income tax purposes, capital loss
carryforwards may be carried forward and applied against future capital gains.
At September 30, 2003, 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 TOTAL
------------ ------------- --------------- --------------- ---------------
Large Cap Value Equity Portfolio ..... $ - $ - $ 17,617,370 $ 45,406,914 $ 63,024,284
Large Cap Growth Equity Portfolio..... - 11,079,766 406,759,816 5,639,584 423,479,166
Mid-Cap Value Equity Portfolio ....... - - - 2,154,621 2,154,621
Mid-Cap Growth Equity Portfolio ...... - 21,893,482 364,728,815 31,703,152 418,325,449
Small Cap Growth Equity Portfolio..... - - 643,318,325 104,987,092 748,305,417
U.S. Opportunities Portfolio ......... - - 120,764,633 16,513,511 137,278,144
Global Science & Technology
Opportunities Portfolio ............. 4,217,622 7,130,245 72,072,910 - 83,420,777
European Equity Portfolio ............ - 106,346 1,890,590 1,475,657 3,472,593
International Equity Portfolio ....... - - 155,266,135 56,618,690 211,884,825
International Opportunities
Portfolio ........................... - 30,120,919 28,712,852 - 58,833,771
Asia Pacific Equity Portfolio ........ - - 858,503 386,213 1,244,716
Select Equity Portfolio .............. - 13,330,826 80,294,645 15,933,441 109,558,912
Balanced Portfolio ................... - 6,410,154 25,643,538 24,829,943 56,883,635
EXPIRING NOVEMBER 30
----------------------------------------------------------
2008 2009 2010 TOTAL
----------- ------------ ------------- ------------
Index Equity Portfolio ............... $1,523,612 $ 8,460,342 $ 79,252,195 $ 89,236,149
(G) Contingencies
In the normal course of business, the Fund enters into contracts that
provide general indemnifications. The Funds' maximum exposure under these
arrangements is dependent on future claims that may be made against the Funds
and, therefore, cannot be estimated; however, based on experience, the risk of
loss from such claims is considered remote.
116
BLACKROCK FUNDS
ADDITIONAL INFORMATION
(A) PricewaterhouseCoopers LLP ("PwC"), the Fund's former independent auditor,
has been hired as an internal audit supporting service provider by The PNC
Financial Services Group, Inc. ("PNC"), the parent company of the Fund's
investment adviser and certain other service providers. In order to provide
certain services to PNC and its affiliates which would have caused PwC to
no longer be independent with respect to the Fund, PwC declined to stand
for re-election as independent auditor of the Fund after the completion of
the fiscal 2003 audit.
The Fund's Audit Committee approved engaging Deloitte & Touche LLP as the
independent auditor to audit the Fund's financial statements for fiscal
year 2004. 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 2004 audit on
November 21, 2003, 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.
(B) 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.
(C) On May 12, 2004, the Board of Trustees of the Fund voted to close the
Investor B and Investor C share classes of the Index Equity Portfolio to
all new purchases and exchanges effective May 31, 2004. In addition, the
Board of Trustees voted to close the European Equity and Asia Pacific
Equity Portfolios to new purchases and exchanges effective May 31, 2004 and
to terminate and wind up the affairs of the Portfolios on or about June 30,
2004.
117
[THIS PAGE INTENTIONALLY LEFT BLANK.]
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
Page
Unaudited Schedule of Investments as of March 31, 2004........... 121
Unaudited Statement of Assets & Liabilities as of March 31, 2004. 126
Audited Financial Statements as of and for the year ended
November 30, 2003:
Schedule of Investments.......................................... 127
Statement of Assets and Liabilities.............................. 132
Statement of Operations.......................................... 133
Statements of Changes in Net Assets.............................. 134
Financial Highlights............................................. 135
Notes to Financial Statements.................................... 136
Report of Independent Registered Certified Public Accounting Firm 139
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.
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series
March 31, 2004
-----------------------
(Unaudited)
Shares Value+
------- ---------------
COMMON STOCKS -- (90.7%)
3M Co..................................... 244,400 $ 20,009,028
Abbott Laboratories....................... 487,700 20,044,470
Ace, Ltd.................................. 87,100 3,715,686
ADC Telecommunications, Inc............... 251,500 729,350*#
Adobe Systems, Inc........................ 74,400 2,933,592#
Advanced Micro Devices, Inc............... 108,700 1,764,201*
AES Corp.................................. 194,200 1,656,526*
Aetna, Inc................................ 47,800 4,288,616
AFLAC, Inc................................ 159,900 6,418,386
Agilent Technologies, Inc................. 148,300 4,690,729*
Air Products & Chemicals, Inc............. 70,900 3,553,508
Alberto-Culver Co. Class B................ 28,300 1,241,521
Albertson's, Inc.......................... 114,400 2,533,960#
Alcoa, Inc................................ 271,400 9,414,866
Allegheny Energy, Inc..................... 39,600 542,916*#
Allegheny Technologies, Inc............... 25,200 304,920
Allergan, Inc............................. 40,900 3,442,144#
Allied Waste Industries, Inc.............. 99,900 1,329,669*
Allstate Corp............................. 219,400 9,973,924
Alltel Corp............................... 97,400 4,859,286
Altera Corp............................... 118,100 2,415,145*
Altria Group, Inc......................... 638,400 34,760,880#
Ambac Financial Group, Inc................ 33,300 2,456,874
Amerada Hess Corp......................... 28,000 1,827,840
Ameren Corp............................... 56,700 2,613,303#
American Electric Power Co., Inc.......... 123,200 4,055,744
American Express Co....................... 401,200 20,802,220
American Greetings Corp. Class A.......... 20,900 475,893*#
American International Group, Inc......... 813,800 58,064,630
American Power Conversion Corp............ 61,900 1,424,319
American Standard Companies, Inc.......... 22,500 2,559,375*
AmerisourceBergen Corp.................... 35,000 1,913,800
Amgen, Inc................................ 402,400 23,407,608*
AmSouth Bancorporation.................... 109,500 2,574,345#
Anadarko Petroleum Corp................... 78,500 4,071,010
Analog Devices, Inc....................... 116,600 5,597,966
Andrew Corp............................... 49,600 868,000*#
Anheuser-Busch Companies, Inc............. 254,100 12,959,100
Anthem, Inc............................... 43,100 3,906,584*
AON Corp.................................. 97,900 2,732,389
Apache Corp............................... 101,100 4,364,487
Apartment Investment & Management Co.
Class A.................................. 29,200 907,828
Apollo Group, Inc. (Class A).............. 54,900 4,727,439*#
Apple Computer, Inc....................... 115,300 3,118,865*#
Applera Corporation -- Applied Biosystems
Group.................................... 64,300 1,271,854#
Applied Materials, Inc.................... 524,500 11,213,810*
Applied Micro Circuits Corp............... 96,900 557,175*#
Archer-Daniels Midland Co................. 202,100 3,409,427
Ashland, Inc.............................. 21,700 1,008,833
AT&T Corp................................. 247,500 4,843,575#
AT&T Wireless Services, Inc............... 849,800 11,565,778*
Autodesk, Inc............................. 35,200 1,113,024
Automatic Data Processing, Inc............ 183,900 7,723,800
AutoNation, Inc........................... 85,800 1,462,890*
Autozone, Inc............................. 27,200 2,338,384*#
Avaya, Inc................................ 132,500 2,104,100*
Avery Dennison Corp....................... 34,500 2,146,245
Avon Products, Inc........................ 73,500 5,576,445#
B B & T Corp.............................. 170,500 6,018,650
Baker Hughes, Inc......................... 104,400 3,808,512
March 31, 2004
-------------------------
(Unaudited)
Shares Value+
--------- ---------------
Ball Corp............................... 17,500 $ 1,186,150
Bank of America Corp.................... 451,700 36,578,666
Bank of New York Co., Inc............... 241,300 7,600,950
Bank One Corp........................... 349,200 19,038,384
Bard (C.R.), Inc........................ 16,200 1,581,768
Bausch & Lomb, Inc...................... 16,400 983,508
Baxter International, Inc............... 190,300 5,878,367#
Bear Stearns Companies, Inc............. 32,400 2,840,832
Becton Dickinson & Co................... 78,800 3,820,224
Bed, Bath and Beyond, Inc............... 93,100 3,887,856*
Bellsouth Corp.......................... 571,100 15,813,759
Bemis Co., Inc.......................... 33,500 871,000
Best Buy Co., Inc....................... 101,300 5,239,236
Big Lots, Inc........................... 36,400 527,800*
Biogen Idec, Inc........................ 102,200 5,682,320*
Biomet, Inc............................. 79,800 3,061,128*#
BJ Services, Co......................... 49,700 2,150,519*
Black & Decker Corp..................... 24,500 1,395,030
Block (H.&R.), Inc...................... 55,600 2,837,268
BMC Software, Inc....................... 70,200 1,372,410*
Boeing Co............................... 262,800 10,793,196
Boise Cascade Corp...................... 27,200 942,480
Boston Scientific Corp.................. 255,400 10,823,852*
Bristol Myers Squibb Co................. 605,400 14,668,842
Broadcom Corp........................... 94,400 3,697,648*#
Brown-Forman Corp. Class B.............. 37,800 1,801,548#
Brunswick Corp.......................... 29,200 1,192,236
Burlington Northern Santa Fe Corp....... 116,100 3,657,150
Burlington Resources, Inc............... 61,700 3,925,971
Calpine Corp............................ 128,900 601,963*#
Campbell Soup Co........................ 128,200 3,496,014
Capital One Financial Corp.............. 72,000 5,430,960
Cardinal Health, Inc.................... 135,700 9,349,730#
Caremark Rx, Inc........................ 140,300 4,664,975*
Carnival Corp........................... 196,500 8,824,815
Caterpillar, Inc........................ 108,300 8,563,281#
Cendant Corp............................ 314,300 7,665,777
CenterPoint Energy, Inc................. 95,500 1,091,565#
Centex Corp............................. 39,000 2,108,340
CenturyTel, Inc......................... 45,000 1,237,050
Charter One Financial, Inc.............. 69,400 2,453,984
ChevronTexaco Corp...................... 333,600 29,283,408
Chiron Corp............................. 58,500 2,574,585*
Chubb Corp.............................. 58,600 4,075,044
CIENA Corp.............................. 148,100 736,057*
CIGNA Corp.............................. 44,000 2,596,880#
Cincinnati Financial Corp............... 50,100 2,176,845
Cinergy Corp............................ 55,500 2,269,395
Cintas Corp............................. 53,400 2,322,366
Circuit City Stores, Inc................ 65,600 741,280
Cisco Sytems, Inc....................... 2,143,400 50,412,768*
Citigroup, Inc.......................... 1,606,500 83,056,050
Citizens Communications Co.............. 88,700 1,147,778*
Citrix Systems, Inc..................... 51,200 1,106,944*
Clear Channel Communications, Inc....... 192,000 8,131,200
Clorox Co............................... 65,500 3,203,605
CMS Energy Corp......................... 50,200 449,290*#
Coca-Cola Co............................ 762,600 38,358,780
Coca-Cola Enterprises, Inc.............. 143,100 3,458,727
Colgate-Palmolive Co.................... 166,100 9,152,110
Comcast Corp. Class A................... 702,100 20,178,354*
Comerica, Inc........................... 54,700 2,971,304
Computer Associates International, Inc.. 181,500 4,875,090
See accompanying notes to financial statements.
121
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Continued)
March 31, 2004
-------------------------
(Unaudited)
Shares Value+
--------- ---------------
Computer Sciences Corp................ 58,500 $ 2,359,305*
Compuware Corp........................ 119,900 893,255*
Comverse Technology, Inc.............. 60,100 1,090,214*
Conagra, Inc.......................... 167,500 4,512,450
ConocoPhilips......................... 213,500 14,904,435
Consolidated Edison, Inc.............. 70,500 3,109,050
Constellation Energy Group............ 52,200 2,085,390
Convergys Corp........................ 44,700 679,440*
Cooper Industries, Ltd................ 28,700 1,641,066
Cooper Tire & Rubber Co............... 23,000 463,450#
Coors (Adolph) Co. Class B............ 11,400 791,730#
Corning, Inc.......................... 420,500 4,701,190*
Costco Wholesale Corp................. 142,900 5,367,324*
Countrywide Financial Corp............ 57,400 5,504,660
Crane Co.............................. 18,500 610,500#
CSX Corp.............................. 66,700 2,020,343
Cummins, Inc.......................... 13,300 777,385#
CVS Corp.............................. 123,600 4,363,080
Dana Corp............................. 46,400 921,504
Danaher Corp.......................... 48,000 4,481,760#
Darden Restaurants, Inc............... 51,400 1,274,206#
Deere & Co............................ 75,900 5,260,629
Dell, Inc............................. 798,600 26,848,932*#
Delphi Automotive Systems Corp........ 174,700 1,740,012
Delta Air Lines, Inc.................. 38,500 304,920* #
Deluxe Corp........................... 15,800 633,580
Devon Energy Corp..................... 72,600 4,221,690
Dillards, Inc. Class A................ 26,000 498,160
Disney (Walt) Co...................... 638,600 15,958,614
Dollar General Corp................... 105,100 2,017,920
Dominion Resources, Inc............... 101,200 6,507,160
Donnelley (R.R.) & Sons Co............ 68,200 2,063,050
Dover Corp............................ 63,400 2,458,018
Dow Chemical Co....................... 290,700 11,709,396
Dow Jones & Co., Inc.................. 25,500 1,221,705#
DTE Energy Co......................... 52,700 2,168,605
Duke Energy Corp...................... 283,100 6,398,060
DuPont (E.I.) de Nemours & Co., Inc... 311,200 13,138,864
Dynegy, Inc........................... 117,500 465,300*#
Eastman Chemical Co................... 24,100 1,028,588
Eastman Kodak Co...................... 89,400 2,339,598
Eaton Corp............................ 47,900 2,691,501
eBay, Inc............................. 201,500 13,969,995*#
Ecolab, Inc........................... 80,200 2,288,106
Edison International.................. 101,600 2,467,864#
El Paso Corp.......................... 200,100 1,422,711#
Electronic Arts, Inc.................. 93,300 5,034,468*#
Electronic Data Systems Corp.......... 149,900 2,900,565#
EMC Corp.............................. 754,400 10,267,384*
Emerson Electric Co................... 131,500 7,879,480
Engelhard Corp........................ 39,100 1,168,699
Entergy Corp.......................... 71,400 4,248,300
EOG Resources, Inc.................... 35,800 1,642,862
Equifax, Inc.......................... 43,400 1,120,588
Equity Office Properties Trust........ 124,700 3,602,583
Equity Residential Corp............... 86,900 2,593,965
Exelon Corp........................... 102,700 7,072,949
Express Scripts, Inc. Class A......... 24,200 1,805,078*
Exxon Mobil Corp...................... 2,044,900 85,047,391
Family Dollar Stores, Inc............. 53,700 1,930,515
Federal Home Loan Mortgage
Corporation.......................... 214,700 12,680,182
Federal National Mortgage Association. 303,000 22,528,050#
March 31, 2004
-------------------------
(Unaudited)
Shares Value+
--------- ---------------
Federated Department Stores, Inc......... 56,400 $ 3,048,420
Federated Investors, Inc................. 33,900 1,065,477
FedEx Corp............................... 93,100 6,997,396
Fifth Third Bancorp...................... 176,200 9,756,194
First Data Corp.......................... 277,800 11,712,048#
First Tennessee National Corp............ 39,200 1,869,840#
FirstEnergy Corp......................... 102,800 4,017,424#
Fiserv, Inc.............................. 60,700 2,171,239*
FleetBoston Financial Corp............... 333,800 14,987,620
Fluor Corp............................... 25,600 990,464
Ford Motor Co............................ 571,200 7,751,184#
Forest Laboratories, Inc................. 114,700 8,214,814*
Fortune Brands, Inc...................... 45,400 3,479,002
FPL Group, Inc........................... 57,500 3,843,875
Franklin Resources, Inc.................. 77,800 4,331,904
Freeport McMoran Copper & Gold, Inc.
Class B................................. 61,100 2,388,399
Gannett Co., Inc......................... 84,500 7,447,830
Gap, Inc................................. 279,400 6,124,448
Gateway, Inc............................. 117,100 618,288*
General Dynamics Corp.................... 61,800 5,520,594
General Electric Co...................... 3,181,800 97,108,536
General Mills, Inc....................... 117,000 5,461,560#
General Motors Corp...................... 175,300 8,256,630#
Genuine Parts Co......................... 54,300 1,776,696
Genzyme Corp............................. 69,900 3,288,096*
Georgia-Pacific Corp..................... 79,100 2,664,879
Gillette Co.............................. 314,100 12,281,310
Golden West Financial Corp............... 47,400 5,306,430
Goodrich (B.F.) Co....................... 36,600 1,027,362
Goodyear Tire & Rubber Co................ 54,700 467,138*#
Grainger (W.W.), Inc..................... 28,500 1,368,000
Great Lakes Chemical Corp................ 15,800 376,830
Guidant Corp............................. 97,200 6,159,564
Halliburton Co........................... 136,600 4,151,274#
Harley-Davidson, Inc..................... 94,500 5,040,630#
Harrahs Entertainment, Inc............... 34,700 1,904,683
Hartford Financial Services Group, Inc... 91,000 5,796,700
Hasbro, Inc.............................. 54,500 1,185,375
HCA, Inc................................. 154,600 6,279,852#
Health Management Associates, Inc........ 75,800 1,759,318
Heinz (H.J.) Co.......................... 109,800 4,094,442
Hercules, Inc............................ 34,600 397,208*
Hershey Foods Corp....................... 40,500 3,355,425
Hewlett-Packard Co....................... 951,500 21,732,260
Hilton Hotels Corp....................... 118,300 1,922,375#
Home Depot, Inc.......................... 709,600 26,510,656#
Honeywell International, Inc............. 267,900 9,068,415
Humana, Inc.............................. 50,500 960,510*#
Huntington Bancshares, Inc............... 71,500 1,586,585#
Illinois Tool Works, Inc................. 96,100 7,614,003#
IMS Health, Inc.......................... 74,700 1,737,522
Ingersoll-Rand Co., Ltd. Class A......... 54,700 3,700,455
Intel Corp............................... 2,022,000 54,998,400
International Business Machines Corp..... 529,900 48,666,016
International Flavors & Fragrances, Inc.. 29,200 1,036,600
International Game Technology............ 108,100 4,860,176
International Paper Co................... 149,900 6,334,774
Interpublic Group of Companies, Inc...... 129,400 1,990,172*#
Intuit, Inc.............................. 61,900 2,778,072*#
ITT Industries, Inc...................... 28,800 2,198,304
Jabil Circuit, Inc....................... 62,400 1,836,432*
Janus Capital Group, Inc................. 75,000 1,228,500*#
See accompanying notes to financial statements.
122
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Continued)
March 31, 2004
-------------------------
(Unaudited)
Shares Value+
--------- ---------------
JDS Uniphase Corp..................... 447,900 $ 1,822,953*
Jefferson-Pilot Corp.................. 44,000 2,420,440
John Hancock Financial Services, Inc.. 90,200 3,940,838
Johnson & Johnson..................... 925,600 46,946,432
Johnson Controls, Inc................. 58,800 3,478,020
Jones Apparel Group, Inc.............. 39,400 1,424,310
JP Morgan Chase & Co.................. 642,100 26,936,095#
KB Home Corp.......................... 14,600 1,179,680
Kellogg Co............................ 128,600 5,046,264
Kerr-McGee Corp....................... 31,400 1,617,100
KeyCorp............................... 130,800 3,961,932
KeySpan Corp.......................... 49,600 1,895,712#
Kimberly Clark Corp................... 156,400 9,868,840
Kinder Morgan, Inc.................... 38,400 2,419,968
King Pharmaceuticals, Inc............. 75,200 1,266,368*
KLA-Tencor Corp....................... 61,200 3,081,420*
Knight Ridder, Inc.................... 24,900 1,823,925
Kohls Corp............................ 106,100 5,127,813*
Kroger Co............................. 232,300 3,865,472*
Leggett and Platt, Inc................ 59,800 1,417,858
Lehman Brothers Holdings, Inc......... 86,500 7,168,255#
Lexmark International Group, Inc...... 40,100 3,689,200*#
Lilly (Eli) & Co...................... 350,500 23,448,450
Limited Brands, Inc................... 161,100 3,222,000#
Lincoln National Corp................. 55,500 2,626,260
Linear Technology Corp................ 97,400 3,605,748
Liz Claiborne, Inc.................... 34,000 1,247,460
Lockheed Martin Corp.................. 140,700 6,421,548#
Loews Corp............................ 57,900 3,419,574
Louisiana-Pacific Corp................ 33,000 851,400#
Lowe's Companies, Inc................. 245,300 13,768,689
LSI Logic Corp........................ 118,200 1,103,988*
Lucent Technologies, Inc.............. 1,329,100 5,462,601*#
M & T Bank Corp....................... 38,000 3,414,300*
Manor Care, Inc....................... 27,900 984,591
Marathon Oil Corp..................... 106,200 3,575,754#
Marriott International, Inc. Class A.. 71,800 3,055,090
Marsh & McLennan Co., Inc............. 165,300 7,653,390
Marshall & Isley Corp................. 70,600 2,669,386
Masco Corp............................ 141,100 4,293,673
Mattel, Inc........................... 134,100 2,472,804
Maxim Integrated Products, Inc........ 102,300 4,817,307
May Department Stores Co.............. 90,000 3,112,200
Maytag Corp........................... 24,500 773,465
MBIA, Inc............................. 45,000 2,821,500
MBNA Corp............................. 398,500 11,010,555
McCormick & Co., Inc.................. 42,800 1,434,656
McDonalds Corp........................ 393,500 11,242,295
McGraw-Hill Companies, Inc............ 59,600 4,537,944
McKesson Corp......................... 90,800 2,732,172
MeadWestavco Corp..................... 62,700 1,773,783
Medco Health Solutions, Inc........... 84,300 2,866,200*
Medimmune, Inc........................ 77,200 1,781,776*
Medtronic, Inc........................ 378,100 18,054,275
Mellon Financial Corp................. 134,200 4,199,118
Merck & Co., Inc...................... 693,800 30,659,022
Mercury Interactive Corp.............. 28,100 1,258,880*
Meredith Corp......................... 15,700 793,792
Merrill Lynch & Co., Inc.............. 302,800 18,034,768
MetLife, Inc.......................... 237,100 8,459,728
MGIC Investment Corp.................. 30,700 1,971,861
Micron Technology, Inc................ 190,000 3,174,900*#
Microsoft Corp........................ 3,366,600 84,064,002#
March 31, 2004
-------------------------
(Unaudited)
Shares Value+
--------- ---------------
Millipore Corp...................... 15,200 $ 780,976*
Molex, Inc.......................... 59,400 1,805,166#
Monsanto Co......................... 82,900 3,039,943
Monster Worldwide, Inc.............. 35,300 924,860*
Moody's Corp........................ 46,400 3,285,120
Morgan Stanley Dean Witter & Co..... 342,200 19,608,060#
Motorola, Inc....................... 730,100 12,849,760
Nabors Industries, Ltd.............. 45,700 2,090,775*#
National City Corp.................. 189,000 6,724,620
National Semiconductor Corp......... 55,500 2,465,865*#
Navistar International Corp......... 21,500 985,775*#
NCR Corp............................ 29,500 1,299,770*
Network Appliance Corp.............. 107,600 2,308,020*
New York Times Class A.............. 46,700 2,064,140
Newell Rubbermaid, Inc.............. 85,600 1,985,920#
Newmont Mining Corp................. 134,800 6,285,724
Nextel Communications Corp. Class A. 342,900 8,479,917*#
Nicor, Inc.......................... 13,700 482,651#
Nike, Inc. Class B.................. 82,100 6,393,127
NiSource, Inc....................... 81,900 1,740,375
Noble Corp.......................... 41,900 1,609,798*
Nordstrom, Inc...................... 42,900 1,711,710
Norfolk Southern Corp............... 121,900 2,692,771
North Fork Bancorporation, Inc...... 47,300 2,001,736#
Northern Trust Corp................. 68,800 3,205,392
Northrop Grumman Corp............... 58,200 5,728,044#
Novell, Inc......................... 117,500 1,337,150*
Novellus Systems, Inc............... 47,800 1,519,562*
Nucor Corp.......................... 24,400 1,500,112#
Nvidia Corp......................... 50,500 1,337,745*#
Occidental Petroleum Corp........... 121,100 5,576,655
Office Depot, Inc................... 96,900 1,823,658*
Omnicom Group, Inc.................. 59,300 4,758,825
Oracle Systems Corp................. 1,630,400 19,581,104*
Paccar, Inc......................... 54,600 3,070,704
Pactiv Corp......................... 49,100 1,092,475*
Pall Corp........................... 39,200 889,448
Parametric Technology Corp.......... 83,200 376,064*
Parker-Hannifin Corp................ 37,000 2,090,500#
Paychex, Inc........................ 117,700 4,190,120
Penney (J.C.) Co., Inc.............. 85,100 2,959,778
Peoples Energy Corp................. 11,700 522,405
Peoplesoft, Inc..................... 113,400 2,096,766*
Pepsi Bottling Group, Inc........... 81,000 2,409,750
Pepsico, Inc........................ 533,400 28,723,590
PerkinElmer, Inc.................... 39,600 819,324
Pfizer, Inc......................... 2,378,100 83,352,405
PG&E Corp. (Holding Co.)............ 130,700 3,786,379*
Phelps Dodge Corp................... 28,900 2,359,974*#
Pinnacle West Capital Corp.......... 28,500 1,121,475
Pitney Bowes, Inc................... 72,900 3,106,269
Plum Creek Timber Co., Inc.......... 57,100 1,854,608
PMC Sierra, Inc..................... 53,900 914,683*
PNC Financial Services Group........ 86,500 4,793,830
Power-One, Inc...................... 26,000 287,560*#
PPG Industries, Inc................. 53,400 3,113,220
PPL Corp............................ 55,300 2,521,680#
Praxair, Inc........................ 101,400 3,763,968
Principal Financial Group, Inc...... 100,000 3,563,000
Procter & Gamble Co................. 403,000 42,266,640
Progress Energy, Inc................ 76,400 3,596,912#
Progressive Corp.................... 67,700 5,930,520
ProLogis............................ 56,500 2,026,655
See accompanying notes to financial statements.
123
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Continued)
March 31, 2004
-------------------------
(Unaudited)
Shares Value+
--------- ---------------
Providian Financial Corp.............. 90,500 $ 1,185,550*#
Prudential Financial, Inc............. 168,600 7,549,908#
Public Service Enterprise Group, Inc.. 73,700 3,462,426
Pulte Homes Inc....................... 39,100 2,173,960#
Q Logic Corp.......................... 29,600 977,096*
Qualcomm, Inc......................... 251,200 16,684,704
Quest Diagnostics, Inc................ 32,300 2,675,409#
Qwest Communications
International, Inc................... 550,800 2,373,948*
Radioshack Corp....................... 51,200 1,697,792
Raytheon Co........................... 129,800 4,067,932#
Reebok International, Ltd............. 18,400 760,840
Regions Financial Corp................ 69,200 2,527,184
RJ Reynolds Tobacco Holdings, Inc..... 26,300 1,591,150#
Robert Half International, Inc........ 53,400 1,261,308*#
Rockwell Collins, Inc................. 55,600 1,757,516#
Rockwell International Corp........... 58,400 2,024,728
Rohm & Haas Co........................ 69,400 2,764,896
Rowan Companies, Inc.................. 32,500 685,425*#
Ryder System, Inc..................... 20,300 786,219
Sabre Holdings Corp................... 43,700 1,084,197#
Safeco Corp........................... 43,200 1,864,944
Safeway, Inc.......................... 137,900 2,837,982*
Saint Jude Medical, Inc............... 53,800 3,878,980*#
Saint Paul Companies, Inc............. 71,100 2,844,711
Sanmina Corp.......................... 161,800 1,781,418*
Sara Lee Corp......................... 246,700 5,392,862
SBC Communications, Inc............... 1,031,700 25,317,918#
Schering-Plough Corp.................. 458,900 7,443,358
Schlumberger, Ltd..................... 183,600 11,722,860
Schwab (Charles) Corp................. 423,100 4,912,191
Scientific-Atlanta, Inc............... 47,600 1,539,384
Sealed Air Corp....................... 26,500 1,317,845*
Sears, Roebuck & Co................... 69,300 2,977,128
Sempra Energy......................... 70,900 2,254,620
Sherwin-Williams Co................... 45,400 1,744,722
Siebel Systems, Inc................... 154,700 1,780,597*
Sigma-Aldrich Corp.................... 21,600 1,195,344#
Simon Property Group, Inc............. 59,600 3,483,024
SLM Corp.............................. 140,700 5,888,295
Snap-On, Inc.......................... 18,200 588,588
Solectron Corp........................ 260,900 1,442,777*
Southern Co........................... 228,400 6,966,200
SouthTrust Corp....................... 103,000 3,415,480
Southwest Airlines Co................. 246,300 3,499,923
Sprint Corp........................... 281,900 5,195,417
Sprint Corp. (PCS Group).............. 322,800 2,969,760*
Stanley Works......................... 25,300 1,079,804
Staples, Inc.......................... 155,800 3,955,762*
Starbucks Corp........................ 123,500 4,662,125*
Starwood Hotels and Resorts
Worldwide, Inc....................... 63,700 2,579,850#
State Street Corp..................... 104,600 5,452,798
Stryker Corp.......................... 62,200 5,506,566#
Sun Microsystems, Inc................. 1,025,300 4,265,248*
Sungard Data Systems, Inc............. 89,600 2,455,040*
Sunoco, Inc........................... 24,100 1,503,358#
Suntrust Banks, Inc................... 88,100 6,141,451
Supervalu, Inc........................ 41,900 1,279,626
Symantec Corp......................... 97,100 4,495,730*
Symbol Technologies, Inc.............. 72,100 994,980
Synovus Financial Corp................ 94,100 2,300,745
Sysco Corp............................ 201,100 7,852,955
March 31, 2004
-------------------------
(Unaudited)
Shares Value+
--------- ---------------
T. Rowe Price Group, Inc............... 39,300 $ 2,115,519
Target Corp............................ 284,200 12,800,368
Teco Energy, Inc....................... 58,600 857,318#
Tektronix, Inc......................... 26,400 863,544
Tellabs, Inc........................... 129,600 1,118,448*
Temple-Inland, Inc..................... 17,000 1,076,780#
Tenet Healthcare Corp.................. 145,000 1,618,200*
Teradyne, Inc.......................... 59,600 1,420,268*
Texas Instruments, Inc................. 540,300 15,787,566
Textron, Inc........................... 43,000 2,285,450
The Goldman Sachs Group, Inc........... 150,800 15,735,980#
Thermo-Electron Corp................... 51,600 1,459,248*
Thomas & Betts Corp.................... 18,200 397,124#
Tiffany & Co........................... 45,700 1,744,369
Time Warner, Inc....................... 1,420,300 23,946,258*
TJX Companies, Inc..................... 157,000 3,855,920
Torchmark Corp......................... 35,300 1,898,787#
Toys R Us, Inc......................... 66,600 1,118,880*#
Transocean, Inc........................ 99,800 2,783,422*
Travelers Property Casualty Corp.
Series B.............................. 313,400 5,412,418
Tribune Co............................. 103,100 5,200,364
TXU Corp............................... 101,000 2,894,660
Tyco International, Ltd................ 623,700 17,869,005#
U.S. Bancorp........................... 598,800 16,556,820
Union Pacific Corp..................... 80,700 4,827,474
Union Planters Corp.................... 58,800 1,755,180
Unisys Corp............................ 103,400 1,476,552*
United Parcel Service, Inc............. 352,200 24,597,648
United States Steel Corp............... 35,300 1,315,631#
United Technologies Corp............... 161,100 13,902,930
Unitedhealth Group, Inc................ 195,200 12,578,688
Univision Communications, Inc. Class A. 100,600 3,320,806*
Unocal Corp............................ 80,800 3,012,224
UnumProvident Corp..................... 92,400 1,351,812
UST, Inc............................... 51,700 1,866,370
Veritas Software Co.................... 133,500 3,592,485*
Verizon Communications, Inc............ 861,400 31,475,556#
VF Corp................................ 33,700 1,573,790
Viacom, Inc. Class B................... 545,600 21,392,976#
Visteon Corp........................... 40,700 389,499#
Vulcan Materials Co.................... 31,700 1,503,848
Wachovia Corp.......................... 410,000 19,270,000
Walgreen Co............................ 319,700 10,534,115
Wal-Mart Stores, Inc................... 1,349,800 80,569,562
Washington Mutual, Inc................. 280,500 11,980,155
Waste Management, Inc.................. 179,900 5,429,382#
Waters Corp............................ 37,900 1,547,836*
Watson Pharmaceuticals, Inc............ 33,700 1,442,023*
Wellpoint Health Networks, Inc......... 48,400 5,504,048*#
Wells Fargo & Co....................... 527,700 29,904,759
Wendy's International, Inc............. 35,600 1,448,564
Weyerhaeuser Co........................ 68,600 4,493,300
Whirlpool Corp......................... 21,700 1,494,479
Williams Companies, Inc................ 161,600 1,546,512
Winn-Dixie Stores, Inc................. 44,200 335,920#
Worthington Industries, Inc............ 26,900 515,673
Wrigley (Wm.) Jr. Co................... 70,100 4,144,312#
Wyeth.................................. 415,400 15,598,270
XCEL Energy, Inc....................... 124,400 2,215,564#
Xerox Corp............................. 248,800 3,625,016*#
Xilinx, Inc............................ 107,600 4,088,800*
XL Capital, Ltd........................ 42,800 3,254,512
See accompanying notes to financial statements.
124
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Continued)
March 31, 2004
--------------------------
(Unaudited)
Shares Value+
----------- --------------
Yahoo!, Inc........................... 207,500 $ 10,082,425*#
Yum! Brands, Inc...................... 91,800 3,487,482*
Zimmer Holdings, Inc.................. 75,400 5,563,012*#
Zions Bancorp......................... 28,000 1,601,600
--------------
TOTAL COMMON STOCKS
(Cost $2,581,453,559)................. $3,263,491,643
--------------
Face Amount
(000) Value+
----------- --------------
TEMPORARY CASH INVESTMENTS --
(9.3%)
Repurchase Agreement, Merrill Lynch
Tri-Party 0.96%, 04/01/04
(Collateralized by $279,818,000 U.S.
Treasury Obligations, rates ranging
from 2.1250% to 7.00%, maturities
ranging from 10/31/04 to 07/15/06,
valued at $295,368,909) to be
repurchased at $293,490,172
(Cost $292,709,613)**................. $295,369 $ 295,368,909
Repurchase Agreement, PNC Capital
Markets, Inc. 0.91%, 04/01/04
(Collateralized by $38,539,000 FNMA
Discount Notes 1.02%, 06/01/04,
valued at $38,473,098) to be
repurchased at $37,912,958 (Cost
$37,912,000).......................... 37,912 37,912,000
--------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $330,621,613)................... 333,280,909
--------------
TOTAL INVESTMENTS -- (100.0%)
(Cost $2,912,075,172)................. $3,596,772,552
==============
- -------------
+ See Note B to Financial Statements.
* Non-Income Producing Securities.
# Total or Partial Securities on Loan.
** Security purchased with cash proceeds from securities on loan.
++ The cost for federal income tax purposes is $3,054,000,640.
See accompanying notes to financial statements.
125
STATEMENT OF ASSETS AND LIABILITIES THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series
(Amounts in thousands)
March 31, 2004
--------------
(Unaudited)
Assets:
Investments at Value............................ $3,596,773
Cash............................................ 1,952
Receivables:
Dividends and Interest......................... 4,007
Securities Lending............................. 23
Prepaid Expenses and Other Assets............... 30
----------
Total Assets................................. $3,602,785
==========
Liabilities:
Payables:
Collateral on Securities Loaned................ 295,369
Investment Securities Purchased................ 4,943
Futures Margin Variation....................... 37
Accrued Expenses............................... 309
----------
Total Liabilities............................ 300,658
----------
Net Assets........................................ $3,302,127
==========
Investments at Cost............................. $2,912,075
==========
See accompanying notes to financial statements.
126
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Continued)
November 30, 2003
-----------------------
Shares Value+
------- ---------------
COMMON STOCKS -- (83.7%)
3M Co.................................... 234,000 $ 18,459,360
Abbott Laboratories...................... 467,100 20,645,820
Ace, Ltd................................. 83,200 3,032,640
ADC Telecommunications, Inc.............. 240,300 591,138*#
Adobe Systems, Inc....................... 69,700 2,880,004#
Advanced Micro Devices, Inc.............. 103,700 1,864,526*#
AES Corp................................. 185,200 1,642,724*
Aetna, Inc............................... 45,900 2,955,042
AFLAC, Inc............................... 153,700 5,528,589
Agilent Technologies, Inc................ 140,900 3,984,652*
Air Products & Chemicals, Inc............ 67,900 3,255,126
Alberto-Culver Co. Class B............... 17,600 1,074,832
Albertson's, Inc......................... 109,700 2,334,416#
Alcoa, Inc............................... 253,000 8,300,930
Allegheny Energy, Inc.................... 37,600 404,200*
Allegheny Technologies, Inc.............. 24,200 198,440
Allergan, Inc............................ 39,000 2,914,470
Allied Waste Industries, Inc............. 62,600 779,370*
Allstate Corp............................ 210,400 8,495,952#
Alltel Corp.............................. 93,200 4,232,212#
Altera Corp.............................. 114,300 2,895,219*
Altria Group, Inc........................ 606,700 31,548,400#
Ambac Financial Group, Inc............... 32,000 2,200,000
Amerada Hess Corp........................ 27,000 1,278,990#
Ameren Corp.............................. 48,400 2,135,892#
American Electric Power Co., Inc......... 118,000 3,267,420#
American Express Co...................... 384,800 17,589,208#
American Greetings Corp. Class A......... 19,800 418,176*#
American International Group, Inc........ 780,000 45,201,000
American Power Conversion Corp........... 59,000 1,289,740
American Standard Companies, Inc......... 21,600 2,153,520*
AmerisourceBergen Corp................... 33,500 2,120,215#
Amgen, Inc............................... 385,900 22,193,109*
AmSouth Bancorporation................... 104,800 2,514,152
Anadarko Petroleum Corp.................. 74,500 3,347,285
Analog Devices, Inc...................... 109,200 5,432,700
Andrew Corp.............................. 45,800 539,066*#
Anheuser-Busch Companies, Inc............ 247,200 12,809,904
Anthem, Inc.............................. 41,300 2,978,556*
AON Corp................................. 93,500 2,051,390#
Apache Corp.............................. 48,400 3,475,120
Apartment Investment & Management Co.
Class A................................. 28,100 956,805
Apollo Group, Inc. (Class A)............. 52,500 3,624,075*
Apple Computer, Inc...................... 108,400 2,267,728*
Applera Corporation - Applied Biosystems
Group................................... 62,500 1,341,875
Applied Materials, Inc................... 495,500 12,040,650*
Applied Micro Circuits Corp.............. 91,100 588,506*
Archer-Daniels Midland Co................ 192,800 2,755,112
Ashland, Inc............................. 20,400 810,696
AT&T Corp................................ 235,500 4,669,965#
AT&T Wireless Services, Inc.............. 811,100 6,083,250*
Autodesk, Inc............................ 33,400 775,548
Automatic Data Processing, Inc........... 178,800 6,835,524
AutoNation, Inc.......................... 82,300 1,446,834*
Autozone, Inc............................ 26,700 2,554,122*
Avaya, Inc............................... 124,600 1,694,560*
Avery Dennison Corp...................... 33,100 1,823,148#
Avon Products, Inc....................... 70,600 4,836,100
B B & T Corp............................. 161,400 6,352,704
Baker Hughes, Inc........................ 100,100 2,888,886#
Ball Corp................................ 16,800 939,960
November 30, 2003
-------------------------
Shares Value+
--------- ---------------
Bank of America Corp.................... 446,900 $ 33,709,667#
Bank of New York Co., Inc............... 230,300 7,065,604
Bank One Corp........................... 337,900 14,651,344
Bard (C.R.), Inc........................ 15,500 1,171,800
Bausch & Lomb, Inc...................... 15,900 798,657
Baxter International, Inc............... 182,000 5,063,240
Bear Stearns Companies, Inc............. 29,800 2,159,308
Becton Dickinson & Co................... 76,000 3,042,280
Bed, Bath and Beyond, Inc............... 88,400 3,734,016*
Bellsouth Corp.......................... 552,300 14,376,369
Bemis Co., Inc.......................... 15,900 723,450
Best Buy Co., Inc....................... 96,400 5,976,800
Big Lots, Inc........................... 34,900 511,634*
Biogen Idec, Inc........................ 51,405 1,962,643*
Biomet, Inc............................. 76,700 2,743,559
BJ Services, Co......................... 47,400 1,511,586*
Black & Decker Corp..................... 23,200 1,076,248#
Block (H.&R.), Inc...................... 53,700 2,915,373#
BMC Software, Inc....................... 68,000 1,130,840*
Boeing Co............................... 251,400 9,651,246
Boise Cascade Corp...................... 17,500 516,425
Boston Scientific Corp.................. 246,000 8,828,940*
Bristol Myers Squibb Co................. 579,500 15,269,825#
Broadcom Corp........................... 88,700 3,231,341*
Brown-Forman Corp. Class B.............. 18,000 1,651,320
Brunswick Corp.......................... 27,100 814,355
Burlington Northern Santa Fe Corp....... 111,300 3,313,401
Burlington Resources, Inc............... 60,000 3,012,000#
Calpine Corp............................ 114,500 488,915*
Campbell Soup Co........................ 122,700 3,142,347#
Capital One Financial Corp.............. 67,900 4,054,988#
Cardinal Health, Inc.................... 133,400 8,156,076#
Carnival Corp........................... 188,300 6,626,277#
Caterpillar, Inc........................ 103,200 7,848,360#
Cendant Corp............................ 303,100 6,716,696*
CenterPoint Energy, Inc................. 91,400 886,580
Centex Corp............................. 18,500 2,023,900#
CenturyTel, Inc......................... 43,100 1,409,370
Charter One Financial, Inc.............. 67,500 2,242,350
ChevronTexaco Corp...................... 319,500 23,994,450
Chiron Corp............................. 55,700 2,986,634*
Chubb Corp.............................. 56,000 3,665,200#
CIENA Corp.............................. 140,800 996,864*
CIGNA Corp.............................. 42,000 2,253,300
Cincinnati Financial Corp............... 48,000 1,945,440#
Cinergy Corp............................ 53,100 1,940,805#
Cintas Corp............................. 50,900 2,379,066
Circuit City Stores, Inc................ 62,400 812,448
Cisco Sytems, Inc....................... 2,098,300 47,547,478*
Citigroup, Inc.......................... 1,540,000 72,441,600
Citizens Communications Co.............. 84,900 922,014*#
Citrix Systems, Inc..................... 49,200 1,181,784*#
Clear Channel Communications, Inc....... 183,900 7,688,859*
Clorox Co............................... 64,800 3,040,416#
CMS Energy Corp......................... 43,100 340,059*#
Coca-Cola Co............................ 734,800 34,168,200
Coca-Cola Enterprises, Inc.............. 135,300 2,793,945#
Colgate-Palmolive Co.................... 160,800 8,442,000
Comcast Corp. Class A................... 672,800 21,112,464*
Comerica, Inc........................... 52,400 2,732,660
Computer Associates International, Inc.. 173,000 4,030,900#
Computer Sciences Corp.................. 55,900 2,314,260*
Compuware Corp.......................... 114,400 654,368*
Comverse Technology, Inc................ 56,300 1,082,649*#
See accompanying notes to financial statements.
127
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Continued)
November 30, 2003
-------------------------
Shares Value+
--------- ---------------
Conagra, Inc.......................... 160,500 $ 3,932,250
Concord EFS, Inc...................... 145,500 1,671,795*
ConocoPhilips......................... 203,300 11,535,242#
Consolidated Edison, Inc.............. 67,300 2,712,190#
Constellation Energy Group............ 49,900 1,878,236
Convergys Corp........................ 42,700 655,018*
Cooper Industries, Ltd................ 27,600 1,480,740
Cooper Tire & Rubber Co............... 22,100 442,221
Coors (Adolph) Co. Class B............ 10,900 600,699
Corning, Inc.......................... 398,100 4,562,226*#
Costco Wholesale Corp................. 136,700 4,896,594*
Countrywide Finanical Corp............ 40,600 4,287,360
Crane Co.............................. 17,700 514,893
CSX Corp.............................. 64,000 2,168,960
Cummins, Inc.......................... 12,400 575,980#
CVS Corp.............................. 118,000 4,420,280
Dana Corp............................. 44,400 717,948#
Danaher Corp.......................... 45,700 3,802,240#
Darden Restaurants, Inc............... 49,100 1,016,861#
Deere & Co............................ 71,600 4,384,068#
Dell Inc.............................. 767,800 26,489,100*#
Delphi Automotive Systems Corp........ 167,500 1,470,650
Delta Air Lines, Inc.................. 37,000 463,980#
Deluxe Corp........................... 15,900 655,080
Devon Energy Corp..................... 69,400 3,425,584
Dillards, Inc. Class A................ 25,000 421,250#
Disney (Walt) Co...................... 601,100 14,110,299
Dollar General Corp................... 99,700 2,105,664
Dominion Resources, Inc............... 96,600 5,822,082#
Donnelley (R.R.) & Sons Co............ 33,900 951,234#
Dover Corp............................ 60,500 2,322,595
Dow Chemical Co....................... 274,600 10,311,230#
Dow Jones & Co., Inc.................. 24,300 1,205,280#
DTE Energy Co......................... 50,300 1,896,813#
Duke Energy Corp...................... 270,400 4,878,016
DuPont (E.I.) de Nemours & Co., Inc... 297,900 12,350,934
Dynegy, Inc........................... 112,000 448,000*#
Eastman Chemical Co................... 23,100 823,977
Eastman Kodak Co...................... 85,700 2,087,652#
Eaton Corp............................ 22,500 2,317,275#
eBay, Inc............................. 192,000 10,723,200*
Ecolab, Inc........................... 77,700 2,037,294
Edison International.................. 97,500 1,990,950*
El Paso Corp.......................... 179,500 1,274,450#
Electronic Arts, Inc.................. 88,000 3,892,240*
Electronic Data Systems Corp.......... 143,400 3,100,308#
EMC Corp.............................. 655,800 9,010,692*#
Emerson Electric Co................... 125,900 7,684,936
Engelhard Corp........................ 37,500 1,118,250
Entergy Corp.......................... 68,100 3,599,766
EOG Resources, Inc.................... 34,300 1,438,542
Equifax, Inc.......................... 42,000 992,460
Equity Office Properties Trust........ 119,300 3,308,189
Equity Residential Corp............... 81,900 2,404,584
Exelon Corp........................... 97,500 6,027,450
Express Scripts, Inc. Class A......... 23,500 1,521,155*#
Exxon Mobil Corp...................... 1,984,200 71,768,514
Family Dollar Stores, Inc............. 51,400 1,983,012
Federal Home Loan Mortgage
Corporation.......................... 208,100 11,324,802
Federal National Mortgage Association. 291,100 20,377,000
Federated Department Stores, Inc...... 55,400 2,719,586
Federated Investors, Inc.............. 32,500 934,375
FedEx Corp............................ 89,200 6,484,840
November 30, 2003
-------------------------
Shares Value+
--------- ---------------
Fifth Third Bancorp...................... 170,400 $ 9,905,352#
First Data Corp.......................... 221,300 8,376,205
First Tennessee National Corp............ 37,700 1,681,420#
FirstEnergy Corp......................... 97,400 3,374,910
Fiserv, Inc.............................. 57,800 2,167,500*
FleetBoston Financial Corp............... 314,600 12,772,760
Fluor Corp............................... 24,400 894,504#
Ford Motor Co............................ 547,700 7,229,640#
Forest Laboratories, Inc................. 109,100 5,961,224*#
Fortune Brands, Inc...................... 43,400 2,965,088
FPL Group, Inc........................... 54,900 3,488,895
Franklin Resources, Inc.................. 75,000 3,587,250
Freeport McMoran Copper & Gold, Inc.
Class B................................. 50,300 2,189,559#
Gannett Co., Inc......................... 80,700 6,988,620
Gap, Inc................................. 267,100 5,742,650#
Gateway, Inc............................. 96,900 432,174*
General Dynamics Corp.................... 59,000 4,771,330
General Electric Co...................... 2,995,200 85,872,384
General Mills, Inc....................... 111,400 5,014,114#
General Motors Corp...................... 167,600 7,169,928#
Genuine Parts Co......................... 52,000 1,636,960#
Genzyme Corp............................. 66,400 3,103,536*
Georgia-Pacific Corp..................... 75,900 2,071,311#
Gillette Co.............................. 304,900 10,284,277
Golden West Financial Corp............... 45,500 4,590,950
Goodrich (B.F.) Co....................... 35,100 965,601
Goodyear Tire & Rubber Co................ 52,400 353,700*#
Grainger (W.W.), Inc..................... 27,300 1,262,898
Great Lakes Chemical Corp................ 15,100 342,921#
Guidant Corp............................. 92,100 5,228,517
Halliburton Co........................... 131,000 3,058,850#
Harley-Davidson, Inc..................... 90,500 4,268,885#
Harrahs Entertainment, Inc............... 32,900 1,574,923#
Hartford Financial Services Group, Inc... 84,400 4,642,000#
Hasbro, Inc.............................. 51,900 1,147,509#
HCA, Inc................................. 149,400 6,261,354
Health Management Associates, Inc........ 71,700 1,842,690#
Heinz (H.J.) Co.......................... 105,200 3,797,720#
Hercules, Inc............................ 33,200 333,328*
Hershey Foods Corp....................... 39,000 3,030,300
Hewlett-Packard Co....................... 912,800 19,798,632
Hilton Hotels Corp....................... 112,900 1,847,044#
Home Depot, Inc.......................... 687,100 25,257,796#
Honeywell International, Inc............. 257,100 7,633,299
Humana, Inc.............................. 48,400 1,080,772*
Huntington Bancshares, Inc............... 68,300 1,501,917
Illinois Tool Works, Inc................. 92,100 7,193,010
IMS Health, Inc.......................... 71,500 1,646,645#
Ingersoll-Rand Co., Ltd. Class A......... 51,100 3,185,574
Intel Corp............................... 1,946,300 65,064,809#
International Business Machines Corp..... 517,200 46,827,288#
International Flavors & Fragrances, Inc.. 28,200 915,654#
International Game Technology............ 103,200 3,580,008
International Paper Co................... 143,300 5,332,193#
Interpublic Group of Companies, Inc...... 117,000 1,667,250*
Intuit, Inc.............................. 61,400 3,087,192*
ITT Industries, Inc...................... 27,600 1,819,392
Jabil Circuit, Inc....................... 59,500 1,636,845*
Janus Capital Group, Inc................. 71,600 995,956
JDS Uniphase Corp........................ 427,600 1,470,944*#
Jefferson-Pilot Corp..................... 42,500 2,062,525
John Hancock Financial Services, Inc..... 86,500 3,178,875
Johnson & Johnson........................ 887,300 43,735,017#
See accompanying notes to financial statements.
128
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Continued)
November 30, 2003
-------------------------
Shares Value+
--------- ---------------
Johnson Controls, Inc................ 26,700 $ 2,922,048
Jones Apparel Group, Inc............. 37,900 1,307,550
JP Morgan Chase & Co................. 608,900 21,530,704
KB Home Corp......................... 14,100 971,208
Kellogg Co........................... 122,000 4,363,940
Kerr-McGee Corp...................... 30,100 1,263,899
KeyCorp.............................. 125,900 3,498,761
KeySpan Corp......................... 47,500 1,673,425
Kimberly Clark Corp.................. 151,400 8,208,908
Kinder Morgan, Inc................... 36,900 2,011,050
King Pharmaceuticals, Inc............ 72,100 930,811*
KLA-Tencor Corp...................... 56,900 3,334,909*
Knight Ridder, Inc................... 24,000 1,785,120
Kohls Corp........................... 101,500 4,904,480*
Kroger Co............................ 224,700 4,237,842*
Leggett and Platt, Inc............... 57,500 1,169,550
Lehman Brothers Holdings, Inc........ 82,200 5,935,662#
Lexmark International Group, Inc..... 38,300 2,964,420*
Lilly (Eli) & Co..................... 335,700 23,015,592
Limited Brands, Inc.................. 155,900 2,793,728
Lincoln National Corp................ 53,200 2,085,972
Linear Technology Corp............... 93,600 4,037,904
Liz Claiborne, Inc................... 32,600 1,141,326
Lockheed Martin Corp................. 134,800 6,192,712#
Loews Corp........................... 55,400 2,361,702
Louisiana-Pacific Corp............... 31,300 566,217*
Lowe's Companies, Inc................ 234,200 13,653,860
LSI Logic Corp....................... 113,200 1,060,684*
Lucent Technologies, Inc............. 1,243,800 3,980,160*#
Manor Care, Inc...................... 26,600 939,512
Marathon Oil Corp.................... 92,700 2,744,847
Marriott International, Inc. Class A. 69,700 3,194,351
Marsh & McLennan Co., Inc............ 159,300 7,079,292
Marshall & Isley Corp................ 67,900 2,519,090
Masco Corp........................... 140,500 3,821,600
Mattel, Inc.......................... 131,300 2,657,512*#
Maxim Integrated Products, Inc....... 97,100 5,056,968
May Department Stores Co............. 86,300 2,558,795#
Maytag Corp.......................... 23,500 621,340
MBIA, Inc............................ 43,400 2,522,408
MBNA Corp............................ 382,000 9,366,640
McCormick & Co., Inc................. 41,800 1,199,242
McDonalds Corp....................... 380,400 9,749,652#
McGraw-Hill Companies, Inc........... 57,200 3,918,200
McKesson Corp........................ 86,900 2,537,480
MeadWestavco Corp.................... 59,900 1,528,648
Medco Health Solutions, Inc.......... 80,900 2,947,187*
Medimmune, Inc....................... 74,600 1,775,480*
Medtronic, Inc....................... 363,800 16,443,760
Mellon Financial Corp................ 128,700 3,706,560
Merck & Co., Inc..................... 669,300 27,173,580
Mercury Interactive Corp............. 25,800 1,207,440*#
Meredith Corp........................ 14,900 713,561
Merrill Lynch & Co., Inc............. 279,500 15,861,625#
MetLife, Inc......................... 227,300 7,430,437#
MGIC Investment Corp................. 29,400 1,556,730#
Micron Technology, Inc............... 182,300 2,371,723*#
Microsoft Corp....................... 3,232,900 83,085,530
Millipore Corp....................... 14,600 625,026*
Molex, Inc........................... 57,100 1, 836,336
Monsanto Co.......................... 78,300 2,123,496
Monster Worldwide, Inc............... 33,600 808,416*
Moody's Corp......................... 44,600 2,554,688
Morgan Stanley Dean Witter & Co...... 325,200 17,977,056
November 30, 2003
-------------------------
Shares Value+
--------- ---------------
Motorola, Inc......................... 695,700 $ 9,767,628
Nabors Industries, Ltd................ 43,800 1,625,856*
National City Corp.................... 183,600 6,159,780
National Semiconductor Corp........... 54,900 2,455,128*
Navistar International Corp........... 20,400 879,240*#
NCR Corp.............................. 28,300 987,670*
Network Appliance Corp................ 102,200 2,361,842*
New York Times Class A................ 44,700 2,051,730
Newell Rubbermaid, Inc................ 82,100 1,877,627#
Newmont Mining Corp................... 129,200 6,219,688
Nextel Communications Corp. Class A... 309,600 7,842,168*
Nicor, Inc............................ 13,200 432,564
Nike, Inc. Class B.................... 78,800 5,299,300
NiSource, Inc......................... 78,500 1,628,875
Noble Corp............................ 39,900 1,379,742*
Nordstrom, Inc........................ 40,500 1,397,250
Norfolk Southern Corp................. 116,700 2,498,547
North Fork Bancorporation, Inc........ 45,400 1,812,822#
Northern Trust Corp................... 66,100 2,964,585
Northrop Grumman Corp................. 54,700 5,066,861#
Novell, Inc........................... 111,000 1,054,500*
Novellus Systems, Inc................. 45,200 1,977,952*
Nucor Corp............................ 23,400 1,312,974
Nvidia Corp........................... 47,600 1,006,740*
Occidental Petroleum Corp............. 114,400 4,196,192
Office Depot, Inc..................... 92,700 1,469,295*
Omnicom Group, Inc.................... 56,800 4,524,688
Oracle Systems Corp................... 1,564,700 18,792,047*#
Paccar, Inc........................... 34,800 2,791,308
Pactiv Corp........................... 47,100 1,056,924*
Pall Corp............................. 37,200 953,064
Parametric Technology Corp............ 79,500 271,890*
Parker-Hannifin Corp.................. 35,300 1,941,147#
Paychex, Inc.......................... 112,600 4,331,722
Penney (J.C.) Co., Inc................ 81,200 2,020,256#
Peoples Energy Corp................... 10,900 438,180
Peoplesoft, Inc....................... 108,800 2,301,120#*
Pepsi Bottling Group, Inc............. 80,000 1,846,400#
Pepsico, Inc.......................... 515,900 24,825,108
PerkinElmer, Inc...................... 37,900 640,889
Pfizer, Inc........................... 2,327,800 78,097,690
PG&E Corp. (Holding Co.).............. 123,100 3,092,272*
Phelps Dodge Corp..................... 26,600 1,693,888*
Pinnacle West Capital Corp............ 27,300 1,074,801
Pitney Bowes, Inc..................... 70,000 2,782,500
Plum Creek Timber Co., Inc............ 54,700 1,456,661#
PMC Sierra, Inc....................... 50,900 1,036,833*
Power-One, Inc........................ 24,800 209,064*
PPG Industries, Inc................... 50,700 2,964,429
PPL Corp.............................. 52,900 2,162,552#
Praxair, Inc.......................... 48,700 3,495,686
Principal Financial Group, Inc........ 96,700 3,201,737
Procter & Gamble Co................... 387,600 37,302,624#
Progress Energy, Inc.................. 72,800 3,190,096
Progressive Corp...................... 64,900 5,068,690#
ProLogis.............................. 53,700 1,637,850
Providian Financial Corp.............. 86,800 980,840*
Prudential Financial, Inc............. 163,100 6,378,841
Public Service Enterprise Group, Inc.. 67,700 2,777,054
Pulte Homes Inc....................... 18,400 1,757,936
Q Logic Corp.......................... 28,200 1,602,606*
Qualcomm, Inc......................... 237,300 10,571,715#
Quest Diagnostics, Inc................ 31,400 2,291,258*
See accompanying notes to financial statements.
129
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Continued)
November 30, 2003
-----------------------
Shares Value+
------- ---------------
Qwest Communications International, Inc.. 506,800 $ 1,854,888*
Radioshack Corp.......................... 49,500 1,541,925#
Raytheon Co.............................. 123,700 3,427,727
Reebok International, Ltd................ 17,700 712,248
Regions Financial Corp................... 66,600 2,471,526
RJ Reynolds Tobacco Holdings, Inc........ 25,200 1,391,040#
Robert Half International, Inc........... 50,900 1,133,034#*
Rockwell Collins, Inc.................... 53,600 1,441,304#
Rockwell International Corp.............. 55,200 1,835,400
Rohm & Haas Co........................... 66,500 2,669,975
Rowan Companies, Inc..................... 28,100 594,877*
Ryder System, Inc........................ 18,900 589,491
Sabre Holdings Corp...................... 43,000 896,550#
Safeco Corp.............................. 41,300 1,545,859
Safeway, Inc............................. 132,000 2,739,000*
Saint Jude Medical, Inc.................. 51,400 3,255,676*
Saint Paul Companies, Inc................ 68,100 2,526,510
Sanmina Corp............................. 152,400 1,857,756*
Sara Lee Corp............................ 232,400 4,775,820#
SBC Communications, Inc.................. 993,600 23,131,008#
Schering-Plough Corp..................... 439,200 7,049,160
Schlumberger, Ltd........................ 174,200 8,173,464
Schwab (Charles) Corp.................... 404,900 4,696,840
Scientific-Atlanta, Inc.................. 44,500 1,285,160
Sealed Air Corp.......................... 25,400 1,340,358#*
Sears, Roebuck & Co...................... 84,500 4,661,020#
Sempra Energy............................ 66,900 1,894,608
Sherwin-Williams Co...................... 43,700 1,417,191#
Siebel Systems, Inc...................... 147,700 1,946,686*
Sigma-Aldrich Corp....................... 21,100 1,130,327#
Simon Property Group, Inc................ 57,500 2,728,375#
SLM Corp................................. 134,800 5,005,124
Snap-On, Inc............................. 17,500 525,350
Solectron Corp........................... 248,100 1,451,385*
Southern Co.............................. 217,800 6,375,006
SouthTrust Corp.......................... 100,900 3,243,935
Southwest Airlines Co.................... 234,000 4,207,320#
Sprint Corp.............................. 270,000 4,047,300#
Sprint Corp. (PCS Group)................. 309,200 1,419,228*
Stanley Works............................ 25,500 834,105
Staples, Inc............................. 146,500 3,977,475*
Starbucks Corp........................... 116,900 3,748,983#*
Starwood Hotels and Resorts Worldwide,
Inc..................................... 60,100 2,071,647#
State Street Corp........................ 99,500 5,070,520
Stryker Corp............................. 59,500 4,819,500
Sun Microsystems, Inc.................... 965,500 4,122,685*
Sungard Data Systems, Inc................ 85,200 2,302,104*
Sunoco, Inc.............................. 23,000 1,104,230#
Suntrust Banks, Inc...................... 84,100 5,975,305
Supervalu, Inc........................... 40,000 1,032,800#
Symantec Corp............................ 90,600 2,974,398#*
Symbol Technologies, Inc................. 68,900 961,155
Synovus Financial Corp................... 90,000 2,579,400
Sysco Corp............................... 194,200 7,053,344#
T. Rowe Price Group, Inc................. 37,000 1,555,480#
Target Corp.............................. 272,300 10,543,456
Teco Energy, Inc......................... 56,100 728,178#
Tektronix, Inc........................... 25,400 699,770
Tellabs, Inc............................. 123,400 987,200*
Temple-Inland, Inc....................... 16,200 915,786#
Tenet Healthcare Corp.................... 138,600 2,024,946*
Teradyne, Inc............................ 56,400 1,419,588*
November 30, 2003
-------------------------
Shares Value+
--------- ---------------
Texas Instruments, Inc................. 517,500 $ 15,400,800#
Textron, Inc........................... 40,500 2,018,520#
The Goldman Sachs Group, Inc........... 141,800 13,624,144#
Thermo-Electron Corp................... 48,500 1,159,150*
Thomas & Betts Corp.................... 17,500 364,000#
Tiffany & Co........................... 43,400 1,968,190#
Time Warner, Inc....................... 1,349,100 21,963,348*
TJX Companies, Inc..................... 152,600 3,447,234
Torchmark Corp......................... 34,100 1,503,810#*
Toys R Us, Inc......................... 63,800 749,012
Transocean, Inc........................ 95,600 1,852,728*
Travelers Property Casualty Corp.
Series B.............................. 300,900 4,694,040
Tribune Co............................. 93,800 4,582,130
Tupperware Corp........................ 17,500 269,675
TXU Corp............................... 96,300 2,132,082#
Tyco International, Ltd................ 597,100 13,703,445#
U.S. Bancorp........................... 575,900 15,958,189
Union Pacific Corp..................... 76,200 4,852,416#
Union Planters Corp.................... 58,600 2,022,286
Unisys Corp............................ 98,400 1,605,888#*
United Parcel Service, Inc............. 336,500 24,487,105#
United States Steel Corp............... 30,900 767,865#
United Technologies Corp............... 140,200 12,015,140
Unitedhealth Group, Inc................ 178,300 9,610,370
Univision Communications, Inc. Class A. 96,300 3,474,504#*
Unocal Corp............................ 77,300 2,456,594#
UnumProvident Corp..................... 88,500 1,321,305
UST, Inc............................... 49,800 1,792,302
Veritas Software Co.................... 127,300 4,840,073*
Verizon Communications, Inc............ 824,100 27,005,757
VF Corp................................ 32,200 1,328,894
Viacom, Inc. Class B................... 525,000 20,643,000#
Visteon Corp........................... 39,100 306,935#
Vulcan Materials Co.................... 30,300 1,347,441
Wachovia Corp.......................... 398,300 18,222,225
Walgreen Co............................ 306,400 11,278,584#
Wal-Mart Stores, Inc................... 1,306,200 72,676,968
Washington Mutual, Inc................. 276,100 12,648,141#
Waste Management, Inc.................. 177,000 5,205,570#
Waters Corp............................ 36,800 1,176,864*
Watson Pharmaceuticals, Inc............ 32,300 1,522,622*
Wellpoint Health Networks, Inc......... 43,900 4,104,211*
Wells Fargo & Co....................... 502,200 28,791,126
Wendy's International, Inc............. 33,900 1,316,337
Weyerhaeuser Co........................ 65,500 3,733,500
Whirlpool Corp......................... 20,600 1,407,392#
Williams Companies, Inc................ 154,900 1,452,962
Winn-Dixie Stores, Inc................. 42,200 381,066
Worthington Industries, Inc............ 25,700 368,024
Wrigley (Wm.) Jr. Co................... 67,300 3,709,576#
Wyeth.................................. 398,100 15,685,140
XCEL Energy, Inc....................... 119,100 1,988,970
Xerox Corp............................. 236,400 2,879,352*
Xilinx, Inc............................ 101,900 3,830,421*
XL Capital, Ltd........................ 40,800 3,068,160#
Yahoo!, Inc............................ 194,200 8,346,716*#
Yum! Brands, Inc....................... 87,800 3,028,222*
Zimmer Holdings, Inc................... 67,800 4,469,376*
Zions Bancorp.......................... 26,900 1,658,923
---------------
TOTAL COMMON STOCKS
(Cost $2,433,299,579).................. $ 2,926,111,543
---------------
See accompanying notes to financial statements.
130
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Continued)
Face Amount
(000) Value+
----------- ---------------
TEMPORARY CASH INVESTMENTS -- (16.3%)
Repurchase Agreement, PNC Capital
Markets Inc. 0.82% 12/01/03 (collateralized
by $65,802,000 FMC Discount Notes 1.11%,
03/25/04, valued at $65,555,243) to be
repurchased at $64,590, 413
(Cost $64,586,000)........................... $ 64,586 $ 64,586,000
Face Amount
(000) Value+
----------- --------------
Repurchase agreements in a Pooled Cash
Account, UBS Warburg and Deutsche Bank
Securities Inc., 1.01% and 1.02%
respectively, 12/01/03 (Collateralized by
$407,137,000 U.S. Treasury Obligations,
rates ranging from 5.50% to 8.875%,
maturities ranging from 08/15/04 to
05/15/30, valued at $503,698,795) to be
repurchased at $490,835,464
(Cost $490,793,933)**...................... $490,794 $ 490,793,933
--------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $555,379,933)........................ 555,379,933
--------------
TOTAL INVESTMENTS -- (100.0%)
(Cost $2,988,679,512)++.................... $3,481,491,476
==============
- -------------
+ See Note B to Financial Statements.
* Non-Income Producing Securities
# Total or Partial Securities on Loan
**Security purchased with cash proceeds from securities on loan
++The cost for federal income tax purposes is $3,129,062,752.
See accompanying notes to financial statements.
131
STATEMENT OF ASSETS AND LIABILITIES THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series
(Amounts in thousands)
November 30, 2003
-----------------
Assets:
Investments at Value (Including $475,028 of securities on loan) $3,481,491
Cash........................................................... 4,161
Receivables:
Dividends, Interest.......................................... 4,882
Securities Lending Income.................................... 34
Fund Shares Sold............................................. 1,784
Fund Margin Variation........................................ 72
Prepaid Expenses and Other Assets.............................. 3
----------
Total Assets............................................... $3,492,427
----------
Liabilities:
Payables:
Collateral on Securities Loaned.............................. 490,794
Fund Shares Redeemed......................................... 375
Due to Advisor............................................... 62
Accrued Expenses and Other Liabilities......................... 199
----------
Total Liabilities.......................................... 491,430
----------
Net Assets...................................................... $3,000,997
==========
Investments at Cost............................................ $2,998,680
==========
See accompanying notes to financial statements.
132
STATEMENT OF OPERATIONS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series
(Amounts in thousands)
Year
Ended
Nov. 30,
2003
---------
Investment Income
Dividends...................................................... $ 46,239
Interest....................................................... 613
Income from Securities Lending................................. 343
---------
Total Investment Income...................................... 47,195
---------
Expenses
Investment Advisory Services................................... 652
Accounting & Transfer Agent Fees............................... 417
Custodian Fees................................................. 101
Legal Fees..................................................... 26
Audit Fees..................................................... 40
S&P 500 Fees................................................... 75
Shareholders' Reports.......................................... 60
Trustees' Fees and Expenses.................................... 41
Other.......................................................... 21
---------
Total Expenses............................................... 1,433
---------
Net Investment Income........................................ 45,762
---------
Net Realized and Unrealized Gain (Loss) on Investment Securities
Net Realized Gain (Loss) on Investment Securities Sold......... (137,474)
Net Realized Gain (Loss) on Futures............................ 9,903
Change in Unrealized Appreciation (Depreciation) of:
Investment Securities........................................ 447,952
Futures...................................................... (3,012)
---------
Net Gain on Investment Securities.............................. 317,369
---------
Net Increase in Net Assets Resulting from Operations............ $ 363,131
=========
See accompanying notes to financial statements.
133
STATEMENT OF CHANGES IN NET ASSETS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series (Amounts in thousands)
Year Year
Ended Ended
Nov. 30, Nov. 30,
2003 2002
---------- ----------
Increase (Decrease) in Net Assets
Operations:
Net Investment Income (Loss)...................................... $ 45,762 $ 42,191
Net Realized Gain (Loss) on Investment Securities Sold............ (137,474) (211,200)
Net Realized Gain (Loss) on Futures............................... 9,903 (12,710)
Change in Unrealized Appreciation (Depreciation) of:
Investment Securities........................................... 447,952 (356,042)
Futures......................................................... (3,012) 5,220
---------- ----------
Net Increase (Decrease) in Net Assets Resulting from Operations. 363,131 (532,541)
---------- ----------
Transactions in Interest:
Contributions..................................................... 547,508 962,613
Withdrawals....................................................... (533,199) (638,165)
---------- ----------
Net Increase (Decrease) from Transactions in Interest........... 14,309 324,448
---------- ----------
Total Increase (Decrease)....................................... 377,440 (208,093)
---------- ----------
Net Assets
Beginning of Period............................................... 2,623,557 2,831,650
---------- ----------
End of Period..................................................... $3,000,997 $2,623,557
========== ==========
See accompanying notes to financial statements.
134
(For a share outstanding throughout each period)
FINANCIAL HIGHLIGHTS THE DFA INVESTMENT TRUST COMPANY
The U.S. Large Company Series
(Amounts in thousands)
Year Year Year Year Year
Ended Ended Ended Ended Ended
Nov. 30, Nov. 30, Nov. 30, Nov. 30, Nov. 30,
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
Net Asset Value, Beginning of
Period................................. N/A N/A N/A N/A N/A
---------- ---------- ---------- ---------- ----------
Income from Investment Operations
Net Investment Income (Loss)............ -- -- -- -- --
Net Gains (Losses) on Securities
(Realized and Unrealized)............. -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total from Investment Operations........ -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Less Distributions
Net Investment Income................... -- -- -- -- --
Net Realized Gains...................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total Distributions................. -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period........... N/A N/A N/A N/A N/A
========== ========== ========== ========== ==========
Total Return............................. 15.05% (16.59)% (12.30)% (4.25)% 20.86%
========== ========== ========== ========== ==========
Net Assets, End of Period (thousands).... $3,000,997 $2,623,557 $2,831,650 $3,138,812 $2,775,062
Ratio of Expenses to Average Net Assets.. 0.05% 0.05% 0.05% 0.06% 0.06%
Ratio of Net Investment Income to Average
Net Assets............................. 1.75% 1.53% 1.26% 1.12% 1.27%
Portfolio Turnover Rate.................. 8% 11% 8% 8% 4%
- -------------
N/A Not applicable as The U.S. Large Company Series is organized as a
partnership.
Note: Portfolio Turnover Rate for the four months ended March 31, 2004 is 2%
(Unaudited).
See accompanying notes to financial statements.
135
NOTES TO FINANCIAL STATEMENTS THE DFA INVESTMENT TRUST COMPANY
A. Organization:
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-five series, of which The U.S. Large Company Series
(the "Series") is presented in this report.
In the normal course of business, the Trust enters into contracts that
contain a variety of representations and warranties and 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.
B. Significant Accounting Policies:
The following significant accounting policies are in conformity with
accounting principles generally accepted in the United States of America for
investment companies. 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 may require management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates and those
estimates 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. Effective May 21, 2003,
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 most
recent 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 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, 2003, the total liability for deferred compensation to Trustees is
included in Accrued Expenses and Other Liabilities in the amount of $38,976.
3. Repurchase Agreements: The Series may purchase money market instruments
subject to the conterparty'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
or 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 28, 2003.
4. Other: Security transactions are accounted for on 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 an accrual basis. Discount and premium on securities
purchased are amortized over the lives of the respective securities. Expenses
directly attributable to the Series are directly charged. Common expenses are
allocated using methods approved by the Board of Trustees, generally based on
average net assets.
C. Investment Advisor:
Dimensional Fund Advisors Inc. ("Dimensional" or the "Advisor") provides
investment advisory services to the Series. For the year ended November 30,
2003, the Series' advisory fees were accrued daily and paid monthly to the
Advisor based on an effective annual rate of 0.025 of 1% of average net assets.
Certain officers of the Series are also officers, directors and shareholders
of the Advisor.
136
NOTES TO FINANCIAL STATEMENTS (Continued) THE DFA INVESTMENT TRUST COMPANY
D. Purchases and Sales of Securities:
For the year ended November 30, 2003, the Series made the following
purchases and sales of investment securities other than short-term securities
(amounts in thousands):
Purchases......................................... $277,992
Sales............................................. 209,469
There were no purchases or sales of U.S. Government Securities during the
year ended November 30, 2003.
E. Federal Income Taxes:
No provision for federal income taxes is required since the Series is
treated as a partnership for federal income tax purposes. Any interest,
dividends and gains or losses have been deemed to have been "passed through" to
its Feeder Fund.
At November 30, 2003, gross unrealized appreciation and depreciation for
federal income tax purposes of investment securities and foreign currencies was
as follows (amounts in thousands):
Gross Unrealized Appreciation..................... $ 692,670
Gross Unrealized Depreciation..................... (340,241)
---------
Net............................................... $ 352,429
=========
F. Financial Instruments:
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:
Futures Contracts: During the year ended November 30, 2003, 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 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, 2003, the Series had outstanding 259 long futures contracts
on the S&P 500 Index, all of which expire on December 19, 2003. The value of
such contracts on November 30, 2003 was $68,492,550, which resulted in an
unrealized gain of $2,241,326.
Risks arise upon entering into futures contracts from potential imperfect
price correlations between the futures contracts and the underlying securities,
from 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.
G. Line of Credit:
The Trust, together with other Dimensional-advised portfolios, has entered
into a $50 million unsecured discretionary line of credit 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 credit, since this is not a
committed facility. The agreement for the discretionary line of credit may be
terminated at any time. There were no borrowings under the discretionary line
of credit by the Series during the year ended November 30, 2003.
The Trust, together with other Dimensional-advised portfolios, has also
entered into an additional $150 million unsecured line of credit 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. 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 for the line of credit expires in
April 2004. There were no borrowings by the Series under the line of credit
during the year ended November 30, 2003.
137
NOTES TO FINANCIAL STATEMENTS (Continued) THE DFA INVESTMENT TRUST COMPANY
H. Securities Lending:
As of November 30, 2003, the Series had securities on loan to
brokers/dealers, for which it 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 Securities
are required at all times to be secured by collateral at least equal to 100% 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, PNCBank, National Association, the lending agent has agreed
to pay the amount of the shortfall to the portfolio or, at the option of the
lending agent, to replace the securities.
The Series invests the cash collateral received from securities on loan in a
pooled cash account, which invests in repurchase agreements collateralized by
U.S. government securities. Securities pledged as collateral for repurchase
agreements are held by a custodian bank until the agreements mature.
138
Report of Independent Registered Certified Public Accounting Firm
THE DFA INVESTMENT TRUST COMPANY
To the Shareholders of the Series and Board of Trustees of
The DFA Investment Trust Company
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, 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 portfolios constituting The DFA Investment Trust Company, hereafter
referred to as the "Series") at November 30, 2003, 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). These 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, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
January 15, 2004
139
BLACKROCK FUNDS
Investment Adviser - Large Cap Value Equity Portfolio, Large Cap Growth Equity
Portfolio, Mid-Cap Value Equity Portfolio, Mid-Cap Growth Equity Portfolio,
Small Cap Value Equity Portfolio, Small Cap Core Equity Portfolio, Small Cap
Growth Equity Portfolio, U.S. Opportunities Portfolio, Global Science &
Technology Opportunities Portfolio, International Equity Portfolio,
International Opportunities Portfolio, Select Equity Portfolio and Balanced
Portfolio
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Investment Adviser - European Equity
Portfolio and Asia Pacific Equity Portfolio
BlackRock International, Limited
Edinburgh, Scotland EH3 8JB
Sub-Adviser - International Equity Portfolio
and International Opportunities Portfolio
BlackRock International, Limited
Edinburgh, Scotland EH3 8JB
Sub-Adviser - Balanced Portfolio
BlackRock Financial Management, Inc.
New York, NY 10022
Custodian
PFPC Trust Co.
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 Auditors
Deloitte & Touche LLP
Philadelphia, Pennsylvania 19103
The Fund delivers only one copy of shareholder documents, including
prospectuses, shareholder reports and proxy statements to shareholders with
multiple accounts at the same address. This practice is known as "householding"
and is intended to eliminate duplicate mailings and reduce expenses. Mailings
of your BlackRock Funds 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 1-800-441-7762.
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
SEC's website at http://www.sec.gov.
BLACKROCK FUNDS
FUND SPECTRUM
BlackRock Funds is a leading mutual fund company currently managing
approximately $19 billion in the following portfolios designed to fit a broad
range of investment goals. Each portfolio is managed by recognized experts in
equity, fixed income, international, and tax-free investing.
STOCK PORTFOLIOS
- --------------------------------------
Large Cap Value Equity Global Science & Technology Opportunities
Large Cap Growth Equity European Equity
Mid-Cap Value Equity International Equity
Mid-Cap Growth Equity International Opportunities
Small Cap Value Equity Asia Pacific Equity
Small Cap Core Equity Select Equity
Small Cap Growth Equity Index Equity
U.S. Opportunities
STOCK & BOND PORTFOLIOS
- --------------------------------------
Balanced
BOND PORTFOLIOS
- --------------------------------------
Enhanced Income Managed Income
Low Duration Bond Core Bond Total Return
Intermediate Government Bond Core PLUS Total Return
Intermediate Bond International Bond
Government Income High Yield Bond
GNMA
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.
Note: Institutional and Service Share Class investors should call
1-800-441-7450.
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 1-888-825-2257.
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.
BlackRock
EQ-SEMI
FIXED INCOME LIQUIDITY EQUITIES ALTERNATIVES BLACKROCK SOLUTIONS
BlackRock Funds
Money Market Portfolios
Semi-Annual Report to Shareholders
March 31, 2004 (Unaudited)
[GRAPHIC]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE BlackRock
BLACKROCK FUNDS
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
TABLE OF CONTENTS
Shareholder Letter.............................................................1
Statements of Net Assets
Money Market.................................................................2
U.S. Treasury Money Market...................................................4
Municipal Money Market.......................................................5
New Jersey Municipal Money Market...........................................15
North Carolina Municipal Money Market.......................................18
Ohio Municipal Money Market.................................................21
Pennsylvania Municipal Money Market.........................................25
Virginia Municipal Money Market.............................................31
Key to Investment Abbreviations.............................................32
Portfolio Financial Statements
Statements of Operations.................................................34-35
Statements of Changes in Net Assets......................................36-37
Financial Highlights.....................................................38-45
Notes to Financial Statements..............................................46-58
Additional Information........................................................59
- --------------------------------------------------------------------------------
PRIVACY PRINCIPLES OF BLACKROCK FUNDS
BlackRock Funds is committed to maintaining the privacy of its shareholders and
to safeguarding their nonpublic personal information. The following
information is provided to help you understand what personal information
BlackRock Funds collects, how we protect that information, and why in certain
cases we may share such information with select other parties.
BlackRock Funds does not receive any nonpublic personal information relating to
its shareholders who purchase shares through their broker-dealers. In the case
of shareholders who are record owners of BlackRock Funds, BlackRock Funds
receives nonpublic personal information on account applications or other forms.
With respect to these shareholders, BlackRock Funds also has access to specific
information regarding their transactions in BlackRock Funds.
BlackRock Funds does not disclose any nonpublic personal information about its
shareholders or former shareholders to anyone, except as permitted by law or as
is necessary in order to service our shareholders' accounts (for example, to a
transfer agent).
BlackRock Funds restricts access to nonpublic personal information about its
shareholders to BlackRock employees with a legitimate business need for the
information. BlackRock Funds maintains physical, electronic and procedural
safeguards designed to protect the nonpublic personal information of our
shareholders.
- --------------------------------------------------------------------------------
BLACKROCK FUNDS
March 31, 2004
Dear Shareholder:
We are pleased to present the Semi-Annual Report to Shareholders of the
BlackRock Funds' Money Market Portfolios for the six-months ended March 31,
2004. The Semi-Annual Report includes important information on each Portfolio,
and is organized as follows:
o Statement of Net Assets - lists portfolio holdings and includes each
holding's market value and par amount/ number of shares as of March 31,
2004. The Statement of Net Assets also contains the net asset value for
each share class of a Portfolio.
o Statement of Operations - displays the components of each Portfolio's
investment income and provides a detailed look at each Portfolio's
expenses. The Statement of Operations also lists the aggregate realized
gains and losses from security sales.
o Statement of Changes in Net Assets - compares Portfolio information from
the prior period to the current period. Specifically, it details
shareholder distributions by share class, aggregate realized gains and
losses, and the change in net assets from the beginning of the period to
the end of the period.
o Financial Highlights - include each Portfolio's expense ratios, net asset
values, total returns, distributions per share, and net investment income
per share for the current period and the last five years or since
inception.
o Notes to Financial Statements - provide additional information on fees, a
summary of significant accounting policies, a list of affiliated
transactions, and a summary of purchases and sales of securities.
In addition to these items, a summary of shareholder privileges is listed
on the inside back cover of the report. Here, shareholders can find information
on how to access account balances, recent transactions, and share prices. It
also includes a summary of the Fund's various investment plans.
We hope you find the report informative, and we thank you for making
BlackRock part of your investment strategy.
Sincerely,
/s/ Anne Ackerley
Anne Ackerley
Managing Director
BlackRock Advisors, Inc.
1
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
AGENCY OBLIGATIONS - 13.4%
Federal Home Loan Bank Bonds - 3.3%
4.88% 04/16/04 $ 39,100 $ 39,156,532
1.38% 03/28/05 30,000 30,000,000
1.42% 04/04/05 26,000 26,000,000
------------
95,156,532
------------
Federal Home Loan Mortgage Corporation Bonds - 3.1%
1.38% 11/15/04 60,000 60,000,000
1.29% 03/23/05 28,000 28,000,000
------------
88,000,000
------------
Federal Home Loan Mortgage Corporation
Discount Notes - 1.4%
1.00% 06/15/04 40,000 39,916,667
------------
Federal National Mortgage Association Bonds - 5.6%
1.20% 08/13/04 100,000 100,000,000
1.50% 12/03/04 60,500 60,500,000
------------
160,500,000
------------
TOTAL AGENCY OBLIGATIONS
(Cost $383,573,199) 383,573,199
------------
CERTIFICATES OF DEPOSIT - 26.8%
Domestic - 7.1%
Citibank N.A. (A-1+,P-1)
1.04% 06/29/04 71,130 71,130,000
Washington Mutual Bank (A-2,P-1)
1.07% 05/12/04 45,000 45,000,000
1.06% 06/08/04 89,000 89,000,000
------------
205,130,000
------------
Euro Dollar - 12.3%
Credit Agricole Indo (A-1+,P-1)
1.05% 05/21/04 126,000 126,001,408
DEPFA Bank Europe PLC (A-1+,P-1)
1.06% 06/07/04 50,000 50,000,000
1.14% 06/14/04 75,000 75,012,777
KBC Bank N.V. (A-1,P-1)
1.05% 05/28/04 100,000 100,001,581
------------
351,015,766
------------
Yankee Dollar - 7.4%
Banco Santander Puerto Rico (A-1,P-1)
1.08% 04/26/04 9,000 9,000,000
1.07% 05/20/04 32,920 32,920,000
Foreningssparbanken AB (Swedbank) (A-1,P-1)
1.44% 03/01/05 61,500 61,491,585
Toronto Dominion Bank of New York (A-1,P-1)
1.26% 04/13/04 68,000 67,999,888
Westdeutsche Landesbank Gironzentrale (A-1+,P-1)
1.40% 08/05/04 40,000 40,000,000
------------
211,411,473
------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $767,557,239) $767,557,239
------------
COMMERCIAL PAPER - 22.2%
Asset Backed Securities - 18.2%
Concord Minutemen Capital Co. LLC (A-1)
1.07% 05/18/04 95,506 95,372,583
1.06% 06/23/04 22,683 22,627,565
PAR
MATURITY (000) VALUE
---------- ---------- --------------
COMMERCIAL PAPER (Continued)
Asset Backed Securities (Continued)
Crown Point Capital Co. (A-1,P-1)
1.05% 06/10/04 $ 50,159 $ 50,056,592
Liberty Lighthouse Capital Co. (A-1)
1.04% 04/23/04 52,971 52,937,334
Regency Markets No. 1 LLC (A-1,P-1)
1.04% 04/20/04 87,706 87,657,859
Silver Tower U.S. Funding LLC (A-1,P-1)
1.07% 04/07/04 11,217 11,215,000
Sydney Capital Corp. (A-1+,P-1)
1.04% 04/19/04 44,530 44,506,844
1.04% 04/27/04 50,070 50,032,392
1.05% 04/27/04 8,000 7,993,933
Tannehill Capital Co. LLC (A-1)
1.07% 04/07/04 6,743 6,741,799
1.05% 04/13/04 63,985 63,962,605
1.05% 04/19/04 27,781 27,766,415
------------
520,870,921
------------
Banks - 0.9%
Credit Suisse First Boston New York (A-1,P-1)
1.03% 04/12/04 24,905 24,897,162
------------
Insurance - 3.1%
Irish Life & Permanent PLC (A-1,P-1)
1.07% 05/17/04 59,220 59,139,033
1.05% 06/08/04 28,790 28,732,900
------------
87,871,933
------------
TOTAL COMMERCIAL PAPER
(Cost $633,640,016)
633,640,016
------------
GUARANTEED INVESTMENT CONTRACTS - 3.1%
Transamerica Life Insurance &
Annuity Co. (A-1+,P-1)
1.26%(b)
(Cost $90,000,000) 06/01/04 90,000 90,000,000
------------
MASTER NOTES - 4.7%
Security Brokers & Dealers - 4.7%
Merrill Lynch Mortgage Capital, Inc. (A-1,P-1)(c)
1.16% 04/05/04 33,000 33,000,000
Morgan Stanley Mortgage Capital, Inc. (A-1,P-1)(c)
1.23% 04/01/04 100,000 100,000,000
------------
TOTAL MASTER NOTES
(Cost $133,000,000)
133,000,000
------------
MEDIUM TERM NOTES - 3.5%
Security Brokers & Dealers - 3.5%
Goldman Sachs Group, Inc. (A-1,P-1)
1.23%
(Cost $100,000,000) 05/18/04 100,000 100,000,000
------------
VARIABLE RATE OBLIGATIONS - 25.5%
Banks - 8.9%
Banque Nationale de Paribas New York (A-1+,P-1)
1.03%(b) 04/01/04 87,000 86,996,310
HBOS Treasury Services PLC (A-1+,P-1)
1.10%(b) 06/24/04 80,000 80,000,000
National City Bank of Indiana (A-1,P-1)
1.04%(b) 04/01/04 64,000 63,997,286
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
2
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
VARIABLE RATE OBLIGATIONS (Continued)
Banks (Continued)
Westpac Banking Corp. (Aa3)
1.12%(b) 06/11/04 $ 24,250 $ 24,250,000
------------
255,243,596
------------
Federal Home Loan Bank Variable Rate Notes - 2.6%
0.98%(b) 06/14/04 75,000 74,934,627
------------
Federal National Mortgage Association
Variable Rate Notes - 2.9%
1.04% (b) 05/18/04 82,000 81,982,071
------------
Insurance - 5.4%
John Hancock Global Funding II (AA,Aa3)
1.22%(b) 06/01/04 30,700 30,717,999
1.16%(b) 06/11/04 109,000 109,029,695
Metlife Global Funding (AA,Aa2)
1.10%(b) 04/28/04 15,000 15,000,000
------------
154,747,694
------------
Personal Credit Institutions - 2.2%
General Electric Capital Corp.(AAA,Aaa)
1.17%(b) 04/19/04 45,000 45,000,000
1.22%(b) 04/22/04 18,000 18,001,433
------------
63,001,433
------------
Security Brokers & Dealers - 3.5%
Merrill Lynch & Co., Inc. (A+,Aa3)
1.10%(b) 04/05/04 50,000 50,000,000
1.22%(b) 04/12/04 50,000 50,000,000
------------
100,000,000
------------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $729,909,421) 729,909,421
------------
MUNICIPAL BONDS - 0.7%
Georgia - 0.2%
De Kalb County Development
Authority University RB Series
1995B DN (A-1+,VMIG-1)
1.09%(b) 04/07/04 4,260 4,260,000
------------
Texas - 0.5%
South Central Texas IDRB Series
1990 DN (Bank One N.A. LOC)
(P-1)
1.11%(b) 04/07/04 14,800 14,800,000
------------
TOTAL MUNICIPAL BONDS
(Cost $19,060,000) 19,060,000
------------
VALUE
--------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $2,856,739,875(a)) 99.9% $2,856,739,875
OTHER ASSETS IN EXCESS OF
LIABILITIES 0.1% 2,290,172
----- --------------
NET ASSETS(Equivalent to $1.00
per share based on
1,874,100,029 Institutional shares,
447,077,079 Service shares,
130,021,467 Hilliard Lyons
shares, 398,251,808 Investor A
shares, 8,920,016 Investor B
shares and 842,375 Investor C
shares outstanding) 100.0% $2,859,030,047
===== ==============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($1,874,002,052/1,874,100,029) $ 1.00
=======
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SERVICE SHARE
($447,033,481/447,077,079) $ 1.00
=======
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
HILLIARD LYONS SHARE
($130,017,103/130,021,467) $ 1.00
=======
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($398,215,736/398,251,808) $ 1.00
=======
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
INVESTOR B SHARE
($8,919,893/8,920,016) $ 1.00
=======
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
INVESTOR C SHARE
($841,782/842,375) $ 1.00
=======
- -------------------
(a) Aggregate cost for Federal tax purposes.
(b) Rates shown are the rates as of March 31, 2004 and maturities shown are the
next interest readjustment date.
(c) Ratings reflect those of guarantor.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
U.S. TREASURY MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
U.S. TREASURY OBLIGATIONS - 30.6%
U.S. Treasury Bills - 12.6%
0.91% 04/01/04 $50,000 $50,000,001
0.99% 08/26/04 15,000 14,939,362
1.00% 09/02/04 10,000 9,957,222
-----------
74,896,585
-----------
U.S. Treasury Notes - 16.5%
3.38% 04/30/04 20,000 20,033,057
3.25% 05/31/04 8,000 8,026,135
2.12% 08/31/04 10,000 10,031,274
7.88% 11/15/04 10,000 10,407,304
2.00% 11/30/04 10,000 10,036,641
1.75% 12/31/04 10,000 10,030,501
1.50% 02/28/05 25,000 25,056,152
1.62% 03/31/05 5,000 5,017,272
-----------
98,638,336
-----------
U.S. Treasury Strip Notes - 1.5%
1.16%(b) 08/15/04 9,000 8,960,592
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $182,495,513) 182,495,513
-----------
REPURCHASE AGREEMENTS - 69.4%
Bear Stearns & Co., Inc.
1.00% 04/01/04 30,000 30,000,000
(Agreement dated 3/31/04 to be
repurchased at $30,000,833.
Collateralized by $47,450,000 U.S.
Treasury Strips 0.00% due
08/15/14. The value of the
collateral is $30,613,601.)
Deutsche Bank Securities, Inc.
1.00% 04/01/04 30,000 30,000,000
(Agreement dated 3/31/04 to be
repurchased at $30,000,833.
Collateralized by $68,379,000 U.S.
Treasury Strips 0.00% due
05/15/20. The value of the
collateral is $30,600,286.)
Goldman Sachs & Co.
0.99% 04/01/04 30,000 30,000,000
(Agreement dated 3/31/04 to be
repurchased at $30,000,825.
Collateralized by $3,521,000 U.S.
Treasury Notes 1.63% due
01/31/05 and $21,378,000 U.S.
Treasury Bonds 6.75% due
08/15/26. The value of the
collateral is $30,600,456.)
Greenwich Capital Markets, Inc.
1.00% 04/01/04 100,000 100,000,000
(Agreement dated 3/31/04 to be
repurchased at $100,002,778.
Collateralized by $136,682,755
U.S. Treasury Strips 0.00% due
08/15/09 to 02/15/16. The value of
the collateral is $102,001,498.)
J.P. Morgan Securities, Inc.
1.00% 04/01/04 30,000 30,000,000
(Agreement dated 3/31/04 to be
repurchased at $30,000,833.
Collateralized by $28,160,000 U.S.
Treasury Notes 6.75% due
05/15/05. The value of the
collateral is $30,600,209.)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
REPURCHASE AGREEMENTS (Continued)
Lehman Brothers, Inc.
1.00% 04/01/04 $30,000 $30,000,000
(Agreement dated 3/31/04 to be
repurchased at $30,000,833.
Collateralized by $21,390,000 U.S.
Treasury Notes 6.75% due
05/15/05 and $5,060,000 U.S.
Treasury Bonds 8.50% due
02/15/20. The value of the
collateral is $30,591,019.)
Merrill Lynch Government Securities,
Inc.
0.97% 04/01/04 30,000 30,000,000
(Agreement dated 3/31/04 to be
repurchased at $30,000,808.
Collateralized by $73,199,750 U.S.
Treasury Strips 0.00% due
11/15/14 to 02/15/31. The value of
the collateral is $30,600,127.)
Morgan Stanley & Co., Inc.
1.00% 04/01/04 103,900 103,900,000
(Agreement dated 3/31/04 to be
repurchased at $103,902,886.
Collateralized by $69,731,000 U.S.
Treasury Bonds 9.00% due
11/15/18. The value of the
collateral is $105,978,124.)
UBS Securities LLC
0.99% 04/01/04 30,000 30,000,000
(Agreement dated 3/31/04 to be
repurchased at $30,000,825.
Collateralized by $30,270,000 U.S.
Treasury Notes 3.00% due
02/15/09. The value of the
collateral is $30,604,299.)
-----------
TOTAL REPURCHASE AGREEMENTS 413,900,000
(Cost $413,900,000) -----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $596,395,513(a)) 100.0% 596,395,513
OTHER ASSETS IN EXCESS OF
LIABILITIES 0.0% 280,803
----- -----------
NET ASSETS (Equivalent to
$1.00 per share based on 341,743,610 Institutional
shares, 208,520,754 Service shares
and 46,468,465 Investor A shares outstanding) 100.0% $596,676,316
===== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($341,722,275/341,743,610) $ 1.00
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($208,472,548/208,520,754) $ 1.00
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INVESTOR A SHARE
($46,481,493/46,468,465) $ 1.00
=======
- -------------------
(a) Aggregate cost for Federal tax purposes.
(b) The rate shown is the effective yield on the zero coupon bonds.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MUNICIPAL MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS - 98.3%
Alabama - 1.7%
Alexander City Industrial Board IDRB
Series 2000 DN (Southtrust Bank
LOC) (A-1, P-1)
1.17%(b) 04/07/04 $ 1,010 $ 1,010,000
Columbia IDRB (Alabama Power Co.
Project) Series 1995B DN (The
Southern Co. Guaranty)
(A-1, VMIG-1)
1.12%(b) 04/01/04 1,300 1,300,000
Columbia IDRB (Alabama Power Co.
Project) Series 1999A DN (The
Southern Co. Guaranty)
(A-1, VMIG-1)
1.12%(b) 04/01/04 1,600 1,600,000
Geneva County Health Care
Authority RB Series 2001 DN
(Southtrust Bank LOC)
1.17%(b) 04/07/04 2,833 2,833,000
Jefferson County GO Warrants
Series 2001B DN (Morgan
Guaranty Trust, Bayerische
Landesbank Girozentrale SBPA)
(A-1+, VMIG-1)
1.12%(b) 04/01/04 4,300 4,300,000
-----------
11,043,000
-----------
Alaska - 2.7%
Valdez Alaska Marine Terminal RB
(Exxon Pipeline Company Project)
Series 1993A DN (A-1+, VMIG-1)
1.00%(b) 04/01/04 17,350 17,350,000
-----------
Arkansas - 0.5%
Little Rock Residential Housing and
Public Facilities Board Capital
Improvement RB (Park Systems
Project) Series 2001 DN (Bank of
America N.A. LOC) (A-1+)
1.12%(b) 04/07/04 2,920 2,920,000
-----------
California - 6.8%
California Affordable Housing Agency
Multi-Family RB (Merrill Lynch
P-Float Trust Receipts) Series
2003 PT-2049 DN (Merrill Lynch &
Co. Guaranty, Merrill Lynch Capital
Services SBPA) (F-1+)
1.00%(b) 04/07/04 4,500 4,500,000
California GO Series 2003A RAN
(SP-1+, MIG-1, F-1+)
2.00% 06/23/04 2,000 2,004,202
California State Trust Receipts RB
Series 1985 DN (FGIC Insurance,
Societe Generale SBPA)
(SP-1+, VMIG-1)
1.06%(b) 04/07/04 9,700 9,700,000
City of Sacramento Unified School
District GO (ABN-AMRO Munitops
Trust Certificates) Series 2002-9
MB (ABN-AMRO Bank N.V. SBPA,
MBIA Insurance) (MIG-1, F-1+)
1.12% 06/18/04 7,000 7,000,000
Foothill-De Anza Community College
GO Series 2000Y DN (Wachovia
Bank N.A. LOC) (VMIG-1)
1.05%(b) 04/07/04 3,700 3,700,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
California (Continued)
Golden State Tobacco Securitization
Corporation RB (Merrill Lynch
P-Float Trust Receipts) Series
2004 PA-1236 DN (Merrill Lynch &
Co. Guaranty, Merrill Lynch Capital
Services SBPA)
1.11%(b) 04/07/04 $ 3,530 $ 3,530,000
Golden State Tobacco Securitization
Corporation RB (Merrill Lynch
P-Float Trust Receipts) Series
2004 PA-1237 DN (Merrill Lynch &
Co. Guaranty, Merrill Lynch Capital
Services SBPA) (F-1+)
1.11%(b) 04/07/04 2,740 2,740,000
Los Angeles Regulatory Airports
Corporation Lease RB (Los
Angeles International Lax Two
Project) Series 1985 DN (Societe
Generale LOC) (A-1)
1.05%(b) 04/01/04 2,000 2,000,000
Metropolitan Water District of
Southern California Waterworks RB
Series 2000B-1 DN (Westdeutsche
Landesbank Girozentrale LOC)
(A-1+, VMIG-1, F-1+)
1.10%(b) 04/01/04 4,400 4,400,000
Sacramento Municipal Utility District
RB Series 2000A DN (AMBAC
Insurance, Wachovia Bank N.A.
LOC) (VMIG-1)
1.05%(b) 04/07/04 3,300 3,300,000
-----------
42,874,202
-----------
Colorado - 0.6%
Colorado Housing & Finance
Authority RB (Single Family
Mortgage Project) Series 2003C-5
MB (AIG Insurance Guaranty)
(A-1+, MIG-1)
1.13% 11/01/04 3,000 3,000,000
Colorado Housing & Finance
Authority RB (Single Family
Mortgage Project) Series 2003 MB
(AIG Insurance Guaranty)
(AAA, MIG-1)
1.18% 11/01/04 1,000 1,000,000
-----------
4,000,000
-----------
Delaware - 1.6%
Delaware Economic Development
Authority RB (Delmarva Power &
Light Co. Project) Series 1988 DN
(A-2, VMIG-2)
1.30%(b) 04/01/04 1,900 1,900,000
Delaware Economic Development
Authority RB (Delmarva Power &
Light Co. Project) Series 1994 DN
(A-2, VMIG-2)
1.30%(b) 04/01/04 2,600 2,600,000
Delaware Economic Development
Authority RB (St. Anne's Episcopal
School Project) Series 2001 DN
(Wilmington Trust Co. LOC) (A-1)
1.15%(b) 04/07/04 2,000 2,000,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
5
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Delaware (Continued)
Sussex County IDRB (Rehoboth Mall
Project) Series 2001A DN (M & T
Bank Corp. LOC) (A-1)
1.17%(b) 04/07/04 $ 3,345 $ 3,345,000
-----------
9,845,000
-----------
District of Columbia - 0.6%
District of Columbia RB (Arts &
Technology Academy Project)
Series 2002 DN (M&T Bank Corp.
LOC) (VMIG-1)
1.17%(b) 04/07/04 3,815 3,815,000
-----------
Florida - 4.8%
Florida Housing Finance Corporation
Multi-Family RB (Merrill Lynch
P-Float Trust Receipts) Series
2000 PT-1234 DN (Merrill Lynch
Capital Services SBPA) (A-1+)
1.12%(b) 04/07/04 1,490 1,490,000
Greater Orlando Aviation Authority
RB (Special Purpose Cessna
Aircraft Project) Series 2001 AMT
DN (Textron, Inc. Guaranty)
(A-2, P-1)
2.18%(b) 04/07/04 4,000 4,000,000
Lee County IDRB Series 1997 AMT
DN (Suntrust Bank LOC)
1.21%(b) 04/07/04 2,000 2,000,000
Municipal Securities Trust Certificates
RB Series 2002A DN (AMBAC
Insurance, Bear Stearns Capital
Markets Liquidity Facility) (A-1)
1.10%(b)(c) 04/07/04 8,760 8,760,000
Munimae Trust RB (Merrill Lynch
P-Float Trust Receipts) Series
2002 PT-617 DN (Merrill Lynch
Capital Services SBPA) (A-1)
1.13%(b)(c) 04/07/04 3,000 3,000,000
Putnam County Development
Authority PCRB (Seminole Electric
Co-op Project) Series 1984D MB
(A-1)
1.12% 06/15/04 6,950 6,950,000
Putnam County Development
Authority PCRB (Seminole Electric
Co-op Project) Series 1984H-3 MB
(A-1, MIG-1)
1.00% 09/15/04 4,245 4,245,000
-----------
30,445,000
-----------
Georgia - 0.9%
Clayton County Development
Authority RB (Delta Airlines
Project) Series 2000B DN (General
Electric Capital Corp. LOC)
(A-1+, VMIG-1)
1.11%(b) 04/07/04 3,655 3,655,000
Emanuel County Development
Authority RB (Jabo Metal
Fabrication Project) Series 2001
AMT DN (Suntrust Bank LOC)
(VMIG-1)
1.18%(b) 04/07/04 2,105 2,105,000
-----------
5,760,000
-----------
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Hawaii - 0.2%
Hawaii Airport Systems RB (Bigelow
Project) Series 2001A AMT DN
(FGIC Insurance, Bear Stearns
SBPA) (A-1)
1.13%(b)(c) 04/07/04 $ 1,190 $ 1,190,000
-----------
Idaho - 1.0%
Blaine County School District GO
(No. 61 Hailey Project) Series
2003 RAN (MIG-1)
2.00% 07/30/04 6,600 6,621,032
-----------
Illinois - 4.4%
Chicago Board of Education
Municipal Securities Trust
Certificates RB (Bear Stearns Trust
Receipts) Series 2001 DN (FSA
Insurance, Bear Stearns Capital
Markets Liquidity Facility) (A-1)
1.10%(b)(c) 04/07/04 5,500 5,500,000
Illinois Development Finance
Authority IDRB (Royal Continental
Box Co. Project) Series 1995A
AMT DN (ABN-AMRO Bank N.V.
LOC) (A-1)
1.16%(b) 04/07/04 300 300,000
Illinois GO Series 2003 MB
(SP-1+, MIG-1)
2.00% 04/15/04 10,000 10,003,898
Illinois Health Facilities Authority
Municipal Securities Trust
Certificates RB (Bear Stearns Trust
Receipts) Series 2002 DN (MBIA
Insurance, Bear Stearns Capital
Markets Liquidity Facility) (A-1)
1.10%(b)(c) 04/07/04 4,640 4,640,000
Quad Cities Regional Economic
Development Authority RB
(Whitey's Ice Cream Manufacturing
Project) Series 1995 AMT DN
(FGIC Insurance, Bank One N.A.
LOC)
1.24%(b) 04/07/04 1,010 1,010,000
Regional Transportation Authority GO
(Merlots Project) Series 2001A-86
DN (FGIC Insurance, Wachovia
Bank N.A. LOC) (VMIG-1)
1.10%(b) 04/07/04 1,500 1,500,000
Rockford RB (Fairhaven Christian
Center Project) Series 2000 DN
(Bank One N.A. LOC)
1.20%(b) 04/07/04 1,880 1,880,000
Roselle Village IDRB (Abrasive-Form,
Inc. Project) Series 1995 AMT DN
(ABN-AMRO Bank N.V. LOC)
1.21%(b) 04/07/04 1,000 1,000,000
Schaumburg IDRB (Termax Corp.
Project) Series 2000 AMT DN
(Bank One N.A. LOC)
1.24%(b) 04/07/04 1,800 1,800,000
Winnebago County RB (Mill Project)
Series 1996 DN (Bank One N.A.
LOC)
1.15%(b) 04/07/04 80 80,000
-----------
27,713,898
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
6
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Indiana - 3.0%
Dekko Foundation Educational
Facilities RB Series 2001 DN
(Bank One N.A. LOC)
1.22%(b) 04/07/04 $2,900 $ 2,900,000
Gary Redevelopment District
Economic Growth RB Series
2001A DN (Bank One N.A. LOC)
(A-1)
1.10%(b) 04/07/04 745 745,000
Hendricks County Industrial
Redevelopment Commission Tax
Increment RB (Heartland Crossing
Project) Series 2000A DN
(Huntington National Bank LOC)
1.15%(b) 04/07/04 1,100 1,100,000
Indiana Development Finance
Authority IDRB Series 2000 AMT
DN (Bank One N.A. LOC)
1.24%(b) 04/07/04 6,600 6,600,000
Indiana Municipal Securities Trust
Certificates RB (Bear Stearns
Municipal Trust Receipts) Series
2001A DN (Bear Stearns Capital
Markets Liquidity Facility) (A-1)
1.10%(b)(c) 04/07/04 5,115 5,115,000
Knox Economic Development RB
(J.W. Hicks Project) Series 1998
AMT DN (Bank One N.A. LOC)
1.27%(b) 04/07/04 1,650 1,650,000
Monroe County IDRB (Griner
Engineering, Inc. Project) Series
1997 AMT DN (Fifth Third Bank
N.A. LOC)
1.21%(b) 04/07/04 852 852,000
-----------
18,962,000
-----------
Iowa - 0.1%
Iowa Finance Authority Economic
Development RB (West Liberty
Foods Project) Series 2002 DN
(Bank One N.A. LOC)
1.27%(b) 04/07/04 840 840,000
-----------
Kentucky - 2.1%
Calvert City PCRB (Air Products &
Chemicals, Inc. Project) Series
1993A DN (A-1)
1.15%(b) 04/07/04 3,000 3,000,000
Calvert City PCRB Series 1993B DN
(A-1)
1.15%(b) 04/07/04 1,000 1,000,000
Clark County PCRB (Eastern
Kentucky Power Project) Series
1984J-2 MB (National Rural
Utilities Guaranty) (A-1, MIG-1)
1.00% 04/15/04 2,500 2,500,000
Newport Industrial Building RB
(Newport Holdings Project) Series
2001A AMT DN (Huntington
National Bank LOC)
1.19%(b) 04/07/04 1,795 1,795,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Kentucky (Continued)
Pulaski County Solid Waste Disposal
RB (Natural Rural Utilities for East
Kentucky Power Project) Series
1993B AMT MB (MIG-1)
1.00% 08/15/04 $4,850 $ 4,850,000
-----------
13,145,000
-----------
Louisiana - 2.6%
Iberville Parish PCRB (Air Products &
Chemicals Project) Series 1992
DN (A-1)
1.15%(b) 04/07/04 4,000 4,000,000
Louisiana Public Facilities Authority
RB (Air Products & Chemicals
Project) Series 2002 AMT DN
(A-1, P-1)
1.10%(b) 04/07/04 4,000 4,000,000
Plaquemines Port Harbor & Terminal
Distribution Port Facilities RB
(Chevron Pipe Line Co. Project)
Series 1984 MB (Chevron Texaco
Guaranty) (AA, Aa2)
1.00% 09/01/04 2,395 2,393,505
Plaquemines Port Harbor & Terminal
Distribution Port Facilities RB
(International Marine Terminal
Project) Series 1984B MB
(Kredietbank N.V. LOC)
1.08% 03/15/05 7,000 7,000,000
-----------
17,393,505
-----------
Maryland - 9.8%
Baltimore County RB (Odyssey
School Facility Project) Series
2001 DN (M & T Bank Corp. LOC)
(A-1)
1.17%(b) 04/07/04 4,655 4,655,000
Baltimore County RB (St. James
Academy Facility Project) Series
1999 DN (M & T Bank Corp. LOC)
(A-1)
1.12%(b) 04/07/04 4,315 4,315,000
Baltimore County RB (St. Paul's
School for Girls Facility Project)
Series 2000 DN (M & T Bank
Corp. LOC ) (A-2)
1.12%(b) 04/07/04 2,400 2,400,000
Frederick County RB (Homewood,
Inc. Facility Project) Series 1997
DN (M & T Bank Corp. LOC) (A-1)
1.17%(b) 04/07/04 4,900 4,900,000
Howard County Economic
Development RB (Pace, Inc.
Project) Series 1995 DN (M & T
Bank Corp. LOC)
1.17%(b) 04/07/04 3,700 3,700,000
Howard County RB (Glenelg Country
School Project) Series 2001 DN (M
& T Bank Corp. LOC) (A-1)
1.12%(b) 04/07/04 3,380 3,380,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
7
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Maryland (Continued)
Maryland Economic Development
Authority RB (Association of
Catholic Charities Project) Series
1999A DN (M & T Bank Corp.
LOC) (A-1)
1.12%(b) 04/07/04 $ 2,655 $ 2,655,000
Maryland Economic Development
Authority RB (Association of
Catholic Charities Project) Series
1999B DN (M & T Bank Corp.
LOC) (A-1)
1.12%(b) 04/07/04 1,575 1,575,000
Maryland Economic Development
Corporation RB (American Health
Assistance Foundation Facility
Project) Series 2001 DN (M & T
Bank Corp. LOC) (A-1)
1.17%(b) 04/07/04 3,620 3,620,000
Maryland Economic Development
Corporation RB (Mirage-Tucker
LLC Facility Project) Series 2002
DN (M & T Bank Corp. LOC)
(VMIG-1)
1.22%(b) 04/07/04 1,425 1,425,000
Maryland Health & Higher
Educational Facilities Authority RB
(Doctors' Community Hospital
Issue Project) Series 1999 DN (M
& T Bank Corp. LOC) (A-1)
1.12%(b) 04/07/04 4,865 4,865,000
Maryland Health & Higher
Educational Facilities Authority RB
(Roland Park Country School
Project) Series 2001 DN (M & T
Bank Corp. LOC) (A-1)
1.12%(b) 04/07/04 5,950 5,950,000
Montgomery County Economic
Development RB (Brooke Grove
Foundation, Inc. Project) Series
1998 DN (M & T Bank Corp. LOC)
(A-1)
1.17%(b) 04/07/04 4,785 4,785,000
Montgomery County Housing
Finance Authority RB Series
2001-1276 DN (Merrill Lynch & Co.
Guaranty) (A-1)
1.16%(b) 04/07/04 6,000 6,000,000
Montgomery County RB (Imagination
Stage, Inc. Facility Project) Series
2002 DN (M & T Bank Corp. LOC)
1.17%(b) 04/07/04 4,000 4,000,000
Ocean City RB (Harrison Inn 58 L.P.
Project) Series 1997 DN (M & T
Bank Corp. LOC) (A-1)
1.37%(b) 04/07/04 3,870 3,870,000
-----------
62,095,000
-----------
Massachusetts - 6.6%
Chelmsford GO Series 2003 BAN
(SP-1+, MIG-1)
1.62% 04/22/04 2,000 2,000,584
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Massachusetts (Continued)
Commonwealth of Massachusetts
GO (Wachovia Merlots Trust
Receipts) Series 2002A-9 DN (FSA
Insurance, Wachovia Bank N.A.
SBPA) (A-1)
1.07%(b) 04/07/04 $ 1,495 $ 1,495,000
Leicester Water District GO Series
2003 BAN
2.00% 06/03/04 1,500 1,502,246
Marlborough GO Series 2003 RAN
(SP-1+, MIG-1)
1.20% 06/17/04 2,000 2,001,206
Millbury GO Series 2004 BAN
2.00% 01/21/05 8,200 8,257,484
Walpole GO Series 2003 BAN
(MIG-1)
2.00% 11/04/04 5,000 5,027,274
Wellesley GO Series 2003 BAN
(SP-1+, MIG-1)
1.15% 06/03/04 6,250 6,251,590
Westborough GO Series 2003 BAN
(MIG-1)
1.38% 05/21/04 15,000 15,006,078
-----------
41,541,462
-----------
Michigan - 1.2%
Detroit Economic Development
Corporation RB (EH Association
Ltd. Project) Series 2002 DN
(Charter One Bank LOC)
1.15%(b) 04/07/04 3,630 3,630,000
Michigan Strategic Fund Limited
Obligation RB (Horizons of
Michigan Project) Series 2001 DN
(Huntington National Bank LOC)
1.12%(b) 04/07/04 1,675 1,675,000
Michigan Strategic Fund Limited
Obligation RB (Kay Screen
Printing, Inc. Project) Series 2000
AMT DN (Bank One N.A. LOC)
1.24%(b) 04/07/04 2,400 2,400,000
-----------
7,705,000
-----------
Minnesota - 1.2%
Duluth GO (Tax & Aid Certificates
Project) Series 2004 MB (A-1, A1)
2.00% 12/31/04 4,000 4,028,489
Hennepin County GO Series 1997C
DN (Westdeutche Landesbank
Gironzentrale LOC) (A-1+, VMIG-1)
0.87%(b) 04/07/04 200 200,000
Minneapolis GO Series 1998B DN
(Dexia Credit Local SBPA)
(A-1+, VMIG-1)
0.87%(b) 04/07/04 680 680,000
Minneapolis Library GO Series 2003
DN (Dexia Credit Local SBPA)
(A-1+, VMIG-1, F-1+)
0.87%(b) 04/07/04 1,000 1,000,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
8
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Minnesota (Continued)
Minnesota Higher Education Facilities
Authority RB (Carleton College
Project) Series 2000G DN (Wells
Fargo Bank LOC) (VMIG-1)
0.87%(b) 04/07/04 $ 1,400 $ 1,400,000
-----------
7,308,489
-----------
Mississippi - 0.6%
Mississippi Development Bank
Special Obligation RB (Correctional
Facilities Project) Series 2002 DN
(AMBAC Insurance, Amsouth Bank
of Alabama SBPA) (A-1)
1.12%(b) 04/07/04 3,985 3,985,000
-----------
Missouri - 0.2%
Missouri State Health & Educational
Facilities RB (Drury College
Project) Series 1999 DN
(Mercantile Bank N.A. LOC)
(VMIG-1)
1.17%(b) 04/01/04 2,200 2,200,000
-----------
Nebraska - 0.5%
American Public Energy Gas Supply
Agency RB (Nebraska Public Gas
Agency Project) Series 1998C MB
(AMBAC Insurance) (AAA, Aaa)
4.00% 09/01/04 3,000 3,037,691
-----------
Nevada - 1.4%
Clark County Economic Development
RB (Lutheran Secondary School
Association Project) Series 2000
DN (Allied Irish Bank PLC LOC)
(VMIG-1)
1.30%(b) 04/07/04 1,500 1,500,000
Clark County School District
Municipal Securities Trust
Certificates RB (Bear Stearns Trust
Receipts) Series 2001A DN (FSA
Insurance) (A-1+)
1.10%(b)(c) 04/07/04 4,500 4,500,000
Municipal Securities Trust Certificates
RB (Bear Stearns Trust Receipts)
Series 2002A DN (FGIC Insurance,
Bear Stearns LOC) (A-1)
1.10%(b)(c) 04/07/04 2,990 2,990,000
-----------
8,990,000
-----------
New Hampshire - 0.4%
New Hampshire Health & Education
Facilities Authority RB (Tilton
School Project) Series 1999 DN
(KeyBank N.A. LOC)
1.10%(b) 04/07/04 2,330 2,330,000
-----------
New Jersey - 3.8%
Montclair GO Series 2003 MB
1.50% 05/28/04 10,847 10,854,521
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
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)
1.05%(b) 04/07/04 $ 4,300 $ 4,300,000
New Jersey Housing & Mortgage
Finance Agency RB (Single Family
Housing Project) Series 2004F
AMT MB
1.05% 04/01/05 6,650 6,650,000
New Jersey Housing & Mortgage
Finance Agency RB Series
2003DD RAN (MBIA Insurance)
(SP-1+, MIG-1)
1.05% 04/01/04 2,500 2,500,000
-----------
24,304,521
-----------
New York - 5.0%
Auburn IDRB (Fat Tire LLC Project)
Series 1997 DN (KeyBank N.A.
LOC)
1.21%(b) 04/07/04 1,265 1,265,000
City of New York Transitional Finance
Authority RB (Future Tax Secured
Bonds) Series 1998C DN
(Bayerische Landesbank
Girozentrale LOC) (A-1+, VMIG-1)
1.08%(b) 04/01/04 8,700 8,700,000
New York City Transitional Finance
Authority RB Series 2001B DN
(Landesbank Hessen-Thuringen
Girozentrale LOC) (A-1+, VMIG-1)
1.10%(b) 04/01/04 3,500 3,500,000
New York City Transitional Finance
Authority RB Series 2003-7 DN
(Banque Nationale de Paribas
SBPA)
1.05%(b) 04/07/04 3,575 3,575,000
New York State Energy Research &
Development Authority PCRB (New
York State Electric & Gas Corp.
Project) Series 1994B DN (XLCA
Insurance, Mellon Bank LOC)
(A-1+, VMIG-1)
1.10%(b) 04/01/04 1,700 1,700,000
New York State Energy Research &
Development Authority PCRB (New
York State Electric & Gas Corp.
Project) Series 1994C DN (XLCA
Insurance, Morgan Guaranty Trust
LOC) (A-1+, VMIG-1)
1.14%(b) 04/01/04 1,100 1,100,000
New York State GO Series 2003R
ROC-II-251A DN (Citibank LOC)
(VMIG-1)
1.09%(b) 04/07/04 7,800 7,800,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
9
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
New York (Continued)
New York State Housing Finance
Agency RB (306 West 43rd Street
Project) Series 2003 DN (Federal
National Mortgage Association
Guaranty)
1.07%(b) 04/07/04 $1,600 $ 1,600,000
New York State Housing Finance
Agency RB (Worth Street Project)
Series 2001A DN (Federal National
Mortgage Association Guaranty)
1.02%(b) 04/07/04 2,500 2,500,000
New York State Local Government
Assistance Corporation RB Series
1995G DN (Bank of Nova Scotia
LOC) (A-1+, VMIG-1)
0.99%(b) 04/07/04 200 200,000
-----------
31,940,000
-----------
North Carolina - 8.4%
Charlotte Airport RB Series 1993A
DN (MBIA Insurance,
Commerzbank SBPA)
(A-2, VMIG-1)
1.19%(b) 04/07/04 5,575 5,575,000
Charlotte Certificates of Participation
(Convention Facilities Project)
Series 2003B DN (Wachovia Bank
N.A. LOC) (A-1, VMIG-1)
1.10%(b) 04/01/04 4,500 4,500,000
Charlotte Certificates of Participation
(Equipment Acquisition Project)
Series 2004C MB (Aa1)
2.00% 03/01/05 3,000 3,027,212
Guilford County Industrial Facilities &
Pollution Control Financing
Authority RB (Quantum Group, Inc.
Project) Series 2000 AMT DN
(Bank of America N.A. LOC) (F-1+,
AA)
1.15%(b) 04/07/04 830 830,000
Mecklenburg County Industrial
Facilities & Pollution Control
Financing Authority IDRB (Griffith
Micro Science Project) Series 1995
AMT DN (Bank One N.A. LOC)
(A-1+)
1.12%(b) 04/07/04 3,000 3,000,000
Mecklenburg County Public
Improvement GO Series 2000D
MB (AAA, Aaa)
4.75% 04/01/05 1,000 1,037,010
North Carolina GO Series 2002D DN
(Landesbank Baden SBPA)
(A-1+, VMIG-1)
1.03%(b) 04/07/04 3,800 3,800,000
North Carolina GO Series 2003A-23
DN (Wachovia Bank N.A. LOC)
(A-1)
1.10%(b) 04/07/04 300 300,000
North Carolina Housing Finance
Agency RB (Wachovia Merlots
Trust Receipts) Series 2000A-37
AMT DN (Wachovia Bank N.A.
LOC) (VMIG-1)
1.15%(b) 04/07/04 2,035 2,035,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
North Carolina (Continued)
North Carolina Medical Care
Commission Hospital RB (Baptist
Hospital Project) Series 1992B DN
(Wachovia Bank N.A. LOC)
(A-1+, VMIG-1)
1.05%(b) 04/07/04 $ 500 $ 500,000
North Carolina Medical Care
Commission Hospital RB (Baptist
Hospital Project) Series 2000 DN
(Wachovia Bank N.A. LOC)
(A-1, VMIG-1)
0.98%(b) 04/07/04 5,800 5,800,000
North Carolina Medical Care
Commission Hospital RB (Lutheran
Retirement Project) Series 1999
DN (Bank of America N.A. LOC)
(F-1+)
1.05%(b) 04/07/04 1,970 1,970,000
North Carolina Medical Care
Commission Hospital RB (Moses
H. Cone Memorial Hospital Project)
Series 1993 DN (Wachovia Bank
N.A. LOC) (A-1)
1.02%(b) 04/07/04 300 300,000
North Carolina Medical Care
Commission Hospital RB (Moses
H. Cone Memorial Hospital Project)
Series 2001A DN (Chase
Manhattan Bank LOC) (A-1+)
1.00%(b) 04/07/04 400 400,000
North Carolina Medical Care
Commission Hospital RB (Park
Ridge Hospital Project) Series
1988 DN (Nationsbank LOC)
(A-1+)
1.02%(b) 04/07/04 6,800 6,800,000
North Carolina Municipal Power
Agency RB (Catawba Electric Co.
Project) Series 2003 DN (MBIA
Insurance, Bank of New York
SBPA) (A-1)
1.06%(b) 04/07/04 700 700,000
North Carolina Municipal Power
Agency RB (Merrill Lynch P-Float
Trust Receipts, Catawba Electric
Co. Project) Series 2003 DN
(AMBAC Insurance, Merrill Lynch
Capital Services SPBA)
(AAA, F-1+)
1.15%(b) 04/07/04 4,500 4,500,000
Raleigh County Certificates of
Participation (Downtown
Improvement Project) Series
2004A DN (Depfa Bank PLC
SBPA) (A-1+, VMIG-1)
1.04%(b) 04/07/04 2,400 2,400,000
Raleigh County Certificates of
Participation (Packaging Facilities
Project) Series 2000A DN (Bank of
America N.A. SBPA)
(A-1+, VMIG-1)
1.05%(b) 04/07/04 1,700 1,700,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
10
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
North Carolina (Continued)
Rockingham County Industrial
Facilities & Pollution Control
Financing Authority RB
(Whiteridge, Inc. Project) Series
1998 AMT DN (Branch Banking &
Trust Co. LOC)
1.15%(b) 04/07/04 $ 80 $ 80,000
Rutherford County Industrial Facilities
& Pollution Control Financing
Authority RB (All American Homes
Project) Series 1996 AMT DN
(Bank One N.A. LOC)
1.27%(b) 04/07/04 1,200 1,200,000
Wake County Public Improvement
GO Series 2003A MB (Suntrust
Bank LOC) (A-1+, MIG-1)
3.00% 04/01/04 2,555 2,555,000
-----------
53,009,222
-----------
North Dakota - 0.2%
Fargo IDRB (Owen Industries, Inc.
Project) Series 1997 AMT DN
(Wells Fargo Bank LOC) (A-1+)
1.07%(b) 04/07/04 500 500,000
North Dakota Housing Finance
Agency RB Series 2001A-19 DN
(Wachovia Bank N.A. LOC)
(VMIG-1)
1.15%(b) 04/07/04 475 475,000
-----------
975,000
-----------
Ohio - 3.9%
Akron Income Tax RB (Community
Learning Centers Project) Series
2004A MB (FGIC Insurance,
ABN-AMRO Bank N.V. LOC)
1.09% 12/08/04 2,000 1,999,999
Cuyahoga County IDRB (Trio
Diversified Co. Project) Series
2000 AMT DN (KeyBank N.A.
LOC)
1.20%(b) 04/07/04 2,095 2,094,999
Galion GO Series 2003 BAN
1.62% 06/03/04 1,000 1,000,722
Greene County GO Series 2003 BAN
(MIG-1)
1.30% 08/20/04 500 500,437
Lancaster GO Series 2004 BAN
1.13% 09/10/04 1,000 1,001,444
Lucas County Economic
Development RB (Maumee Valley
Country Day School Project)
Series 1998 AMT DN (American
National Bank & Trust Co. LOC)
2.01%(b) 04/07/04 1,125 1,125,000
Marysville City Sewer Authority GO
Series 2003 BAN
1.41% 11/10/04 2,000 2,003,121
Middletown School District GO Series
2003 BAN
1.75% 06/10/04 2,000 2,002,280
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Ohio Air Quality Development
Authority RB (JMG Funding Ltd.
Partnership Project) Series 1994A
AMT DN (Societe Generale LOC)
(A-1+)
0.99%(b) 04/07/04 $7,500 $ 7,500,000
Ohio Air Quality Development
Authority RB (JMG Funding Ltd.
Partnership Project) Series 1995B
AMT DN (Westdeutsche
Landesbank Gironzentrale LOC)
(A-1+)
1.10%(b) 04/07/04 300 300,000
Ohio Higher Educational Facility
Community RB Series 2000C DN
(Fifth Third Bank N.A. LOC)
1.12%(b) 04/07/04 1,100 1,100,000
Ohio PCRB (Ross Incineration
Project) Series 2000-1 AMT DN
(Bank One N.A. LOC)
1.24%(b) 04/07/04 1,240 1,240,000
Summit County Civic Facility RB
(Akron Area Electrical Joint
Apprenticeship & Training Trust
Project) Series 2001 DN (Key
Bank N.A. LOC)
1.10%(b) 04/07/04 180 180,000
Troy GO Series 2004 BAN
1.64% 09/30/04 1,000 1,002,899
Wood County IDRB (Aluminite, Inc.
Project) Series 1997 AMT DN (Sky
Bank LOC)
2.01%(b) 04/07/04 1,380 1,380,000
-----------
24,430,901
-----------
Oklahoma - 0.7%
Canadian County Home Financing
Authority RB (Merrill Lynch P-Float
Trust Receipts, Multi-Family
Housing Project) Series 2003
PT-1885 AMT DN (Merrill Lynch
Captial Services SBPA) (F-1+, AA-)
1.16%(b) 04/01/04 2,650 2,650,000
Oklahoma Development Finance
Authority RB (ConocoPhillips Co.
Project) Series 2003 MB
(A-2, VMIG-2)
1.35% 12/01/04 2,000 2,000,000
-----------
4,650,000
-----------
Oregon - 0.6%
Oregon GO Series 2003 TAN
(SP-1+, MIG-1)
2.25% 11/15/04 3,500 3,525,454
-----------
Pennsylvania - 1.5%
Lancaster County Hospital Authority
RB (Landis Homes Retirement
Community Project) Series 2002
DN (M & T Bank Corp. LOC)
1.12%(b) 04/07/04 4,285 4,285,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
11
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Philadelphia GO Series 2003 TRAN
2.00% 06/30/04 $ 5,000 $ 5,012,668
-----------
9,297,668
-----------
Puerto Rico - 0.8%
Commonwealth of Puerto Rico
Highway & Transportation Authority
RB (Merrill Lynch P-Float Trust
Receipts) Series 2002 PT-1052 DN
(Merrill Lynch Capital Services
Liquidity Facility) (A-1)
1.05%(b) 04/07/04 900 900,000
Commonwealth of Puerto Rico Public
Improvement GO Series 2001 DN
(FSA Insurance, Toronto Dominion
LOC) (A-1+)
1.00%(b) 04/07/04 800 800,000
Commonwealth of Puerto Rico Public
Improvement GO Series 2002A DN
(FGIC Insurance, Salomon Smith
Barney Liquidity Facility) (VMIG-1)
1.05%(b) 04/07/04 2,200 2,200,000
Commonwealth of Puerto Rico Public
Improvement GO Series 2003C
DN (FSA Insurance, Merrill Lynch
Capital Services SBPA) (A-1)
1.01%(b) 04/07/04 980 980,000
-----------
4,880,000
-----------
South Carolina - 0.2%
South Carolina Housing Finance &
Development RB (Arrington Place
Apartment Project) Series 2001
AMT DN (Suntrust Bank LOC)
(VMIG-1)
1.18%(b) 04/07/04 1,300 1,300,000
-----------
Texas - 4.2%
Austin Airport Systems RB Series
2000J AMT DN (MBIA Insurance,
Wachovia Bank N.A. LOC)
(VMIG-1)
1.15%(b) 04/07/04 2,000 2,000,000
Brazos Industrial Development
Corporation Environmental
Facilities RB (ConocoPhillips Co.
Project) Series 2003 AMT MB
(A-2, MIG-2)
1.38% 08/01/04 2,000 2,000,000
Collin County Housing Finance
Corporation Multi-Family RB
(Merrill Lynch P-Float Trust
Receipts) Series 1999 PT-1160 DN
(Merrill Lynch & Co. Guaranty,
Merrill Lynch Capital Services
Liquidity Facility)
1.10%(b) 04/07/04 2,355 2,355,000
Lower Colorado River Authority RB
(Wachovia Merlots Trust Receipts)
Series 2000 DN (FSA Insurance,
Wachovia Bank N.A. SBPA)
(VMIG-1)
1.10%(b) 04/07/04 1,900 1,900,000
Texas GO Series 2003 TRAN
(SP-1+, MIG-1)
2.00% 08/31/04 18,000 18,063,638
-----------
26,318,638
-----------
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Virginia - 7.4%
Alexandria IDRB (Association for
Supervision & Curriculum
Development Project) Series 1997
DN (Wachovia Bank N.A. LOC)
(A-1)
1.01%(b) 04/07/04 $ 300 $ 300,000
Alexandria IDRB (Young Men's
Christian Association of Billings
Project) Series 1998 DN (M & T
Bank Corp. LOC) (A-1)
1.17%(b) 04/07/04 3,375 3,375,000
Chesapeake Bay Bridge & Tunnel
Commonwealth District RB
(Wachovia Merlots Trust Receipts)
Series 2003 DN (MBIA Insurance,
Wachovia Bank N.A. Liquidity
Facility) (VMIG-1)
1.10%(b) 04/07/04 1,100 1,100,000
Commonwealth of Virginia
Transportation Authority RB
(Citibank Eagle Trust Receipts)
Series 1999 DN (Citibank Liquidity
Facility) (A-1+)
1.08%(b) 04/07/04 1,500 1,500,000
Fairfax County Economic
Development Authority RB (NISH
Project) Series 2002 501-C-3 DN
(Suntrust Bank LOC) (VMIG-1)
1.05%(b) 04/07/04 1,200 1,200,000
Fairfax County Economic
Development Authority RB Series
2003 ROCS-RR-II-R-4024 DN
(Citigroup Liquidity Facility)
(VMIG-1)
1.08%(b) 04/07/04 4,985 4,985,000
Fairfax County IDRB (Fairfax
Hospital System Project) Series
1988B DN (Inova Health System
Liquidity Facility) (A-1+, VMIG-1)
0.95%(b) 04/07/04 400 400,000
Fairfax County IDRB (Inova Health
Systems Project) Series 2000 DN
(A-1+, VMIG-1)
0.95%(b) 04/07/04 900 900,000
Halifax County GO (Vepco Project)
Series 2003 TECP (A-1, MIG-1)
1.15% 08/13/04 2,000 2,000,000
Harrisonburg Redevelopment &
Housing Authority Lease Purchase
RB Series 2001A DN (Societe
Generale LOC) (A-1+)
1.05%(b) 04/07/04 1,850 1,850,000
Henrico County Economic
Development Authority Residential
Care Facility RB (Westminster
Centerbury Project) Series 2003B
DN (KBC Bank LOC) (VMIG-1)
1.01%(b) 04/07/04 100 100,000
Loudoun County Educational
Facilities IDRB (Hill School Project)
Series 2002 DN (Suntrust Bank
LOC) (AA-, A-1+)
1.05%(b) 04/07/04 1,400 1,400,000
Loudoun County IDRB (Howard
Hughes Medical Institute Project)
Series 2003D DN (A-1+, VMIG-1)
0.98%(b) 04/07/04 1,500 1,500,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
12
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Virginia (Continued)
Loudoun County IDRB (Howard
Hughes Medical Institute Project)
Series 2003E DN (A-1+, VMIG-1)
1.08%(b) 04/01/04 $ 200 $ 200,000
Loudoun County IDRB (Howard
Hughes Medical Institute Project)
Series 2003F DN (A-1+, VMIG-1)
1.00%(b) 04/07/04 400 400,000
Lynchburg Public Improvement GO
Series 2003B MB (AA, Aa3)
2.00% 02/01/05 820 826,627
Norfolk Redevelopment & Housing
Authority Multi-Family Housing RB
(Residential Rental Project) Series
2003 AMT DN (Suntrust Bank
LOC)
1.23%(b) 04/07/04 2,094 2,094,000
Prince William County GO (Vepco
Project) Series 2004 TECP
(A-1, MIG-1)
1.10% 08/13/04 700 700,000
Richmond IDRB (Diocese of Virginia
Church School Project) Series
2001 DN (Suntrust Bank LOC)
(VMIG-1)
1.11%(b) 04/01/04 200 200,000
Richmond Public Improvement GO
Series 2002A MB (FSA Insurance)
(AAA, Aaa)
4.00% 07/15/04 500 504,319
University of Virginia RB Series
2003B-31 DN (Wachovia Bank
N.A. SBPA) (VMIG-1)
1.10%(b) 04/07/04 900 900,000
Virginia Beach Development Authority
IDRB (Ocean Ranch Motel Corp.
Project) Series 1998 DN (Branch
Banking & Trust Co. LOC)
1.05%(b) 04/07/04 400 400,000
Virginia Beach Development Authority
Multi-Family Housing RB Series
1999-1146 DN (Merrill Lynch
Capital Services SBPA)
1.08%(b) 04/07/04 6,830 6,830,000
Virginia Commonwealth
Transportation Board
Transportation RB Series 2000
SG-134 DN (Societe Generale
LOC) (A-1C+)
1.07%(b) 04/07/04 5,600 5,600,000
Virginia Commonwealth
Transportation Board
Transportation RB Series
2002-1013 DN (Salomon Smith
Barney Liquidity Facility) (A-1+)
1.08%(b) 04/07/04 5,970 5,970,000
Virginia Resource Authority Clean
Water State Revolving Fund RB
Series 2000 DN (Merrill Lynch
Captial Services SBPA) (A-1)
1.07%(b) 04/07/04 805 805,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Virginia (Continued)
Virginia Small Business Financing
Authority IDRB (Ennstone Project)
Series 1999 AMT DN (Wachovia
Bank N.A. LOC)
1.11%(b) 04/07/04 $ 620 $ 620,000
-----------
46,659,946
-----------
Washington - 2.8%
Chelan County Public Utility District
RB Series 2001B DN (MBIA
Insurance, Wachovia Bank N.A.
SBPA) (A-1)
1.15%(b) 04/07/04 1,150 1,150,000
Seattle Housing Authority RB (Rainier
Vista Project Phase I) Series 2003
AMT DN (KeyBank N.A. LOC)
(A-1)
1.07%(b) 04/07/04 5,625 5,625,000
Washington GO Series 1996B DN
(Landesbank Hessen-Thuringen
Girozentrale SBPA) (A-1+, VMIG-1)
0.95%(b) 04/07/04 10,000 10,000,000
Yakima County Public Corp. RB
(Michelsen Packaging Co. Project)
Series 2000 AMT DN (Bank of
America N.A. LOC) (A-1+)
1.20%(b) 04/01/04 805 805,000
-----------
17,580,000
-----------
West Virginia - 0.8%
West Virginia Economic Development
Authority RB (Juvenile Correctional
Project) Series 2002A DN (MBIA
Insurance, Bear Stearns Capital
Markets Liquidity Facility) (A-1)
1.10%(b)(c) 04/07/04 4,990 4,990,000
-----------
Wisconsin - 2.5%
Amery IDRB (Plastech Corp. Project)
Series 1997 AMT DN (U.S. Bank
N.A. LOC)
1.22%(b) 04/07/04 2,000 2,000,000
Germantown IDRB (Cambridge Major
Labs Project) Series 2003 AMT DN
(Bank One N.A. LOC)
1.21%(b) 04/07/04 6,000 6,000,000
Mequon IDRB (Johnson Level GRW
Investment Project) Series 1995
AMT DN (Bank One N.A. LOC)
1.24%(b) 04/07/04 750 750,000
Southeast Wisconsin Professional
Baseball Park RB (Wachovia
Merlots Trust Receipts) Series
2000Y DN (MBIA Insurance,
Wachovia Bank N.A. SBPA)
(VMIG-1)
1.10%(b) 04/07/04 2,280 2,280,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
13
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MUNICIPAL MONEY MARKET PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- -------- -------------
MUNICIPAL BONDS (Continued)
Wisconsin (Continued)
Whitewater IDRB (Husco
International, Inc. Project) Series
1997 AMT DN (LaSalle National
Bank LOC) (A-1)
1.11%(b) 04/07/04 $ 500 $ 500,000
Wisconsin GO Series 2004-1 MB
0.96% 07/15/04 4,000 4,000,000
-----------
15,530,000
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $622,501,629(a)) 98.3% 622,501,629
OTHER ASSETS IN EXCESS OF
LIABILITIES 1.7% 10,467,939
----- -----------
NET ASSETS (Equivalent to $1.00 per
share based on 404,887,556
Institutional shares, 79,541,715
Service shares, 142,288,911 Hilliard
Lyons shares and 6,167,304 Investor
A shares outstanding) 100.0% $632,969,568
===== ============
VALUE
--------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($404,960,865/404,887,556) $ 1.00
=======
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SERVICE SHARE
($79,527,004/79,541,715) $ 1.00
=======
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
HILLIARD LYONS SHARE
($142,313,180/142,288,911) $ 1.00
=======
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($6,168,519/6,167,304) $ 1.00
=======
- -------------------
(a) Aggregate cost for Federal tax purposes.
(b) Rates shown are the rates as of March 31, 2004 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, 2004, the fund held 6.4% of its net assets, with a current market value
of $40,685,000, in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
14
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS - 100.4%
New Jersey - 96.2%
Bernards Township Sewer Authority
RB Series 1985 MB (Wachovia
Bank N.A. LOC) (AAA)
1.20% 12/15/04 $1,675 $1,675,000
Cumberland County GO Series 2003
BAN
2.50% 11/05/04 2,000 2,016,638
Florence GO Series 2004 MB (FSA
Insurance) (AAA, Aaa)
2.50% 03/01/05 365 369,699
Gloucester County GO Series 2003
MB (MBIA Insurance) (AAA, Aaa)
2.00% 07/15/04 940 942,696
Gloucester County GO Series 2003A
BAN
2.00% 10/27/04 2,800 2,814,702
Hudson County Certificates of
Participation Series 2001A-35 DN
(MBIA Insurance, Wachovia Bank
N.A. LOC) (VMIG-1)
1.06%(b) 04/07/04 4,945 4,945,000
Lyndhurst Township GO Series 2003
MB (MBIA Insurance) (AAA, Aaa)
2.00% 10/01/04 320 321,429
Middlesex County GO Series 2003
MB (AAA, Aa1)
2.00% 06/15/04 1,440 1,443,229
Middlesex County Improvement
Authority RB Series 2003 MB
(AAA, Aa1)
2.00% 09/15/04 2,660 2,670,985
Monmouth County GO Series 2002
MB (AAA, Aaa)
3.25% 07/15/04 450 452,892
Montclair GO Series 2003 BAN
(AAA, Aaa)
1.50% 05/28/04 6,000 6,004,160
New Jersey Economic Development
Authority Market Transition
Facilities RB Series 1994A MB
(MBIA Insurance) (AAA, Aaa)
5.80% 07/01/04 1,000 1,032,110
New Jersey Economic Development
Authority Multi-Mode IDRB (V & S
Amboy Galvanizing LLC Project)
Series 1999 AMT DN (KeyBank
N.A. LOC)
1.20%(b) 04/07/04 2,685 2,685,000
New Jersey Economic Development
Authority RB (Beldar Business
Form Manufacturing Project)
Series 1999 AMT DN (Wachovia
Bank N.A. LOC)
1.17%(b) 04/07/04 795 795,000
New Jersey Economic Development
Authority RB (Bethany Baptist
Church Project) Series 1998 DN
(Wachovia Bank N.A. LOC)
1.07%(b) 04/07/04 360 360,000
New Jersey Economic Development
Authority RB (Denglas
Technologies Project) Series 2000
AMT DN (Commerce Bank N.A.
LOC)
1.17%(b) 04/07/04 3,700 3,700,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
New Jersey Economic Development
Authority RB (Encap Golf Holdings
LLC Project) Series 2001A AMT
DN (Bayerische Landesbank
Girozentrale LOC) (A-1+, VMIG-1)
1.07%(b) 04/07/04 $5,100 $5,100,000
New Jersey Economic Development
Authority RB (First Mortgage of
Winchester Project) Series 2004B
DN
1.02%(b) 04/07/04 2,400 2,400,000
New Jersey Economic Development
Authority RB (Hamilton Industrial
Development Project) Series 1998
AMT DN (Wachovia Bank N.A.
LOC)
1.11%(b) 04/07/04 1,705 1,705,000
New Jersey Economic Development
Authority RB (J. James Realty Co.
Project) Series 1998 AMT DN
(Wachovia Bank N.A. LOC)
1.17%(b) 04/07/04 600 600,000
New Jersey Economic Development
Authority RB (Market Transition
Facility Project) Series 1994A MB
(MBIA Insurance) (AAA, Aaa)
5.75% 07/01/04 435 448,697
New Jersey Economic Development
Authority RB (Nandan Co. Project)
Series 2000 AMT DN (M & T Bank
Corp. LOC) (A-1)
1.07%(b) 04/07/04 3,735 3,735,000
New Jersey Economic Development
Authority RB (Nandan Co. Project)
Series 2001 DN (M & T Bank
Corp. LOC) (A-1)
1.07%(b) 04/07/04 1,990 1,990,000
New Jersey Economic Development
Authority RB (Newark Fibers, Inc.
Project) Series 1998 AMT DN
(Bank of New York LOC)
1.07%(b) 04/07/04 1,065 1,065,000
New Jersey Economic Development
Authority RB (Parke Place
Association Project) Series 2000
AMT DN (Commerce Bank N.A.
LOC)
1.17%(b) 04/07/04 7,725 7,725,000
New Jersey Economic Development
Authority RB (Pennington
Montessori School Project) Series
1998 AMT DN (Wachovia Bank
N.A. LOC)
1.17%(b) 04/07/04 1,205 1,205,000
New Jersey Economic Development
Authority RB (Stuart Country Day
School Project) Series 2002 DN (M
& T Bank Corp. LOC) (VMIG-1)
1.10%(b) 04/07/04 2,600 2,600,000
New Jersey Economic Development
Authority RB (Thermal Energy LP
Project) Series 1995 AMT DN
(Bank One N.A. LOC)
1.05%(b) 04/07/04 4,000 4,000,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
15
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
New Jersey Economic Development
Authority Special Facilities RB
(Port Newark Container LLC
Project) Series 2003 AMT DN
(Citibank LOC) (A-1+, Aa)
1.08%(b) 04/07/04 $5,300 $5,300,000
New Jersey Economic Development
Authority Special Facilities RB
Series 2004-1 DN (Bank of New
York LOC) (A-1+)
1.07%(b) 04/07/04 5,000 5,000,000
New Jersey Economic Development
Authority Thermal Energy Facilities
RB (Marina Energy LLC Project)
Series 2001A AMT DN (Wachovia
Bank N.A. LOC) (A-1, VMIG-1)
1.02%(b) 04/07/04 1,000 1,000,000
New Jersey Health Care Facilities
Financing Authority RB (Hospital
Capital Asset Financing Project)
Series 1985A DN (Wachovia Bank
N.A. LOC) (Aa2, VMIG-1)
1.02%(b) 04/07/04 1,200 1,200,000
New Jersey Health Care Facilities
Financing Authority RB (Hospital
Capital Asset Financing Project)
Series 1985D DN (J.P. Morgan
Chase Bank LOC) (Aa2, VMIG-1)
1.02%(b) 04/01/04 2,000 2,000,000
New Jersey Health Care Facilities
Financing Authority RB (Meridian
Health System Project) Series
2003 DN (J.P. Morgan Chase Bank
LOC) (A-1+, VMIG-1)
1.00%(b) 04/07/04 2,400 2,400,000
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)
1.05%(b) 04/07/04 375 375,000
New Jersey Health Care Facilities
Financing Authority RB (St.
Barnabas Medical Center Project)
Series 2001A DN (J.P. Morgan
Chase Bank LOC) (A-1+)
1.03%(b) 04/07/04 2,500 2,500,000
New Jersey Health Care Facilities
Financing Authority RB (St. Francis
Hospital Project) Series 2003A-5
DN (Wachovia Bank N.A. LOC)
(VMIG-1)
0.97%(b) 04/07/04 1,000 1,000,000
New Jersey Health Care Facilities
Financing Authority RB (St.
Joseph's Project) Series 2003A-6
DN (Valley National Bank LOC)
(A2, VMIG-1)
1.02%(b) 04/07/04 3,250 3,250,000
New Jersey Housing & Mortgage
Finance Agency RB (Single Family
Housing Project) Series 2003B
AMT MB (SP-1+, MIG-1)
1.10% 10/01/04 3,185 3,185,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
New Jersey Housing & Mortgage
Finance Agency RB (Single Family
Housing Project) Series 2004F
AMT MB
1.05% 04/01/05 $3,350 $3,350,000
New Jersey Housing & Mortgage
Finance Agency RB (Wachovia
Merlots Trust Receipts) Series
2000A-2 DN (MBIA Insurance,
Wachovia Bank N.A. SBPA) (Aaa)
1.11%(b) 04/07/04 2,000 2,000,000
New Jersey State Municipal Trust
Receipts Series 2002-L42J DN
(Lehman Brothers, Inc. Liquidity
Facility) (VMIG-1)
1.13%(b) 04/07/04 9,910 9,910,000
New Jersey State Transportation
Trust Fund Authority RB Series
2002R-149 MB (AMBAC
Insurance, Citibank Liquidity
Facility) (MIG-1)
1.20% 11/18/04 5,495 5,495,000
New Jersey State Turnpike Authority
RB Series 2002J DN (MBIA
Insurance, Lehman Bothers, Inc.
Liquidity Facility) (VMIG-1)
1.08%(b) 04/07/04 4,900 4,900,000
New Jersey State Turnpike Authority
RB Series 2003C-1 DN
(Landesbank Hessen-Thuringen
Girozentrale LOC) (A-1+, VMIG-1)
1.02%(b) 04/07/04 9,500 9,500,000
Newark GO Series 2003 DN (FSA
Insurance, Citibank LOC)
1.05%(b) 04/07/04 4,205 4,205,000
Port Authority of New York & New
Jersey Special Obligation RB
(Merrill Lynch P-Float Trust
Receipts) Series 2003 PT-1755 DN
(MBIA Insurance, Merrill Lynch
Capital Services SBPA)
(AAA, F-1+)
1.12%(b) 04/07/04 6,000 6,000,000
Port Authority of New York & New
Jersey Special Obligation RB
(Merrill Lynch P-Float Trust
Receipts) Series 2003 PT-1847
AMT DN (MBIA Insurance, Merrill
Lynch Capital Services SBPA)
1.12%(b) 04/07/04 3,995 3,995,000
Red Bank GO Series 2003 BAN
1.50% 06/25/04 3,468 3,472,786
Rockaway Township GO Series 2004
MB (MBIA Insurance) (AAA, Aaa)
2.10% 07/15/04 470 471,483
Salem County Pollution Control
Financing Authority PCRB (E.I.
DuPont de Nemours Project)
Series 1982A DN (A-1+, P-1)
1.00%(b) 04/07/04 9,600 9,600,000
Somerset County GO Series 1999
MB (AAA, Aaa)
5.10% 09/15/04 250 254,513
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
16
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
Trenton GO Series 2004 MB
(AMBAC Insurance) (AAA, Aaa)
2.00% 01/15/05 $ 850 $ 855,983
Warren County GO Series 2003B MB
(AMBAC Insurance) (Aaa)
3.00% 11/15/04 195 197,201
Warren County GO Series 2003D MB
(AMBAC Insurance) (Aaa)
3.00% 11/15/04 220 222,481
Warren County GO Series 2003E MB
(AMBAC Insurance) (Aaa)
3.00% 11/15/04 185 187,086
------------
156,628,770
------------
Puerto Rico - 4.2%
Commonwealth of Puerto Rico
Infrastructure Financing Authority
Special Obligation Bonds
(ABN-AMRO Munitops Trust
Certificates) Series 2000A-17 MB
(ABN-AMRO Bank N.V. SBPA)
(MIG-1, F-1+)
1.06% 09/22/04 3,500 3,500,000
Commonwealth of Puerto Rico Public
Improvement GO Series 2002A DN
(FGIC Insurance, Salomon Smith
Barney Liquidity Facility) (VMIG-1)
1.05%(b) 04/07/04 300 300,000
Commonwealth of Puerto Rico Public
Improvement GO Series 2003C
DN (FSA Insurance, Merrill Lynch
Capital Services SBPA) (A-1)
1.01%(b) 04/07/04 1,000 1,000,000
Puerto Rico Public Financing
Corporation RB Series 2004-911
DN (Morgan Stanley Group
Liquidity Facility) (AAA, F-1+)
1.05%(b) 04/07/04 2,000 2,000,000
------------
6,800,000
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $163,428,770(a)) 100.4% 163,428,770
LIABILITIES IN EXCESS OF
OTHER ASSETS ( 0.4)% (678,672)
----- -----------
NET ASSETS (Equivalent to $1.00
per share based on 86,199,806
Institutional shares, 63,466,007
Service shares and 13,060,841
Investor A shares outstanding) 100.0% $162,750,098
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($86,221,519/86,199,806) $ 1.00
=======
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SERVICE SHARE
($63,459,390/63,466,007) $ 1.00
=======
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($13,069,189/13,060,841) $ 1.00
=======
- -------------------
(a) Aggregate cost for Federal tax purposes.
(b) Rates shown are the rates as of March 31, 2004 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
17
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
NORTH CAROLINA MUNICIPAL MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS - 103.3%
North Carolina - 91.3%
Appalachian State University RB
Series 2003A MB (FGIC
Insurance) (AAA)
2.00% 05/01/04 $ 620 $ 620,428
Charlotte Airport RB Series 1993A
DN (MBIA Insurance,
Commerzbank SBPA)
(A-2, VMIG-1)
1.19%(b) 04/07/04 2,000 2,000,000
Charlotte Certificates of Participation
(Convention Facilities Project)
Series 2003A MB (Aa2, AA+)
5.00% 08/01/04 760 769,877
Charlotte Certificates of Participation
(Equipment Acquisition Project)
Series 2004C MB (Aa1)
2.00% 03/01/05 1,480 1,493,427
Charlotte Water & Sewer GO Series
1996 MB (AAA, Aaa)
5.50% 05/01/04 1,000 1,003,728
Cleveland County Industrial Facilities
PCRB (Blanchford Rubber Project)
Series 2003 DN (Bank One N.A.
LOC)
1.09%(b) 04/07/04 4,000 4,000,000
Iredell County Certificates of
Participation (Public Facilities
Project) Series 2003 MB (AMBAC
Insurance) (AAA, Aaa)
2.00% 10/01/04 675 677,884
Lee County Industrial Facilities &
Pollution Control Financing
Authority RB (Trion, Inc. Project)
Series 1995 DN (Wachovia Bank
N.A. LOC)
1.11%(b) 04/07/04 100 100,000
Lee County Industrial Facilities &
Pollution Control Financing
Authority RB (Var-Arden Corp.
Project) Series 1999 AMT DN
(Comerica Bank N.A. LOC)
1.15%(b) 04/07/04 2,700 2,700,000
Mecklenburg County Public
Improvement GO Series 2000D
MB (AAA, Aaa)
4.75% 04/04-04/05 1,880 1,922,563
Moore County Public Improvement
GO Series 2003 MB (FGIC
Insurance) (AAA, Aaa)
5.00% 06/01/04 400 402,505
New Hanover County GO Series
2004 MB (AA, Aa2)
5.00% 11/01/04 1,075 1,100,042
North Carolina Capital Facilities
Finance Agency RB (Aquarium
Society Project) Series 2004 DN
(Bank of America N.A. LOC)
(AA-, F-1+)
1.05%(b) 04/07/04 2,000 2,000,000
North Carolina Educational Facilities
Financing Agency RB (Gaston Day
School Project) Series 2000 DN
(Bank of America N.A. LOC) (F-1+)
1.05%(b) 04/07/04 100 100,000
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
North Carolina (Continued)
North Carolina GO Series 2002D DN
(Landesbank Baden SBPA)
(A-1+, VMIG-1)
1.03%(b) 04/07/04 $1,100 $1,100,000
North Carolina GO Series 2002F DN
(Wavhovia Bank N.A. LOC)
(A-1, VMIG-1)
1.02%(b) 04/07/04 1,100 1,100,000
North Carolina Housing Finance
Agency RB (Municipal Securities
Trust Certificates Project) Series
2002A-9034 AMT DN (Bear
Stearns SBPA) (A-1)
1.13%(b)(c) 04/07/04 8,670 8,670,000
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)
1.02%(b) 04/07/04 100 100,000
North Carolina Medical Care
Commission Hospital RB
(Aces-Pooled Equipment Financing
Project) Series 1985 DN (MBIA
Insurance, KBC Bank SBPA)
(A-1+, VMIG-1)
0.96%(b) 04/07/04 200 200,000
North Carolina Medical Care
Commission Hospital RB (Angel
Medical Center, Inc. Project) Series
1997 DN (Wachovia Bank N.A.
LOC) (A-1)
1.01%(b) 04/07/04 600 600,000
North Carolina Medical Care
Commission Hospital RB (Baptist
Hospital Project) Series 1996 DN
(Wachovia Bank N.A. LOC)
(A-1+, VMIG-1)
1.05%(b) 04/07/04 200 200,000
North Carolina Medical Care
Commission Hospital RB (Lincoln
Health System Project) Series
1996A DN (Bank of America N.A.
LOC) (A-1, VMIG-1)
1.05%(b) 04/07/04 700 700,000
North Carolina Medical Care
Commission Hospital RB (Lutheran
Retirement Project) Series 1999
DN (Bank of America N.A. LOC)
(F-1+)
1.05%(b) 04/07/04 100 100,000
North Carolina Medical Care
Commission Hospital RB
(McDowell Hospital, Inc. Project)
Series 1999 DN (Wachovia Bank
N.A. SBPA) (A-1)
1.01%(b) 04/07/04 900 900,000
North Carolina Medical Care
Commission Hospital RB (Moses
H. Cone Memorial Hospital Project)
Series 1998 DN (Wachovia Bank
N.A. LOC) (A-1)
1.02%(b) 04/07/04 200 200,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
18
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
NORTH CAROLINA MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
North Carolina (Continued)
North Carolina Medical Care
Commission Hospital RB (Moses
H. Cone Memorial Hospital Project)
Series 2001A DN (Chase
Manhattan Bank LOC) (A-1+)
1.00%(b) 04/07/04 $2,100 $ 2,100,000
North Carolina Medical Care
Commission Hospital RB (Park
Ridge Hospital Project) Series
1988 DN (Nationsbank LOC)
(A-1+)
1.02%(b) 04/07/04 1,425 1,425,000
North Carolina Medical Care
Commission Retirement Facilities
RB (Aldersgate Project) Series
2001 DN (Branch Banking & Trust
Co. LOC) (A-1)
1.13%(b) 04/07/04 1,200 1,200,000
North Carolina Medical Care
Commission Retirement Facilities
RB (Brookwood Project) Series
2001C DN (Branch Banking &
Trust Co. LOC) (A-1)
1.13%(b) 04/07/04 600 600,000
North Carolina Municipal Power
Agency RB (Catawba Electric Co.
Project) Series 2003 DN (MBIA
Insurance, Bank of New York
SBPA) (A-1)
1.06%(b) 04/07/04 1,700 1,700,000
North Carolina State Clean Water
GO Series 1995A MB (AAA, Aa1)
5.20% 06/01/04 250 251,669
Raleigh County Certificates of
Participation (Downtown
Improvement Project) Series
2004A DN (Depfa Bank PLC
SBPA) (A-1+, VMIG-1)
1.04%(b) 04/07/04 600 600,000
Raleigh County Certificates of
Participation (Packaging Facilities
Project) Series 2000A DN (Bank of
America N.A. SBPA)
(A-1+, VMIG-1)
1.05%(b) 04/07/04 1,200 1,200,000
Raleigh Durham Airport Authority RB
Series 2002 AMT DN (FGIC
Insurance)
(AAA, Aaa, VMIG-1, F-1+)
1.03%(b) 04/07/04 800 800,000
Raleigh Public Improvement GO
Series 2004A MB (AAA, Aaa)
2.00% 04/01/05 795 802,775
Rockingham County Industrial
Facilities & Pollution Control
Financing Authority RB (Medibeg,
Inc. Project) Series 1997 AMT DN
(Wachovia Bank N.A. LOC) (Aa2)
1.16%(b) 04/07/04 1,500 1,500,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
North Carolina (Continued)
Rockingham County Industrial
Facilities & Pollution Control
Financing Authority RB
(Whiteridge, Inc. Project) Series
1998 AMT DN (Branch Banking &
Trust Co. LOC)
1.15%(b) 04/07/04 $ 720 $ 720,000
Sampson County Industrial Facilities
& Pollution Control Financing
Authority IDRB (Dubose Strapping,
Inc. Project) Series 1997 DN
(Wachovia Bank N.A. LOC) (A-1)
1.21%(b) 04/07/04 1,070 1,070,000
University Hospital Chapel Hill RB
Series 2001B DN (Landesbank
Hessen-Thuringen Girozentrale
LOC) (A-1+, VMIG-1)
1.10%(b) 04/07/04 300 300,000
University North Carolina Ashville RB
Series 2002A MB (AMBAC
Insurance) (AAA, Aaa)
2.50% 06/01/04 385 385,993
Wake County Public Improvement
GO Series 2003B MB (Suntrust
Bank LOC) (A-1+, MIG-1)
1.75% 04/01/04 2,500 2,500,000
Winston-Salem Certificates of
Participation (Risk Acceptance
Management Corp. Project) Series
1988 DN (National Westminster
Bank LOC) (A-1+)
1.03%(b) 04/07/04 550 550,000
Winston-Salem GO Series 1990 DN
(Wachovia Bank N.A. LOC)
(A-1+, VMIG-1)
1.05%(b) 04/07/04 420 420,000
-----------
50,885,891
-----------
Puerto Rico - 12.0%
Commonwealth of Puerto Rico Public
Improvement GO (Merrill Lynch
P-Float Trust Receipts) Series
2001 PA-931 DN (XLCA Insurance,
Merrill Lynch Capital Services
SBPA) (A-1)
1.02%(b) 04/07/04 500 500,000
Commonwealth of Puerto Rico Public
Improvement GO Series 2003 MB
(Merrill Lynch Capital Services
Liquidity Facility) (A-1, AA+)
1.30% 11/18/04 1,760 1,760,000
Commonwealth of Puerto Rico Public
Improvement GO Series 2003
TRAN (Morgan Stanley Group
Liquidity Facility) (SP-1+, MIG-1)
2.00% 07/30/04 2,000 2,006,718
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
19
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
NORTH CAROLINA MUNICIPAL MONEY MARKET PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- --------- -------------
MUNICIPAL BONDS (Continued)
Puerto Rico (Continued)
Puerto Rico Public Financing
Corporation RB Series 2004-911
DN (Morgan Stanley Group
Liquidity Facility) (AAA, F-1+)
1.05%(b) 04/07/04 $2,400 $2,400,000
----------
6,666,718
----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $57,552,609(a)) 103.3% 57,552,609
LIABILITIES IN EXCESS OF
OTHER ASSETS ( 3.3)% (1,821,754)
----- ----------
NET ASSETS (Equivalent to $1.00
per share based on 55,272,459
Institutional shares, 146,090
Service shares and 322,219
Investor A shares outstanding) 100.0% $55,730,855
===== ===========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($55,262,440/55,272,459) $ 1.00
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($146,260/146,090) $ 1.00
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INVESTOR A SHARE
($322,155/322,219) $ 1.00
=======
- -------------------
(a) Aggregate cost for Federal tax purposes.
(b) Rates shown are the rates as of March 31, 2004 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, 2004, the fund held 15.6% of its net assets, with a current market
value of $8,670,000, in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
20
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
OHIO MUNICIPAL MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS - 100.4%
Ohio - 100.4%
American Municipal Power
Incorporated Electric System
Improvement RB (Amherst City
Project) Series 2003 BAN
1.25% 12/02/04 $ 620 $ 620,000
American Municipal Power
Incorporated Electric System
Improvement RB (City of
Columbus Project) Series 2003
BAN
1.10% 07/15/04 1,025 1,025,000
American Municipal Power
Incorporated Electric System
Improvement RB (Village of
Montpelier Project) Series 2003
BAN
1.10% 07/08/04 1,950 1,950,000
American Municipal Power
Incorporated RB (City of Bryan
Project) Series 2003 BAN
1.20% 08/20/04 2,500 2,500,000
American Municipal Power
Incorporated RB (City of Oberlin
Project) Series 2003 BAN
1.30% 12/09/04 565 565,000
American Municipal Power
Incorporated RB (Gorsuch Station
Improvement Project) Series
2003A RAN
1.10% 04/01/04 1,000 1,000,000
American Municipal Power
Incorporated RB (Gorsuch Station
Improvement Project) Series
2004A MB
1.15% 04/01/05 525 525,000
American Municipal Power
Incorporated RB (Milan Village
Project) Series 2004 BAN
1.40% 01/13/05 651 651,250
American Municipal Power
Incorporated RB Series 2003 BAN
1.20% 11/04/04 1,000 1,000,000
Ashtabula County IDRB (Brighton
Manor, Inc. Project) Series 1986
AMT DN (KeyBank N.A. LOC)
1.21%(b) 04/07/04 2,500 2,500,000
Avon GO Series 2003-2 BAN
1.25% 04/15/04 670 670,076
Avon GO Series 2004 BAN
1.35% 04/14/05 340 340,840
Bedford Heights GO Series 2003-2
BAN
1.30% 04/15/04 800 800,106
Belmont County Water Supply
Improvement GO Series 2003-2
BAN
1.43% 10/07/04 1,000 1,001,428
Brooklyn IDRB (Dylon Industries, Inc.
Project) Series 1999 AMT DN
(KeyBank N.A. LOC)
1.20%(b) 04/07/04 910 910,000
Champaign County IDRB (Allied
Signal, Inc. Project) Series 1998
DN (A-1)
1.34%(b) 04/07/04 1,000 1,000,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Cleveland Airport System RB Series
1997A AMT MB (FSA Insurance)
(AAA, Aaa)
5.50% 01/01/05 $2,250 $2,323,873
Cuyahoga County Civic Facility RB
(Orion Services, Inc. Project)
Series 2001 DN (Bank One N.A.
LOC)
1.17%(b) 04/07/04 3,200 3,200,000
Cuyahoga County Economic
Development RB (Berea Children's
Home Project) Series 2000 DN
(Huntington National Bank LOC)
(VMIG-1)
1.12%(b) 04/07/04 2,690 2,690,000
Cuyahoga County IDRB (Actron
Manufacturing Project) Series 1998
AMT DN (National City Bank N.A.
LOC)
1.21%(b) 04/07/04 450 450,000
Cuyahoga County IDRB (Great
Lakes Brewing Co. Project) Series
2001 AMT DN (Huntington National
Bank LOC)
1.22%(b) 04/07/04 1,340 1,340,000
Cuyahoga County IDRB (Marine
Mechanical Corp. Project) Series
2000 AMT DN (Charter One Bank
LOC)
1.31%(b) 04/07/04 3,155 3,155,000
Dayton-Montgomery County Port
Authority RB Series 2003 BAN
1.85% 05/14/04 500 500,377
Delaware County Economic
Development RB (The Columbus
Zoological Park Associates, Inc.
Project) Series 2003 DN
(Huntington National Bank LOC)
1.15%(b) 04/07/04 4,190 4,190,000
Delaware County IDRB (Air Waves,
Inc. Project) Series 1995 DN
(KeyBank N.A. LOC)
1.21%(b) 04/07/04 550 550,000
East Guernsey Local School District
School Facilities Construction &
Improvement GO Series 2003 BAN
1.50% 05/05/04 655 655,617
Erie County IDRB (Brighton Manor
Co. Project) Series 1986 AMT DN
(KeyBank N.A. LOC)
1.21%(b) 04/07/04 4,200 4,200,000
Fairfield County GO Series 2003
BAN
1.62% 06/10/04 600 600,613
1.65% 12/16/04 648 649,900
Franklin County Healthcare Facilities
RB (Heritage Day Health Centers
Project) Series 2002 DN
(Huntington National Bank LOC)
1.15%(b) 04/01/04 700 700,000
Fulton County IDRB (Haas Door Co.
& Nofziger Doors International, Inc.
Project) Series 1999 AMT DN
(National City Bank N.A. LOC)
1.21%(b) 04/07/04 1,530 1,530,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
21
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
OHIO MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Galion GO Series 2003 BAN
1.62% 06/03/04 $1,000 $1,000,722
Geauga County RB (Thistle Lane
Project) Series 2000 AMT DN
(Huntington National Bank LOC)
1.22%(b) 04/07/04 2,400 2,400,000
Greene County GO Series 2003 BAN
(MIG-1)
1.30% 08/20/04 680 680,594
Greene County IDRB (AFC Stamping
& Production, Inc., Barsplice
Products Project) Series 1995 AMT
DN (National City Bank N.A. LOC)
1.21%(b) 04/07/04 390 390,000
Greene County Sewer System
Certificates of Indebtedness GO
Series 2003 MB
1.42% 08/20/04 750 750,774
Hamilton County Convention
Facilities Authority RB Series 2004
MB
2.00% 12/01/04 740 744,198
Hamilton County GO Series 2003
BAN (MIG-1)
1.16% 06/03/04 1,000 1,000,000
Hamilton County GO Series 2003I
BAN
1.36% 11/10/04 2,300 2,303,593
Lorain County IDRB (Ohio
Metallurgical Services Project)
Series 2001 AMT DN (First Merit
Bank N.A. LOC)
1.33%(b) 04/07/04 2,310 2,310,000
Mahoning County IDRB (M & J
Development Ltd. Project) Series
2002 AMT DN (KeyBank N.A.
LOC)
1.20%(b) 04/07/04 2,720 2,720,000
Mahoning County IDRB (Serra Land
Project) Series 1997 AMT DN
(KeyBank N.A. LOC)
1.21%(b) 04/07/04 1,405 1,405,000
Mahoning County RB (Youngstown
Iron & Metal, Inc. Project) Series
1997 AMT DN (National City Bank
N.A. LOC)
1.21%(b) 04/07/04 840 840,000
Marysville City Sewer Authority GO
Series 2003 BAN
1.41% 11/10/04 1,000 1,001,559
Marysville Vehicle & Equipment GO
Series 2004 MB
1.47% 03/09/05 720 721,993
Middletown School District GO Series
2003 BAN
1.75% 06/10/04 2,000 2,002,280
Montgomery County Healthcare
Facilities RB Series 2002 DN
(Bank One N.A. LOC)
1.17%(b) 04/07/04 2,600 2,600,000
Napoleon GO Series 2003 BAN
1.50% 07/29/04 2,340 2,342,948
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
North Canton Water System
Improvement GO Series 2004 MB
1.45% 02/16/05 $1,600 $1,603,462
North Royalton GO Series 2004 BAN
1.35% 01/20/05 1,000 1,001,587
Oakwood GO Series 2004 BAN
1.25% 03/17/05 1,200 1,201,927
Ohio Air Quality Development
Authority RB (JMG Funding Ltd.
Partnership Project) Series 1994B
AMT DN (Westdeutsche
Landesbank Gironzentrale LOC)
(A-1+, VMIG-1)
1.10%(b) 04/07/04 150 150,000
Ohio Higher Educational Facility
Community RB Series 2000C DN
(Fifth Third Bank N.A. LOC)
1.12%(b) 04/07/04 640 640,000
Ohio Housing Finance Agency
Mortgage RB Series 2001 AMT DN
(Bank of America N.A. LOC)
(VMIG-1)
1.14%(b) 04/07/04 1,920 1,920,000
Ohio Housing Finance Agency
Multi-Family Housing RB (Lincoln
Park Association Project) Series
1985 MB (Bank One N.A. LOC)
(MIG-1)
1.40% 05/03/04 605 605,000
Ohio Housing Finance Agency RB
(Wachovia Merlots Trust Receipts)
Series 2001A-78 DN (Wachovia
Bank N.A. LOC) (VMIG-1)
1.15%(b) 04/07/04 2,660 2,660,000
Ohio Housing Finance Authority RB
Series 2000AA DN (Government
National Mortgage Association
Guaranty) (VMIG-1)
1.15%(b) 04/07/04 100 100,000
Ohio IDRB (Ashley Ward, Inc.
Project) Series 1997 AMT DN (Fifth
Third Bank N.A. LOC)
1.16%(b) 04/07/04 910 910,000
Ohio PCRB (Ross Incineration
Project) Series 2000-1 AMT DN
(Bank One N.A. LOC)
1.24%(b) 04/07/04 2,760 2,760,000
Ohio State Higher Education Facility
RB Series 1999 DN (Fifth Third
Bank N.A. LOC)
1.12%(b) 04/07/04 285 285,000
Ohio State Solid Waste Facilities RB
(Pel Technologies LLC Project)
Series 2002 AMT DN (KeyBank
N.A. LOC) (VMIG-1)
1.10%(b) 04/07/04 2,600 2,600,000
Olmsted Falls GO Series 2003 BAN
1.45% 10/21/04 1,070 1,071,462
Painesville IDRB (Core System LLC
Project) Series 2000 AMT DN
(National City Bank N.A. LOC)
1.21%(b) 04/07/04 745 745,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
22
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
OHIO MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Portage County IDRB (Action Super
Abrasive Project) Series 1996 AMT
DN (National City Bank N.A. LOC)
1.17%(b) 04/07/04 $ 870 $ 870,000
Portage County IDRB (Bauer/Hibbard
Properties Ltd. Project) Series
1998 DN (National City Bank N.A.
LOC)
1.21%(b) 04/07/04 600 600,000
Sandusky County IDRB (Brighton
Manor Co. Project) Series 1986
AMT DN (Bank One N.A. LOC)
(VMIG-1)
1.21%(b) 04/07/04 2,800 2,800,000
Springboro GO Series 2003 BAN
1.75% 05/27/04 1,650 1,651,422
St. Marys GO Series 2003 BAN
1.50% 09/16/04 675 675,611
Stark County GO Series 2003 BAN
1.40% 04/22/04 1,310 1,310,185
Stark County IDRB (Thakar
Properties LLC Project) Series
2002 AMT DN (National City Bank
N.A. LOC)
1.16%(b) 04/07/04 2,500 2,500,000
Strongsville IDRB (Web Plastics Co.
Project) Series 1997 DN (National
City Bank N.A. LOC)
1.21%(b) 04/07/04 655 655,000
Summit County IDRB (Austin Printing
Co., Inc. Project) Series 1994 AMT
DN (Bank One N.A. LOC)
1.21%(b) 04/07/04 160 160,000
Summit County IDRB (Flutes LLC
Project) Series 2002 AMT DN
(Marshall & Ilsley LOC)
1.16%(b) 04/07/04 2,945 2,945,000
Summit County IDRB (Jendrisak
Properties Project) Series 2001
AMT DN (First Merit Bank N.A.
LOC)
1.33%(b) 04/07/04 2,350 2,350,000
Summit County IDRB (JRB. Co., Inc.
Project) Series 1997 DN (National
City Bank N.A. LOC)
1.16%(b) 04/07/04 2,415 2,415,000
Summit County IDRB (KB Compost
Services, Inc. Project) Series 2001
AMT DN (KeyBank N.A. LOC)
1.20%(b) 04/07/04 2,200 2,200,000
Summit County IDRB (Sigma
Properties Project) Series 2000A
AMT DN (National City Bank N.A.
LOC)
1.21%(b) 04/07/04 1,395 1,395,000
Summit County IDRB (Waltco Truck
Equipment Project) Series 1988
AMT MB (Skandinaviska Enskilda
LOC)
2.05% 07/15/04 450 450,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Summit County Port Authority RB
(Meadow Lane Building LLC
Project) Series 2003A AMT DN
(KeyBank N.A. LOC)
1.20%(b) 04/07/04 $2,500 $2,500,000
Tipp County GO Series 2003 BAN
1.25% 05/06/04 950 950,063
Toledo Multi-Family Housing RB
(Cherrywood Apartments Project)
Series 2001 AMT DN (KeyBank
N.A. LOC)
1.20%(b) 04/07/04 2,905 2,905,000
Trumbull County IDRB (ATD Corp.
Project) Series 1995 AMT DN
(Society National Bank LOC)
1.21%(b) 04/07/04 1,850 1,850,000
Trumbull County IDRB Series 2000B
AMT DN (Bank One N.A. LOC)
1.29%(b) 04/07/04 445 445,000
Union County GO Series 2003
Memorial Hospital Improvement
Notes
1.75% 04/15/04 1,725 1,725,358
University of Toledo RB (Societe
Generale Trust Receipts) Series
2001 SGA-125 DN (FGIC
Insurance) (A-1+)
1.09%(b) 04/07/04 100 100,000
Wapakoneta GO Series 2004 BAN
1.50% 02/17/05 850 851,845
Western Reserve Housing
Development Corporation
Economic RB (Trumbull
Metropolitan Housing Project)
Series 2003 DN (KeyBank N.A.
LOC)
1.16%(b) 04/07/04 2,400 2,400,000
Wood County Economic
Development RB (Hammill
Manufacturing Co. Project) Series
2000 AMT DN (Sky Bank LOC)
2.01%(b) 04/07/04 1,805 1,805,000
Wood County Economic
Development RB (Precision
Aggregate II Project) Series 1996
AMT DN (Mid American National
Banking & Trust LOC)
2.01%(b) 04/07/04 1,945 1,945,000
Wood County Economic
Development RB (Sun Seed
Holding Co., Inc. Project) Series
2001A AMT DN (Sky Bank
Financial LOC)
2.01%(b) 04/07/04 1,990 1,990,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
23
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
OHIO MUNICIPAL MONEY MARKET PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------- --------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Wood County Economic
Development RB (Toledo Electrical
Joint Apprenticeship & Training
Fund Project) Series 2000 DN (Sky
Bank Financial LOC)
2.01%(b) 04/07/04 $330 $ 330,000
------------
130,035,663
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $130,035,663(a)) 100.4% 130,035,663
LIABILITIES IN EXCESS OF
OTHER ASSETS ( 0.4)% (528,399)
----- -----------
NET ASSETS (Equivalent to $1.00
per share based on 86,198,017
Institutional shares, 18,843,556
Service shares and 24,492,888
Investor A shares outstanding) 100.0% $129,507,264
===== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($86,183,016/86,198,017) $ 1.00
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($18,840,990/18,843,556) $ 1.00
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INVESTOR A SHARE
($24,483,258/24,492,888) $ 1.00
=======
- -------------------
(a) Aggregate cost for Federal tax purposes.
(b) Rates shown are the rates as of March 31, 2004 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
24
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS - 99.8%
Pennsylvania - 97.8%
Abington School District GO Series
1999 MB (FSA Insurance)
(AAA, Aaa)
5.00% 09/15/04 $1,500 $1,526,836
Albert Gallatin Area School District
GO Series 1995 MB (MBIA
Insurance) (AAA, Aaa)
6.30% 09/01/04 1,000 1,021,847
Allegheny County IDRB
(Commonwealth Development
Parkway Project) Series 1994A DN
(National City Bank N.A. LOC)
(Aa3)
1.06%(b) 04/07/04 3,500 3,500,000
Allegheny County IDRB (UPMC
Health System Project) Series
2002C DN (Comerica Bank N.A.
LOC) (A-1)
1.10%(b) 04/07/04 1,900 1,900,000
Berks County IDRB (Backman Co.
Project) Series 1994 AMT DN (M &
T Bank Corp. LOC) (P-1)
1.27%(b) 04/07/04 1,800 1,800,000
Berks County IDRB (Beacon
Container Corp. Project) Series
1997A AMT DN (Wachovia Bank
N.A. LOC) (P-1)
1.20%(b) 04/07/04 1,165 1,165,000
Berks County IDRB (Tray Pak Co.
Project) RB Series 2001A AMT DN
(Wachovia Bank N.A. LOC)
1.21%(b) 04/07/04 3,705 3,705,000
Berks County Municipal Authority RB
Series 1994 MB (FGIC Insurance)
(AAA, Aaa)
7.10% 05/15/04 1,330 1,339,649
Berks County Vocational Technical
School Authority RB Series 1998
MB (MBIA Insurance) (Aaa)
3.90% 06/01/04 810 813,845
Blair County IDRB Series 2003 AMT
DN (Fulton Bank LOC)
(A-1, VMIG-1)
1.20%(b) 04/07/04 2,325 2,325,000
Bucks County IDRB (LTL Color
Compounders Project) Series
1999B DN (Wachovia Bank N.A.
LOC)
1.21%(b) 04/07/04 2,285 2,285,000
Carbon County GO Series 2004 MB
(MBIA Insurance)
2.00% 12/15/04 735 739,318
Chester County Health & Education
Facilities Retirement Community
RB (Kendal Crosslands Community
Projects) Series 2003 DN (Allied
Irish Bank PLC LOC) (A-1)
1.05%(b) 04/01/04 2,000 2,000,000
Chester County IDRB (RV Industrial,
Inc. Project) Series 2001AMT DN
(M & T Bank Corp. LOC) (A-1)
1.17%(b) 04/07/04 4,400 4,400,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Chester County Industrial
Development Authority Student
Housing RB (University Student
Housing Limited Project) Series
2003 DN (VMIG-1)
1.10%(b) 04/07/04 $5,500 $5,500,000
Crawford County IDRB Series 2000
AMT DN (National City Bank N.A.
LOC)
1.21%(b) 04/07/04 1,285 1,285,000
Cumberland County IDRB (Lane
Enterprises, Inc. Project) Series
1994 AMT DN (Wachovia Bank
N.A. LOC) (P-1)
1.15%(b) 04/07/04 110 110,000
Cumberland County IDRB (Lawrence
Schiff Silk Co. Project) Series 1998
AMT DN (Wachovia Bank N.A.
LOC)
1.20%(b) 04/07/04 1,210 1,210,000
Cumberland County Municipal
Authority RB (Messiah Village
Project) Series 2002 DN (Citizens
Bank of Pennsylvania LOC)
1.05%(b) 04/07/04 500 500,000
Cumberland County Municipal
Authority Retirement Community
RB (Wesley Affiliated Services
Project) Series 2002C DN (Lloyds
Bank LOC) (A-1+)
1.02%(b) 04/07/04 700 700,000
Delaware Valley Regional Finance
Authority Local Government RB
Series 1985B DN (A-2, VMIG-1)
1.04%(b) 04/07/04 700 700,000
Donegal School District GO Series
2003A MB (MBIA Insurance)
2.00% 04/01/04 470 470,000
Duquesne School District GO Series
1999 MB (AMBAC Insurance)
(AAA, Aaa)
5.00% 10/01/04 500 509,812
East Hempfield Township IDRB
(Herley Industrial, Inc. Project)
Series 2001 AMT DN (M & T Bank
Corp. LOC) (A-1)
1.17%(b) 04/07/04 2,805 2,805,000
East Pennsboro Area School District
GO Series 1999 MB (FSA
Insurance) (AAA, Aaa)
5.55% 08/15/04 325 330,394
East Vincent Municipal Authority RB
Series 1999 MB (FSA Insurance)
(AAA, Aaa)
5.00% 07/01/04 900 908,758
Erie County IDRB (American Turned
Products Project) Series 1997 AMT
DN (KeyBank N.A. LOC)
1.21%(b) 04/07/04 1,490 1,490,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
25
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Erie County IDRB (Reed
Manufacturing Project) Series 1997
AMT DN (National City Bank N.A.
LOC)
1.16%(b) 04/07/04 $ 600 $ 600,000
Fayette County IDRB (Dynamic
Material Corp. Project) Series 1998
AMT DN (KeyBank N.A. LOC)
1.21%(b) 04/07/04 3,405 3,405,000
Franklin County IDRB
(Chambersburg Hospital Project)
Series 2000 DN (AMBAC
Insurance, Wachovia Bank N.A.
SBPA) (A-1+)
1.12%(b) 04/07/04 2,160 2,160,000
Franklin County IDRB (Menno Haven
Project) Series 2001 DN (National
Westminster Bank LOC) (A-1)
1.12%(b) 04/07/04 1,885 1,885,000
Franklin County IDRB (Precast
System Project) Series 2001A AMT
DN (M & T Bank Corp. LOC)
(A-2, P-1, F-1)
1.17%(b) 04/07/04 1,830 1,830,000
Glendale School Distict GO Series
2003 MB (FSA Insurance) (AAA)
2.00% 04/15/04 240 240,077
Greenville Area School District GO
Series 2003A MB (FSA Insurance)
(AAA)
2.00% 08/15/04 260 260,912
Harrisburg Parking Authority RB
Series 2003 MB (AMBAC
Insurance) (AAA)
1.50% 08/01/04 735 736,092
Haverford Township School District
GO Series 1994B MB (FGIC
Insurance) (AAA, Aaa)
6.25% 06/01/04 2,300 2,319,953
Hempfield Area School District GO
Series 2001A MB (FSA Insurance)
3.75% 09/15/04 550 556,810
Holidaysburg Area School District GO
Series 1994 MB (AMBAC
Insurance) (AAA, Aaa)
6.05% 06/01/04 240 242,044
Horizon Hospital System Authority
Health & Housing Facility RB (St.
Paul Homes Project) Series 2002
DN (M & T Bank Corp. LOC)
1.17%(b) 04/07/04 7,455 7,455,000
Indiana County IDRB (Conemaugh
Project) Series 1997A AMT DN
(Union Bank of Switzerland LOC)
(VMIG-1)
1.15%(b) 04/07/04 2,500 2,500,000
Lackawanna County IDRB (Herff
Jones, Inc. Project) Series 2001
AMT DN (National City Bank N.A.
LOC)
1.16%(b) 04/07/04 2,800 2,800,000
Lancaster County Hospital Authority
RB (Health Center Luthercare
Project) Series 1999 DN (M & T
Bank Corp. LOC) (A-1)
1.12%(b) 04/07/04 5,185 5,185,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Lancaster County Hospital Authority
RB (Lancaster General Hospital
Project) Series 2002 DN (Fulton
Bank LOC) (VMIG-1)
1.17%(b) 04/07/04 $4,000 $4,000,000
Lancaster County Hospital Authority
RB (Landis Homes Retirement
Community Project) Series 2002
DN (M & T Bank Corp. LOC)
1.12%(b) 04/07/04 4,715 4,715,000
Lancaster County Hospital Authority
RB (Willow Valley Retirement
Project) Series 2002A DN (National
Westminster Bank LOC) (A-1)
1.12%(b) 04/07/04 5,000 5,000,000
Lancaster County IDRB (Clean Creek
Partners Project) Series 2000 AMT
DN (M & T Bank Corp. LOC) (A-1)
1.17%(b) 04/07/04 5,635 5,635,000
Lancaster County IDRB (D&P Skibo
LLC Project) Series 2001 AMT DN
(Wachovia Bank N.A. LOC)
1.21%(b) 04/07/04 1,915 1,915,000
Lancaster County IDRB (John F.
Martin & Sons Project) Series 2001
AMT DN (Fulton Bank LOC) (A-2)
1.25%(b) 04/07/04 800 800,000
Lancaster County IDRB (Oakfront LP
Project) Series 2001 AMT DN (M &
T Bank Corp. LOC) (A-2, P-1, F-1)
1.17%(b) 04/07/04 2,455 2,455,000
Lancaster County IDRB Series 1998
AMT DN (Bank One N.A. LOC)
1.27%(b) 04/07/04 2,000 2,000,000
Lancaster School District GO Series
2003 MB (FGIC Insurance)
2.00% 02/15/05 500 504,101
Lawrence County IDRB (L&N
Metallurgical Products Project)
Series 1996 AMT DN (Banque
Nationale de Paribas LOC)
1.31%(b) 04/07/04 4,305 4,305,000
Lawrence County IDRB (Villa Maria
Project) Series 2003 DN (VMIG-1)
1.05%(b) 04/07/04 2,655 2,655,000
Lebanon County Health Facility RB
Series 2000 DN (Northern Trust
LOC) (A-1+)
1.07%(b) 04/07/04 680 680,000
Lebanon County Health Facility RB
Series 2002 DN (Fleet National
Bank SPBA, Radian Insurance)
(A-1)
1.12%(b) 04/07/04 5,400 5,400,000
Lower Dauphin School District GO
Series 2003 MB (Aaa)
2.00% 09/01/04 485 486,905
Lycoming County IDRB (Brodart Co.
Project) Series 1998A AMT DN
(Wachovia Bank N.A. LOC)
1.20%(b) 04/07/04 1,905 1,905,000
Lycoming County IDRB (Brodart Co.
Project) Series 1998C AMT DN
(Wachovia Bank N.A. LOC)
1.20%(b) 04/07/04 1,000 1,000,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
26
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Manheim Central School District GO
Series 1994 MB (FGIC Insurance)
(AAA, Aaa)
5.40% 05/15/04 $ 650 $ 653,498
Marple Township GO Series 2004
MB (AMBAC Insurance) (Aaa)
2.25% 12/15/04 275 277,304
Mercer County Industrial Authority
Economic Development RB (Solar
Atmospheres Western
Pennsylvania Project) Series 2001
DN
1.05%(b) 04/07/04 3,020 3,020,000
Montgomery County GO Series 2004
TECP (A-1, P-1)
0.98% 04/06/04 3,600 3,600,000
Montgomery County Higher
Education & Health Authority RB
(Pennsylvania Higher Education &
Health Loan Project) Series 1996A
DN (M & T Bank Corp. LOC) (A-2)
1.12%(b) 04/07/04 3,105 3,105,000
Montgomery County IDRB (Apple
Fresh Foods Ltd. Project) Series
1996 AMT DN (Wachovia Bank
N.A. LOC) (VMIG-1)
1.25%(b) 04/07/04 740 740,000
Montgomery County IDRB (H.P.
Cadwallander, Inc. Project) Series
1995 AMT DN (Wachovia Bank
N.A. LOC) (VMIG-1)
1.20%(b) 04/07/04 235 235,000
Montgomery County IDRB (Laneko
Engineering Co. Project) Series
1999A AMT DN (Wachovia Bank
N.A. LOC) (VMIG-1)
1.16%(b) 04/07/04 1,730 1,730,000
Mount Pleasant Area School District
GO Series 2004 MB (FGIC
Insurance) (AAA)
2.00% 05/15/04 1,000 1,001,151
Muhlenberg School District GO
Series 2003A MB (FSA Insurance)
(Aaa)
1.00% 09/01/04 350 349,926
New Garden General Municipal
Authority RB Series 1999 DN
(AMBAC Insurance, Bank of Nova
Scotia LOC) (A-1)
1.05%(b) 04/07/04 5,900 5,900,000
New Hope Solebury School District
GO Series 1996 MB (AA-, Aa2)
5.00% 08/15/04 500 507,287
North Pocono School District GO
Series 2003-8 MB (ABN-AMRO
Bank N.V. SBPA, FGIC Insurance)
1.16% 09/22/04 9,995 9,995,000
Northampton County IDRB (Accu
Machining Center, Inc. Project)
Series 1998B AMT DN (Wachovia
Bank N.A. LOC)
1.20%(b) 04/07/04 1,515 1,515,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Northampton County IDRB (Accu
Machining Center, Inc. Project)
Series 1998C AMT DN (Wachovia
Bank N.A. LOC)
1.20%(b) 04/07/04 $ 310 $ 310,000
Northampton County IDRB
(Bethlehem Contracting Project)
Series 2001A AMT DN (M & T
Bank Corp. LOC) (A-2, P-1, F-2)
1.17%(b) 04/07/04 3,900 3,900,000
Northampton County IDRB (Trent
Family Partnership Project) Series
2002 AMT DN (Wachovia Bank
N.A. LOC)
1.21%(b) 04/07/04 2,150 2,150,000
Northern Tioga School District GO
Series 1999 MB (FGIC Insurance)
4.40% 09/15/04 555 563,388
Northern York County School District
GO Series 1999 MB (FSA
Insurance) (AAA, Aaa)
4.85% 05/15/04 200 200,877
5.15% 05/15/04 880 884,292
5.25% 05/15/04 500 502,512
Norwin School District GO Series
2001-12 MB (MBIA Insurance,
ABN-AMRO Bank N.V. SBPA)
(MIG-1)
1.12% 06/16/04 12,500 12,500,000
Penn Trafford School District GO
Series 1994 MB (MBIA Insurance)
(AAA, Aaa)
5.90% 05/01/04 300 301,175
Pennsylvania Economic Development
Financing Authority RB
(Homewood Retirement Project)
Series 1992E DN (M & T Bank
Corp. LOC) (VMIG-1)
1.07%(b) 04/07/04 5,075 5,075,000
Pennsylvania Economic Development
Financing Authority RB (Material
Technology Project) Series 2000D
AMT DN (Wachovia Bank N.A.
LOC)
1.16%(b) 04/07/04 1,000 1,000,000
Pennsylvania Economic Development
Financing Authority RB (Reliant
Energy Seward Project) Series
2003A AMT DN
1.08%(b) 04/07/04 1,600 1,600,000
Pennsylvania Economic Development
Financing Authority RB (Wengers
Feed Mill, Inc. Project) Series
1999B-1 AMT DN (Wachovia Bank
N.A. LOC)
1.16%(b) 04/07/04 1,300 1,300,000
Pennsylvania Economic Development
Financing Authority RB Series
1999D AMT DN (Wachovia Bank
N.A. LOC)
1.21%(b) 04/07/04 2,100 2,100,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
27
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Pennsylvania Higher Educational
Assistance Agency RB (Capital
Acquistion Project) Series 2001
MB (MBIA Insurance) (AA-, Aa2)
5.00% 12/15/04 $ 320 $ 328,761
Pennsylvania Higher Educational
Assistance Agency Student Loan
RB Series 1988A AMT DN
(Student Loan Marketing
Association Guaranty)
(A-1, VMIG-1)
1.03%(b) 04/07/04 2,800 2,800,000
Pennsylvania Higher Educational
Assistance Agency Student Loan
RB Series 1997A AMT DN (Mellon
Bank LOC) (A-1+, VMIG-1)
1.09%(b) 04/07/04 8,000 8,000,000
Pennsylvania Higher Educational
Assistance Agency Student Loan
RB Series 2001A AMT DN
(AMBAC Insurance)
(A-1+, VMIG-1)
1.09%(b) 04/07/04 1,000 1,000,000
Pennsylvania Higher Educational
Assistance Agency Student Loan
RB Series 2001B AMT DN
(VMIG-1)
1.10%(b) 04/07/04 9,600 9,600,000
Pennsylvania Higher Educational
Facilities Authority Hospital RB
(Merrill Lynch P-Float Trust
Receipts) Series 2003 PT-802 DN
(Merrill Lynch & Co. Guaranty)
(A-1)
1.12%(b) 04/07/04 920 920,000
Pennsylvania Higher Educational
Facilities Authority RB (Association
of Independent Colleges &
Universities Project) Series
2004M-1 DN (Commerce Bank
N.A. LOC)
1.11%(b) 04/07/04 2,000 2,000,000
Pennsylvania Higher Educational
Facilities Authority RB (Association
of Independent Colleges &
Universities Project) Series
2004M-3 MB (A-1)
1.10% 11/01/04 2,000 2,000,000
Pennsylvania Higher Educational
Facilities Authority RB (Holy Family
University Project) Series 2004 DN
(VMIG-1)
1.05%(b) 04/07/04 7,465 7,465,000
Pennsylvania Higher Educational
Facilities Authority RB (Lycoming
College Project) Series 2003 MB
(Allied Irish Bank PLC Liquidity
Facility) (MIG-1)
1.11% 11/01/04 5,500 5,500,000
Pennsylvania Higher Educational
Facilities Authority RB (Mount
Aloysuis College Project) Series
2003 DN (A-1)
1.06%(b) 04/07/04 2,500 2,500,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Pennsylvania Higher Educational
Facilities Authority RB (Mount
Aloysuis College Project) Series
2003 MB (M & T Bank Corp. LOC)
(MIG-1)
1.11% 11/01/04 $1,300 $1,300,000
Pennsylvania Higher Educational
Facilities Authority RB (Trustees
University of Pennsylvania) Series
2002A MB (AA, A1)
5.00% 07/01/04 500 504,904
Pennsylvania Higher Educational
Facilities Authority RB Series
1997O MB (AMBAC Insurance)
(Aaa)
5.00% 06/15/04 1,000 1,008,136
Pennsylvania Higher Educational
Facilities Authority RB Series 1998
DN (VMIG-1)
1.09%(b) 04/07/04 3,000 3,000,000
Pennsylvania Higher Educational
Facilities Authority RB Series
2002A DN (Commerce Bank N.A.
LOC) (VMIG-1)
1.05%(b) 04/07/04 625 625,000
Pennsylvania Higher Educational
Facilities Authority RB Series
2002B DN (Commerce Bank N.A.
LOC) (VMIG-1)
1.05%(b) 04/07/04 400 400,000
Pennsylvania State GO First Series
1994 MB
5.38% 05/01/04 1,000 1,018,570
Pennsylvania State GO Second
Series 1994 MB (MBIA Insurance)
(AAA, Aaa)
5.20% 06/15/04 100 100,831
Pennsylvania State GO Second
Series 2001 MB (AA, Aa2)
5.00% 09/15/04 1,750 1,781,310
Pennsylvania State GO Second
Series 2002 MB (AA, Aa2)
4.00% 10/01/04 200 202,862
Pennsylvania State GO Second
Series 2003 DN (Wachovia Bank
N.A. LOC) (VMIG-1)
1.10%(b) 04/07/04 1,500 1,500,000
Pennsylvania State GO Series 1992
MB (AA, Aa2)
5.80% 07/01/04 800 809,410
Pennsylvania State Turnpike
Community Oil Franchise Tax RB
Series 1994A MB (Kredietbank
LOC) (AAA, Aaa)
5.50% 12/01/04 250 262,571
Perkiomen Valley School District GO
Series 2003 TRAN
1.50% 06/30/04 2,000 2,001,948
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
28
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Philadelphia Authority for Industrial
Development Airport RB Series
1998P-1 AMT DN (FGIC
Insurance, Bank of America N.A.
SBPA) (A-1C+)
1.17%(b) 04/07/04 $ 5,000 $ 5,000,000
Philadelphia Authority for Industrial
Development Health Care Facility
RB (Greater Philadelphia Health
System) Series 2003 DN
(Commerce Bank N.A. Liquidity
Facility)
1.05%(b) 04/07/04 5,165 5,165,000
Philadelphia Authority for Industrial
Development RB (Gift Of Life
Donor Program Project) Series
2003 DN (A-1, VMIG-1, P-1)
1.05%(b) 04/01/04 7,400 7,400,000
Philadelphia Authority for Industrial
Development RB (Universal
Community Homes Project) Series
2003 DN
1.11%(b) 04/07/04 3,000 3,000,000
Philadelphia GO Series 1995 MB
(MBIA Insurance) (AAA, Aaa)
6.00% 05/15/04 250 251,469
Philadelphia GO Series 2003 TRAN
2.00% 06/30/04 40,000 40,098,718
Philadelphia Hospital & Higher
Education Facilities Authority RB
(Philadelphia Protestant Home
Project) Series 2004 DN (Fleet
National Bank LOC) (VMIG-1)
1.00%(b) 04/07/04 4,450 4,450,000
Philadelphia IDA Municipal Securities
Trust Certificates RB Series
2001-9022 DN (FSA Insurance,
Bear Stearns SBPA) (A-1)
1.10%(b)(c) 04/07/04 9,990 9,990,000
Philadelphia IDRB (30th Street
Station Project) Series 1987 AMT
DN (MBIA Insurance, Bank of New
York SBPA) (A-1+, VMIG-1)
1.10%(b) 04/07/04 14,900 14,900,000
Philadelphia Water & Waste Water
RB Series 1995 MB (MBIA
Insurance) (AAA, Aaa)
6.75% 08/01/04 750 764,176
Reading Regional Airport Authority
RB Series 1998A AMT DN
(Wachovia Bank N.A. LOC)
1.20%(b) 04/07/04 1,500 1,500,000
Sayre Health Care Facilities Authority
RB (VHA Capital Financing
Project) Series 1985B DN (AMBAC
Insurance) (A-1)
1.02%(b) 04/07/04 2,000 2,000,000
Scranton Lackawanna Health &
Welfare Authority RB (Wachovia
Merlots Trust Receipts) Series
2002A-18 DN (Wachovia Bank
N.A. LOC) (VMIG-1)
1.10%(b) 04/07/04 2,900 2,900,000
Selingsgrove Area School District GO
Series 2003 MB (FSA Insurance)
(AAA)
1.30% 04/01/04 425 425,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Southcentral General Authority RB
(Homewood Hanover Project)
Series 2003 DN
1.12%(b) 04/07/04 $18,500 $18,500,000
Southcentral General Authority RB
(York Cerebral Palsy Home
Project) Series 2000 DN (Fulton
Bank LOC) (A-1)
1.17%(b) 04/07/04 3,800 3,800,000
Southcentral General Authority RB
Series 2003 DN (AMBAC
Insurance) (A-1)
1.07%(b) 04/07/04 5,000 5,000,000
State College Area School District
GO Series 2004 MB (Aaa)
2.00% 09/01/04 415 416,422
State Public School Building Authority
College RB (Allegheny County
Community College Project) Series
2003 MB (FGIC Insurance) (Aaa)
2.00% 07/15/04 560 561,594
State Public School Building Authority
RB (Philadelphia School District
Project) Series 2003-24 DN
(VMIG-1)
1.08%(b) 04/07/04 5,145 5,145,000
State Public School Building Authority
RB (Wachovia Merlots Trust
Receipts) Series 2004A-1 MB
(FSA Insurance, Wachovia Bank
N.A. LOC) (MIG-1)
1.20% 02/04/05 7,000 7,000,000
Union County Hospital Authority RB
(Evangelical Community Hospital
Project) Series 2001 AMT MB
(Fleet National Bank SPBA,
Radian Insurance) (A-1)
1.22% 02/01/05 7,500 7,500,000
Union County IDRB (Playworld
Systems, Inc. Project) Series 1999
AMT DN (Wachovia Bank N.A.
LOC)
1.20%(b) 04/07/04 1,000 1,000,000
Union County IDRB (Stabler Cos.,
Inc. Project) Series 2001 AMT DN
(M & T Bank Corp. LOC) (A-1)
1.17%(b) 04/07/04 8,045 8,045,000
University of Pittsburgh of The
Commonwealth System of Higher
Education GO Series 2003 TRAN
(SP-1, MIG-1)
2.00% 12/03/04 10,000 10,059,816
Upper Dauphin IDRB (United Church
Christ Homes Project) Series 2001
DN (First Tennessee Bank LOC)
(A-1)
1.12%(b) 04/07/04 2,500 2,500,000
Upper Merion General Authority
Lease RB Series 2003 DN
(Commerce Bank N.A. LOC)
1.05%(b) 04/07/04 5,890 5,890,000
Upper St. Clair Township GO Series
2002 MB (FSA Insurance,
ABN-AMRO Bank N.V. SBPA)
(AAA, MIG-1, F-1+)
1.11% 06/18/04 9,650 9,650,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
29
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Venango TECP Series 2003 MB
(Dexia Bank LOC) (A-1, P-1)
1.05% 04/08/04 $35,950 $ 35,950,000
Washington County GO Series 2004
TRAN
2.00% 12/30/04 1,000 1,006,054
Western Berks Water Authority RB
Series 2003 MB (MBIA Insurance)
(Aaa)
2.00% 04/01/04 555 555,000
Westmoreland County IDRB
(Industrial Development
McCutcheon Enterprise Project)
Series 1999 AMT DN (National City
Bank N.A. LOC)
1.16%(b) 04/07/04 2,110 2,110,000
Wilson School District GO Series
2003 MB (FSA Insurance)
2.00% 05/15/04 200 200,226
York County GO Series 2004 TRAN
1.75% 07/30/04 4,000 4,009,164
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)
1.07%(b) 04/07/04 5,400 5,400,000
York County IDA Economic
Development RB (Fypon Limited
Project) Series 2000 AMT DN (M &
T Bank Corp. LOC)
1.22%(b) 04/07/04 2,700 2,700,000
York County IDRB (Allied-Signal, Inc.
Project) Series 1993 DN (FGIC
Insurance) (A-1)
1.20%(b) 04/07/04 1,000 1,000,000
York County IDRB (Interstate
Holdings Co. Project) Series 2003
AMT DN (Wachovia Bank N.A.
Liquidity Facility)
1.21%(b) 04/07/04 1,375 1,375,000
York County IDRB (York Sheet Metal,
Inc. Project) Series 1998 DN
(Wachovia Bank N.A. LOC)
1.20%(b) 04/07/04 2,790 2,790,000
York County IDRB Series 2000 AMT
DN (M & T Bank Corp. LOC) (A-2)
1.17%(b) 04/07/04 2,820 2,820,000
York General Authority RB (Strand
Capitol Performing Arts Center
Project) Series 2002 DN (M & T
Bank Corp. LOC) (A-2)
1.12%(b) 04/07/04 3,900 3,900,000
------------
489,045,705
------------
Puerto Rico - 2.0%
Commonwealth of Puerto Rico
Highway & Transportation Authority
RB (Merrill Lynch P-Float Trust
Receipts) Series 2002 PT-1052 DN
(Merrill Lynch Capital Services
Liquidity Facility) (A-1)
1.05%(b) 04/07/04 6,200 6,200,000
PAR
MATURITY (000) VALUE
---------- ---------- --------------
MUNICIPAL BONDS (Continued)
Puerto Rico (Continued)
Commonwealth of Puerto Rico
Infrastructure Financing Authority
Special Obligation Bonds Series
2000A-17 MB (ABN-AMRO Bank
N.V. SBPA) (MIG-1, F-1+)
1.06% 09/22/04 $ 2,000 $ 2,000,000
Commonwealth of Puerto Rico Public
Improvement GO Series 2003 MB
(Merrill Lynch Capital Services
Liquidity Facility) (A-1, AA+)
1.30% 11/18/04 2,000 2,000,000
-----------
10,200,000
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $499,245,705(a)) 99.8% 499,245,705
OTHER ASSETS IN EXCESS OF
LIABILITIES 0.2% 1,146,962
----- -----------
NET ASSETS (Equivalent to
$1.00 per
share based on
430,179,434
Institutional shares,
36,015,232
Service shares and
34,110,094
Investor A shares outstanding) 100.0% $500,392,667
===== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($430,265,379/430,179,434) $ 1.00
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($36,012,114/36,015,232) $ 1.00
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INVESTOR A SHARE
($34,115,174/34,110,094) $ 1.00
=======
- -------------------
(a) Aggregate cost for Federal tax purposes.
(b) Rates shown are the rates as of March 31, 2004 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, 2004, the fund held 2.0% of its net assets, with a current market value
of $9,990,000, in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
30
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
VIRGINIA MUNICIPAL MONEY MARKET PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- ------------
MUNICIPAL BONDS - 99.3%
Virginia - 87.5%
Alexandria IDRB (Young Men's
Christian Association of Billings
Project) Series 1998 DN (M & T
Bank Corp. LOC) (A-1)
1.17%(b) 04/07/04 $ 500 $ 500,000
Chesapeake Bay Bridge & Tunnel
Commonwealth District RB
(Wachovia Merlots Trust Receipts)
Series 2003 DN (MBIA Insurance,
Wachovia Bank N.A. Liquidity
Facility) (VMIG-1)
1.10%(b) 04/07/04 500 500,000
Commonwealth of Virginia
Transportation Authority RB
(Citibank Eagle Trust Receipts)
Series 1999 DN (Citibank Liquidity
Facility) (A-1+)
1.08%(b) 04/07/04 500 500,000
Fairfax County Economic
Development Authority RB Series
2003 ROCS-RR-II-R-4024 DN
(Citigroup Liquidity Facility)
(VMIG-1)
1.08%(b) 04/07/04 500 500,000
Fairfax County IDRB (Fairfax
Hospital System Project) Series
1988B DN (Inova Health System
LOC) (A-1+, VMIG-1)
0.95%(b) 04/07/04 300 300,000
Harrisonburg Redevelopment &
Housing Authority Lease Purchase
RB Series 2001A DN (Societe
Generale LOC) (A-1+)
1.05%(b) 04/07/04 450 450,000
Loudoun County Educational
Facilities IDRB (Hill School Project)
Series 2002 DN (Suntrust Bank
LOC) (AA-, A-1+)
1.05%(b) 04/07/04 500 500,000
Loudoun County IDA Residential
Care Facilities RB (Falcons
Landing Project) Series 1998 DN
(VMIG-1)
1.04%(b) 04/07/04 500 500,000
Loudoun County Public Improvement
GO Series 2002A MB (AA+, Aa1)
5.00% 05/01/04 280 280,909
Louisa County IDRB (Pooled
Financing Project) Series 1995 DN
(Bank of America N.A. LOC) (A-1)
1.05%(b) 04/07/04 100 100,000
Lynchburg Public Improvement GO
Series 2003B MB (AA, Aa3)
2.00% 02/01/05 600 604,849
Prince William County GO (Vepco
Project) Series 2004 TECP
(A-1, MIG-1)
1.10% 08/13/04 700 700,000
Richmond Public Improvement GO
Series 2002A MB (FSA Insurance)
(AAA, Aaa)
4.00% 07/15/04 690 695,960
Virginia Beach Development Authority
IDRB (Ocean Ranch Motel Corp.
Project) Series 1998 DN (Branch
Banking & Trust Co. LOC)
1.05%(b) 04/07/04 500 500,000
PAR
MATURITY (000) VALUE
---------- ---------- ------------
MUNICIPAL BONDS (Continued)
Virginia (Continued)
Virginia Beach Development Authority
Multi-Family Housing RB Series
1999-1146 DN (Merrill Lynch
Capital Services SBPA)
1.08%(b) 04/07/04 $ 250 $ 250,000
Virginia Commonwealth
Transportation Board
Transportation RB Series
2002-1013 DN (Salomon Smith
Barney Liquidity Facility) (A-1+)
1.08%(b) 04/07/04 500 500,000
Virginia Public School Authority
School Educational Technology
Notes RB Series 2003 MB
(AA1, Aa+)
1.75% 04/15/04 1,000 1,000,255
Virginia Public School Authority
School Financing Bonds RB Series
2003D MB (AA+, Aa1)
2.50% 08/01/04 500 502,383
----------
8,884,356
----------
Puerto Rico - 11.8%
Commonwealth of Puerto Rico
Infrastructure Financing Authority
Special Obligation Bonds Series
2000A-17 MB (ABN-AMRO Bank
N.V. SBPA) (MIG-1, F-1+)
1.06% 09/22/04 500 500,000
Commonwealth of Puerto Rico Public
Improvement GO Series 2003 MB
(Merrill Lynch Capital Services
Liquidity Facility) (A-1, AA+)
1.30% 11/18/04 300 300,000
Puerto Rico Public Financing
Corporation RB Series 2004-911
DN (Morgan Stanley Group
Liquidity Facility) (AAA, F-1+)
1.05%(b) 04/07/04 400 400,000
----------
1,200,000
----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $10,084,356(a)) 99.3% 10,084,356
OTHER ASSETS IN EXCESS OF
LIABILITIES 0.7% 66,508
----- ----------
NET ASSETS (Equivalent to
$1.00 per share based on 10,151,13
Institutional shares outstanding) 100.0% $10,150,864
===== ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($10,150,864/10,151,132) $ 1.00
=======
- -------------------
(a) Aggregate cost for Federal tax purposes.
(b) Rates shown are the rates as of March 31, 2004 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
Key to Investment Abbreviations
AMBAC ....... American Municipal Bond Assurance Corp.
AMT ......................... Alternative Minimum Tax
BAN .......................... Bond Anticipation Note
DN ..................................... Demand Notes
FGIC ........... Financial Guaranty Insurance Company
FSA .................... Financial Security Assurance
GO ............................... General Obligation
IDA ................ Industrial Development Authority
IDRB ............ Industrial Development Revenue Bond
LOC ................................ Letter of Credit
MB ................................... Municipal Bond
MBIA ........... Municipal Bond Insurance Association
PCRB ................. Pollution Control Revenue Bond
RAN ....................... Revenue Anticipation Note
RB ..................................... Revenue Bond
SBPA ............... Stand-by Bond Purchase Agreement
TAN .......................... Tax Anticipation Notes
TECP .................... Tax-Exempt Commercial Paper
TRAN .............. Tax and Revenue Anticipation Note
XLCA ........................... XL Capital Assurance
ZCM ....................... Zurich Capital Management
The ratings provided by 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, 2004.
32
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 2004 (UNAUDITED)
U.S. TREASURY MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
---------------- --------------- ---------------
Investment income:
Interest ....................................... $ 16,718,066 $ 3,310,442 $ 3,561,914
------------ ----------- -----------
Expenses:
Investment advisory fee ........................ 5,887,571 1,422,039 1,490,013
Administration fee ............................. 1,008,901 262,007 273,336
Administration fee - class specific ............ 1,251,188 300,208 314,559
Custodian fee .................................. 133,985 43,234 51,795
Transfer agent fee ............................. 48,632 8,980 8,302
Transfer agent fee - class specific ............ 450,816 85,102 105,405
Shareholder servicing fees - class specific..... 1,025,749 229,978 256,159
Shareholder processing fees - class
specific ...................................... 739,441 205,648 181,597
Distribution fees - class specific ............. 326,701 24,330 74,563
Legal and audit ................................ 96,610 24,113 27,745
Printing ....................................... 239,441 50,568 53,700
Registration fees and expenses ................. 41,622 17,490 20,353
Trustees' fees ................................. 37,800 8,013 8,566
Other .......................................... 55,068 23,494 20,317
------------ ----------- -----------
Total expenses ................................ 11,343,525 2,705,204 2,886,410
Less investment advisory and
administration fees waived .................. (3,050,512) (933,887) (962,642)
Less administration fees waived -
class specific .............................. (78,069) (8,931) -
Less transfer agent fee waived - class
specific .................................... (2,254) - -
Less distribution fees waived - class
specific .................................... (280,094) (24,330) (74,563)
Less shareholder servicing fees
waived - class specific ..................... (15,536) - (177,934)
Less shareholder processing fees
waived - class specific ..................... (9,321) - (5,084)
Less expenses reimbursed by advisor........... - - -
------------ ----------- -----------
Net expenses .................................. 7,907,739 1,738,056 1,666,187
------------ ----------- -----------
Net investment income ........................... 8,810,327 1,572,386 1,895,727
------------ ----------- -----------
Net realized gain (loss) on investments ......... 67,698 8,597 89,746
------------ ----------- -----------
Net increase in net assets resulting
from operations ................................ $ 8,878,025 $ 1,580,983 $ 1,985,473
============ =========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34
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
- -------------- --------------- -------------- -------------- -------------
$ 850,254 $ 602,282 $ 805,675 $ 2,763,541 $ 97,312
---------- ---------- ---------- ----------- --------
359,109 243,585 300,553 1,128,764 40,701
67,832 46,010 56,771 212,999 7,688
75,812 51,423 63,454 238,295 8,592
13,573 10,429 12,411 36,423 5,089
2,729 3,810 3,807 9,755 1,719
21,944 14,711 20,843 66,777 2,243
67,324 591 43,887 79,914 968
59,606 419 30,742 60,823 968
7,718 171 13,144 19,091 -
9,737 9,866 10,220 19,799 6,288
12,892 13,183 11,072 40,130 1,423
6,330 5,890 4,612 7,404 6,591
1,983 1,957 1,691 6,037 754
6,356 6,372 4,443 15,553 1,608
---------- ---------- ---------- ----------- --------
712,945 408,417 577,650 1,941,764 84,632
(265,653) (244,788) (226,007) (715,550) (49,059)
- - - - (2)
- - - - -
(7,718) (171) (13,144) (19,091) -
- - - - (968)
(11,576) (256) - (28,637) (323)
- - - - (6,501)
---------- ---------- ---------- ----------- --------
427,998 163,202 338,499 1,178,486 27,779
---------- ---------- ---------- ----------- --------
422,256 439,080 467,176 1,585,055 69,533
---------- ---------- ---------- ----------- --------
36,064 (9,008) - 117,343 584
---------- ---------- ---------- ----------- --------
$ 458,320 $ 430,072 $ 467,176 $ 1,702,398 $ 70,117
========== ========== ========== =========== ========
35
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
U.S.TREASURY MUNICIPAL
MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
-------------------------------- ----------------------------- -----------------------------
FOR THE FOR THE FOR THE
SIX SIX SIX
MONTHS FOR THE MONTHS FOR THE MONTHS FOR THE
ENDED YEAR ENDED YEAR ENDED YEAR
3/31/04 ENDED 3/31/04 ENDED 3/31/04 ENDED
(UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
--------------- --------------- ------------- -------------- ------------- --------------
Increase (decrease) in net assets:
Operations:
Net investment income ........... $ 8,810,327 $ 31,056,775 $ 1,572,386 $ 6,369,710 $ 1,895,727 $ 5,774,749
Net realized gain (loss) on
investments .................... 67,698 12,679 8,597 378 89,746 9,734
--------------- --------------- ------------- -------------- ------------- -------------
Net increase in net assets
resulting from operations ...... 8,878,025 31,069,454 1,580,983 6,370,088 1,985,473 5,784,483
--------------- --------------- ------------- -------------- ------------- -------------
Distributions to shareholders from:
Net investment income:
Institutional Class ............. (7,085,290) (23,276,050) (1,145,636) (4,527,100) (1,392,645) (3,984,565)
Service Class ................... (932,445) (4,035,277) (384,303) (1,579,280) (171,866) (651,980)
Hilliard Lyons Class ............ (187,336) (840,699) - - (319,415) (1,103,413)
Investor A Class ................ (600,396) (2,866,013) (42,447) (263,330) (11,801) (34,791)
Investor B Class ................ (4,328) (28,994) - - - -
Investor C Class ................ (532) (9,742) - - - -
--------------- --------------- ------------- -------------- ------------- -------------
Total distributions from net
investment income .............. (8,810,327) (31,056,775) (1,572,386) (6,369,710) (1,895,727) (5,774,749)
--------------- --------------- ------------- -------------- ------------- -------------
Capital share transactions ........ (194,733,877) (689,744,955) (82,792,528) (181,023,763) (45,825,813) (8,863,150)
--------------- --------------- ------------- -------------- ------------- -------------
Total increase (decrease) in
net assets ...................... (194,666,179) (689,732,276) (82,783,931) (181,023,385) (45,736,067) (8,853,416)
Net assets:
Beginning of period ............. 3,053,696,226 3,743,428,502 679,460,247 860,483,632 678,705,635 687,559,051
--------------- --------------- ------------- -------------- ------------- -------------
End of period ................... $ 2,859,030,047 $ 3,053,696,226 $ 596,676,316 $ 679,460,247 $ 632,969,568 $ 678,705,635
=============== =============== ============= ============== ============= =============
End of period undistributed
net investment income .......... $ 64,239 $ 64,239 $ 46,591 $ 46,591 $ - $ -
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
36
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 SIX
SIX FOR THE MONTHS FOR THE MONTHS FOR THE
MONTHS YEAR ENDED YEAR ENDED YEAR
ENDED ENDED 3/31/04 ENDED 3/31/04 ENDED
3/31/04 9/30/03 (UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------
$ 422,256 $ 1,284,763 $ 439,080 $ 1,557,626 $ 467,176 $ 1,453,594
36,064 - (9,008) - - -
------------- ------------- --------------- ------------- ------------- -------------
458,320 1,284,763 430,072 1,557,626 467,176 1,453,594
============= ============= =============== ============= ============= =============
(272,043) (823,960) (437,712) (1,554,109) (382,048) (1,184,600)
(122,174) (388,878) (550) (1,545) (38,069) (93,438)
- - - - - -
(28,039) (71,925) (818) (1,972) (47,059) (175,556)
- - - - - -
- - - - - -
------------- ------------- --------------- ------------- ------------- -------------
(422,256) (1,284,763) (439,080) (1,557,626) (467,176) (1,453,594)
------------- ------------- --------------- ------------- ------------- -------------
3,350,995 (6,528,126) (107,289,835) 5,973,563 (4,644,174) (12,636,827)
------------- ------------- --------------- ------------- ------------- -------------
3,387,059 (6,528,126) (107,298,843) 5,973,563 (4,644,174) (12,636,827)
159,363,039 165,891,165 163,029,698 157,056,135 134,151,438 146,788,265
------------- ------------- --------------- ------------- ------------- -------------
$ 162,750,098 $ 159,363,039 $ 55,730,855 $ 163,029,698 $ 129,507,264 $ 134,151,438
============= ============= =============== ============= ============= =============
$ - $ - $ - $ - $ - $ -
PENNSYLVANIA MUNICIPAL VIRGINIA MUNICIPAL
MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
---------------------------------- ---------------------------------
FOR THE FOR THE
SIX SIX
MONTHS FOR THE MONTHS FOR THE
ENDED YEAR ENDED YEAR
3/31/04 ENDED 3/31/04 ENDED
(UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
- ------------------ ---------------- ---------------- ----------------
$ 1,585,055 $ 4,675,094 $ 69,533 $ 635,780
117,343 1,159 584 -
------------- ------------- ------------- ------------
1,702,398 4,676,253 70,117 635,780
============= ============= ============= ============
(1,433,192) (4,040,379) (64,975) (209,774)
(82,339) (322,428) (4,558) (426,006)
- - - -
(69,524) (312,287) - -
- - - -
- - - -
------------- ------------- ------------- ------------
(1,585,055) (4,675,094) (69,533) (635,780)
------------- ------------- ------------- ------------
5,972,961 (94,515,945) (52,823,601) (977,482)
------------- ------------- ------------- ------------
6,090,304 (94,514,786) (52,823,017) (977,482)
494,302,363 588,817,149 62,973,881 63,951,363
------------- ------------- ------------- ------------
$ 500,392,667 $ 494,302,363 $ 10,150,864 $ 62,973,881
============= ============= ============= ============
$ - $ - $ - $ -
37
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
10/01/03 through 3/31/04 /12/ $1.00 $0.0038 $(0.0038) $1.00
9/30/03 1.00 0.0103 (0.0103) 1.00
9/30/02 1.00 0.0186 (0.0186) 1.00
9/30/01 1.00 0.0496 (0.0496) 1.00
9/30/00 1.00 0.0582 (0.0582) 1.00
9/30/99 1.00 0.0478 (0.0478) 1.00
Service Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0023 $(0.0023) $1.00
9/30/03 1.00 0.0073 (0.0073) 1.00
9/30/02 1.00 0.0156 (0.0156) 1.00
9/30/01 1.00 0.0466 (0.0466) 1.00
9/30/00 1.00 0.0552 (0.0552) 1.00
9/30/99 1.00 0.0448 (0.0448) 1.00
Hilliard Lyons Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0014 $(0.0014) $1.00
9/30/03 1.00 0.0056 (0.0056) 1.00
9/30/02 1.00 0.0139 (0.0139) 1.00
9/30/01 1.00 0.0450 (0.0450) 1.00
10/18/99 /1/ through 9/30/00 1.00 0.0518 (0.0518) 1.00
Investor A Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0014 $(0.0014) $1.00
9/30/03 1.00 0.0056 (0.0056) 1.00
9/30/02 1.00 0.0139 (0.0139) 1.00
9/30/01 1.00 0.0449 (0.0449) 1.00
9/30/00 1.00 0.0539 (0.0539) 1.00
9/30/99 1.00 0.0441 (0.0441) 1.00
Investor B Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0004 $(0.0004) $1.00
9/30/03 1.00 0.0014 (0.0014) 1.00
9/30/02 1.00 0.0079 (0.0079) 1.00
9/30/01 1.00 0.0389 (0.0389) 1.00
9/30/00 1.00 0.0475 (0.0475) 1.00
9/30/99 1.00 0.0371 (0.0371) 1.00
Investor C Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0004 $(0.0004) $1.00
9/30/03 1.00 0.0014 (0.0014) 1.00
9/30/02 1.00 0.0078 (0.0078) 1.00
9/30/01 1.00 0.0389 (0.0389) 1.00
9/30/00 1.00 0.0475 (0.0475) 1.00
9/30/99 1.00 0.0371 (0.0371) 1.00
------------------------------------
U.S. Treasury Money Market Portfolio
------------------------------------
Institutional Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0032 $(0.0032) $1.00
9/30/03 1.00 0.0091 (0.0091) 1.00
9/30/02 1.00 0.0166 (0.0166) 1.00
9/30/01 1.00 0.0464 (0.0464) 1.00
9/30/00 1.00 0.0543 (0.0543) 1.00
9/30/99 1.00 0.0453 (0.0453) 1.00
Service Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0017 $(0.0017) $1.00
9/30/03 1.00 0.0061 (0.0061) 1.00
9/30/02 1.00 0.0136 (0.0136) 1.00
9/30/01 1.00 0.0435 (0.0435) 1.00
9/30/00 1.00 0.0513 (0.0513) 1.00
9/30/99 1.00 0.0423 (0.0423) 1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME
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)
============ ============== ================= ===================== =================== ==================
0.38% $ 1,874,002 0.42%/2/ 0.63%/2/ 0.75%/2/ 0.54%/2/
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
5.98 2,231,404 0.42 0.60 5.83 5.65
4.89 2,076,083 0.42 0.61 4.78 4.59
0.23% $ 447,033 0.72%/2/ 0.94%/2/ 0.45%/2/ 0.23%/2/
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
5.66 629,769 0.72 0.90 5.49 5.31
4.58 748,191 0.72 0.91 4.48 4.29
0.14% $ 130,017 0.87%/2/ 1.08%/2/ 0.27%/2/ (0.04)%/2/
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
5.30 154,279 0.912 1.09/2/ 5.43/2/ 5.25/2/
0.14% $ 398,216 0.85%/2/ 1.08%/2/ 0.28%/2/ (0.04)%/2/
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
5.53 405,740 0.85 1.03 5.37 5.19
4.50 486,578 0.80 0.99 4.40 4.21
0.04% $ 8,920 1.09%/2/ 1.83%/2/ 0.08%/2/ (0.67)%/2/
0.14 13,490 1.34 1.86 0.15 (0.37)
0.79 21,864 1.49 1.83/10/ 0.77 0.42/10/
3.96 15,853 1.49 1.82/10/ 3.64 3.31/10/
4.85 6,371 1.49 1.82/10/ 4.84 4.51/10/
3.77 5,414 1.49 1.83/10/ 3.71 3.37/10/
0.04% $ 842 1.09%/2/ 1.83%/2/ 0.08%/2/ (0.67)%/2/
0.14 2,197 1.35 1.86 0.15 (0.35)
0.79 7,873 1.49 1.83/10/ 0.79 0.45/10/
3.96 9,429 1.49 1.82/10/ 3.68 3.35/10/
4.85 4,134 1.49 1.82/10/ 4.77 4.44/10/
3.77 4,268 1.49 1.83/10/ 3.71 3.37/10/
0.32% $ 341,722 0.41%/2/ 0.71%/2/ 0.64%/2/ 0.34%/2/
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
5.56 317,272 0.41 0.68 5.43 5.16
4.63 324,879 0.41 0.68 4.53 4.26
0.17% $ 208,473 0.71%/2/ 1.01%/2/ 0.34%/2/ 0.04%/2/
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
5.25 412,321 0.71 0.98 5.10 4.83
4.31 524,122 0.71 0.98 4.23 3.96
39
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
=========== ============ =============== ===========
Investor A Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0009 $(0.0009) $1.00
9/30/03 1.00 0.0044 (0.0044) 1.00
9/30/02 1.00 0.0119 (0.0119) 1.00
9/30/01 1.00 0.0417 (0.0417) 1.00
9/30/00 1.00 0.0497 (0.0497) 1.00
9/30/99 1.00 0.0412 (0.0412) 1.00
Investor B Class
1/10/00 /1/ through 2/7/00 $1.00 $0.0037 $(0.0037) $1.00
Investor C Class
1/22/02 /4/ through 2/6/02 $1.00 $0.0003 $(0.0003) $1.00
12/8/98 /1/ through 5/25/99 1.00 0.0138 (0.0138) 1.00
--------------------------------
Municipal Money Market Portfolio
--------------------------------
Institutional Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0033 $(0.0033) $1.00
9/30/03 1.00 0.0092 (0.0092) 1.00
9/30/02 1.00 0.0142 (0.0142) 1.00
9/30/01 1.00 0.0315 (0.0315) 1.00
9/30/00 1.00 0.0356 (0.0356) 1.00
9/30/99 1.00 0.0281 (0.0281) 1.00
Service Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0018 $(0.0018) $1.00
9/30/03 1.00 0.0062 (0.0062) 1.00
9/30/02 1.00 0.0112 (0.0112) 1.00
9/30/01 1.00 0.0285 (0.0285) 1.00
9/30/00 1.00 0.0326 (0.0326) 1.00
9/30/99 1.00 0.0252 (0.0252) 1.00
Hilliard Lyons Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0022 $(0.0022) $1.00
9/30/03 1.00 0.0070 (0.0070) 1.00
9/30/02 1.00 0.0120 (0.0120) 1.00
9/30/01 1.00 0.0292 (0.0292) 1.00
10/26/99 /1/ through 9/30/00 1.00 0.0316 (0.0316) 1.00
Investor A Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0017 $(0.0017) $1.00
9/30/03 1.00 0.0048 (0.0048) 1.00
9/30/02 1.00 0.0095 (0.0095) 1.00
9/30/01 1.00 0.0268 (0.0268) 1.00
9/30/00 1.00 0.0309 (0.0309) 1.00
9/30/99 1.00 0.0235 (0.0235) 1.00
Investor C Class
10/1/98 through 12/18/98 $1.00 $0.0040 $(0.0040) $1.00
-------------------------------------------
New Jersey Municipal Money Market Portfolio
-------------------------------------------
Institutional Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0034 $(0.0034) $1.00
9/30/03 1.00 0.0089 (0.0089) 1.00
9/30/02 1.00 0.0134 (0.0134) 1.00
9/30/01 1.00 0.0305 (0.0305) 1.00
9/30/00 1.00 0.0347 (0.0347) 1.00
9/30/99 1.00 0.0279 (0.0279) 1.00
Service Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0019 $(0.0019) $1.00
9/30/03 1.00 0.0059 (0.0059) 1.00
9/30/02 1.00 0.0104 (0.0104) 1.00
9/30/01 1.00 0.0275 (0.0275) 1.00
9/30/00 1.00 0.0317 (0.0317) 1.00
9/30/99 1.00 0.0249 (0.0249) 1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME
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)
============ =========== ================= ===================== =================== ==================
0.09% $ 46,481 0.84%/2/ 1.24%/2/ 0.17%/2/ (0.22)%/2/
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
5.09 31,808 0.86 1.13 4.91 4.64
4.20 45,224 0.82 1.09 4.12 3.85
0.37% $ -/5/ 1.48%/2/ 1.75%/2/ 4.70%/2/ 4.43%/2/
0.03% $ -/9/ 1.48%/2/ 1.76%/2/ 0.72%/2/ 0.44%/2/
1.39 -/3/ 1.48/2/ 1.75/2/ 3.46/2/ 3.19/2/
0.33% $ 404,961 0.42%/2/ 0.71%/2/ 0.66%/2/ 0.37%/2/
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
3.62 314,307 0.42 0.70 3.63 3.35
2.85 238,281 0.42 0.70 2.80 2.52
0.18% $ 79,527 0.72%/2/ 1.01%/2/ 0.37%/2/ 0.08%/2/
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
3.31 112,807 0.72 1.00 3.23 2.95
2.54 151,261 0.72 1.00 2.50 2.22
0.23% $ 142,313 0.60%/2/ 1.24%/2/ 0.45%/2/ (0.19)%/2/
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
3.21 105,572 0.66/2/ 0.94/2/ 3.42/2/ 3.14/2/
0.18% $ 6,169 0.71%/2/ 1.25%/2/ 0.35%/2/ (0.19)%/2/
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
3.13 7,396 0.89 1.17 3.09 2.81
2.37 4,705 0.89 1.17 2.33 2.05
0.40% $ -/3/ 1.49%/2/ 1.77%/2/ 1.73%/2/ 1.45%/2/
0.34% $ 86,222 0.39%/2/ 0.72%/2/ 0.68%/2/ 0.35%/2/
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
3.52 82,080 0.39 0.70 3.45 3.14
2.83 79,568 0.39 0.71 2.79 2.47
0.19% $ 63,459 0.69%/2/ 1.02%/2/ 0.38%/2/ 0.05%/2/
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
3.21 55,177 0.69 1.00 3.23 2.92
2.52 37,120 0.69 1.01 2.49 2.17
41
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
========= ========== ============= ======
Investor A Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0018 $ $(0.0018) $1.00
9/30/03 1.00 0.0045 (0.0045) 1.00
9/30/02 1.00 0.0087 (0.0087) 1.00
9/30/01 1.00 0.0258 (0.0258) 1.00
9/30/00 1.00 0.0292 (0.0292) 1.00
9/30/99 1.00 0.0227 (0.0227) 1.00
Investor B Class
10/1/99 through 2/8/00 $1.00 $0.0077 $(0.0077) $1.00
9/30/99 1.00 0.0094 (0.0094) 1.00
-----------------------------------------------
North Carolina Municipal Money Market Portfolio
-----------------------------------------------
Institutional Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0040 $(0.0040) $1.00
9/30/03 1.00 0.0097 (0.0097) 1.00
9/30/02 1.00 0.0134 (0.0134) 1.00
9/30/01 1.00 0.0313 (0.0313) 1.00
9/30/00 1.00 0.0362 (0.0362) 1.00
9/30/99 1.00 0.0288 (0.0288) 1.00
Service Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0025 $(0.0025) $1.00
9/30/03 1.00 0.0067 (0.0067) 1.00
9/30/02 1.00 0.0104 (0.0104) 1.00
9/30/01 1.00 0.0283 (0.0283) 1.00
9/30/00 1.00 0.0332 (0.0332) 1.00
9/30/99 1.00 0.0258 (0.0258) 1.00
Investor A Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0024 $(0.0024) $1.00
9/30/03 1.00 0.0053 (0.0053) 1.00
9/30/02 1.00 0.0082 (0.0082) 1.00
9/30/01 1.00 0.0266 (0.0266) 1.00
9/30/00 1.00 0.0315 (0.0315) 1.00
9/30/99 1.00 0.0241 (0.0241) 1.00
Investor B Class
10/1/01 through 12/14/01 $1.00 $0.0012 $(0.0012) $1.00
9/30/01 1.00 0.0203 (0.0203) 1.00
1/12/00 /1/ through 9/30/00 1.00 0.0185 (0.0185) 1.00
-------------------------------------
Ohio Municipal Money Market Portfolio
-------------------------------------
Institutional Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0041 $(0.0041) $1.00
9/30/03 1.00 0.0105 (0.0105) 1.00
9/30/02 1.00 0.0154 (0.0154) 1.00
9/30/01 1.00 0.0331 (0.0331) 1.00
9/30/00 1.00 0.0361 (0.0361) 1.00
9/30/99 1.00 0.0294 (0.0294) 1.00
Service Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0026 $(0.0026) $1.00
9/30/03 1.00 0.0075 (0.0075) 1.00
9/30/02 1.00 0.0124 (0.0124) 1.00
9/30/01 1.00 0.0301 (0.0301) 1.00
9/30/00 1.00 0.0331 (0.0331) 1.00
9/30/99 1.00 0.0264 (0.0264) 1.00
Investor A Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0018 $(0.0018) $1.00
9/30/03 1.00 0.0058 (0.0058) 1.00
9/30/02 1.00 0.0107 (0.0107) 1.00
9/30/01 1.00 0.0284 (0.0284) 1.00
9/30/00 1.00 0.0313 (0.0313) 1.00
9/30/99 1.00 0.0246 (0.0246) 1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME
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)
============ =========== ================= ===================== =================== ==================
0.18% $ 13,069 0.67%/2/ 1.26%/2/ 0.36%/2/ (0.22)%/2/
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
2.96 6,421 0.93 1.24 2.86 2.55
2.30 22,370 0.91 1.23 2.27 1.95
0.77% $ -/5/ 1.46%/2/ 1.77%/2/ 2.33%/2/ 2.02%/2/
0.94 - 1.46 1.78 1.72 1.40
0.40% $ 55,263 0.30%/2/ 0.75%/2/ 0.81%/2/ 0.36%/2/
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
3.68 102,155 0.30 0.72 3.62 3.20
2.92 178,059 0.30 0.70 2.87 2.47
0.25% $ 146 0.60%/2/ 1.07%/2/ 0.50%/2/ 0.03%/2/
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
3.37 649 0.60 1.02 3.20 2.78
2.61 1,639 0.60 1.00 2.57 2.17
0.24% $ 322 0.58%/2/ 1.32%/2/ 0.48%/2/ (0.25)%/2/
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
3.20 358 0.77 1.19 3.15 2.73
2.44 369 0.77 1.17 2.40 2.00
0.12% $ -/7/ 1.37%/2/ 1.79%/2/ 0.60%/2/ 0.18%/2/
2.05 6 1.37 1.77 2.02 1.62
1.86 6 1.37/2/ 1.79/2/ 2.61/2/ 2.19/2/
0.41% $ 86,183 0.39%/2/ 0.73%/2/ 0.83%/2/ 0.49%/2/
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
3.67 52,095 0.39 0.71 3.60 3.28
2.98 49,237 0.39 0.71 2.95 2.63
0.26% $ 18,841 0.69%/2/ 1.02%/2/ 0.52%/2/ 0.18%/2/
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
3.36 10,284 0.69 1.01 3.29 2.97
2.67 11,284 0.69 1.01 2.65 2.33
0.18% $ 24,483 0.82%/2/ 1.26%/2/ 0.36%/2/ (0.08)%/2/
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
3.18 41,010 0.87 1.19 3.13 2.81
2.49 44,929 0.87 1.19 2.47 2.15
43
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
10/01/03 through 3/31/04 /12/ $1.00 $0.0034 $(0.0034) $1.00
9/30/03 1.00 0.0093 (0.0093) 1.00
9/30/02 1.00 0.0131 (0.0131) 1.00
9/30/01 1.00 0.0299 (0.0299) 1.00
9/30/00 1.00 0.0354 (0.0354) 1.00
9/30/99 1.00 0.0280 (0.0280) 1.00
Service Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0019 $(0.0019) $1.00
9/30/03 1.00 0.0063 (0.0063) 1.00
9/30/02 1.00 0.0101 (0.0101) 1.00
9/30/01 1.00 0.0269 (0.0269) 1.00
9/30/00 1.00 0.0324 (0.0324) 1.00
9/30/99 1.00 0.0250 (0.0250) 1.00
Investor A Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0018 $(0.0018) $1.00
9/30/03 1.00 0.0049 (0.0049) 1.00
9/30/02 1.00 0.0084 (0.0084) 1.00
9/30/01 1.00 0.0252 (0.0252) 1.00
9/30/00 1.00 0.0304 (0.0304) 1.00
9/30/99 1.00 0.0235 (0.0235) 1.00
Investor Class B
12/12/01 /1/ through 4/9/02 $1.00 $0.0003 $(0.0003) $1.00
-----------------------------------------
Virginia Municipal Money Market Portfolio
-----------------------------------------
Institutional Class
10/01/03 through 3/31/04 /12/ $1.00 $0.0039 $(0.0039) $1.00
9/30/03 1.00 0.0094 (0.0094) 1.00
9/30/02 1.00 0.0144 (0.0144) 1.00
9/30/01 1.00 0.0323 (0.0323) 1.00
9/30/00 1.00 0.0367 (0.0367) 1.00
9/30/99 1.00 0.0294 (0.0294) 1.00
Service Class
10/01/03 through 10/07/03 /12/ $1.00 $0.0001 $(0.0001) $1.00
9/30/03 1.00 0.0084 (0.0084) 1.00
9/30/02 1.00 0.0124 (0.0124) 1.00
9/30/01 1.00 0.0293 (0.0293) 1.00
9/30/00 1.00 0.0337 (0.0337) 1.00
9/30/99 1.00 0.0264 (0.0264) 1.00
Investor A Class
10/1/01 through 3/12/02 $1.00 $0.0051 $(0.0051) $1.00
9/30/01 1.00 0.0276 (0.0276) 1.00
9/30/00 /6/ 1.00 0.0288 (0.0288) 1.00
9/30/99 1.00 0.0237 (0.0237) 1.00
/1/ Commencement of operations of share class.
/2/ Annualized.
/3/ There were no Investor C shares outstanding as of September 30, 1999.
/4/ Reissuance of shares.
/5/ There were no Investor B shares outstanding as of September 30, 2000.
/6/ This class has opened, closed and then reopened during the fiscal year.
The financial highlights are reflective of the cumulative periods that
the class opened.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44
BLACKROCK FUNDS
RATIO OF NET
NET RATIO OF TOTAL INVESTMENT INCOME
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)
============ ============ ================= ===================== =================== ==================
0.34% $ 430,266 0.42%/2/ 0.71%/2/ 0.68%/2/ 0.40%/2/
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
3.60 400,378 0.42 0.68 3.53 3.27
2.84 376,402 0.42 0.70 2.80 2.52
0.19% $ 36,012 0.72%/2/ 1.01%/2/ 0.38%/2/ 0.10%/2/
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
3.29 83,474 0.72 0.98 3.25 2.99
2.53 76,173 0.72 1.00 2.50 2.22
0.18% $ 34,115 0.71%/2/ 1.24%/2/ 0.36%/2/ (0.17)%/2/
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
3.08 62,421 0.92 1.18 3.00 2.74
2.37 135,341 0.88 1.16 2.34 2.06
0.05% $ -/7/ 1.49%/2/ 1.76%/2/ 0.14%/2/ (0.13)%/2/
0.39% $ 10,151 0.30%/2/ 0.85%/2/ 0.77%/2/ 0.23%/2/
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
3.73 61,561 0.30 0.74 3.65 3.21
2.98 51,301 0.30 0.75 2.95 2.50
0.01% $ -/11/ 0.40%/2/ 1.06%/2/ 0.71%/2/ 0.04%/2/
0.85 41,011 0.40 1.05 0.85 0.19
1.25 44,143 0.40 1.00/10/ 1.19 0.60/10/
2.97 611 0.60 1.03 2.94 2.51
3.42 458 0.60 1.04 3.17 2.73
2.68 2,786 0.60 1.05 2.65 2.20
0.51% $ -/8/ 0.77%/2/ 1.20%/2/ 1.21%/2/ 0.77%/2/
2.80 3,008 0.77 1.20 2.72 2.28
2.92 3,020 0.87 1.31 3.11 2.67
2.40 1,261 0.87 1.32 2.38 1.93
/7/ There were no Investor B shares outstanding as of September 30, 2002.
/8/ There were no Investor A shares outstanding as of September 30, 2002.
/9/ There were no Investor C shares outstanding as of September 30, 2002.
/10/ Certain prior year amounts were reclassified to conform to current year
presentation.
/11/ There were no Service shares outstanding as of March 31, 2004.
/12/ Unaudited.
45
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS
BlackRock Funds/SM/ (the "Fund") was organized on December 22, 1988, as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. The Fund
currently has 44 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. Shares of all classes of a
Portfolio represent equal pro rata interests in such Portfolio, except that
each class bears different expenses which reflect the difference in the range
of services provided to them. The following table provides a list of the
Portfolios included in this report along with a summary of their respective
class-specific fee arrangements as provided under the Fund's Amended and
Restated Distribution and Service Plan (the "Plan"). Fees are expressed as a
percentage of average daily net asset values of the respective classes.
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 0.30% 0.30% 0.50% 0.40%
U.S. Treasury Money Market None None 0.30% 0.30% N/A N/A
Municipal Money Market None None 0.30% 0.30% 0.50% 0.15%
New Jersey Municipal Money Market None None 0.30% 0.30% N/A N/A
North Carolina Municipal Money None None 0.30% 0.30% N/A N/A
Market
Ohio Municipal Money Market None None 0.30% 0.30% N/A N/A
Pennsylvania Municipal Money Market None None 0.30% 0.30% N/A N/A
Virginia Municipal Money Market None None 0.30% 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 0.50% 0.40% 1.15% 0.75% 1.15% 0.75%
U.S. Treasury Money Market 0.50% 0.40% 1.15% N/A 1.15% N/A
Municipal Money Market 0.50% 0.25% 1.15% N/A 1.15% N/A
New Jersey Municipal Money Market 0.50% 0.25% 1.15% N/A 1.15% N/A
North Carolina Municipal Money 0.50% 0.25% 1.15% N/A 1.15% N/A
Market
Ohio Municipal Money Market 0.50% 0.40% 1.15% N/A 1.15% N/A
Pennsylvania Municipal Money Market 0.50% 0.25% 1.15% N/A 1.15% N/A
Virginia Municipal Money Market 0.50% N/A 1.15% N/A 1.15% N/A
(1) - the maximum annual contractual fees are comprised of a .15% service fee
and .15% shareholder processing fee. During the period a portion of the
service fee and shareholder processing fee with respect to the Service
shares of the Virginia Municipal Money Market Portfolio were waived.
(2) - the maximum annual contractual fees are comprised of a .10% distribution
fee, .25% service fee and .15% shareholder processing fee. During the
period a portion of the shareholder processing fees with respect to the
Investor A shares of the Municipal Money Market, New Jersey Municipal
Money Market, North Carolina Municipal Money Market and Pennsylvania
Municipal Money Market portfolios were waived.
(3) - the maximum annual contractual fees are comprised of a .75% distribution
fee, .25% service fee and .15% share-holder processing fee. During the
period a portion of the shareholder servicing and shareholder processing
fees with respect to the Investor B and Investor C shares of the Money
Market Portfolio were waived.
(4) - the actual fees are as of March 31, 2004.
In addition, for the period 10/1/03 through 12/31/03, Institutional and
Service shares bore a Transfer Agent fee at an annual rate not to exceed .03%
and Hilliard Lyons, Investor A, Investor B and Investor C shares bore a
Transfer Agent fee at an annual rate not to exceed .10% of the average daily
net assets of such respective classes. Effective January 1, 2004, each of the
Institutional, Service, Hilliard Lyons, Investor A, Investor B and Investor C
share classes bear a Transfer Agent fee at an annual rate not to exceed .018%
of the average daily net assets of such respective classes. During the period,
PFPC Inc., the Fund's transfer agent waived a portion of the transfer agent
fees with respect to the Investor B and Investor C shares of the Money Market
Portfolio.
(A) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with accounting principles generally
accepted in the United States of America requires the use of management
estimates. Actual results could differ from these estimates.
Security Valuation - Portfolio securities are valued under the amortized
cost method which approximates current market value. 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.
46
BLACKROCK FUNDS
Dividends to Shareholders - Dividends from net investment income are
declared daily and paid monthly. Net real-ized capital gains, if any, are
distributed at least annually.
Security Transactions and Investment Income - Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
federal income tax purposes. Interest income is recorded on the accrual basis.
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 Fund's
custodian or an authorized securities depository.
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,
such as 12b-1 service fees, are borne by that class. 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. For the six
months ended March 31, 2004, the following shows the various types of
class-specific expenses borne directly by each class of each fund and any
associated waivers of those expenses.
SHARE CLASSES
ADMINISTRATION FEES ------------------------------------------------------------------------------
HILLIARD
INSTITUTIONAL SERVICE LYONS INVESTOR A INVESTOR B INVESTOR C
--------------- ------------ ----------- ------------ ------------ -----------
Money Market ............................ $ 782,850 $ 196,320 $ 65,567 $ 200,522 $ 5,268 $ 661
U.S. Treasury Money Market .............. 169,964 107,131 - 23,113 - -
Municipal Money Market .................. 199,545 44,179 67,615 3,220 - -
New Jersey Municipal Money
Market ................................. 38,062 30,418 - 7,332 - -
North Carolina Municipal Money
Market ................................. 51,157 104 - 162 - -
Ohio Municipal Money Market ............. 43,984 6,983 - 12,487 - -
Pennsylvania Municipal Money
Market ................................. 199,774 20,385 - 18,136 - -
Virginia Municipal Money Market ......... 7,979 613 - - - -
SHARE CLASSES
ADMINISTRATION FEES WAIVED ----------------------------------------------------------------------------------
HILLIARD
INSTITUTIONAL SERVICE LYONS INVESTOR A INVESTOR B INVESTOR C
--------------- -------------- ----------- -------------- ------------ -----------
Money Market ............................ $ (13,885) $ (27,304) $ (955) $ (30,003) $ (5,262) $ (660)
U.S. Treasury Money Market .............. (4,704) (3,472) - (755) - -
Virginia Municipal Money Market ......... (2) - - - - -
SHARE CLASSES
TRANSFER AGENT FEES -----------------------------------------------------------------------------
HILLIARD
INSTITUTIONAL SERVICE LYONS INVESTOR A INVESTOR B INVESTOR C
--------------- ----------- ----------- ------------ ------------ -----------
Money Market ........................ $ 228,428 $ 49,956 $ 41,411 $ 127,037 $ 3,506 $ 478
U.S. Treasury Money Market .......... 43,288 27,256 - 14,558 - -
Municipal Money Market .............. 50,155 11,254 41,922 2,074 - -
New Jersey Municipal Money
Market ............................. 9,578 7,736 - 4,630 - -
North Carolina Municipal Money
Market ............................. 14,584 27 - 100 - -
Ohio Municipal Money Market ......... 11,250 1,720 - 7,873 - -
Pennsylvania Municipal Money
Market ............................. 50,563 5,263 - 10,951 - -
47
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SHARE CLASSES
TRANSFER AGENT FEES -------------------------------------------------------------------------
HILLIARD
INSTITUTIONAL SERVICE LYONS INVESTOR A INVESTOR B INVESTOR C
--------------- --------- --------- ------------ ------------ -----------
Virginia Municipal Money Market ......... $2,049 $194 $- $- $- $-
SHARE CLASSES
TRANSFER AGENT FEES WAIVED --------------------------
INVESTOR B INVESTOR C
------------ -----------
Money Market ............ $ (1,980) $ (274)
SHARE CLASSES
SHAREHOLDER SERVICE FEES -----------------------------------------------------------------------
HILLIARD
SERVICE LYONS INVESTOR A INVESTOR B INVESTOR C
------------ ------------ ------------ ------------ -----------
Money Market ............................ $ 309,978 $ 172,546 $ 527,689 $ 13,802 $ 1,734
U.S. Treasury Money Market .............. 169,154 - 60,824 - -
Municipal Money Market .................. 69,752 177,934 8,473 - -
New Jersey Municipal Money
Market ................................. 48,030 - 19,294 - -
North Carolina Municipal Money
Market ................................. 164 - 427 - -
Ohio Municipal Money Market ............. 11,026 - 32,861 - -
Pennsylvania Municipal Money
Market ................................. 32,186 - 47,728 - -
Virginia Municipal Money Market ......... 968 - - - -
SHARE CLASSES
SHAREHOLDER SERVICE FEES WAIVED ----------------------------------------------------------
HILLIARD
SERVICE LYONS INVESTOR B INVESTOR C
--------- ------------- -------------- -------------
Money Market ............................ $ - $ - $ (13,802) $ (1,734)
Municipal Money Market .................. - (177,934) - -
Virginia Municipal Money Market ......... (968) - - -
SHARE CLASSES
SHAREHOLDER PROCESSING FEES -----------------------------------------------------------------------
HILLIARD
SERVICE LYONS INVESTOR A INVESTOR B INVESTOR C
------------ ------------ ------------ ------------ -----------
Money Market ............................ $ 309,980 $ 103,527 $ 316,613 $ 8,281 $ 1,040
U.S. Treasury Money Market .............. 169,154 - 36,494 - -
Municipal Money Market .................. 69,753 106,760 5,084 - -
New Jersey Municipal Money
Market ................................. 48,030 - 11,576 - -
North Carolina Municipal Money
Market ................................. 163 - 256 - -
Ohio Municipal Money Market ............. 11,026 - 19,716 - -
Pennsylvania Municipal Money
Market ................................. 32,186 - 28,637 - -
Virginia Municipal Money Market ......... 968 - - - -
SHARE CLASSES
SHAREHOLDER PROCESSING FEES WAIVED -------------------------------------------
INVESTOR A INVESTOR B INVESTOR C
------------ ------------ -------------
Money Market .................................. $ - $ (8,281) $ (1,040)
Municipal Money Market ........................ (5,084) - -
New Jersey Municipal Money Market ............. (11,576) - -
North Carolina Municipal Money Market ......... (256) - -
Pennsylvania Municipal Money Market ........... (28,637) - -
48
BLACKROCK FUNDS
SHARE CLASSES
SHAREHOLDER PROCESSING FEES WAIVED -----------------------------------------------------
SERVICE INVESTOR A INVESTOR B INVESTOR C
--------- ------------ ------------ -----------
Virginia Municipal Money Market ......... $ (323) $- $- $-
SHARE CLASSES
DISTRIBUTION FEES ------------------------------------------------------
HILLIARD LYONS INVESTOR A INVESTOR B INVESTOR C
---------------- ------------ ------------ -----------
Money Market .............................. $ 69,018 $ 211,076 $ 41,405 $ 5,202
U.S. Treasury Money Market ................ - 24,330 - -
Municipal Money Market .................... 71,174 3,389 - -
New Jersey Municipal Money Market ......... - 7,718 - -
North Carolina Municipal Money Market ..... - 171 - -
Ohio Municipal Money Market ............... - 13,144 - -
Pennsylvania Municipal Money Market ....... - 19,091 - -
SHARE CLASSES
DISTRIBUTION FEES WAIVED ----------------------------------
HILLIARD LYONS INVESTOR A
---------------- ---------------
Money Market .................................. $ (69,018) $ (211,076)
U.S. Treasury Money Market .................... - (24,330)
Municipal Money Market ........................ (71,179) (3,389)
New Jersey Municipal Money Market ............. - (7,718)
North Carolina Municipal Money Market ......... - (171)
Ohio Municipal Money Market ................... - (13,144)
Pennsylvania Municipal Money Market ........... - (19,091)
(B) Transactions with Affiliates and Related Parties
Pursuant to an Investment Advisory Agreement, BlackRock Advisors, Inc.
("BlackRock"), a wholly-owned subsidiary of BlackRock, Inc., serves as
investment adviser to the Portfolios. BlackRock 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: .45% of the first $1 billion, .40% of the
next $1 billion, .375% of the next $1 billion and .35% of net assets in excess
of $3 billion.
For the six months ended March 31, 2004, advisory fees and waivers for
each Portfolio were as follows:
GROSS NET
ADVISORY ADVISORY
FEE WAIVER FEE
-------------- -------------- --------------
Money Market Portfolio .................................. $ 5,887,571 $ 3,050,512 $ 2,837,059
U.S. Treasury Money Market Portfolio .................... 1,422,039 933,887 488,152
Municipal Money Market Portfolio ........................ 1,490,013 962,642 527,371
New Jersey Municipal Money Market Portfolio ............. 359,109 265,653 93,456
North Carolina Municipal Money Market Portfolio ......... 243,584 230,804 12,780
Ohio Municipal Money Market Portfolio ................... 300,553 226,007 74,546
Pennsylvania Municipal Money Market Portfolio ........... 1,128,764 715,550 413,214
Virginia Municipal Money Market Portfolio ............... 40,701 36,584 4,117
In the interest of limiting the expenses of the Portfolios, BlackRock and
the Fund have entered into a series of annual expense limitation agreements
beginning February 1, 1999. 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. Effective February 1, 2004, these expense limits apply to the aggregate
expenses incurred on a Share Class (excluding: interest, taxes, brokerage
commissions, and other expenditures which are capitalized in accordance with
generally accepted accounting principles). Prior to February 1, 2004, the
expense
49
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
limits applied to expenses charged on Portfolio assets as a whole, but not
expenses separately charged to the different share classes of a Portfolio.
If in the following two years the operating expenses of a Portfolio that
previously received a waiver or reimbursement from BlackRock are less than the
expense limit for that Portfolio, the Portfolio is required to repay BlackRock
up to the amount of fees waived or expenses reimbursed under the agreement if:
(1) the Portfolio has more than $50 million in assets, (2) BlackRock continues
to be the Portfolio's investment adviser and (3) the Board of Trustees of the
Fund has approved the payments to BlackRock on a quarterly basis.
At March 31, 2004, the amounts subject to possible future reimbursement
under the expense limitation agreement are as follows:
EXPIRING EXPIRING EXPIRING TOTAL WAIVERS SUBJECT
JANUARY 31, 2005 JANUARY 31, 2006 JANUARY 31, 2007 TO REIMBURSEMENT
------------------ ------------------ ------------------ ----------------------
Money Market Portfolio ............... $ 7,697,755 $ 6,569,912 $ 930,365 $ 15,198,032
U.S. Treasury Money Market
Portfolio ........................... 2,639,070 2,107,024 284,672 5,030,766
Municipal Money Market Portfolio ..... 2,114,002 1,946,590 305,148 4,365,740
New Jersey Municipal Money
Market Portfolio .................... 582,682 553,395 85,055 1,221,132
North Carolina Municipal Money
Market Portfolio .................... 611,462 645,013 55,769 1,312,244
Ohio Municipal Money Market
Portfolio ........................... 506,362 492,327 70,244 1,068,933
Pennsylvania Municipal Money
Market Portfolio .................... 1,845,254 1,505,526 214,343 3,565,123
Virginia Municipal Money Market
Portfolio ........................... 282,198 230,488 14,382 527,068
PFPC Inc. ("PFPC"), an indirect subsidiary of The PNC Financial Services
Group, Inc., and BlackRock act as co-administrators for the Fund. For these
services, the co-administrators receive a combined administration fee computed
daily and payable monthly, based on a percentage of the average daily net
assets of each Portfolio, at the following annual rates: .085% of the first
$500 million, .075% of the next $500 million and .065% of assets in excess of
$1 billion. In addition, each of the classes is charged an administration fee
based on the following percentage of average daily net assets of each
respective class: .095% of the first $500 million, .085% of the next $500
million and .075% 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.
During the period PFPC and BlackRock waived a portion of the
administration fees otherwise due to them with respect to the Investor B and
Investor C Shares of the Money Market Portfolio.
For the six months ended March 31, 2004, administration fees and waivers
for each Portfolio were as follows:
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
---------------- ----------- ---------------
Money Market Portfolio .................................. $ 2,260,089 $ 78,070 $ 2,182,019
U.S. Treasury Money Market Portfolio .................... 562,215 8,931 553,284
Municipal Money Market Portfolio ........................ 587,895 - 587,895
New Jersey Municipal Money Market Portfolio ............. 143,644 - 143,644
North Carolina Municipal Money Market Portfolio ......... 97,433 13,984 83,449
Ohio Municipal Money Market Portfolio ................... 120,225 - 120,225
Pennsylvania Municipal Money Market Portfolio ........... 451,294 - 451,294
Virginia Municipal Money Market Portfolio ............... 16,280 12,477 3,803
PFPC Trust Co., 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.
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 Advisers, Inc. ("BlackRock") or any other affiliate of
50
BLACKROCK FUNDS
PNC Bank 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 BlackRock or any other affiliate of PNC Bank fees for the
provision of personal services to shareholders and the processing and
administration of shareholder accounts. BlackRock, in turn, determines the
amount of the service fee and shareholder processing fee to be paid to brokers,
dealers, financial institutions and industry professionals (including PNC Bank
and its affiliates) that provide services to their customers who own shares of
the Fund. BlackRock may retain a significant portion of the shareholder
processing fees and may retain some of the service fees paid by the Fund.
Currently, only Hilliard Lyons Shares, Investor A Shares, Investor B Shares,
Investor C Shares and Service Shares bear the expense of service fees and
shareholder processing fees under the Plan. Refer to the fee table in the
"Notes to Financial Statements" for fee information.
As of the period ended March 31, 2004, affiliated payables were as
follows:
PNC BANK
PFPC(1) BLACKROCK(2) AFFILIATES(3)
------------ -------------- --------------
Money Market Portfolio .................................. $ 219,940 $ 757,257 $ 295,636
U.S.Treasury Money Market Portfolio ..................... 51,268 147,459 68,856
Municipal Money Market Portfolio ........................ 54,663 168,637 41,641
New Jersey Municipal Money Market Portfolio ............. 13,839 35,214 19,078
North Carolina Municipal Money Market Portfolio ......... 4,511 5,945 107
Ohio Municipal Money Market Portfolio ................... 12,951 29,608 13,966
Pennsylvania Municipal Money Market Portfolio ........... 43,832 141,886 17,302
Virginia Municipal Money Market Portfolio ............... 3,185 2,563 -
(1) - payables to PFPC are for Accounting, Administration, Custody and Transfer
Agent services provided as of March 31, 2004.
(2) - payables to BlackRock are for Advisory and Administration services
provided as of March 31, 2004.
(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, 2004, was $3,201,515, a portion of which is paid to
service organizations, including other PNC Bank affiliates.
(C) 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 mounts shown below for such transactions.
51
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Transactions in capital shares for each period were as follows:
MONEY MARKET PORTFOLIO
----------------------------------------
FOR THE SIX MONTHS
ENDED FOR THE YEAR
3/31/04 ENDED
(UNAUDITED) 9/30/03
------------------- ------------------
Shares sold:
Institutional Class .................... $ 1,382,054,343 $ 2,601,501,549
Service Class .......................... 754,328,519 1,508,229,922
Hilliard Lyons Class ................... 64,517,547 525,159,045
Investor A Class ....................... 87,280,921 1,281,528,590
Investor B Class ....................... 1,379 14,204,786
Investor C Class ....................... 19,341 68,746,632
Shares issued in reinvestment of dividends:
Institutional Class .................... 977 19,712
Service Class .......................... 167,711 689,789
Hilliard Lyons Class ................... 191,162 928,685
Investor A Class ....................... 602,297 3,152,332
Investor B Class ....................... 3,537 31,835
Investor C Class ....................... 419 9,961
Shares redeemed:
Institutional Class .................... (1,514,299,213) (3,057,907,259)
Service Class .......................... (739,326,446) (1,644,640,626)
Hilliard Lyons Class ................... (82,972,255) (522,082,513)
Investor A Class ....................... (141,354,073) (1,372,274,269)
Investor B Class ....................... (4,575,338) (22,610,179)
Investor C Class ....................... (1,374,705) (74,432,947)
---------------- ----------------
Net decrease .............................. $ (194,733,877) $ (689,744,955)
================ ================
U.S. TREASURY MONEY
MARKET PORTFOLIO
-----------------------------------------
FOR THE SIX MONTHS
ENDED FOR THE YEAR
3/31/04 ENDED
(UNAUDITED) 9/30/03
------------------- -------------------
Shares sold:
Institutional Class .................... $ 328,868,280 $ 617,737,925
Service Class .......................... 589,352,733 1,149,394,222
Investor A Class ....................... 14,166,777 97,110,160
Investor C Class ....................... - -
Shares issued in reinvestment of dividends:
Institutional Class .................... 288 1,142
Service Class .......................... 8,670 40,358
Investor A Class ....................... 41,424 308,404
Shares redeemed:
Institutional Class .................... (366,391,720) (764,842,515)
Service Class .......................... (631,205,978) (1,164,961,087)
Investor A Class ....................... (17,633,002) (115,812,372)
Investor C Class ....................... - -
-------------- ----------------
Net decrease .............................. $ (82,792,528) $ (181,023,763)
============== ================
52
BLACKROCK FUNDS
MUNICIPAL MONEY
MARKET PORTFOLIO
--------------------------------------
FOR THE SIX MONTHS
ENDED FOR THE YEAR
3/31/04 ENDED
(UNAUDITED) 9/30/03
------------------- ----------------
Shares sold:
Institutional Class .................... $ 346,649,199 $ 637,841,883
Service Class .......................... 148,628,299 287,219,165
Hilliard Lyons Class ................... 64,756,401 611,402,393
Investor A Class ....................... 5,493,607 50,884,902
Shares issued in reinvestment of dividends:
Institutional Class .................... 785 -
Service Class .......................... 24,438 89,274
Hilliard Lyons Class ................... 318,135 1,179,821
Investor A Class ....................... 11,874 36,724
Shares redeemed:
Institutional Class .................... (379,358,316) (628,978,058)
Service Class .......................... (157,906,502) (303,015,842)
Hilliard Lyons Class ................... (66,086,685) (617,033,658)
Investor A Class ....................... (8,357,048) (48,489,754)
-------------- --------------
Net decrease .............................. $ (45,825,813) $ (8,863,150)
============== ==============
NEW JERSEY MUNICIPAL
MONEY MARKET PORTFOLIO
--------------------------------------
FOR THE SIX MONTHS
ENDED FOR THE YEAR
3/31/04 ENDED
(UNAUDITED) 9/30/03
------------------- ----------------
Shares sold:
Institutional Class .................... $ 108,245,543 $ 202,723,999
Service Class .......................... 9,807,329 40,494,924
Investor A Class ....................... 16,845,453 86,120,417
Shares issued in reinvestment of dividends:
Institutional Class .................... 19,094 33,056
Service Class .......................... 6,317 20,174
Investor A Class ....................... 29,616 68,967
Shares redeemed:
Institutional Class .................... (99,328,318) (212,062,757)
Service Class .......................... (10,682,054) (41,275,903)
Investor A Class ....................... (21,591,985) (82,651,003)
------------- --------------
Net increase(decrease) .................... $ 3,350,995 $ (6,528,126)
============= ==============
53
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NORTH CAROLINA MUNICIPAL
MONEY MARKET PORTFOLIO
--------------------------------------
FOR THE SIX MONTHS
ENDED FOR THE YEAR
3/31/04 ENDED
(UNAUDITED) 9/30/03
------------------- ----------------
Shares sold:
Institutional Class .................... $ 108,180,765 $ 185,899,631
Service Class .......................... 67,725 515,818
Investor A Class ....................... 42,000 45,449
Investor B Class ....................... - -
Shares issued in reinvestment of dividends:
Institutional Class .................... 86,931 -
Service Class .......................... 42 118
Investor A Class ....................... 824 1,922
Investor B Class ....................... - -
Shares redeemed:
Institutional Class .................... (215,461,334) (179,910,659)
Service Class .......................... (148,325) (494,140)
Investor A Class ....................... (58,463) (84,576)
Investor B Class ....................... - -
--------------- --------------
Net increase (decrease) ................... $ (107,289,835) $ 5,973,563
=============== ==============
OHIO MUNICIPAL
MONEY MARKET PORTFOLIO
----------------------------------------
FOR THE SIX MONTHS
ENDED FOR THE YEAR
3/31/04 ENDED
(UNAUDITED) 9/30/03
------------------- ------------------
Shares sold:
Institutional Class .................... $ 122,392,163 $ 218,069,254
Service Class .......................... 46,229,109 99,804,900
Investor A Class ....................... 24,523,004 108,725,662
Shares issued in reinvestment of dividends:
Institutional Class .................... 50,030 179,029
Service Class .......................... 16,289 27,788
Investor A Class ....................... 47,679 174,443
Shares redeemed:
Institutional Class .................... (131,195,608) (227,738,879)
Service Class .......................... (40,465,380) (98,282,331)
Investor A Class ....................... (26,241,460) (113,596,693)
-------------- --------------
Net decrease .............................. $ (4,644,174) $ (12,636,827)
============== ==============
54
BLACKROCK FUNDS
PENNSYLVANIA MUNICIPAL
MONEY MARKET PORTFOLIO
----------------------------------------
FOR THE SIX MONTHS
ENDED FOR THE YEAR
3/31/04 ENDED
(UNAUDITED) 9/30/03
------------------- ------------------
Shares sold:
Institutional Class .................... $ 272,927,654 $ 583,434,949
Service Class .......................... 35,326,276 76,638,075
Investor A Class ....................... 53,304,197 309,367,165
Investor B Class ....................... - -
Shares issued in reinvestment of dividends:
Institutional Class .................... 14,175 70,954
Service Class .......................... 21,242 93,350
Investor A Class ....................... 70,080 312,192
Investor B Class ....................... - -
Shares redeemed:
Institutional Class .................... (259,187,724) (633,134,366)
Service Class .......................... (43,508,995) (87,141,248)
Investor A Class ....................... (52,993,944) (344,157,016)
Investor B Class ....................... - -
-------------- --------------
Net increase (decrease) ................... $ 5,972,961 $ (94,515,945)
============== ==============
VIRGINIA MUNICIPAL
MONEY MARKET PORTFOLIO
---------------------------------------
FOR THE SIX MONTHS
ENDED FOR THE YEAR
3/31/04 ENDED
(UNAUDITED) 9/30/03
------------------- -----------------
Shares sold:
Institutional Class .................... $ 27,949,027 $ 67,717,158
Service Class .......................... - 101,574,864
Investor A Class ....................... - -
Shares issued in reinvestment of dividends:
Institutional Class .................... 7,648 -
Service Class .......................... - -
Investor A Class ....................... - -
Shares redeemed:
Institutional Class .................... (39,769,789) (65,562,037)
Service Class .......................... (41,010,487) (104,707,467)
Investor A Class ....................... - -
-------------- --------------
Net decrease .............................. $ (52,823,601) $ (977,482)
============== ==============
On March 31, 2004, two shareholders held approximately 77% of the
outstanding shares of the Money Market Portfolio, three shareholders held
approximately 84% of the outstanding shares of the U.S. Treasury Money Market
Portfolio, two shareholders held approximately 85% of the outstanding shares of
the Municipal Money Market Portfolio, two shareholders held approximately 72%
of the outstanding shares of the New Jersey Municipal Money Market Portfolio,
two shareholders held approximately 61% of the outstanding shares of the North
Carolina Municipal Money Market Portfolio, two shareholders held approximately
58% of the outstanding shares of the Ohio Municipal Money Market Portfolio, one
shareholder held approximately 74% of the outstanding shares of the
Pennsylvania Municipal Money Market Portfolio and four shareholders held
approximately 85% of the outstanding shares of the Virginia
55
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Municipal Money Market Portfolio. Some of the shareholders are comprised of
omnibus accounts, which are held on behalf of several individual shareholders.
(D) At March 31, 2004, net assets consisted of:
NEW JERSEY
U.S. TREASURY MUNICIPAL MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET MONEYMARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------ ----------------- ---------------- ----------------
Capital paid-in .................................. $ 2,859,157,548 $ 596,667,166 $ 632,890,803 $ 162,715,329
Undistributed net investment
income .......................................... 64,239 46,591 - -
Accumulated net realized gain (loss) on investment
transactions .................................... (191,740) (37,441) 78,765 34,769
--------------- ------------- ------------- -------------
$ 2,859,030,047 $ 596,676,316 $ 632,969,568 $ 162,750,098
=============== ============= ============= =============
NORTH
CAROLINA OHIO VIRGINIA
MUNICIPAL MUNICIPAL PENNSYLVANIA MUNICIPAL
MONEY MARKET MONEY MARKET MUNICIPAL MONEYMARKET
PORTFOLIO PORTFOLIO MONEY MARKET PORTFOLIO
------------- ------------- ------------- -------------
Capital paid-in ....................... $ 55,740,647 $ 129,534,462 $ 500,298,069 $ 10,150,941
Accumulated net realized gain (loss) on
investment transactions .............. (9,792) (27,198) 94,598 (77)
------------ ------------- ------------- ------------
$ 55,730,855 $ 129,507,264 $ 500,392,667 $ 10,150,864
============ ============= ============= ============
(E) 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 distributions that are reported in the
Statement of Changes in Net Assets are reported as ordinary income for federal
tax purposes. There were no short-term or long-term capital gain distributions
for the year ended September 30, 2003.
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. 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 September 30, 2003, attributable to
capital loss carryforwards expiring, were reclassified to the following
accounts:
INCREASE
INCREASE (DECREASE)
ACCUMULATED UNDISTRIBUTED
DECREASE NET REALIZED NET INVESTMENT
PAID-IN CAPITAL GAIN (LOSS) INCOME
----------------- -------------- ---------------
North Carolina Municipal Money Market Portfolio ......... $ (121) $ 121 $ -
Pennsylvania Municipal Money Market Portfolio ........... (3,403) 3,403 -
Virginia Municipal Money Market Portfolio ............... (171) 171 -
These reclassifications had no effect on net assets or net asset value per
share.
56
BLACKROCK FUNDS
The tax character of distributions paid during the last two fiscal years
were as follows:
TAX-FREE ORDINARY
INCOME INCOME
------------ ---------------
Money Market Portfolio
9/30/03 ................................................ $ - $ 31,056,775
9/30/02 ................................................ - 70,457,841
U.S. Treasury Money Market Portfolio
9/30/03 ................................................ - 6,369,710
9/30/02 ................................................ - 15,388,338
Municipal Money Market Portfolio
9/30/03 ................................................ 5,774,749 -
9/30/02 ................................................ 9,827,759 -
New Jersey Municipal Money Market Portfolio .............
9/30/03 ................................................ 1,284,763 -
9/30/02 ................................................ 2,073,226 -
North Carolina Municipal Money Market Portfolio .........
9/30/03 ................................................ 1,557,626 -
9/30/02 ................................................ 1,804,145 -
Ohio Municipal Money Market Portfolio ...................
9/30/03 ................................................ 1,453,594 -
9/30/02 ................................................ 1,998,035 -
Pennsylvania Municipal Money Market Portfolio ...........
9/30/03 ................................................ 4,675,094 -
9/30/02 ................................................ 8,033,116 -
Virginia Municipal Money Market Portfolio ...............
9/30/03 ................................................ 635,780 -
9/30/02 ................................................ 823,177 -
As of September 30, 2003, the components of distributable earnings/
(accumulated losses) were as follows:
UNDISTRIBUTED UNDISTRIBUTED CAPITAL POST-
TAX-FREE ORDINARY LOSS OCTOBER
INCOME INCOME CARRYFOWARDS LOSSES
--------------- --------------- -------------- --------
Money Market Portfolio .................................. $ - $ 1,604,890 $ (259,438) $ -
U.S. Treasury Money Market Portfolio .................... - 325,964 (46,038) -
Municipal Money Market Portfolio ........................ 316,695 - (10,981) -
New Jersey Municipal Money Market Portfolio ............. 70,441 - (1,295) -
North Carolina Municipal Money Market Portfolio ......... 101,361 - (784) -
Ohio Municipal Money Market Portfolio ................... 77,616 - (27,198) -
Pennsylvania Municipal Money Market Portfolio ........... 259,853 - (22,745) -
Virginia Municipal Money Market Portfolio ............... 36,727 - (661) -
Post-October losses represent losses realized on investment transactions
from November 1, 2002 through September 30, 2003 that, in accordance with
Federal income tax regulations, the Portfolios defer and treat as having arisen
in the following fiscal year. For Federal income tax purposes, capital loss
carryforwards may be carried forward and applied against future capital gains.
57
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
At September 30, 2003, the Portfolios had capital loss carryforwards
available to offset future realized capital gains through the indicated
expiration dates:
EXPIRING SEPTEMBER 30
---------------------------------------------------------------------------------------
2005 2006 2007 2008 2009 2010 2011 TOTAL
--------- --------- ---------- ---------- ----------- ---------- ----------- ----------
Money Market Portfolio ..................... $ - $ - $ 23,015 $ 44,610 $ 106,537 $ - $ 85,276 $ 259,438
U.S. Treasury Money Market Portfolio ....... - - - 4,849 16,898 11,911 12,380 46,038
Municipal Money Market Portfolio ........... - - - - 10,981 - - 10,981
New Jersey Municipal Money Market
Portfolio ................................. - - - 1,295 - - - 1,295
North Carolina Municipal Money Market
Portfolio ................................. - - - 784 - - - 784
Ohio Municipal Money Market Portfolio ...... - 3,203 16,541 6,193 - - 1,261 27,198
Pennsylvania Municipal Money Market
Portfolio ................................. 1,626 3,403 - - 17,716 - - 22,745
Virginia Municipal Money Market Portfolio... - - 401 - - 260 - 661
(F) Contingencies
In the normal course of business, the Fund enters into contracts that
provide general indemnifications. The Funds' maximum exposure under these
arrangements is dependent on future claims that may be made against the Funds
and, therefore, cannot be estimated; however, based on experience, the risk of
loss from such claims is considered remote.
58
BLACKROCK FUNDS
ADDITIONAL INFORMATION
(A) PricewaterhouseCoopers LLP ("PwC"), the Fund's former independent auditor,
has been hired as an internal audit supporting service provider by The PNC
Financial Services Group, Inc. ("PNC"), the parent company of the Fund's
investment adviser and certain other service providers. In order to provide
certain services to PNC and its affiliates which would have caused PwC to
no longer be independent with respect to the Fund, PwC declined to stand
for re-election as independent auditor of the Fund after the completion of
the fiscal 2003 audit.
The Fund's Audit Committee approved engaging Deloitte & Touche LLP as the
independent auditor to audit the Fund's financial statements for fiscal
year 2004. 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 2004 audit on
November 21, 2003, 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.
(B) 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.
59
BLACKROCK FUNDS
Investment Adviser Distributor
BlackRock Advisors, Inc. BlackRock Distributors, Inc.
Wilmington, Delaware 19809 King of Prussia, Pennsylvania 19406
Sub-Adviser
BlackRock Institutional Management Corporation Co-Administrator
Wilmington, Delaware 19809 BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Custodian Counsel
PFPC Trust Co. Simpson Thacher & Bartlett LLP
Philadelphia, Pennsylvania 19153 New York, New York 10017
Co-Administrator and Transfer Agent Independent Auditors
PFPC Inc. Deloitte & Touche LLP
Wilmington, Delaware 19809 Philadelphia, Pennsylvania 19103
The Fund delivers only one copy of shareholder documents, including
prospectuses, shareholder reports and proxy statements to shareholders with
multiple accounts at the same address. This practice is known as "householding"
and is intended to eliminate duplicate mailings and reduce expenses. Mailings
of your BlackRock Funds 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 1-800-441-7762.
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
SEC's website at http://www.sec.gov.
BLACKROCK FUNDS
FUND SPECTRUM
BlackRock Funds is a leading mutual fund company currently managing
approximately $19 billion in the following portfolios designed to fit a broad
range of investment goals. Each portfolio is managed by recognized experts in
equity, fixed income, international, and tax-free investing.
STOCK PORTFOLIOS
- ------------------------------------
Large Cap Value Equity Global Science & Technology Opportunities
Large Cap Growth Equity European Equity
Mid-Cap Value Equity International Equity
Mid-Cap Growth Equity International Opportunities
Small Cap Value Equity Asia Pacific Equity
Small Cap Core Equity Select Equity
Small Cap Growth Equity Index Equity
U.S. Opportunities
STOCK & BOND PORTFOLIOS
- ------------------------------------
Balanced
BOND PORTFOLIOS
- ------------------------------------
Enhanced Income Managed Income
Low Duration Bond Core Bond Total Return
Intermediate Government Bond Core PLUS Total Return
Intermediate Bond International Bond
Government Income High Yield Bond
GNMA
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. Note: Institutional and Service Share
Class investors should call 1-800-441-7450. 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 1-888-825-2257.
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.
BLACKROCK
MM-SEMI
FIXED INCOME LIQUIDITY EQUITIES ALTERNATIVES BLACKROCK SOLUTIONS
BlackRock Funds
Taxable Bond Portfolios
Semi-Annual Report to Shareholders
March 31, 2004 (Unaudited)
[GRAPHIC]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE BlackRock
BLACKROCK FUNDS
TAXABLE BOND PORTFOLIOS
* Enhanced Income * Intermediate Bond * GNMA
* Low Duration Bond * Core Bond Total Return * Managed Income
* Intermediate Government Bond * Core PLUS Total Return * International Bond
* Government Income * High Yield Bond
TABLE OF CONTENTS
Shareholder Letter..........................................................1
Portfolio Summaries
Low Duration Bond.........................................................2
Intermediate Government Bond..............................................3
Intermediate Bond.........................................................4
Core Bond Total Return....................................................5
Core PLUS Total Return....................................................6
Government Income.........................................................7
GNMA......................................................................8
Managed Income............................................................9
International Bond.......................................................10
High Yield Bond..........................................................11
Note on Performance Information..........................................12
Statement of Net Assets/Schedule of Investments.........................13-69
Enhanced Income Statement of Assets and Liabilities......................15
Government Income Statement of Assets and Liabilities....................48
GNMA Statement of Assets and Liabilities.................................51
Managed Income Statement of Assets and Liabilities.......................58
International Bond Statement of Assets and Liabilities...................61
Portfolio Financial Statements
Statements of Operations..............................................70-71
Statement of Cash Flows..................................................72
Statements of Changes in Net Assets...................................74-77
Financial Highlights..................................................78-91
Notes to Financial Statements..........................................92-115
Additional Information....................................................116
- --------------------------------------------------------------------------------
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
collect, how we protect that information, and why in certain cases we may share
such information with select other parties.
BlackRock Funds does not receive any nonpublic personal information relating to
its shareholders who purchase shares through their broker-dealers. In the case
of shareholders who are record owners of BlackRock Funds, BlackRock Funds
receives nonpublic personal information on account applications or other forms.
With respect to these shareholders, BlackRock Funds also has access to specific
information regarding their transactions in BlackRock Funds.
BlackRock Funds does not disclose any nonpublic personal information about its
shareholders or former shareholders to anyone, except as permitted by law or as
is necessary in order to service our shareholders' accounts (for example, to a
transfer agent).
BlackRock Funds restricts access to nonpublic personal information about its
shareholders to BlackRock employees with a legitimate business need for the
information. BlackRock Funds maintains physical, electronic and procedural
safeguards designed to protect the nonpublic information of our shareholders.
- --------------------------------------------------------------------------------
BLACKROCK FUNDS
March 31,2004
Dear Shareholder:
We are pleased to present the Semi-Annual Report to Shareholders of the
BlackRock Funds' Taxable Bond Portfolios for the six-months ended March 31,
2004. The Semi-Annual Report includes important information on each Portfolio,
and is organized as follows:
o Portfolio Summary - discusses recent portfolio management activity and
highlights total returns.
o Statement of Net Assets (or Schedule of Investments/Statement of Assets and
Liabilities) - lists portfolio holdings and includes each holding's market
value and par amount/number of shares as of March 31, 2004. The Statement
of Net Assets also contains the net asset value for each share class of a
Portfolio. If your Portfolio has a Schedule of Investments, then the net
asset value for each share class may be found in the Statement of Assets
and Liabilities.
o Statement of Operations - displays the components of each Portfolio's
investment income and provides a detailed look at each Portfolio's
expenses. The Statement of Operations also lists the aggregate change in
value of a Portfolio's securities due to market fluctuations and security
sales.
o Statement of Changes in Net Assets - compares Portfolio information from
the prior period to the current period. Specifically, it details
shareholder distributions by share class, aggregate realized gains and
losses, and the change in net assets from the beginning of the period to
the end of the period.
o Financial Highlights - include each Portfolio's expense ratios, net asset
values, total returns, distributions per share, and turnover ratios for the
current period and the last five years or since inception.
o Notes to Financial Statements - provide additional information on fees, a
summary of significant accounting policies, a list of affiliated
transactions, and a summary of purchases and sales of securities.
In addition to these items, a summary of shareholder privileges is listed
on the inside back cover of the report. Here, shareholders can find information
on how to access account balances, recent transactions, and share prices. It
also includes a summary of the Fund's various investment plans.
We hope you find the report informative, and we thank you for making
BlackRock part of your investment strategy.
Sincerely,
/s/ Anne Ackerley
Anne Ackerley
Managing Director
BlackRock Advisors,Inc.
1
LOW DURATION BOND PORTFOLIO
Total Net Assets (3/31/04): $2.0 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 (+or-) 20% of the benchmark. The Portfolio normally invests in bonds
diversified among several categories including: U.S. Treasuries and agency
securities, commercial and residential mortgage-backed securities,
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 After initially rising in October due to stronger economic data,
interest rates fluctuated in an increasingly narrow range over the balance of
the fourth quarter. By year-end 2003, the yield of the 2-year Treasury had
risen by 0.36% from its September 30th level. While most measures of economic
activity were improving, the combination of benign inflation and anemic job
growth convinced the Federal Reserve that its accommodative monetary posture
could be maintained "for a considerable period". During the first quarter of
2004, additional employment data disappointments and renewed terrorism fears
began to shake investor confidence in the sustainability of the economic
recovery. As a result, 2-year Treasury yields declined by 0.25% over the
three-month period. Without a clear trend of strengthening economic indicators,
the Fed maintained the status quo. By quarter-end, the Fed Funds Target Rate
had remained unchanged at 1.00% for nine consecutive months.
o All share classes of the Portfolio underperformed the benchmark for the
semi-annual period. During the first half of the period, the Portfolio suffered
from its yield curve flattening bias as the difference between 2- and 5-year
Treasury yields increased by 0.06%. The Portfolio benefited from its allocation
to ABS, agencies, and mortgages as the sectors returned 0.40%, 0.08%, and 0.84%
over duration-adjusted Treasuries, respectively. The Portfolio's small
allocation to corporates and commercial mortgage-backed securities ("CMBS")
also benefited performance as the sectors returned 1.05% and 0.61% over
duration-adjusted Treasuries, respectively.
o The Portfolio's short duration versus its benchmark was the main
detractor from performance during the second half of the period. The Portfolio
benefited from its allocation to ABS, agencies and mortgages as the sectors
returned 0.69%, 0.27%, and 0.31% over duration-adjusted Treasuries,
respectively. The Portfolio's small allocation to CMBS and its yield curve
positioning were other positive factors.
o During the semi-annual period, the Portfolio reduced its allocation to
the mortgage sector, focusing its holdings on seasoned pass throughs and
floating rate securities. The Portfolio also maintained a position in taxable
municipals. The Portfolio increased, then decreased its allocation to agencies
as valuations were favorable and maintained a small allocation to corporates,
with holdings concentrated in the finance sector. In the ABS sector, holdings
were concentrated in non-prepayment sensitive sectors such as autos and credit
cards. Although the Portfolio maintained a significant allocation to ABS,
holdings were reduced over the period. The Portfolio also reduced its
allocation to CMOs.
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.
[LINE CHART]
Institutional Investor A Merrill Lynch 1-3 Year Treasury Index
------------- ---------- -------------------------------------
03/31/1994 $ 10,000 $ 9,703 $ 10,000
06/30/1994 10,020 9,722 10,008
09/30/1994 10,137 9,836 10,107
12/31/1994 10,158 9,857 10,107
03/31/1995 10,490 10,179 10,447
06/30/1995 10,777 10,457 10,782
09/30/1995 11,008 10,681 10,944
12/31/1995 11,226 10,893 11,219
03/31/1996 11,238 10,887 11,256
06/30/1996 11,361 10,993 11,370
09/30/1996 11,546 11,159 11,558
12/31/1996 11,791 11,382 11,778
03/31/1997 11,845 11,421 11,855
06/30/1997 12,101 11,654 12,117
09/30/1997 12,341 11,872 12,354
12/31/1997 12,505 12,015 12,562
03/31/1998 12,708 12,196 12,746
06/30/1998 12,914 12,379 12,941
09/30/1998 13,240 12,677 13,339
12/31/1998 13,334 12,752 13,441
03/31/1999 13,491 12,887 13,521
06/30/1999 13,581 12,958 13,598
09/30/1999 13,757 13,110 13,770
12/31/1999 13,876 13,208 13,852
03/31/2000 14,057 13,365 14,026
06/30/2000 14,285 13,566 14,267
09/30/2000 14,623 13,871 14,567
12/31/2000 15,023 14,233 14,960
03/31/2001 15,437 14,624 15,373
06/30/2001 15,613 14,758 15,553
09/30/2001 16,116 15,216 16,079
12/31/2001 16,183 15,276 16,201
03/31/2002 16,224 15,282 16,203
06/30/2002 16,587 15,605 16,587
09/30/2002 16,973 15,966 16,987
12/31/2002 17,143 16,096 17,134
03/31/2003 17,241 16,174 17,235
06/30/2003 17,413 16,337 17,358
09/30/2003 17,453 16,360 17,432
12/31/2003 17,466 16,358 17,459
03/31/2004 17,631 16,482 17,633
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
---------- --------- --------- ----------
BlackRock Class 2.42% 4.65% 5.64% 5.93%
Institutional Class 2.26% 4.53% 5.50% 5.83%
Service Class 1.96% 4.22% 5.19% 5.57%
Investor A Class (Load Adjusted) (1.18)% 3.02% 4.40% 5.12%
Investor A Class (NAV) 1.91% 4.07% 5.04% 5.44%
Investor B Class (Load Adjusted) (3.43)% 2.19% 3.90% 4.85%
Investor B Class (NAV) 1.04% 3.29% 4.24% 4.85%
Investor C Class (Load Adjusted) 0.05% 3.29% 4.24% 4.85%
Investor C Class (NAV) 1.04% 3.29% 4.24% 4.85%
- --------------------------------------------------------------------------------
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 12 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
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
Total Net Assets (3/31/04) $ 313.0 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 (+or-) 20% of the Lehman Brothers Intermediate
Government Index. The Portfolio normally invests in bonds that are issued or
guaranteed by the U.S. Government and its agencies. The portfolio management
team selects bonds from several categories including: U.S. Treasuries and
agency securities, commercial and residential mortgage-backed securities,
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 After initially rising in October due to stronger economic data,
interest rates fluctuated in an increasingly narrow range over the balance of
the fourth quarter. By year-end 2003, the yield of the 5-year Treasury had
risen by 0.42% from its September 30th level. While most measures of economic
activity were improving, the combination of benign inflation and anemic job
growth convinced the Federal Reserve that its accommodative monetary posture
could be maintained "for a considerable period". During the first quarter of
2004, additional employment data disappointments and renewed terrorism fears
began to shake investor confidence in the sustainability of the economic
recovery. As a result, 5-year Treasury yields declined by 0.47% over the
three-month period. Without a clear trend of strengthening economic indicators,
the Fed maintained the status quo. By quarter-end, the Fed Funds Target Rate
had remained unchanged at 1.00% for nine consecutive months.
o All share classes of the Portfolio underperformed the benchmark for the
semi-annual period. During the first half of the period, the Portfolio
benefited from its allocations to residential mortgage-backed securities, ABS
and commercial mortgage-backed securities ("CMBS") as the sectors returned
0.84%, 0.40% and 0.61% over duration adjusted Treasuries, respectively. The
Portfolio also benefited sightly from its yield curve positioning.
o During the second half of the period, the Portfolio's short duration
versus its benchmark and its yield curve positioning detracted from
performance. The Portfolio benefited from its allocations to residential
mortgage-backed securities, ABS and CMBS as the sectors returned 0.31%, 0.69%,
and 0.27% over duration-adjusted Treasuries, respectively.
o After a difficult summer, mortgages were able to recover somewhat
during the fourth quarter of 2003 as bank demand for spread in a low interest
rate environment supported valuations. Although short-term technicals remain
strong, we believe the mortgage-backed securities sector appears fully valued,
and vulnerable to either a large move in interest rates or a change in bank
appetite. During the period, the Portfolio's mortgage holdings favored more
defensive floating rate securities and seasoned pass-throughs.
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.
[LINE CHART]
Institutional Investor A Lehman Brothers Intermediate Government Index
------------- ---------- ---------------------------------------------
03/31/1994 $ 10,000 $ 9,597 $ 10,000
06/30/1994 9,877 9,473 9,944
09/30/1994 9,926 9,512 10,019
12/31/1994 9,901 9,483 10,010
03/31/1995 10,345 9,902 10,427
06/30/1995 10,783 10,313 10,915
09/30/1995 10,946 10,462 11,083
12/31/1995 11,266 10,767 11,454
03/31/1996 11,206 10,687 11,376
06/30/1996 11,274 10,739 11,453
09/30/1996 11,474 10,917 11,649
12/31/1996 11,763 11,178 11,919
03/31/1997 11,760 11,163 11,915
06/30/1997 12,089 11,461 12,248
09/30/1997 12,401 11,744 12,561
12/31/1997 12,672 11,986 12,839
03/31/1998 12,860 12,150 13,032
06/30/1998 13,108 12,370 13,273
09/30/1998 13,620 12,838 13,892
12/31/1998 13,637 12,839 13,927
03/31/1999 13,660 12,846 13,889
06/30/1999 13,588 12,763 13,862
09/30/1999 13,722 12,874 14,002
12/31/1999 13,750 12,898 13,996
03/31/2000 13,974 13,079 14,225
06/30/2000 14,215 13,303 14,484
09/30/2000 14,620 13,666 14,872
12/31/2000 15,159 14,153 15,462
03/31/2001 15,645 14,589 15,926
06/30/2001 15,709 14,646 15,992
09/30/2001 16,505 15,384 16,786
12/31/2001 16,487 15,334 16,763
03/31/2002 16,474 15,304 16,719
06/30/2002 17,064 15,833 17,366
09/30/2002 17,822 16,515 18,202
12/31/2002 17,980 16,643 18,380
03/31/2003 18,138 16,785 18,550
06/30/2003 18,466 17,051 18,863
09/30/2003 18,373 16,945 18,838
12/31/2003 18,328 16,900 18,800
03/31/2004 18,684 17,208 19,215
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
---------- --------- --------- ----------
Institutional Class 3.01% 6.10% 6.46% 6.45%
Service Class 2.70% 5.75% 6.13% 6.13%
Investor A Class (Load Adjusted) (1.59)% 4.23% 5.17% 5.58%
Investor A Class (NAV) 2.52% 5.66% 6.02% 6.01%
Investor B Class (Load Adjusted) (2.67)% 3.75% 4.85% 5.40%
Investor B Class (NAV) 1.76% 4.82% 5.18% 5.40%
Investor C Class (Load Adjusted) 0.77% 4.85% 5.20% 5.41%
Investor C Class (NAV) 1.76% 4.85% 5.20% 5.41%
- --------------------------------------------------------------------------------
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 12 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.
3
INTERMEDIATE BOND PORTFOLIO
Total Net Assets (3/31/04): $991.3 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 (+or-) 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 categories including: U.S. Treasuries and agency
securities, commercial and residential mortgage-backed securities,
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 After initially rising in October due to stronger economic data,
interest rates fluctuated in an increasingly narrow range over the balance of
the fourth quarter. By year-end 2003, the yield of the 5-year Treasury had
risen by 0.42% from its September 30th level. While most measures of economic
activity were improving, the combination of benign inflation and anemic job
growth convinced the Federal Reserve that its accommodative monetary posture
could be maintained "for a considerable period". During the first quarter of
2004, additional employment data disappointments and renewed terrorism fears
began to shake investor confidence in the sustainability of the economic
recovery. As a result, 5-year Treasury yields declined by 0.47% over the
three-month period. Without a clear trend of strengthening economic indicators,
the Fed maintained the status quo. By quarter-end, the Fed Funds Target Rate
had remained unchanged at 1.00% for nine consecutive months.
o All share classes of the Portfolio underperformed the benchmark for the
semi-annual period. During the first half of the period, the Portfolio suffered
from its underweight in corporates, which returned 1.05% over duration-adjusted
Treasuries during the fourth quarter. The Portfolio's yield curve positioning
also detracted from performance as yield differentials between the 2- and
10-year segments of the yield curve decreased. On the positive side, the
Portfolio's allocations to residential mortgages, asset-backed securities
("ABS") and commercial mortgage-backed securities ("CMBS") added to performance
as the sectors returned 0.84%, 0.40% and 0.61%, over duration adjusted
Treasuries, respectively.
o While yield maximization strategies continued to dominate during
January, as they had through much of 2003, greater caution emerged over the
latter part of the quarter. Corporate bonds underperformed Treasuries in March,
the first month in over a year. Caution was less evident in other higher
quality spread sectors as financial institutions continued to take advantage of
the cheap cost of funds to increase positions in agencies, residential
mortgages, corporates, ABS and CMBS. The Portfolio's allocations to agencies,
residential mortgages, ABS, and CMBS added to performance in the second half of
the period as the sectors returned 0.27%, 0.31%, 0.69%, and 0.27% over
duration-adjusted Treasuries, respectively. Although security selection within
corporates aided performance, the Portfolio's overall underweight in the sector
detracted from performance. The main detractor from performance, however, was
the Portfolio's duration positioning. Also detracting from performance was the
Portfolio's large weighting in the 3-year segment of the yield curve. At the
end of the period, the Portfolio was short duration versus its benchmark and
positioned to take advantage of moderate yield curve flattening.
o During the period, the Portfolio had a historically low allocation to
mortgages, favoring adjustable rate mortgages and seasoned pass-throughs. The
Portfolio was also underweight corporates, with holdings concentrated in the
finance sector.
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.
[LINE CHART]
Institutional Investor A Lehman Brothers Intermediate Government/Credit Index
------------- ---------- ----------------------------------------------------
03/31/1994 $ 10,000 $ 9,599 $ 10,000
06/30/1994 9,917 9,512 9,940
09/30/1994 9,982 9,566 10,021
12/31/1994 9,970 9,549 10,010
03/31/1995 10,383 9,939 10,448
06/30/1995 10,853 10,380 10,970
09/30/1995 11,056 10,556 11,151
12/31/1995 11,424 10,898 11,542
03/31/1996 11,335 10,811 11,447
06/30/1996 11,418 10,878 11,518
09/30/1996 11,620 11,057 11,723
12/31/1996 11,916 11,325 12,010
03/31/1997 11,910 11,306 11,997
06/30/1997 12,263 11,628 12,350
09/30/1997 12,596 11,929 12,683
12/31/1997 12,822 12,130 12,955
03/31/1998 13,025 12,307 13,156
06/30/1998 13,258 12,512 13,404
09/30/1998 13,705 12,919 14,005
12/31/1998 13,731 12,929 14,046
03/31/1999 13,805 12,984 14,020
06/30/1999 13,747 12,914 13,965
09/30/1999 13,855 13,000 14,093
12/31/1999 13,866 12,995 14,100
03/31/2000 14,103 13,186 14,312
06/30/2000 14,358 13,410 14,555
09/30/2000 14,810 13,831 14,974
12/31/2000 15,354 14,322 15,527
03/31/2001 15,879 14,795 16,053
06/30/2001 15,971 14,848 16,161
09/30/2001 16,768 15,571 16,905
12/31/2001 16,718 15,523 16,919
03/31/2002 16,761 15,545 16,881
06/30/2002 17,289 16,016 17,482
09/30/2002 18,061 16,711 18,273
12/31/2002 18,402 17,012 18,583
03/31/2003 18,710 17,282 18,863
06/30/2003 19,247 17,745 19,376
09/30/2003 19,217 17,719 19,372
12/31/2003 19,204 17,710 19,384
03/31/2004 19,643 18,081 19,863
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
--------- --------- --------- --------
BlackRock Class 5.26% 7.55% 7.49% 7.09%
Institutional Class 4.99% 7.35% 7.31% 6.98%
Service Class 4.78% 7.07% 7.01% 6.68%
Investor A Class (Load Adjusted) 0.45% 5.45% 5.98% 6.10%
Investor A Class (NAV) 4.63% 6.92% 6.85% 6.54%
Investor B Class (Load Adjusted) (0.57)% 5.07% 5.73% 6.05%
Investor B Class (NAV) 3.84% 6.12% 6.05% 6.05%
Investor C Class (Load Adjusted) 2.96% 6.11% 6.07% 6.06%
Investor C Class (NAV) 3.94% 6.11% 6.07% 6.06%
- -------------------------------------------------------------------------------
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, 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
12 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
CORE BOND TOTAL RETURN PORTFOLIO
Total Net Assets (3/31/04): $2.7 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 investing primarily in investment grade bonds that
allow it to maintain an average portfolio duration that is within (+or-) 20% of
the index. The portfolio management team selects bonds from several categories
including: U.S. Treasuries and agency securities, commercial and residential
mortgage-backed securities, collateralized mortgage obligations ("CMOs"),
asset-backed securities 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 management team determines that they have the potential for
above-average total return.
Recent Portfolio Management Activity
o After initially rising in October due to stronger economic data,
interest rates fluctuated in an increasingly narrow range over the balance of
the fourth quarter. By year-end 2003, the yield of the 10-year Treasury had
risen by 0.31% from its September 30th level. While most measures of economic
activity were improving, the combination of benign inflation and anemic job
growth convinced the Federal Reserve that its accommodative monetary posture
could be maintained "for a considerable period". During the first quarter of
2004, additional employment data disappointments and renewed terrorism fears
began to shake investor confidence in the sustainability of the economic
recovery. As a result, 10-year Treasury yields declined by 0.41% over the
three-month period. Without a clear trend of strengthening economic indicators,
the Fed maintained the status quo. By quarter-end, the Fed Funds Target Rate
had remained unchanged at 1.00% for nine consecutive months.
o All share classes of the Portfolio underperformed the benchmark for the
semi-annual period. For the first half of the period, the Portfolio's yield
curve positioning contributed negatively to performance. The Portfolio also
suffered from its underweight in the corporate and mortgage sectors, which
returned 1.05% and 0.84%, respectively, over duration-adjusted Treasuries.
Security selection within both the corporate and mortgage sectors was additive
to performance, specifically a bias towards 15-year maturities within mortgages
and holdings in autos and cable media sectors within corporates. Further
benefiting performance was the Portfolio's overweight in commercial
mortgage-backed securities ("CMBS"), which returned 0.61% over
duration-adjusted Treasuries. The Portfolio's allocation to non-dollar
contributed to relative performance. Yields fell in Europe relative to the U.S.
as economic growth disparities between Europe and the U.S. increased, largely
due to the strengthening Euro.
o During the second half of the period, the Portfolio held a short
duration position relative to its benchmark, which was the most significant
detractor from relative performance. Additionally, the Portfolio was positioned
to take advantage of decreasing yield differentials between the 10- and 20-year
segments of the yield curve, resulting in a slightly negative impact on the
Portfolio's return. The Portfolio also suffered from its underweight in the
mortgage sector, which returned 0.31% over duration-adjusted Treasuries.
Security selection within corporate and agency issues were the most significant
contributors to relative performance. Security selection within autos was also
positive. The Portfolio benefited from its overweight in CMBS and asset-backed
securities, which returned 0.27% and 0.69%, respectively, over
duration-adjusted Treasuries. In the agency sector, the allocation to callable
debentures later in the period was positive for returns. The Portfolio also
held a significant allocation to non-dollar assets throughout the quarter,
which did not meaningfully impact relative performance.
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.
[LINE CHART]
Institutional Investor A Lehman Brothers U.S. Aggregate Index
------------- ---------- ------------------------------------
03/31/1994 $ 10,000 $ 9,600 $ 10,000
06/30/1994 9,904 9,507 9,897
09/30/1994 9,981 9,582 9,958
12/31/1994 10,031 9,630 9,995
03/31/1995 10,517 10,096 10,499
06/30/1995 11,135 10,689 11,139
09/30/1995 11,354 10,900 11,358
12/31/1995 11,855 11,380 11,842
03/31/1996 11,575 11,100 11,631
06/30/1996 11,644 11,152 11,697
09/30/1996 11,876 11,362 11,913
12/31/1996 12,283 11,737 12,270
03/31/1997 12,249 11,691 12,202
06/30/1997 12,658 12,068 12,651
09/30/1997 13,068 12,444 13,073
12/31/1997 13,391 12,736 13,458
03/31/1998 13,608 12,928 13,666
06/30/1998 13,930 13,218 13,985
09/30/1998 14,450 13,693 14,577
12/31/1998 14,484 13,710 14,626
03/31/1999 14,464 13,675 14,551
06/30/1999 14,322 13,525 14,423
09/30/1999 14,426 13,607 14,522
12/31/1999 14,394 13,561 14,504
03/31/2000 14,755 13,885 14,824
06/30/2000 15,009 14,092 15,082
09/30/2000 15,478 14,531 15,537
12/31/2000 16,155 15,149 16,190
03/31/2001 16,637 15,599 16,682
06/30/2001 16,656 15,599 16,776
09/30/2001 17,496 16,366 17,549
12/31/2001 17,479 16,331 17,557
03/31/2002 17,486 16,318 17,574
06/30/2002 18,121 16,891 18,223
09/30/2002 18,784 17,470 19,058
12/31/2002 19,171 17,832 19,358
03/31/2003 19,472 18,079 19,627
06/30/2003 19,990 18,543 20,118
09/30/2003 19,946 18,504 20,089
12/31/2003 19,997 18,516 20,152
03/31/2004 20,453 18,922 20,688
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
--------- --------- --------- ----------
BlackRock Class 5.19% 7.35% 7.38% 7.55%
Institutional Class 5.04% 7.13% 7.18% 7.42%
Service Class 4.72% 6.81% 6.86% 7.16%
Investor A Class (Load Adjusted) 0.45% 5.20% 5.85% 6.59%
Investor A Class (NAV) 4.67% 6.65% 6.71% 7.02%
Investor B Class (Load Adjusted) (0.52)% 4.84% 5.60% 6.38%
Investor B Class (NAV) 3.88% 5.89% 5.92% 6.38%
Investor C Class (Load Adjusted) 2.91% 5.93% 5.94% 6.39%
Investor C Class (NAV) 3.88% 5.93% 5.94% 6.39%
- --------------------------------------------------------------------------------
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 12 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.
5
CORE PLUS TOTAL RETURN PORTFOLIO
Total Net Assets (3/31/04): $311.9 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 investing primarily in bonds that allow it to maintain
an average portfolio duration that is within (+or-) 20% of the benchmark. The
portfolio management team invests primarily in dollar-denominated investment
grade bonds but may invest up to 20% of its assets in any combination on
non-investment grade bonds (high yield or junk bonds), non-dollar denominated
bonds and bonds of emerging market issuers. The portfolio management team
selects bonds from several categories including: U.S. Treasuries and agency
securities, commercial and residential mortgage-backed securities,
collateralized mortgage obligations ("CMOs"), asset-backed securities and
corporate bonds. 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 management team determines that they have the potential for
above-average total return.
Recent Portfolio Management Activity
o After initially rising in October due to stronger economic data,
interest rates fluctuated in an increasingly narrow range over the balance of
the fourth quarter. By year-end 2003, the yield of the 10-year Treasury had
risen by 0.31% from its September 30th level. While most measures of economic
activity were improving, the combination of benign inflation and anemic job
growth convinced the Federal Reserve that its accommodative monetary posture
could be maintained "for a considerable period". During the first quarter of
2004, additional employment data disappointments and renewed terrorism fears
began to shake investor confidence in the sustainability of the economic
recovery. As a result, 10-year Treasury yields declined by 0.41% over the
three-month period. Without a clear trend of strengthening economic indicators,
the Fed maintained the status quo. By quarter-end, the Fed Funds Target Rate
had remained unchanged at 1.00% for nine consecutive months.
o All share classes of the Portfolio underperformed the benchmark for
the semi-annual period. During the first half of the period, yield curve
positioning was a negative for performance. In addition, the Portfolio suffered
from its underweight in the corporate and mortgage sectors, which returned
1.05% and 0.84%, respectively, over duration-adjusted Treasuries. Security
selection within the mortgage sector was additive to performance, specifically
a bias towards 15-year maturities. The Portfolio's allocation to non-dollar
also contributed to relative performance. Yields fell in Europe relative to the
U.S. as economic growth disparities between Europe and the U.S. increased,
largely due to the strengthening Euro. The Portfolio's allocations to the
below-investment grade sectors of high-yield and emerging markets were the
largest positive contributors to performance. Both sectors continued to benefit
as investors moved down the credit curve in search of higher yielding assets.
o The Portfolio held a short duration position relative to its benchmark,
which was the most significant detractor from relative performance for the
second half of the period. Additionally, the Portfolio was positioned to take
advantage of decreasing yield differentials between the 10- and 20-year
segments of the yield curve, resulting in a slightly negative impact on the
Portfolio's return. The Portfolio suffered from its underweight in the mortgage
sector, which returned 31 bps over duration-adjusted Treasuries. Despite a
significant allocation to non-dollar assets, spreads were relatively unchanged
over the quarter and the allocation did not meaningfully impact relative
performance. Security selection within corporate and agency issues was the most
significant positive contributor to performance. In the agency sector, the
Portfolio's allocation to callable debentures later in the period was positive
for returns.
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 AND AT EACH SEMI-ANNUAL PERIOD END.
[LINE CHART]
Institutional Investor A Lehman Brothers U.S. Aggregate Index
------------- ---------- ------------------------------------
12/07/2001 $ 10,000 $ 9,597 $ 10,000
12/31/2001 10,098 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
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year From Inception
------------ ---------------
BlackRock Class 5.51% 7.35%
Institutional Class 5.05% 7.05%
Service Class 5.54% 7.20%
Investor A Class (Load Adjusted) 0.81% 4.91%
Investor A Class (NAV) 4.98% 6.80%
Investor B Class (Load Adjusted) (0.30)% 4.69%
Investor B Class (NAV) 4.20% 6.10%
Investor C Class (Load Adjusted) 3.00% 6.01%
Investor C Class (NAV) 4.00% 6.01%
- --------------------------------------------------------------------------------
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 12 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
GOVERNMENT INCOME PORTFOLIO
Total Net Assets (3/31/04): $215.7 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 categories including: U.S.
Treasuries and agency securities, commercial and residential mortgage-backed
securities ("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 After initially rising in October due to stronger economic data,
interest rates fluctuated in an increasingly narrow range over the balance of
the fourth quarter. By year-end 2003, the yield of the 10-year Treasury had
risen by 0.31% from its September 30th level. While most measures of economic
activity were improving, the combination of benign inflation and anemic job
growth convinced the Federal Reserve that its accommodative monetary posture
could be maintained "for a considerable period". During the first quarter of
2004, additional employment data disappointments and renewed terrorism fears
began to shake investor confidence in the sustainability of the economic
recovery. As a result, 10-year Treasury yields declined by 0.41% over the
three-month period. Without a clear trend of strengthening economic indicators,
the Fed maintained the status quo. By quarter-end, the Fed Funds Target Rate
had remained unchanged at 1.00% for nine consecutive months.
o The Portfolio's BlackRock and Investor A class shares outperformed the
benchmark for the semi-annual period. The other share classes underperformed
the benchmark. During the first half of the period, the Portfolio benefited
from its overweight in residential MBS, as well as its allocations to agencies
and CMOs. During the second half of the period. The Portfolio was short
duration versus its benchmark and was structured in anticipation of decreasing
yield differentials across the yield curve, both of which negatively impacted
performance. During the period, the Portfolio benefited from its overweight in
residential MBS, as the sector returned 0.31% over duration-adjusted
Treasuries. The Portfolio also benefited from its allocation to agencies, which
returned 0.27% over duration-adjusted Treasuries. During the quarter, the
Portfolio sold agencies as valuations provided for an attractive opportunity
and bought mortgages.
o After a difficult summer, mortgages were able to recover somewhat
during the fourth quarter of 2003 as bank demand for spread in a low interest
rate environment supported valuations. Although short-term technicals remain
strong, we believe the mortgage-backed securities sector appears fully valued,
and vulnerable to either a large move in interest rates or a change in bank
appetite. During the period, the Portfolio's mortgage holdings favored lower
coupons and 30-years over 15-years.
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 FROM INCEPTION AND AT EACH SEMI-ANNUAL PERIOD END.
[LINE CHART]
Investor A Lehman Brothers Mortgage/Merrill Lynch 10 Year Treasury In
---------- ----------------------------------------------------------
10/03/1994 $ 9,551 $ 10,000
12/31/1994 9,543 10,079
03/31/1995 10,026 10,632
06/30/1995 10,720 11,382
09/30/1995 10,916 11,586
12/31/1995 11,360 12,110
03/31/1996 11,134 11,829
06/30/1996 11,163 11,829
09/30/1996 11,400 12,049
12/31/1996 11,747 12,436
03/31/1997 11,721 12,308
06/30/1997 12,179 12,831
09/30/1997 12,595 13,285
12/31/1997 12,983 13,722
03/31/1998 13,190 13,928
06/30/1998 13,518 14,241
09/30/1998 13,997 15,085
12/31/1998 14,022 15,076
03/31/1999 13,903 14,907
06/30/1999 13,701 14,631
09/30/1999 13,801 14,726
12/31/1999 13,705 14,578
03/31/2000 14,000 14,972
06/30/2000 14,306 15,249
09/30/2000 14,820 15,651
12/31/2000 15,546 16,472
03/31/2001 15,989 16,850
06/30/2001 15,952 16,748
09/30/2001 17,064 17,696
12/31/2001 16,967 17,502
03/31/2002 16,956 17,413
06/30/2002 17,900 18,227
09/30/2002 19,037 19,480
12/31/2002 19,265 19,552
03/31/2003 19,461 19,897
06/30/2003 19,953 20,311
09/30/2003 19,863 20,185
12/31/2003 19,851 20,140
03/31/2004 20,482 20,799
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
--------- ---------- -------- ---------------
BlackRock Class 5.89% 8.89% 8.23% 8.46%
Investor A Class (Load Adjusted) 0.54% 6.94% 7.06% 7.85%
Investor A Class (NAV) 5.24% 8.60% 8.06% 8.37%
Investor B Class (Load Adjusted) (0.03)% 6.79% 6.95% 7.58%
Investor B Class (NAV) 4.46% 7.80% 7.26% 7.58%
Investor C Class (Load Adjusted) 3.38% 7.78% 7.22% 7.56%
Investor C Class (NAV) 4.37% 7.78% 7.22% 7.56%
- --------------------------------------------------------------------------------
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; AND BLACKROCK SHARES, 2/10/03. SEE "NOTE ON
PERFORMANCE INFORMATION" ON PAGE 12 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.
7
GNMA PORTFOLIO
Total Net Assets (3/31/04): $278.4 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 After initially rising in October due to stronger economic data,
interest rates fluctuated in an increasingly narrow range over the balance of
the fourth quarter. By year-end 2003, the yield of the 10-Year Treasury had
risen by 0.31% from its September 30th level. While most measures of economic
activity were improving, the combination of benign inflation and anemic job
growth convinced the Federal Reserve that its accommodative monetary posture
could be maintained "for a considerable period". During the first quarter of
2004, additional employment data disappointments and renewed terrorism fears
began to shake investor confidence in the sustainability of the economic
recovery. As a result, 10-Year Treasury yields declined by 0.41% over the
three-month period. Without a clear trend of strengthening economic indicators,
the Fed maintained the status quo. By quarter-end, the Fed Funds Target Rate
had remained unchanged at 1.00% for nine consecutive months.
o All share classes of the Portfolio underperformed the benchmark for the
semi-annual period. Marked volatility in interest rates impacted mortgage
investors during the first half of the period. While the Lehman MBS Index
duration was approximately 1 year as of June 30, 2003, the subsequent rise in
rates extended duration to 3 years by the end of December. The increase in
rates also impacted refinancing activity. After hitting a high of 9978 at the
end of May, the MBA Refinancing Index generally fell through the second half of
2003.
o During the first half of the period, the Portfolio benefited from its
overweight in agency securities. The Portfolio's bias towards 15-year issues
also aided performance, as did its allocation to collateralized mortgage
obligations ("CMOs"). On the other hand, the Portfolio suffered from its
underweight in residential mortgage-backed securities ("MBS"), as the group
outperformed duration-adjusted Treasuries. As of December 31, the Portfolio was
short duration versus its benchmark and was positioned to take advantage of
moderately decreasing yield differentials across the yield curve. It also
increased its allocation to Freddie Mac issues due to the collapse in
prepayment speed differentials between Fannie Mae and Freddie Mac.
o Mortgages outperformed duration-adjusted Treasuries in the second half
of the period as bank demand for spread in a low rate environment continued to
support valuations. Again, the Portfolio suffered from its underweight in the
residential MBS sector, however its bias towards 15-year issues and lower
coupon securities aided performance, as did its allocation to CMOs.
Prepayments rose again during the second half of the period, and the MBA
Refinancing Index closed March at 4860, the highest month-end reading since
July. Since December 31, the fixed rate mortgage market has increased from 26%
to approximately 65% refinanceable. The Portfolio also benefited from its
allocation to agency securities, most of which were sold during the quarter as
valuations provided for an attractive opportunity. The Portfolio's positioning
in anticipation of decreasing yield differentials between the long and short
ends of the yield curve detracted from performance.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GNMA PORTFOLIO AND
THE LEHMAN BROTHERS GNMA MBS INDEX FOR THE PAST TEN YEARS.
[LINE CHART]
Institutional Investor A Lehman Brothers GNMA MBS Index
------------- ---------- ------------------------------
03/31/1994 $ 10,000 $ 9,602 $ 10,000
06/30/1994 9,895 9,490 9,945
09/30/1994 9,940 9,522 10,027
12/31/1994 10,021 9,589 10,094
03/31/1995 10,580 10,112 10,626
06/30/1995 11,193 10,686 11,189
09/30/1995 11,417 10,887 11,439
12/31/1995 11,795 11,233 11,814
03/31/1996 11,690 11,121 11,778
06/30/1996 11,781 11,194 11,861
09/30/1996 12,003 11,391 12,110
12/31/1996 12,348 11,705 12,467
03/31/1997 12,360 11,703 12,484
06/30/1997 12,839 12,143 12,970
09/30/1997 13,231 12,499 13,353
12/31/1997 13,544 12,780 13,655
03/31/1998 13,783 12,989 13,876
06/30/1998 14,082 13,253 14,110
09/30/1998 14,406 13,543 14,470
12/31/1998 14,569 13,680 14,599
03/31/1999 14,681 13,769 14,745
06/30/1999 14,514 13,596 14,683
09/30/1999 14,646 13,704 14,816
12/31/1999 14,610 13,654 14,880
03/31/2000 14,923 13,931 15,170
06/30/2000 15,287 14,253 15,492
09/30/2000 15,772 14,673 15,957
12/31/2000 16,341 15,247 16,533
03/31/2001 16,835 15,689 16,979
06/30/2001 16,992 15,816 17,198
09/30/2001 17,796 16,542 17,859
12/31/2001 17,966 16,696 17,892
03/31/2002 18,168 16,864 18,083
06/30/2002 18,794 17,422 18,670
09/30/2002 19,206 17,782 19,176
12/31/2002 19,550 18,079 19,447
03/31/2003 19,688 18,185 19,610
06/30/2003 19,887 18,346 19,717
09/30/2003 19,973 18,404 19,800
12/31/2003 20,179 18,571 20,002
03/31/2004 20,442 18,790 20,319
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1Year 3 Year 5 Year 10 Year
--------- -------- -------- --------
BlackRock Class 3.88% 6.71% 6.86% 7.42%
Institutional Class 3.83% 6.68% 6.84% 7.41%
Service Class 3.42% 6.33% 6.51% 7.08%
Investor A Class (Load Adjusted) (0.84)% 4.76% 5.54% 6.51%
Investor A Class (NAV) 3.33% 6.20% 6.41% 6.94%
Investor B Class (Load Adjusted) (1.83)% 4.38% 5.25% 6.13%
Investor B Class (NAV) 2.57% 5.43% 5.57% 6.13%
Investor C Class (Load Adjusted) 1.49% 5.40% 5.54% 6.11%
Investor C Class (NAV) 2.47% 5.40% 5.54% 6.11%
- --------------------------------------------------------------------------------
IN CONNECTION WITH THE CONVERSION OF VARIOUS COMMON TRUST FUNDS MAINTAINED BY
PNC BANK AND PNC BANK, DELAWARE ("PNC-DE"), AN AFFILIATE OF PNC BANK, INTO THE
FUND BETWEEN MAY 1 AND MAY 15,1998 (THE "CTF CONVERSION"), THE GNMA PORTFOLIO
WAS ESTABLISHED TO RECEIVE THE ASSETS OF THE GNMA FUND OF PNC BANK. PERFORMANCE
INFORMATION PRESENTED FOR THIS PORTFOLIO INCLUDES PERFORMANCE FOR THE
PREDECESSOR COMMON TRUST FUND WHICH TRANSFERRED ITS ASSETS AND LIABILITIES TO
THE RELATED PORTFOLIO PURSUANT TO THE CTF CONVERSION. PERFORMANCE INFORMATION
PRESENTED IS BASED UPON THE PERFORMANCE OF THE GNMA FUND FOR PERIODS PRIOR TO
THE CTF CONVERSION. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 12 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
MANAGED INCOME PORTFOLIO
Total Net Assets (3/31/04): $901.0 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 (+or-)
20% 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 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 categories including: U.S. Treasuries and agency
securities, commercial and residential mortgage-backed securities,
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 After initially rising in October due to stronger economic data,
interest rates fluctuated in an increasingly narrow range over the balance of
the fourth quarter. By year-end 2003, the yield of the 10-year Treasury had
risen by 0.31% from its September 30th level. While most measures of economic
activity were improving, the combination of benign inflation and anemic job
growth convinced the Federal Reserve that its accommodative monetary posture
could be maintained "for a considerable period". During the first quarter of
2004, additional employment data disappointments and renewed terrorism fears
began to shake investor confidence in the sustainability of the economic
recovery. As a result, 10-year Treasury yields declined by 0.41% over the
three-month period. Without a clear trend of strengthening economic indicators,
the Fed maintained the status quo. By quarter-end, the Fed Funds Target Rate
had remained unchanged at 1.00% for nine consecutive months.
o All share classes of the Portfolio underperformed the benchmark for the
semi-annual period. For the first half of the period, the Portfolio's yield
curve positioning contributed negatively to performance. The Portfolio also
suffered from its underweight in the corporate and mortgage sectors, which
returned 1.05% and 0.84%, respectively, over duration-adjusted Treasuries.
Security selection within the corporate sector was additive to performance,
specifically holdings in autos and cable media sectors. Further benefiting
performance was the Portfolio's overweight in commercial mortgage-backed
securities ("CMBS"), which returned 0.61% over duration-adjusted Treasuries.
The Portfolio's allocation to non-dollar contributed to relative performance.
Yields fell in Europe relative to the U.S. as economic growth disparities
between Europe and the U.S. increased, largely due to the strengthening Euro.
o During the second half of the period, the Portfolio held a short
duration position relative to its benchmark, which was the most significant
detractor from relative performance. Additionally, the Portfolio was positioned
to take advantage of decreasing yield differentials between the 10- and 20-year
segments of the yield curve, resulting in a slightly negative impact on the
Portfolio's return. The Portfolio also suffered from its underweight in the
mortgage sector, which returned 31 bps over duration-adjusted Treasuries.
Security selection within corporate and agency issues were the most significant
contributors to relative performance. Security selection within autos was also
positive. The Portfolio benefited from its overweight in CMBS and asset-backed
securities, which returned 0.27% and 0.69%, respectively, over Treasuries. In
the agency sector, the allocation to callable debentures later in the period
was positive for returns. The Portfolio also held a significant allocation to
non-dollar assets throughout the quarter, which did not meaningfully impact
relative performance.
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.
[LINE CHART]
Institutional Investor A Lehman Brothers U.S. Aggregate Index
------------- ---------- ------------------------------------
03/31/1994 $ 10,000 $ 9,553 $ 10,000
06/30/1994 9,819 9,371 9,897
09/30/1994 9,844 9,383 9,958
12/31/1994 9,893 9,419 9,995
03/31/1995 10,366 9,860 10,499
06/30/1995 10,957 10,409 11,139
09/30/1995 11,150 10,579 11,358
12/31/1995 11,623 11,015 11,842
03/31/1996 11,391 10,782 11,631
06/30/1996 11,439 10,813 11,697
09/30/1996 11,633 10,984 11,913
12/31/1996 12,023 11,339 12,270
03/31/1997 11,988 11,293 12,202
06/30/1997 12,419 11,686 12,651
09/30/1997 12,826 12,054 13,073
12/31/1997 13,160 12,354 13,458
03/31/1998 13,353 12,520 13,666
06/30/1998 13,703 12,834 13,985
09/30/1998 14,012 13,108 14,577
12/31/1998 14,119 13,193 14,626
03/31/1999 14,127 13,185 14,551
06/30/1999 13,983 13,035 14,423
09/30/1999 14,091 13,120 14,522
12/31/1999 14,033 13,051 14,504
03/31/2000 14,334 13,315 14,824
06/30/2000 14,581 13,543 15,082
09/30/2000 15,055 13,953 15,537
12/31/2000 15,707 14,553 16,190
03/31/2001 16,195 14,988 16,682
06/30/2001 16,246 15,018 16,776
09/30/2001 17,071 15,747 17,549
12/31/2001 17,068 15,726 17,557
03/31/2002 17,046 15,687 17,574
06/30/2002 17,661 16,234 18,223
09/30/2002 18,235 16,742 19,058
12/31/2002 18,694 17,144 19,358
03/31/2003 18,979 17,384 19,627
06/30/2003 19,525 17,864 20,118
09/30/2003 19,512 17,831 20,089
12/31/2003 19,551 17,845 20,152
03/31/2004 19,987 18,222 20,688
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
---------- ---------- --------- ----------
Institutional Class 5.32% 7.26% 7.19% 7.17%
Service Class 5.00% 6.94% 6.87% 6.86%
Investor A Class (Load Adjusted) 0.09% 5.10% 5.71% 6.18%
Investor A Class (NAV) 4.82% 6.73% 6.69% 6.67%
Investor B Class (Load Adjusted) (0.35)% 4.92% 5.57% 6.14%
Investor B Class (NAV) 4.03% 5.97% 5.89% 6.14%
Investor C Class (Load Adjusted) 3.17% 5.99% 5.86% 6.12%
Investor C Class (NAV) 4.15% 5.99% 5.86% 6.12%
- --------------------------------------------------------------------------------
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 12 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.
9
INTERNATIONAL BOND PORTFOLIO
Total Net Assets (3/31/04): $381.4 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 its assets in bonds of a diversified
group of non-U.S. issuers from at least three developed countries.
Recent Portfolio Management Activity
o All share classes of the Portfolio underperformed the benchmark for the
semi-annual period. After initially rising in October due to stronger economic
data, U.S. interest rates fluctuated in an increasingly narrow range over the
balance of the fourth quarter of 2004. Canadian yields first rose in light of
lower unemployment, growth in consumer prices and industrial purchasing and
then fell in November and December. The Portfolio's overweight in Canada had a
positive impact on performance during the first half of the period.
o In Europe, yields generally tracked higher over the quarter. Although
inflation remained at or below central bank targets, signs of growth came from
the manufacturing sector and business confidence improved. The ECB kept rates
at 2% during the fourth quarter of 2003. As yields improved, the Portfolio's
overweight position in European bonds benefited performance. The Portfolio's
overweight in U.K. bonds detracted from performance as yields rose during the
first half of the period. The Portfolio remained underweight in Japan, given
our belief that other global markets offer better value.
o The Euro hit a series of historical highs in December, breaking through
to 1.259 USD at year-end. The currency appreciated over 20% in 2003. The
British Pound also appreciated strongly against the dollar, finishing the year
at a high of 1.786 USD. Additionally, the yen appreciated to 107.22 by
year-end. Given its unhedged nature, the Portfolio benefited from these
appreciations.
o During the second half of the period, there was a general decline in
U.S. bond yields due to tepid job growth and renewed terrorism fears. The
Portfolio's short duration positioning, particularly in the Dollar Bloc and
Japan, was the primary cause of underperformance for the quarter.
o Despite low inflation, a strong Euro, and a worsening employment
situation, the ECB held rates at 2% throughout the first quarter of 2004. The
Portfolio maintains positions in Euroland through German bunds as well as
French and Spanish Treasuries. In Sweden, inflation remains low and
unemployment continues to climb. The Portfolio maintains a position in Sweden
in the 3 to 5-year part of the yield curve. We remain overweight the U.K. as
valuations look attractive versus European counterparts. The Portfolio also
maintains an allocation to Canada through 10-year Canadian bonds as the outlook
for Canadian inflation continues to be very weak. In addition, the Portfolio
moved from Australian to New Zealand bonds on the view that the Australian
economy will benefit more from growth in Asia.
o As the Portfolio is unhedged, investors gain exposure to general
movements in the currency markets. For the most part, the Portfolio has the
same currency positions as its benchmark. During the second half of the period,
the Yen's relative strength offset the Euro's weakness. The Portfolio's active
position long the British Pound versus the Euro also helped performance for the
quarter.
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.
[LINE CHART]
Service Investor A Citigroup Non-U.S. World Government Bond Index
---------- ---------- ----------------------------------------------
03/31/1994 $ 10,000 $ 9,502 $ 10,000
06/30/1994 9,794 9,306 10,170
09/30/1994 9,728 9,243 10,338
12/31/1994 9,828 9,338 10,397
03/31/1995 10,653 10,122 11,898
06/30/1995 11,053 10,502 12,480
09/30/1995 11,248 10,688 12,177
12/31/1995 11,795 11,208 12,429
03/31/1996 11,837 11,248 12,219
06/30/1996 12,107 11,500 12,268
09/30/1996 12,575 11,940 12,667
12/31/1996 13,023 12,358 12,936
03/31/1997 13,148 12,471 12,188
06/30/1997 13,588 12,883 12,533
09/30/1997 13,987 13,256 12,559
12/31/1997 14,317 13,563 12,385
03/31/1998 14,685 13,905 12,436
06/30/1998 14,935 14,136 12,643
09/30/1998 15,690 14,844 13,858
12/31/1998 15,914 15,050 14,588
03/31/1999 16,138 15,256 13,882
06/30/1999 15,988 15,108 13,259
09/30/1999 15,941 15,056 14,070
12/31/1999 15,943 15,052 13,848
03/31/2000 16,264 15,349 13,688
06/30/2000 16,681 15,736 13,579
09/30/2000 17,011 16,040 12,965
12/31/2000 17,753 16,733 13,484
03/31/2001 18,365 17,303 12,823
06/30/2001 18,516 17,438 12,570
09/30/2001 19,048 17,931 13,544
12/31/2001 19,117 17,988 13,007
03/31/2002 19,017 17,887 12,764
06/30/2002 19,511 18,344 14,547
09/30/2002 20,072 18,863 14,960
12/31/2002 20,397 19,160 15,867
03/31/2003 20,828 19,557 16,459
06/30/2003 21,672 20,322 17,151
09/30/2003 22,212 20,838 17,623
12/31/2003 23,622 22,134 18,805
03/31/2004 23,859 22,365 19,100
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
---------- --------- --------- ----------
Institutional Class 15.00% 9.44% 8.46% 9.34%
Service Class 14.55% 9.12% 8.14% 9.09%
Investor A Class (Load Adjusted) 8.61% 7.08% 6.85% 8.38%
Investor A Class (NAV) 14.36% 8.93% 7.95% 8.94%
Investor B Class (Load Adjusted) 9.10% 7.15% 6.86% 8.30%
Investor B Class (NAV) 13.60% 8.15% 7.17% 8.30%
Investor C Class (Load Adjusted) 12.59% 8.14% 7.20% 8.31%
Investor C Class (NAV) 13.59% 8.14% 7.20% 8.31%
- --------------------------------------------------------------------------------
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 12 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
HIGH YIELD BOND PORTFOLIO
Total Net Assets (3/31/04): $647.1 million
Performance Benchmark
Lehman Brothers U.S. Corporate High Yield Index
Investment Approach
Seeks to maximize total return, consistent with income generation and
prudent investment management by investing primarily in non-investment grade
(or high yield) bonds, including convertible and preferred securities. The high
yield securities purchased by the Portfolio will generally be in the lower
rating categories of major rating agencies 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 High yield issues were the top-performing fixed income sector in 2003,
with an excess return over duration-adjusted Treasuries of 26.42%. Each
industry sector in the Index generated positive returns in 2003. Leading the
extraordinary performance were highly distressed securities within the
Caa-rated sector, which posted a 60.23% return for the year. The 10 largest
issuers in the Index, many of which were last year's `fallen angels',
contributed 821 basis points to the year's performance, or 28% of the total.
During the first half of the semi-annual period, high yield issues returned
5.91% as risk appetite broadly increased on the back of improved economic data
and strong corporate earnings.
o BlackRock, Institutional, Service and Investor A class shares of the
Portfolio outperformed the benchmark for the semi-annual period. The other
share classes underperformed. The main drivers of performance for the period
included the Portfolio's underweight in technology, its overweights in
industrials and media cable and a bias towards B-rated issues. During the
first half of the period, the Portfolio suffered from underweights in Ba- and
Caa- rated issues. This was partially offset by its overweight in B-rated
issues. Additionally, overweights in media cable, oil field services and
industrials bolstered performance, while underweights in chemicals and
wirelines had a negative impact.
o Despite underperforming Treasuries by 0.47% for the second half of the
period, the high yield market outpaced the major equity indices, posting a
2.34% return. Within the high yield market, higher quality names led the way,
with Ba's returning 3.54%, B's returning 1.96% and Caa's returning 0.14%. The
Portfolio's suffered from its underweight in Ba-rated issues during the second
half of the period, but again benefited from its overweight in B's.
o All of the sectors in the Index generated positive returns for the
second half of the period. The real drivers of the Index's return were the
consumer cyclical, basic industries and the consumer non-cyclical sector. The
Portfolio benefited from overweights in technology, industrials, cable and
healthcare sectors. This was partially offset by underperformance in electric,
media and wireless sectors. In February, the Portfolio's performance was
boosted considerably by its holding in Communications and Power, which posted
exceptional performance after it was bought out by a private equity firm.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE HIGH YIELD BOND
PORTFOLIO AND THE LEHMAN BROTHERS U.S. CORPORATE HIGH YIELD INDEX FROM INCEPTION
AND AT EACH SEMI-ANNUAL PERIOD END.
[LINE CHART]
Institutional Investor A Lehman Brothers U.S. Corporate High Yield Index
------------- ---------- -----------------------------------------------
11/19/1998 $ 10,000 $ 9,497 $ 10,000
12/31/1998 10,128 9,613 10,160
03/31/1999 10,465 9,922 10,347
06/30/1999 10,622 10,059 10,382
09/30/1999 10,593 10,019 10,234
12/31/1999 11,013 10,394 10,402
03/31/2000 10,883 10,269 10,159
06/30/2000 10,994 10,362 10,276
09/30/2000 10,923 10,282 10,334
12/31/2000 10,221 9,610 9,793
03/31/2001 10,764 10,110 10,415
06/30/2001 10,647 9,988 10,177
09/30/2001 10,318 9,667 9,746
12/31/2001 10,941 10,239 10,310
03/31/2002 11,210 10,478 10,483
06/30/2002 10,860 10,140 9,810
09/30/2002 10,510 9,800 9,523
12/31/2002 11,060 10,301 10,164
03/31/2003 11,785 10,949 10,938
06/30/2003 13,024 12,088 12,044
09/30/2003 13,346 12,373 12,377
12/31/2003 14,164 13,133 13,109
03/31/2004 14,518 13,446 13,416
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year From Inception
---------- --------- --------- --------------
BlackRock Class 23.38% 10.65% 6.93% 7.32%
Institutional Class 23.20% 10.49% 6.77% 7.20%
Service Class 22.84% 10.16% 6.45% 6.85%
Investor A Class (Load Adjusted) 16.61% 8.12% 5.19% 5.68%
Investor A Class (NAV) 22.81% 9.97% 6.27% 6.70%
Investor B Class (Load Adjusted) 17.42% 8.23% 5.22% 5.78%
Investor B Class (NAV) 21.92% 9.21% 5.48% 5.90%
Investor C Class (Load Adjusted) 20.90% 9.20% 5.50% 5.90%
Investor C Class (NAV) 21.90% 9.20% 5.50% 5.90%
- --------------------------------------------------------------------------------
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 12 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.
11
BLACKROCK FUNDS
NOTE ON PERFORMANCE INFORMATION
The performance information above includes information for each class of
each Portfolio since the commencement of operations of the Portfolio, rather
than the date such class was introduced. Performance information for each class
introduced after the commencement of operations of a Portfolio is therefore
based on the performance history of a predecessor class or predecessor classes.
If a class of shares in a Portfolio (the "Subsequent Class") has more than one
predecessor class, the performance data predating the introduction of the
Subsequent Class is based initially on the performance of the Portfolio's first
operational predecessor class (the "Initial Class"); thereafter, the
performance of the Subsequent Class is based upon the performance of any other
predecessor class or classes which were introduced after the Initial Class and
which had total operating expenses more similar to those of the Subsequent
Class. In the case of Investor A, Investor B, Investor C and Service Shares,
the performance information for periods prior to their introduction dates has
not been restated to reflect the shareholder servicing and processing and/or
distribution fees and certain other expenses borne by these share classes
which, if reflected, would reduce the performance quoted. Accordingly, the
performance information may be used in assessing each Portfolio's performance
history but does not reflect how the distinct classes would have performed on a
relative basis prior to the introduction of these classes, which would require
an adjustment to the ongoing expenses.
Performance information is restated to reflect the current maximum
front-end sales charge (in the case of Investor A Shares) or the maximum
contingent deferred sales charge (in the case of Investor B and Investor C
Shares), and assumes the reinvestment of dividends and distributions. The
maximum front-end sales charges for Investor A Shares are as follows:
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 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, 2005. 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 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.
12
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ENHANCED INCOME PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- ------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 26.8%
Federal Home Loan Mortgage Corp.,
Unsecured Notes
3.88% 01/12/09 $ 250 $ 253,765
U.S. Treasury Notes
1.62% 03/05-02/06 7,895 7,924,106
2.25% 02/15/07 1,645 1,659,009
----------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $9,817,232) 9,836,880
----------
MORTGAGE PASS-THROUGHS - 12.9%
Federal Home Loan Mortgage Corp.
Gold
6.00% 07/09-07/28 393 403,758
4.02% (b) 03/01/34 300 305,343
4.31% (b) 10/01/37 320 326,367
Federal National Mortgage
Association
7.00% 05/01/22 77 81,655
6.50% 06/01/29 101 106,475
4.35% (b) 12/01/33 789 814,562
Government National Mortgage
Association
4.00% (b) 11/29-02/32 1,371 1,385,648
3.50% 04/20/32 569 575,821
5.00% (b) 01/20/33 665 680,516
----------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $4,669,229) 4,680,145
----------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 3.1%
Federal Home Loan Mortgage Corp.
Gold, Series 2564, Class AU
7.50% 06/15/17 242 261,846
Federal Home Loan Mortgage Corp.,
Series 1570, Class F
3.31% (b) 08/15/23 218 222,299
Federal National Mortgage
Association, Series 02-39, Class
FB
1.64% (b) 03/18/32 132 132,435
Federal National Mortgage
Association, Series 03-19, Class
PA
5.50% 03/01/33 200 213,625
Federal National Mortgage
Association, Series 04-25, Class
PA
5.50% 11/25/21 300 321,844
----------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $1,151,580) 1,152,049
----------
COMMERCIAL MORTGAGE BACKED SECURITIES - 3.8%
Credit Suisse First Boston Mortgage
Securities Corp., Series 02-10,
Class 2A1
7.50% 05/25/32 229 243,117
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 03-C1, Class X2 (IO)
3.20%(c) 05/10/36 1,292 106,446
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 03-C2, Class X2 (IO)
2.82%(c) 05/10/40 7,175 84,428
MATURITY (000) VALUE
-------------- ---------- ------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Merrill Lynch Mortgage Trust, Series
02-MW1, Class XP (IO)
2.81%(c) 07/12/34 $1,507 $ 97,938
Structured Asset Securities Corp.,
Series 04-3AC, Class A2
4.92%(b) 01/15/34 400 413,374
Washington Mutual Mortgage Loan
Trust, Series 03-AR8, Class A
4.03% 08/25/33 452 456,179
----------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $1,402,572) 1,401,482
----------
ASSET BACKED SECURITIES - 32.5%
American Express Credit Account
Master Trust, Series 99-1, Class A
5.60% 11/15/06 350 350,589
American Express Credit Account
Master Trust, Series 01-4, Class A
1.22%(b) 04/17/06 375 375,846
American Express Credit Account
Master Trust, Series 01-7, Class A
1.21%(b) 07/17/06 500 501,033
American Express Master Trust,
Series 01-1, Class A
1.18%(b) 09/15/05 350 350,173
American Express Master Trust,
Series 02-2, Class A
1.14%(b) 06/15/05 490 490,417
Amortizing Residential Collateral
Trust, Series 02-BC8, Class A2
1.30%(b) 11/25/32 201 200,697
BMW Vehicle Owner Trust, Series
02-A, Class A3
3.80% 05/25/06 188 189,192
BMW Vehicle Owner Trust, Series
03-A, Class A2
1.45% 11/25/05 527 527,425
Centex Home Equity, Series 01-C,
Class A3
4.49%(b) 03/25/29 110 110,412
Centex Home Equity, Series 03-C,
Class AV
1.39%(b) 09/25/33 436 436,472
Chase Funding Mortgage Loan,
Series 03-2, Class 2A1
2.04%(b) 10/25/21 464 464,423
Chase Manhattan Auto Owner Trust,
Series 02-A, Class A3
3.49% 03/15/06 277 278,193
Chase Manhattan Auto Owner Trust,
Series 02-B, Class A3
3.58% 05/15/06 343 345,327
Comed Transitional Funding Trust,
Series 98-1, Class A5
5.44% 03/25/07 213 218,422
Connecticut RRB Special Purpose
Trust, Series 01-1, Class A2
5.36% 03/30/07 245 251,905
DaimlerChrysler Auto Trust, Series
00-C, Class A4
6.85% 11/06/05 244 246,689
DaimlerChrysler Auto Trust, Series
01-A, Class A4
5.40% 03/06/06 382 387,210
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
ENHANCED INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ------- -------------
ASSET BACKED SECURITIES (Continued)
DaimlerChrysler Auto Trust, Series
01-C, Class A3
4.21%(b) 07/06/05 $166 $ 165,690
DaimlerChrysler Auto Trust, Series
01-D, Class A3
3.15% 11/06/05 200 201,051
DaimlerChrysler Auto Trust, Series
02-A, Class A3
3.85% 04/06/06 407 410,711
Discover Card Master Trust I, Series
95-1, Class A
1.37%(b) 02/16/07 400 400,399
Discover Card Master Trust I, Series
99-5, Class A
1.27%(b) 12/18/06 350 350,118
Discover Card Master Trust I, Series
00-1, Class A
1.26%(b) 08/16/07 300 300,399
Discover Card Master Trust I, Series
01-5, Class A
5.30% 11/16/06 300 301,452
Ford Credit Auto Owner Trust, Series
01-C, Class A5
5.25% 09/15/05 500 504,755
Ford Credit Auto Owner Trust, Series
02-A, Class A3A
3.62% 01/15/06 278 280,794
Honda Auto Receivables Owner
Trust, Series 01-3, Class A4
3.96% 02/19/07 266 269,664
Long Beach Mortgage Loan Trust,
Series 02-1, Class 2A1
1.41% 05/25/32 379 379,490
MBNA Master Credit Card Trust,
Series 99-D, Class A
1.28%(b) 06/15/06 695 697,611
Nissan Auto Receivables Owner
Trust, Series 02-C, Class A3
2.60% 08/15/06 395 398,455
Option One Mortgage Loan Trust,
Series 01-4, Class A
1.39%(b) 01/25/32 117 117,371
Residential Asset Mortgage Products,
Inc., Series 02-RZ2, Class A4
5.70%(b) 09/25/30 500 503,485
Saxon Asset Securities Trust, Series
03-2, Class AF1
1.17%(b) 03/25/18 554 553,537
Vanderbilt Mortgage and Finance,
Inc., Series 99-D, Class IA3
7.06%(b) 10/07/17 160 164,486
Vanderbilt Mortgage and Finance,
Inc., Series 02-B, Class A1V
1.35%(b) 04/07/10 187 186,875
------------
TOTAL ASSET BACKED SECURITIES
(Cost $11,919,298) 11,910,768
-----------
CORPORATE BONDS - 4.1%
Finance - 1.4%
Merrill Lynch & Co., Inc.
1.43%(b) 12/21/04 500 500,000
-----------
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- -----------
CORPORATE BONDS (Continued)
Telecommunications - 2.7%
SBC Communications, Inc., Notes
4.18% 06/05/04 $1,000 $1,005,270
----------
TOTAL CORPORATE BONDS
(Cost $1,506,372) 1,505,270
----------
TAXABLE MUNICIPAL BONDS - 2.7%
California Department of Water
Resources Revenue Bonds, Series
02, Class E
3.58%
(Cost $1,001,139) 05/01/04 1,000 1,001,490
----------
SHORT TERM INVESTMENTS - 14.1%
Federal Home Loan Bank, Discount
Notes
1.03% 04/01/04 5,000 5,000,000
Galileo Money Market Fund 162 162,132
---------
TOTAL SHORT TERM INVESTMENTS
(Cost $5,162,132) 5,162,132
---------
TOTAL INVESTMENTS IN
SECURITIES - 100.0%
(Cost $36,629,554(a)) $36,650,216
===========
- -------------------
(a) Also cost for Federal income tax purposes. The gross
unrealized appreciation (depreciation) on a tax basis
is as follows:
Gross unrealized appreciation $45,245
Gross unrealized depreciation (24,583)
-------
$20,662
=======
(b) Rates shown are the rates as of March 31, 2004.
(c) Rates shown are the effective yields as of March 31, 2004.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
ENHANCED INCOME PORTFOLIO
MARCH 31, 2004(UNAUDITED)
ASSETS
Investments at value (Cost $36,629,554)............................ $ 36,650,216
Interest receivable ............................................... 143,123
Receivable from advisor ........................................... 1,667
Capital shares sold receivable .................................... 3,820,000
Prepaid expenses .................................................. 33,595
-------------
TOTAL ASSETS ................................................... 40,648,601
-------------
LIABILITIES
Investments purchased payable ..................................... 214,792
Distributions payable ............................................. 49,649
Transfer agent fees payable ....................................... 120
Other accrued expenses payable .................................... 3,725
-------------
TOTAL LIABILITIES .............................................. 268,286
-------------
NET ASSETS (Applicable to 3,539,171 BlackRock shares,
495,714 Institutional shares, 10 Service shares
and 10 Investor A shares outstanding) ............................. $ 40,380,315
=============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER BLACKROCK SHARE ($35,418,122/3,539,171)....................... $ 10.01
=======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($4,961,993/495,714)...................... $ 10.01
=======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($100/10)....................................... $ 10.00
=======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($100/10).................................... $ 10.00
=======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE ($10.00/0.970)......... $ 10.31
=======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LOW DURATION BOND PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- ----------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 58.9%
Federal Home Loan Mortgage Corp.,
Unsecured Notes
3.88% 01/12/09 $ 14,050 $ 14,261,593
Federal National Mortgage
Association, Unsecured Notes
4.45% 05/03/05 5,675 5,693,058
6.62% 10/15/07 17,700 20,133,679
5.75% 02/15/08 9,630 10,704,265
Small Business Administration
Participation Certificates, Series
97, Class A
1.85%(b) 08/15/22 967 916,052
U.S. Treasury Bonds
10.38%(c) 11/09-11/12 20,635 25,182,120
10.00% 05/15/10 7,100 7,786,428
U.S. Treasury Notes
2.12% 08/31/04 13,200 13,261,354
1.88% 09/30/04 13,700 13,758,335
1.62% 01/05-02/06 448,375 450,424,027
6.75% 05/15/05 28,700 30,470,216
1.25% 05/31/05 95,865 95,924,916
1.12% 06/30/05 1,190 1,188,698
1.50% 07/31/05 27,820 27,911,277
2.00%(d) 08/31/05 88,700 89,587,000
5.75% 11/15/05 37,425 40,031,576
2.38% 08/15/06 935 948,770
3.50% 11/15/06 174,180 181,548,685
2.25%(d) 02/15/07 90,835 91,608,551
3.25% 08/07-01/09 24,420 25,213,254
3.38% 12/15/08 11,100 11,426,495
2.62%(d) 03/15/09 16,265 16,148,087
--------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $1,166,094,369) 1,174,128,436
--------------
MORTGAGE PASS-THROUGHS - 7.7%
Federal Home Loan Mortgage Corp.
8.25% 06/01/09 10 10,078
5.50% 10/15/13 15,122 15,969,058
5.00% 11/15/16 6,548 6,782,287
5.21%(b) 07/01/20 1,140 1,169,094
7.00% 11/15/21 3,771 3,813,696
4.40%(b) 09/01/23 891 903,404
2.14%(b) 06/01/28 1,422 1,418,057
7.32%(b) 03/01/31 199 206,669
Federal Home Loan Mortgage Corp.
Gold
6.00% 02/09-07/11 4,737 5,004,929
5.50% 12/13-12/17 654 683,997
Federal National Mortgage
Association
7.00% 06/01/04 1 863
6.80% 08/01/05 624 625,807
6.50% 10/05-11/08 981 1,045,222
5.50% 02/09-11/11 7,268 7,614,384
6.00% 03/12-06/17 2,137 2,258,307
4.00% 10/25/16 6,139 6,242,993
3.58%(b) 02/01/24 1,640 1,669,563
5.19%(b) 10/01/32 7,803 8,009,560
6.24%(b) 04/01/40 6,255 6,466,855
Federal National Mortgage
Association 15 Year Balloon
5.50% 03/01/16 8 8,151
PAR
MATURITY (000) VALUE
-------------- ---------- ----------------
MORTGAGE PASS-THROUGHS (Continued)
Federal National Mortgage
Association 1Year CMT
3.50%(b) 08/01/22 $ 661 $ 681,614
6.21%(b) 09/01/29 277 284,240
3.67%(b) 12/01/30 1,296 1,334,952
6.69%(b) 02/01/31 513 522,925
6.55%(b) 12/01/31 2,306 2,400,917
5.56%(b) 08/01/32 4,361 4,537,825
5.60%(b) 01/01/33 8,952 9,270,316
Federal National Mortgage
Association COFI
4.80%(b) 05/01/27 211 218,135
Federal National Mortgage
Association MULTI
3.61%(b) 12/01/09 10,283 10,333,890
Government National Mortgage
Association
7.25% 04/15/06 27 28,015
7.00% 11/07-05/12 1,054 1,128,400
6.00% 12/08-02/11 1,618 1,717,721
6.50% 06/09-04/24 1,628 1,736,072
5.00% 09/20/21 1,635 1,673,038
3.50%(b) 08/33-03/34 43,707 44,371,542
MLCC Mortgage Investors, Inc.,
Series 97-B, Class A
1.37%(b) 03/16/26 1,818 1,819,985
MLCC Mortgage Investors, Inc.,
Series 99-A, Class A
1.47%(b) 03/15/25 1,186 1,190,178
--------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $151,994,601)
153,152,739
--------------
COMMERCIAL MORTGAGE BACKED SECURITIES - 2.9%
Bayview Financial Acquisition Trust,
Series 98-1, Class A1
7.01% 05/25/29 1,192 1,207,315
Conseco Finance Securitizations
Corp., Series 00-2, Class A3
8.07% 12/01/31 942 954,248
Countrywide Home Loans, Series
01-HYB1, Class A1
3.16%(b) 06/19/31 354 353,534
First Republic Mortgage Loan Trust,
Series 00-FRB1, Class A2
3.85%(b) 06/25/30 1,521 1,520,679
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 03-C1, Class X2 (IO)
4.32%(e) 05/10/36 41,500 3,419,288
Goldman Sachs Mortgage Securities
Corp. II, Series 00-1, Class A
1.44%(b) 06/20/24 1,075 1,074,210
Goldman Sachs Mortgage Securities
Corp. II, Series 03-C1, Class X2
(IO)
4.32%(e) 01/10/40 223,818 8,986,645
LB Commercial Conduit Mortgage
Trust, Series 96-C2, Class A
7.46%(b) 10/25/26 284 297,167
LB-UBS Commercial Mortgage Trust,
Series 03-C3, Class XCP (IO)
3.53%(e) 02/15/37 14,170 805,212
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LOW DURATION BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ----------- -------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
LB-UBS Commercial Mortgage Trust,
Series 03-C5, Class XCP (IO)
2.59%(e) 04/15/37 $193,402 $ 8,421,932
Residential Funding Mortgage
Securities I, Inc., Series 96-S1,
Class A11
7.10% 01/25/26 669 671,265
Structured Asset Securities Corp.,
Series 04-3AC, Class A2
4.92%(b) 01/15/34 22,018 22,754,171
Washington Mutual Mortgage Loan
Trust, Series 03-AR10, Class A6
4.10% 10/25/33 550 557,657
Washington Mutual Mortgage
Securities Corp., Series 01-9,
Class 1A1
3.74%(b) 04/25/28 723 735,543
Washington Mutual Mortgage
Securities Corp., Series 02-AR1,
Class IA1
3.72%(b) 11/25/30 1,809 1,804,921
Washington Mutual Mortgage
Securities Corp., Series 02-AR2,
Class 3A1
5.76%(b) 08/25/32 4,736 4,803,342
-----------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $58,054,299) 58,367,129
-----------
PROJECT LOANS - 0.0%
Federal Housing Authority, Series 82
7.43%
(Cost $75,488) 09/01/22 76 82,239
-----------
ASSET BACKED SECURITIES - 10.1%
Amresco Independence Funding,
Inc., Series 99-1, Class A
2.50%(b) 06/15/26 2,401 2,376,931
Business Loan Express, Inc., Series
98-1, Class A
3.00%(b) 01/01/25 593 580,837
Capco America Securitization Corp.,
Series 98-D7, Class PS1 (IO)
8.89%(e) 10/15/30 37,170 2,015,079
Capital Auto Receivables Asset Trust,
Series 02-2, Class A3
3.82% 07/15/05 1,870 1,882,109
Capital Auto Receivables Asset Trust,
Series 02-3, Class A3
3.58% 10/16/06 8,300 8,538,625
Chase Manhattan Auto Owner Trust,
Series 00-A, Class A4
6.26% 06/15/07 1,070 1,085,938
Citibank Credit Card Issuance Trust,
Series 03-A5, Class A5
2.50% 04/07/08 11,600 11,730,964
Citibank Credit Card Master Trust I,
Series 97-6, Class A (PO)
3.82%(e) 08/15/08 3,750 3,740,266
Conseco Finance Securitizations
Corp., Series 01-D, Class A3
4.67% 11/15/32 103 103,165
DaimlerChrysler Auto Trust, Series
03-B, Class A3
2.25% 08/08/07 16,825 16,956,445
PAR
MATURITY (000) VALUE
---------- ----------- -------------
ASSET BACKED SECURITIES (Continued)
Discover Card Master Trust I, Series
00-1, Class A
1.26%(b) 08/16/07 $ 15,045 $15,065,010
Epoch, Series 02, Class 2l
1.76%(b) 05/30/07 8,500 8,415,000
Fannie Mae Grantor Trust, Series
02-T6, Class A1
3.31% 02/25/32 3,047 3,046,093
Ford Credit Auto Owner Trust, Series
01-B, Class A5
5.36% 06/15/05 8,209 8,272,155
Ford Credit Auto Owner Trust, Series
01-C, Class A4
4.83% 02/15/05 67 66,609
Ford Credit Auto Owner Trust, Series
01-D, Class A3
4.31% 06/15/05 1,562 1,570,351
Ford Credit Auto Owner Trust, Series
01-E, Class A4
4.01% 03/15/06 8,800 8,918,800
Ford Credit Auto Owner Trust, Series
02-A, Class A3A
3.62% 01/15/06 2,921 2,945,215
Green Tree Financial Corp., Series
98-6, Class A5
6.06% 06/01/30 736 744,240
Green Tree Financial Corp., Series
98-6, Class A6
6.27% 07/01/21 375 390,760
Green Tree Financial Corp., Series
99-2, Class A3
6.08% 12/01/30 11,649 12,056,596
Heller Financial Commercial
Mortgage Asset Corp., Series 98-1,
Class A
1.62%(b) 07/15/24 676 642,531
Honda Auto Receivables Owner
Trust, Series 01-3, Class A4
3.96% 02/19/07 5,328 5,393,281
Honda Auto Receivables Owner
Trust, Series 02-2, Class A3
3.83% 02/15/06 5,835 5,888,248
IFC Small Business Administration
Loan-Backed Adjustable Rate
Certificates, Series 97-1, Class A
2.00%(b) 01/15/24 1,329 1,276,207
Mellon Auto Grantor Trust, Series
00-1, Class A
6.39% 07/15/07 676 685,391
Missouri Higher Education Loan
Authority, Series 97, Class P
1.57%(b) 07/25/08 887 887,738
The Money Store Small Business
Administration Loan-Backed
Securities, Series 96-2, Class A
1.86%(b) 04/15/24 105 103,286
The Money Store Small Business
Administration Loan-Backed
Securities, Series 97-1, Class A
1.75%(b) 01/15/25 306 300,736
1.90%(b) 04/15/28 1,346 1,292,345
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LOW DURATION BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- --------- --------------
ASSET BACKED SECURITIES (Continued)
The Money Store Small Business
Administration Loan-Backed
Securities, Series 97-1, Class B
2.23%(b) 01/15/25 $ 547 $ 492,341
Mortgage Capital Funding, Inc.,
Series 98-MC1, Class X (IO)
8.50%(e) 03/18/30 88,144 1,709,582
Nissan Auto Receivables Owner
Trust, Series 01-B, Class A4
5.35% 10/15/06 2,743 2,771,714
Nissan Auto Receivables Owner
Trust, Series 01-C, Class A4
4.80% 02/15/07 3,950 4,023,868
Nissan Auto Receivables Owner
Trust, Series 02-A, Class A3
3.58% 09/15/05 3,535 3,551,751
Nissan Auto Receivables Owner
Trust, Series 02-B, Class A3
3.99% 12/15/05 5,215 5,257,128
Nomura Asset Securities Corp.,
Series 98-D6, Class PS1 (IO)
8.99%(e) 03/15/30 38,943 2,601,347
PBG Equipment Trust, Series 00-1A,
Class A
6.27% 01/20/12 735 767,532
PMC Capital Limited Partnership,
Series 98-1, Class A
3.00%(b) 04/01/21 3,028 3,028,353
PMC Capital Small Business
Administration Loan-Backed
Adjustable Rate Certificates, Series
97-1, Class A
2.10%(b) 09/15/23 588 569,168
PMC Capital Small Business
Administration Loan-Backed
Adjustable Rate Certificates, Series
97-1, Class B
2.45%(b) 09/15/23 188 181,685
Residential Accredit Loans, Inc.,
Series 01-QS19, Class A1
6.00% 12/25/16 1,431 1,444,197
Sallie Mae Student Loan Trust,
Series 01-4, Class A1
1.17%(b) 01/25/11 1,344 1,344,604
Sears Credit Account Master Trust,
Series 00-4, Class A
1.34%(b) 10/18/11 10,950 11,004,750
Sears Credit Account Master Trust,
Series 02-3, Class A
1.38%(b) 05/17/16 12,350 12,454,209
SWB Loan Backed Certificates,
Series 98-1, Class AV
1.75%(b) 09/15/24 1,077 1,028,338
Toyota Auto Receivables Owner
Trust, Series 01-C, Class A4
4.72% 09/15/08 10,400 10,586,879
Toyota Auto Receivables Owner
Trust, Series 02-A, Class A4
4.00% 07/15/08 11,000 11,259,534
------------
TOTAL ASSET BACKED SECURITIES
(Cost $198,505,454) 201,047,931
------------
PAR/(j)/
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS - 1.6%
Banks - 0.1%
State Street Capital Trust II, Capital
Securities
1.63%(b) 02/15/08 $ 1,700 $ 1,711,662
Wells Fargo & Co., Unsecured Notes
3.50%(f) 04/04/08 1,200 1,229,598
-----------
2,941,260
-----------
Energy & Utilities - 0.1%
Virginia Electric & Power Co., Senior
Unsecured Notes
5.75% 03/31/06 2,315 2,479,458
-----------
Finance - 1.0%
Citigroup, Inc., Senior Unsecured
Notes
3.50% 02/01/08 5,200 5,312,945
General Electric Capital Corp., Senior
Unsecured Notes
5.35% 03/30/06 2,095 2,236,412
Household Finance Corp., Unsecured
Notes
4.12% 12/15/08 4,375 4,518,806
RC Trust I
7.00% 05/15/06 14,500 7,801,000
SLM Corp., Senior Unsecured Notes
3.62% 03/17/08 650 665,878
-----------
20,535,041
-----------
Food & Agriculture - 0.3%
Kraft Foods, Inc., Senior Unsecured
Notes
4.62%(f) 11/01/06 3,575 3,772,626
-----------
Oil & Gas - 0.1%
Conoco, Inc., Senior Unsecured
Notes
5.90% 04/15/04 1,845 1,847,402
-----------
Telecommunications - 0.0%
WorldCom, Inc., Senior Notes
6.40%(g)(h) 08/15/05 610 207,400
WorldCom, Inc., Senior Unsecured
Notes
8.00%(f)(g)(h) 05/15/06 390 132,600
7.50%(f)(g)(h) 05/15/11 1,575 551,250
-----------
891,250
-----------
TOTAL CORPORATE BONDS
(Cost $32,992,492) 32,467,037
-----------
FOREIGN BONDS - 7.7%
Bundesobligation (Germany)
3.50% 10/10/08 42,600 53,529,815
Government of Canada
4.25% 09/01/08 11,800 9,306,220
Kingdom of Sweden
3.50% 04/20/06 251,475 33,972,619
Spain Bonos y Obligation del Estado
5.15% 07/30/09 20,580 27,686,162
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LOW DURATION BOND PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR/SHARES/j)/
MATURITY (000) VALUE
---------- -------------- ---------------
FOREIGN BONDS (Continued)
United Kingdom Treasury Notes
5.00% 03/07/08 14,225 $ 26,509,350
------------
TOTAL FOREIGN BONDS
(Cost $147,781,286) 151,004,166
------------
TAXABLE MUNICIPAL BONDS - 0.5%
California Department of Water
Resources Revenue Bonds, Series
02, Class E
3.58% 05/01/04 3,250 3,254,842
Texas Public Finance Authority
Unemployment Compensation
Obligation Assessment Revenue
Bonds, Series 03, Class B
2.62% 06/15/06 7,430 7,537,141
------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $10,663,524) 10,791,983
------------
SHORT TERM INVESTMENTS - 17.6%
Fed Funds
1.05%(i) 04/01/04 1,420 1,420,500
Federal Home Loan Bank, Discount
Notes
0.90% 04/01/04 61,500 61,500,000
0.97% 04/01/04 106,200 106,200,000
0.97% 04/07/04 27,000 26,995,635
0.98% 04/07/04 50,000 49,991,875
0.98% 04/12/04 15,000 14,995,531
0.99% 05/06/04 35,000 34,966,312
Federal National Mortgage
Association, Discount Notes
1.00% 04/15/04 30,000 29,988,333
U.S. Treasury Bills
0.96% 04/08/04 18,000 17,996,659
0.94% 04/15/04 1,500 1,499,452
Galileo Money Market Fund 6,326 6,326,377
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $351,880,674) 351,880,674
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $2,118,042,187(a)) 107.0% 2,132,922,334
LIABILITIES IN EXCESS OF OTHER
ASSETS
(Including $106,785,450 of
investment purchases payable) (7.0) % (138,973,370)
---- -------------
NET ASSETS (Applicable to
84,908,233 BlackRock shares,
48,629,795 Institutional shares,
29,544,881 Service shares,
10,755,754 Investor A shares,
7,222,296 Investor B shares and
14,961,590 Investor C shares
outstanding) 100.0% $1,993,948,964
===== ==============
VALUE
-----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
BLACKROCK SHARE
($863,375,146/84,908,233) $ 10.17
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($494,840,574/48,629,795) $ 10.18
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($300,638,886/29,544,881) $ 10.18
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($109,469,365/10,755,754) $ 10.18
=======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.18/0.970) $ 10.49
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($73,477,906/7,222,296) $ 10.17
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($152,147,087/14,961,590) $ 10.17
=======
- -------------------
(a) Cost for Federal income tax purposes is $2,119,372,193.
The gross unrealized appreciation (depreciation) on a
tax basis is as follows:
Gross unrealized appreciation $19,621,805
Gross unrealized depreciation (6,071,664)
-----------
$13,550,141
===========
(b) Rates shown are the rates as of March 31, 2004.
(c) Securities, or a portion thereof, pledged as collateral with a value
of $2,224,414 on 470 long U.S. Treasury Note futures contracts and
2,283 short U.S. Treasury Note futures contracts expiring June 2004.
The value of such contracts on March 31, 2004 was $360,430,846, with an
unrealized loss of $4,215,604.
(d) Securities, or a portion thereof, subject to financing transactions.
(e) Rates shown are the effective yields as of March 31, 2004.
(f) Total or partial securities on loan.
(g) Non-income producing security.
(h) Security in default.
(i) Securities purchased with the cash proceeds from securities loaned.
(j) In local currency.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 63.8%
Federal Home Loan Mortgage Corp.,
Unsecured Notes
4.88% 03/15/07 $16,210 $ 17,425,312
3.50% 04/01/08 3,210 3,242,341
3.88% 01/12/09 2,300 2,334,638
5.75% 03/15/09 7,100 7,940,356
6.62% 09/15/09 1,420 1,655,070
7.00% 03/15/10 17,875 21,271,143
Federal National Mortgage
Association, Debentures
5.88% 02/02/06 3,800 4,077,791
Federal National Mortgage
Association, Unsecured Notes
5.00% 01/15/07 1,780 1,916,238
3.25% 01/15/08 3,060 3,123,645
5.75% 02/15/08 3,400 3,779,284
6.00% 05/15/08 17,200 19,334,520
7.12% 06/15/10 7,600 9,127,007
4.75% 02/21/13 1,595 1,614,752
Small Business Administration
Participation Certificates, Series
96-20H, Class 1
7.25% 08/01/16 2,549 2,826,517
Small Business Administration
Participation Certificates, Series
96-20J, Class 1
7.20% 10/01/16 2,279 2,524,081
Small Business Administration
Participation Certificates, Series
98-20J, Class 1
5.50% 10/01/18 3,488 3,726,928
Small Business Investment Cos.
Pass-Through, Series 96-P10A,
Class 1
6.67% 02/01/06 800 856,072
U.S. Treasury Bonds
10.38%(b) 11/09-11/12 13,250 16,295,436
8.12% 08/15/19 14,975 21,007,709
6.25% 08/15/23 2,965 3,525,453
6.00% 02/15/26 1,625 1,883,984
U.S. Treasury Notes
3.38% 04/30/04 1,590 1,593,043
5.75% 11/15/05 555 593,655
1.62% 02/28/06 1,180 1,181,843
3.50% 11/15/06 2,000 2,084,610
2.25%(b) 02/15/07 14,850 14,976,463
3.25% 08/15/07 4,050 4,193,492
3.00% 02/15/08 525 537,325
3.12% 10/15/08 1,840 1,877,663
2.62%(b) 03/15/09 14,665 14,559,588
4.88% 02/15/12 7,100 7,750,374
4.00% 11/15/12 780 799,866
------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $194,779,975) 199,636,199
------------
MORTGAGE PASS-THROUGHS - 12.0%
Federal Home Loan Mortgage Corp.
Gold
6.00% 11/01/16 240 253,324
5.50% 04/01/17 29 30,397
6.50% 03/29-04/34 989 1,039,530
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
MORTGAGE PASS-THROUGHS (Continued)
Federal National Mortgage
Association
6.50% 10/05-04/32 $ 3,138 $ 3,343,461
6.09% 10/01/08 6,875 7,616,630
6.00% 02/09-04/34 3,462 3,655,870
8.50% 08/01/09 351 366,656
7.00% 10/09-03/13 959 1,026,674
5.50% 01/14-03/14 659 689,695
3.58% (c) 02/01/24 2,035 2,072,559
4.02% (c) 04/01/34 2,825 2,873,926
Federal National Mortgage
Association Multi-Family
6.54% (c) 12/01/18 588 605,177
Government National Mortgage
Association
7.25% 04/15/06 413 430,478
6.00% 02/15/11 932 990,418
7.00% 12/15/27 54 57,434
3.50% (c) 08/33-09/33 8,317 8,441,274
4.00% (c) 01/20/34 3,958 4,053,072
MLCC Mortgage Investors, Inc.,
Series 95-C2 (IO)
10.40% (d) 06/15/21 5,747 107,764
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $36,086,441)
37,654,339
------------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 1.8%
Federal Home Loan Mortgage Corp.,
Series 1361, Class I
6.00% 09/15/07 300 307,320
Federal National Mortgage
Association, Series 01-35, Class
VC
6.50% 07/25/31 5,101 5,371,428
------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $5,547,272)
5,678,748
------------
COMMERCIAL MORTGAGE BACKED SECURITIES - 1.4%
Credit Suisse First Boston Mortgage
Securities Corp., Series 01-33,
Class 4A1
6.50% 04/25/16 234 238,627
General Motors Acceptance Corp.,
Commercial Mortgage Securities,
Inc., Series 97-C1, Class X (IO)
8.26%(d) 07/15/27 13,379 723,861
LB-UBS Commercial Mortgage Trust,
Series 00-C5, Class A1
6.41% 01/15/10 2,528 2,777,572
Summit Mortgage Trust, Series 00-1,
Class B1
6.08%(c) 12/28/12 239 239,985
Washington Mutual Mortgage
Securities Corp., Series 01-9,
Class 1A1
3.74%(c) 04/25/28 524 532,436
------------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $4,220,138)
4,512,481
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- --------- -------------
PROJECT LOANS - 1.0%
Federal Housing Authority, Merrill
Lynch Project, Series 29, Class
1A1
7.43% 06/01/22 $ 555 $ 598,273
Federal Housing Authority, USGI
Project, Series 56
7.46% 01/01/23 2,381 2,571,471
-------------
TOTAL PROJECT LOANS
(Cost $3,003,149) 3,169,744
-------------
ASSET BACKED SECURITIES - 6.1%
Boston Edison Co., Series 99-1,
Class A4
6.91% 09/15/09 4,475 4,982,286
Capital Auto Receivables Asset Trust,
Series 02-3, Class A3
3.58% 10/16/06 2,700 2,777,625
Citibank Credit Card Master Trust I,
Series 97-6, Class A (PO)
3.82%(d)(e) 08/15/08 2,750 2,742,862
Fannie Mae Grantor Trust, Series
02-T6, Class A1
3.31% 02/25/32 995 994,211
Green Tree Financial Corp., Series
97-5, Class A7
7.13% 05/15/29 2,812 3,042,176
Green Tree Financial Corp., Series
99-5, Class A3
6.97%(e) 04/01/31 265 265,500
Huntington Auto Trust, Series 00-A,
Class A4
7.42% 07/15/05 1,137 1,146,035
The Money Store Small Business
Administration Loan Trust, Series
99-1, Class A
1.80%(c) 07/15/25 1,449 1,437,600
PMC Capital Small Business
Administration Loan-Backed
Adjustable Rate Certificates, Series
97-1, Class A
2.10%(c) 09/15/23 588 569,168
SWB Loan-Backed Certificates,
Series 99-1, Class A
7.38% 05/15/25 1,211 1,119,993
-------------
TOTAL ASSET BACKED SECURITIES
(Cost $18,067,771) 19,077,456
-------------
TAXABLE MUNICIPAL BONDS - 1.4%
Stanislaus County, California Taxable
Pension Obligation Refunding
Revenue Bonds, Series 95
7.15%
(Cost $3,755,000) 08/15/13 3,755 4,476,411
-------------
SHORT TERM INVESTMENTS - 22.7%
Federal Home Loan Bank, Discount
Notes
0.97% 04/01/04 64,000 64,000,000
NUMBER OF
SHARES VALUE
-------------- -------------
SHORT TERM INVESTMENTS (Continued)
Galileo Money Market Fund 6,635,490 $ 6,635,490
=============
TOTAL SHORT TERM INVESTMENTS
(Cost $70,635,490) 70,635,490
-------------
TOTAL INVESTMENTS IN
SECURITIES
(Cost $336,095,236(a)) 110.1% 344,840,868
NUMBER OF
CONTRACTS
--------------
PUT SWAPTIONS WRITTEN - (0.1)%
Union Bank of Switzerland, Strike
Price 5.75, Expires 09/23/05 (2,300)(f) (237,820)
Union Bank of Switzerland, Strike
Price 6.00, Expires 10/25/04 (360)(f) (29,304)
-------------
TOTAL PUT SWAPTIONS WRITTEN
(Premiums received $662,250) (267,124)
-------------
LIABILITIES IN EXCESS OF OTHER
ASSETS
(Including $28,020,445 of payable for
financing transactions) (10.1)% (31,531,276)
------------ -------------
NET ASSETS (Applicable to
21,624,959 Institutional shares,
135,683 Service shares, 4,982,147
Investor A shares, 1,215,033 Investor
B shares and 1,606,073 Investor C
shares outstanding) 100.0% $ 313,042,468
============ =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
VALUE
----------
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($228,884,902/21,624,959) $10.58
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($1,434,504/135,683) $10.57
======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($52,855,625/4,982,147) $10.61
======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($10.61/0.960) $11.05
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($12,858,491/1,215,033) $10.58
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($17,008,946/1,606,073) $10.59
======
- -------------------
(a) Also cost for Federal income tax purposes. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $8,960,157
Gross unrealized depreciation (214,525)
----------
$8,745,632
==========
(b) Securities, or a portion thereof, subject to financing transactions.
(c) Rates shown are the rates as of March 31, 2004.
(d) Rates shown are the effective yields as of March 31, 2004.
(e) Securities, or a portion thereof, pledged as collateral with a value of
$3,855,718 on 406 short U.S. Treasury Note futures contracts, 23 long U.S.
Treasury Note futures contracts and 18 short U.S. Treasury Bond futures
contracts expiring June 2004. The value of such contracts on March 31, 2004
was $50,813,844, with an unrealized loss of $761,618.
(f) Each swaption contract is equivalent to $10,000 in notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 41.2%
Federal Home Loan Mortgage Corp.,
Unsecured Notes
4.00% 10/29/07 $ 3,300 $ 3,344,187
3.50% 04/01/08 7,820 7,898,785
3.88% 01/12/09 6,980 7,085,119
5.75% 03/15/09 22,000 24,603,920
6.62% 09/15/09 5,400 6,293,927
7.00% 03/15/10 3,540 4,212,579
4.75% 10/11/12 3,980 4,021,191
Federal National Mortgage
Association, Unsecured Notes
1.75% 06/16/06 4,175 4,152,537
7.12% 03/15/07 2,680 3,051,764
5.25% 04/15/07 2,025 2,200,098
3.25% 01/15/08 15,310 15,628,433
5.75% 02/15/08 7,350 8,169,922
6.00% 05/08-05/11 14,980 16,879,250
7.25% 01/15/10 28,065 33,740,248
4.75% 02/21/13 10,740 10,873,004
Small Business Administration
Participation Certificates, Series
92-20H, Class 1
7.40% 08/01/12 1,001 1,080,608
Small Business Administration
Participation Certificates, Series
96-20H, Class 1
7.25% 08/01/16 2,907 3,223,221
Small Business Administration,
Series 01-P10, Class B-1
6.34% 08/01/11 3,275 3,546,816
Small Business Investment Cos.
Pass-Through, Series 96-P10A,
Class 1
6.67% 02/01/06 596 638,066
Small Business Investment Cos.
Pass-Through, Series 97-P10D,
Class 1
6.51% 11/10/07 115 124,679
Small Business Investment Cos.
Pass-Through, Series 98-10A,
Class 1
6.12% 02/01/08 322 347,974
U.S. Treasury Bonds
10.38%(b) 11/09-11/12 19,610 23,318,132
8.12% 08/15/19 9,775 13,712,878
6.25% 08/15/23 5,225 6,212,645
6.00% 02/15/26 8,925 10,347,422
U.S. Treasury Notes
2.12% 08/31/04 495 497,301
1.62% 02/28/06 4,565 4,572,131
1.50% 03/31/06 32,885 32,833,634
3.50% 11/15/06 2,465 2,569,282
2.25%(b) 02/15/07 16,810 16,953,154
4.38% 05/15/07 2,930 3,134,186
3.00% 11/07-02/09 6,275 6,392,717
2.62%(b) 05/08-03/09 43,370 43,490,652
5.62% 05/15/08 16,865 18,945,450
3.38% 12/15/08 4,325 4,452,216
5.75% 08/15/10 1,010 1,159,606
4.88% 02/15/12 29,010 31,667,374
4.00%(b) 11/15/12 26,715 27,395,404
------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $401,444,006) 408,770,512
------------
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
MORTGAGE PASS-THROUGHS - 4.8%
Federal Home Loan Mortgage Corp.
Gold
9.00% 11/04-11/05 $ 3 $ 2,664
9.50% 01/01/05 1 632
8.50% 07/01/06 6 5,816
7.25% 12/01/06 4 4,018
6.00% 04/01/11 659 695,890
Federal National Mortgage
Association
9.50% 03/01/05 0 202
5.50% 02/09-08/15 14,532 15,209,960
8.50% 08/01/09 450 470,193
6.50% 09/14-01/33 481 504,350
6.00% 05/16-05/32 1,243 1,308,584
3.58%(c) 02/01/24 3,703 3,770,909
5.19%(c) 10/01/32 3,848 3,949,410
4.02%(c) 04/01/34 8,900 9,054,137
Government National Mortgage
Association
7.25% 04/15/06 74 76,823
9.50% 05/16-02/17 63 70,250
8.50% 02/15/17 67 74,071
3.50%(c) 08/20/33 8,294 8,417,956
MLCC Mortgage Investors, Inc.,
Series 95-C2 (IO)
10.40%(d) 06/15/21 9,242 173,293
Structured Asset Securities Corp.,
Series 03-AL1, Class A
3.36% 04/25/31 3,816 3,672,487
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $46,357,753)
47,461,645
------------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 0.2%
Federal Home Loan Mortgage Corp.,
Series 1361, Class I
6.00% 09/15/07 556 570,747
Federal Home Loan Mortgage Corp.,
Series 96T-2, Class A
7.00% 01/25/21 1,526 1,572,859
Federal National Mortgage
Association, Series 89-16, Class B
(PO)
6.20%(d) 03/25/19 195 166,198
Federal National Mortgage
Association, Strip Notes, Series
279, Class 1 (PO)
6.00%(d) 07/01/26 62 55,479
------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $2,283,386)
2,365,283
------------
COMMERCIAL MORTGAGE BACKED SECURITIES - 2.7%
Bank of America Commercial
Mortgage, Inc., Series 04, Class 1
4.76% 01/10/14 4,840 4,954,611
Bayview Financial Acquisition Trust,
Series 98-1, Class A1
7.01% 05/25/29 749 759,118
Credit Suisse First Boston Mortgage
Securities Corp., Series 01-33,
Class 4A1
6.50% 04/25/16 635 647,069
First Republic Mortgage Loan Trust,
Series 00-FRB1, Class A2
3.85%(c) 06/25/30 2,646 2,645,773
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
General Motors Acceptance Corp.,
Commercial Mortgage Securities,
Inc., Series 97
7.43% 02/21/21 $ 521 $ 562,415
General Motors Acceptance Corp.,
Commercial Mortgage Securities,
Inc., Series 97-C1, Class X (IO)
8.26%(d) 07/15/27 20,027 1,083,546
LB Commercial Conduit Mortgage
Trust, Series 99-C2, Class A1
7.10% 10/15/32 5,266 5,682,549
LB-UBS Commercial Mortgage Trust,
Series 00-C5, Class A1
6.41% 01/15/10 5,408 5,940,524
NationsLink Funding Corp., Series
99-SL, Class A6
6.61% 04/10/07 2,236 2,358,872
NYC Mortgage Loan Trust, Series
96, Class A1
6.75% 06/25/06 526 537,439
Summit Mortgage Trust, Series 00-1,
Class B1
6.08%(c) 12/28/12 478 479,971
Washington Mutual Mortgage
Securities Corp., Series 01-9,
Class 1A1
3.74%(c) 04/25/28 1,361 1,383,698
-----------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $26,255,256) 27,035,585
-----------
PROJECT LOANS - 0.4%
Federal Housing Authority, USGI
Project, Series 56
7.46%
(Cost $2,370,027) 01/01/23 2,342 2,529,315
-----------
ASSET BACKED SECURITIES - 6.7%
Amresco Independence Funding,
Inc., Series 00-1, Class A
2.15%(c) 01/15/27 1,191 1,137,765
Boston Edison Co., Series 99-1,
Class A4
6.91% 09/15/09 5,500 6,123,480
Citibank Credit Card Master Trust I,
Series 97-6, Class A (PO)
3.82%(d) 08/15/08 7,625 7,605,209
Epoch, Series 02, Class 2l
1.76%(c) 05/30/07 4,900 4,851,000
Fannie Mae Grantor Trust, Series
02-T6, Class A1
3.31% 02/25/32 2,793 2,792,252
Ford Credit Auto Owner Trust, Series
02-C, Class A3
3.38% 12/15/05 9,000 9,075,942
Green Tree Financial Corp., Series
96-7, Class A6
7.65%(e) 10/15/27 1,891 2,070,990
Green Tree Financial Corp., Series
99-5, Class A3
6.97%(e) 04/01/31 450 450,924
PAR
MATURITY (000) VALUE
---------- ---------- -------------
ASSET BACKED SECURITIES (Continued)
Huntington Auto Trust, Series 00-A,
Class A4
7.42% 07/15/05 $ 985 $ 992,298
IFC Small Business Administration
Loan-Backed Adjustable Rate
Certificates, Series 97-1, Class A
2.00%(c) 01/15/24 935 897,572
MBNA Master Credit Card Trust,
Series 00-E, Class A
7.80% 10/15/12 6,100 7,447,124
The Money Store Small Business
Administration Loan Trust, Series
96-1, Class A
1.95%(c) 07/15/21 653 637,778
The Money Store Small Business
Administration Loan Trust, Series
97-2, Class A
1.80% 02/15/29 590 590,376
The Money Store Small Business
Administration Loan Trust, Series
99-1, Class A
1.80%(c) 07/15/25 2,371 2,352,436
Nissan Auto Receivables Owner
Trust, Series 01-B, Class A4
5.35% 10/15/06 3,503 3,539,554
PBG Equipment Trust, Series 00-1A,
Class A
6.27% 01/20/12 2,820 2,945,404
PMC Capital Limited Partnership,
Series 98-1, Class A
3.00%(c) 04/01/21 1,335 1,335,284
PMC Capital Small Business
Administration Loan-Backed
Adjustable Rate Certificates, Series
97-1, Class A
2.10%(c) 09/15/23 965 933,975
Sears Credit Account Master Trust,
Series 00-3, Class A
1.25%(c) 10/16/08 7,570 7,571,243
SWB Loan-Backed Certificates,
Series 99-1, Class A
7.38% 05/15/25 1,867 1,727,217
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $62,406,381)
65,077,823
-----------
CORPORATE BONDS - 33.2%
Aerospace - 0.4%
Lockheed Martin Corp., Senior
Unsecured Notes
8.20% 12/01/09 305 376,922
Raytheon Co., Senior Notes
6.75% 08/15/07 3,000 3,372,678
-----------
3,749,600
-----------
Banks - 5.1%
Bank of America Corp., Senior
Unsecured Notes
5.25% 02/01/07 1,435 1,548,517
3.88% 01/15/08 2,210 2,290,762
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Banks (Continued)
Bank of America Corp., Subordinated
Notes
7.20% 04/15/06 $ 795 $ 878,564
7.80% 02/15/10 1,115 1,353,790
7.40% 01/15/11 2,840 3,408,932
Bank One N.A., Senior Bank Notes
5.50% 03/26/07 1,385 1,508,971
Bank One N.A., Senior Unsecured
Notes
3.70% 01/15/08 2,325 2,397,354
Barclays Bank PLC, Capital
Securities
8.55%(c)(f) 09/29/49 3,030 3,807,171
Depfa ACS Bank, Senior Notes
3.62% 10/29/08 5,150 5,276,175
Firstar Bank N.A., Subordinated
Notes
7.80%(c) 07/05/10 2,600 2,791,282
HSBC Bank USA, Subordinated
Notes
4.62% 04/01/14 1,700 1,691,398
The Huntington National Bank,
Subordinated Bank Notes
2.75% 10/16/06 750 754,170
J.P. Morgan Chase & Co., Senior
Unsecured Notes
5.25% 05/30/07 4,405 4,756,792
3.62% 05/01/08 105 107,472
J.P. Morgan Chase & Co.,
Subordinated Notes
6.75% 02/01/11 800 924,552
6.25% 02/15/11 1,500 1,692,087
6.62% 03/15/12 750 862,661
5.75% 01/02/13 500 544,395
State Street Capital Trust II, Capital
Securities
1.63%(c) 02/15/08 1,650 1,661,319
U.S. Bank NA, Senior Bank Notes
2.40% 03/12/07 4,560 4,552,750
U.S. Central Credit Union, Unsecured
Notes
2.75% 05/30/08 1,915 1,910,508
Wells Fargo & Co., Senior Unsecured
Notes
5.90% 05/21/06 1,600 1,729,408
5.25% 12/01/07 1,700 1,855,320
Wells Fargo & Co., Subordinated
Notes
5.00% 11/15/14 1,040 1,073,348
Wells Fargo & Co., Unsecured Notes
3.50%(g) 04/04/08 950 973,432
-----------
50,351,130
-----------
Beverages & Bottling - 0.3%
Cadbury Schweppes PLC,
Unsecured Notes
3.88%(f) 10/01/08 1,290 1,316,664
5.12%(f) 10/01/13 650 672,530
The Pepsi Bottling Group, Inc.,
Unsecured Notes
5.00% 11/15/13 835 869,232
-----------
2,858,426
-----------
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Chemicals - 0.4%
Dow Chemical Co., Senior
Debentures
5.97% 01/15/09 $3,773 $ 4,169,957
-----------
Energy & Utilities - 1.5%
Carolina Power & Light, Senior
Secured Notes
7.50% 04/01/05 2,850 3,017,608
Centerpoint Engery Houston, General
& Refunding Mortgages Notes
5.70% 03/15/13 1,300 1,395,121
Dominion Resources, Inc., Senior
Unsecured Notes
4.12%(g) 02/15/08 1,730 1,790,273
5.12% 12/15/09 1,250 1,337,012
Florida Power Corp., First Mortgage
Bonds
6.65% 07/15/11 500 576,909
Kinder Morgan Energy Partners LP,
Senior Unsecured Notes
5.00% 12/15/13 950 957,165
Ontario Electricity Financial Corp.,
Senior Notes
6.10% 01/30/08 1,020 1,145,247
PECO Energy Co., First Refunding
Mortgages
5.95% 11/01/11 1,900 2,117,644
Virginia Electric and Power Co.,
Unsecured Notes
5.73% 11/25/08 2,514 2,742,902
-----------
15,079,881
-----------
Entertainment & Leisure - 0.8%
Time Warner Cos., Inc., Debentures
8.11% 08/15/06 1,575 1,776,712
8.18% 08/15/07 350 408,084
Time Warner Cos., Inc., Senior
Debentures
7.57% 02/01/24 1,750 2,015,267
Time Warner Cos., Inc., Senior
Unsecured Notes
6.75% 04/15/11 3,050 3,457,733
Turner Broadcasting Corp., Senior
Notes
8.38% 07/01/13 300 373,668
-----------
8,031,464
-----------
Finance - 13.2%
American General Financial Corp.,
Notes
8.12% 08/15/09 2,250 2,735,973
Archstone-Smith Trust Corp., Senior
Unsecured Notes
5.00% 08/15/07 850 904,672
3.00% 06/15/08 925 913,872
ASIF Global Finance, Unsecured
Notes
3.85%(f) 11/26/07 5,450 5,637,316
3.90%(f) 10/22/08 2,320 2,393,266
Cable and Wireless Optus Finance
Ltd., Unsecured Notes
8.00%(f) 06/22/10 1,425 1,639,686
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS (Continued)
Finance (Continued)
Citigroup, Inc., Senior Unsecured
Notes
5.75% 05/10/06 $2,150 $ 2,317,304
5.00% 03/06/07 2,690 2,886,534
3.50% 02/01/08 1,300 1,328,236
Citigroup, Inc., Subordinated Notes
7.75% 06/15/06 3,480 3,900,920
6.38% 11/15/08 1,710 1,924,745
7.25% 10/01/10 4,500 5,359,329
Citigroup, Inc., Unsecured Notes
3.62%(g) 02/09/09 1,865 1,896,183
Credit Suisse First Boston USA, Inc.,
Senior Unsecured Notes
4.62% 01/15/08 3,070 3,252,220
6.12% 11/15/11 1,180 1,318,060
Diageo Finance BV, Unsecured
Notes
3.88% 04/01/11 2,950 2,925,369
General Electric Capital Corp., Senior
Unsecured Notes
6.88%(g) 11/15/10 3,545 4,161,472
5.88% 02/15/12 2,480 2,752,140
6.00% 06/15/12 1,500 1,675,695
General Electric Capital Corp.,
Unsecured Notes
2.80%(g) 01/15/07 2,650 2,657,950
3.50% 08/15/07 3,820 3,928,144
General Motors Acceptance Corp.,
Senior Unsecured Notes
7.25% 03/02/11 495 549,341
6.88% 09/15/11 4,810 5,215,916
Glaxosmithline Capital, Inc.,
Unsecured Notes
4.38% 04/15/14 815 811,519
The Goldman Sachs Group, Inc.,
Senior Unsecured Notes
6.88% 01/15/11 955 1,109,223
6.60% 01/15/12 4,795 5,495,362
5.25% 10/15/13 1,445 1,502,236
The Goldman Sachs Group, Inc.,
Unsecured Notes
4.75% 07/15/13 625 624,932
Greenpoint Financial Corp., Senior
Unsecured Notes
3.20% 06/06/08 1,510 1,492,653
Household Finance Corp., Notes
4.62% 01/15/08 1,940 2,054,256
6.38% 11/27/12 1,125 1,271,284
Household Finance Corp., Senior
Unsecured Notes
7.20% 07/15/06 1,975 2,192,708
5.75% 01/30/07 500 544,567
6.38% 10/15/11 6,020 6,825,831
7.00% 05/15/12 150 176,023
Household Finance Corp., Unsecured
Notes
4.12% 12/15/08 775 800,474
Lehman Brothers Holdings, Inc.,
Senior Notes
6.62% 02/05/06 625 678,512
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS (Continued)
Finance (Continued)
Lehman Brothers Holdings, Inc.,
Senior Unsecured Notes
6.25%(g) 05/15/06 $2,675 $ 2,910,455
Lehman Brothers Holdings, Inc.,
Unsecured Notes
4.00% 01/22/08 1,495 1,552,318
Massmutual Global Funding II,
Senior Secured Notes
2.55%(f) 07/15/08 2,535 2,480,477
Morgan Stanley, Senior Unsecured
Notes
5.80% 04/01/07 1,805 1,971,782
3.88% 01/15/09 5,950 6,069,537
6.75% 04/15/11 1,940 2,240,915
Morgan Stanley, Subordinated Notes
4.75% 04/01/14 1,975 1,939,701
Nationwide Building Society,
Unsecured Notes
2.62%(f) 01/30/07 1,795 1,806,208
New York Life Global Funding,
Unsecured Notes
3.88%(f) 01/15/09 2,945 3,018,702
Principal Life Global Funding I,
Unsecured Notes
3.62%(f) 04/30/08 3,600 3,677,940
Protective Life Secured Trust,
Secured Notes
3.70% 11/24/08 1,110 1,131,079
Prudential Funding LLC, Senior
Unsecured Notes
6.60%(f) 05/15/08 810 914,636
Rabobank Capital Funding Trust II,
Capital Securities
5.26%(f) 12/29/49 400 414,125
SLM Corp., Senior Unsecured Notes
3.62% 03/17/08 2,565 2,627,658
5.12% 08/27/12 1,665 1,745,969
SP Powerassets Ltd., Unsecured
Notes
3.80%(f) 10/22/08 1,925 1,978,476
Swedbank, Capital Securities
7.50%(c)(f) 09/29/49 2,200 2,639,780
UBS Preferred Funding Trust I,
Capital Securities
8.62%(c) 10/29/49 475 599,352
Washington Mutual Finance Corp.,
Senior Unsecured Notes
6.25% 05/15/06 2,750 2,990,136
------------
130,563,169
------------
Food & Agriculture - 1.1%
General Mills, Inc., Senior Unsecured
Notes
5.12% 02/15/07 5,190 5,543,543
Kellogg Co., Senior Unsecured Notes
6.60% 04/01/11 875 1,012,490
Kraft Foods, Inc., Senior Notes
6.85% 06/15/05 1,485 1,576,580
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Food & Agriculture (Continued)
Kraft Foods, Inc., Senior Unsecured
Notes
4.62%(g) 11/01/06 $ 825 $ 870,606
5.62% 11/01/11 3,092 3,352,888
-----------
12,356,107
-----------
Insurance - 0.3%
Allstate Financial Global Funding,
Senior Unsecured Notes
1.38%(c)(f) 06/21/06 1,750 1,753,850
Fund American Cos., Inc., Senior
Notes
5.88% 05/15/13 175 183,800
RLI Corp., Senior Unsecured Notes
5.95% 01/15/14 1,155 1,197,354
-----------
3,135,004
-----------
Manufacturing - 0.4%
General Electric Co., Senior Notes
5.00% 02/01/13 3,605 3,764,593
-----------
Medical & Medical Services - 0.1%
Anthem, Inc., Senior Unsecured
Notes
6.80% 08/01/12 750 869,500
-----------
Motor Vehicles - 0.8%
DaimlerChrysler North America
Holding Corp., Notes
4.75% 01/15/08 3,720 3,875,681
DaimlerChrysler North America
Holding Corp., Unsecured Notes
4.05% 06/04/08 2,405 2,423,335
6.50% 11/15/13 1,230 1,330,313
-----------
7,629,329
-----------
Oil & Gas - 2.0%
Atlantic Richfield Co., Debentures
10.88% 07/15/05 2,960 3,307,711
Encana Corp., Senior Unsecured
Notes
4.75% 10/15/13 1,410 1,438,300
Occidental Petroleum Corp., Senior
Unsecured Notes
6.75% 01/15/12 980 1,135,918
Ocean Energy Inc., Senior
Unsecured Notes
4.38% 10/01/07 1,660 1,736,343
Texas Eastern Transmission LLP,
Senior Unsecured Notes
5.25% 07/15/07 1,590 1,703,192
Tosco Corp., Senior
Notes
7.62% 05/15/06 2,525 2,800,907
Tosco Corp., Senior Unsecured
Notes
7.25% 01/01/07 805 905,761
Union Pacific Resources, Inc.,
Debentures
7.38% 05/15/06 5,845 6,476,844
-----------
19,504,976
-----------
Paper & Forest Products - 0.2%
International Paper Co., Senior
Unsecured Notes
4.25% 01/15/09 1,250 1,282,508
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Paper & Forest Products (Continued)
Weyerhaeuser Co., Debentures
7.12% 07/15/23 $ 905 $ 1,000,865
-----------
2,283,373
-----------
Pharmaceuticals - 0.2%
Bristol-Myers Squibb Co., Senior
Unsecured Notes
5.75% 10/01/11 1,980 2,176,656
-----------
Real Estate - 0.7%
Avalonbay Communities, Inc., Senior
Unsecured Notes
5.00% 08/01/07 1,380 1,460,551
EOP Operating LP, Senior Unsecured
Notes
6.76% 06/15/07 750 839,473
7.75% 11/15/07 1,225 1,409,314
6.95% 03/02/11 2,820 3,261,804
-----------
6,971,142
-----------
Retail Merchandising - 0.4%
Kroger Co., Senior Unsecured Notes
6.80% 04/01/11 1,945 2,231,998
Wal-Mart Stores, Inc., Senior
Unsecured Notes
6.88% 08/10/09 1,640 1,924,670
Wal-Mart Stores, Inc., Unsecured
Notes
3.38% 10/01/08 80 80,844
-----------
4,237,512
-----------
Telecommunications - 2.8%
AT&T Broadband Corp., Unsecured
Notes
8.38% 03/15/13 738 916,502
Comcast Cable Communications
Corp., Senior Notes
8.38% 05/01/07 2,550 2,961,210
Comcast Cable Communications
Corp., Senior Unsecured Notes
6.88% 06/15/09 975 1,111,071
5.50% 03/15/11 4,680 4,959,583
Cox Communications, Inc., Senior
Unsecured Notes
7.75% 11/01/10 565 674,170
Qwest Corp., Senior Unsecured
Notes
9.12%(f) 03/15/12 340 385,900
SBC Communications, Inc., Senior
Unsecured Notes
5.88% 02/01/12 1,285 1,403,959
Telus Corp., Senior Unsecured Notes
7.50% 06/01/07 2,100 2,371,971
Verizon New Jersey, Inc., Senior
Debentures
5.88% 01/17/12 5,850 6,369,363
Vodafone Group PLC, Senior
Unsecured Notes
3.95% 01/30/08 2,595 2,686,956
7.75% 02/15/10 1,825 2,198,650
WorldCom, Inc., Senior Notes
6.40%(h)(i) 08/15/05 2,850 969,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- -------- -------------
CORPORATE BONDS (Continued)
Telecommunications (Continued)
WorldCom, Inc., Senior Unsecured
Notes
7.38%(f)(h)(i) 01/15/06 $ 270 $ 91,800
8.00%(g)(h)(i) 05/15/06 380 129,200
8.25%(g)(h)(i) 05/15/10 190 64,600
-------------
27,293,935
-------------
Transportation - 0.5%
Burlington Northern Santa Fe Corp.,
Senior Unsecured Notes
7.88% 04/15/07 4,500 5,199,255
-------------
Yankee - 2.0%
Deutsche Telekom International
Finance BV, Senior Unsecured
Notes
8.25% 06/15/05 2,415 2,596,608
8.50%(c) 06/15/10 2,990 3,666,786
Mobil Oil Canada
5.00% 12/21/04 3,500 3,592,505
Province of Quebec, Debentures
7.00% 01/30/07 1,540 1,736,703
Telefonica Europe BV, Senior
Unsecured Notes
7.75% 09/15/10 1,250 1,509,595
United Mexican States, Unsecured
Notes
10.38% 02/17/09 4,850 6,251,650
-------------
19,353,847
-------------
TOTAL CORPORATE BONDS
(Cost $315,654,247) 329,578,856
-------------
TAXABLE MUNICIPAL BONDS - 1.2%
California Department of Water
Resources Revenue Bonds, Series
02, Class E
3.58% 05/01/04 2,625 2,628,911
Elmhurst, Illinois Sales Tax Revenue
Bonds, Series 98
5.62% 05/15/10 250 263,636
New Jersey Economic Development
Authority State Pension Funding
Zero Coupon Revenue Bonds,
Series 97, Class B
6.94%(d) 02/15/05 2,900 2,860,473
Oregon School Board Taxable
Pension Deferred Interest Bonds,
Series A
1.00% 06/30/07 2,700 2,466,072
Texas Public Finance Authority
Taxable Revenue Bond, Series 03
3.12% 06/15/07 2,020 2,062,238
Wisconsin General Revenue Bonds,
Series 03-A
4.80% 05/01/13 1,910 1,992,722
-------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $11,890,679) 12,274,052
-------------
SHORT TERM INVESTMENTS - 22.3%
Chase Manhattan Bank, Time
Deposit
1.06%(j) 04/01/04 $ 214 $ 214,186
Federal Home Loan Bank,
Discount
Notes
0.90% 04/01/04 38,600 38,600,000
0.97% 04/01/04 57,900 57,900,000
0.98% 04/07/04 20,000 19,996,750
0.98% 04/12/04 25,000 24,992,552
0.99% 05/06/04 20,000 19,980,750
Federal National Mortgage
Association, Discount Notes
1.00% 04/15/04 30,000 29,988,333
HBOS Treasury Services PLC,
Asset
Backed Commercial Paper
1.11%(j) 08/11/04 2,004 2,003,949
Natexis Banques
International,
Floating Rate Notes
1.11%(j) 04/01/04 71 70,965
U.S. Treasury Bills
0.96% 04/08/04 20,000 19,996,286
Galileo Money Market Fund 4,650 4,650,336
Institutional Money Market Trust(j) 3,066 3,065,610
-------------
TOTAL SHORT TERM INVESTMENTS
(Cost $221,459,717) 221,459,717
-------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $1,090,121,452(a)) 112.6% 1,116,552,788
NUMBER OF
CONTRACTS
------------------
PUT SWAPTIONS WRITTEN - (0.1)%
Union Bank of Switzerland, Strike
Price 5.75, Expires 09/23/05 (5,200)(k) (537,680)
Union Bank of Switzerland, Strike
Price 6.00, Expires 10/25/04 (1,000)(k) (81,400)
-------------
TOTAL PUT SWAPTIONS WRITTEN
(Premiums received $1,581,000) (619,080)
-------------
LIABILITIES IN EXCESS OF OTHER
ASSETS
(Including $52,745,492 of investment
purchases payable and $84,571,144
of payable for financing transactions) (12.6)% (124,643,608)
------ -------------
NET ASSETS (Applicable to
48,196,644 BlackRock shares,
39,067,102 Institutional shares,
7,433,791 Service shares, 4,563,849
Investor A shares, 1,517,678 Investor
B shares and 1,679,977 Investor C
shares outstanding) 100.0% $ 991,290,100
====== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
VALUE
-----------
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
BLACKROCK SHARE
($466,345,396/48,196,644) $ 9.68
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($377,926,719/39,067,102) $ 9.67
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($71,931,768/7,433,791) $ 9.68
======
NET ASSET VALUE AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($44,141,971/4,563,849) $ 9.67
======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($9.67/d0.960) $10.07
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($14,682,244/1,517,678) $ 9.67
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR C SHARE
($16,262,002/1,679,977) $ 9.68
======
- -------------------
(a) Cost for Federal income tax purposes is $1,091,063,031.
The gross unrealized appreciation (depreciation) on a tax basis
is as follows:
Gross unrealized appreciation $27,321,109
Gross unrealized depreciation (1,831,352)
-----------
$25,489,757
===========
(b) Securities, or a portion thereof, subject to financing transactions.
(c) Rates shown are the rates as of March 31, 2004.
(d) Rates shown are the effective yields as of March 31, 2004.
(e) Securities, or a portion thereof, pledged as collateral with a value of
$9,185,713 on 4 short U.S. Treasury Bond futures contracts and 1,235
short U.S. Treasury Note futures contracts expiring June 2004. The
value of such contracts on March 31, 2004 was $151,302,813, with an
unrealized loss of $2,123,120.
(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,
2004, the fund held 3.2% of its net assets, with a current market value
of $31,988,747 in securities restricted as to resale.
(g) Total or partial securities on loan.
(h) Non-income producing security.
(i) Security in default.
(j) Securities purchased with the cash proceeds from securities loaned.
(k) Each swaption contract is equivalent to $10,000 in notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE BOND TOTAL RETURN PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 26.9%
Federal Home Loan Mortgage Corp.,
Unsecured Notes
3.50% 04/01/08 $ 9,700 $ 9,797,728
3.62% 09/15/08 4,875 5,013,206
3.88% 11/10/08 42,225 43,006,585
4.38% 02/04/10 20,805 21,095,588
6.88% 09/15/10 34,895 41,450,654
4.75% 12/08/10 5,135 5,280,788
4.12% 02/24/11 11,025 11,053,246
4.62% 05/28/13 7,375 7,357,934
Federal National Mortgage
Association, Unsecured Notes
1.75% 06/16/06 3,925 3,903,884
7.12% 03/15/07 8,985 10,231,381
3.25% 01/15/08 26,565 27,117,524
5.75% 02/15/08 13,740 15,272,752
6.00% 05/08-05/11 21,105 23,735,036
3.75% 09/15/08 8,925 9,069,282
6.62% 09/15/09 9,385 10,947,978
Overseas Private Investment Co.
4.09% 05/29/12 310 306,160
4.30% 05/29/12 862 866,982
4.64% 05/29/12 640 654,829
4.68% 05/29/12 361 361,358
4.87% 05/29/12 2,721 2,721,482
5.40% 05/29/12 3,374 3,591,409
5.46% 05/29/12 386 406,666
5.79% 05/29/12 680 727,937
5.88% 05/29/12 468 495,759
5.94% 05/29/12 1,289 1,400,510
5.95% 05/29/12 367 400,084
6.10% 05/29/12 432 472,046
6.81% 05/29/12 518 570,072
6.89% 05/29/12 4,126 4,589,968
6.91% 05/29/12 1,387 1,514,504
7.35% 05/29/12 371 413,501
Resolution Funding Corp. Strip
Bonds
6.29%(b) 07/15/18 2,850 1,402,724
6.30%(b) 10/15/18 2,850 1,380,212
Small Business Administration
Participation Certificates, Series
92-20H, Class 1
7.40% 08/01/12 60 64,835
Small Business Administration
Participation Certificates, Series
96-20J, Class 1
7.20% 10/01/16 1,774 1,965,561
Small Business Administration
Participation Certificates, Series
97-20B, Class 1
7.10% 02/01/17 1,783 1,977,776
Small Business Investment Cos.
Pass-Through, Series 97-P10C,
Class 1
6.85% 08/01/07 3,388 3,709,205
Small Business Investment Cos.
Pass-Through, Series 97-P10D,
Class 1
6.51% 11/10/07 107 116,367
Small Business Investment Cos.
Pass-Through, Series 98-10A,
Class 1
6.12% 02/01/08 300 323,912
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (Continued)
Small Business Investment Cos.
Pass-Through, Series 03-10A,
Class 1
4.63% 03/10/13 $ 10,625 $ 10,750,216
U.S. Treasury Bonds
10.38%(c) 11/15/12 22,160 28,327,571
8.12%(d) 08/15/19 40,865 57,327,547
8.50%(c) 02/15/20 27,905 40,443,721
8.00% 11/15/21 20,105 28,224,744
6.25% 08/15/23 7,910 9,405,172
6.00% 02/15/26 24,135 27,981,516
6.75%(c)(d) 08/15/26 43,950 55,569,281
5.38% 02/15/31 43,495 47,409,550
U.S. Treasury Notes
1.50% 03/31/06 8,705 8,691,403
2.62% 03/15/09 26,045 25,857,789
5.00% 08/15/11 405 446,275
4.88% 02/15/12 27,510 30,029,971
4.00%(e) 11/12-02/14 73,990 75,394,085
------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $705,598,312)
720,626,266
------------
MORTGAGE PASS-THROUGHS - 22.7%
Federal Home Loan Mortgage Corp.
Gold
5.50% 03/11-09/33 45,225 47,171,275
6.00% 04/11-04/34 84,302 88,178,015
8.00% 11/15-10/25 59 63,940
4.00% 08/01/18 198 196,578
7.00% 03/25-05/31 409 433,637
7.50% 07/26-05/30 11 12,131
6.50% 11/28-04/34 4,812 5,056,384
5.00% 12/33-04/34 38,358 38,538,391
Federal National Mortgage
Association
6.50% 04/08-06/33 23,800 25,075,769
6.00% 09/08-04/34 8,711 9,194,148
7.00% 11/08-08/32 20,251 21,553,124
5.50% 02/09-04/34 100,691 103,262,587
8.00% 10/09-05/22 19 20,377
4.00% 07/18-11/18 9,859 9,800,317
4.50% 09/18-04/19 36,082 36,166,951
5.00% 04/19-04/34 122,900 124,342,609
7.50% 09/01/22 5 5,427
6.57%(f) 01/01/31 10,722 11,161,693
Government National Mortgage
Association
8.50% 01/15/10 2 2,159
7.00% 03/13-02/33 9,763 10,415,462
6.00% 11/14-04/34 42,434 44,359,170
9.00% 07/15/18 8 8,646
7.50% 05/23-02/30 25 26,978
6.50% 12/23-11/31 14,842 15,707,365
5.50% 12/32-09/33 16,727 17,219,146
MLCC Mortgage Investors, Inc.,
Series 95-C2 (IO)
10.40%(b) 06/15/21 14,922 279,779
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $601,148,640) 608,252,058
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 2.0%
Federal Home Loan Mortgage Corp.,
Series 1361, Class I
6.00% 09/15/07 $ 1,027 $ 1,053,667
Federal Home Loan Mortgage Corp.,
Series 2594, Class TV
5.50% 03/15/14 7,970 8,548,669
Federal National Mortgage
Association Strip Notes, Series
329, Class 1 (PO)
6.40%(b) 12/01/32 13,828 11,572,501
Federal National Mortgage
Association Strip Notes, Series
333, Class 1 (PO)
5.21%(b) 03/25/33 21,254 17,600,552
Federal National Mortgage
Association Strip Notes, Series
334, Class 3 (IO)
1.00%(b) 02/01/33 13,557 2,270,780
Federal National Mortgage
Association Strip Notes, Series
339, Class 8 (IO)
5.79%(b) 07/01/33 20,815 3,486,436
Federal National Mortgage
Association, Series 96-48, Class Z
7.00% 11/25/26 7,215 7,699,918
Federal National Mortgage
Association, Strip Notes, Series
279, Class 1 (PO)
6.00%(b) 07/01/26 48 43,201
Salomon Brothers Mortgage
Securities VI, Series 87-1 (IO)
7.00%(b) 02/17/17 381 84,500
Salomon Brothers Mortgage
Securities VI, Series 87-1 (PO)
7.00%(b) 02/17/17 397 368,758
Salomon Brothers Mortgage
Securities VI, Series 87-2 (IO)
7.00%(b) 03/06/17 302 70,453
Salomon Brothers Mortgage
Securities VI, Series 87-2 (PO)
7.00%(b) 03/06/17 302 274,630
Salomon Brothers Mortgage
Securities, Series 87-3, Class A
(PO)
12.50%(b) 10/23/17 147 138,969
Structured Asset Securities Corp.,
Series 96-CFL, Class X1 (IO)
1260.00%(b) 02/25/28 8,167 490,000
-----------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $55,257,844) 53,703,034
-----------
COMMERCIAL MORTGAGE BACKED SECURITIES - 7.5%
Bank of America Alternative Loan
Trust, Series 03-5, Class 2A1
5.00% 07/25/18 19,382 19,769,692
Chase Commercial Mortgage
Securities Corp., Series 97-1,
Class X (IO)
8.69%(b) 04/19/15 36,783 1,261,361
Chase Commercial Mortgage
Securities Corp., Series 99-2,
Class A2
7.20% 01/15/32 10,105 11,910,934
PAR
MATURITY (000) VALUE
---------- ---------- -------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Citicorp Mortgage Securities, Inc.,
Series 01-11, Class 2A
6.25% 07/25/16 $ 1,299 $ 1,310,059
Citigroup Mortgage Loan Trust, Inc.,
Series 03-UP3, Class A2
7.00% 12/25/33 8,888 9,284,875
Countrywide Alternative Loan Trust,
Series 04-2CB, Class 4A1
5.00% 02/15/19 10,041 10,173,133
Credit Suisse First Boston Mortgage
Securities Corp., Series 97-C1,
Class AX (IO)
8.60%(b) 06/20/29 47,591 2,524,555
Credit Suisse First Boston Mortgage
Securities Corp., Series 97-C2,
Class AX (IO)
8.32%(b) 01/17/35 17,001 552,451
Deutsche Mortgage and Asset
Receiving Corp., Series 98-C1,
Class A1
6.22% 06/15/31 36 36,562
First Union Commercial Mortgage
Trust, Series 97-C1, Class D
7.50% 04/18/29 50 56,308
General Motors Acceptance Corp.,
Commercial Mortgage Securities,
Inc., Series 97-C1, Class X (IO)
8.26%(b) 07/15/27 44,598 2,412,994
General Motors Acceptance Corp.,
Commercial Mortgage Securities,
Inc., Series 99-C2, Class A2
6.94% 09/15/33 3,175 3,664,763
General Motors Acceptance Corp.,
Commercial Mortgage Securities,
Inc., Series 03-C3, Class A3
4.65% 04/10/40 1,840 1,916,038
GS Mortgage Securities Corp. II,
Series 98-C1, Class A3
6.14% 10/18/30 7,224 7,903,297
GSR Mortgage Loan Trust, Series
02-8F, Class 3AB1
6.50% 09/25/32 3,052 3,076,970
GSR Mortgage Loan Trust, Series
03-10, Class 2A1
4.51%(f) 10/25/33 9,838 9,925,867
GSR Mortgage Loan Trust, Series
03-13, Class 1A1
4.53%(f) 11/28/33 20,321 20,378,189
LB Commercial Conduit Mortgage
Trust, Series 98-C4, Class X (IO)
9.77%(b) 09/15/23 16,297 409,836
LB Commercial Conduit Mortgage
Trust, Series 99-C2, Class A1
7.10% 10/15/32 1,314 1,418,386
LB Commercial Conduit Mortgage
Trust, Series 99-C2, Class A2
7.32% 10/15/32 85 99,946
LB-UBS Commercial Mortgage Trust,
Series 00-C5, Class A1
6.41% 01/15/10 11,132 12,228,832
LB-UBS Commercial Mortgage Trust,
Series 03-C8, Class A4
5.12% 11/15/32 8,000 8,454,262
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Master Alternative Loans Trust,
Series 03-5, Class 7A1
5.00% 08/25/18 $10,148 $ 10,352,917
Master Resecuritization Trust, Series
03-1
5.00% 03/28/32 6,119 6,145,759
Master Resecuritization Trust, Series
03-3
4.25% 01/28/33 9,628 9,543,441
Merrill Lynch Mortgage Investors,
Inc., Series 03-KEY1, Class A4
5.24% 11/12/35 7,100 7,518,921
Morgan Stanley Capital Investments,
Series 99-FNV1, Class A2
6.53% 03/15/31 10,415 11,809,853
Paine Webber Mortgage Acceptance
Corp., Series 99-C1, Class A2
6.82% 04/15/09 81 90,552
Residential Accredit Loans, Inc.,
Series 99-QS8, Class A1
6.50% 06/25/14 4,876 4,960,552
Summit Mortgage Trust, Series 00-1,
Class B1
6.08%(f) 12/28/12 558 559,966
Union Planters Mortgage Finance
Corp., Series 99-1, Class A1
6.25% 04/01/29 427 430,044
Wachovia Bank Commercial
Mortgage Trust, Series 03, Class
C6
5.12% 08/15/35 18,000 19,043,266
Washington Mutual Mortgage
Securities Corp., Series 02-MS12,
Class A
6.50% 05/25/32 1,720 1,745,608
------------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $197,988,037) 200,970,189
------------
ASSET BACKED SECURITIES - 2.9%
Citibank Credit Card Issuance Trust,
Series 03-A6, Class A6
2.90% 05/17/10 17,000 16,997,348
Citibank Credit Card Issuance Trust,
Series 04-1, Class A1
2.53% 01/20/09 21,450 21,592,642
Conseco Finance Securitizations
Corp., Series 00-4, Class A3
7.47% 05/01/32 1,698 1,709,519
MBNA Credit Card Master Note
Trust, Series 03, Class A7
2.65% 11/15/10 20,000 19,797,474
Sallie Mae Student Loan Trust,
Series 01-4, Class A1
1.17%(f) 01/25/11 2,021 2,021,962
Sears Credit Account Master Trust,
Series 02-5, Class A
1.47%(f) 11/05/05 12,400 12,462,000
------------
TOTAL ASSET BACKED SECURITIES
(Cost $73,777,801) 74,580,945
------------
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS - 22.1%
Aerospace - 0.3%
Lockheed Martin Corp., Senior
Debentures
8.50% 12/01/29 $ 2,225 $ 2,983,380
Lockheed Martin Corp., Senior
Unsecured Notes
8.20% 12/01/09 630 778,560
Northrop Grumman Corp., Senior
Debentures
7.75% 03/15/26 1,100 1,336,703
Northrop Grumman Corp., Senior
Unsecured Notes
7.12% 02/15/11 1,710 2,021,240
Raytheon Co., Senior Notes
6.15% 11/01/08 30 33,353
Raytheon Co., Unsecured Notes
4.85% 01/15/11 1,800 1,858,536
------------
9,011,772
------------
Banks - 4.1%
Bank of America Corp., Senior Notes
4.38% 12/01/10 1,000 1,030,680
Bank of America Corp., Senior
Unsecured Notes
5.25% 02/01/07 4,090 4,413,545
3.88% 01/15/08 2,275 2,358,138
Bank of America Corp., Subordinated
Notes
7.40% 01/15/11 4,785 5,743,569
Barclays Bank PLC, Capital
Securities
8.55%(f)(g) 09/29/49 7,655 9,618,446
Depfa ACS Bank, Senior Notes
3.62% 10/29/08 15,300 15,674,850
HBOs Treasury Services PLC,
Unsecured Notes
3.12%(g) 01/12/07 2,400 2,449,925
HSBC Bank USA, Subordinated
Notes
4.62% 04/01/14 9,990 9,939,451
J.P. Morgan Chase & Co., Senior
Unsecured Notes
5.35% 03/01/07 4,842 5,244,816
5.25% 05/30/07 450 485,938
4.00% 02/01/08 1,915 1,989,809
3.62% 05/01/08 7,260 7,430,937
3.50% 03/15/09 7,085 7,130,677
J.P. Morgan Chase & Co.,
Subordinated Notes
6.75% 02/01/11 1,860 2,149,583
Royal Bank of Scotland Group PLC,
Capital Trust
6.80% 12/31/49 3,000 3,151,272
U.S. Bank NA, Senior Bank Notes
2.87% 02/01/07 4,500 4,541,220
2.40% 03/12/07 6,500 6,489,665
U.S. Bancorp, Senior Unsecured
Notes
3.95% 08/23/07 1,100 1,146,090
Wachovia Corp., Senior Notes
3.50% 08/15/08 1,945 1,983,317
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS (Continued)
Banks (Continued)
Wachovia Corp., Unsecured Notes
3.62% 02/17/09 $ 3,420 $ 3,476,430
Wells Fargo & Co., Subordinated
Notes
7.80%(f) 06/15/10 3,625 3,876,383
Wells Fargo & Co., Unsecured Notes
3.50%(h) 04/04/08 330 338,139
3.12% 04/01/09 7,300 7,264,449
Westpac Capital Trust III,
Subordinated Notes
5.82%(g) 12/29/49 1,395 1,488,060
------------
109,415,389
------------
Beverages & Bottling - 0.0%
Cadbury Schweppes PLC,
Unsecured Notes
5.12%(g) 10/01/13 1,265 1,308,845
------------
Chemicals - 0.2%
Dow Chemical Co., Debentures
7.38% 11/01/29 3,970 4,628,226
------------
Energy & Utilities - 0.5%
Dominion Resources, Inc.,
Debentures
6.80% 12/15/27 3,600 4,021,650
FirstEnergy Corp., Senior Unsecured
Notes
7.38% 11/15/31 1,945 2,157,161
Florida Power Corp., First Mortgage
Bonds
6.65% 07/15/11 3,250 3,760,962
Ohio Edison Co., Senior Unsecured
Notes
5.45% 05/01/15 225 229,327
Ontario Electricity Financial Corp.,
Senior Notes
6.10% 01/30/08 2,000 2,245,580
Southern California Edison Co.,
Unsecured Notes
5.75% 04/01/35 1,875 1,851,411
------------
14,266,091
------------
Entertainment & Leisure - 0.6%
Time Warner Cos., Inc., Senior
Debentures
7.57% 02/01/24 5,730 6,598,559
6.62% 05/15/29 820 856,823
7.62% 04/15/31 4,632 5,419,116
7.70% 05/01/32 2,290 2,717,222
Time Warner Cos., Inc., Senior
Unsecured Notes
6.15% 05/01/07 1,020 1,117,614
------------
16,709,334
------------
Finance - 9.1%
American General Institutional
Capital, Capital Securities
7.57%(c)(g) 12/01/45 2,450 3,064,460
Anadarko Finance Co., Senior
Unsecured Notes
7.50% 05/01/31 1,920 2,335,701
ANZ Capital Trust I, Unsecured
Notes
4.48%(g) 12/31/49 3,395 3,466,911
5.36%(g) 12/31/49 2,470 2,540,148
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS (Continued)
Finance (Continued)
ASIF Global Finance, Unsecured
Notes
3.85%(g) 11/26/07 $ 3,125 $ 3,232,406
The Bear Stearns Cos., Inc., Senior
Notes
7.00% 03/01/07 1,428 1,605,787
CA Preferred Fund Trust, Notes
7.00% 12/31/49 5,000 5,280,000
Citigroup Global Markets Holdings,
Inc., Senior Unsecured Notes
6.50% 02/15/08 2,880 3,251,390
Citigroup, Inc., Senior Unsecured
Notes
5.75% 05/10/06 6,715 7,237,534
5.50% 08/09/06 2,500 2,693,465
5.00% 03/06/07 4,165 4,469,299
3.50% 02/01/08 11,290 11,535,219
Citigroup, Inc., Subordinated Notes
7.75% 06/15/06 675 756,644
7.25% 10/01/10 1,335 1,589,934
6.00% 10/31/33 9,760 10,222,429
Citigroup, Inc., Unsecured Notes
3.62%(h) 02/09/09 1,300 1,321,736
Conoco Global Funding Co., Senior
Unsecured Notes
6.35% 10/15/11 900 1,027,593
Credit Suisse First Boston USA, Inc.,
Senior Unsecured Notes
3.88% 01/15/09 3,450 3,530,713
6.12% 11/15/11 1,535 1,714,595
Devon Financing Corp., Senior
Unsecured Notes
6.88%(h) 09/30/11 4,300 4,975,655
Diageo Capital PLC, Unsecured
Notes
3.50% 11/19/07 4,345 4,467,038
Diageo Finance BV, Unsecured
Notes
3.88% 04/01/11 600 594,990
EOP Operating LP, Unsecured Notes
4.75% 03/15/14 6,745 6,640,544
General Electric Capital Corp., Senior
Unsecured Notes
5.35% 03/30/06 2,620 2,796,850
6.12% 02/22/11 2,400 2,708,232
5.88% 02/15/12 9,960 11,052,951
6.00% 06/15/12 5,540 6,188,900
6.75% 03/15/32 675 780,003
General Electric Capital Corp.,
Unsecured Notes
2.80% 01/15/07 16,245 16,293,735
General Motors Acceptance Corp.,
Debentures
6.51% 12/01/12 1,630 956,914
General Motors Acceptance Corp.,
Senior Unsecured Notes
7.25% 03/02/11 775 860,079
6.88% 09/15/11 7,245 7,856,406
8.00%(h) 11/01/31 1,430 1,583,267
Glaxosmithline Capital, Inc.,
Unsecured Notes
4.38% 04/15/14 2,600 2,588,896
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS (Continued)
Finance (Continued)
Goldman Sachs Capital I, Capital
Securities
6.34% 02/15/34 $ 5,790 $ 5,881,308
The Goldman Sachs Group, Inc.,
Senior Notes
6.12% 02/15/33 1,660 1,711,621
The Goldman Sachs Group, Inc.,
Senior Unsecured Notes
7.35% 10/01/09 1,320 1,563,023
6.60% 01/15/12 2,020 2,315,043
The Goldman Sachs Group, Inc.,
Unsecured Notes
3.88% 01/15/09 1,585 1,619,648
Household Finance Corp., Notes
6.38% 11/27/12 1,390 1,570,742
Household Finance Corp., Senior
Notes
5.88% 02/01/09 2,350 2,604,284
Household Finance Corp., Senior
Unsecured Notes
7.88% 03/01/07 2,200 2,522,916
6.75% 05/15/11 650 750,791
6.38% 10/15/11 7,965 9,031,187
Household Finance Corp., Unsecured
Notes
4.12% 12/15/08 2,900 2,995,323
Lehman Brothers Holdings, Inc.,
Senior Unsecured Notes
6.25%(h) 05/15/06 4,385 4,770,968
7.00% 02/01/08 175 200,615
Lehman Brothers Holdings, Inc.,
Unsecured Notes
3.60%(h) 03/13/09 3,000 3,029,010
Morgan Stanley, Senior Unsecured
Notes
5.80% 04/01/07 2,225 2,430,590
3.88% 01/15/09 6,755 6,890,708
6.75% 04/15/11 1,970 2,275,569
Morgan Stanley, Subordinated Notes
4.75% 04/01/14 12,375 12,153,825
Protective Life Secured Trust,
Secured Notes
3.70% 11/24/08 3,000 3,056,970
Qwest Capital Funding, Inc., Senior
Notes
6.38% 07/15/08 3,350 2,981,500
Rabobank Capital Funding Trust II,
Capital Securities
5.26%(g) 12/29/49 1,300 1,345,906
SLM Corp., Unsecured Notes
5.00% 10/01/13 3,875 3,975,518
SP Powerassets Ltd., Unsecured
Notes
5.00%(g) 10/22/13 2,010 2,076,451
Sun Life of Canada Capital Trust,
Capital Securities
8.53%(g) 05/29/49 2,935 3,511,581
Swedbank, Capital Securities
7.50%(f) 09/29/49 2,800 3,359,720
9.00%(g) 12/29/49 7,500 9,436,500
PAR
MATURITY (000) VALUE
---------- ---------- --------------
CORPORATE BONDS (Continued)
Finance (Continued)
Swedish Export Credit Corp.,
Unsecured Notes
2.88% 01/26/07 $ 2,700 $ 2,747,304
UBS Preferred Funding Trust I,
Capital Securities
8.62%(f) 10/29/49 2,865 3,615,037
Wells Fargo Financial, Inc., Senior
Unsecured Notes
5.88% 08/15/08 2,010 2,239,492
------------
243,883,574
------------
Food & Agriculture - 0.7%
General Mills, Inc., Senior Unsecured
Notes
5.12% 02/15/07 3,125 3,337,875
Kellogg Co., Senior Unsecured Notes
6.60% 04/01/11 1,235 1,429,058
Kraft Foods, Inc., Senior Unsecured
Notes
5.25% 06/01/07 1,975 2,124,804
5.62% 11/01/11 8,135 8,821,391
6.25% 06/01/12 2,355 2,640,402
------------
18,353,530
------------
Industrial - 0.0%
Osprey Trust / Osprey I, Inc.
7.63%(f)(g)(i)(j) 01/15/49 2,375 831,250
------------
Insurance - 0.2%
American General Corp., Capital
Securities
8.50% 07/01/30 2,325 3,154,890
Fund American Cos., Inc., Senior
Notes
5.88% 05/15/13 420 441,120
Pacific Life Corp., Senior Notes
6.60%(g) 09/15/33 1,000 1,102,050
------------
4,698,060
------------
Manufacturing - 0.1%
General Electric Co., Senior Notes
5.00% 02/01/13 3,400 3,550,518
------------
Metal & Mining - 0.2%
Alcan, Inc., Unsecured Notes
6.12% 12/15/33 1,675 1,769,319
------------
Motor Vehicles - 0.5%
DaimlerChrysler AG, Senior
Debentures
7.45% 03/01/27 3,000 3,291,237
DaimlerChrysler North America
Holding Corp., Notes
4.75% 01/15/08 4,380 4,563,303
DaimlerChrysler North America
Holding Corp., Unsecured Notes
4.05% 06/04/08 2,955 2,977,528
6.50% 11/15/13 2,350 2,541,654
------------
13,373,722
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Oil & Gas - 1.1%
Anadarko Petroleum Corp., Senior
Unsecured Notes
5.38% 03/01/07 $ 3,515 $ 3,786,569
Atlantic Richfield Co., Debentures
9.12%(c) 03/01/11 4,960 6,414,768
Conoco, Inc., Senior Unsecured
Notes
5.90% 04/15/04 3,250 3,254,232
6.95% 04/15/29 1,350 1,573,494
Consolidated Natural Gas Co.,
Senior Unsecured Notes
5.38% 11/01/06 2,300 2,466,934
Devon Energy Corp., Senior
Debentures
7.95% 04/15/32 1,670 2,069,234
Occidental Petroleum Corp., Senior
Unsecured Notes
5.88% 01/15/07 2,750 3,003,165
Phillips Petroleum Co., Senior
Unsecured Notes
8.50% 05/25/05 4,675 5,042,628
Suncor Energy, Inc., Bonds
5.95% 12/01/34 1,000 1,057,380
-----------
28,668,404
-----------
Pharmaceuticals - 0.1%
Bristol-Myers Squibb Co., Senior
Debentures
6.88% 08/01/47 1,634 1,905,857
Wyeth, Unsecured Notes
6.50% 02/01/34 1,800 1,906,254
-----------
3,812,111
-----------
Publishing & Printing - 0.1%
News America, Inc., Debentures
8.88% 04/26/23 300 393,991
News America, Inc., Senior
Debentures
7.75% 01/20/24 1,220 1,443,123
-----------
1,837,114
-----------
Retail Merchandising - 0.1%
Wal-Mart Stores, Inc., Unsecured
Notes
4.12% 02/15/11 2,705 2,746,625
-----------
Telecommunications - 2.1%
AT&T Broadband Corp., Unsecured
Notes
8.38% 03/15/13 345 428,446
Comcast Cable Communications
Corp., Senior Notes
8.38% 11/01/05 160 175,496
Comcast Cable Communications
Corp., Senior Unsecured Notes
6.38% 01/30/06 95 101,765
5.50% 03/15/11 510 540,467
Continental Cablevision, Inc., Senior
Notes
8.30%(c) 05/15/06 5,655 6,302,334
Cox Enterprises, Inc., Unsecured
Notes
4.38%(g) 05/01/08 830 856,367
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Telecommunications (Continued)
France Telecom, Senior Unsecured
Notes
9.50%(f) 03/01/31 $ 700 $ 946,189
New England Telephone & Telegraph
Co., Debentures
7.88% 11/15/29 2,650 3,252,846
SBC Communications, Inc., Senior
Unsecured Notes
5.88% 08/15/12 4,025 4,386,767
TCI Communications, Inc., Senior
Debentures
7.88% 02/15/26 8,320 9,853,235
TCI Communications, Inc., Senior
Notes
7.12% 02/15/28 750 832,988
Verizon Maryland, Inc., Senior
Debentures
6.12% 03/01/12 3,105 3,428,910
Verizon New Jersey, Inc., Senior
Debentures
5.88% 01/17/12 4,330 4,714,417
Verizon Pennsylvania, Inc.,
Debentures
5.65% 11/15/11 1,530 1,652,622
Vodafone Group PLC, Senior
Unsecured Notes
7.75% 02/15/10 13,660 16,456,748
WorldCom, Inc., Senior Unsecured
Notes
7.38%(g)(j)(k) 01/15/06 5,455 1,854,700
8.00%(h)(i)(j) 05/15/06 300 102,000
7.50%(h)(i)(j) 05/15/11 2,285 799,750
8.25%(h)(i)(j) 05/15/31 1,385 470,900
-----------
57,156,947
-----------
Transportation - 0.1%
Burlington Northern & Santa Fe
Railroad Co., Pass-Through
Certificates
8.25% 01/15/21 1,889 2,481,200
Burlington Northern Santa Fe Corp.,
Senior Unsecured Notes
6.12% 03/15/09 575 639,935
-----------
3,121,135
-----------
Yankee - 2.0%
British Telecommunications Group
PLC, Senior Unsecured Notes
8.88% 12/15/30 3,505 4,676,473
Canadian National Railway Co.,
Senior Notes
6.90% 07/15/28 3,780 4,468,640
Canadian Pacific Railroad Co.,
Senior Unsecured Notes
6.25% 10/15/11 1,900 2,150,568
Deutsche Telekom International
Finance BV, Senior Unsecured
Notes
8.50%(f) 06/15/10 1,255 1,539,069
8.75% 06/15/30 3,775 4,949,145
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE BOND TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR(n)
MATURITY (000) VALUE
---------- --------- ------------
CORPORATE BONDS (Continued)
Yankee (Continued)
Pemex Finance Ltd., Senior
Unsecured Notes
9.14% 08/15/04 $ 521 $ 531,420
9.03% 02/15/11 1,700 2,036,209
Province of Ontario, Senior
Unsecured Notes
3.50% 09/17/07 2,010 2,075,755
Province of Quebec, Debentures
7.00% 01/30/07 2,525 2,847,516
Province of Quebec, Unsecured
Notes
7.36% 03/06/26 225 284,200
7.38% 04/09/26 2,300 2,875,389
Tyco International Group SA, Senior
Notes
6.38% 06/15/05 5,300 5,571,254
Tyco International Group SA, Senior
Unsecured Notes
6.12%(h) 11/01/08 2,225 2,422,180
United Mexican States, Bonds
8.12% 12/30/19 2,975 3,532,812
United Mexican States, Senior
Unsecured Notes
8.38% 01/14/11 2,680 3,239,450
United Mexican States, Unsecured
Notes
4.62%(h) 10/08/08 1,950 2,018,250
10.38% 02/17/09 2,860 3,686,540
5.88%(h) 01/15/14 3,815 3,961,878
------------
52,866,748
------------
TOTAL CORPORATE BONDS
(Cost $576,740,955) 592,008,714
------------
FOREIGN BONDS - 8.9%
Bundesobligation (Germany)
3.50% 10/10/08 9,030 11,346,813
Bundesrepublic Deutschland
4.25% 01/04/14 23,900 30,115,398
French Treasury Notes
3.50% 01/12/08 75,675 95,327,958
Government of Canada
5.25% 06/01/13 39,920 32,479,708
Kingdom of Sweden
8.00% 08/15/07 82,425 12,655,412
5.00% 01/28/09 106,175 15,048,768
Spain Bonos y Obligation del Estado
5.15% 07/30/09 4,600 6,188,355
United Kingdom Treasury Notes
5.00% 03/07/08 19,050 35,501,097
------------
TOTAL FOREIGN BONDS
(Cost $228,648,893) 238,663,509
------------
TAXABLE MUNICIPAL BONDS - 0.3%
California Department of Water
Resources Revenue Bonds, Series
02, Class E
3.98% 05/01/05 3,350 3,425,208
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- ------------
TAXABLE MUNICIPAL BONDS (Continued)
New Jersey Economic Development
Authority State Pension Funding
Zero Coupon Revenue Bonds,
Series 97, Class B
6.94%(b) 02/15/05 $ 200 $ 197,274
7.51% 02/15/16 10,100 5,462,282
------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $7,721,924) 9,084,764
------------
SHORT TERM INVESTMENTS - 24.3%
Chase Manhattan Bank, Time
Deposit
1.06%(l) 04/01/04 716 716,333
Federal Home Loan Bank, Discount
Notes
0.97% 04/01/04 169,800 169,800,000
0.98% 04/07/04 150,000 149,975,625
0.98% 04/12/04 123,225 123,188,216
0.98% 04/13/04 34,000 33,988,892
0.99% 05/06/04 40,000 39,961,500
Federal National Mortgage
Association, Discount Notes
1.00% 04/15/04 60,000 59,976,667
HBOS Treasury Services PLC, Asset
Backed Commercial Paper
1.11%(l) 08/11/04 6,568 6,568,193
Natexis Banques International,
Floating Rate Notes
1.11%(l) 04/01/04 786 785,874
U.S. Treasury Bills
0.96% 04/08/04 50,000 49,990,715
Galileo Money Market Fund 6,419 6,419,339
Institutional Money Market Trust(l) 10,260 10,260,490
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $651,631,844) 651,631,844
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $3,098,514,250(a)) 117.3% 3,149,521,323
NUMBER OF
CONTRACTS
-------------
OPTIONS - (0.3)%
Call Options Written - 0.0%
May 30 Year Federal National
Mortgage Association 5.0%
mortgages, Strike Price 99.578125,
Expires 05/06/04 (2,040) (194,438)
Put Swaptions Written - (0.3)%
Morgan Stanley, Strike Price 3.60,
Expires 11/01/04 (31,110)(m) (382,457)
Union Bank of Switzerland, Strike
Price 4.90, Expires 12/05/05 (4,700)(m) (2,135,209)
Union Bank of Switzerland, Strike
Price 5.75, Expires 09/23/05 (20,700)(m) (2,140,380)
Union Bank of Switzerland, Strike
Price 5.85, Expires 12/05/05 (10,100)(m) (2,684,580)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE BOND TOTAL RETURN PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
----------------- ----------------
OPTIONS (Continued)
Put Swaptions Written (Continued)
Union Bank of Switzerland, Strike
Price 6.00, Expires 10/25/04 (6,570)(m) $ (534,798)
--------------
TOTAL OPTIONS
(Premiums received $16,402,893) (8,071,862)
--------------
LIABILITIES IN EXCESS OF OTHER
ASSETS
(Including $473,766,107 of
investment purchases payable) (17.3)% (463,765,800)
------ --------------
NET ASSETS (Applicable to
137,253,321 BlackRock shares,
90,569,802 Institutional shares,
14,993,249 Service shares,
14,127,266 Investor A shares,
6,523,554 Investor B shares, and
9,726,065 Investor C shares
outstanding) 100.0% $2,677,683,661
====== ==============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
BLACKROCK SHARE
($1,346,602,193/137,253,321) $ 9.81
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($886,749,628/90,569,802) $ 9.79
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($146,756,370/14,993,249) $ 9.79
======
NET ASSET VALUE AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($138,349,909/14,127,266) $ 9.79
======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($9.79/0.960) $10.20
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($63,892,782/6,523,554) $ 9.79
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR C SHARE
($95,332,779/9,726,065) $ 9.80
======
- -------------------
(a) Cost for Federal income tax purposes is $3,100,630,460. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 61,232,215
Gross unrealized depreciation (12,341,352)
--------------
$ 48,890,863
==============
(b) Rates shown are the effective yields as of March 31, 2004.
(c) Securities, or a portion thereof, pledged as collateral with a value of
$12,746,148 on 595 long U.S. Treasury Bond futures contracts and 5,898
short U.S. Treasury Note futures contracts expiring June 2004. The
value of such contracts on March 31, 2004 was $740,972,031, with an
unrealized loss of $12,221,331.
(d) Securities, or a portion thereof, with a market value of $12,431,205
have been pledged as collateral for swap and swaption contracts.
(e) Securities, or a portion thereof, subject to financing transactions.
(f) Rates shown are the rates as of March 31, 2004.
(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,
2004, the fund held 1.8% of its net assets, with a current market value
of $48,184,006, in securities restricted as to resale.
(h) Total or partial securities on loan.
(i) Non-income producing security.
(j) Security in default.
(k) The rate shown is the effective yield on the zero coupon bonds.
(l) Securities purchased with the cash proceeds from securities loaned.
(m) Each swaption contract is equivalent to $10,000 in notional amount.
(n) In local currency.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE PLUS TOTAL RETURN PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 25.5%
Federal Home Loan Mortgage Corp.,
Unsecured Notes
3.50% 04/01/08 $ 800 $ 808,060
3.88% 11/08-01/09 7,500 7,627,440
4.38% 02/04/10 1,130 1,145,783
6.88% 09/15/10 1,855 2,203,495
4.75% 12/08/10 3,690 3,794,763
Federal National Mortgage
Association, Unsecured Notes
1.75% 06/16/06 185 184,005
7.12% 03/07-06/10 3,240 3,863,619
5.25% 04/15/07 2,400 2,607,523
3.25% 01/15/08 1,325 1,352,559
5.75% 02/15/08 1,055 1,172,689
6.00% 05/08-05/11 3,635 4,107,104
3.75% 09/15/08 850 863,741
5.50% 07/18/12 1,000 1,041,065
4.75% 02/21/13 1,430 1,447,709
Resolution Funding Corp. Strip
Bonds
6.29%(b) 07/15/18 100 49,218
6.30%(b) 10/15/18 100 48,428
Small Business Administration
Participation Certificates, Series
02-P10B, Class 1
5.20% 08/01/12 405 421,387
Small Business Administration
Participation Certificates, Series
04-P10A, Class 1
4.50% 02/01/14 1,400 1,412,250
U.S. Treasury Bonds
10.38%(c) 11/15/12 295 377,104
8.12%(d) 08/15/19 9,515 13,348,137
6.25%(d) 08/15/23 4,620 5,493,286
6.00% 02/15/26 3,390 3,930,281
6.75% 08/15/26 3,185 4,027,034
5.38% 02/15/31 5,085 5,542,650
U.S. Treasury Notes
2.25% 02/15/07 2,915 2,939,824
3.25% 08/15/07 245 253,680
2.62% 03/15/09 3,045 3,023,113
5.00% 08/15/11 430 473,823
4.88% 02/15/12 3,430 3,744,195
4.00% 11/12-02/14 2,125 2,176,036
-----------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $78,079,545) 79,480,001
-----------
MORTGAGE PASS-THROUGHS - 23.4%
Federal Home Loan Mortgage Corp.
6.00% 05/13-02/33 189 198,090
Federal Home Loan Mortgage Corp.
Gold
6.00% 05/17-04/34 3,853 4,020,187
5.50% 08/17-09/33 1,848 1,911,009
4.00% 05/01/18 574 570,749
6.50% 09/28-04/34 3,080 3,236,612
5.00% 09/33-04/34 4,492 4,513,444
Federal National Mortgage
Association
6.00% 07/12-04/34 6,254 6,557,419
5.50% 09/12-04/34 17,503 17,990,296
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MORTGAGE PASS-THROUGHS (Continued)
Federal National Mortgage
Association
6.50% 03/16-04/34 $ 2,237 $ 2,357,806
5.00% 09/17-04/34 19,020 19,339,647
4.00% 09/01/18 97 96,341
4.50% 04/20/19 3,200 3,239,002
7.00% 07/29-10/32 1,385 1,470,233
Government National Mortgage
Association
6.00% 11/28-04/34 3,953 4,128,236
7.00% 08/30-09/31 698 743,754
6.50% 04/31-09/32 1,727 1,823,372
5.50% 07/33-08/33 765 787,596
-----------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $72,581,224)
72,983,793
-----------
COMMERCIAL MORTGAGE BACKED SECURITIES - 4.2%
Chase Commercial Mortgage
Securities Corp., Series 99-2,
Class A2
7.20% 01/15/32 225 265,210
Chase Commercial Mortgage
Securities Corp., Series 00-1,
Class A2
7.76% 04/15/32 565 668,263
Commercial Mortgage Pass-Through
Certificates, Series 04-LB2A, Class
A4
4.72% 03/10/39 1,510 1,534,066
Countrywide Alternative Loan Trust,
Series 04-2CB, Class 4A1
5.00% 02/15/19 1,969 1,994,732
Credit Suisse First Boston Mortgage
Securities Corp., Series 01-CK6,
Class A3
6.39% 10/15/11 325 371,831
Goldman Sachs Mortgage Securities
Corp. II, Series 03-C1, Class X2
(IO)
3.44%(b) 01/10/40 24,047 965,525
IMPAC Secured Assets Corp., Series
03-2, Class A2
6.00% 08/25/33 447 460,361
J.P. Morgan Chase Commercial
Mortgage Securities Corp., Series
01-CIB2, Class A3
6.43% 04/15/35 820 935,563
J.P. Morgan Chase Commercial
Mortgage Securities Corp., Series
01-CIBC, Class A3
6.26% 03/15/33 1,150 1,300,911
LB Commercial Conduit Mortgage
Trust, Series 98-C4, Class A1B
6.21% 10/15/35 900 1,007,872
LB-UBS Commercial Mortgage Trust,
Series 02-C7, Class A2
3.90% 12/15/26 510 527,985
LB-UBS Commercial Mortgage Trust,
Series 03-C8, Class A4
5.12% 11/15/32 1,835 1,939,196
Morgan Stanley Capital Investments,
Series 98-HF2, Class A2
6.48% 11/15/30 365 412,058
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Morgan Stanley Capital Investments,
Series 99-FNV1, Class A2
6.53% 03/15/31 $ 500 $ 566,964
Washington Mutual Mortgage
Securities Corp., Series 02-MS12,
Class A
6.50% 05/25/32 67 68,455
-----------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $12,732,490) 13,018,992
-----------
ASSET BACKED SECURITIES - 4.6%
Asset Securitization Corp., Series
97-D5, Class A1C
6.75% 02/14/41 945 1,063,182
Citibank Credit Card Issuance Trust,
Series 03-A3, Class A3
3.10% 03/10/10 1,125 1,136,249
Citibank Credit Card Issuance Trust,
Series 03-A6, Class A6
2.90% 05/17/10 1,700 1,699,735
Citibank Credit Card Issuance Trust,
Series 04-1, Class A1
2.53% 01/20/09 3,150 3,170,948
MBNA Credit Card Master Note
Trust, Series 03, Class A6
2.75% 10/15/10 1,500 1,492,614
MBNA Credit Card Master Note
Trust, Series 03, Class A7
2.65% 11/15/10 3,250 3,217,090
Sallie Mae Student Loan Trust,
Series 02-3, Class A2
1.16%(e) 10/26/09 158 158,082
Sallie Mae Student Loan Trust,
Series 03-3, Class A2
1.13%(e) 06/15/10 622 621,836
Sears Credit Account Master Trust,
Series 02-5, Class A
1.47%(e) 11/05/05 625 628,124
Structured Asset Securities Corp.,
Series 03-AL2, Class A
3.36% 01/25/31 1,076 1,040,749
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $14,106,651) 14,228,609
-----------
CORPORATE BONDS - 21.2%
Aerospace - 0.2%
BE Aerospace, Inc., Senior Notes
8.50% 10/01/10 110 117,700
Lockheed Martin Corp., Senior
Debentures
8.50% 12/01/29 345 462,591
Lockheed Martin Corp., Senior
Unsecured Notes
8.20% 12/01/09 110 135,939
Northrop Grumman Corp.,
Debentures
7.88%(f) 03/01/26 100 124,566
Northrop Grumman Corp., Senior
Debentures
7.75% 02/15/31 40 49,703
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Aerospace (Continued)
Raytheon Co., Unsecured Notes
4.85% 01/15/11 $ 185 $ 191,016
-----------
1,081,515
-----------
Banks - 2.9%
Bank of America Corp., Senior
Unsecured Notes
5.25% 02/01/07 400 431,641
3.88% 01/15/08 180 186,578
Bank of America Corp., Subordinated
Notes
7.80% 02/15/10 60 72,850
7.40% 01/15/11 860 1,032,282
Barclays Bank PLC, Capital
Securities
8.55%(e)(f) 09/29/49 615 772,743
Depfa ACS Bank, Senior Notes
3.62% 10/29/08 850 870,825
HSBC Bank USA, Subordinated
Notes
4.62% 04/01/14 655 651,686
ING Bank NV, Subordinated Notes
5.12%(f) 05/01/15 225 230,876
J.P. Morgan Chase & Co., Senior
Unsecured Notes
5.25% 05/30/07 50 53,993
3.62% 05/01/08 440 450,360
J.P. Morgan Chase & Co.,
Subordinated Notes
7.12% 06/15/09 100 117,148
6.75% 02/01/11 125 144,460
6.62% 03/15/12 400 460,086
Sovereign Bancorp, Inc., Senior
Unsecured Notes
10.50% 11/15/06 50 59,500
U.S. Bank NA, Senior Bank Notes
2.87% 02/01/07 650 655,954
2.40% 03/12/07 715 713,863
U.S. Bancorp, Senior Unsecured
Notes
3.95% 08/23/07 65 67,724
Wachovia Corp., Unsecured Notes
3.62% 02/17/09 630 640,395
Wells Fargo & Co., Subordinated
Notes
7.80%(e) 06/15/10 325 347,538
Wells Fargo & Co., Unsecured Notes
3.12% 04/01/09 800 796,104
Westpac Capital Trust III,
Subordinated Notes
5.82%(e)(f) 12/29/49 200 213,342
-----------
8,969,948
-----------
Beverages & Bottling - 0.0%
Cadbury Schweppes PLC,
Unsecured Notes
5.12%(f) 10/01/13 120 124,159
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
39
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- ------------
CORPORATE BONDS (Continued)
Broadcasting - 0.1%
Charter Communications Holdings
LLC, Senior Unsecured Notes
10.75% 10/01/09 $ 120 $ 105,000
News America, Inc., Senior
Debentures
7.62% 11/30/28 100 118,871
----------
223,871
----------
Chemicals - 0.3%
Dow Chemical Co., Debentures
7.38% 03/23-11/29 400 460,630
Dow Chemical Co., Notes
5.75% 11/15/09 350 384,167
----------
844,797
----------
Computer & Office Equipment - 0.1%
Avery Dennison Corp., Senior
Unsecured Notes
4.88% 01/15/13 200 207,010
----------
Construction - 0.0%
D.R. Horton, Inc., Senior Unsecured
Notes
10.50% 04/01/05 15 16,050
8.50% 04/15/12 50 58,250
----------
74,300
----------
Containers - 0.0%
Crown Holdings, Inc., Senior Secured
Notes
9.50% 03/01/11 55 61,875
----------
Energy & Utilities - 1.0%
AES Corp., Senior Secured Notes
8.75% 05/15/13 130 142,675
Calpine Corp., Senior Secured Notes
8.50%(f) 07/15/10 125 115,000
Dominion Resources, Inc., Senior
Unsecured Notes
4.12% 02/15/08 175 181,097
5.12% 12/15/09 150 160,442
Exelon Generation Corp., Senior
Unsecured Notes
6.75% 05/01/11 100 114,348
FirstEnergy Corp., Senior Unsecured
Notes
7.38% 11/15/31 170 188,544
Midwest Generation LLC,
Pass-Through Certificates
8.30% 07/02/09 110 113,300
Midwest Generation LLC,
Pass-Through Certificates, Series
B
8.56% 01/02/16 130 135,200
Nalco Co., Senior Notes
7.75%(f) 11/15/11 125 130,000
National Waterworks, Inc., Senior
Subordinated Notes, Series B
10.50% 12/01/12 55 62,150
NRG Energy, Inc., Second Mortgage
Bonds
8.00%(f) 12/15/13 155 160,038
Ohio Edison Co., Senior Unsecured
Notes
5.45% 05/01/15 475 484,133
PAR
MATURITY (000) VALUE
-------------- ---------- ------------
CORPORATE BONDS (Continued)
Energy & Utilities (Continued)
Ontario Electricity Financial Corp.,
Senior Notes
6.10% 01/30/08 $ 295 $ 331,223
Pioneer Natural Resources Co.,
Senior Notes
7.20% 01/15/28 140 155,823
Southern California Edison Co.,
Unsecured Notes
5.75% 04/01/35 200 197,484
XTO Energy, Inc., Senior Unsecured
Notes
4.90% 02/01/14 500 501,892
----------
3,173,349
----------
Entertainment & Leisure - 0.8%
Time Warner Cos., Inc., Senior
Debentures
7.57% 02/01/24 180 207,285
6.62% 05/15/29 225 235,104
7.62% 04/15/31 780 912,545
7.70% 05/01/32 295 350,035
Time Warner Cos., Inc., Senior
Unsecured Notes
6.12% 04/15/06 25 26,934
6.15% 05/01/07 570 624,549
----------
2,356,452
----------
Finance - 8.7%
AID-Israel, Unsecured Notes
5.50% 09/18/23 850 900,541
Anadarko Finance Co., Senior
Unsecured Notes
7.50% 05/01/31 250 304,128
ANZ Capital Trust I, Unsecured
Notes
4.48%(f) 12/31/49 320 326,778
5.36%(f) 12/31/49 240 246,816
ASIF Global Finance, Unsecured
Notes
3.85%(c)(f) 11/26/07 1,310 1,355,025
3.90%(f) 10/22/08 865 892,317
The Bear Stearns Cos., Inc., Senior
Unsecured Notes
5.70% 01/15/07 170 184,734
CA Preferred Fund Trust, Notes
7.00% 12/31/49 200 211,200
Citigroup, Inc., Senior Unsecured
Notes
5.75% 05/10/06 530 571,242
3.50% 02/01/08 200 204,344
Citigroup, Inc., Subordinated Notes
7.25% 10/01/10 815 970,634
5.88% 02/22/33 775 796,553
6.00% 10/31/33 570 597,007
Conoco Global Funding Co., Senior
Unsecured Notes
6.35% 10/15/11 650 742,150
Credit Suisse First Boston USA, Inc.,
Senior Unsecured Notes
3.88% 01/15/09 70 71,638
6.12% 11/15/11 270 301,590
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Finance (Continued)
Crown European Holdings SA,
Senior Secured Notes
10.88% 03/01/13 $ 125 $ 145,625
Devon Financing Corp., Senior
Unsecured Notes
7.88% 09/30/31 70 86,135
Diageo Capital PLC, Notes
3.38% 03/20/08 150 152,264
Diageo Capital PLC, Unsecured
Notes
3.50% 11/19/07 175 179,915
Dominion Resources Capital Trust III,
Capital Securities
8.40% 01/15/31 220 276,761
EOP Operating LP, Unsecured Notes
4.75% 03/15/14 445 438,109
General Electric Capital Corp., Senior
Unsecured Notes
6.50% 12/10/07 200 226,340
5.88% 02/15/12 1,485 1,647,955
6.00% 06/15/12 370 413,338
6.75% 03/15/32 100 115,556
General Electric Capital Corp.,
Unsecured Notes
2.80% 01/15/07 2,030 2,036,090
General Motors Acceptance Corp.,
Senior Unsecured Notes
7.25% 03/02/11 385 427,265
6.88% 09/15/11 435 471,710
8.00% 11/01/31 295 326,618
Glaxosmithline Capital, Inc.,
Unsecured Notes
4.38% 04/15/14 305 303,697
Goldman Sachs Capital I, Capital
Securities
6.34% 02/15/34 595 604,383
The Goldman Sachs Group, Inc.,
Senior Notes
6.12% 02/15/33 90 92,799
The Goldman Sachs Group, Inc.,
Senior Unsecured Notes
7.35% 10/01/09 20 23,682
6.60% 01/15/12 100 114,606
The Goldman Sachs Group, Inc.,
Unsecured Notes
5.15% 01/15/14 195 199,824
Household Finance Corp., Notes
6.38% 11/27/12 165 186,455
Household Finance Corp., Senior
Unsecured Notes
7.20% 07/15/06 50 55,512
8.00% 07/15/10 466 570,864
6.75% 05/15/11 225 259,889
7.00% 05/15/12 800 938,790
7.62% 05/17/32 75 94,637
Household Finance Corp., Unsecured
Notes
4.12% 12/15/08 750 774,652
Lehman Brothers Holdings, Inc.,
Senior Notes
6.62% 02/05/06 851 923,863
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Finance (Continued)
Morgan Stanley, Senior Unsecured
Notes
5.80% 04/01/07 $ 365 $ 398,726
3.88% 01/15/09 1,865 1,902,468
6.75% 04/15/11 65 75,082
Morgan Stanley, Subordinated Notes
4.75% 04/01/14 925 908,468
Orion Power Holdings, Inc., Senior
Unsecured Notes
12.00% 05/01/10 95 118,038
Protective Life Secured Trust,
Secured Notes
3.70% 11/24/08 310 315,887
Qwest Capital Funding, Inc., Senior
Unsecured Notes
7.75% 08/15/06 65 65,325
7.00% 08/03/09 115 101,200
Rabobank Capital Funding Trust II,
Capital Securities
5.26%(f) 12/29/49 100 103,531
RC Trust I
7.00% 05/15/06 2,000 1,076,000
SLM Corp., Senior Unsecured Notes
5.62% 04/10/07 70 76,575
SLM Corp., Unsecured Notes
5.00% 10/01/13 420 430,895
Swedish Export Credit Corp.,
Unsecured Notes
2.88% 01/26/07 375 381,570
UBS Preferred Funding Trust I,
Capital Securities
8.62%(e) 10/29/49 40 50,472
Wells Fargo Financial, Inc., Senior
Unsecured Notes
5.88% 08/15/08 200 222,835
-----------
26,991,103
-----------
Food & Agriculture - 0.6%
General Mills, Inc., Senior Unsecured
Notes
5.12% 02/15/07 165 176,240
Kellogg Co., Senior Unsecured Notes
6.60% 04/01/11 210 242,998
Kraft Foods, Inc., Senior Unsecured
Notes
5.62% 11/01/11 550 596,406
6.25% 06/01/12 715 801,651
-----------
1,817,295
-----------
Insurance - 0.2%
American General Corp., Capital
Securities
8.50% 07/01/30 60 81,417
American General Corp., Senior
Unsecured Notes
7.50%(c) 08/11/10 150 181,302
Fund American Cos., Inc., Senior
Notes
5.88% 05/15/13 20 21,006
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
41
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- ------------
CORPORATE BONDS (Continued)
Insurance (Continued)
New York Life Insurance Co.,
Unsecured Notes
5.88%(f) 05/15/33 $ 100 $ 103,244
Pacific Life Corp., Senior Notes
6.60%(f) 09/15/33 95 104,695
----------
491,664
----------
Manufacturing - 0.2%
Briggs & Stratton Corp., Senior
Unsecured Notes
8.88% 03/15/11 65 79,625
Dresser, Inc., Senior Subordinated
Notes
9.38% 04/15/11 20 21,800
General Electric Co., Senior Notes
5.00% 02/01/13 510 532,578
----------
634,003
----------
Medical & Medical Services - 0.0%
HCA, Inc., Senior Unsecured Notes
6.95% 05/01/12 60 65,443
HCA, Inc., Unsecured Notes
7.50% 11/06/33 75 79,364
----------
144,807
----------
Metal & Mining - 0.1%
Alcan, Inc., Unsecured Notes
6.12% 12/15/33 200 211,262
----------
Motor Vehicles - 0.5%
DaimlerChrysler AG, Senior
Debentures
7.45% 03/01/27 215 235,872
DaimlerChrysler North America
Holding Corp., Notes
4.75% 01/15/08 145 151,068
DaimlerChrysler North America
Holding Corp., Unsecured Notes
4.05% 06/04/08 625 629,765
6.50% 11/15/13 550 594,855
----------
1,611,560
----------
Oil & Gas - 1.0%
Anadarko Petroleum Corp., Senior
Unsecured Notes
5.38% 03/01/07 60 64,636
Consolidated Natural Gas, Inc.,
Senior Notes
5.00% 03/01/14 225 231,030
Consolidated Natural Gas, Inc.,
Senior Unsecured Notes
6.25% 11/01/11 150 168,533
Devon Energy Corp., Senior
Debentures
7.95% 04/15/32 550 681,484
El Paso Natural Gas Co., Senior
Unsecured Notes
8.38% 06/15/32 130 131,950
El Paso Production Holding Co.,
Senior Notes
7.75% 06/01/13 115 106,950
PAR
MATURITY (000) VALUE
---------- ---------- ------------
CORPORATE BONDS (Continued)
Oil & Gas (Continued)
Encana Corp., Senior Unsecured
Notes
4.75% 10/15/13 $ 340 $ 346,824
Gulfterra Energy Partners LP, Senior
Notes
6.25% 06/01/10 155 168,561
Gulfterra Energy Partners LP, Senior
Subordinated Notes
10.62% 12/01/12 17 21,335
Hanover Equipment Trust, Senior
Secured Notes
8.75% 09/01/11 100 108,500
Kinder Morgan Energy Partners LP,
Senior Unsecured Notes
7.30% 08/15/33 100 115,407
Oao Gazprom, Unsecured Notes
9.62% 03/01/13 260 299,325
Occidental Petroleum Corp., Senior
Notes
8.45% 02/15/29 70 95,063
Phillips Petroleum Co., Senior
Debentures
7.00% 03/30/29 80 93,408
Suncor Energy, Inc., Bonds
5.95% 12/01/34 110 116,312
The Williams Cos., Inc., Senior
Unsecured Notes
7.12% 09/01/11 50 52,500
8.12% 03/15/12 90 101,588
7.62% 07/15/19 80 80,800
----------
2,984,206
----------
Paper & Forest Products - 0.0%
Georgia-Pacific Corp., Senior
Unsecured Notes
8.00%(f) 01/15/24 275 289,438
Weyerhaeuser Co., Debentures
6.95% 10/01/27 155 167,916
----------
457,354
----------
Pharmaceuticals - 0.2%
Bristol-Myers Squibb Co., Senior
Debentures
6.88% 08/01/47 185 215,780
Bristol-Myers Squibb Co., Senior
Unsecured Notes
5.75% 10/01/11 250 274,830
----------
490,610
----------
Publishing & Printing - 0.0%
News America, Inc., Debentures
8.88% 04/26/23 75 98,498
----------
Real Estate - 0.1%
Avalonbay Communities, Inc., Senior
Unsecured Notes
6.62% 09/15/11 180 204,918
----------
Retail Merchandising - 0.2%
Kroger Co., Senior Unsecured Notes
6.80% 04/01/11 250 286,889
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- -------- ------------
CORPORATE BONDS (Continued)
Retail Merchandising (Continued)
Proctor & Gamble Co., Senior
Unsecured Notes
4.30% 08/15/08 $ 220 $ 232,491
----------
519,380
----------
Telecommunications - 2.1%
AT&T Broadband Corp., Unsecured
Notes
8.38% 03/15/13 790 981,080
Comcast Cable Communications
Corp., Senior Unsecured Notes
6.88% 06/15/09 70 79,769
5.50% 03/15/11 155 164,260
7.05% 03/15/33 235 261,122
Continental Cablevision, Inc., Senior
Notes
8.30% 05/15/06 400 445,788
CSC Holdings, Inc., Senior
Debentures
7.88% 02/15/18 60 64,800
CSC Holdings, Inc., Senior
Unsecured Notes
6.75%(f) 04/15/12 145 145,000
France Telecom, Senior Unsecured
Notes
9.50% 03/01/31 75 101,377
L-3 Communications Corp., Senior
Subordinated Notes
6.12%(f) 01/15/14 100 102,750
New England Telephone & Telegraph
Co., Debentures
7.88% 11/15/29 175 214,811
New Jersey Bell Telephone,
Debentures
7.85% 11/15/29 20 24,421
Qwest Communications Intl., Inc.,
Senior Unsecured Notes
7.50%(f) 02/15/14 150 140,625
SBC Communications, Inc., Senior
Unsecured Notes
5.88% 08/15/12 475 517,693
TCI Communications, Inc., Senior
Debentures
7.88% 08/13-02/26 385 460,882
Verizon New Jersey, Inc., Senior
Debentures
5.88% 01/17/12 1,230 1,339,199
Verizon Pennsylvania, Inc.,
Debentures
5.65% 11/15/11 175 189,025
Vodafone Group PLC, Unsecured
Notes
5.00% 12/16/13 1,040 1,068,164
WorldCom, Inc., Senior Unsecured
Notes
8.00%(g)(h) 05/15/06 20 6,800
8.25%(g)(h) 05/10-05/31 325 110,500
7.50%(g)(h) 05/15/11 75 26,250
----------
6,444,316
----------
Transportation - 0.1%
Burlington Northern Santa Fe Corp.,
Unsecured Notes
6.38% 12/15/05 140 150,393
PAR (j)
MATURITY (000) VALUE
-------------- -------- ------------
CORPORATE BONDS (Continued)
Transportation (Continued)
Omi Corp., Senior Notes
7.62% 12/01/13 $ 85 $ 88,611
Overseas Shipholding Group, Inc.,
Senior Unsecured Notes
7.50% 02/15/24 185 186,937
-----------
425,941
-----------
Waste Management - 0.1%
Allied Waste North America, Inc.,
Senior Notes
8.88% 04/01/08 150 168,375
7.88% 04/15/13 90 98,325
Allied Waste North America, Inc.,
Senior Unsecured Notes
9.25% 09/01/12 25 28,438
-----------
295,138
-----------
Yankee - 1.7%
British Telecommunications Group
PLC, Senior Unsecured Notes
8.88% 12/15/30 345 460,309
Canadian National Railway Co.,
Senior Notes
6.90% 07/15/28 185 218,702
Deutsche Telekom International
Finance BV, Senior Unsecured
Notes
8.25% 06/15/05 200 215,040
8.50%(e) 06/15/10 40 49,054
8.75% 06/15/30 460 603,075
Province of Quebec, Debentures
7.00% 01/30/07 400 451,092
Province of Quebec, Unsecured
Notes
7.36% 03/06/26 75 94,733
7.38% 04/09/26 230 287,539
Republic of Colombia, Senior
Unsecured Notes
9.75% 04/09/11 436 509,626
Tyco International Group SA, Senior
Unsecured Notes
6.12% 11/01/08 425 462,664
United Mexican States, Bonds
8.12% 12/30/19 460 546,250
United Mexican States, Senior
Unsecured Notes
8.38% 01/14/11 650 785,688
6.62% 03/03/15 140 152,530
8.00% 09/24/22 220 254,100
United Mexican States, Unsecured
Notes
4.62% 10/08/08 100 103,500
-----------
5,193,902
-----------
TOTAL CORPORATE BONDS
(Cost $64,586,670) 66,133,233
-----------
FOREIGN BONDS - 8.3%
Bundesobligation (Germany)
3.50% 10/10/08 3,530 4,435,687
Bundesrepublic Deutschland
4.25% 01/04/14 1,425 1,795,583
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
43
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE PLUS TOTAL RETURN PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR/SHARES (j)
MATURITY (000) VALUE
---------- --------------- --------------
FOREIGN BONDS (Continued)
French Treasury Notes
3.50% 01/12/08 7,720 $ 9,724,900
Government of Canada
5.25% 06/01/13 3,870 3,148,709
Kingdom of Sweden
8.00% 08/15/07 2,170 333,179
5.00% 01/28/09 6,195 878,051
Spain Bonos y Obligation del
Estado
5.15% 07/30/09 1,350 1,816,148
United Kingdom Treasury
Notes
5.00% 03/07/08 1,950 3,633,971
------------
TOTAL FOREIGN BONDS
(Cost $24,998,855) 25,766,228
------------
TAXABLE MUNICIPAL BONDS - 0.0%
California Department of
Water
Resources Revenue Bonds,
Series
02, Class E
3.98%
(Cost $149,993) 05/01/05 150 153,368
------------
SHORT TERM INVESTMENTS - 27.7%
Federal Home Loan Bank,
Discount
Notes
0.97% 04/01/04 20,000 19,999,999
0.98% 04/12/04 20,000 19,994,041
0.99% 05/06/04 25,000 24,975,938
U.S. Treasury Bills
0.96% 04/08/04 15,000 14,997,215
Galileo Money Market Fund 6,790 6,790,314
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $86,757,507) 86,757,507
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $353,992,935(a)) 114.5% 358,521,732
NUMBER OF
CONTRACTS
---------------
OPTIONS - (0.4)%
Call Options Written - 0.0%
May 30 Year Federal National
Mortgage Association 5.0%
mortgages, Strike Price 99.578125,
Expires 05/06/04 (210) (20,016)
Put Swaptions Written - (0.4)%
Citibank, Strike Price 3.40, Expires
03/15/05 (7,700)(i) (508,200)
Morgan Stanley, Strike Price 3.60,
Expires 11/01/04 (2,950)(i) (36,266)
Union Bank of Switzerland, Strike
Price 4.90, Expires 12/05/05 (500)(i) (227,150)
Union Bank of Switzerland, Strike
Price 5.75, Expires 09/23/05 (1,600)(i) (165,440)
NUMBER OF
CONTRACTS VALUE
--------------- --------------
OPTIONS (Continued)
Put Swaptions Written (Continued)
Union Bank of Switzerland, Strike
Price 5.85, Expires 12/05/05 (1,000)(i) $ (265,800)
Union Bank of Switzerland, Strike
Price 6.00, Expires 10/25/04 (620)(i) (50,468)
------------
TOTAL OPTIONS
(Premiums received $1,990,838) (1,273,340)
------------
LIABILITIES IN EXCESS OF OTHER
ASSETS
(Including $48,713,124 of investment
purchases payable) (14.5)% (45,323,123)
------ ------------
NET ASSETS (Applicable to
29,987,556 BlackRock shares, 11
Institutional shares, 11 Service
shares, 862 Investor A shares, 7,280
Investor B shares and 11 Investor C
shares outstanding) 100.0% $311,925,269
====== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
BLACKROCK SHARE
($311,840,257/29,987,556) $ 10.40
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($115/11) $ 10.38
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($115/11) $ 10.45
=======
NET ASSET VALUE AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($8,964/862) $ 10.40
=======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($10.40/0.960) $ 10.83
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($75,704/7,280) $ 10.40
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR C SHARE
($114/11) $ 10.38
=======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
CORE PLUS TOTAL RETURN PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
- -------------------
(a) Cost for Federal income tax purposes is $354,293,344.
The gross unrealized appreciation (depreciation) on a
tax basis is as follows:
Gross unrealized appreciation $4,963,162
Gross unrealized depreciation (734,774)
----------
$4,228,388
==========
(b) Rates shown are the effective yields as of March 31, 2004.
(c) Securities, or a portion thereof, pledged as collateral with a value of
$619,445 on 48 long U.S. Treasury Bond futures contracts and 504 short
U.S. Treasury Note futures contracts expiring June 2004. The value of such
contracts on March 31, 2004 was $63,012,875, with an unrealized loss of
$986,569.
(d) Securities, or a portion thereof, with a market value of $1,543,445 have
been pledged as collateral for swap and swaption contracts.
(e) Rates shown are the rates as of March 31, 2004.
(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, 2004,
the fund held 1.8% of its net assets, with a current market value of
$5,556,377, in securities restricted as to resale.
(g) Non-income producing security.
(h) Security in default.
(i) Each swaption contract is equivalent to $10,000 in notional amount.
(j) In local currency.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GOVERNMENT INCOME PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 9.0%
Federal Home Loan Mortgage Corp.,
Unsecured Notes
7.00% 03/15/10 $ 1,500 $ 1,784,990
Small Business Administration
Participation Certificates, Series
96-20J, Class 1
7.20% 10/01/16 218 241,668
Small Business Administration
Participation Certificates, Series
98-20J, Class 1
5.50% 10/01/18 170 181,249
Small Business Investment Cos.
Pass-Through, Series 03-10A,
Class 1
4.63% 03/10/13 1,325 1,340,614
U.S. Treasury Bonds
8.00%(b) 11/15/21 2,820 3,958,905
6.50% 11/15/26 735 904,222
6.12% 11/15/27 1,100 1,297,743
5.38% 02/15/31 4,000 4,360,000
U.S. Treasury Notes
3.25% 08/15/07 6,290 6,512,855
4.25% 11/15/13 6,400 6,620,250
------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $26,409,753) 27,202,496
------------
MORTGAGE PASS-THROUGHS - 45.5%
Federal Home Loan Mortgage Corp.
6.00% 12/01/12 127 134,210
5.50% 10/13-11/13 570 596,724
8.00% 01/25-11/26 287 313,296
7.50% 11/01/25 2 2,639
6.50% 08/32-10/32 659 692,200
Federal Home Loan Mortgage Corp.
Gold
6.00% 12/08-04/34 3,916 4,127,428
5.50% 05/14-03/34 28,447 29,183,748
6.50% 03/29-04/34 980 1,029,918
7.00% 09/31-04/32 392 415,521
5.00% 04/15/34 22,300 22,404,542
Federal National Mortgage
Association
6.50% 02/09-04/34 5,163 5,488,130
7.00% 08/09-12/11 64 68,547
6.00% 11/09-04/34 13,755 14,379,796
8.00% 11/13-08/14 30 30,622
5.50% (b) 12/13-04/34 27,309 28,134,245
4.50% 06/18-04/19 57 66,626
4.00% 08/18-03/19 5,000 4,969,512
5.00% 10/18-09/33 22,751 23,381,992
7.50% 06/24-04/26 98 104,956
Government National Mortgage
Association
8.00% 04/20/13 96 102,934
6.00% 01/14-06/14 415 440,663
5.50% 03/15/14 697 732,951
6.50% 11/23-04/34 40 48,345
7.00% 10/27-06/28 653 697,143
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
MORTGAGE PASS-THROUGHS (Continued)
Government National Mortgage
Association
7.50% 11/27-12/27 $ 67 $ 72,231
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $136,594,191) 137,618,919
------------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 0.1%
Federal National Mortgage
Association Strip Notes, Series
338, Class 2 (IO)
4.12% (c) 06/01/33 936 191,287
Salomon Brothers Mortgage
Securities VI, Series 87-1 (IO)
7.00% (c) 02/17/17 67 14,848
Salomon Brothers Mortgage
Securities VI, Series 87-1 (PO)
7.00% (c) 02/17/17 67 62,070
------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $328,834)
268,205
------------
COMMERCIAL MORTGAGE BACKED SECURITIES - 1.2%
Goldman Sachs Mortgage Securities
Corp., Series 98-1, Class A
8.00% 09/20/27 60 66,158
Goldman Sachs Mortgage Securities
Corp., Series 98-2, Class A
7.75% 05/19/27 65 70,058
GSR Mortgage Loan Trust, Series
03-13, Class 1A1
4.53%(d) 11/28/33 2,339 2,345,691
Residential Accredit Loans, Series
03-QS4, Class A (IO)
0.10%(c) 03/25/33 848 126,947
Washington Mutual Mortgage
Securities Corp., Series 02-S8,
Class 1A3
8.00% 01/25/33 645 654,610
------------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $3,253,446)
3,263,464
------------
PROJECT LOANS - 0.0%
Federal Housing Authority, Series 82
7.43%
(Cost $9,553) 09/01/22 9 9,968
------------
ASSET BACKED SECURITIES - 0.0%
The Money Store Small Business
Administration Loan Trust, Series
99-1, Class A
1.80%(d)
(Cost $131,688) 07/15/25 132 130,691
------------
SHORT TERM INVESTMENTS - 44.2%
Federal Home Loan Bank, Discount
Notes
0.97% 04/01/04 18,000 18,000,000
0.98% 04/12/04 25,000 24,992,552
0.99% 05/06/04 40,000 39,961,500
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
46
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GOVERNMENT INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- --------------
SHORT TERM INVESTMENTS (Continued)
Federal National Mortgage
Association, Discount Notes
1.00% 04/15/04 $15,000 $ 14,994,167
U.S. Treasury Bills
0.96% 04/08/04 30,000 29,994,429
Galileo Money Market Fund 5,719 5,718,827
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $133,661,475) 133,661,475
------------
TOTAL INVESTMENTS IN
SECURITIES - 100.0%
(Cost $300,388,940(a)) $302,155,218
============
NUMBER OF
CONTRACTS
-----------
CALL OPTIONS PURCHASED - 0.0%
June 10 year U.S. Treasury Notes
futures, Strike Price 117, Expires
06/30/04
(Cost $174,797) 318 198,750
----------
PUT SWAPTIONS WRITTEN - 0.0%
Morgan Stanley, Strike Price 3.60,
Expires 11/01/04 (2,230)(e) (27,415)
Union Bank of Switzerland, Strike
Price 6.00, Expires 10/25/04 (470)(e) (38,258)
----------
TOTAL PUT SWAPTIONS WRITTEN
(Premiums received $408,272) (65,673)
----------
- -------------------
(a) Cost for Federal income tax purposes is $300,392,896.
The gross unrealized appreciation (depreciation) on a
tax basis is as follows:
Gross unrealized appreciation $2,264,445
Gross unrealized depreciation (502,123)
----------
$1,762,322
==========
(b) Securities, or a portion thereof, pledged as collateral with a value of
$2,941,577 on 195 short U.S. Treasury Note futures contracts, 928 long
U.S. Treasury Note futures contracts, 49 short U.S. Treasury Bond futures
contracts, 39 short Interst Rate Swap futures contracts expiring June 2004
and 32 long Eurodollar futures contracts expiring December 2004. The value
of such contracts on March 31, 2004 was $147,124,338, with an unrealized
loss of $476,370.
(c) Rates shown are the effective yields as of March 31, 2004.
(d) Rates shown are the rates as of March 31, 2004.
(e) Each swaption contract is equivalent to $10,000 in notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
GOVERNMENT INCOME PORTFOLIO
MARCH 31, 2004(UNAUDITED)
ASSETS
Investments at value (Cost $300,388,940).............................. $ 302,155,218
Option purchased at value (Premiums paid $174,797).................... 198,750
Interest receivable .................................................. 893,151
Interest receivable on interest rate swaps ........................... 14,813
Investments sold receivable .......................................... 33,578,166
Capital shares sold receivable ....................................... 14,344,447
Prepaid expenses ..................................................... 33,600
Unrealized appreciation on interest rate swaps ....................... 129,597
Futures margin receivable ............................................ 443,565
--------------
TOTAL ASSETS ...................................................... 351,791,307
--------------
LIABILITIES
Investments purchased payable ........................................ 127,548,629
Capital shares redeemed payable ...................................... 7,533,299
Distributions payable ................................................ 360,023
Advisory fees payable ................................................ 33,098
Administrative fees payable .......................................... 38,275
Transfer agent fees payable .......................................... 12,098
Other accrued expenses payable ....................................... 152,652
Interest payable on interest rate swaps .............................. 156,267
Swaptions written, at fair value (Premiums received $408,272)......... 65,673
Futures margin payable ............................................... 42,078
Unrealized depreciation on interest rate swaps ....................... 161,297
--------------
TOTAL LIABILITIES ................................................. 136,103,389
--------------
NET ASSETS (Applicable to 872,897 BlackRock shares,
11,153,334 Investor A shares, 4,531,760 Investor B shares and
2,536,374 Investor C shares outstanding) ............................. $ 215,687,918
==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER BLACKROCK SHARE ($9,870,239/872,897).............................. $11.31
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($125,995,086/11,153,334)........................ $11.30
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE ($11.30/0.955)............. $11.83
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($51,212,086/4,531,760).......................... $11.30
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($28,610,507/2,536,374).......................... $11.28
======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GNMA PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 1.9%
Federal Home Loan Mortgage Corp.,
Unsecured Notes
7.00%(b) 03/15/10 $ 3,000 $ 3,569,983
U.S. Treasury Bonds
6.50% 11/15/26 1,130 1,390,164
6.12% 11/15/27 1,400 1,651,672
------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $6,456,138) 6,611,819
------------
MORTGAGE PASS-THROUGHS - 89.3%
Federal Home Loan Mortgage Corp.
9.00% 05/01/05 11 10,980
8.56% 11/01/07 1 1,277
Federal Home Loan Mortgage Corp.
Gold
6.00% 04/09-04/34 355 371,934
5.50% 06/13-03/34 1,202 1,235,668
6.50% 12/13-04/31 703 747,996
8.00% 07/01/17 93 101,623
9.00% 12/01/19 1 1,399
7.50% 09/26-03/27 12 13,294
5.00% 09/01/33 100 100,654
Federal National Mortgage
Association
5.50%(c) 02/09-04/34 198 231,903
6.00% 04/11-04/34 10,068 10,483,521
6.50% 02/13-04/34 7,566 7,954,771
8.00% 11/13-08/14 89 91,344
4.00% 08/18-04/19 7,300 7,259,175
4.50% 12/18-04/19 3,100 3,137,783
8.50% 10/01/24 8 8,694
5.00% 10/33-01/34 100 100,295
Government National Mortgage
Association
8.00% 12/07-08/24 848 929,577
5.50% 11/08-04/34 107,042 110,680,892
6.00% 02/16-04/34 53,996 56,411,125
6.50% 03/16-04/34 45,408 48,131,040
8.50% 03/17-09/21 473 525,181
7.00%(c) 09/17-05/32 4,746 5,067,364
5.00% 12/17-04/34 55,723 56,803,501
9.00% 05/18-07/21 469 525,602
10.00% 12/15/20 4 3,967
7.50% 01/22-11/29 2,238 2,418,114
Government National Mortgage
Association II
6.00% 02/20/29 265 276,953
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $307,772,379) 313,625,627
------------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 0.1%
Federal National Mortgage
Association Strip Notes, Series
338, Class 2 (IO)
4.12%(d)
(Cost $463,506) 06/01/33 1,787 365,184
------------
COMMERCIAL MORTGAGE BACKED SECURITIES - 1.6%
GSR Mortgage Loan Trust, Series
03-13, Class 1A1
4.53%(e) 11/28/33 4,678 4,691,382
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- -------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
Residential Accredit Loans, Series
03-QS4, Class A (IO)
0.10%(d) 03/25/33 $ 1,060 $ 158,683
Washington Mutual Mortgage
Securities Corp., Series 02-S8,
Class 1A3
8.00% 01/25/33 860 872,813
------------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $5,685,232) 5,722,878
------------
PROJECT LOANS - 0.0%
Federal Housing Authority, Series 82
7.43%
(Cost $49,553) 09/01/22 49 52,335
-----------
ASSET BACKED SECURITIES - 0.1%
The Money Store Small Business
Administration Loan Trust, Series
99-1, Class A
1.80%(e)
(Cost $395,064) 07/15/25 395 392,073
-----------
SHORT TERM INVESTMENTS - 5.8%
Federal Home Loan Bank, Discount
Notes
0.97% 04/01/04 7,900 7,900,000
Federal National Mortgage
Association, Discount Notes
1.00% 04/15/04 10,000 9,996,111
Galileo Money Market Fund 2,361 2,361,271
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $20,257,382) 20,257,382
-----------
REPURCHASE AGREEMENTS - 1.2%
Lehman Brothers, Inc.
(Agreement dated 03/31/04 to be repurchased at
$4,066,355. Collateralized by $4,000,000
Federal National Mortgage Association,
Unsecured Notes 3.50% due 01/28/08. The
value of the collateral is $4,089,500.)
0.80%(b)
(Cost $4,065,000) 04/15/04 4,065 4,065,000
-----------
TOTAL INVESTMENTS IN
SECURITIES - 100.0%
(Cost $345,144,254(a)) $351,092,298
============
NUMBER OF
CONTRACTS
-----------
CALL OPTIONS PURCHASED - 0.0%
June 10 Year U.S. Treasury Notes
futures, Strike Price 117, Expires
05/22/04
(Cost $255,049) 464 290,000
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
49
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GNMA PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
----------------- -------------
PUT SWAPTIONS WRITTEN - 0.0%
Morgan Stanley, Strike Price 3.60,
Expires 11/01/04 (4,400)(f) $ (54,092)
Union Bank of Switzerland, Strike
Price 6.00, Expires 10/25/04 (930)(f) (75,702)
----------
TOTAL PUT SWAPTIONS WRITTEN
(Premiums received $806,747) (129,794)
----------
- -------------------
(a) Cost for Federal income tax purposes is $345,168,815.
The gross unrealized appreciation (depreciation) on a
tax basis is as follows:
Gross unrealized appreciation $6,481,916
Gross unrealized depreciation (558,433)
----------
$5,923,483
==========
(b) Securities, or a portion thereof, subject to financing transactions .
(c) Securities, or a portion thereof, pledged as collateral with a value of
$11,170,781 on 603 short U.S. Treasury Note futures contracts, 73 long
U.S. Treasury Bond futures and 122 short Interest Rate Swap futures
contracts expiring June 2004 and 66 long Eurodollar futures contracts
expiring December 2004. The value of such contracts on March 31, 2004 was
$107,100,294, with an unrealized loss of $1,121,200.
(d) Rates shown are the effective yields as of March 31, 2004.
(e) Rates shown are the rates as of March 31, 2004.
(f) Each swaption contract is equivalent to $10,000 in notional amount.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
GNMA PORTFOLIO
MARCH 31, 2004(UNAUDITED)
ASSETS
Investments at value (Cost $345,144,254).............................. $ 351,092,298
Option purchased at value (Premiums paid $255,049).................... 290,000
Interest receivable .................................................. 1,589,993
Principal receivable ................................................. 2,131
Interest receivable on interest rate swaps ........................... 18,517
Investments sold receivable .......................................... 110,007,244
Capital shares sold receivable ....................................... 958,915
Prepaid expenses ..................................................... 37,538
Unrealized appreciation on interest rate swaps ....................... 161,247
Futures margin receivable ............................................ 4,596
--------------
TOTAL ASSETS ...................................................... 464,162,479
--------------
LIABILITIES
Reverse repurchase agreements payable ................................ 24,357,416
Investments purchased payable ........................................ 151,061,274
Capital shares redeemed payable ...................................... 298,072
Distributions payable ................................................ 1,245,561
Advisory fees payable ................................................ 55,265
Administrative fees payable .......................................... 53,151
Transfer agent fees payable .......................................... 8,677
Other accrued expenses payable ....................................... 147,271
Interest payable on interest rate swaps .............................. 190,993
Payable for financing transactions ................................... 7,670,207
Swaptions written, at fair value (Premiums received $806,747)......... 129,794
Futures margin payable ............................................... 262,579
Unrealized depreciation on interest rate swaps ....................... 314,104
--------------
TOTAL LIABILITIES ................................................. 185,794,364
--------------
NET ASSETS (Applicable to 1,050,061 BlackRock shares,
16,529,160 Institutional shares, 200,295 Service shares,
1,981,276 Investor A shares, 3,204,852 Investor B shares and
5,001,946 Investor C shares outstanding) ............................. $ 278,368,115
==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER BLACKROCK SHARE ($10,441,114/1,050,061)........................... $ 9.94
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($164,490,522/16,529,160)..................... $ 9.95
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($1,991,032/200,295)................................ $ 9.94
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($19,792,820/1,981,276).......................... $ 9.99
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE ($9.99/0.960).............. $10.41
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($31,909,202/3,204,852).......................... $ 9.96
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($49,743,425/5,001,946).......................... $ 9.94
======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
51
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 27.7%
Federal Home Loan Mortgage Corp.,
Unsecured Notes
3.50% 04/01/08 $ 5,900 $ 5,959,442
3.88% 11/10/08 17,000 17,314,670
4.38% 02/04/10 11,685 11,848,207
4.75% 12/08/10 3,870 3,979,873
4.12% 02/24/11 3,145 3,153,057
Federal National Mortgage
Association, Unsecured Notes
1.75% 06/16/06 2,120 2,108,594
7.12% 03/15/07 5,340 6,080,754
5.25% 04/15/07 4,800 5,215,046
3.25% 01/15/08 8,040 8,207,224
5.75% 02/15/08 7,120 7,914,264
6.00% 05/15/08 4,490 5,047,209
3.75% 09/15/08 6,675 6,782,908
6.62% 09/15/09 2,600 3,033,004
4.75% 02/21/13 2,990 3,027,028
Overseas Private Investment Co.
4.09% 05/29/12 437 431,408
4.30% 05/29/12 1,215 1,221,657
4.64% 05/29/12 902 922,713
4.68% 05/29/12 509 509,186
4.87% 05/29/12 3,835 3,834,816
5.40% 05/29/12 4,755 5,060,622
5.46% 05/29/12 545 573,029
5.79% 05/29/12 959 1,025,729
5.88% 05/29/12 659 698,569
5.94% 05/29/12 1,817 1,973,446
5.95% 05/29/12 517 563,755
6.10% 05/29/12 609 665,155
6.81% 05/29/12 730 803,285
6.89% 05/29/12 5,814 6,467,682
6.91% 05/29/12 1,954 2,134,073
7.35% 05/29/12 522 582,661
Resolution Funding Corp. Strip
Bonds
6.29%(b) 07/15/18 1,725 849,017
6.30%(b) 10/15/18 1,725 835,392
Small Business Administration
Participation Certificates, Series
96-20B, Class 1
6.38% 02/01/16 3,175 3,445,382
Small Business Administration
Participation Certificates, Series
96-20K, Class 1
6.95% 11/01/16 5,290 5,835,115
Small Business Administration
Participation Certificates, Series
97, Class A
1.85%(c) 08/15/22 1,041 986,516
Small Business Administration
Participation Certificates, Series
97-20B, Class 1
7.10% 02/01/17 3,876 4,300,668
Small Business Administration
Participation Certificates, Series
97-20F, Class 1
7.20% 06/01/17 1,123 1,251,081
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (Continued)
Small Business Administration
Participation Certificates, Series
97-20G, Class 1
6.85% 07/01/17 $ 6,698 $ 7,517,621
U.S. Treasury Bonds
10.38%(d) 11/15/12 6,830 8,730,926
8.12% 08/15/19 14,475 20,306,283
8.00%(e) 11/15/21 8,065 11,322,188
6.25%(d) 08/15/23 12,140 14,434,739
6.00% 02/15/26 11,225 13,013,984
6.75% 08/15/26 15,405 19,477,697
5.38% 02/15/31 18,345 19,996,050
U.S. Treasury Notes
2.25% 02/15/07 12,050 12,152,618
2.62% 03/15/09 6,445 6,398,673
4.88% 02/15/12 9,950 10,861,440
4.00% 11/15/12 2,865 2,937,969
------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $273,551,930)
281,792,425
------------
MORTGAGE PASS-THROUGHS - 21.4%
Federal Home Loan Mortgage Corp.
Gold
6.50% 03/09-12/30 2,081 2,208,683
6.00% 11/12-04/34 3,474 3,660,122
5.50% 10/17-09/33 12,545 12,877,907
7.50% 06/24-10/27 93 100,075
7.00% 04/29-04/32 163 172,723
5.00% 04/15/34 5,600 5,626,253
Federal National Mortgage
Association
9.50% 03/01/05 0 405
7.00% 06/06-06/32 5,983 6,354,790
6.50% 02/11-06/32 6,259 6,661,401
6.00% 09/12-04/34 36,056 37,651,320
5.50% 09/13-04/34 41,885 43,095,190
4.00% 04/20/19 3,600 3,571,877
4.50% 04/20/19 9,000 9,109,692
5.00% 04/19-04/34 68,472 69,618,961
Government National Mortgage
Association
8.50% 01/10-11/21 47 52,018
9.50% 09/16-09/17 51 57,141
9.00% 03/18-08/20 19 21,598
6.50% 11/23-04/34 15,096 15,972,839
6.00% 11/28-04/34 13 20,185
5.50% 03/15/33 670 689,669
Government National Mortgage
Association II
9.50% 05/20/17 1 1,287
MLCC Mortgage Investors, Inc.,
Series 95-C2 (IO)
10.40% (b) 06/15/21 21,941 411,385
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $212,913,414)
217,935,521
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
52
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 0.0%
Federal National Mortgage
Association, Strip Notes, Series
279, Class 1 (PO)
4.55%(b)
(Cost $94,064) 07/01/26 $ 142 $ 126,648
-----------
COMMERCIAL MORTGAGE BACKED SECURITIES - 4.1%
Bear Stearns Commercial Mortgage
Securities, Series 00-WF2, Class
A2
7.32% 08/15/32 4,590 5,461,416
Commercial Capital Access One,
Series 98-3, Class A1
6.30% 11/15/28 2,968 3,150,858
LB-UBS Commercial Mortgage Trust,
Series 03-C8, Class A4
5.12% 11/15/32 4,545 4,803,076
Master Resecuritization Trust, Series
03-1
5.00% 03/28/32 2,720 2,731,447
Master Resecuritization Trust, Series
03-3
4.25%(c) 01/28/33 4,223 4,185,720
Morgan Stanley Capital Investments,
Series 98-HF2, Class A2
6.48% 11/15/30 4,645 5,243,856
Residential Accredit Loans, Inc.,
Series 99-QS8, Class A1
6.50% 06/25/14 3,043 3,095,702
Salomon Brothers Mortgage
Securities VII, Series 00-C1, Class
A2
7.52% 12/18/09 5,565 6,585,006
Summit Mortgage Trust, Series 00-1,
Class B1
6.08%(c) 12/28/12 741 743,092
USGI, Series 87
7.43% 12/01/22 243 261,975
Wachovia Bank Commercial
Mortgage Trust, Series 03, Class
C6
5.12% 08/15/35 4,470 4,729,078
Washington Mutual Mortgage
Securities Corp., Series 02-MS12,
Class A
6.50% 05/25/32 725 735,894
-----------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $40,678,081) 41,727,120
-----------
PROJECT LOANS - 2.1%
Quabbin Valley Healthcare,
Construction Loan Collateral
7.66% 06/01/39 1,007 1,055,740
Whittier Rehab at Haverhill Project
Loan
7.60% 12/01/39 10,931 12,292,592
Whittier Rehab at Westborough
Project Loan
8.12% 02/28/37 6,980 7,891,111
-----------
TOTAL PROJECT LOANS
(Cost $18,652,184) 21,239,443
-----------
PAR
MATURITY (000) VALUE
---------- ---------- -------------
ASSET BACKED SECURITIES - 3.8%
Citibank Credit Card Issuance Trust,
Series 00, Class A3
6.88% 11/15/09 $ 6,275 $ 7,169,821
Citibank Credit Card Issuance Trust,
Series 04-1, Class A1
2.53% 01/20/09 9,150 9,210,848
Green Tree Financial Corp., Series
96-7, Class A6
7.65% 10/15/27 5,889 6,448,308
The Money Store Small Business
Administration Loan-Backed
Securities, Series 97-1, Class A
1.90%(c) 04/15/28 2,772 2,660,711
Railcar Leasing LLC, Series 97-1,
Class A1
6.75% 07/15/06 4,261 4,456,791
Residential Funding Mortgage
Securities I, Series 02-S6, Class
A6
6.00% 04/25/17 1,258 1,258,810
Residential Funding Mortgage
Securities I, Series 02-S6, Class
A7
6.00% 04/25/17 557 557,321
Sears Credit Account Master Trust,
Series 02-5, Class A
1.47%(c) 11/05/05 6,925 6,959,625
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $37,957,688) 38,722,235
-----------
CORPORATE BONDS - 20.3%
Aerospace - 0.6%
Lockheed Martin Corp., Senior
Debentures
8.50% 12/01/29 3,025 4,056,056
Lockheed Martin Corp., Senior
Unsecured Notes
8.20% 12/01/09 85 105,044
Northrop Grumman Corp., Senior
Unsecured Notes
7.12% 02/15/11 915 1,081,540
Raytheon Co., Senior Unsecured
Notes
4.50% 11/15/07 800 841,672
-----------
6,084,312
-----------
Banks - 3.1%
Bank of America Corp., Senior Notes
4.38% 12/01/10 1,560 1,607,861
Bank of America Corp., Senior
Unsecured Notes
5.25% 02/01/07 425 458,620
Bank of America Corp., Subordinated
Notes
7.80%(d) 02/15/10 1,190 1,444,852
7.40% 01/15/11 400 480,131
BankBoston NA, Subordinated Notes
7.00% 09/15/07 1,500 1,711,080
Barclays Bank PLC, Capital
Securities
8.55%(c)(f) 09/29/49 745 936,087
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
53
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Banks (Continued)
HSBC Bank USA, Subordinated
Notes
4.62% 04/01/14 $2,195 $ 2,183,893
International Finance Corp., Senior
Unsecured Notes
7.12% 04/06/05 3,875 4,098,223
J.P. Morgan Chase & Co., Senior
Unsecured Notes
5.25% 05/30/07 3,380 3,649,934
3.62% 05/01/08 1,630 1,668,378
J.P. Morgan Chase & Co.,
Subordinated Notes
6.75% 02/01/11 1,280 1,479,283
Royal Bank of Scotland Group PLC,
Capital Trust
6.80% 12/31/49 1,000 1,050,424
U.S. Bank NA, Senior Bank Notes
2.87% 02/01/07 2,275 2,295,839
2.40% 03/12/07 1,580 1,577,488
U.S. Bancorp, Senior Unsecured
Notes
3.95% 08/23/07 335 349,036
Wachovia Corp., Unsecured Notes
3.62% 02/17/09 1,390 1,412,935
Wells Fargo & Co., Subordinated
Notes
7.80%(c) 06/15/10 1,450 1,550,553
Wells Fargo & Co., Unsecured Notes
3.12% 04/01/09 2,600 2,587,338
Westpac Capital Trust III,
Subordinated Notes
5.82%(c)(f) 12/29/49 600 640,026
-----------
31,181,981
-----------
Beverages & Bottling - 0.2%
Cadbury Schweppes PLC,
Unsecured Notes
5.12%(f) 10/01/13 530 548,369
The Pepsi Bottling Group, Inc.,
Unsecured Notes
5.00% 11/15/13 1,130 1,176,327
-----------
1,724,696
-----------
Broadcasting - 0.1%
News America, Inc., Senior
Debentures
7.62% 11/30/28 575 683,511
-----------
Chemicals - 0.1%
Dow Chemical Co., Debentures
7.38% 11/01/29 1,085 1,264,893
-----------
Energy & Utilities - 0.4%
FirstEnergy Corp., Senior Unsecured
Notes
7.38% 11/15/31 740 820,720
Florida Power Corp., First Mortgage
Bonds
6.65% 07/15/11 2,000 2,314,438
Ontario Electricity Financial Corp.,
Senior Notes
6.10% 01/30/08 855 959,985
-----------
4,095,143
-----------
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Entertainment & Leisure - 0.6%
Time Warner Cos., Inc., Senior
Debentures
9.15% 02/01/23 $1,110 $ 1,465,011
7.57% 02/01/24 1,030 1,186,128
6.62% 05/15/29 1,600 1,671,850
7.62% 04/15/31 1,345 1,573,556
-----------
5,896,545
-----------
Finance - 8.4%
AID-Israel, Unsecured Notes
5.50% 09/18/23 5,000 5,297,300
Anadarko Finance Co., Senior
Unsecured Notes
7.50% 05/01/31 850 1,034,035
ASIF Global Finance, Unsecured
Notes
3.85%(f) 11/26/07 5,725 5,921,768
3.90%(f) 10/22/08 1,090 1,124,422
The Bear Stearns Cos., Inc.,
Unsecured Notes
2.88% 07/02/08 1,000 991,337
CA Preferred Fund Trust, Notes
7.00% 12/31/49 800 844,800
Citigroup, Inc., Senior Unsecured
Notes
5.75% 05/10/06 3,385 3,648,407
Citigroup, Inc., Subordinated Notes
7.25% 10/01/10 933 1,111,169
6.00% 10/31/33 3,105 3,252,115
Citigroup, Inc., Unsecured Notes
3.62%(g) 02/09/09 1,150 1,169,228
6.88% 06/01/25 685 783,366
Conoco Global Funding Co., Senior
Unsecured Notes
6.35% 10/15/11 2,300 2,626,071
Credit Suisse First Boston USA, Inc.,
Senior Unsecured Notes
6.12% 11/15/11 1,150 1,284,550
Devon Financing Corp., Senior
Unsecured Notes
6.88% 09/30/11 840 971,988
Diageo Finance BV, Unsecured
Notes
3.88% 04/01/11 440 436,326
Dominion Resources Capital Trust III,
Capital Securities
8.40% 01/15/31 1,150 1,446,705
EOP Operating LP, Unsecured Notes
4.75% 03/15/14 1,285 1,265,100
General Electric Capital Corp., Senior
Unsecured Notes
5.35% 03/30/06 1,535 1,638,612
5.88% 02/15/12 2,990 3,318,105
6.00% 06/15/12 1,010 1,128,301
General Electric Capital Corp.,
Unsecured Notes
2.80%(g) 01/15/07 7,540 7,562,620
General Motors Acceptance Corp.,
Senior Unsecured Notes
7.25% 03/02/11 2,490 2,763,350
6.88% 09/15/11 670 726,541
8.00%(g) 11/01/31 475 525,910
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Finance (Continued)
Glaxosmithline Capital, Inc.,
Unsecured Notes
4.38% 04/15/14 $ 875 $ 871,263
Goldman Sachs Capital I, Capital
Securities
6.34% 02/15/34 1,515 1,538,893
The Goldman Sachs Group, Inc.,
Senior Notes
6.12% 02/15/33 680 701,146
The Goldman Sachs Group, Inc.,
Senior Unsecured Notes
7.35% 10/01/09 415 491,405
6.60% 01/15/12 530 607,412
The Goldman Sachs Group, Inc.,
Unsecured Notes
5.15% 01/15/14 695 712,194
Household Finance Corp., Notes
6.38% 11/27/12 1,900 2,147,057
Household Finance Corp., Senior
Unsecured Notes
6.50% 11/15/08 1,615 1,828,085
6.75% 05/15/11 1,300 1,501,582
6.38% 10/15/11 510 578,268
7.00% 05/15/12 1,125 1,320,174
7.62% 05/17/32 550 694,006
Larwin Group - Participation in Asset
Exchange
8.00%(h)(i)(j)(k) 12/01/09 1 603
Lehman Brothers Holdings, Inc.,
Senior Unsecured Notes
6.25%(g) 05/15/06 1,210 1,316,504
7.00% 02/01/08 345 395,498
Lehman Brothers Holdings, Inc.,
Unsecured Notes
3.60%(g) 03/13/09 1,000 1,009,670
Morgan Stanley, Senior Unsecured
Notes
5.80% 04/01/07 1,000 1,092,400
3.88% 01/15/09 4,565 4,656,711
6.75% 04/15/11 725 837,455
Morgan Stanley, Subordinated Notes
4.75% 04/01/14 2,575 2,528,978
PECO Energy Capital Trust IV,
Capital Securities
5.75% 06/15/33 1,760 1,661,016
Protective Life Secured Trust,
Secured Notes
3.70% 11/24/08 1,330 1,355,257
Qwest Capital Funding, Inc., Senior
Unsecured Notes
7.90% 08/15/10 570 507,300
Rabobank Capital Funding Trust II,
Capital Securities
5.26%(c)(f) 12/29/49 500 517,656
SLM Corp., Senior Unsecured Notes
3.62% 03/17/08 375 384,160
5.38% 01/15/13 1,980 2,112,096
Sun Life of Canada Capital Trust,
Capital Securities
8.53%(f) 05/29/49 2,700 3,230,415
Swedish Export Credit Corp.,
Unsecured Notes
2.88% 01/26/07 1,550 1,577,156
-----------
87,046,486
-----------
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Food & Agriculture - 0.6%
General Mills, Inc., Senior Unsecured
Notes
5.12% 02/15/07 $ 925 $ 988,011
Kellogg Co., Senior Unsecured Notes
6.60% 04/01/11 970 1,122,418
Kraft Foods, Inc., Senior Unsecured
Notes
5.25% 06/01/07 1,065 1,145,780
5.62% 11/01/11 2,415 2,618,766
-----------
5,874,975
-----------
Insurance - 0.1%
Fund American Cos., Inc., Senior
Notes
5.88% 05/15/13 80 84,023
Pacific Life Corp., Senior Notes
6.60%(f) 09/15/33 525 578,576
-----------
662,599
-----------
Manufacturing - 0.2%
General Electric Co., Senior Notes
5.00% 02/01/13 1,715 1,790,923
-----------
Metal & Mining - 0.0%
Alcan, Inc., Unsecured Notes
6.12% 12/15/33 475 501,747
-----------
Motor Vehicles - 0.5%
DaimlerChrysler AG, Senior
Debentures
7.45% 03/01/27 1,355 1,486,542
DaimlerChrysler North America
Holding Corp., Notes
4.75% 01/15/08 1,665 1,734,680
DaimlerChrysler North America
Holding Corp., Unsecured Notes
4.05% 06/04/08 1,175 1,183,958
6.50% 11/15/13 460 497,515
-----------
4,902,695
-----------
Oil & Gas - 1.2%
Anadarko Petroleum Corp., Senior
Unsecured Notes
5.38% 03/01/07 1,000 1,077,260
Conoco, Inc., Senior Unsecured
Notes
5.90% 04/15/04 2,900 2,903,776
Consolidated Natural Gas Co.,
Senior Unsecured Notes
5.38% 11/01/06 1,850 1,984,273
Devon Energy Corp., Senior
Debentures
7.95% 04/15/32 2,040 2,527,686
Kinder Morgan Energy Partners LP,
Senior Unsecured Notes
7.30% 08/15/33 780 900,175
Michigan Consolidated Gas Co.,
Senior Notes
6.12% 09/01/08 1,675 1,863,504
Suncor Energy, Inc., Bonds
5.95% 12/01/34 470 496,969
-----------
11,753,643
-----------
Paper & Forest Products - 0.1%
Weyerhaeuser Co., Debentures
6.95% 10/01/27 935 1,012,915
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- --------- -------------
CORPORATE BONDS (Continued)
Pharmaceuticals - 0.2%
Bristol-Myers Squibb Co., Senior
Unsecured Notes
5.75% 10/01/11 $1,660 $ 1,824,873
Wyeth, Unsecured Notes
6.50% 02/01/34 600 635,418
-----------
2,460,291
-----------
Real Estate - 0.3%
ERP Operating LP, Unsecured Notes
5.20% 04/01/13 2,975 3,105,562
-----------
Telecommunications - 1.7%
AT&T Broadband Corp., Unsecured
Notes
8.38% 03/15/13 200 248,375
Comcast Cable Communications
Corp., Senior Unsecured Notes
6.38% 01/30/06 413 442,410
Continental Cablevision, Inc., Senior
Notes
8.30% 05/15/06 2,640 2,942,202
Cox Communications, Inc.,
Unsecured Notes
4.62% 06/01/13 280 273,348
New England Telephone & Telegraph
Co., Debentures
7.88% 11/15/29 200 245,498
SBC Communications, Inc., Senior
Unsecured Notes
5.88% 08/15/12 1,400 1,525,832
TCI Communications, Inc., Senior
Debentures
7.88% 02/15/26 1,850 2,190,924
TCI Communications, Inc., Senior
Notes
7.12% 02/15/28 620 688,603
Verizon Pennsylvania, Inc.,
Debentures
5.65% 11/15/11 5,005 5,406,125
Vodafone Group PLC, Notes
6.25% 11/30/32 340 362,859
Vodafone Group PLC, Senior
Unsecured Notes
7.88% 02/15/30 660 836,225
Vodafone Group PLC, Unsecured
Notes
5.00%(g) 12/16/13 1,405 1,443,049
WorldCom, Inc., Senior Unsecured
Notes
7.38%(f)(h)(i) 01/15/06 3,260 1,108,400
8.00%(g)(h)(i) 05/15/06 220 74,800
-----------
17,788,650
-----------
PAR (o)
MATURITY (000) VALUE
---------- --------- --------------
CORPORATE BONDS (Continued)
Transportation - 0.2%
Burlington Northern & Santa Fe
Railroad Co., Pass-Through
Certificates
8.25% 01/15/21 $ 1,243 $ 1,632,539
------------
Yankee - 1.7%
British Telecommunications Group
PLC, Senior Unsecured Notes
8.88% 12/15/30 945 1,260,845
Canadian National Railway Co.,
Senior Notes
6.90% 07/15/28 770 910,279
Deutsche Telekom International
Finance BV, Senior Unsecured
Notes
8.50%(c) 06/15/10 325 398,564
8.75% 06/15/30 2,450 3,212,028
Lloyds TSB Bank PLC, Subordinated
Notes
6.90% 11/29/49 2,000 2,124,219
Pemex Finance Ltd., Senior
Unsecured Notes
9.14% 08/15/04 810 826,200
9.03% 02/15/11 3,505 4,198,184
Province of Ontario, Senior
Unsecured Notes
3.50% 09/17/07 880 908,788
Province of Quebec, Debentures
7.00% 01/30/07 575 648,444
Province of Quebec, Unsecured
Notes
7.38%(c) 04/09/26 625 781,356
Tyco International Group SA, Senior
Notes
6.38% 06/15/05 1,820 1,913,148
------------
17,182,055
------------
TOTAL CORPORATE BONDS
(Cost $200,825,283) 206,646,161
------------
FOREIGN BONDS - 8.8%
Bundesobligation (Germany)
3.50% 10/10/08 12,060 15,154,215
French Treasury Notes
3.50% 01/12/08 26,855 33,829,300
Government of Canada
5.25% 06/01/13 16,400 13,343,367
Kingdom of Sweden
8.00% 08/15/07 46,470 7,134,935
5.00% 01/28/09 54,105 7,668,600
United Kingdom Treasury Notes
5.00% 03/07/08 6,750 12,579,129
------------
TOTAL FOREIGN BONDS
(Cost $84,854,387) 89,709,546
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
56
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR/SHARES
MATURITY (000) VALUE
-------- ---------- -------------
TAXABLE MUNICIPAL BONDS - 1.1%
California Department of Water
Resources Revenue Bonds, Series
02, Class E
3.98% 05/01/05 $ 1,825 $ 1,865,971
Los Angeles County Pension
Obligation Revenue Bonds, Series
95, Class D
6.97% 06/30/08 7,355 8,597,333
New Jersey Economic Development
Authority State Pension Funding
Zero Coupon Revenue Bonds,
Series 97, Class B
7.51%(l) 02/15/16 1,600 865,312
--------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $9,846,842) 11,328,616
--------------
SHORT TERM INVESTMENTS - 11.0%
Chase Manhattan Bank, Time
Deposit
1.06%(m) 04/01/04 150 149,915
Federal Home Loan Bank, Discount
Notes
0.97% 04/01/04 72,800 72,800,000
Federal National Mortgage
Association, Discount Notes
1.00% 04/15/04 30,000 29,988,333
HBOS Treasury Services PLC,
Commercial Paper
1.11%(m) 08/11/04 1,359 1,359,309
Natexis Banques International,
Floating Rate Notes
1.10%(m) 04/01/04 227 227,126
Galileo Money Market Fund 5,560 5,559,561
Institutional Money Market Trust(m) 2,314 2,314,500
--------------
TOTAL SHORT TERM INVESTMENTS
(Cost $112,398,744) 112,398,744
--------------
TOTAL INVESTMENTS IN
SECURITIES - 100.0%
(Cost $991,772,617(a)) $1,021,626,459
==============
NUMBER OF
CONTRACTS
----------
OPTIONS - (0.3)%
Call Options Written - 0.0%
May 30 Year Federal National
Mortgage Association 5.0%
mortgages, Strike Price 99.578125,
Expires 05/06/04 (720) (68,625)
Put Swaptions Written - (0.3)%
Morgan Stanley, Strike Price 3.60,
Expires 11/01/04 (12,580)(n) (154,655)
Union Bank of Switzerland, Strike
Price 4.90, Expires 12/05/05 (1,900)(n) (863,170)
Union Bank of Switzerland, Strike
Price 5.75, Expires 09/23/05 (9,100)(n) (940,940)
Union Bank of Switzerland, Strike
Price 5.85, Expires 12/05/05 (4,000)(n) (1,063,200)
Union Bank of Switzerland, Strike
Price 6.00, Expires 10/25/04 (2,660)(n) (216,524)
-------------
TOTAL OPTIONS
(Premiums received $6,748,173) $ (3,307,114)
-------------
- -------------------
(a) Cost for Federal income tax purposes is $993,199,200.
The gross unrealized appreciation (depreciation) on a
tax basis is as follows:
Gross unrealized appreciation $33,766,847
Gross unrealized depreciation (5,339,588)
-----------
$28,427,259
===========
(b) Rates shown are the effective yields as of March 31, 2004.
(c) Rates shown are the rates as of March 31, 2004.
(d) Securities, or a portion thereof, pledged as collateral with a value of
$4,702,811 on 25 long U.S. Treasury Bond futures contracts and 2,160 short
U.S. Treasury Note futures contracts expiring June 2004. The value of such
contracts on March 31, 2004 was $248,424,969, with an unrealized loss of
$4,286,469.
(e) Securities, or a portion thereof, with a market value of $5,089,018 have
been pledged as collateral for swap and swaption contracts.
(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, 2004,
the fund held 1.6% of its net assets, with a current market value of
$14,605,719, in securities restricted as to resale.
(g) Total or partial securities on loan.
(h) Non-income producing security.
(i) Security in default.
(j) Security is illiquid.
(k) Securities valued at fair value as determined in good faith by or under
the direction of the Trustees.
(l) The rate shown is the effective yield on the zero coupon bonds.
(m) Securities purchased with the cash proceeds from securities loaned.
(n) Each swaption contract is equivalent to $10,000 in notional amount.
(o) In local currency.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
57
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
MANAGED INCOME PORTFOLIO
MARCH 31, 2004(UNAUDITED)
ASSETS
Investments at value (Cost $991,772,617) - including $3,921,053 of securities loaned $ 1,021,626,459
(Note A)
Cash denominated in foreign currencies (Cost $28,969).................................. 29,415
Interest receivable ................................................................... 8,614,063
Interest receivable on interest rate swaps ............................................ 57,019
Investments sold receivable ........................................................... 93,797,593
Capital shares sold receivable ........................................................ 411,901
Prepaid expenses ...................................................................... 53,322
Unrealized appreciation on forward foreign currency contracts ......................... 2,616,914
Unrealized appreciation on interest rate swaps ........................................ 2,206,581
Futures margin receivable ............................................................. 31,004
----------------
TOTAL ASSETS ....................................................................... 1,129,444,271
----------------
LIABILITIES
Payable upon return of securities loaned .............................................. 4,050,850
Investments purchased payable ......................................................... 198,222,686
Capital shares redeemed payable ....................................................... 1,436,629
Distributions payable ................................................................. 3,279,797
Advisory fees payable ................................................................. 273,902
Administrative fees payable ........................................................... 175,274
Transfer agent fees payable ........................................................... 19,451
Other accrued expenses payable ........................................................ 195,559
Interest payable on interest rate swaps ............................................... 119,588
Payable for financing transactions .................................................... 13,876,267
Options written, at fair value (Premiums received $53,437)............................. 68,625
Swaptions written, at fair value (Premiums received $6,694,736)........................ 3,238,489
Futures margin payable ................................................................ 867,420
Futures sold payable .................................................................. 20,172
Unrealized depreciation on forward foreign currency contracts ......................... 348,818
Unrealized depreciation on interest rate swaps ........................................ 2,232,954
----------------
TOTAL LIABILITIES .................................................................. 228,426,481
----------------
NET ASSETS (Applicable to 72,553,970 Institutional shares, 8,078,863 Service shares,
4,045,030 Investor A shares, 959,562 Investor B shares and
80,102 Investor C shares outstanding) ................................................. $ 901,017,790
================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($762,642,568\d72,553,970)..................................... $10.51
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($84,913,281\d8,078,863)............................................. $10.51
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($42,533,184\d4,045,030).......................................... $10.51
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE ($10.51\d0.955)............................. $11.01
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($10,088,786\d959,562)............................................ $10.51
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($839,971\d80,102)................................................ $10.49
======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
58
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL BOND PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR (e)
MATURITY (000) VALUE
---------- ---------- --------------
FOREIGN BONDS - 69.0%
Austria - 2.0%
Republic of Austria
3.90% 10/20/05 5,850 $ 7,391,615
-----------
Belgium - 1.4%
Belgium Kingdom
3.75% 03/28/09 4,250 5,363,814
-----------
Canada - 5.2%
Canada Housing Trust, Unsecured
Notes
4.40% 03/15/08 4,165 3,298,823
Government of Canada
6.00% 06/01/11 3,027 2,582,364
5.25% 06/01/13 11,750 9,560,034
Province of Manitoba
2.83%(b) 06/02/08 5,250 4,014,249
-----------
19,455,470
-----------
Denmark - 0.0%
Realkredit Danmark
5.00% 10/01/35 10 1,587
-----------
Finland - 4.0%
Finnish Government Bonds
3.00% 07/04/08 4,300 5,300,466
5.38% 07/04/13 7,100 9,703,147
-----------
15,003,613
-----------
France - 2.3%
Cie Financement Foncier
5.00% 12/04/07 600 1,103,364
French Treasury Notes
3.00% 07/12/08 4,300 5,297,454
Government of France
5.75% 10/25/32 1,500 2,119,197
-----------
8,520,015
-----------
Germany - 11.9%
Bundesrepublic Deutschland
4.50% 01/04/13 4,335 5,594,043
4.25% 01/04/14 11,920 15,019,897
6.25% 01/04/24 7,985 11,857,000
5.50% 01/04/31 3,420 4,678,541
4.75% 07/04/34 3,250 3,988,633
Deutsche Telekom International
Finance
8.12% 05/29/12 445 682,151
Kredit Fuer Wiederaufbau
5.00% 07/04/11 1,455 1,940,531
LB Baden-Wuerttemberg
5.12% 05/30/07 875 943,547
-----------
44,704,343
-----------
Hungary - 0.9%
Hungary Government Bonds
6.25% 06/12/08 787,170 3,525,388
-----------
Ireland - 1.6%
Irish Treasury Notes
3.25% 04/18/09 5,000 6,173,102
-----------
Italy - 2.6%
Buoni Poliennali Del Tesoro
5.00% 02/01/12 6,500 8,638,337
PAR (e)
MATURITY (000) VALUE
---------- ---------- --------------
FOREIGN BONDS (Continued)
Italy (Continued)
Republic of Italy
5.88% 08/14/08 1,575 $ 1,211,455
-----------
9,849,792
-----------
Japan - 4.9%
Citigroup, Inc., Unsecured Bonds
2.24% 12/09/22 200,000 1,910,059
Development Bank of Japan
1.40% 06/20/12 521,000 5,057,619
1.70% 09/20/22 170,000 1,577,299
Japan Finance Corp.
6.00% 05/07/09 640 722,401
1.55% 02/21/12 924,000 9,059,698
-----------
18,327,076
-----------
Netherlands - 4.6%
Government of Netherlands
4.00% 07/15/05 4,465 5,624,570
5.75% 02/15/07 1,845 2,468,918
4.25% 07/15/13 7,400 9,313,702
-----------
17,407,190
-----------
New Zealand - 1.3%
Government of New Zealand
8.00% 11/15/06 6,650 4,705,444
-----------
Portugal - 1.0%
Portugal Government Bonds
4.38% 06/16/14 2,950 3,705,463
-----------
South Africa - 0.3%
Republic of South Africa
13.00% 08/31/10 9,120 1,684,769
-----------
Spain - 3.8%
Bonos y Obligation del Estado
6.00% 01/31/08 1,650 2,260,614
4.00% 01/31/10 700 890,910
5.75% 07/30/32 2,475 3,493,815
Kingdom of Spain
5.00% 07/30/12 4,155 5,538,485
4.20% 07/30/13 1,520 1,906,753
-----------
14,090,577
-----------
Sweden - 6.3%
AB Spintab
4.38% 04/20/09 1,780 2,292,318
6.00% 04/20/09 7,100 1,036,702
Government of Sweden
8.00% 08/15/07 11,875 1,822,986
Kingdom of Sweden
5.00% 01/28/09 54,790 7,765,689
Stadshypotek AB
6.00% 06/18/08 73,000 10,603,467
-----------
23,521,162
-----------
United Kingdom - 14.9%
BP Capital Markets PLC
5.12% 12/07/08 1,345 2,477,019
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
59
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL BOND PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR(e)
MATURITY (000) VALUE
---------- -------- -------------
FOREIGN BONDS (Continued)
United Kingdom (Continued)
United Kingdom Treasury Bonds
7.50% 12/07/06 4,355 $ 8,596,181
5.00% 03/07/08 8,100 15,093,615
8.00% 06/07/21 700 1,773,074
United Kingdom Treasury Notes
4.50% 03/07/07 8,720 16,006,581
7.25% 12/07/07 2,385 4,773,198
5.75% 12/07/09 2,430 4,705,385
5.00% 03/07/12 700 1,307,654
6.00% 12/07/28 615 1,352,243
------------
56,084,950
------------
TOTAL FOREIGN BONDS
(Cost $244,138,931) 259,515,370
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 0.8%
U.S. Treasury Bonds
5.38%
(Cost $3,359,458) 02/15/31 3,005 3,275,450
------------
COMMERCIAL MORTGAGE BACKED SECURITIES - 0.6%
Bank of America Commercial
Mortgage, Inc., Series 04, Class 1
4.76% 01/10/14 2,300 2,354,464
Morgan Stanley Capital Investments,
Series 99-FNV1, Class A2
6.53% 03/15/31 685 776,740
------------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(Cost $3,070,285) 3,131,204
------------
ASSET BACKED SECURITIES - 1.3%
Citibank Credit Card Issuance Trust,
Series 03-A6, Class A6
2.90% 05/17/10 1,375 1,374,786
Student Loan Marketing Association
Student Loan Trust, Series 99-3,
Class A2
1.28%(b)(c) 07/25/12 1,375 1,378,398
Student Loan Marketing Association
Student Loan Trust, Series 03-7
5.15% 09/15/39 1,280 2,334,821
------------
TOTAL ASSET BACKED SECURITIES
(Cost $4,858,740) 5,088,005
------------
CORPORATE BONDS - 3.9%
Aviva PLC, Unsecured Notes
5.70% 06/29/49 630 813,564
Dexia Municipal Agency, Unsecured
Notes
5.62% 03/27/09 3,000 3,331,740
European Investment Bank,
Unsecured Notes
5.75% 02/15/07 7,925 10,574,040
United Mexican States, Senior
Unsecured Notes
8.38% 01/14/11 273 329,989
------------
TOTAL CORPORATE BONDS
(Cost $14,967,550) 15,049,333
------------
PAR
MATURITY (000) VALUE
---------- -------- -------------
SHORT TERM INVESTMENTS - 23.6%
Federal Home Loan Bank,
Discount
Notes
0.97% 04/01/04 $ 4,800 $ 4,799,999
0.98% 04/07/04 30,000 29,995,125
0.99% 05/06/04 45,000 44,956,688
French Discount
Treasury Bills
2.01% 04/29/04 8,000 9,813,159
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $89,871,673) 89,564,971
------------
TOTAL INVESTMENTS IN
SECURITIES - 100.0%
(Cost $360,266,637(a)) $375,624,333
============
NUMBER OF
CONTRACTS
---------
PUT SWAPTIONS WRITTEN - 0.0%
Morgan Stanley, Strike Price 3.60,
Expires 11/01/04 (3,000)(d) (36,881)
Union Bank of Switzerland, Strike
Price 6.00, Expires 10/25/04 (640)(d) (52,096)
---------
TOTAL PUT SWAPTIONS WRITTEN
(Premiums received $552,714) $ (88,977)
---------
- -------------------
(a) Cost for Federal income tax purposes is $360,431,494.
The gross unrealized appreciation (depreciation) on a
tax basis is as follows:
Gross unrealized appreciation $16,441,601
Gross unrealized depreciation (1,248,762)
-----------
$15,192,839
===========
(b) Rates shown are the rates as of March 31, 2004.
(c) Securities, or a portion thereof, pledged as collateral with a value of
$1,504,220 on 472 short U.S. Treasury Note futures contracts, 36 long U.S.
Treasury Bond futures contracts, 46 long Euro Bobl futures contracts, 31
long Japan Government Bond futures contracts expiring June 2004. The value
of such contracts on March 31, 2004 was $105,606,210, with an unrealized
loss of $1,083,681.
(d) Each swaption contract is equivalent to $10,000 in notional amount.
(e) In local currency.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
INTERNATIONAL BOND PORTFOLIO
MARCH 31, 2004(UNAUDITED)
ASSETS
Investments at value (Cost $360,266,637)............................................. $ 375,624,333
Cash denominated in foreign currencies (Cost $5,049,559)............................. 5,102,802
Cash ................................................................................ 163,968
Interest receivable ................................................................. 5,222,306
Investments sold receivable ......................................................... 10,653,146
Capital shares sold receivable ...................................................... 1,893,048
Prepaid expenses .................................................................... 60,878
Unrealized appreciation on forward foreign currency contracts ....................... 4,961,039
Futures margin receivable ........................................................... 39,413
--------------
TOTAL ASSETS ..................................................................... 403,720,933
--------------
LIABILITIES
Investments purchased payable ....................................................... 15,797,120
Capital shares redeemed payable ..................................................... 528,362
Distributions payable ............................................................... 1,046,341
Advisory fees payable ............................................................... 163,047
Administrative fees payable ......................................................... 68,155
Transfer agent fees payable ......................................................... 17,810
Other accrued expenses payable ...................................................... 174,061
Interest payable on interest rate swaps ............................................. 16,253
Swaptions written, at fair value (Premiums received $552,714)........................ 88,977
Futures margin payable .............................................................. 209,301
Unrealized depreciation on forward foreign currency contracts ....................... 3,970,517
Unrealized depreciation on foreign currency spot contracts .......................... 743
Unrealized depreciation on interest rate swaps ...................................... 287,826
--------------
TOTAL LIABILITIES ................................................................ 22,368,513
--------------
NET ASSETS (Applicable to 11,874,687 Institutional shares, 6,589,369 Service shares,
9,929,372 Investor A shares, 1,423,513 Investor B shares and
2,795,018 Investor C shares outstanding) ............................................ $ 381,352,420
==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($138,776,343/11,874,687).................................... $11.69
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($77,063,126/6,589,369)............................................ $11.70
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($116,108,656/9,929,372)........................................ $11.69
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE ($11.69/0.950)............................ $12.31
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($16,648,744/1,423,513)......................................... $11.70
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($32,755,551/2,795,018)......................................... $11.72
======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
61
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
HIGH YIELD BOND PORTFOLIO
AS OF MARCH 31, 2004
NUMBER
OF SHARES VALUE
----------- -------------
COMMON STOCKS - 0.7%
HCI Direct, Inc., Class A(b)(g) 242,857 $4,177,140
Knology, Inc.(b)(d) 13,271 91,437
Mattress Discounters Corp.(b)(g) 12,494 0
Ubiquitel, Inc.(b) 50,000 176,451
----------
TOTAL COMMON STOCKS
(Cost $6,936,118) 4,445,028
----------
PREFERRED STOCKS - 0.2%
Adelphia Business Solutions, Inc.,
Series B(b)(k) 2,200 0
Paxson Communications Corp.(b)(k) 225 1,980,000
----------
TOTAL PREFERRED STOCKS
(Cost $4,058,085) 1,980,000
----------
WARRANTS - 0.0%
DIVA Systems Corp. (expiring
03/01/08)(b)(d) 4,500 5
Mattress Discounters Co. (expiring
07/15/07)(b)(d) 1,500 0
PF Net Communications, Inc.
(expiring 05/15/10) 1,000 0
Ubiquitel, Inc.
(expiring 04/15/10)(b)(d) 30,000 0
----------
TOTAL WARRANTS
(Cost $352,295) 5
----------
PAR
MATURITY (000)
---------- ------------
ASSET BACKED SECURITIES - 1.0%
Continental Airlines, Inc.,
Pass-Through Certificates, Series
99-1B
6.80% 08/02/18 $3,120 2,558,437
Continental Airlines, Inc., Series
974B
6.90% 01/02/17 2,563 2,216,945
Credit Suisse Asset Management
Funding Corp., Subordinated
Bonds, Series 2A, Class D1
12.78% 10/15/16 1,500 1,499,999
----------
TOTAL ASSET BACKED SECURITIES
(Cost $5,867,309) 6,275,381
---------
CORPORATE BONDS - 92.2%
Aerospace - 1.7%
AAR Corp., Senior Unsecured Notes
6.88% 12/15/07 1,705 1,709,262
BE Aerospace, Inc., Senior Notes
8.50% 10/01/10 2,510 2,685,701
Condor Systems, Inc., Senior
Subordinated Notes, Series B
11.88%(b)(c) 05/01/09 1,500 105,000
Dunlop Standard Aerospace Holdings
PLC, Senior Unsecured Notes
11.88%(d) 05/15/09 3,225 3,430,300
Esterline Technologies Corp., Senior
Subordinated Notes
7.75% 06/15/13 2,875 3,061,875
----------
10,992,138
----------
PAR
MATURITY (000) VALUE
---------- ----------- -------------
CORPORATE BONDS (Continued)
Air Transportation - 0.2%
Northwest Airlines, Inc.,
Pass-Through Certificates, Series
99-2B
7.95% 03/01/15 $ 1,802 $ 1,603,337
-----------
Broadcasting - 4.8%
Adelphia Communications Corp.,
Senior Notes
10.50%(b)(c) 07/15/04 2,000 1,920,000
Alliance Atlantis Communications,
Inc., Senior Subordinated Notes
13.00% 12/15/09 4,500 5,085,000
Asia Global Crossing Ltd., Senior
Unsecured Notes
13.38%(b)(c) 10/15/10 2,000 225,000
Charter Communications Holdings
LLC, Senior Unsecured Notes
11.12%(e) 01/15/11 10,345 9,103,600
Granite Broadcasting Corp., First
Mortgage Notes
9.75%(d) 12/01/10 2,475 2,388,375
Insight Communications Co., Inc.,
Notes
12.75%(f) 02/15/11 3,680 3,128,000
Nextmedia Operating, Inc., Senior
Subordinated Notes
10.75% 07/01/11 3,000 3,360,000
Quebecor Media, Inc., Senior
Unsecured Notes
11.12% 07/15/11 2,000 2,295,000
XM Satellite Radio, Inc., Senior
Secured Notes
14.00% 03/15/10 3,000 3,330,000
-----------
30,834,975
-----------
Business Services - 1.6%
Global Cash Access, Senior
Subordinated Notes
8.75%(d) 03/15/12 1,810 1,882,399
Service Corp. Intl., Unsecured Notes
6.75%(d) 04/01/16 2,345 2,333,274
Worldspan LP, Senior Notes
9.62%(e) 06/15/11 5,815 6,003,988
-----------
10,219,661
-----------
Chemicals - 3.3%
Hercules, Inc., Senior Subordinated
Notes
6.75%(d) 10/15/29 3,175 3,175,000
Hercules, Inc., Senior Unsecured
Notes
11.12% 11/15/07 4,530 5,413,350
Huntsman Advanced Materials LLC,
Senior Secured Notes
11.00%(d)(e) 07/15/10 1,500 1,680,000
Huntsman Intl. LLC, Senior
Unsecured Notes
9.88% 03/01/09 2,445 2,689,500
Lyondell Chemical Co., Senior
Secured Notes
11.12% 07/15/12 1,395 1,499,625
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
62
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Chemicals (Continued)
Nova Chemicals Corp., Senior
Unsecured Notes
6.50%(d) 01/15/12 $2,075 $ 2,154,431
Noveon, Inc., Senior Subordinated
Notes
11.00% 02/28/11 2,500 2,862,500
Rockwood Specialties Group, Inc.,
Senior Subordinated Notes
10.62% 05/15/11 1,500 1,657,500
-----------
21,131,906
-----------
Computer Software & Services - 0.3%
DRS Technologies, Inc., Senior
Subordinated Notes
6.88% 11/01/13 1,695 1,758,562
-----------
Construction - 2.1%
Beazer Homes USA, Inc., Senior
Unsecured Notes
8.38% 04/15/12 360 402,300
Blount, Inc., Senior Subordinated
Notes
13.00% 08/01/09 2,475 2,623,500
Boyd Gaming Corp., Senior
Subordinated Notes
7.75% 12/15/12 2,015 2,156,050
D.R. Horton, Inc., Senior Unsecured
Notes
6.88% 05/01/13 3,000 3,330,000
K. Hovnanian Enterprises, Inc.,
Senior Unsecured Notes
10.50% 10/01/07 2,000 2,350,000
NVR, Inc., Senior Unsecured Notes
5.00% 06/15/10 2,875 2,889,375
-----------
13,751,225
-----------
Containers - 0.6%
Crown Holdings, Inc., Debentures
8.00% 04/15/23 1,175 1,133,875
Owens-Brockway Glass Container,
Inc., Senior Secured Notes
8.75% 11/15/12 975 1,063,969
Owens-Brockway Glass Container,
Inc., Senior Unsecured Notes
8.25% 05/15/13 1,500 1,545,000
-----------
3,742,844
-----------
Electronics - 1.8%
Affinity Group, Inc., Senior
Subordinated Notes
9.00%(d) 02/15/12 1,700 1,810,501
Amkor Technology, Inc., Senior
Unsecured Notes
7.12%(d) 03/15/11 2,070 2,064,825
Knowles Electronics, Inc., Senior
Subordinated Notes
13.12% 10/15/09 2,530 2,669,150
PF Net Communications, Inc., Senior
Unsecured Notes
13.75%(b)(c) 05/15/10 1,000 0
Stoneridge, Inc., Senior Unsecured
Notes
11.50% 05/01/12 2,500 3,000,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Electronics (Continued)
Viasystems, Inc., Senior
Subordinated Notes
10.50%(d) 01/15/11 $1,845 $ 2,071,012
-----------
11,615,488
-----------
Energy & Utilities - 10.0%
AES Corp., Senior Secured Notes
9.00%(d) 05/15/15 2,450 2,701,124
AES Corp., Senior Unsecured Notes
9.38% 09/15/10 1,090 1,186,738
AES Ironwood LLC, Senior Secured
Notes
8.86% 11/30/25 1,678 1,830,654
AES Red Oak LLC, Senior Secured
Notes
8.54% 11/30/19 3,311 3,625,464
Calpine Corp., Senior Secured Notes
8.75%(d)(e) 07/15/13 2,325 2,054,719
Cogentrix Energy, Inc., Senior
Unsecured Notes
8.75% 10/15/08 3,490 3,681,950
Edison Mission Energy, Senior
Unsecured Notes
10.00% 08/15/08 1,765 1,853,250
7.73% 06/15/09 3,795 3,662,175
Elwood Energy LLC, Senior Secured
Notes
8.16% 07/05/26 4,801 5,065,563
Homer City Funding LLC, Senior
Secured Notes
8.73% 10/01/26 1,375 1,527,144
Massey Energy Co., Senior Notes
6.95% 03/01/07 4,715 4,856,450
Midwest Generation LLC, Pass
Through Certificates, Series B
8.56% 01/02/16 6,565 6,827,600
Mirant Americas Generation, Inc.,
Senior Unsecured Notes
7.63%(b)(c)(e) 05/01/06 4,325 3,200,500
Nalco Co., Senior Notes
7.75%(d)(e) 11/15/11 5,630 5,855,200
National Waterworks, Inc., Senior
Subordinated Notes, Series B
10.50% 12/01/12 4,750 5,367,500
NRG Energy, Inc., Second Mortgage
Bonds
8.00%(d) 12/15/13 7,635 7,883,138
Reliant Resources, Inc., Senior
Secured Notes
9.25% 07/15/10 540 585,900
9.50% 07/15/13 1,020 1,127,100
Swift Energy Co., Senior
Subordinated Notes
10.25% 08/01/09 1,830 1,958,100
-----------
64,850,269
-----------
Entertainment & Leisure - 5.8%
Ameristar Casinos, Inc., Senior
Subordinated Notes
10.75% 02/15/09 1,450 1,676,562
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
63
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Entertainment & Leisure (Continued)
Gaylord Entertainment Co.,
Unsecured Notes
8.00%(d) 11/15/13 $2,035 $ 2,169,820
Host Marriott LP, Unsecured Notes
7.12% 11/01/13 3,915 4,061,812
John Q. Hammons Hotels LP, First
Mortgage Notes
8.88% 05/15/12 2,925 3,232,126
MGM Mirage, Inc., Senior Notes
6.00% 10/01/09 2,000 2,100,000
MGM Mirage, Inc., Senior Unsecured
Notes
5.88%(e) 02/27/14 2,900 2,892,750
Mohegan Tribal Gaming Authority,
Senior Subordinated Notes
8.00% 04/01/12 2,215 2,436,500
Park Place Entertainment, Inc.,
Senior Subordinated Notes
7.88% 03/15/10 4,075 4,543,625
Pinnacle Entertainment, Inc., Senior
Subordinated Notes
8.25%(d) 03/15/12 1,835 1,789,125
Prime Hospitality Corp., Senior
Subordinated Notes
8.38% 05/01/12 515 543,325
Starwood Hotels & Resorts
Worldwide, Inc., Debentures
7.38% 11/15/15 2,000 2,160,000
Station Casinos, Inc., Senior
Subordinated Notes
6.50%(d) 02/01/14 1,990 2,007,412
Station Casinos, Inc., Unsecured
Notes
6.00%(d) 04/01/12 1,310 1,355,850
True Temper Sports, Inc., Senior
Subordinated Notes
8.38%(d) 09/15/11 1,595 1,626,900
Vivendi Universal SA, Senior Notes
6.25% 07/15/08 715 772,200
Waterford Gaming LLC, Senior
Unsecured Notes
8.62%(d) 09/15/12 3,735 3,875,062
-----------
37,243,069
-----------
Finance - 7.7%
Ameriserve Finance Trust, Senior
Secured Notes
12.00%(b)(c)(d)(e) 09/15/06 500 25,000
Arch Western Finance LLC, Senior
Notes
6.75%(d) 07/01/13 2,625 2,795,625
BCP Luxemburg Holdings, Term
Loans
9.10% 02/19/05 2,993 2,993,000
10.10% 02/19/05 996 996,000
Calpine Canada Energy Finance
ULC, Senior Unsecured Notes
8.50% 05/01/08 2,260 1,666,750
Capital Guardian Ltd., Subordinated
Bonds
11.45% 05/24/13 1,000 906,900
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Finance (Continued)
CE Generation LLC, Senior Notes
7.42% 12/15/18 $2,445 $ 2,591,636
Charter Communications Holdings II,
LLC, Unsecured Notes
10.25% 09/15/10 600 618,000
Crown European Holdings SA,
Senior Secured Notes
10.88% 03/01/13 4,400 5,126,000
Dynegy-Roseton Danskammer LLC,
Pass-Through Certificates
7.27% 11/08/10 4,450 4,227,500
Gemstone Investor Ltd., Unsecured
Notes
7.71%(d) 10/31/04 2,600 2,587,000
Jason, Inc., Second Lien Notes
Certificates
15.00%(g) 12/15/07 1,500 1,455,000
Larwin Group - Participation in Asset
Exchange
7.00%(b)(c)(g)(h) 12/01/20 0 349
MDP Acquisitions PLC, Senior
Unsecured Notes
9.62% 10/01/12 3,000 3,375,000
New Asat Finance Ltd., Senior Notes
9.25%(d)(e) 02/01/11 2,550 2,728,500
Nexstar Finance LLC, Senior
Subordinated Notes
12.00% 04/01/08 1,720 1,930,700
Orion Power Holdings, Inc., Senior
Unsecured Notes
12.00% 05/01/10 4,800 5,964,000
Qwest Capital Funding, Inc., Senior
Unsecured Notes
7.75% 02/15/31 2,135 1,740,025
Qwest Services Corp., Senior
Subordinated Notes
13.50%(d) 12/15/10 4,470 5,185,200
WMC Finance Co., Senior
Unsecured Notes
11.75%(d) 12/15/08 2,875 3,047,500
Zais Investment Grade Ltd., Secured
Notes
9.95% 09/23/14 1,102 110,198
-----------
50,069,883
-----------
Food & Agriculture - 0.8%
American Seafoods Group LLC.,
Senior Subordinated Notes
10.12% 04/15/10 3,000 3,600,000
Gold Kist, Inc., Senior Notes
10.25%(d) 03/15/14 1,700 1,717,000
Nebco Evans Holding Co., Senior
Notes
17.25%(b)(c)(g) 07/15/07 800 0
-----------
5,317,000
-----------
Insurance - 0.5%
Crum & Forster Holdings Corp.,
Senior Notes
10.38%(d) 06/15/13 3,000 3,390,000
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Manufacturing - 4.5%
Briggs & Stratton Corp., Senior
Unsecured Notes
8.88% 03/15/11 $4,000 $ 4,900,000
California Steel Industries, Inc.,
Senior Notes
6.12%(d) 03/15/14 1,990 1,999,950
Collins & Aikman Floor Coverings,
Inc., Senior Subordinated Notes
9.75% 02/15/10 3,000 3,210,000
Compagnie Generale de
Geophysique, Senior Unsecured
Notes
10.62% 11/15/07 2,000 2,145,000
Cummins, Inc., Senior Debentures
7.12% 03/01/28 470 465,300
Dresser, Inc., Senior Subordinated
Notes
9.38% 04/15/11 1,950 2,125,500
Erico Intl. Corp., Senior Subordinated
Notes
8.88%(d) 03/01/12 2,005 2,080,188
General Cable Corp., Senior
Unsecured Notes
9.50%(d) 11/15/10 2,480 2,721,800
Gentek, Inc., Escrow Bonds
33.26% 12/01/33 1,000 0
Hexcel Corp., Senior Secured Notes
9.88% 10/01/08 3,200 3,552,000
Ispat Inland, Inc., Senior Notes
9.75%(d) 04/01/14 1,205 1,253,200
Plastipak Holdings, Inc., Senior
Unsecured Notes
10.75% 09/01/11 2,000 2,180,000
Rayovac Corp., Senior Subordinated
Notes
8.50% 10/01/13 1,410 1,515,750
SPX Corp., Senior Notes
6.25% 06/15/11 1,190 1,231,650
-----------
29,380,338
-----------
Medical & Medical Services - 2.8%
Athena Neurosciences, Inc., Senior
Unsecured Notes
7.25% 02/21/08 3,070 3,085,350
Flowserve Corp., Senior
Subordinated Notes
12.25% 08/15/10 1,600 1,848,000
HEALTHSOUTH Corp., Senior Notes
6.88%(e) 06/15/05 3,250 3,217,500
Iasis Healthcare Corp., Senior
Subordinated Notes
8.50% 10/15/09 2,265 2,417,888
Insight Health Services Corp., Senior
Subordinated Notes, Series B
9.88%(e) 11/01/11 575 571,406
Matria Healthcare, Inc., Senior
Unsecured Notes
11.00%(e) 05/01/08 2,150 2,386,500
Neighborcare, Inc., Senior
Subordinated Notes
6.88%(d) 11/15/13 1,450 1,504,375
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Medical & Medical Services (Continued)
Province Healthcare Co., Senior
Subordinated Notes
7.50% 06/01/13 $2,935 $ 3,052,400
-----------
18,083,419
-----------
Medical Instruments & Supplies - 2.5%
Apogent Technologies, Inc., Senior
Subordinated Notes
6.50% 05/15/13 2,230 2,374,950
Inverness Medical Innovations, Inc.,
Senior Subordinated Notes
8.75%(d) 02/15/12 1,495 1,517,425
National Nephrology Associates,
Senior Subordinated Notes
9.00%(d) 11/01/11 2,645 3,068,200
Norcross Safety Products LLC,
Senior Subordinated Notes
9.88% 08/15/11 1,600 1,752,000
Perkinelmer, Inc., Senior
Subordinated Notes
8.88% 01/15/13 3,235 3,736,425
Universal Hospital Services, Inc.,
Senior Notes
10.12%(d) 11/01/11 3,275 3,537,000
-----------
15,986,000
-----------
Metal & Mining - 2.3%
Century Aluminum Co., Senior
Secured Notes
11.75% 04/15/08 3,000 3,360,000
Ipsco, Inc., Senior Notes
8.75% 06/01/13 3,460 3,935,750
Russell Metals, Inc., Senior
Subordinated Notes
6.38%(d) 03/01/14 1,790 1,834,750
TRIMAS Corp., Senior Subordinated
Notes
9.88% 06/15/12 3,535 3,835,475
United States Steel Corp., Senior
Notes
9.75% 05/15/10 1,640 1,869,600
-----------
14,835,575
-----------
Motor Vehicles - 1.4%
CSK Auto, Inc., Senior Subordinated
Notes
7.00%(d)(e) 01/15/14 2,145 2,155,725
Dana Corp., Senior Notes
6.50% 03/01/09 1,045 1,112,925
Dura Operating Corp., Senior
Unsecured Notes
8.62% 04/15/12 2,500 2,662,500
Metaldyne Corp., Senior Unsecured
Notes
10.00%(d) 11/01/13 1,795 1,795,000
TRW Automotive, Inc., Senior
Subordinated Notes
11.00%(e) 02/15/13 1,300 1,547,000
-----------
9,273,150
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
65
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Oil & Gas - 8.9%
Chesapeake Energy Corp., Senior
Unsecured Notes
9.00% 08/15/12 $3,000 $ 3,465,000
Compton Petroleum Corp., Senior
Unsecured Notes
9.90% 05/15/09 3,000 3,337,500
Dynegy Holdings, Inc., Secured
Notes
10.12%(d) 07/15/13 2,250 2,469,375
El Paso Production Holding Co.,
Senior Notes
7.75% 06/01/13 8,140 7,570,200
Encore Acquisition Co., Senior
Subordinated Notes
6.25%(d) 04/15/14 1,115 1,126,150
Evergreen Resources, Inc., Senior
Subordinated Notes
5.88%(d) 03/15/12 1,520 1,535,200
Exco Resources, Inc., Senior Notes
7.25%(d) 01/15/11 1,880 1,941,100
Gulfterra Energy Partners LP, Senior
Notes
6.25% 06/01/10 2,500 2,718,750
Gulfterra Energy Partners LP, Senior
Subordinated Notes
8.50% 06/01/10 1,700 1,961,086
Hanover Compressor Co., Senior
Unsecured Notes
8.62% 12/15/10 1,620 1,733,400
Hanover Equipment Trust, Senior
Secured Notes
8.75% 09/01/11 4,150 4,502,750
KCS Energy, Inc., Senior Unsecured
Notes
7.12%(d) 04/01/12 1,580 1,595,800
North American Energy Partners,
Inc., Senior Unsecured Notes
8.75%(d) 12/01/11 4,605 4,651,050
Plains All American Pipeline LP,
Senior Notes
7.75% 10/15/12 1,250 1,485,450
The Premcor Refining Group, Inc.,
Senior Subordinated Notes
7.75%(e) 02/01/12 1,195 1,308,525
Range Resources Corp., Senior
Subordinated Notes
7.38% 07/15/13 2,325 2,418,000
Tom Brown, Inc., Senior
Subordinated Notes
7.25% 09/15/13 2,000 2,170,000
Transcontinental Gas Pipe Line
Corp., Senior Notes
8.88% 07/15/12 2,000 2,400,000
The Williams Cos., Inc., Senior
Debentures
7.50% 01/15/31 3,530 3,406,450
The Williams Cos., Inc., Senior Notes
8.62% 06/01/10 500 550,000
The Williams Cos., Inc., Senior
Unsecured Notes
7.62% 07/15/19 5,010 5,060,100
-----------
57,405,886
-----------
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Paper & Forest Products - 1.9%
Cascades, Inc., Unsecured Notes
7.25% 02/15/13 $2,175 $ 2,289,188
Georgia-Pacific Corp., Senior Notes
7.38% 07/15/08 2,500 2,725,000
Georgia-Pacific Corp., Senior
Unsecured Notes
8.00%(d) 01/15/24 3,900 4,104,750
Millar Western Forest Products Ltd.,
Senior Notes
7.75%(d) 11/15/13 2,825 2,994,500
-----------
12,113,438
-----------
Personal Services - 0.5%
United Rentals NA, Inc., Senior
Subordinated Notes
7.00%(d)(e) 02/15/14 735 690,900
United Rentals NA, Inc., Senior
Unsecured Notes
6.50%(d) 02/15/12 2,565 2,539,350
-----------
3,230,250
-----------
Plastics - 0.7%
Solo Cup Co., Senior Subordinated
Notes
8.50% 02/15/14 1,740 1,792,200
Tekni-Plex, Inc., Senior Secured
Notes
8.75%(d) 11/15/13 2,980 3,009,800
-----------
4,802,000
-----------
Publishing & Printing - 3.5%
Dex Media West LLC, Senior Notes
8.50%(d) 08/15/10 1,465 1,611,500
Dex Media West LLC, Senior
Subordinated Notes
9.88%(d) 08/15/13 1,445 1,603,950
Mail-Well I Corp., Senior
Subordinated Notes
7.88% 12/01/13 3,050 2,874,625
PEI Holdings, Inc., Senior Secured
Notes
11.00% 03/15/10 4,000 4,640,000
Perry-Judd's, Inc., Senior
Subordinated Notes
10.62% 12/15/07 4,500 3,690,000
Vertis, Inc., Senior Unsecured Notes
10.88% 06/15/09 1,400 1,407,000
Von Hoffmann Corp., Senior
Unsecured Notes
10.25% 03/15/09 2,000 2,090,000
Von Hoffmann Press, Inc., Senior
Subordinated Notes
10.38%(e) 05/15/07 1,000 1,002,500
WRC Media, Inc., Senior
Subordinated Notes
12.75% 11/15/09 4,000 4,030,000
-----------
22,949,575
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
66
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Real Estate - 1.2%
American Casino & Entertainment
Properties LLC, Senior Secured
Notes
7.85%(d) 02/01/12 $3,630 $ 3,630,000
HMH Properties, Inc., Senior Notes,
Series B
7.88% 08/01/08 2,000 2,085,000
WCI Communities, Inc., Senior
Subordinated Notes
7.88%(e) 10/01/13 2,050 2,193,500
-----------
7,908,500
-----------
Restaurants - 0.4%
Friendly Ice Cream Corp., Senior
Subordinated Notes
8.38%(d)(e) 06/15/12 1,545 1,591,350
Tricon Global Restaurants, Inc.,
Senior Unsecured Notes
8.88% 04/15/11 600 751,500
-----------
2,342,850
-----------
Retail Merchandising - 3.6%
AutoNation, Inc., Senior Unsecured
Notes
9.00% 08/01/08 2,500 2,918,750
Group 1 Automotive, Inc., Senior
Subordinated Notes
8.25% 08/15/13 2,000 2,205,000
J.C. Penney Co., Inc., Senior
Debentures
7.95% 04/01/17 2,300 2,702,500
J.C. Penney Co., Inc., Unsecured
Notes
8.00% 03/01/10 1,577 1,856,918
National Wine & Spirits, Inc., Senior
Unsecured Notes
10.12% 01/15/09 1,050 1,008,000
Office Depot, Inc., Senior
Subordinated Notes
10.00%(e) 07/15/08 3,000 3,630,000
Pantry, Inc., Senior Subordinated
Notes
7.75%(d) 02/15/14 3,190 3,205,950
Petro Stopping Centers Holdings LP,
Senior Secured Notes
9.00%(d) 02/15/12 1,680 1,730,400
Rite Aid Corp., Senior Debentures
6.88%(e) 08/15/13 4,125 3,836,250
-----------
23,093,768
-----------
Semiconductors & Related Devices - 0.6%
Chippac Intl. Co. Ltd., Senior
Subordinated Notes, Series B
12.75%(e) 08/01/09 3,700 4,033,000
-----------
Soaps & Cosmetics - 0.3%
Chattem, Inc., Senior Subordinated
Notes
7.00%(d) 03/01/14 1,995 1,999,988
-----------
Telecommunications - 11.5%
ACC Escrow Corp., Senior Notes
10.00% 08/01/11 2,175 2,077,125
Adelphia Communications Corp.,
Senior Unsecured Notes
10.88%(b)(c) 10/01/10 500 485,000
PAR
MATURITY (000) VALUE
---------- ---------- -------------
CORPORATE BONDS (Continued)
Telecommunications (Continued)
Alamosa Delaware, Inc., Senior
Unsecured Notes
8.50%(d)(e) 01/31/12 $4,335 $ 4,107,411
American Tower Corp., Senior
Subordinated Notes
7.25%(d) 12/01/11 1,090 1,111,800
CCO Holdings LLC, Senior
Unsecured Note
8.75%(d)(e) 11/15/13 1,270 1,308,100
Centennial Communications Corp.,
Senior Unsecured Notes
8.12%(d)(e) 02/01/14 3,875 3,565,000
Cincinnati Bell, Inc., Senior
Subordinated Notes
8.38% 01/15/14 1,240 1,202,800
Cincinnati Bell, Inc., Senior
Unsecured Notes
7.25% 07/15/13 1,245 1,257,450
Crown Castle Intl. Corp., Senior
Unsecured Notes
7.50% 12/01/13 1,550 1,588,750
CSC Holdings, Inc., Senior
Debentures
7.88% 02/15/18 7,090 7,657,200
CSC Holdings, Inc., Senior
Unsecured Notes
6.75%(d) 04/15/12 2,500 2,500,000
DirecTV Holdings LLC, Unsecured
Notes
8.38% 03/15/13 1,700 1,942,250
Echostar DBS Corp., Senior
Unsecured Notes
10.38% 10/01/07 3,000 3,262,500
Knology, Inc., Senior Unsecured
Notes
12.00% 11/30/09 2,683 2,670,031
L-3 Communications Corp., Senior
Subordinated Notes
6.12% 07/15/13 1,295 1,337,088
Nextel Communications, Inc., Senior
Notes
5.95% 03/15/14 2,850 2,828,625
7.38% 08/01/15 4,450 4,828,250
Nextel Communications, Inc., Senior
Unsecured Notes
5.25% 01/15/10 1,119 1,139,813
Panamsat Corp., Senior Unsecured
Notes
8.50%(i) 02/01/12 4,385 4,560,400
Qwest Communications Intl., Inc.,
Senior Debentures
6.88% 07/15/28 2,135 1,643,950
Qwest Communications Intl., Inc.,
Senior Notes
7.25% 06/15/07 2,930 2,666,300
Qwest Communications Intl., Inc.,
Senior Unsecured Notes
7.50%(d)(e) 02/15/14 2,945 2,760,938
Qwest Corp., Senior Unsecured
Notes
9.12%(d) 03/15/12 3,050 3,461,750
Rural Cellular Corp., Senior
Unsecured Notes
9.88% 02/01/10 1,270 1,276,350
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
67
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004
PAR
MATURITY (000) VALUE
---------- --------- -------------
CORPORATE BONDS (Continued)
Telecommunications (Continued)
Rural Cellular Corp., Unsecured
Notes
8.25%(d) 03/15/12 $1,095 $ 1,119,638
Ubiquitel Operating Co., Senior
Notes
9.88%(d) 03/01/11 3,335 3,234,950
Western Wireless Corp., Senior
Unsecured Notes
9.25% 07/15/13 3,785 3,889,088
Worldcom, Inc., Senior Debentures
8.25%(b)(c) 01/20/23 2,950 2,345,250
7.75%(b)(c)(e) 03/15/24 1,200 954,000
WorldCom, Inc., Senior Unsecured
Notes
8.25%(b)(c)(e) 05/15/10 4,000 1,360,000
-----------
74,141,807
-----------
Tires & Rubber - 0.2%
Kraton Polymers LLC, Senior
Subordinated Notes
8.12%(d) 01/15/14 1,440 1,519,200
-----------
Transportation - 2.7%
Hornbeck Offshore Services, Inc.,
Senior Unsecured Notes
10.62% 08/01/08 2,500 2,762,499
Omi Corp., Senior Notes
7.62% 12/01/13 2,670 2,783,474
Overseas Shipholding Group, Inc.,
Debentures
8.75% 12/01/13 4,350 4,942,688
RailAmerica Transportation Corp.,
Senior Subordinated Notes
12.88% 08/15/10 1,235 1,432,600
Teekay Shipping Corp., Senior
Unsecured Notes
8.88% 07/15/11 1,250 1,450,000
Transportacion Ferroviaria Mexicana,
SA de CV, Senior Unsecured
Notes
12.50% 06/15/12 3,500 3,920,000
-----------
17,291,261
-----------
Waste Management - 1.5%
Allied Waste Industries, Inc., Senior
Debentures
7.40% 09/15/35 3,500 3,377,500
PAR/SHARES(l)
MATURITY (000) VALUE
---------- -------------- --------------
CORPORATE BONDS (Continued)
Waste Management (Continued)
Allied Waste NA, Inc., Senior
Secured Notes
8.50% 12/01/08 $ 1,000 $ 1,117,500
Allied Waste NA, Inc., Senior
Unsecured Notes
6.50%(d) 11/15/10 500 507,500
Casella Waste Systems, Inc., Senior
Subordinated Notes
9.75% 02/01/13 4,000 4,480,000
------------
9,482,500
------------
TOTAL CORPORATE BONDS
(Cost $576,668,036) 596,392,862
------------
FOREIGN BONDS - 0.4%
BCP Luxemburg Holdings, Term
Loans
10.10%
(Cost $2,497,957) 02/19/05 1,987 2,441,812
------------
SHORT TERM INVESTMENTS - 14.9%
Chase Manhattan Bank, Time
Deposit
1.06%(j) 04/01/04 201 201,100
Federal Home Loan Bank, Discount
Notes
0.97% 04/01/04 15,000 15,000,000
0.99% 05/06/04 20,000 19,980,750
HBOS Treasury Services PLC, Asset
Backed Commercial Paper
1.11%(j) 08/11/04 1,318 1,317,852
Natexis Banques International,
Floating Rate Notes
1.11%(j) 04/01/04 2,376 2,375,997
Galileo Money Market Fund 5,195 5,194,871
Institutional Money Market Trust(j) 52,278 52,278,060
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $96,348,630) 96,348,630
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
HIGH YIELD BOND PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004
VALUE
---------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $692,728,430(a)) 109.4% $707,883,718
LIABILITIES IN EXCESS OF
OTHER ASSETS
(Including $56,173,010 of payable
upon return of securities loaned) ( 9.4)% (60,783,075)
----- ------------
NET ASSETS (Applicable to
11,874,781 BlackRock shares,
21,538,277 Institutional shares,
14,045,696 Service shares,
8,933,863 Investor A shares,
13,710,298 Investor B shares and
9,661,946 Investor C shares
outstanding) 100.0% $647,100,643
===== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
BLACKROCK SHARE
($96,351,456/11,874,781) $ 8.11
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($174,738,263/21,538,277) $ 8.11
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($113,971,268/14,045,696) $ 8.11
======
NET ASSET VALUE AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($72,455,983/8,933,863) $ 8.11
======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($8.11/0.950) $ 8.54
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($111,170,713/13,710,298) $ 8.11
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR C SHARE
($78,412,960/9,661,946) $ 8.12
======
- -------------------
(a) Cost for Federal income tax purposes is $693,539,053. The
gross unrealized appreciation (depreciation) on a tax basis is
as follows:
Gross unrealized appreciation $29,429,527
Gross unrealized depreciation (15,084,862)
-----------
$14,344,665
===========
(b) Non-income producing security.
(c) Security in default.
(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, 2004,
the fund held 25.7% of its net assets, with a current market value of
$166,479,310, in securities restricted as to resale.
(e) Total or partial securities on loan.
(f) Rates shown are the effective yields as of March 31, 2004.
(g) Securities valued at fair value as determined in good faith by or under the
direction of the Trustees.
(h) Security is illiquid.
(i) Rates shown are the rates as of March 31, 2004.
(j) Securities purchased with the cash proceeds from securities loaned.
(k) Payment in kind security.
(l) In local currency.
INVESTMENT ABBREVIATIONS
IO Interest Only
PO Principal Only
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
69
BLACKROCK FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 2004 (UNAUDITED)
ENHANCED LOW DURATION INTERMEDIATE INTERMEDIATE CORE BOND
INCOME BOND GOVERNMENT BOND TOTAL RETURN
PORTFOLIO/1/ PORTFOLIO BOND PORTFOLIO PORTFOLIO PORTFOLIO
------------ ---------------- ---------------- ---------------- ---------------
Investment income:
Interest ...................................... $ 56,488 $ 22,752,298 $ 6,948,003 $ 19,143,311 $ 53,753,536
Securities lending income ..................... - 1,263 - 3,545 11,205
Dividends ..................................... - - - - -
--------- ------------ ------------ ------------ -------------
Total investment income ...................... 56,488 22,753,561 6,948,003 19,146,856 53,764,741
--------- ------------ ------------ ------------ -------------
Expenses:
Investment advisory fee ....................... 9,611 4,437,315 778,522 2,281,356 5,808,954
Administration fee ............................ 2,043 679,834 132,349 367,204 886,958
Administration fee - class specific ........... 843 928,293 225,700 438,930 1,103,866
Custodian fee ................................. 755 124,149 34,826 75,627 220,612
Transfer agent fee ............................ - 92,102 12,968 28,472 64,299
Transfer agent fee - class specific ........... 120 226,687 52,132 87,363 249,090
Shareholder servicing fees - class specific.... - 649,701 106,059 133,567 454,431
Shareholder processing fees - class
specific ..................................... - 470,963 64,068 99,089 314,963
Distribution fees - class specific ............ - 1,000,717 140,878 127,771 645,029
Legal and audit ............................... 3,760 59,707 16,396 35,877 79,607
Printing ...................................... 810 154,860 26,802 77,143 203,156
Registration fees and expenses ................ 1,350 49,553 26,641 23,411 35,776
Trustees' fees ................................ 270 20,462 3,847 10,654 27,723
Other ......................................... 1,441 59,621 15,956 37,597 90,973
--------- ------------ ------------ ------------ -------------
Total expenses excluding interest
expense ..................................... 21,003 8,953,964 1,637,144 3,824,061 10,185,437
Interest expense ............................ - 1,437 - - -
--------- ------------ ------------ ------------ -------------
Total expenses ............................... 21,003 8,955,401 1,637,144 3,824,061 10,185,437
--------- ------------ ------------ ------------ -------------
Less investment advisory and
administration fees waived ................. (11,653) (2,130,432) (377,278) (969,340) (2,627,764)
Less administration fee waived - class
specific ................................... (843) (170,335) (1) (65,175) (205,466)
Less distribution fee waived - class
specific ................................... - (51,094) (26,193) (19,684) (59,998)
Less transfer agent fee waived - class
specific ................................... - (65,486) - (11,715) (47,589)
Less expenses reimbursed by advisor.......... (1,667) - - - -
--------- ------------ ------------- ------------ -------------
Net expenses ................................. 6,840 6,538,054 1,233,672 2,758,147 7,244,620
--------- ------------ ------------- ------------ -------------
Net investment income .......................... 49,648 16,215,507 5,714,331 16,388,709 46,520,121
--------- ------------ ------------- ------------ -------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions (net of foreign
taxes) ...................................... 2,081 3,782,095 3,796,420 7,499,296 34,081,830
Futures and options contracts ................ - (5,856,217) (2,064,353) (5,202,020) (26,814,897)
Swap and swaption contracts .................. - 119,813 21,523 5,467,384 10,892,934
Foreign currency related transactions ........ - (6,391,976) - - (10,636,963)
--------- ------------ ------------- ------------ -------------
2,081 (8,346,285) 1,753,590 7,764,660 7,522,904
--------- ------------ ------------- ------------ -------------
Change in unrealized appreciation
(depreciation) from:
Investments (net of foreign taxes) ........... 20,663 (2,233,851) (3,887,627) (2,296,762) 1,091,644
Futures and options contracts ................ - 1,293,235 1,018,316 2,469,386 7,369,364
Swap and swaption contracts .................. - 2,179,722 525,925 (2,978,528) (6,009,479)
Foreign currency related transactions ........ - 7,452,525 - - 9,190,362
--------- ------------ ------------- ------------ -------------
20,663 8,691,631 (2,343,386) (2,805,904) 11,641,891
--------- ------------ ------------- ------------ -------------
Net gain (loss) on investments and foreign
currency transactions ......................... 22,744 345,346 (589,796) 4,958,756 19,164,795
--------- ------------ ------------- ------------ -------------
Net increase in net assets resulting from
operations .................................... $ 72,392 $ 16,560,853 $ 5,124,535 $ 21,347,465 $ 65,684,916
========= ============ ============= ============ =============
- ---------
/1/ For the period 3/4/04 (commencement of operations) through 3/31/04.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70
BLACKROCK FUNDS
CORE PLUS GOVERNMENT MANAGED INTERNATIONAL HIGH YIELD
TOTAL RETURN INCOME GNMA INCOME BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------- -------------- -------------- --------------- --------------- ---------------
$ 4,904,068 $ 3,788,405 $ 8,329,684 $ 22,824,237 $ 4,607,484 $ 26,272,163
- - - 3,388 - 71,999
- - - - - 53,066
----------- ------------ ------------ ------------- ------------ ------------
4,904,068 3,788,405 8,329,684 22,827,625 4,607,484 26,397,228
----------- ------------ ------------ ------------- ------------ ------------
647,707 448,067 842,659 2,324,608 763,500 1,558,770
110,111 76,171 130,230 373,691 117,995 258,816
45,375 129,155 202,819 659,997 201,091 409,039
53,773 40,527 64,461 108,244 76,270 50,259
3,807 32,026 16,802 18,758 55,305 49,000
9,355 51,018 52,268 122,542 52,730 114,757
106 222,232 129,781 139,260 209,352 409,358
64 133,339 78,391 110,420 144,394 275,019
293 353,864 319,942 64,396 186,826 754,150
13,246 13,294 19,073 37,489 14,084 19,140
19,305 14,541 28,838 81,640 19,378 49,509
5,879 16,744 19,896 20,309 25,762 40,039
2,342 2,682 3,892 11,684 2,539 7,012
10,361 12,490 14,929 43,863 13,323 37,746
----------- ------------ ------------ ------------- ------------ ------------
921,724 1,546,150 1,923,981 4,116,901 1,882,549 4,032,614
- - 150,310 341 - 34,701
----------- ------------ ------------ ------------- ------------ ------------
921,724 1,546,150 2,074,291 4,117,242 1,882,549 4,067,315
----------- ------------ ------------ ------------- ------------ ------------
(374,730) (270,052) (481,099) (748,633) - (420,853)
(30,984) (194) (3,760) (21,401) - (9,479)
(4) (47,140) (9,852) (22,824) (45,264) (38,075)
(15) - - - - -
- - - - - -
----------- ------------ ------------ ------------- ------------ ------------
515,991 1,228,764 1,579,580 3,324,384 1,837,285 3,598,908
----------- ------------ ------------ ------------- ------------ ------------
4,388,077 2,559,641 6,750,104 19,503,241 2,770,199 22,798,320
----------- ------------ ------------ ------------- ------------ ------------
2,897,653 1,972,895 3,166,332 11,491,702 1,759,550 27,429,434
(1,799,772) 2,715,262 (3,128,627) (14,675,618) (634,081) -
(169,087) (194,629) (421,425) 6,916,716 (69,377) 362,807
(1,034,472) - - (4,654,096) 15,725,441 157
----------- ------------ ------------ ------------- ------------ ------------
(105,678) 4,493,528 (383,720) (921,296) 16,781,533 27,792,398
----------- ------------ ------------ ------------- ------------ ------------
1,168,578 (1,346,622) (1,655,129) (523,834) 1,841,221 37,941
377,308 (684,027) 1,089,152 5,114,894 (21,030) -
290,232 348,318 842,834 (4,546,950) 175,912 35,826
916,752 - - 3,719,561 (2,100,198) 55,465
----------- ------------ ------------ ------------- ------------ ------------
2,752,870 (1,682,331) 276,857 3,763,671 (104,095) 129,232
----------- ------------ ------------ ------------- ------------ ------------
2,647,192 2,811,197 (106,863) 2,842,375 16,677,438 27,921,630
----------- ------------ ------------ ------------- ------------ ------------
$ 7,035,269 $ 5,370,838 $ 6,643,241 $ 22,345,616 $ 19,447,637 $ 50,719,950
=========== ============ ============ ============= ============ ============
71
BLACKROCK FUNDS
STATEMENT OF CASH FLOWS
GNMA PORTFOLIO
FOR THE SIX MONTHS ENDED MARCH 31, 2004(UNAUDITED)
Increase (decrease) in cash
Cash flows from operating activities:
Net increase (decrease) in net assets from operations ................................... $ 6,643,241
Adjustments to reconcile net increase in net assets from operations to net cash provided
by (used for) operating activities:
Purchase of long-term investment securities .......................................... (1,269,855,218)
Proceeds from disposition of long-term investment securities ......................... 1,332,642,447
Increase (decrease) in options written, at value ..................................... (255,049)
Increase (decrease) in swaptions written, at value ................................... 806,747
Net purchase of short term investment securities ..................................... 3,109,440
Amortization (accretion) of premium (discount) ....................................... 340,445
(Increase) decrease in futures variation margin ...................................... (92,816)
(Increase) decrease in interest receivable ........................................... 330,375
(Increase) decrease in investments sold receivable ................................... 229,174,602
(Increase) decrease in interest receivable on interest rate swaps .................... (1,172)
(Increase) decrease in prepaid expenses .............................................. (5,559)
Increase (decrease) in investments purchased payable ................................. (257,790,819)
Increase (decrease) in interest payable on interest rate swaps ....................... (332,514)
Increase (decrease) in accrued expenses .............................................. 10,100
Net (increase) decrease in unrealized appreciation (depreciation) on investment
securities .......................................................................... 1,655,129
Net (increase) decrease in unrealized appreciation (depreciation) on swap
and swaption contracts .............................................................. 1,618,066
Net realized (gain) loss on investment securities .................................... (3,166,332)
----------------
Net cash provided by (used for) operating activities .................................... 44,831,113
----------------
Cash flows from financing activities:
Net borrowing (repayment) of reverse repurchase agreements and other
short term borrowings ............................................................... 20,764,348
Proceeds from units sold ............................................................. 40,814,957
Payments on units redeemed ........................................................... (98,672,989)
Cash distributions paid .............................................................. (7,737,429)
----------------
Net cash provided by (used for) financing activities .................................... (44,831,113)
----------------
Net increase (decrease) in cash .......................................................... -
----------------
Cash:
Beginning balance ....................................................................... -
----------------
Ending balance .......................................................................... $ -
================
Supplemental disclosure of cash flow information:
Reinvestment of dividends and distributions (non-cash financing activity) ................ $ 1,371,666
Cash paid during the year for interest ................................................... $ (150,310)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
ENHANCED
INCOME LOW DURATION INTERMEDIATE GOVERNMENT
PORTFOLIO BOND PORTFOLIO PORTFOLIO
----------------- ----------------------------------- -------------------------------
FOR THE FOR THE FOR THE
PERIOD 3/4/04 /1/ SIX MONTHS SIX MONTHS
TO ENDED FOR THE ENDED FOR THE
3/31/04 3/31/04 YEAR ENDED 3/31/04 YEAR ENDED
(UNAUDITED) (UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
----------------- ----------------- ----------------- --------------- ---------------
Increase (decrease) in net assets:
Operations:
Net investment income ...................... $ 49,648 $ 16,215,507 $ 25,490,358 $ 5,714,331 $ 14,677,248
Net realized gain (loss) on investments,
futures, options, swap and swaption
contracts and foreign currency related
transactions .............................. 2,081 (8,346,285) 15,335,792 1,753,590 3,454,205
Net unrealized gain (loss) on investments,
futures, options, swap and swaption
contracts and foreign currency related
transactions .............................. 20,663 8,691,631 (8,776,574) (2,343,386) (8,592,344)
------------ --------------- --------------- ------------- -------------
Net increase in net assets resulting
from operations ........................... 72,392 16,560,853 32,049,576 5,124,535 9,539,109
------------ --------------- --------------- ------------- -------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ............................ (49,445) (8,362,463) (10,255,580) - -
Institutional Class ........................ (203) (5,212,651) (11,541,761) (4,861,099) (12,522,267)
Service Class .............................. - (2,458,037) (4,657,450) (28,914) (67,485)
Investor A Class ........................... - (932,277) (2,463,978) (1,024,892) (2,488,527)
Investor B Class ........................... - (413,506) (1,292,709) (195,378) (418,868)
Investor C Class ........................... - (926,485) (3,057,821) (273,253) (484,207)
------------ --------------- --------------- ------------- -------------
Total distributions from net investment
income .................................... (49,648) (18,305,419) (33,269,299) (6,383,536) (15,981,354)
------------ --------------- --------------- ------------- -------------
Net realized gains:
BlackRock Class ............................ - (3,237,280) (82,434) - -
Institutional Class ........................ - (2,090,517) (191,283) - -
Service Class .............................. - (1,158,715) (79,846) - -
Investor A Class ........................... - (463,589) (44,408) - -
Investor B Class ........................... - (352,109) (34,934) - -
Investor C Class ........................... - (776,700) (81,548) - -
------------ --------------- --------------- ------------- -------------
Total distributions from net realized gains. - (8,078,910) (514,453) - -
------------ --------------- --------------- ------------- -------------
Total distributions to shareholders ........ (49,648) (26,384,329) (33,783,752) (6,383,536) (15,981,354)
------------ --------------- --------------- ------------- -------------
Capital share transactions ................... 40,357,571 268,345,496 794,612,662 (2,788,216) (28,551,422)
------------ --------------- --------------- ------------- -------------
Redemption fees .............................. - - - - -
------------ --------------- --------------- ------------- -------------
Total increase (decrease) in net assets .... 40,380,315 258,522,020 792,878,486 (4,047,217) (34,993,667)
Net assets:
Beginning of period ........................ - 1,735,426,944 942,548,458 317,089,685 352,083,352
------------ --------------- --------------- ------------- -------------
End of period .............................. $ 40,380,315 $ 1,993,948,964 $ 1,735,426,944 $ 313,042,468 $ 317,089,685
============ =============== =============== ============= =============
End of period distributions in excess of
net investment income ..................... $ - $ (6,038,150) $ (3,948,238) $ (1,108,315) $ (439,110)
- ---------
/1/ Commencement of operations.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
74
BLACKROCK FUNDS
INTERMEDIATE CORE CORE PLUS
BOND PORTFOLIO BOND TOTAL RETURN PORTFOLIO TOTAL RETURN PORTFOLIO
- ------------------------------------- ----------------------------------------- -----------------------------------------
FOR THE FOR THE FOR THE
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED FOR THE ENDED FOR THE ENDED FOR THE
3/31/04 YEAR ENDED 3/31/04 YEAR ENDED 3/31/04 YEAR ENDED
(UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
- ----------------- ----------------- ------------------- ------------------- ------------------- -------------------
$ 16,388,709 $ 39,716,866 $ 46,520,121 $ 92,570,855 $ 4,388,077 $ 4,958,465
7,764,660 19,119,793 7,522,904 56,327,671 (105,678) 3,954,274
(2,805,904) (9,719,840) 11,641,891 (21,849,836) 2,752,870 1,495
------------- ------------- --------------- --------------- ------------ ------------
21,347,465 49,116,819 65,684,916 127,048,690 7,035,269 8,914,234
------------- ------------- --------------- --------------- ------------ ------------
(8,983,421) (18,828,295) (26,131,148) (47,373,640) (4,789,115) (6,432,996)
(8,137,930) (19,095,974) (19,886,043) (48,830,922) (2) (5)
(1,260,173) (2,159,818) (2,871,339) (5,999,079) (2) (4)
(795,958) (1,537,884) (2,460,049) (5,203,878) (132) (169)
(221,249) (388,162) (1,108,033) (2,786,614) (974) (1,471)
(237,377) (316,713) (1,437,775) (3,007,369) (2) (36)
------------- ------------- --------------- --------------- ------------ ------------
(19,636,108) (42,326,846) (53,894,387) (113,201,502) (4,790,227) (6,434,681)
------------- ------------- --------------- --------------- ------------ ------------
(8,456,396) (883,521) (26,256,064) (4,227,575) (2,841,616) (525,738)
(8,468,244) (856,709) (22,929,791) (4,985,423) (2) -
(1,395,950) (87,669) (3,469,665) (585,558) (2) -
(910,295) (65,175) (2,988,709) (502,460) (96) (15)
(311,883) (17,708) (1,715,637) (329,345) (900) -
(351,717) (11,922) (2,208,746) (337,812) (2) -
------------- ------------- --------------- --------------- ------------ ------------
(19,894,485) (1,922,704) (59,568,612) (10,968,173) (2,842,618) (525,753)
------------- ------------- --------------- --------------- ------------ ------------
(39,530,593) (44,249,550) (113,462,999) (124,169,675) (7,632,845) (6,960,434)
------------- ------------- --------------- --------------- ------------ ------------
125,206,955 56,681,926 377,419,968 352,885,179 88,186,661 126,877,504
------------- ------------- --------------- --------------- ------------ ------------
- - - - - -
------------- ------------- --------------- --------------- ------------ ------------
107,023,827 61,549,195 329,641,885 355,764,194 87,589,085 128,831,304
884,266,273 822,717,078 2,348,041,776 1,992,277,582 224,336,184 95,504,880
------------- ------------- --------------- --------------- ------------ ------------
$ 991,290,100 $ 884,266,273 $ 2,677,683,661 $ 2,348,041,776 $311,925,269 $224,336,184
============= ============= =============== =============== ============ ============
$ (4,508,614) $ (1,261,215) $ (17,255,074) $ (9,880,808) $ (1,167,103) $ (764,953)
75
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
GOVERNMENT GNMA
INCOME PORTFOLIO PORTFOLIO
------------------------------------ ------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
3/31/04 YEAR ENDED 3/31/04 YEAR ENDED
(UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
------------------ ----------------- ------------------ -----------------
Increase (decrease) in net assets:
Operations:
Net investment income ............................... $ 2,559,641 $ 7,737,857 $ 6,750,104 $ 14,156,969
Net realized gain (loss) on investments,
futures, options, swap and swaption
contracts and foreign currency related
transactions ....................................... 4,493,528 3,758,752 (383,720) 936,714
Net unrealized gain (loss) on investments,
futures, options, swap and swaption contracts
and foreign currency related
transactions ....................................... (1,682,331) (995,243) 276,857 (3,974,356)
------------- ------------- ------------- -------------
Net increase in net assets resulting from
operations ......................................... 5,370,838 10,501,366 6,643,241 11,119,327
------------- ------------- ------------- -------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ..................................... (21,615) (2,941,449) (1,093,697) (1,357,007)
Institutional Class ................................. - - (5,038,402) (12,333,041)
Service Class ....................................... - - (49,934) (75,619)
Investor A Class .................................... (1,830,863) (3,920,267) (559,675) (915,781)
Investor B Class .................................... (822,082) (1,808,311) (784,510) (1,423,856)
Investor C Class .................................... (449,014) (890,807) (1,210,544) (2,276,734)
------------- ------------- ------------- -------------
Total distributions from net investment income ...... (3,123,574) (9,560,834) (8,736,762) (18,382,038)
------------- ------------- ------------- -------------
Capital:
BlackRock Class ..................................... - - - -
Institutional Class ................................. - - - -
Service Class ....................................... - - - -
Investor A Class .................................... - - - -
Investor B Class .................................... - - - -
Investor C Class .................................... - - - -
------------- ------------- ------------- -------------
Total distributions from capital .................... - - - -
------------- ------------- ------------- -------------
Net realized gains:
BlackRock Class ..................................... (40) - - -
Institutional Class ................................. - - - -
Service Class ....................................... - - - -
Investor A Class .................................... (1,252,750) (1,211,930) - -
Investor B Class .................................... (740,622) (391,017) - -
Investor C Class .................................... (407,937) (177,059) - -
------------- ------------- ------------- -------------
Total distributions from net realized gains ......... (2,401,349) (1,780,006) - -
------------- ------------- ------------- -------------
Total distributions to shareholders ................. (5,524,923) (11,340,840) (8,736,762) (18,382,038)
------------- ------------- ------------- -------------
Capital share transactions ............................ 45,847,463 61,370,630 (55,956,902) 85,516,111
------------- ------------- ------------- -------------
Redemption fees ....................................... - - - -
------------- ------------- ------------- -------------
Total increase (decrease) in net assets ............. 45,693,378 60,531,156 (58,050,423) 78,253,400
Net assets:
Beginning of period ................................. 169,994,540 109,463,384 336,418,538 258,165,138
------------- ------------- ------------- -------------
End of period ....................................... $ 215,687,918 $ 169,994,540 $ 278,368,115 $ 336,418,538
============= ============= ============= =============
End of period undistributed net investment
income (distributions in excess of net investment
income) ............................................ $ (1,083,020) $ (519,087) $ (3,604,552) $ (1,617,894)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
76
BLACKROCK FUNDS
MANAGED INTERNATIONAL HIGH YIELD
INCOME PORTFOLIO BOND PORTFOLIO BOND PORTFOLIO
- -------------------------------------- -------------------------------------- --------------------------------------
FOR THE FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
3/31/04 YEAR ENDED 3/31/04 YEAR ENDED 3/31/04 YEAR ENDED
(UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
- ------------------ ----------------- ------------------ ----------------- ------------------ -----------------
$ 19,503,241 $ 50,894,352 $ 2,770,199 $ 3,734,959 $ 22,798,320 $ 40,997,834
(921,296) 33,061,141 16,781,533 1,888,540 27,792,398 12,455,790
3,763,671 (15,654,912) (104,095) 10,665,228 129,232 52,524,913
------------- -------------- ------------- ------------- ------------- -------------
22,345,616 68,300,581 19,447,637 16,288,727 50,719,950 105,978,537
------------- -------------- ------------- ------------- ------------- -------------
- - - - (2,998,016) (7,201,283)
(20,097,923) (50,665,007) (1,665,667) (1,090,173) (6,731,952) (14,329,771)
(2,165,413) (5,092,302) (1,135,263) (879,879) (3,545,382) (5,011,712)
(1,093,458) (2,800,732) (1,585,891) (1,154,445) (2,766,043) (4,999,000)
(198,778) (466,236) (195,928) (222,829) (3,560,098) (7,093,599)
(15,379) (30,380) (307,369) (157,085) (2,489,265) (4,037,112)
------------- -------------- ------------- ------------- ------------- -------------
(23,570,951) (59,054,657) (4,890,118) (3,504,411) (22,090,756) (42,672,477)
------------- -------------- ------------- ------------- ------------- -------------
- - - - - -
- - - (959,635) - -
- - - (727,598) - -
- - - (1,120,801) - -
- - - (196,022) - -
- - - (265,702) - -
------------- -------------- ------------- ------------- ------------- -------------
- - - (3,269,758) - -
------------- -------------- ------------- ------------- ------------- -------------
- - - - - -
(20,585,568) - - (214,906) - -
(2,347,707) - - (205,184) - -
(1,248,261) - - (304,717) - -
(267,625) - - (78,456) - -
(19,166) - - (63,113) - -
------------- -------------- ------------- ------------- ------------- -------------
(24,468,327) - - (866,376) - -
------------- -------------- ------------- ------------- ------------- -------------
(48,039,278) (59,054,657) (4,890,118) (7,640,545) (22,090,756) (42,672,477)
------------- -------------- ------------- ------------- ------------- -------------
(37,135,124) (169,624,908) 148,478,512 87,478,509 42,390,665 258,632,905
------------- -------------- ------------- ------------- ------------- -------------
- - 9,131 - 9,555 -
------------- -------------- ------------- ------------- ------------- -------------
(62,828,786) (160,378,984) 163,045,162 96,126,691 71,029,414 321,938,965
963,846,576 1,124,225,560 218,307,258 122,180,567 576,071,229 254,132,264
------------- -------------- ------------- ------------- ------------- -------------
$ 901,017,790 $ 963,846,576 $ 381,352,420 $ 218,307,258 $ 647,100,643 $ 576,071,229
============= ============== ============= ============= ============= =============
$ (3,456,121) $ 611,589 $ (5,853,963) $ (3,734,044) $ (2,778,348) $ (3,485,912)
77
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS
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 INCOME AND UNREALIZED) INCOME/7/ GAINS PERIOD
=========== ============ ================= =============== =============== ============
- -------------------------
Enhanced Income Portfolio
- -------------------------
BlackRock Class
3/04/04 /1/ through 3/31/04 /10/ $ 10.00 $ 0.02 $ 0.01 $ (0.02) $ - $ 10.01
Institutional Class
3/19/04 /1/ through 3/31/04 /10/ $ 10.00 $ - $ 0.01 $ - $ - $ 10.01
Service Class
3/19/04 /1/ through 3/31/04 /10/ $ 10.00 $ - $ - $ - $ - $ 10.00
Investor A Class
3/19/04 /1/ through 3/31/04 /10/ $ 10.00 $ - $ - $ - $ - $ 10.00
- ---------------------------
Low Duration Bond Portfolio
- ---------------------------
BlackRock Class
10/01/03 through 3/31/04 /10/ $ 10.23 $ 0.12 $ (0.02) $ (0.12) $ (0.04) $ 10.17
9/30/03 10.25 0.30 0.01 (0.32) (0.01) 10.23
9/30/02 10.20 0.42 0.13 (0.45) (0.05) 10.25
9/30/01 9.81 0.57 0.42 (0.60) - 10.20
9/30/00 9.82 0.62 (0.02) (0.61) - 9.81
9/30/99 10.03 0.61 (0.22) (0.60) - 9.82
Institutional Class
10/01/03 through 3/31/04 /10/ $ 10.23 $ 0.10 $ - $ (0.11) $ (0.04) $ 10.18
9/30/03 10.25 0.26 0.03 (0.30) (0.01) 10.23
9/30/02 10.21 0.41 0.12 (0.44) (0.05) 10.25
9/30/01 9.82 0.56 0.41 (0.58) - 10.21
9/30/00 9.82 0.61 (0.01) (0.60) - 9.82
9/30/99 10.03 0.58 (0.20) (0.59) - 9.82
Service Class
10/01/03 through 3/31/04 /10/ $ 10.23 $ 0.08 $ - $ (0.09) $ (0.04) $ 10.18
9/30/03 10.25 0.24 0.02 (0.27) (0.01) 10.23
9/30/02 10.21 0.38 0.12 (0.41) (0.05) 10.25
9/30/01 9.82 0.53 0.41 (0.55) - 10.21
9/30/00 9.82 0.57 - (0.57) - 9.82
9/30/99 10.03 0.55 (0.20) (0.56) - 9.82
Investor A Class
10/01/03 through 3/31/04 /10/ $ 10.24 $ 0.08 $ (0.01) $ (0.09) $ (0.04) $ 10.18
9/30/03 10.26 0.21 0.04 (0.26) (0.01) 10.24
9/30/02 10.21 0.36 0.13 (0.39) (0.05) 10.26
9/30/01 9.82 0.52 0.41 (0.54) - 10.21
9/30/00 9.82 0.55 - (0.55) - 9.82
9/30/99 10.03 0.54 (0.21) (0.54) - 9.82
Investor B Class
10/01/03 through 3/31/04 /10/ $ 10.23 $ 0.03 $ - $ (0.05) $ (0.04) $ 10.17
9/30/03 10.25 0.15 0.03 (0.19) (0.01) 10.23
9/30/02 10.21 0.29 0.12 (0.32) (0.05) 10.25
9/30/01 9.82 0.44 0.41 (0.46) - 10.21
9/30/00 9.82 0.48 - (0.48) - 9.82
9/30/99 10.03 0.45 (0.19) (0.47) - 9.82
Investor C Class
10/01/03 through 3/31/04 /10/ $ 10.23 $ 0.03 $ - $ (0.05) $ (0.04) $ 10.17
9/30/03 10.25 0.15 0.03 (0.19) (0.01) 10.23
9/30/02 10.21 0.30 0.11 (0.32) (0.05) 10.25
9/30/01 9.82 0.44 0.41 (0.46) - 10.21
9/30/00 9.82 0.48 - (0.48) - 9.82
9/30/99 10.03 0.46 (0.20) (0.47) - 9.82
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
78
BLACKROCK FUNDS
RATIO OF NET RATIO OF NET
EXPENSES TO INVESTMENT
NET AVERAGE NET RATIO OF TOTAL INCOME
ASSETS RATIO OF NET ASSETS EXPENSES TO AVERAGE RATIO OF NET TO AVERAGE
END OF EXPENSES TO (EXCLUDING NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET INTEREST (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS EXPENSE) WAIVERS) ASSETS WAIVERS) RATE
============== =========== ============== ============= ===================== =================== ============== ==========
0.26% $ 35,418 0.30%/2/ 0.30%/2/ 0.82%/2/ 2.06%/2/ 1.54%/2/ 4%
0.13% $ 4,962 0.40%/2/ 0.40%/2/ 0.92%/2/ 1.96%/2/ 1.44%/2/ 4%
0.08% $ - 0.75%/2/ 0.75%/2/ 1.27%/2/ 1.61%/2/ 1.09%/2/ 4%
0.01%/3/ $ - 0.80%/2/ 0.80%/2/ 1.32%/2/ 1.56%/2/ 1.04%/2/ 4%
1.00% $ 863,375 0.40%/2/ 0.40%/2/ 0.65%/2/ 2.06%/2/ 1.80%/2/ 102%
2.98 625,363 0.40 0.40 0.67 2.31 2.04 195
5.58 281,844 0.40 0.40 0.79 3.86 3.47 195
10.38 114,205 0.99 0.40 1.28 5.78 5.48 168
6.35 86,868 2.25 0.40 2.66 6.30 5.89 182
4.06 79,326 2.26 0.41 2.59 6.04 5.71 177
1.02% $ 494,841 0.55%/2/ 0.55%/2/ 0.78%/2/ 1.89%/2/ 1.66%/2/ 102%
2.82 477,420 0.55 0.55 0.80 2.29 2.04 195
5.32 298,698 0.55 0.55 0.81 3.76 3.50 195
10.21 135,243 1.24 0.55 1.52 5.64 5.36 168
6.29 126,818 2.43 0.55 2.71 6.16 5.88 182
3.91 157,553 2.39 0.56 2.67 5.89 5.62 177
0.87% $ 300,639 0.85%/2/ 0.85%/2/ 1.08%/2/ 1.59%/2/ 1.37%/2/ 102%
2.52 248,426 0.85 0.85 1.10 1.95 1.70 195
5.01 120,857 0.85 0.85 1.11 3.40 3.15 195
9.88 42,909 1.41 0.85 1.68 5.26 4.98 168
5.98 19,745 2.77 0.85 3.05 5.86 5.58 182
3.60 16,872 2.70 0.86 2.97 5.59 5.32 177
0.74%/3/ $ 109,469 0.90%/2/ 0.90%/2/ 1.31%/2/ 1.53%/2/ 1.12%/2/ 102%
2.47/3/ 102,047 0.90 0.90 1.20 1.92 1.62 195
4.93/3/ 69,211 1.02 1.02 1.27 3.18 2.93 195
9.70/3/ 12,808 1.43 1.00 1.70 4.92 4.65 168
5.80/3/ 2,512 2.94 1.02 3.22 5.69 5.41 182
3.42/3/ 2,594 2.79 1.02 3.07 5.38 5.10 177
0.37%/4/ $ 73,478 1.65%/2/ 1.65%/2/ 1.97%/2/ 0.78%/2/ 0.47%/2/ 102%
1.70/4/ 83,937 1.65 1.65 1.95 1.18 0.88 195
4.05/4/ 53,087 1.77 1.77 2.02 2.48 2.23 195
8.89/4/ 20,485 2.28 1.76 2.55 4.29 4.02 168
5.01/4/ 8,142 3.66 1.77 3.94 4.93 4.65 182
2.65/4/ 7,549 3.41 1.75 3.67 4.59 4.34 177
0.37%/4/ $ 152,147 1.65%/2/ 1.65%/2/ 1.97%/2/ 0.79%/2/ 0.47%/2/ 102%
1.70/4/ 198,234 1.65 1.65 1.95 1.17 0.87 195
4.05/4/ 118,851 1.77 1.77 2.00 2.30 2.05 195
8.89/4/ 9,282 1.99 1.72 2.26 4.05 3.78 168
5.01/4/ 807 3.69 1.77 3.97 4.96 4.68 182
2.65/4/ 1,570 3.47 1.77 3.72 4.62 4.37 177
79
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 INCOME AND UNREALIZED) INCOME/7/ GAINS PERIOD
=========== ============ ================= =============== =============== ============
- --------------------------------------
Intermediate Government Bond Portfolio
- --------------------------------------
Institutional Class
10/01/03 through 3/31/04 /10/ $ 10.63 $ (0.02) $ 0.20 $ (0.23) $ - $ 10.58
9/30/03 10.82 0.48 (0.15) (0.52) - 10.63
9/30/02 10.55 0.54 0.27 (0.54) - 10.82
9/30/01 9.91 0.61 0.63 (0.60) - 10.55
9/30/00 9.89 0.61 0.01 (0.59) (0.01) 9.91
9/30/99 10.48 0.59 (0.51) (0.59) (0.08) 9.89
Service Class
10/01/03 through 3/31/04 /10/ $ 10.62 $ (0.02) $ 0.18 $ (0.21) $ - $ 10.57
9/30/03 10.81 0.44 (0.15) (0.48) - 10.62
9/30/02 10.55 0.51 0.26 (0.51) - 10.81
9/30/01 9.91 0.58 0.63 (0.57) - 10.55
9/30/00 9.89 0.58 0.01 (0.56) (0.01) 9.91
9/30/99 10.48 0.56 (0.51) (0.56) (0.08) 9.89
Investor A Class
10/01/03 through 3/31/04 /10/ $ 10.65 $ (0.02) $ 0.18 $ (0.20) $ - $ 10.61
9/30/03 10.84 0.43 (0.15) (0.47) - 10.65
9/30/02 10.57 0.49 0.27 (0.49) - 10.84
9/30/01 9.91 0.56 0.65 (0.55) - 10.57
9/30/00 9.89 0.55 0.02 (0.54) (0.01) 9.91
9/30/99 10.48 0.54 (0.51) (0.54) (0.08) 9.89
Investor B Class
10/01/03 through 3/31/04 /10/ $ 10.62 $ (0.02) $ 0.14 $ (0.16) $ - $ 10.58
9/30/03 10.82 0.34 (0.15) (0.39) - 10.62
9/30/02 10.55 0.41 0.27 (0.41) - 10.82
9/30/01 9.91 0.48 0.64 (0.48) - 10.55
9/30/00 9.89 0.49 0.01 (0.47) (0.01) 9.91
9/30/99 10.48 0.46 (0.51) (0.46) (0.08) 9.89
Investor C Class
10/01/03 through 3/31/04 /10/ $ 10.63 $ (0.02) $ 0.14 $ (0.16) $ - $ 10.59
9/30/03 10.83 0.34 (0.15) (0.39) - 10.63
9/30/02 10.55 0.41 0.28 (0.41) - 10.83
9/30/01 9.91 0.48 0.64 (0.48) - 10.55
9/30/00 9.89 0.48 0.02 (0.47) (0.01) 9.91
9/30/99 10.48 0.46 (0.51) (0.46) (0.08) 9.89
- ---------------------------
Intermediate Bond Portfolio
- ---------------------------
BlackRock Class
10/01/03 through 3/31/04 /10/ $ 9.89 $ 0.19 $ 0.04 $ (0.22) $ (0.22) $ 9.68
9/30/03 9.81 0.49 0.13 (0.52) (0.02) 9.89
9/30/02 9.72 0.56 0.17 (0.54) (0.10) 9.81
9/30/01 9.13 0.57 0.61 (0.59) - 9.72
9/30/00 9.10 0.58 0.03 (0.58) - 9.13
9/30/99 9.67 0.58 (0.47) (0.58) (0.10) 9.10
Institutional Class
10/01/03 through 3/31/04 /10/ $ 9.89 $ 0.18 $ 0.03 $ (0.21) $ (0.22) $ 9.67
9/30/03 9.81 0.48 0.13 (0.51) (0.02) 9.89
9/30/02 9.71 0.55 0.18 (0.53) (0.10) 9.81
9/30/01 9.13 0.56 0.60 (0.58) - 9.71
9/30/00 9.10 0.58 0.02 (0.57) - 9.13
9/30/99 9.67 0.57 (0.47) (0.57) (0.10) 9.10
Service Class
10/01/03 through 3/31/04 /10/ $ 9.89 $ 0.17 $ 0.04 $ (0.20) $ (0.22) $ 9.68
9/30/03 9.81 0.45 0.13 (0.48) (0.02) 9.89
9/30/02 9.71 0.52 0.18 (0.50) (0.10) 9.81
9/30/01 9.13 0.53 0.60 (0.55) - 9.71
9/30/00 9.10 0.55 0.02 (0.54) - 9.13
9/30/99 9.67 0.54 (0.47) (0.54) (0.10) 9.10
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
80
BLACKROCK FUNDS
RATIO OF NET
RATIO OF NET RATIO OF TOTAL INVESTMENT
NET EXPENSES TO EXPENSES RATIO OF NET INCOME
ASSETS RATIO OF NET AVERAGE NET TO AVERAGE INVESTMENT TO AVERAGE
END OF EXPENSES TO ASSETS NET ASSETS INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS INTEREST EXPENSE) WAIVERS) ASSETS WAIVERS) RATE
=============== =========== ============== =================== ================ ================ ============= ==========
1.69% $ 228,885 0.60%/2/ 0.60%/2/ 0.84%/2/ 3.86%/2/ 3.62%/2/ 81%
3.09 230,610 0.60 0.60 0.85 4.46 4.21 143
7.97 281,983 0.60 0.60 0.83 5.26 5.04 183
12.90 309,383 1.33 0.60 1.54 5.97 5.75 157
6.54 325,510 1.02 0.60 1.23 6.17 5.96 131
0.75 388,917 0.81 0.60 1.02 5.77 5.56 191
1.55% $ 1,434 0.90%/2/ 0.90%/2/ 1.14%/2/ 3.57%/2/ 3.33%/2/ 81%
2.79 1,447 0.90 0.90 1.15 4.17 3.92 143
7.56 2,007 0.91 0.90 1.12 5.23 5.01 183
12.56 32,336 1.56 0.90 1.78 5.65 5.43 157
6.23 25,325 1.32 0.90 1.54 5.87 5.66 131
0.45 26,687 1.11 0.90 1.32 5.47 5.26 191
1.55%/3/ $ 52,856 1.04%/2/ 1.04%/2/ 1.38%/2/ 3.42%/2/ 3.08%/2/ 81%
2.60/3/ 54,693 1.07 1.07 1.32 3.94 3.70 143
7.46/3/ 52,507 1.08 1.07 1.30 4.71 4.49 183
12.58/3/ 14,033 1.64 1.04 1.85 5.29 5.08 157
6.05/3/ 9,262 1.47 1.08 1.69 5.66 5.45 131
0.28/3/ 7,239 1.25 1.06 1.46 5.29 5.08 191
1.17%/4/ $ 12,858 1.79%/2/ 1.79%/2/ 2.03%/2/ 2.69%/2/ 2.44%/2/ 81%
1.75/4/ 12,312 1.82 1.82 2.06 3.17 2.92 143
6.68/4/ 8,197 1.81 1.81 2.04 3.88 3.66 183
11.55/4/ 3,518 2.34 1.81 2.56 4.67 4.46 157
5.26/4/ 1,398 2.24 1.81 2.45 4.96 4.75 131
(0.47)/4/ 809 1.97 1.80 2.19 4.57 4.34 191
1.17%/4/ $ 17,009 1.79%/2/ 1.79%/2/ 2.03%/2/ 2.69%/2/ 2.44%/2/ 81%
1.75/4/ 18,028 1.82 1.82 2.06 3.08 2.84 143
6.77/4/ 7,389 1.81 1.81 2.03 3.81 3.59 183
11.55/4/ 1,677 2.24 1.77 2.45 4.57 4.36 157
5.26/4/ 598 2.23 1.81 2.44 4.87 4.66 131
(0.47)/4/ 468 2.00 1.81 2.22 4.56 4.34 191
2.40% $ 466,345 0.45%/2/ 0.45%/2/ 0.69%/2/ 3.74%/2/ 3.51%/2/ 97%
6.56 392,112 0.45 0.45 0.69 5.00 4.76 220
7.87 371,857 0.48 0.45 0.81 5.82 5.50 239
13.39 524,046 0.70 0.45 0.92 6.07 5.85 250
7.05 152,412 1.24 0.45 1.59 6.58 6.23 199
1.25 42,311 1.61 0.44 1.87 6.27 6.00 221
2.22% $ 377,927 0.60%/2/ 0.60%/2/ 0.81%/2/ 3.60%/2/ 3.39%/2/ 97%
6.40 371,079 0.61 0.60 0.84 4.88 4.66 220
7.82 378,616 0.63 0.60 0.84 5.68 5.47 239
13.11 502,749 0.95 0.60 1.16 6.02 5.82 250
6.89 516,538 1.43 0.60 1.65 6.42 6.20 199
1.10 476,236 1.74 0.60 1.96 6.12 5.90 221
2.17% $ 71,932 0.90%/2/ 0.90%/2/ 1.11%/2/ 3.29%/2/ 3.08%/2/ 97%
6.08 56,632 0.89 0.89 1.11 4.52 4.30 220
7.50 35,198 0.94 0.90 1.15 5.38 5.17 239
12.77 35,351 1.21 0.90 1.41 5.69 5.48 250
6.57 25,242 1.74 0.90 1.96 6.12 5.90 199
0.80 24,299 2.05 0.90 2.26 5.81 5.60 221
81
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 INCOME AND UNREALIZED) INCOME/7/ GAINS PERIOD
=========== ============ ================= =============== =============== ===========
Investor A Class
10/01/03 through 3/31/04 /10/ $ 9.88 $ 0.16 $ 0.04 $ (0.19) $ (0.22) $ 9.67
9/30/03 9.81 0.44 0.13 (0.48) (0.02) 9.88
9/30/02 9.71 0.50 0.18 (0.48) (0.10) 9.81
9/30/01 9.12 0.52 0.61 (0.54) - 9.71
9/30/00 9.10 0.53 0.02 (0.53) - 9.12
9/30/99 9.67 0.52 (0.47) (0.52) (0.10) 9.10
Investor B Class
10/01/03 through 3/31/04 /10/ $ 9.89 $ 0.13 $ 0.03 $ (0.16) $ (0.22) $ 9.67
9/30/03 9.81 0.37 0.13 (0.40) (0.02) 9.89
9/30/02 9.72 0.43 0.17 (0.41) (0.10) 9.81
9/30/01 9.13 0.45 0.61 (0.47) - 9.72
9/30/00 9.10 0.47 0.02 (0.46) - 9.13
9/30/99 9.67 0.45 (0.47) (0.45) (0.10) 9.10
Investor C Class
10/01/03 through 3/31/04 /10/ $ 9.89 $ 0.13 $ 0.04 $ (0.16) $ (0.22) $ 9.68
9/30/03 9.82 0.36 0.13 (0.40) (0.02) 9.89
9/30/02 9.72 0.42 0.19 (0.41) (0.10) 9.82
9/30/01 9.14 0.45 0.60 (0.47) - 9.72
9/30/00 9.10 0.46 0.04 (0.46) - 9.14
10/16/98 /1/ through 9/30/99 9.65 0.43 (0.45) (0.43) (0.10) 9.10
- --------------------------------
Core Bond Total Return Portfolio
- --------------------------------
BlackRock Class
10/01/03 through 3/31/04 /10/ $ 10.03 $ 0.21 $ 0.04 $ (0.22) $ (0.25) $ 9.81
9/30/03 10.02 0.45 0.16 (0.55) (0.05) 10.03
9/30/02 9.98 0.55 0.19 (0.58) (0.12) 10.02
9/30/01 9.36 0.58 0.62 (0.58) - 9.98
9/30/00 9.31 0.61 0.05 (0.60) (0.01) 9.36
9/30/99 10.12 0.59 (0.60) (0.58) (0.22) 9.31
Institutional Class
10/01/03 through 3/31/04 /10/ $ 10.01 $ 0.19 $ 0.06 $ (0.22) $ (0.25) $ 9.79
9/30/03 10.00 0.44 0.16 (0.54) (0.05) 10.01
9/30/02 9.98 0.54 0.17 (0.57) (0.12) 10.00
9/30/01 9.36 0.57 0.62 (0.57) - 9.98
9/30/00 9.31 0.60 0.05 (0.59) (0.01) 9.36
9/30/99 10.12 0.57 (0.59) (0.57) (0.22) 9.31
Service Class
10/01/03 through 3/31/04 /10/ $ 10.01 $ 0.17 $ 0.06 $ (0.20) $ (0.25) $ 9.79
9/30/03 9.99 0.42 0.16 (0.51) (0.05) 10.01
9/30/02 9.98 0.53 0.14 (0.54) (0.12) 9.99
9/30/01 9.36 0.54 0.62 (0.54) - 9.98
9/30/00 9.31 0.57 0.05 (0.56) (0.01) 9.36
9/30/99 10.12 0.54 (0.59) (0.54) (0.22) 9.31
Investor A Class
10/01/03 through 3/31/04 /10/ $ 10.01 $ 0.17 $ 0.06 $ (0.20) $ (0.25) $ 9.79
9/30/03 10.00 0.40 0.16 (0.50) (0.05) 10.01
9/30/02 9.99 0.48 0.17 (0.52) (0.12) 10.00
9/30/01 9.36 0.52 0.63 (0.52) - 9.99
9/30/00 9.31 0.55 0.05 (0.54) (0.01) 9.36
9/30/99 10.12 0.53 (0.60) (0.52) (0.22) 9.31
Investor B Class
10/01/03 through 3/31/04 /10/ $ 10.01 $ 0.14 $ 0.05 $ (0.16) $ (0.25) $ 9.79
9/30/03 10.00 0.33 0.16 (0.43) (0.05) 10.01
9/30/02 9.98 0.42 0.17 (0.45) (0.12) 10.00
9/30/01 9.35 0.46 0.62 (0.45) - 9.98
9/30/00 9.31 0.48 0.04 (0.47) (0.01) 9.35
9/30/99 10.12 0.46 (0.60) (0.45) (0.22) 9.31
Investor C Class
10/01/03 through 3/31/04 /10/ $ 10.02 $ 0.14 $ 0.05 $ (0.16) $ (0.25) $ 9.80
9/30/03 10.01 0.33 0.16 (0.43) (0.05) 10.02
9/30/02 9.99 0.42 0.17 (0.45) (0.12) 10.01
9/30/01 9.35 0.46 0.63 (0.45) - 9.99
9/30/00 9.31 0.47 0.05 (0.47) (0.01) 9.35
9/30/99 10.12 0.47 (0.61) (0.45) (0.22) 9.31
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
82
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) ASSETS WAIVERS) RATE
============== ============== ============== ============= ================ ================ ============== ==========
2.14%/3/ $ 44,142 0.95%/2/ 0.95%/2/ 1.35%/2/ 3.24%/2/ 2.85%/2/ 97%
5.92/3/ 38,547 0.94 0.94 1.21 4.46 4.19 220
7.32/3/ 26,805 1.12 1.07 1.33 5.22 5.01 239
12.58/3/ 7,106 1.33 1.06 1.54 5.44 5.24 250
6.27/3/ 3,398 1.95 1.08 2.16 5.98 5.76 199
0.62/3/ 2,387 2.21 1.08 2.43 5.70 5.49 221
1.66%/4/ $ 14,682 1.70%/2/ 1.70%/2/ 2.00%/2/ 2.49%/2/ 2.19%/2/ 97%
5.24/4/ 12,850 1.69 1.69 1.96 3.67 3.40 220
6.41/4/ 6,291 1.86 1.81 2.07 4.45 4.24 239
11.87/4/ 2,933 2.05 1.80 2.25 4.67 4.47 250
5.60/4/ 1,071 2.66 1.82 2.87 5.19 4.97 199
(0.13)/4/ 1,010 2.81 1.79 3.02 4.89 4.68 221
1.76%/4/ $ 16,262 1.70%/2/ 1.70%/2/ 1.99%/2/ 2.48%/2/ 2.18%/2/ 97%
5.13/4/ 13,046 1.68 1.68 1.95 3.58 3.32 220
6.52/4/ 3,950 1.85 1.80 2.06 4.39 4.18 239
11.74/4/ 885 2.11 1.81 2.31 4.73 4.53 250
5.71/4/ 475 2.71 1.82 2.92 5.20 4.98 199
(0.18)/4/ 420 2.81/2/ 1.82/2/ 3.02/2/ 4.99/2/ 4.77/2/ 221
2.62% $ 1,346,602 0.40%/2/ 0.40%/2/ 0.63%/2/ 3.90%/2/ 3.67%/2/ 158%
6.33 1,035,461 0.40 0.40 0.65 4.50 4.26 659/11/
7.74 763,736 0.46 0.40 0.79 5.58 5.24 359
13.21 530,153 0.47 0.40 0.72 6.02 5.78 304
7.45 320,489 0.62 0.40 0.99 6.68 6.31 248
(0.02) 160,791 0.79 0.40 1.07 6.13 5.85 328
2.54% $ 886,750 0.55%/2/ 0.55%/2/ 0.76%/2/ 3.76%/2/ 3.55%/2/ 158%
6.19 907,864 0.55 0.55 0.78 4.43 4.20 659/11/
7.36 918,935 0.60 0.55 0.82 5.46 5.24 359
13.04 1,088,073 0.63 0.55 0.85 5.90 5.67 304
7.29 1,051,089 0.78 0.55 1.02 6.51 6.27 248
(0.17) 712,529 0.93 0.55 1.19 5.94 5.68 328
2.39% $ 146,756 0.85%/2/ 0.85%/2/ 1.06%/2/ 3.46%/2/ 3.25%/2/ 158%
5.98 139,499 0.85 0.85 1.08 4.08 3.85 659/11/
6.94 115,774 0.91 0.85 1.13 5.17 4.95 359
12.71 112,748 0.91 0.85 1.13 5.55 5.33 304
6.98 59,334 1.11 0.85 1.35 6.19 5.95 248
(0.47) 65,758 1.23 0.86 1.48 5.63 5.37 328
2.36%/3/ $ 138,350 0.90%/2/ 0.90%/2/ 1.30%/2/ 3.41%/2/ 3.01%/2/ 158%
5.81/3/ 113,190 0.90 0.90 1.25 4.01 3.66 659/11/
6.75/3/ 90,460 1.08 1.02 1.30 4.99 4.77 359
12.63/3/ 22,123 1.07 1.02 1.28 5.33 5.12 304
5.89/3/ 6,977 1.27 1.02 1.51 5.98 5.74 248
(0.64)/3/ 6,776 1.41 1.03 1.66 5.48 5.23 328
1.98%/4/ $ 63,893 1.65%/2/ 1.65%/2/ 1.95%/2/ 2.66%/2/ 2.36%/2/ 158%
5.03/4/ 70,550 1.65 1.65 2.00 3.26 2.91 659/11/
6.06/4/ 56,047 1.83 1.76 2.04 4.24 4.02 359
11.69/4/ 36,314 1.81 1.75 2.02 4.60 4.39 304
5.89/4/ 12,189 2.04 1.77 2.28 5.26 5.02 248
(1.38)/4/ 14,383 2.15 1.77 2.41 4.72 4.47 328
1.98%/4/ $ 95,333 1.64%/2/ 1.64%/2/ 1.94%/2/ 2.64%/2/ 2.34%/2/ 158%
5.02/4/ 81,478 1.65 1.65 2.00 3.22 2.87 659/11/
6.06/4/ 47,326 1.82 1.76 2.04 4.24 4.02 359
11.80/4/ 21,678 1.79 1.75 2.00 4.56 4.35 304
6.00/4/ 2,911 2.07 1.77 2.31 5.20 4.96 248
(1.38)/4/ 6,762 2.16 1.76 2.40 4.81 4.56 328
83
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 DISTRIBUTIONS FROM NET VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT FROM REALIZED END OF
OF PERIOD INCOME AND UNREALIZED) INCOME CAPITAL GAINS PERIOD
========= ========== =============== ============= ============= ============= =========
- --------------------------------
Core PLUS Total Return Portfolio
- --------------------------------
BlackRock Class
10/01/03 through 3/31/04 /10/ $ 10.46 $ 0.19 $ 0.07 $ (0.19) $ - $ (0.13) $ 10.40
9/30/03 10.31 0.42 0.29 (0.50) - (0.06) 10.46
12/7/01 /1/ through 9/30/02 10.00 0.40 0.32 (0.41) - - 10.31
Institutional Class
10/01/03 through 3/31/04 /10/ $ 10.46 $ 0.19 $ 0.05 $ (0.19) $ - $ (0.13) $ 10.38
9/30/03 10.31 0.40 0.29 (0.48) - (0.06) 10.46
12/7/01 /1/ through 9/30/02 10.00 0.24 0.47 (0.40) - - 10.31
Service Class
10/01/03 through 3/31/04 /10/ $ 10.46 $ 0.16 $ 0.13 $ (0.17) $ - $ (0.13) $ 10.45
9/30/03 10.31 0.37 0.29 (0.45) - (0.06) 10.46
12/7/01 /1/ through 9/30/02 10.00 0.23 0.48 (0.40) - - 10.31
Investor A Class
10/01/03 through 3/31/04 /10/ $ 10.46 $ 0.16 $ 0.08 $ (0.17) $ - $ (0.13) $ 10.40
9/30/03 10.31 0.37 0.29 (0.45) - (0.06) 10.46
12/7/01 /1/ through 9/30/02 10.00 0.08 0.59 (0.36) - - 10.31
Investor B Class
10/01/03 through 3/31/04 /10/ $ 10.46 $ 0.11 $ 0.09 $ (0.13) $ - $ (0.13) $ 10.40
9/30/03 10.31 0.29 0.29 (0.37) - (0.06) 10.46
12/7/01 /1/ through 9/30/02 10.00 0.43 0.21 (0.33) - - 10.31
Investor C Class
10/01/03 through 3/31/04 /10/ $ 10.46 $ 0.09 $ 0.09 $ (0.13) $ - $ (0.13) $ 10.38
9/30/03 10.31 0.29 0.29 (0.37) - (0.06) 10.46
12/7/01 /1/ through 9/30/02 10.00 0.43 0.21 (0.33) - - 10.31
- ---------------------------
Government Income Portfolio
- ---------------------------
Blackrock Class
10/01/03 through 3/31/04 /10/ $ 11.34 $ 0.04 $ 0.34 $ (0.25) $ - $ (0.16) $ 11.31
02/10/03 /1/ through 9/30/03 11.27 0.598 (0.18) (0.34) - - 11.34
Investor A Class
10/01/03 through 3/31/04 /10/ $ 11.33 $ (0.02) $ 0.37 $ (0.22) $ - $ (0.16) $ 11.30
9/30/03 11.40 0.338 0.15 (0.46) - (0.09) 11.33
9/30/02 10.99 0.438 0.76 (0.51) - (0.27) 11.40
9/30/01 10.03 0.55 0.95 (0.54) - - 10.99
9/30/00 9.92 0.56 0.13 (0.54) (0.04) - 10.03
9/30/99 10.84 0.55 (0.70) (0.54) (0.07) (0.16) 9.92
Investor B Class
10/01/03 through 3/31/04 /10/ $ 11.33 $ (0.04) $ 0.34 $ (0.17) $ - $ (0.16) $ 11.30
9/30/03 11.40 0.298 0.11 (0.38) - (0.09) 11.33
9/30/02 10.98 0.378 0.75 (0.43) - (0.27) 11.40
9/30/01 10.03 0.47 0.94 (0.46) - - 10.98
9/30/00 9.92 0.49 0.13 (0.47) (0.04) - 10.03
9/30/99 10.84 0.47 (0.70) (0.46) (0.07) (0.16) 9.92
Investor C Class
10/01/03 through 3/31/04 /10/ $ 11.31 $ (0.04) $ 0.34 $ (0.17) $ - $ (0.16) $ 11.28
9/30/03 11.38 0.298 0.11 (0.38) - (0.09) 11.31
9/30/02 10.97 0.348 0.77 (0.43) - (0.27) 11.38
9/30/01 10.02 0.47 0.94 (0.46) - - 10.97
9/30/00 9.92 0.49 0.12 (0.47) (0.04) - 10.02
9/30/99 10.84 0.47 (0.70) (0.46) (0.07) (0.16) 9.92
- --------------
GNMA Portfolio
- --------------
BlackRock Class
10/01/03 through 3/31/04 /10/ $ 10.02 $ 0.468 $ (0.28) $ (0.26) $ - $ - $ 9.94
12/19/02 /1/ through 9/30/03 10.27 0.41 (0.18) (0.48) - - 10.02
Institutional Class
10/01/03 through 3/31/04 /10/ $ 10.02 $ 0.23 $ - $ (0.30) $ - $ - $ 9.95
9/30/03 10.23 0.46 (0.06) (0.61) - - 10.02
9/30/02 10.28 0.58 0.21 (0.63) - (0.21) 10.23
9/30/01 9.70 0.64 0.57 (0.63) - - 10.28
9/30/00 9.61 0.62 0.13 (0.64) - (0.02) 9.70
9/30/99 10.11 0.61 (0.49) (0.60) - (0.02) 9.61
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
84
BLACKROCK FUNDS
RATIO OF NET
RATIO OF NET RATIO OF TOTAL INVESTMENT
NET EXPENSES TO EXPENSES RATIO OF NET INCOME
ASSETS RATIO OF NET AVERAGE NET TO AVERAGE INVESTMENT TO AVERAGE
END OF EXPENSES TO ASSETS NET ASSETS INCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS INTEREST EXPENSE) WAIVERS) ASSETS WAIVERS) RATE
=============== ============ ============== =================== ================ ================ ============= ==========
2.55% $ 311,840 0.40%/2/ 0.40%/2/ 0.71%/2/ 3.39%/2/ 3.07%/2/ 177%
7.00 224,248 0.40 0.40 0.75 3.62 3.27 1,021/12/
7.37 95,503 0.32/2/ 0.32/2/ 0.72/2/ 3.94/2/ 3.54/2/ 330
2.28% $ - 0.55%/2/ 0.55%/2/ 0.86%/2/ 3.24%/2/ 2.92%/2/ 177%
6.84 - 0.55 0.55 0.90 3.47 3.12 1,021/12/
7.21 - 0.52/2/ 0.52/2/ 0.93/2/ 3.80/2/ 3.38/2/ 330
2.82% $ - 0.85%/2/ 0.85%/2/ 1.16%/2/ 2.94%/2/ 2.62%/2/ 177%
6.53 - 0.85 0.85 1.20 3.17 2.82 1,021/12/
7.22 - 0.82/2/ 0.82/2/ 1.23/2/ 3.50/2/ 3.08 330
2.30%/3/ $ 9 0.86%/2/ 0.86%/2/ 1.32%/2/ 2.93%/2/ 2.47%/2/ 177%
6.47/3/ 8 0.90 0.90 1.25 3.12 2.77 1,021/12/
6.88/3/ 2 0.99/2/ 0.99/2/ 1.40/2/ 3.33/2/ 2.91/2/ 330
1.92%/4/ $ 76 1.65%/2/ 1.65%/2/ 2.03%/2/ 2.16%/2/ 1.78%/2/ 177%
5.684 80 1.65 1.65 2.00 2.37 2.02 1,021/12/
6.464 - 1.74/2/ 1.74/2/ 2.15/2/ 2.58/2/ 2.16/2/ 330
1.73%/4/ $ - 1.65%/2/ 1.65%/2/ 2.03%/2/ 2.16%/2/ 1.78%/2/ 177%
5.68/4/ - 1.65 1.65 2.00 2.37 2.02 1,021/12/
6.46/4/ - 1.74/2/ 1.74/2/ 2.15/2/ 2.58/2/ 2.16/2/ 330
3.43% $ 9,870 0.48%/2/ 0.48%/2/ 0.81%/2/ 3.33%/2/ 3.00%/2/ 210%
3.68 3 0.29/2/ 0.29/2/ 0.47/2/ 2.88/2/ 2.69/2/ 1,981/13/
3.11%/3/ $ 125,995 1.03%/2/ 1.03%/2/ 1.43%/2/ 3.16%/2/ 2.76%/2/ 210%
4.34/3/ 86,559 1.07 1.07 1.34 2.98 2.71 1,981/13/
11.47/3/ 42,845 1.11 1.07 1.41 4.06 3.77 615
15.36/3/ 12,040 1.31 1.06 1.60 5.16 4.87 849
7.27/3/ 5,716 2.43 1.06 2.77 5.71 5.37 168
(1.40)/3/ 6,713 1.96 1.07 2.32 5.30 4.94 195
2.73%/4/ $ 51,212 1.79%/2/ 1.79%/2/ 2.09%/2/ 2.48%/2/ 2.18%/2/ 210%
3.56/4/ 53,896 1.82 1.82 2.09 2.55 2.28 1,981/13/
10.74/4/ 48,240 1.87 1.82 2.17 3.49 3.20 615
14.41/4/ 29,936 2.10 1.82 2.39 4.52 4.23 849
6.48/4/ 24,608 3.25 1.82 3.60 5.05 4.71 168
(2.14)4 34,753 2.72 1.81 3.08 4.55 4.19 195
2.73%/4/ $ 28,611 1.79%/2/ 1.79%/2/ 2.09%/2/ 2.48%/2/ 2.18%/2/ 210%
3.56/4/ 29,537 1.82 1.82 2.09 2.54 2.27 1,981/13/
10.66/4/ 18,378 1.84 1.81 2.13 3.21 2.92 615
14.42/4/ 3,589 2.04 1.80 2.33 4.41 4.12 849
6.38/4/ 1,279 3.29 1.82 3.64 5.10 4.76 168
(2.14)/4/ 2,435 2.70 1.81 3.06 4.52 4.16 195
2.32% $ 10,441 0.56%/2/ 0.45%/2/ 0.84%/2/ 4.76%/2/ 4.43%/2/ 127%
2.33 59,934 0.35/2/ 0.35/2/ 0.61/2/ 3.21/2/ 2.94/2/ 1,365/14/
2.35% $ 164,491 0.70%/2/ 0.60%/2/ 1.02%/2/ 4.76%/2/ 4.45%/2/ 127%
4.00 172,358 0.64 0.60 0.95 4.77 4.46 1,365/14/
8.03 183,328 0.95 0.60 1.24 5.62 5.33 401
12.84 117,528 1.34 0.60 1.66 6.40 6.07 773
7.58 95,108 1.49 0.60 1.84 6.52 6.16 184
1.14 110,611 0.86 0.60 1.21 6.15 5.81 124
85
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 INCOME AND UNREALIZED) INCOME/7/ GAINS PERIOD
=========== ============ ================= =============== =============== ===========
Service Class
10/01/03 through 3/31/04 /10/ $ 10.01 $ 0.24 $ (0.02) $ (0.29) $ - $ 9.94
9/30/03 10.23 0.49 (0.13) (0.58) - 10.01
9/30/02 10.29 0.55 0.20 (0.60) (0.21) 10.23
9/30/01 9.72 0.61 0.56 (0.60) - 10.29
9/30/00 9.61 0.58 0.16 (0.61) (0.02) 9.72
9/30/99 10.11 0.58 (0.49) (0.57) (0.02) 9.61
Investor A Class
10/01/03 through 3/31/04 /10/ $ 10.06 $ 0.22 $ (0.01) $ (0.28) $ - $ 9.99
9/30/03 10.27 0.45 (0.10) (0.56) - 10.06
9/30/02 10.32 0.51 0.23 (0.58) (0.21) 10.27
9/30/01 9.71 0.59 0.60 (0.58) - 10.32
9/30/00 9.61 0.56 0.15 (0.59) (0.02) 9.71
9/30/99 10.11 0.56 (0.49) (0.55) (0.02) 9.61
Investor B Class
10/01/03 through 3/31/04 /10/ $ 10.03 $ 0.18 $ (0.01) $ (0.24) $ - $ 9.96
9/30/03 10.24 0.37 (0.10) (0.48) - 10.03
9/30/02 10.29 0.45 0.21 (0.50) (0.21) 10.24
9/30/01 9.71 0.51 0.58 (0.51) - 10.29
9/30/00 9.61 0.49 0.15 (0.52) (0.02) 9.71
9/30/99 10.11 0.48 (0.49) (0.47) (0.02) 9.61
Investor C Class
10/01/03 through 3/31/04 /10/ $ 10.01 $ 0.18 $ (0.01) $ (0.24) $ - $ 9.94
9/30/03 10.23 0.37 (0.11) (0.48) - 10.01
9/30/02 10.27 0.44 0.23 (0.50) (0.21) 10.23
9/30/01 9.68 0.51 0.59 (0.51) - 10.27
9/30/00 9.61 0.50 0.11 (0.52) (0.02) 9.68
9/30/99 10.11 0.48 (0.49) (0.47) (0.02) 9.61
- ------------------------
Managed Income Portfolio
- ------------------------
Institutional Class
10/01/03 through 3/31/04 /10/ $ 10.80 $ 0.22 $ 0.04 $ (0.27) $ (0.28) $ 10.51
9/30/03 10.71 0.55 0.17 (0.63) - 10.80
9/30/02 10.60 0.60 0.10 (0.59) - 10.71
9/30/01 9.92 0.61 0.68 (0.61) - 10.60
9/30/00 9.92 0.62 0.02 (0.62) (0.02) 9.92
9/30/99 10.64 0.62 (0.57) (0.62) (0.15) 9.92
Service Class
10/01/03 through 3/31/04 /10/ $ 10.80 $ 0.21 $ 0.04 $ (0.26) $ (0.28) $ 10.51
9/30/03 10.71 0.54 0.15 (0.60) - 10.80
9/30/02 10.60 0.58 0.09 (0.56) - 10.71
9/30/01 9.92 0.58 0.68 (0.58) - 10.60
9/30/00 9.92 0.60 0.01 (0.59) (0.02) 9.92
9/30/99 10.64 0.59 (0.57) (0.59) (0.15) 9.92
Investor A Class
10/01/03 through 3/31/04 /10/ $ 10.80 $ 0.20 $ 0.04 $ (0.25) $ (0.28) $ 10.51
9/30/03 10.71 0.50 0.17 (0.58) - 10.80
9/30/02 10.60 0.54 0.11 (0.54) - 10.71
9/30/01 9.92 0.56 0.68 (0.56) - 10.60
9/30/00 9.92 0.59 0.01 (0.58) (0.02) 9.92
9/30/99 10.64 0.58 (0.57) (0.58) (0.15) 9.92
Investor B Class
10/01/03 through 3/31/04 /10/ $ 10.80 $ 0.17 $ 0.03 $ (0.21) $ (0.28) $ 10.51
9/30/03 10.71 0.41 0.18 (0.50) - 10.80
9/30/02 10.60 0.47 0.10 (0.46) - 10.71
9/30/01 9.92 0.49 0.68 (0.49) - 10.60
9/30/00 9.92 0.51 0.02 (0.51) (0.02) 9.92
9/30/99 10.64 0.50 (0.57) (0.50) (0.15) 9.92
Investor C Class
10/01/03 through 3/31/04 /10/ $ 10.78 $ 0.17 $ 0.03 $ (0.21) $ (0.28) $ 10.49
9/30/03 10.68 0.41 0.19 (0.50) - 10.78
9/30/02 10.57 0.47 0.10 (0.46) - 10.68
9/30/01 9.91 0.49 0.66 (0.49) - 10.57
11/22/99 /6/ through 9/30/00 9.92 0.44 (0.02) (0.43) - 9.91
5/19/99 /1/ through 9/30/99 10.14 0.08 (0.22) (0.08) - 9.92
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
86
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 NCOME NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET INTEREST (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS EXPENSE) WAIVERS) ASSETS WAIVERS) RATE
============= ============ ============== ============= ================ ================ ============== ==========
2.19% $ 1,991 1.00%/2/ 0.89%/2/ 1.32%/2/ 4.43%/2/ 4.11%/2/ 127%
3.58 1,554 0.93 0.90 1.25 4.59 4.28 1,365/14/
7.61 1,069 1.14 0.90 1.44 5.01 4.71 401
12.38 224 1.59 0.90 1.92 6.07 5.75 773
7.47 197 1.78 0.90 2.15 6.17 5.81 184
0.84 97 1.31 0.88 1.64 6.12 5.79 124
2.10%/3/ $ 19,793 1.14%/2/ 1.03%/2/ 1.55%/2/ 4.29%/2/ 3.87%/2/ 127%
3.50/3/ 18,978 1.11 1.07 1.42 4.15 3.84 1,365/14/
7.50/3/ 13,620 1.36 1.07 1.65 4.81 4.52 401
12.74/3/ 3,672 1.81 1.07 2.13 5.87 5.55 773
7.18/3/ 1,882 1.98 1.08 2.33 6.06 5.70 184
0.67/3/ 1,106 1.37 1.08 1.69 5.76 5.44 124
1.72%/4/ $ 31,909 1.89%/2/ 1.79%/2/ 2.20%/2/ 3.55%/2/ 3.24%/2/ 127%
2.74/4/ 32,486 1.85 1.82 2.16 3.44 3.13 1,365/14/
6.72/4/ 23,928 2.07 1.80 2.36 4.07 3.78 401
11.48/4/ 4,936 2.53 1.77 2.83 4.77 4.46 773
6.39/4/ 335 2.71 1.81 3.06 5.24 4.89 184
(0.09)/4/ 229 2.08 1.81 2.43 4.94 4.59 124
1.73%/4/ $ 49,743 1.89%/2/ 1.79%/2/ 2.20%/2/ 3.55%/2/ 3.24%/2/ 127%
2.64/4/ 51,109 1.85 1.82 2.16 3.44 3.13 1,365/14/
6.84/4/ 36,220 1.94 1.79 2.23 3.77 3.48 401
11.62/4/ 1,225 2.48 1.75 2.79 4.64 4.33 773
6.39/4/ 29 2.69 1.81 3.04 5.33 4.98 184
(0.09)/4/ 24 2.16 1.71 2.50 5.15 4.81 124
2.53% $ 762,643 0.65%/2/ 0.65%/2/ 0.82%/2/ 4.26%/2/ 4.09%/2/ 117%
6.91 810,453 0.65 0.65 0.82 5.09 4.92 613/15/
6.82 924,211 0.75 0.65 0.90 5.67 5.54 290
13.39 1,042,238 1.07 0.65 1.19 5.98 5.86 262
6.84 1,158,375 1.30 0.65 1.41 6.44 6.33 205
0.57 1,252,991 1.45 0.65 1.57 6.11 5.99 239
2.38% $ 84,913 0.95%/2/ 0.95%/2/ 1.12%/2/ 3.96%/2/ 3.79%/2/ 117%
6.58 92,336 0.95 0.95 1.13 4.77 4.59 613/15/
6.50 137,084 1.06 0.95 1.19 5.34 5.21 290
13.05 238,117 1.37 0.95 1.48 5.68 5.56 262
6.52 284,075 1.59 0.95 1.70 6.15 6.04 205
0.26 270,943 1.76 0.95 1.88 5.81 5.69 239
2.29%/3/ $ 42,533 1.09%/2/ 1.09%/2/ 1.36%/2/ 3.83%/2/ 3.56%/2/ 117%
6.41/3/ 49,870 1.13 1.12 1.30 4.59 4.42 613/15/
6.32/3/ 52,794 1.23 1.12 1.38 5.19 5.05 290
12.86/3/ 20,196 1.50 1.13 1.61 5.46 5.34 262
6.35/3/ 16,936 1.77 1.12 1.89 6.03 5.92 205
0.09/3/ 15,092 1.93 1.12 2.04 5.62 5.50 239
1.91%/4/ $ 10,089 1.84%/2/ 1.84%/2/ 2.00%/2/ 3.08%/2/ 2.91%/2/ 117%
5.61/4/ 10,425 1.87 1.87 2.05 3.82 3.65 613/15/
5.53/4/ 9,582 1.99 1.87 2.11 4.47 4.34 290
12.03/4/ 7,981 2.21 1.87 2.33 4.70 4.59 262
5.56/4/ 4,831 2.53 1.87 2.64 5.23 5.12 205
(0.66)/4/ 5,818 2.68 1.87 2.80 4.88 4.77 239
1.91%/4/ $ 840 1.84%/2/ 1.84%/2/ 2.00%/2/ 3.07%/2/ 2.91%/2/ 117%
5.73/4/ 763 1.87 1.87 2.05 3.79 3.62 613/15/
5.54/4/ 554 2.00 1.87 2.14 4.49 4.35 290
11.84/4/ 345 2.03 1.86 2.14 4.59 4.48 262
4.91/4/ 31 2.36/2/ 1.78/2/ 2.47/2/ 5.25/2/ 5.14/2/ 205
0.00 -5 2.53/2/ 1.79/2/ 2.64/2/ 4.93/2/ 4.82/2/ 239
87
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 DISTRIBUTIONS FROM NET VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT FROM REALIZED END OF
OF PERIOD INCOME AND UNREALIZED) INCOME/7/ CAPITAL GAINS PERIOD
=========== ============ ================= =============== =============== =============== ==========
- ----------------------------
International Bond Portfolio
- ----------------------------
Institutional Class
10/01/03 through 3/31/04 /10/ $ 11.07 $ 0.13/8/ $ 0.71 $ (0.22) $ - $ - $ 11.69
9/30/03 10.54 0.29/8/ 0.81 (0.33) (0.17) (0.07) 11.07
9/30/02 10.53 0.42/8/ 0.17 (0.58) - - 10.54
9/30/01 10.69 0.55 0.68 (1.39) - - 10.53
9/30/00 10.81 0.49 0.23 (0.52) - (0.32) 10.69
9/30/99 11.24 0.30 (0.09) (0.64) - - 10.81
Service Class
10/01/03 through 3/31/04 /10/ $ 11.08 $ 0.12/8/ $ 0.71 $ (0.21) $ - $ - $ 11.70
9/30/03 10.54 0.26/8/ 0.81 (0.29) (0.17) (0.07) 11.08
9/30/02 10.53 0.37/8/ 0.19 (0.55) - - 10.54
9/30/01 10.69 0.50 0.70 (1.36) - - 10.53
9/30/00 10.81 0.46 0.23 (0.49) - (0.32) 10.69
9/30/99 11.24 0.24 (0.06) (0.61) - - 10.81
Investor A Class
10/01/03 through 3/31/04 /10/ $ 11.07 $ 0.11/8/ $ 0.71 $ (0.20) $ - $ - $ 11.69
9/30/03 10.54 0.24/8/ 0.81 (0.28) (0.17) (0.07) 11.07
9/30/02 10.53 0.35/8/ 0.19 (0.53) - - 10.54
9/30/01 10.69 0.47 0.71 (1.34) - - 10.53
9/30/00 10.81 0.46 0.21 (0.47) - (0.32) 10.69
9/30/99 11.24 0.23 (0.07) (0.59) - - 10.81
Investor B Class
10/01/03 through 3/31/04 /10/ $ 11.07 $ 0.07/8/ $ 0.71 $ (0.15) $ - $ - $ 11.70
9/30/03 10.54 0.16/8/ 0.81 (0.20) (0.17) (0.07) 11.07
9/30/02 10.53 0.27/8/ 0.19 (0.45) - - 10.54
9/30/01 10.69 0.39 0.71 (1.26) - - 10.53
9/30/00 10.81 0.36 0.23 (0.39) - (0.32) 10.69
9/30/99 11.24 0.13 (0.05) (0.51) - - 10.81
Investor C Class
10/01/03 through 3/31/04 /10/ $ 11.10 $ 0.07/8/ $ 0.70 $ (0.15) $ - $ - $ 11.72
9/30/03 10.56 0.15/8/ 0.83 (0.20) (0.17) (0.07) 11.10
9/30/02 10.55 0.27/8/ 0.19 (0.45) - - 10.56
9/30/01 10.69 0.39 0.73 (1.26) - - 10.55
9/30/00 10.81 0.35 0.24 (0.39) - (0.32) 10.69
9/30/99 11.24 0.13 (0.05) (0.51) - - 10.81
- -------------------------
High Yield Bond Portfolio
- -------------------------
BlackRock Class
10/01/03 through 3/31/04 /10/ $ 7.74 $ 0.33 $ 0.35 $ (0.31) $ - $ - $ 8.11
9/30/03 6.75 0.71 1.03 (0.75) - - 7.74
9/30/02 7.39 0.85 (0.66) (0.83) - - 6.75
9/30/01 8.92 0.99 (1.45) (1.07) - - 7.39
9/30/00 9.73 1.14 (0.82) (1.13) - - 8.92
11/19/98 /1/ through 9/30/99 10.00 0.90 (0.32) (0.85) - - 9.73
Institutional Class
10/01/03 through 3/31/04 /10/ $ 7.74 $ 0.31 $ 0.36 $ (0.30) $ - $ - $ 8.11
9/30/03 6.75 0.73 1.00 (0.74) - - 7.74
9/30/02 7.39 0.82 (0.64) (0.82) - - 6.75
9/30/01 8.92 0.94 (1.41) (1.06) - - 7.39
9/30/00 9.73 1.12 (0.82) (1.11) - - 8.92
11/19/98 /1/ through 9/30/99 10.00 0.90 (0.31) (0.86) - - 9.73
Service Class
10/01/03 through 3/31/04 /10/ $ 7.74 $ 0.31 $ 0.35 $ (0.29) $ - $ - $ 8.11
9/30/03 6.75 0.73 0.98 (0.72) - - 7.74
9/30/02 7.39 0.86 (0.71) (0.79) - - 6.75
9/30/01 8.92 0.88 (1.38) (1.03) - - 7.39
9/30/00 9.73 1.08 (0.81) (1.08) - - 8.92
11/19/98 /1/ through 9/30/99 10.00 0.85 (0.31) (0.81) - - 9.73
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
88
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) ASSETS WAIVERS) RATE
==================== =========== ============== ============= ================ ================ ============== ==========
7.67%/9/ $ 138,775 0.96%/2/ 0.96%/2/ 0.95%/2/ 2.36%/2/ 2.37%/2/ 151%
10.78 64,038 0.94 0.94 0.94 2.69 2.69 209
5.79 35,425 1.05 0.90 1.05 3.89 3.89 206
12.30 73,636 2.43 0.88 2.43 5.54 5.54 111
7.04 69,172 1.38 0.92 1.38 4.69 4.69 266
1.91 59,265 1.03 1.03 1.03 3.79 3.79 317
7.51%/9/ $ 77,063 1.25%/2/ 1.25%/2/ 1.25%/2/ 2.08%/2/ 2.08%/2/ 151%
10.55 48,584 1.24 1.24 1.24 2.41 2.41 209
5.47 27,131 1.30 1.20 1.30 3.55 3.55 206
11.97 11,045 2.74 1.20 2.74 5.08 5.08 111
6.72 4,092 1.66 1.22 1.66 4.36 4.36 266
1.60 3,730 1.33 1.33 1.33 3.50 3.50 317
7.42%/3,9/ $ 116,109 1.38%/2/ 1.38%/2/ 1.48%/2/ 1.93%/2/ 1.83%/2/ 151%
10.27/3/ 74,821 1.41 1.41 1.41 2.21 2.21 209
5.29/3/ 39,727 1.47 1.37 1.47 3.36 3.36 206
11.79/3/ 16,827 2.88 1.36 2.88 4.85 4.85 111
6.54/3/ 5,435 1.89 1.38 1.89 4.20 4.20 266
1.43/3/ 2,638 1.49 1.49 1.49 3.30 3.30 317
7.11%/4,9/ $ 16,649 2.14%/2/ 2.14%/2/ 2.14%/2/ 1.20%/2/ 1.20%/2/ 151%
9.45/4/ 13,087 2.16 2.16 2.16 1.51 1.51 209
4.51/4/ 11,470 2.25 2.11 2.25 2.64 2.64 206
10.96/4/ 7,393 3.63 2.10 3.63 4.17 4.17 111
5.74/4/ 3,283 2.59 2.13 2.59 3.45 3.45 266
0.67/4/ 2,447 2.24 2.24 2.24 2.56 2.56 317
7.01%/4,9/ $ 32,756 2.13%/2/ 2.13%/2/ 2.13%/2/ 1.16%/2/ 1.17%/2/ 151%
9.53/4/ 17,777 2.15 2.15 2.15 1.44 1.44 209
4.50/4/ 8,427 2.23 2.11 2.23 2.62 2.62 206
11.15/4/ 4,182 3.64 2.10 3.64 4.20 4.20 111
5.74/4/ 2,228 2.56 2.15 2.56 3.43 3.43 266
0.67/4/ 2,269 2.24 2.24 2.24 2.55 2.55 317
8.86%/9/ $ 96,351 0.56%/2/ 0.55%/2/ 0.72%/2/ 7.84%/2/ 7.68%/2/ 79%
27.17 57,207 0.61 0.55 0.77 9.83 9.67 212
2.15 32,240 0.73 0.55 0.89 11.15 11.01 301
(5.52) 27,766 0.84 0.55 1.10 5.54 5.29 331
3.26 - 1.21 0.55 0.90 11.38 11.11 235
5.87 - 0.33/2/ 0.28/2/ 0.41/2/ 10.45/2/ 10.38/2/ 185
8.78%/9/ $ 174,739 0.71%/2/ 0.70%/2/ 0.84%/2/ 7.76%/2/ 7.63%/2/ 79%
26.98 170,902 0.76 0.70 0.90 9.63 9.49 212
2.00 94,065 0.87 0.70 1.01 10.94 10.80 301
(5.66) 95,663 1.06 0.70 1.22 11.22 11.06 331
3.11 72,839 1.24 0.70 1.41 11.95 11.78 235
5.93 63,860 1.02/2/ 0.71/2/ 1.67/2/ 10.49/2/ 9.85/2/ 185
8.63%/9/ $ 113,971 1.01%/2/ 1.00%/2/ 1.14%/2/ 7.43%/2/ 7.30%/2/ 79%
26.61 85,247 1.06 1.00 1.20 9.31 9.17 212
1.69 29,344 1.17 1.00 1.34 11.37 11.20 301
(5.95) 9 1.36 1.00 1.52 11.82 11.66 331
2.80 43 1.60 1.00 1.63 12.13 12.10 235
5.47 - 2.21/2/ 1.59/2/ 3.33/2/ 9.93/2/ 8.81/2/ 185
89
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONCLUDED)
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 INCOME AND UNREALIZED) INCOME/7/ GAINS PERIOD
=========== ============ ================= =============== =============== ==========
Investor A Class
10/01/03 through 3/31/04 /10/ $ 7.73 $ 0.28 $ 0.38 $ (0.28) $ - $ 8.11
9/30/03 6.75 0.73 0.96 (0.71) - 7.73
9/30/02 7.40 0.82 (0.69) (0.78) - 6.75
9/30/01 8.92 0.90 (1.40) (1.02) - 7.40
9/30/00 9.73 1.07 (0.81) (1.07) - 8.92
11/19/98 through 9/30/99 10.00 0.86 (0.31) (0.82) - 9.73
Investor B Class
10/01/03 through 3/31/04 /10/ $ 7.73 $ 0.26 $ 0.37 $ (0.25) $ - $ 8.11
9/30/03 6.75 0.65 0.98 (0.65) - 7.73
9/30/02 7.39 0.74 (0.66) (0.72) - 6.75
9/30/01 8.91 0.83 (1.40) (0.95) - 7.39
9/30/00 9.73 0.99 (0.81) (1.00) - 8.91
11/19/98 /1/ through 9/30/99 10.00 0.79 (0.31) (0.75) - 9.73
Investor C Class
10/01/03 through 3/31/04 /10/ $ 7.74 $ 0.26 $ 0.37 $ (0.25) $ - $ 8.12
9/30/03 6.75 0.67 0.97 (0.65) - 7.74
9/30/02 7.40 0.76 (0.69) (0.72) - 6.75
9/30/01 8.92 0.83 (1.40) (0.95) - 7.40
9/30/00 9.73 0.99 (0.80) (1.00) - 8.92
11/19/98 /1/ through 9/30/99 10.00 0.78 (0.31) (0.74) - 9.73
/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, 1999.
/6/ Reissuance of shares.
/7/ Certain prior year amounts were reclassified to conform to current year
presentation.
/8/ Calculated using the average shares outstanding method.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
90
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) ASSETS WAIVERS) RATE
=================== ============ ============== ============= ================ ================ ============== ==========
8.68%/3,9/ $ 72,456 1.15%/2/ 1.14%/2/ 1.38%/2/ 7.38%/2/ 7.15%/2/ 79%
26.25/3/ 82,391 1.22 1.17 1.36 8.81 8.68 212
1.38/3/ 18,932 1.33 1.17 1.48 10.42 10.28 301
(5.98)/3/ 8,980 1.52 1.17 1.68 10.55 10.39 331
2.63/3/ 5,094 1.70 1.17 1.88 11.41 11.23 235
5.50/3/ 4,412 1.54/2/ 1.15/2/ 2.21/2/ 10.17/2/ 9.49/2/ 185
8.28%/4,9/ $ 111,171 1.89%/2/ 1.88%/2/ 2.03%/2/ 6.59%/2/ 6.45%/2/ 79%
25.34/4/ 107,078 1.98 1.92 2.12 8.39 8.25 212
0.75/4/ 57,612 2.09 1.92 2.23 9.81 9.66 301
(6.71)/4/ 49,786 2.27 1.91 2.43 10.01 9.85 331
1.74/4/ 39,897 2.47 1.92 2.57 10.84 10.74 235
4.78/4/ 12,407 2.272 1.88/2/ 2.94/2/ 9.41/2/ 8.73/2/ 185
8.27%/4,9/ $ 78,413 1.89%/2/ 1.88%/2/ 2.03%/2/ 6.58%/2/ 6.44%/2/ 79%
25.48/4/ 73,246 1.97 1.92 2.11 8.14 8.00 212
0.61/4/ 21,939 2.08 1.91 2.23 9.73 9.59 301
(6.70)/4/ 11,319 2.25 1.91 2.41 9.63 9.47 331
1.86/4/ 3,758 2.45 1.92 2.63 10.63 10.45 235
4.69/4/ 2,647 2.25/2/ 1.88/2/ 2.92/2/ 9.36/2/ 8.69/2/ 185
/9/ Redemption fee of 2.00% is reflected in total return calculations.
/10/ Unaudited.
/11/ Includes dollar roll transactions, excluding these transactions the
portfolio turnover would have been 257%.
/12/ Includes dollar roll transactions, excluding these transactions the
portfolio turnover would have been 319%.
/13/ Includes dollar roll transactions, excluding these transactions the
portfolio turnover would have been 371%.
/14/ Includes dollar roll transactions, excluding these transactions the
portfolio turnover would have been 268%.
/15/ Includes dollar roll transactions, excluding these transactions the
portfolio turnover would have been 206%.
91
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS
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 44 registered portfolios, eleven of which are included in these
financial statements (the "Portfolios"). Each Portfolio is authorized to issue
an unlimited number of shares with a par value of $0.001. Each portfolio of the
Fund may offer as many as seven classes of shares. Shares of all classes of a
Portfolio represent equal pro rata interests in such Portfolio, except that
each class bears different expenses which reflect the difference in the range
of services provided to them. The following table provides a list of the
Portfolios included in this report along with a summary of their respective
class-specific fee arrangements as provided under the Fund's Amended and
Restated Distribution and Service Plan (the "Plan"). Fees are expressed as a
percentage of average daily net asset values of the respective classes.
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 0.30% 0.30%
Low Duration Bond None None None None 0.30% 0.30%
Intermediate Government Bond N/A N/A None None 0.30% 0.30%
Intermediate Bond None None None None 0.30% 0.30%
Core Bond Total Return None None None None 0.30% 0.30%
Core PLUS Total Return None None None None 0.30% 0.30%
Government Income None None N/A N/A N/A N/A
GNMA None None None None 0.30% 0.30%
Managed Income N/A N/A None None 0.30% 0.30%
International Bond N/A N/A None None 0.30% 0.30%
High Yield Bond None None None None 0.30% 0.30%
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 0.50% 0.40% N/A N/A N/A N/A
Low Duration Bond 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Intermediate Government Bond 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Intermediate Bond 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Core Bond Total Return 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Core PLUS Total Return 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Government Income 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
GNMA 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Managed Income 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
International Bond 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
High Yield Bond 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
(1) - the maximum annual contractual fees are comprised of a .15% service fee
and .15% shareholder processing fee.
(2) - the maximum annual contractual fees are comprised of a .10% distribution
fee, .25% service fee and .15% shareholder processing fee.
(3) - the maximum annual contractual fees are comprised of a .75% distribution
fee, .25% service fee and .15% shareholder processing fee.
(4) - the actual fees are as of March 31, 2004.
In addition, for the period 10/01/03 through 12/31/03 BlackRock shares
bore a Transfer Agent fee at an annual rate not to exceed .01%, Institutional
and Service shares bore a Transfer Agent fee at an annual rate not to exceed
..03% and Investor A, Investor B and Investor C shares bore a Transfer Agent fee
at an annual rate not to exceed .10% of the average daily net assets of such
respective classes. Effective January 1, 2004, the BlackRock shares bear a
Transfer Agent fee at an annual rate not to exceed .005% of the average daily
net assets and each of the Institutional, Service, Investor A, Investor B and
Investor C share classes bear a Tranfer Agent fee at an annual rate not to
exceed .018% of the average daily net assets of such respective classes.
For the period 10/01/03 through 12/31/03 PFPC has contractually agreed to
waive fees otherwise due to it under the Company's Transfer Agency Agreement in
an amount equal to 0.07% of average daily net assets attributable to Investor
A, B and C shares of the Low Duration Bond, Intermediate Bond, Core Bond Total
Return and Core PLUS Total Return Portfolios until February 1, 2004.
(A) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with accounting principles generally
accepted in the United States of America requires the use of management
estimates. Actual results could differ from these estimates.
Security Valuation - Valuation of securities held by each Bond Portfolio
is as follows: fixed income securities are valued by using market quotations,
prices provided by market makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics
under the supervision of the Board of Trustees; a
92
BLACKROCK FUNDS
portion of the fixed income securities are valued utilizing one or more pricing
services approved by the Board of Trustees; 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); and, the amortized cost
method of valuation is used with respect to debt obligations with sixty days or
less remaining to maturity. Any securities that are denominated in a foreign
currency are translated into U.S. dollars at the prevailing market rates.
Securities for which market quotations are not readily available are
valued at fair market value as determined in good faith by or under the
direction of the Fund's Board of Trustees. As of March 31, 2004, there were
four securities in the High Yield Bond Portfolio that were valued in accordance
with such fair market value procedures. These securities had a total market
value of $5,632,489 which represents 0.9% of the High Yield Bond Portfolio's
net assets.
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.
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, 2004, 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 SOLD AMOUNT 2004 GAIN/(LOSS)
- ------------ ------------- --------------------------------- -------------- -------------- --------------
Low Duration Bond Portfolio
04/15/04 253,683,649 Swedish Krone ................... $ 35,228,947 $ 33,621,356 $1,607,591
04/16/04 108,958,563 European Currency Unit .......... 137,990,039 133,988,186 4,001,853
04/21/04 12,053,862 Canadian Dollar ................. 9,334,961 9,182,432 152,529
04/23/04 14,698,902 Great British Pound ............. 26,797,571 27,020,239 (222,668)
------------ ------------ ----------
$209,351,518 $203,812,213 $5,539,305
============ ============ ==========
Core Bond Total Return Portfolio
04/15/04 181,442,286 Swedish Krone ................... $ 25,196,818 $ 24,047,020 $1,149,798
04/16/04 144,482,149 European Currency Unit .......... 182,681,345 177,672,144 5,009,201
93
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT SOLD AMOUNT 2004 GAIN/(LOSS)
- ------------ ------------- --------------------------------- --------------- --------------- --------------
04/21/04 42,643,995 Canadian Dollar ................. 33,025,103 32,485,490 539,613
04/23/04 19,684,645 Great British Pound ............. 35,887,081 36,185,276 (298,195)
------------ ------------ ----------
$276,790,347 $270,389,930 $6,400,417
============ ============ ==========
Core PLUS Total Return Portfolio
04/15/04 8,632,185 Swedish Krone ................... $ 1,198,748 $ 1,144,046 $ 54,702
04/16/04 23,738,918 European Currency Unit .......... 29,951,937 29,192,148 759,789
04/21/04 4,134,778 Canadian Dollar ................. 3,202,126 3,149,805 52,321
04/23/04 2,014,964 Great British Pound ............. 3,673,481 3,704,005 (30,524)
------------ ------------ ----------
$ 38,026,292 $ 37,190,004 $ 836,288
============ ============ ==========
Managed Income Portfolio
04/15/04 105,228,052 Swedish Krone ................... $ 14,612,977 $ 13,946,148 $ 666,829
04/16/04 50,575,628 European Currency Unit .......... 63,922,089 62,193,705 1,728,384
04/21/04 17,520,378 Canadian Dollar ................. 13,568,435 13,346,734 221,701
04/23/04 6,974,874 Great British Pound ............. 12,715,894 12,821,553 (105,659)
------------ ------------ ----------
$104,819,395 $102,308,140 $2,511,255
============ ============ ==========
International Bond Portfolio
04/06/04 2,370,334 European Currency Unit .......... $ 3,008,582 $ 2,916,365 $ 92,217
04/06/04 1,595,000 Great British Pound ............. 2,932,146 2,931,393 753
04/06/04 4,556,604 New Zealand Dollar .............. 3,090,113 3,033,550 56,563
04/15/04 174,629,909 Swedish Krone ................... 24,016,616 23,146,651 869,965
04/16/04 57,900,000 European Currency Unit .......... 71,690,414 71,127,254 563,160
04/19/04 504,000,000 Japanese Yen .................... 4,700,668 4,846,853 (146,185)
04/20/04 12,000,000 New Zealand Dollar .............. 7,980,857 7,969,872 10,985
04/21/04 16,489,280 Canadian Dollar ................. 12,701,159 12,538,900 162,259
04/22/04 250,000 Danish Krone .................... 41,709 41,239 470
04/22/04 714,100,000 Hungarian Forint ................ 3,310,711 3,504,554 (193,843)
04/22/04 15,400,000 South African Rand .............. 2,277,601 2,433,667 (156,066)
04/23/04 4,821,407 Australian Dollar ............... 3,701,876 3,671,719 30,157
04/23/04 41,855,592 Great British Pound ............. 75,841,796 76,791,076 (949,280)
------------ ------------ ----------
$215,294,248 $214,953,093 $ 341,155
============ ============ ==========
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT BOUGHT AMOUNT 2004 GAIN/(LOSS)
- -------------------------------- ------------ --------------------------------- -------------- -------------- ----------------
Low Duration Bond Portfolio
04/16/04 44,743,205 European Currency Unit .......... $56,273,216 $55,021,474 $ (1,251,742)
04/23/04 300,000 Great British Pound ............. 548,100 551,475 3,375
----------- ----------- ------------
$56,821,316 $55,572,949 $ (1,248,367)
=========== =========== ============
Core Bond Total Return Portfolio
04/16/04 29,471,533 European Currency Unit .......... $36,898,504 $36,241,639 $ (656,865)
=========== =========== ============
Core PLUS Total Return Portfolio
04/16/04 9,382,565 European Currency Unit .......... $11,751,891 $11,537,899 $ (213,992)
=========== =========== ============
Managed Income Portfolio
04/16/04 11,374,860 European Currency Unit .......... $14,231,016 $13,987,857 $ (243,159)
=========== =========== ============
94
BLACKROCK FUNDS
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE AMOUNT BOUGHT AMOUNT 2004 GAIN/(LOSS)
- ------------ ----------------- --------------------------------- --------------- --------------- ---------------
International Bond Portfolio
04/06/04 4,055,000 Australian Dollar ............... $ 3,090,112 $ 3,095,798 $ 5,686
04/06/04 2,365,213 European Currency Unit .......... 2,932,147 2,910,064 (22,083)
04/06/04 1,595,000 Great British Pound ............. 3,008,582 2,931,393 (77,189)
04/15/04 39,200,000 Swedish Krone ................... 5,369,318 5,195,838 (173,480)
04/15/04 86,039,027 European Currency Unit .......... 107,546,612 105,694,105 (1,852,507)
04/16/04 106,600,000 Japanese Yen .................... 1,002,813 1,025,148 22,335
04/19/04 13,453,079,087 Japanese Yen .................... 126,455,828 129,375,189 2,919,361
04/20/04 5,000,000 New Zealand Dollar .............. 3,287,500 3,320,780 33,280
04/21/04 2,850,000 Canadian Dollar ................. 2,126,459 2,167,218 40,759
04/22/04 25,604,092 Danish Krone .................... 4,351,927 4,223,599 (128,328)
04/22/04 4,600,000 Polish Zloty .................... 1,244,926 1,187,940 (56,986)
04/22/04 4,900,000 South African Rand .............. 705,467 774,349 68,882
04/23/04 4,700,000 Australian Dollar ............... 3,495,055 3,579,262 84,207
04/23/04 21,275,000 Great British Pound ............. 39,163,720 39,032,544 (131,176)
04/23/04 4,268,000 Norwegian Krone ................. 632,009 621,329 (10,680)
04/23/04 4,033,000 Swiss Francs .................... 3,257,961 3,185,247 (72,714)
------------ ------------ ------------
$307,670,436 $308,319,803 $ 649,367
============ ============ ============
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 (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. 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, 2004, the following Portfolios had swap agreements
outstanding:
Unrealized
Termination Interest Interest Notional Amount Appreciation
Portfolio Counter-party Date Receivable Rate Payable Rate (U.S. Dollars) (Depreciation)
------------- -------------- ------------- --------------- ------------ --------------- ---------------
Low Duration Bond Union Bank of 8/14/2006 2.64% 1.12%/1/ $ 49,000,000 $ 628,448
Switzerland
Goldman Sachs 2/2/2007 3.50%/2/ N/A /3/ 90,000,000 1,278,000
Deutsche Bank 2/10/2007 2.68% 1.13%/1/ 80,300,000 847,179
Deutsche Bank 3/11/2007 2.33% 1.11%/1/ 57,925,000 (93,369)
Intermediate Union Bank of 8/14/2006 2.64% 1.12%/1/ 10,000,000 128,255
Government Bond Switzerland
Goldman Sachs 2/2/2007 3.50%/2/ N/A /3/ 16,000,000 227,200
Deutsche Bank 2/10/2007 2.68% 1.13%/1/ 12,800,000 135,042
Deutsche Bank 3/11/2007 2.33% 1.11%/1/ 9,300,000 (14,991)
Union Bank of 9/26/2008 3.52% 1.11%/1/ 3,400,000 72,977
Switzerland
Deutsche Bank 8/15/2023 1.12%/1/ 5.23% 4,000,000 (152,120)
Union Bank of 10/27/2024 N/A /4/ 5.82%/5/ 1,400,000 (118,850)
Switzerland
95
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Unrealized
Termination Interest Interest Notional Amount Appreciation
Portfolio Counter-party Date Receivable Rate Payable Rate (U.S. Dollars) (Depreciation)
----------- -------------- ----------- --------------- ------------ --------------- --------------
Intermediate Bond Union Bank of 8/14/2006 2.64% 1.12%/1/ $ 26,000,000 $ 333,462
Switzerland
Goldman Sachs 2/2/2007 3.50%/2/ N/A /3/ 131,000,000 1,860,200
Deutsche Bank 2/10/2007 2.68% 1.13%/1/ 38,600,000 407,237
Deutsche Bank 3/11/2007 2.33% 1.11%/1/ 27,900,000 (44,972)
Union Bank of 9/26/2008 3.52% 1.11%/1/ 7,600,000 163,124
Switzerland
Deutsche Bank 8/15/2023 1.12%/1/ 5.23% 13,000,000 (494,390)
Union Bank of 10/27/2024 N/A /4/ 5.82%/5/ 4,000,000 (339,572)
Switzerland
Core Bond Union Bank of 8/14/2006 2.64% 1.12%/1/ 66,500,000 852,894
Total Return Switzerland
Goldman Sachs 2/2/2007 3.50%/2/ N/A /3/ 180,000,000 2,556,000
Deutsche Bank 3/11/2007 2.33% 1.11%/1/ 79,150,000 (127,582)
Union Bank of 9/26/2008 3.52% 1.11%/1/ 30,300,000 650,351
Switzerland
Morgan Stanley 2/17/2014 1.12%/1/ 4.41% 34,300,000 (561,379)
Union Bank of 12/7/2015 N/A /6/ 5.58%/7/ 23,800,000 (1,034,705)
Switzerland
Deutsche Bank 8/15/2023 1.12%/1/ 5.23% 27,000,000 (1,026,811)
Union Bank of 10/27/2024 N/A /4/ 5.82%/5/ 26,300,000 (2,232,688)
Switzerland
Core PLUS Morgan Stanley 2/19/2006 1.12%/1/ 2.00% 12,000,000 (38,896)
Total Return Citibank 3/22/2006 1.11%/1/ 1.84% 17,000,000 5,360
Union Bank of 8/14/2006 2.64% 1.12%/1/ 5,000,000 64,127
Switzerland
Deutsche Bank 3/11/2007 2.33% 1.11%/1/ 9,300,000 (14,991)
Union Bank of 9/26/2008 3.52% 1.11%/1/ 2,300,000 49,367
Switzerland
Morgan Stanley 2/17/2014 1.12%/1/ 4.41% 3,500,000 (57,284)
Union Bank of 12/7/2015 N/A /6/ 5.58%/7/ 2,300,000 (99,993)
Switzerland
Union Bank of 10/27/2024 N/A /4/ 5.82%/5/ 2,500,000 (212,233)
Switzerland
Government Deutsche Bank 6/24/2005 1.11%/1/ 1.38% 45,000,000 26,994
Income Union Bank of 8/14/2006 2.64% 1.12%/1/ 8,000,000 102,603
Switzerland
Union Bank of 10/27/2024 N/A /4/ 5.82%/5/ 1,900,000 (161,297)
Switzerland
GNMA Deutsche Bank 6/24/2005 1.11%/1/ 1.38% 55,000,000 32,992
Union Bank of 8/14/2006 2.64% 1.12%/1/ 10,000,000 128,255
Switzerland
Union Bank of 10/27/2024 N/A /4/ 5.82%/5/ 3,700,000 (314,104)
Switzerland
Managed Income Union Bank of 8/14/2006 2.64% 1.12%/1/ 28,000,000 359,113
Switzerland
Goldman Sachs 2/2/2007 3.50%/2/ N/A /3/ 110,000,000 1,562,000
Deutsche Bank 3/11/2007 2.33% 1.11%/1/ 26,975,000 (43,481)
Union Bank of 9/26/2008 3.52% 1.11%/1/ 13,300,000 285,468
Switzerland
Morgan Stanley 2/17/2014 1.12%/1/ 4.41% 12,000,000 (196,401)
Union Bank of 12/7/2015 N/A /6/ 5.58%/7/ 9,400,000 (408,664)
Switzerland
Deutsche Bank 8/15/2023 1.12%/1/ 5.23% 18,000,000 (684,541)
Union Bank of 10/27/2024 N/A /4/ 5.82%/5/ 10,600,000 (899,867)
Switzerland
96
BLACKROCK FUNDS
Unrealized
Termination Interest Interest Notional Amount Appreciation
Portfolio Counter-party Date Receivable Rate Payable Rate (U.S. Dollars) (Depreciation)
----------- --------------- ------------ --------------- ------------ --------------- --------------
International Bond Morgan Stanley 2/17/2014 1.12%/1/ 4.41% $ 4,100,000 $ (67,104)
Union Bank of 10/27/2024 N/A /4/ 5.82%/5/ 2,600,000 (220,722)
Switzerland
High Yield Morgan Stanley 6/20/2009 N/A /8/ 1.51% 5,000,000 35,826
1 Rate shown is based on the 3 month LIBOR as of the most recent payment date.
2 Per the terms of the agreement, rate becomes effective 02/02/05.
3 Rate to be determined based on the 3 month LIBOR on 02/02/05.
4 Rate to be determined based on the 3 month LIBOR on 10/27/04.
5 Per the terms of the agreement, rate becomes effective 10/27/04.
6 Rate to be determined based on the 3 month LIBOR on 12/07/05.
7 Per the terms of the agreement, rate becomes effective 12/07/05.
8 Rate to be determined upon notice of event of default by Eastman Kodak
Company on the 7.25% bond issue maturing 11/15/13.
Security 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 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.
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 Fund's
custodian or an authorized securities depository.
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 Fund's Board of Trustees. 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 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.
GNMA
PORTFOLIO
-----------------
Average daily balance of reverse repurchase agreements
outstanding during the period ended March 31, 2004 .... $ 25,913,327
Weighted Average Interest Rate ........................ 1.09%
Maximum Amount of reverse repurchase agreements
outstanding at any month-end during the period ended
March 31, 20041 ....................................... $ 52,166,918
Percentage of total assets ............................ 12.82%
Amount of reverse repurchase agreements outstanding at
March 31, 2004 ........................................ $ 24,357,416
Percentage of total assets ............................ 5.25%
/1/ The maximum amount of reverse repurchase agreements outstanding at any month
end occurred on January 31, 2004.
Futures Transactions - The Portfolios use futures and options on futures
contracts to manage the overall duration, yield curve, and convexity risk of
their fixed income securities. 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 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
97
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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 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
rate 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 value of the
swaption. Changes in the value of the swaption are reported as unrealized gains
or losses in the Statement of Assets and Liabilities or Statement of Net
Assets. 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 in excess of the amounts
reported in the Statement of Assets and Liabilities, 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 approved by the Board of
Trustees. 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, 2004 are summarized as follows:
INTERMEDIATE CORE BOND
GOVERNMENT BOND INTERMEDIATE BOND TOTAL RETURN
--------------------- ------------------------- ---------------------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS PREMIUM CONTRACTS PREMIUM CONTRACTS PREMIUM
----------- --------- ----------- ------------- ----------- ---------------
Balance at 9/30/03 ......... 2,300 $500,250 5,200 $1,131,000 20,964 $ 4,798,793
Purchased .................. - - - - (2,403) (292,805)
Written .................... 360 162,000 1,000 450,000 56,923 12,264,772
Expired .................... - - - - (264) (296,543)
Closed ..................... - - - - - (71,324)
Exercised .................. - - - - - -
----- -------- ----- ---------- ------ -----------
Balance at 3/31/04 ......... 2,660 $662,250 6,200 $1,581,000 75,220 $16,402,893
===== ======== ===== ========== ====== ===========
98
BLACKROCK FUNDS
CORE PLUS
TOTAL RETURN GOVERNMENT INCOME GNMA
---------------------------- --------------------------- ---------------------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS PREMIUM CONTRACTS PREMIUM CONTRACTS PREMIUM
------------ --------------- ----------- --------------- ----------- ---------------
Balance at 9/30/03 ......... 1,620 $ 370,465 (166) $ (244,335) - $ -
Purchased .................. (155) (18,891) (2,347) (2,338,944) (11,554) (2,434,439)
Written .................... 23,135 1,991,955 2,818 426,080 5,560 841,607
Expired .................... (20) (22,465) - - - -
Closed ..................... (10,000) (330,226) 2,077 2,390,674 10,860 2,144,530
Exercised .................. - - - - - -
------- ---------- ----- ----------- ------- -----------
Balance at 3/31/04 ......... 14,580 $1,990,838 2,382 $ 233,475 4,866 $ 551,698
======= ========== ===== =========== ======= ===========
MANAGED INCOME INTERNATIONAL BOND
---------------------------- ------------------------
NUMBER OF NUMBER OF
CONTRACTS PREMIUM CONTRACTS PREMIUM
---------- ----------- --------- ------------
Balance at 9/30/03 ......... 9,208 $2,100,563 - $ -
Purchased .................. (663) (80,742) - -
Written .................... 22,523 4,869,333 3,640 552,714
Expired .................... (108) (121,313) - -
Closed ..................... - (19,668) - -
Exercised .................. - - - -
------- ---------- ------ --------
Balance at 3/31/04 ......... 30,960 $6,748,173 3,640 $552,714
======= ========== ====== ========
TBA Purchase Commitments - The Portfolios may enter into "TBA" (to be
announced) purchase commitments to purchase securities for a fixed price at a
future date. TBA purchase commitments are considered securities in themselves,
and involve a risk of loss if the value of the security to be purchased
declines prior to settlement date, which is in addition to the risk of decline
in the value of a Portfolio's other assets. Unsettled TBA purchase commitments
are valued at the current market value of the underlying securities, according
to the procedures described under "Security Valuation" above.
Mortgage Dollar Rolls - The Portfolios may enter into mortgage dollar
rolls (principally using TBA's) in which the Portfolios sell mortgage
securities for delivery in the current month and simultaneously contract 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 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.
Securities Lending - Through an agreement with PFPC Trust Co. 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
at least equal to 102% of the market value of the securities on loan. Loans of
foreign securities are secured by collateral at least equal to 105% of the
market value of
99
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 securities lending is invested in short-term investments by the lending
agent. These may include the Institutional Money Market Trust (the "Trust"), a
portfolio of money market securities advised by BlackRock Capital Management,
Inc., or high-quality, short-term instruments with a maturity date not to
exceed 397 days. At March 31, 2004, 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
--------------- ----------------------- --------------------
Low Duration Bond Portfolio .............. $ 1,362,198 $ - $ 1,420,500
Intermediate Bond Portfolio .............. 5,192,376 3,065,610 5,354,710
Core Bond Total Return Portfolio ......... 17,717,397 10,260,490 18,330,890
Managed Income Portfolio ................. 3,921,053 2,314,500 4,050,850
High Yield Bond Portfolio ................ 53,697,989 52,278,060 56,173,009
BlackRock Capital Management, Inc., a wholly-owned subsidiary of
BlackRock, Inc., serves as investment adviser to the Trust, but receives no
fees for these services. Administrative and accounting services are provided by
PFPC Inc., 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.
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.
Transfers In-Kind - During the current fiscal year, September 30, 2004,
certain shareholders of the Enhanced Income Portfolio and the Core Bond Total
Return Portfolio transferred cash and securities with a value of $31,831,191
and $146,170,410 respectively, in exchange for fund shares. During the fiscal
year ended September 30, 2003, certain shareholders of the Low Duration Bond
Portfolio, the Intermediate Bond Portfolio, the Core Bond Total Return
Portfolio and the Core PLUS Total Return Portfolio transferred cash and
securities with a value of $12,785,206, $4,040,941, $16,686,623 and $28,745,036
respectively, in exchange for fund shares. The securities contributed were
subject to a taxable event prior to the in-kind transfers to the Portfolios and
had the same market value and cost basis as of the date of transfer.
Accordingly, for purposes of generally accepted accounting principles, the book
cost of any securities transferred in-kind to the portfolios were equal to the
market value of such securities on their date of contribution to the Portfolios
resulting in no difference between book cost and tax cost.
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 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.
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.
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, such
as 12b-1 service fees, are borne by that class. 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. For the six
months ended March 31, 2004, the following shows the various types of class
specific expenses borne directly by each class of each fund and any associated
waivers of those expenses.
100
BLACKROCK FUNDS
SHARE CLASSES
ADMINISTRATION FEES ----------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- --------------- ---------- ------------ ------------ -----------
Enhanced Income .................. $ 825 $ 18 $ - $ - $ - $ -
Low Duration Bond ................ 117,780 355,248 196,095 75,805 57,124 126,241
Intermediate Government Bond ..... - 163,768 1,046 38,856 9,224 12,806
Intermediate Bond ................ 70,785 272,359 45,794 29,181 10,021 10,790
Core Bond Total Return ........... 162,926 636,476 102,235 89,450 48,590 64,189
Core PLUS Total Return ........... 45,313 - - 6 56 -
Government Income ................ 252 - - 69,785 38,234 20,884
GNMA ............................. 6,155 120,889 1,258 14,609 23,575 36,333
Managed Income ................... - 553,258 64,921 33,886 7,361 571
International Bond ............... - 61,510 45,391 67,004 10,510 16,676
High Yield Bond .................. 13,677 129,511 71,059 56,527 81,333 56,932
SHARE CLASSES
ADMINISTRATION FEES WAIVED -----------------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
------------- --------------- ------------- -------------- ------------ -----------
Enhanced Income ...................... $ (825) $ (18) $ - $ - $ - $ -
Low Duration Bond .................... (80,964) (2) - (26,140) (19,698) (43,531)
Intermediate Government Bond ......... - (1) - - - -
Intermediate Bond .................... (47,936) - - (10,062) (3,456) (3,721)
Core Bond Total Return ............... (123,863) (187) (2,809) (34,800) (18,859) (24,948)
Core PLUS Total Return ............... (30,963) - - (2) (19) -
Government Income .................... (194) - - - - -
GNMA ................................. (3,702) - (58) - - -
Managed Income ....................... - (15,909) (3,268) (1,942) (263) (19)
High Yield Bond ...................... (9,473) (1) (5) - - -
SHARE CLASSES
TRANSFER AGENT FEES ---------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- --------------- --------- ------------ ------------ -----------
Enhanced Income ...................... $ 118 $ 2 $ - $ - $ - $ -
Low Duration Bond .................... 27,047 58,627 32,128 31,001 23,941 53,943
Intermediate Government Bond ......... - 27,161 173 15,840 3,708 5,250
Intermediate Bond .................... 14,884 45,072 7,477 11,645 3,993 4,292
Core Bond Total Return ............... 42,634 108,755 16,850 35,063 20,176 25,612
Core PLUS Total Return ............... 9,330 - - 2 23 -
Government Income .................... 36 - - 26,664 15,769 8,549
GNMA ................................. 1,585 20,099 206 5,876 9,662 14,840
Managed Income ....................... - 94,343 10,801 14,157 3,015 226
International Bond ................... - 9,713 7,278 25,534 4,103 6,102
High Yield Bond ...................... 2,726 21,377 11,451 23,573 32,837 22,793
SHARE CLASSES
TRANSFER AGENT FEES WAIVED --------------------------------------------------
INVESTOR A INVESTOR B INVESTOR C
---------------- -------------- --------------
Low Duration Bond .............. $ (18,431) $ (14,384) $ (32,671)
Intermediate Bond .............. (6,848) (2,346) (2,521)
Core Bond Total Return ......... (20,453) (12,075) (15,061)
Core PLUS Total Return ......... (1) (14) -
101
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SHARE CLASSES
SHAREHOLDER SERVICE FEES --------------------------------------------------------
SERVICE INVESTOR A INVESTOR B INVESTOR C
------------ ------------ ------------ -----------
Low Duration Bond .................... $ 202,857 $ 130,698 $ 98,490 $ 217,656
Intermediate Government Bond ......... 1,083 66,993 15,903 22,080
Intermediate Bond .................... 47,373 50,312 17,278 18,604
Core Bond Total Return ............... 105,760 154,224 83,776 110,671
Core PLUS Total Return ............... - 10 96 -
Government Income .................... - 120,320 65,906 36,006
GNMA ................................. 1,304 25,188 40,646 62,643
Managed Income ....................... 67,160 58,424 12,691 985
International Bond ................... 46,956 115,524 18,120 28,752
High Yield Bond ...................... 73,510 97,459 140,230 98,159
SHARE CLASSES
SHAREHOLDER PROCESSING FEES -------------------------------------------------------
SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- ------------ ------------ -----------
Low Duration Bond .................... $202,857 $78,418 $59,094 $130,594
Intermediate Government Bond ......... 1,083 40,195 9,542 13,248
Intermediate Bond .................... 47,373 30,187 10,367 11,162
Core Bond Total Return ............... 105,760 92,536 50,265 66,402
Core PLUS Total Return ............... - 6 58 -
Government Income .................... - 72,192 39,543 21,604
GNMA ................................. 1,304 15,113 24,388 37,586
Managed Income ....................... 67,160 35,054 7,615 591
International Bond ................... 46,956 69,315 10,872 17,251
High Yield Bond ...................... 73,510 58,476 84,138 58,895
SHARE CLASSES
DISTRIBUTION FEES -----------------------------------------
INVESTOR A INVESTOR B INVESTOR C
------------ ------------ -----------
Low Duration Bond .................... $ 52,279 $ 295,469 $ 652,969
Intermediate Government Bond ......... 26,797 47,840 66,241
Intermediate Bond .................... 20,125 51,835 55,811
Core Bond Total Return ............... 61,689 251,327 332,013
Core PLUS Total Return ............... 4 289 -
Government Income .................... 48,128 197,717 108,019
GNMA ................................. 10,076 121,938 187,928
Managed Income ....................... 23,369 38,073 2,954
International Bond ................... 46,209 54,360 86,257
High Yield Bond ...................... 38,984 420,690 294,476
SHARE CLASSES
DISTRIBUTION FEES WAIVED ------------------------------
INVESTOR A
----------------
Low Duration Bond .................... $ (51,094)
Intermediate Government Bond ......... (26,193)
Intermediate Bond .................... (19,684)
Core Bond Total Return ............... (59,998)
Core PLUS Total Return ............... (4)
Government Income .................... (47,140)
GNMA ................................. (9,852)
Managed Income ....................... (22,824)
International Bond ................... (45,264)
High Yield Bond ...................... (38,075)
102
BLACKROCK FUNDS
(B) Transactions with Affiliates and Related Parties
Pursuant to an Investment Advisory Agreement, BlackRock Advisors, Inc.
("BlackRock"), a wholly-owned subsidiary of BlackRock, Inc., serves as
investment adviser to the Portfolios. BlackRock Financial Management, Inc.,
("BFM") a wholly-owned subsidiary of BlackRock, serves as sub-adviser for all
of the bond 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
PORTFOLIO, INTERNATIONAL BOND PORTFOLIO INTERNATIONAL BOND PORTFOLIO
& GNMA PORTFOLIO & GNMA PORTFOLIO
----------------------------------------- -----------------------------
INVESTMENT INVESTMENT
AVERAGE DAILY NET ASSETS ADVISORY FEE ADVISORY FEE
- ------------------------------- ----------------------------------------- -----------------------------
first $1 billion .500% .550%
$1 billion-$2 billion .450 .500
$2 billion-$3 billion .425 .475
greater than $3 billion .400 .450
The investment advisory fee for the Enhanced Income Portfolio is .40%.
For the period ended March 31, 2004, advisory fees and waivers for each
Portfolio were as follows:
GROSS NET
ADVISORY ADVISORY
FEE WAIVER FEE
------------ ------------ ------------
Enhanced Income Portfolio ...................... $ 9,611 $ 9,611 $ -
Low Duration Bond Portfolio .................... 4,437,315 2,130,432 2,306,883
Intermediate Government Bond Portfolio ......... 778,522 377,278 401,244
Intermediate Bond Portfolio .................... 2,281,356 969,340 1,312,016
Core Bond Total Return Portfolio ............... 5,808,954 2,627,764 3,181,190
Core PLUS Total Return Portfolio ............... 647,707 374,730 272,977
Government Income Portfolio .................... 448,067 270,052 178,015
GNMA Portfolio ................................. 842,659 481,099 361,560
Managed Income Portfolio ....................... 2,324,608 748,633 1,575,975
International Bond Portfolio ................... 763,500 - 763,500
High Yield Bond Portfolio ...................... 1,558,770 420,853 1,137,917
In the interest of limiting the expenses of the Portfolios, BlackRock and
the Fund have entered into a series of annual expense limitation agreements
beginning February 1, 1999. 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. Effective February 1, 2004, these expense limits apply to the aggregate
expenses incurred on a Share Class (excluding: interest, taxes, brokerage
commissions, and other expenditures which are capitalized in accordance with
generally accepted accounting principles). Prior to February 1, 2004, the
expense limits applied to expenses charged on Portfolio assets as a whole, but
not expenses separately charged to the different share classes of a Portfolio.
If in the following two years the operating expenses of a Portfolio that
previously received a waiver or reimbursement from BlackRock are less than the
expense limit for that Portfolio, the Portfolio is required to repay BlackRock
up to the amount of fees waived or expenses reimbursed under the agreement if:
(1) the Portfolio has more than $50 million in assets, (2) BlackRock continues
to be the Portfolio's investment adviser and (3) the Board of Trustees of the
Fund has approved the payments to BlackRock on a quarterly basis.
103
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At March 31, 2004, the amounts subject to possible future reimbursement
under the expense limitation agreement are as follows:
TOTAL WAIVERS
EXPIRING EXPIRING EXPIRING SUBJECT TO
JANUARY 31, 2005 JANUARY 31, 2006 JANUARY 31, 2007 REIMBURSEMENT
------------------ ------------------ ------------------ --------------
Low Duration Bond Portfolio .................... $ 1,912,708 $ 3,619,537 $ 762,523 $ 6,294,768
Intermediate Government Bond Portfolio ......... 655,308 639,093 119,754 1,414,155
Intermediate Bond Portfolio .................... 1,861,005 1,750,280 343,197 3,954,482
Core Bond Total Return Portfolio ............... 4,450,377 5,029,818 897,386 10,377,581
Core PLUS Total Return Portfolio ............... 266,493 606,696 147,963 1,021,152
Government Income Portfolio .................... 170,412 361,714 95,550 627,676
GNMA Portfolio ................................. 600,858 830,940 148,068 1,579,866
Managed Income Portfolio ....................... 1,721,558 1,600,137 234,518 3,556,213
High Yield Bond Portfolio ...................... 425,847 740,256 149,269 1,315,372
BlackRock pays BFM fees for its sub-advisory services.
PFPC, Inc. ("PFPC"), an indirect subsidiary of The PNC Financial Services
Group, Inc., and BlackRock act as co-administrators for the Fund. For these
services, the co-administrators receive a combined administration fee computed
daily and payable monthly, based on a percentage of the average daily net
assets of each Portfolio, at the following annual rates: .085% of the first
$500 million, .075% of the next $500 million and .065% of assets in excess of
$1 billion. In addition, each of the classes, except for the BlackRock Class,
is charged an administration fee based on the following percentage of average
daily net assets of each respective class: .145% of the first $500 million,
..135% of the next $500 million and .125% of assets in excess of $1 billion. The
BlackRock Class is charged an administration fee of .035% of the first $500
million, .025% of the next $500 million and .015% of assets in excess of $1
billion based upon average daily net assets of its class. In addition, PFPC and
BlackRock may have, at their discretion, voluntarily waived all or any portion
of their administration fees for any Portfolio.
PFPC and BlackRock have contractually agreed to waive fees otherwise due
to them under the Administration Agreement in an amount equal to 0.05% of
average daily net assets attributable to Investor A, B and C Shares of Low
Duration Bond, Intermediate Bond, Core Bond Total Return and Core PLUS Total
Return Portfolios until February 1, 2005.
For the period ended March 31, 2004, administration fees and waivers for
each Portfolio were as follows:
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
---------------- ---------- ---------------
Enhanced Income Portfolio ...................... $ 2,886 $ 2,885 $ 1
Low Duration Bond Portfolio .................... 1,608,127 170,335 1,437,792
Intermediate Government Bond Portfolio ......... 358,049 1 358,048
Intermediate Bond Portfolio .................... 806,134 65,175 740,959
Core Bond Total Return Portfolio ............... 1,990,824 205,466 1,785,358
Core PLUS Total Return Portfolio ............... 155,486 30,984 124,502
Government Income Portfolio .................... 205,326 194 205,132
GNMA Portfolio ................................. 333,049 3,760 329,289
Managed Income Portfolio ....................... 1,033,688 21,401 1,012,287
International Bond Portfolio ................... 319,086 - 319,086
High Yield Bond Portfolio ...................... 667,855 9,479 658,376
PFPC Trust Co., 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.
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 Advisers, Inc. ("BlackRock") or any other affiliate of PNC
Bank 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 BlackRock or
any
104
BLACKROCK FUNDS
other affiliate of PNC Bank fees for the provision of personal services to
shareholders and the processing and administration of shareholder accounts.
BlackRock, in turn, determines the amount of the service fee and shareholder
processing fee to be paid to brokers, dealers, financial institutions and
industry professionals (including PNC Bank and its affiliates) that provide
services to their customers who own shares of the Fund. BlackRock may retain a
significant portion of the shareholder processing fees and may retain some of
the service fees paid by the Fund. Currently, only Investor A Shares, Investor
B Shares, Investor C Shares and Service Shares bear the expense of service fees
and shareholder processing fees under the Plan. Refer to the fee table in the
"Notes to Financial Statements" for fee information.
As of the period ended March 31, 2004, affiliated payables were as
follows:
PNC BANK
PFPC (1) BLACKROCK (2) AFFILIATES (3)
----------- --------------- ----------------
Enhanced Income ...................... $ 2,765 $ - $ -
Low Duration Bond .................... 162,718 579,595 340,462
Intermediate Government Bond ......... 31,587 116,374 49,210
Intermediate Bond .................... 90,184 315,401 62,852
Core Bond ............................ 211,298 776,289 240,408
Core Plus Total Return ............... 33,013 71,092 77
Government Income .................... 31,254 58,347 119,147
GNMA ................................. 37,019 90,373 89,693
Managed Income ....................... 92,162 393,577 48,327
High Yield Bond ...................... 72,237 268,296 243,463
International Bond ................... 87,558 208,576 101,921
(1) - payables to PFPC are for Accounting, Administration, Custody and Transfer
Agent services provided as of March 31, 2004.
(2) - payables to BlackRock are for Advisory and Administration services
provided as of March 31, 2004.
(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, 2004, was $3,201,515, a portion of which is paid to
service organizations, including other PNC Bank affiliates.
Effective October 1, 2002, BlackRock, the Distributor and PFPC have
contractually agreed to waive or reimburse fees or expenses in order to limit
fund expenses to .90% (excluding interest expense) (for Investor A Shares) and
1.65% (excluding interest expense) (for Investor B and C Shares) of average
daily net assets for the Low Duration Bond, Core Bond Total Return and Core
PLUS Total Return Portfolios.
Effective October 1, 2002, BlackRock, the Distributor and PFPC have
contractually agreed to waive or reimburse fees or expenses in order to limit
fund expenses to .95% (excluding interest expense) (for Investor A Shares) and
1.70% (excluding interest expense) (for Investor B and C Shares) of average
daily net assets for the Intermediate Bond Portfolio.
(C) Purchases and Sales of Securities
For the period ended March 31, 2004, purchases and sales of securities,
other than short-term investments, dollar rolls and U.S. government securities,
were as follows:
PURCHASES SALES
---------------- ----------------
Enhanced Income Portfolio ...................... $ 22,531,015 $ -
Low Duration Bond Portfolio .................... 841,948,970 861,703,509
Intermediate Government Bond Portfolio ......... 93,519,689 90,684,233
Intermediate Bond Portfolio .................... 415,538,703 322,396,484
Core Bond Total Return Portfolio ............... 2,197,423,339 1,839,180,969
Core PLUS Total Return Portfolio ............... 264,936,367 198,603,436
Government Income Portfolio .................... 204,831,561 111,562,168
GNMA Portfolio ................................. 169,569,892 207,225,562
Managed Income Portfolio ....................... 906,153,623 577,054,764
International Bond Portfolio ................... 411,403,662 307,295,237
High Yield Bond Portfolio ...................... 507,553,400 471,657,199
105
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the period ended March 31, 2004, purchases and sales of U.S.
government securities were as follows:
PURCHASES SALES
---------------- ----------------
Enhanced Income Portfolio ...................... $ 10,771,905 $ 1,209,810
Low Duration Bond Portfolio .................... 1,272,505,844 916,095,127
Intermediate Government Bond Portfolio ......... 162,799,170 155,200,240
Intermediate Bond Portfolio .................... 598,320,904 547,540,435
Core Bond Total Return Portfolio ............... 2,048,412,198 1,984,552,960
Core PLUS Total Return Portfolio ............... 320,883,890 226,840,938
Government Income Portfolio .................... 242,319,721 282,349,473
GNMA Portfolio ................................. 269,464,290 292,430,858
Managed Income Portfolio ....................... 610,053,598 666,757,519
International Bond Portfolio ................... 115,866,309 34,745,287
High Yield Bond Portfolio ...................... 18,997,707 -
(D) Capital Shares
Transactions in capital shares for each period were as follows:
ENHANCED INCOME PORTFOLIO
--------------------------------
FOR THE PERIOD 3/4/04 /1/
THROUGH 3/31/04
(UNAUDITED)
--------------------------------
SHARES VALUE
------------- ----------------
Shares sold:
BlackRock Class ....................... 3,589,121 $ 35,895,271/2/
Institutional Class ................... 495,714 4,962,100
Service Class ......................... 10 100
Investor A Class ...................... 10 100
Shares redeemed:
BlackRock Class ....................... (49,950) (500,000)
--------- -------------
Net increase ............................. 4,034,905 $ 40,357,571
========= =============
/1/ Commencement of operations.
/2/ Includes 3,183,119 shares issued in exchange for cash and securities
transferred in-kind with a value of $31,831,191. See Note (A).
106
BLACKROCK FUNDS
LOW DURATION BOND PORTFOLIO
-----------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
---------------------------------- ----------------------------------
SHARES VALUE SHARES VALUE
---------------- ----------------- ---------------- -----------------
Shares sold:
BlackRock Class ............................. 33,462,180 $ 339,971,231 64,471,904 $659,645,2411
Institutional Class ......................... 14,696,911 149,371,972 33,855,591 346,300,203
Service Class ............................... 8,519,958 86,609,503 16,627,895 170,105,567
Investor A Class ............................ 4,444,035 45,211,845 13,035,998 133,430,923
Investor B Class ............................ 698,346 7,101,799 5,323,252 54,436,901
Investor C Class ............................ 1,623,738 16,495,671 14,578,339 149,127,191
Shares issued in reinvestment of dividends:
BlackRock Class ............................. 800,444 8,124,352 548,645 5,605,823
Institutional Class ......................... 172,739 1,752,928 135,039 1,382,033
Service Class ............................... 359,101 3,647,857 389,302 3,983,178
Investor A Class ............................ 89,530 909,743 136,962 1,401,789
Investor B Class ............................ 36,774 373,254 50,221 513,941
Investor C Class ............................ 60,328 612,251 88,194 902,366
Shares redeemed:
BlackRock Class ............................. (10,499,414) (106,639,751) (31,381,290) (320,978,094)
Institutional Class ......................... (12,886,886) (131,023,633) (16,478,951) (168,619,760)
Service Class ............................... (3,606,856) (36,667,264) (4,533,185) (46,362,649)
Investor A Class ............................ (3,746,069) (38,071,945) (9,953,500) (101,821,390)
Investor B Class ............................ (1,715,638) (17,430,706) (2,349,737) (24,031,860)
Investor C Class ............................ (6,103,820) (62,003,611) (6,879,124) (70,408,741)
----------- ------------- ----------- -------------
Net increase ................................... 26,405,401 $ 268,345,496 77,665,555 $ 794,612,662
=========== ============= =========== =============
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
-----------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------- ----------------------------------
SHARES VALUE SHARES VALUE
-------------- -------------- -------------- -----------------
Shares sold:
Institutional Class ......................... 2,591,047 $ 27,286,169 1,929,145 $ 20,584,491
Service Class ............................... 2,311 24,445 119,756 1,286,543
Investor A Class ............................ 1,076,190 11,353,835 6,749,202 72,423,892
Investor B Class ............................ 200,990 2,111,271 796,971 8,541,701
Investor C Class ............................ 325,676 3,429,955 2,297,250 24,695,791
Shares issued in reinvestment of dividends:
Institutional Class ......................... 8,734 91,904 46,063 494,350
Service Class ............................... 795 8,355 1,087 11,587
Investor A Class ............................ 86,700 913,919 192,236 2,064,457
Investor B Class ............................ 11,291 118,703 20,855 223,280
Investor C Class ............................ 11,903 125,258 17,791 190,280
Shares redeemed:
Institutional Class ......................... (2,678,675) (28,175,084) (6,333,075) (67,549,103)
Service Class ............................... (3,687) (39,030) (170,298) (1,821,306)
Investor A Class ............................ (1,316,925) (13,892,458) (6,647,232) (71,264,288)
Investor B Class ............................ (156,280) (1,642,484) (416,526) (4,440,567)
Investor C Class ............................ (427,534) (4,502,974) (1,301,563) (13,992,530)
---------- ------------- ---------- -------------
Net decrease ................................... (267,464) $ (2,788,216) (2,698,338) $ (28,551,422)
========== ============= ========== =============
/1/ Includes 1,251,524 shares issued in exchage for cash and securities
transferred in-kind with a value of $12,785,206. See Note (A).
107
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INTERMEDIATE BOND PORTFOLIO
--------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------------ -----------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ ---------------- ----------------
Shares sold:
BlackRock Class ......................... 15,938,750 $153,502,820 19,503,837 $ 193,323,8081
Institutional Class ..................... 5,043,756 48,786,417 10,473,835 102,802,529
Service Class ........................... 2,244,618 21,716,262 3,082,236 30,362,030
Investor A Class ........................ 1,524,101 14,746,130 3,879,270 38,014,328
Investor B Class ........................ 352,513 3,415,026 972,144 9,564,782
Investor C Class ........................ 692,935 6,719,863 1,205,254 11,928,848
Shares issued in reinvestment of dividends:
BlackRock Class ......................... 1,550,746 14,921,511 1,124,240 11,046,141
Institutional Class ..................... 702,479 6,724,008 87,932 860,227
Service Class ........................... 266,117 2,563,082 183,828 1,809,170
Investor A Class ........................ 158,259 1,523,217 134,272 1,320,336
Investor B Class ........................ 20,944 201,412 14,751 145,099
Investor C Class ........................ 21,267 204,598 7,548 74,294
Shares redeemed:
BlackRock Class ......................... (8,942,820) (86,569,600) (18,871,437) (185,542,625)
Institutional Class ..................... (4,213,327) (40,726,121) (11,624,133) (113,887,900)
Service Class ........................... (803,868) (7,775,213) (1,126,448) (11,072,372)
Investor A Class ........................ (1,018,090) (9,834,378) (2,846,760) (27,889,464)
Investor B Class ........................ (155,484) (1,505,341) (328,413) (3,221,790)
Investor C Class ........................ (352,998) (3,406,738) (296,389) (2,955,515)
---------- ------------ ----------- --------------
Net increase .............................. 13,029,898 $125,206,955 5,575,567 $ 56,681,926
========== ============ =========== ==============
CORE BOND TOTAL RETURN PORTFOLIO
--------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------------ -----------------------------------
SHARES VALUE SHARES VALUE
------------- ---------------- ---------------- ----------------
Shares sold:
BlackRock Class ......................... 57,418,758 $ 560,386,2722 74,894,893 $ 751,294,6523
Institutional Class ..................... 12,916,681 126,452,436 25,253,885 252,237,012
Service Class ........................... 2,213,709 21,623,027 7,850,927 78,371,483
Investor A Class ........................ 5,035,747 49,315,710 11,634,467 116,580,815
Investor B Class ........................ 572,592 5,613,629 3,440,440 34,460,306
Investor C Class ........................ 3,070,151 30,124,191 6,637,418 66,382,900
Shares issued in reinvestment of dividends:
BlackRock Class ......................... 4,438,916 43,328,823 3,639,142 36,422,062
Institutional Class ..................... 2,098,454 20,365,055 949,350 9,469,076
Service Class ........................... 497,919 4,848,736 332,452 3,319,627
Investor A Class ........................ 479,788 4,679,095 490,967 4,908,140
Investor B Class ........................ 122,069 1,190,033 124,229 1,241,556
Investor C Class ........................ 57,083 556,531 46,087 460,865
Shares redeemed:
BlackRock Class ......................... (27,840,327) (273,167,622) (51,558,388) (516,256,914)
Institutional Class ..................... (15,152,942) (148,230,799) (27,434,862) (274,419,532)
Service Class ........................... (1,659,651) (16,289,904) (5,826,607) (58,765,661)
Investor A Class ........................ (2,694,606) (26,416,721) (9,867,567) (98,839,883)
Investor B Class ........................ (1,217,989) (11,931,145) (2,123,837) (21,190,357)
Investor C Class ........................ (1,532,836) (15,027,379) (3,281,494) (32,790,968)
----------- -------------- ----------- --------------
Net increase .............................. 38,823,516 $ 377,419,968 35,201,502 $ 352,885,179
=========== ============== =========== ==============
/1/ Includes 400,887 shares issued in exchange for cash and securities
transferred in-kind with a value of $4,040,941. See Note (A).
/2/ Includes 15,115,865 shares issued in exchange for cash and securities
transferred in-kind with a value of $146,170,410. See Note (A).
/3/ Includes 1,675,428 shares issued in exchange for cash and securities
transferred in-kind with a value of $16,686,623. See Note (A)
108
BLACKROCK FUNDS
CORE PLUS TOTAL RETURN PORTFOLIO
------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
---------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
--------------- ---------------- --------------- -----------------
Shares sold:
BlackRock Class ........................ 10,910,319 $ 112,711,193 20,697,640 $ 215,470,594/1/
Investor A Class ....................... 119 1,220 462 4,824
Investor B Class ....................... 1,074 11,040 9,526 98,686
Investor C Class ....................... - - 1,871 20,094
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 657,267 6,785,667 635,078 6,598,242
Institutional Class .................... - 3 1 4
Service Class .......................... - 3 1 5
Investor A Class ....................... 22 231 16 165
Investor B Class ....................... 114 1,178 120 1,250
Investor C Class ....................... - 3 3 28
Shares redeemed:
BlackRock Class ........................ (3,014,784) (31,307,409) (9,158,177) (95,276,029)
Investor B Class ....................... (1,588) (16,468) (1,976) (20,466)
Investor C Class ....................... - - (1,873) (19,893)
---------- ------------- ---------- --------------
Net increase .............................. 8,552,543 $ 88,186,661 12,182,692 $ 126,877,504
========== ============= ========== ==============
GOVERNMENT INCOME PORTFOLIO
------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
---------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
------------- --------------- ------------- -----------------
Shares sold:
BlackRock Class ........................ 872,666 $ 9,784,589 8,904,938 $ 100,358,688
Investor A Class ....................... 5,785,179 64,856,292 24,826,856 279,892,579
Investor B Class ....................... 505,232 5,650,845 3,022,597 34,089,123
Investor C Class ....................... 435,238 4,851,440 2,323,172 26,250,763
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 9 104 4 40
Investor A Class ....................... 199,850 2,227,301 219,994 2,482,064
Investor B Class ....................... 82,307 917,048 102,954 1,160,950
Investor C Class ....................... 40,630 451,941 38,561 434,122
Shares redeemed:
BlackRock Class ........................ - - (8,904,720) (100,089,047)
Investor A Class ....................... (2,471,846) (27,699,321) (21,164,032) (238,627,834)
Investor B Class ....................... (811,088) (9,062,152) (2,602,040) (29,208,794)
Investor C Class ....................... (550,172) (6,130,624) (1,365,364) (15,372,024)
---------- ------------- ----------- --------------
Net increase .............................. 4,088,005 $ 45,847,463 5,402,920 $ 61,370,630
========== ============= =========== ==============
/1/ Includes 2,774,617 shares issued in exchange for cash and securities
transferred in-kind with a value of $28,745,036. See Note (A).
109
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
GNMA PORTFOLIO
----------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------------ -------------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ --------------- -------------------
Shares sold:
BlackRock Class ........................ 7,547 $75,518 6,918,437 $70,050,732
Institutional Class .................... 1,187,308 11,846,111 7,823,962 79,816,210
Service Class .......................... 62,948 628,018 291,547 2,938,731
Investor A Class ....................... 571,227 5,716,343 2,364,238 24,145,076
Investor B Class ....................... 334,582 3,335,426 1,661,621 16,909,064
Investor C Class ....................... 957,430 9,543,929 3,538,816 36,008,174
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 26,919 268,065 78,475 787,966
Institutional Class .................... 10,183 101,544 47,701 486,858
Service Class .......................... 3,921 39,056 5,735 58,111
Investor A Class ....................... 30,506 305,409 51,894 528,487
Investor B Class ....................... 38,862 387,771 70,945 720,127
Investor C Class ....................... 27,084 269,821 46,287 468,439
Shares redeemed:
BlackRock Class ........................ (4,965,985) (49,684,686) (1,015,332) (10,173,630)
Institutional Class .................... (1,865,401) (18,601,313) (8,588,520) (87,028,407)
Service Class .......................... (21,727) (216,550) (246,625) (2,459,843)
Investor A Class ....................... (506,849) (5,076,181) (1,855,641) (18,923,220)
Investor B Class ....................... (408,500) (4,076,002) (829,953) (8,381,346)
Investor C Class ....................... (1,085,809) (10,819,181) (2,023,665) (20,435,418)
---------- ------------ ---------- ------------
Net increase (decrease) ................... (5,595,754) $(55,956,902) 8,339,922 $ 85,516,111
========== ============ ========== ============
MANAGED INCOME PORTFOLIO
-------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
---------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
------------- -------------- ------------- ---------------
Shares sold:
Institutional Class .................... 1,875,066 $19,815,802 5,447,882 $58,460,885
Service Class .......................... 2,392,375 25,247,395 7,654,822 82,423,998
Investor A Class ....................... 298,403 3,156,553 2,696,527 29,002,173
Investor B Class ....................... 64,047 676,215 336,429 3,628,610
Investor C Class ....................... 22,081 231,207 50,219 539,709
Shares issued in reinvestment of dividends:
Institutional Class .................... 1,649,158 17,220,783 65,436 704,199
Service Class .......................... 252,818 2,647,961 132,655 1,427,147
Investor A Class ....................... 210,605 2,213,280 234,161 2,520,090
Investor B Class ....................... 20,766 217,930 20,339 218,890
Investor C Class ....................... 731 7,650 168 1,800
Shares redeemed:
Institutional Class .................... (5,984,413) (63,182,946) (16,805,512) (180,753,013)
Service Class .......................... (3,113,510) (32,897,225) (12,043,022) (129,528,997)
Investor A Class ....................... (1,079,569) (11,393,519) (3,244,123) (34,859,884)
Investor B Class ....................... (90,134) (953,655) (286,695) (3,075,910)
Investor C Class ....................... (13,526) (142,555) (31,445) (334,605)
---------- ------------ ----------- -------------
Net decrease .............................. (3,495,102) $(37,135,124) (15,772,159) $(169,624,908)
========== ============ =========== =============
110
BLACKROCK FUNDS
INTERNATIONAL BOND PORTFOLIO
------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
---------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
--------------- ---------------- --------------- -----------------
Shares sold:
Institutional Class .................... 7,255,290 $ 83,459,399 4,806,368 $ 51,708,847
Service Class .......................... 2,992,085 34,356,964 3,744,362 39,958,885
Investor A Class ....................... 4,878,804 55,887,842 5,938,781 63,521,893
Investor B Class ....................... 357,239 4,118,548 547,770 5,858,051
Investor C Class ....................... 1,350,946 15,604,593 1,199,720 12,914,769
Shares issued in reinvestment of dividends:
Institutional Class .................... 43,686 496,599 85,232 902,502
Service Class .......................... 88,059 1,002,757 138,412 1,468,698
Investor A Class ....................... 113,066 1,285,299 209,728 2,220,133
Investor B Class ....................... 10,847 123,193 31,735 335,434
Investor C Class ....................... 15,195 173,303 28,662 303,886
Shares redeemed:
Institutional Class .................... (1,209,935) (13,760,720) (2,467,998) (26,176,507)
Service Class .......................... (877,466) (10,078,442) (2,070,210) (22,163,110)
Investor A Class ....................... (1,819,810) (20,763,467) (3,160,528) (33,654,736)
Investor B Class ....................... (126,389) (1,447,202) (486,076) (5,166,103)
Investor C Class ....................... (173,042) (1,980,154) (424,406) (4,554,133)
---------- ------------ ---------- -------------
Net increase .............................. 12,898,575 $148,478,512 8,121,552 $ 87,478,509
========== ============ ========== =============
HIGH YIELD BOND PORTFOLIO
----------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FORTHE YEAR ENDED
(UNAUDITED) 9/30/03
-------------------------------- ---------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- --------------
Shares sold:
BlackRock Class ........................ 6,706,027 $ 53,988,732 10,158,381 $ 71,572,618
Institutional Class .................... 5,317,291 42,500,059 21,425,272 154,644,394
Service Class .......................... 5,350,025 42,964,662 8,411,060 61,247,173
Investor A Class ....................... 3,747,344 30,139,944 27,287,012 201,330,595
Investor B Class ....................... 1,331,899 10,687,251 7,657,034 55,563,971
Investor C Class ....................... 1,476,391 11,841,235 8,478,281 61,877,392
Shares issued in reinvestment of dividends:
BlackRock Class ........................ 319,914 2,559,669 762,655 5,510,063
Institutional Class .................... 70,919 566,701 68,522 506,641
Service Class .......................... 59,693 478,297 19,912 143,025
Investor A Class ....................... 184,428 1,469,514 299,671 2,199,179
Investor B Class ....................... 184,524 1,470,334 335,907 2,434,668
Investor C Class ....................... 127,366 1,015,991 177,500 1,301,709
Shares redeemed:
BlackRock Class ........................ (2,544,218) (20,639,113) (8,303,757) (62,624,825)
Institutional Class .................... (5,935,018) (47,652,602) (13,348,336) (98,190,198)
Service Class .......................... (2,377,206) (18,932,456) (1,764,213) (12,728,387)
Investor A Class ....................... (5,649,795) (45,421,946) (19,740,537) (148,481,187)
Investor B Class ....................... (1,652,592) (13,314,281) (2,687,824) (19,446,183)
Investor C Class ....................... (1,404,343) (11,331,326) (2,442,021) (18,227,743)
---------- ------------ ----------- -------------
Net increase .............................. 5,312,649 $ 42,390,665 36,794,519 $ 258,632,905
========== ============ =========== =============
On March 31, 2004, two shareholders held approximately 75% of the
outstanding shares of the Enhanced Income Portfolio, two shareholders held
approximately 33% of the outstanding shares of the Low Duration Bond Portfolio,
one shareholder held approximately 64% of the outstanding shares of the
Intermediate Government Portfolio, one shareholder held approximately 35% of
the outstanding shares of the Intermediate Bond Portfolio, one shareholder held
111
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
approximately 26% of the outstanding shares of the Core Bond Total Return
Portfolio, two shareholders held approximately 23% of the outstanding shares of
the Core PLUS Total Return Portfolio, two shareholders held approximately 27%
of the outstanding shares of the Government Income Portfolio, two shareholders
held approximately 67% of the outstanding shares of the GNMA Portfolio, one
shareholder held approximately 83% 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 36% 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.
(E) At March 31, 2004, net assets consisted of:
LOW INTERMEDIATE
ENHANCED DURATION GOVERNMENT INTERMEDIATE
INCOME BOND BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------------ ---------------- ----------------
Capital paid-in ........................ $40,357,571 $1,988,692,299 $303,599,950 $960,920,327
End of period distributions in
excess of net investment
income ................................ - (6,038,150) (1,108,315) (4,508,614)
Accumulated net realized gain
(loss) on investment
transactions, futures, options,
swaptions, swap contracts and
foreign currency related
transactions .......................... 2,081 (6,341,130) 1,892,745 7,666,558
Net unrealized appreciation on
investment transactions
futures, options, swaptions,
swap contracts and foreign
currency related transactions ......... 20,663 17,635,945 8,658,088 27,211,829
------------ --------------- ------------- -------------
$40,380,315 $1,993,948,964 $313,042,468 $991,290,100
============ =============== ============= =============
CORE BOND CORE PLUS GOVERNMENT
TOTAL RETURN TOTAL RETURN INCOME GNMA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------ ---------------- ---------------- ----------------
Capital paid-in ........................ $2,630,325,449 $308,192,949 $210,965,037 $280,932,957
End of period distributions in
excess of net investment
income ................................ (17,255,074) (1,167,103) (1,083,020) (3,604,552)
Accumulated net realized gain
(loss) on investment
transactions, futures, options,
swaptions, swap contracts and
foreign currency related
transactions .......................... 12,745,971 330,242 4,178,309 (4,348,477)
Net unrealized appreciation on
investment transactions,
futures, options, swaptions,
swap contracts and foreign
currency related transactions ......... 51,867,315 4,569,181 1,627,592 5,388,187
--------------- ------------- ------------- -------------
$2,677,683,661 $311,925,269 $215,687,918 $278,368,115
=============== ============= ============= =============
112
BLACKROCK FUNDS
MANAGED INTERNATIONAL HIGH YIELD
INCOME BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ----------------- ----------------
Capital paid-in ........................ $ 870,503,969 $ 354,154,264 $ 631,656,578
End of period distributions in
excess of net investment
income ................................ (3,456,121) (5,853,963) (2,778,348)
Accumulated net realized gain
on investment transactions,
futures, options, swaptions,
swap contracts and foreign
currency related transactions ......... 2,716,980 17,581,878 2,975,834
Net unrealized appreciation on
investment transactions,
futures, options, swaptions,
swap contracts and foreign
currency related transactions ......... 31,252,962 15,470,241 15,246,579
------------- ------------- -------------
$ 901,017,790 $ 381,352,420 $ 647,100,643
============= ============= =============
(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. 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 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 September 30, 2003, attributable to
realized foreign currency gains/(losses), foreign futures realized
gains/(losses), return of capital, bond bifurcation and paydown adjustments
were reclassified to the following accounts:
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
INCREASE/ ACCUMULATED UNDISTRIBUTED
(DECREASE) NET REALIZED NET INVESTMENT
PAID IN-CAPITAL GAIN (LOSS) INCOME
----------------- ----------------- ---------------
Low Duration Bond Portfolio .................... $ - $(6,279,860) $ 6,279,860
Intermediate Government Bond Portfolio ......... - (280,254) 280,254
Intermediate Bond Portfolio .................... - (118,696) 118,696
Core Bond Total Return Portfolio ............... - (4,580,550) 4,580,550
Core PLUS Total Return Portfolio ............... - (520,464) 520,464
Government Income Portfolio .................... - (1,564,577) 1,564,577
GNMA Portfolio ................................. (12,451) (3,051,834) 3,064,285
Managed Income Portfolio ....................... - (1,669,299) 1,669,299
International Bond Portfolio ................... (3,269,758) (535,935) 3,805,693
These reclassifications had no effect on net assets or net asset value per
share.
113
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The tax character of distributions paid during the last two fiscal years
were as follows:
ORDINARY LONG-TERM TAX RETURN TOTAL
INCOME CAPITAL GAIN OF CAPITAL DISTRIBUTIONS
--------------- -------------- ------------ --------------
Low Duration Bond Portfolio ....................
9/30/03 ....................................... $ 33,783,752 $ - $ - $ 33,783,752
9/30/02 ....................................... 24,038,708 421,787 - 24,460,495
Intermediate Government Bond Portfolio .........
9/30/03 ....................................... 15,981,354 - - 15,981,354
9/30/02 ....................................... 17,712,764 - - 17,712,764
Intermediate Bond Portfolio ....................
9/30/03 ....................................... 44,207,199 42,351 - 44,249,550
9/30/02 ....................................... 62,116,204 839,247 - 62,955,451
Core Bond Total Return Portfolio ...............
9/30/03 ....................................... 124,169,675 - - 124,169,675
9/30/02 ....................................... 131,807,323 - - 131,807,323
Core PLUS Total Return Portfolio ...............
9/30/03 ....................................... 6,848,966 111,468 - 6,960,434
9/30/02 ....................................... 2,934,835 - - 2,934,835
Government Income Portfolio ....................
9/30/03 ....................................... 11,243,305 97,535 - 11,340,840
9/30/02 ....................................... 3,036,996 798,056 - 3,835,052
GNMA Portfolio .................................
9/30/03 ....................................... 18,382,038 - - 18,382,038
9/30/02 ....................................... 14,462,465 - - 14,462,465
Managed Income Portfolio .......................
9/30/03 ....................................... 59,054,657 - - 59,054,657
9/30/02 ....................................... 69,193,212 - - 69,193,212
International Bond Portfolio ...................
9/30/03 ....................................... 4,281,693 89,094 3,269,758 7,640,545
9/30/02 ....................................... 7,399,929 - - 7,399,929
High Yield Bond Portfolio ......................
9/30/03 ....................................... 42,672,477 - - 42,672,477
9/30/02 ....................................... 27,988,824 - - 27,988,824
As of September 30, 2003, the components of distributable earnings/
(accumulated losses) were as follows:
UNDISTRIBUTED UNDISTRIBUTED CAPITAL POST-
ORDINARY LONG-TERM LOSS OCTOBER
INCOME CAPITAL GAIN CARRYFOWARDS LOSSES
--------------- --------------- ---------------- --------------------
Low Duration Bond Portfolio .................... $ 8,075,760 $ - $ - $ (6,091,598)/1/
Intermediate Government Bond Portfolio ......... 745,384 - (1,284,135) -
Intermediate Bond Portfolio .................... 4,501,068 14,556,941 - -
Core Bond Total Return Portfolio ............... 25,357,126 24,041,370 - (3,869,412)/1/
Core PLUS Total Return Portfolio ............... 1,160,594 1,073,450 - (363,895)/1/
Government Income Portfolio .................... 1,006,357 1,394,662 - -
GNMA Portfolio ................................. - - (2,180,253) (3,851,784)
Managed Income Portfolio ....................... 8,591,988 16,554,716 - (1,524,170)/1/
International Bond Portfolio ................... - - - (296,652)
High Yield Bond Portfolio ...................... 76,401 - (18,006,379) (4,354,958)
/1/ Includes Post-October currency losses of $3,946,225 for the BlackRock Low
Duration Bond Portfolio, $3,869,412 for the BlackRock Core Bond Total Return
Portfolio, $363,895 for the BlackRock Core PLUS Total Return Portfolio and
$1,524,170 for the BlackRock Managed Income Portfolio.
Post-October losses represent losses realized on investment transactions
from November 1, 2002 through September 30, 2003 that, in accordance with
Federal income tax regulations, the Portfolios defer and treat as having
114
BLACKROCK FUNDS
arisen in the following fiscal year. For Federal income tax purposes, capital
loss carryforwards may be carried forward and applied against future capital
gains.
At September 30, 2003, the Portfolios had capital loss carryforwards
available to offset future realized capital gains through the indicated
expiration dates:
EXPIRING SEPTEMBER 30
--------------------------------------------------------------------------------
2007 2008 2009 2010 2011 TOTAL
---------- -------------- ------------ ------------ ------------- --------------
Intermediate Government Bond
Portfolio ....................... $ - $ 1,284,135 $ - $ - $ - $ 1,284,135
GNMA Portfolio ................... - - - 603,989 1,576,264 2,180,253
High Yield Bond Portfolio ........ 683,582 603,164 1,980,685 3,431,765 11,307,183 18,006,379
(G) Contingencies
In the normal course of business, the Fund enters into contracts that
provide general indemnifications. The Funds' maximum exposure under these
arrangements is dependent on future claims that may be made against the Funds
and, therefore, cannot be estimated; however, based on experience, the risk of
loss from such claims is considered remote.
115
BLACKROCK FUNDS
ADDITIONAL INFORMATION
(A) PricewaterhouseCoopers LLP ("PwC"), the Fund's former independent auditor,
has been hired as an internal audit supporting service provider by The PNC
Financial Services Group, Inc. ("PNC"), the parent company of the Fund's
investment adviser and certain other service providers. In order to provide
certain services to PNC and its affiliates which would have caused PwC to
no longer be independent with respect to the Fund, PwC declined to stand
for re-election as independent auditor of the Fund after the completion of
the fiscal 2003 audit.
The Fund's Audit Committee approved engaging Deloitte & Touche LLP as the
independent auditor to audit the Fund's financial statements for fiscal
year 2004. 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 2004 audit on
November 21, 2003, 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.
(B) 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.
116
BLACKROCK FUNDS
Investment Adviser
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Sub-Adviser
BlackRock Financial Management, Inc.
New York, New York 10022
Custodian
PFPC Trust Co.
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 Auditors
Deloitte & Touche LLP
Philadelphia, Pennsylvania 19103
The Fund delivers only one copy of shareholder documents, including
prospectuses, shareholder reports and proxy statements to shareholders with
multiple accounts at the same address. This practice is known as "householding"
and is intended to eliminate duplicate mailings and reduce expenses. Mailings
of your BlackRock Funds 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 1-800-441-7762.
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
SEC's website at http://www.sec.gov.
BLACKROCK FUNDS
FUND SPECTRUM
BlackRock Funds is a leading mutual fund company currently managing
approximately $19 billion in the following portfolios designed to fit a broad
range of investment goals. Each portfolio is managed by recognized experts in
equity, fixed income, international, and tax-free investing.
STOCK PORTFOLIOS
- -------------------------------
Large Cap Value Equity Global Science & Technology Opportunities
Large Cap Growth Equity European Equity
Mid-Cap Value Equity International Equity
Mid-Cap Growth Equity International Opportunities
Small Cap Value Equity Asia Pacific Equity
Small Cap Core Equity Select Equity
Small Cap Growth Equity Index Equity
U.S. Opportunities
STOCK & BOND PORTFOLIOS
- -------------------------------
Balanced
BOND PORTFOLIOS
- -------------------------------
Enhanced Income Managed Income
Low Duration Bond Core Bond Total Return
Intermediate Government Bond Core PLUS Total Return
Intermediate Bond International Bond
Government Income High Yield Bond
GNMA
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.
Note: Institutional and Service Share Class investors should call
1-800-441-7450.
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 1-888-825-2257.
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. BlackRock
BND-SEMI1
FIXED INCOME LIQUIDITY EQUITIES ALTERNATIVES BLACKROCK SOLUTIONS
BlackRock Funds
Tax-Free Bond Portfolios
Semi-Annual Report to Shareholders
March 31, 2004 (Unaudited)
[GRAPHIC]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE BlackRock
BLACKROCK FUNDS
TAX-FREE BOND PORTFOLIOS
* UltraShort Municipal * New Jersey Tax-Free Income
* Tax-Free Income * Ohio Tax-Free Income
* Pennsylvania Tax-Free Income * Delaware Tax-Free Income
* Kentucky Tax-Free Income
TABLE OF CONTENTS
Shareholder Letter..........................................................1
Portfolio Summaries
Tax-Free Income...........................................................2
Pennsylvania Tax-Free Income..............................................3
New Jersey Tax-Free Income................................................4
Ohio Tax-Free Income......................................................5
Delaware Tax-Free Income..................................................6
Kentucky Tax-Free Income..................................................7
Note on Performance Information...........................................8
Statement of Net Assets/Schedule of Investments..........................9-30
New Jersey Tax-Free Income Statement of Assets and Liabilities...........24
Portfolio Financial Statements
Statements of Operations..............................................32-33
Statements of Changes in Net Assets...................................34-35
Financial Highlights..................................................36-43
Notes to Financial Statements...........................................44-56
Additional Information.....................................................57
- --------------------------------------------------------------------------------
PRIVACY PRINCIPLES OF BLACKROCK FUNDS
BlackRock Funds is committed to maintaining the privacy of its shareholders and
to safeguarding their nonpublic personal information. The following information
is provided to help you understand what personal information BlackRock Funds
collects, how we protect that information, and why in certain cases we may share
such information with select other parties.
BlackRock Funds does not receive any nonpublic personal information relating to
its shareholders who purchase shares through their broker-dealers. In the case
of shareholders who are record owners of BlackRock Funds, BlackRock Funds
receives nonpublic personal information on account applications or other forms.
With respect to these shareholders, BlackRock Funds also has access to specific
information regarding their transactions in BlackRock Funds.
BlackRock Funds does not disclose any nonpublic personal information about its
shareholders or former shareholders to anyone, except as permitted by law or as
is necessary in order to service our shareholders' accounts (for example, to a
transfer agent). BlackRock Funds restricts access to nonpublic personal
information about its shareholders to BlackRock employees with a legitimate
business need for the information. BlackRock Funds maintains physical,
electronic and procedural safeguards designed to protect the nonpublic personal
information of our shareholders.
- --------------------------------------------------------------------------------
BLACKROCK FUNDS
March 31, 2004
Dear Shareholder:
We are pleased to present the Semi-Annual Report to Shareholders of the
BlackRock Funds' Tax-Free Bond Portfolios for the six-months ended March 31,
2004. The Semi-Annual Report includes important information on each Portfolio,
and is organized as follows:
o Portfolio Summary - discusses recent portfolio management activity and
highlights total returns.
o Statement of Net Assets (or Schedule of Investments/Statement of Assets and
Liabilities) - lists portfolio holdings and includes each holding's market
value and par amount/number of shares as of March 31, 2004. The Statement
of Net Assets also contains the net asset value for each share class of a
Portfolio. If your Portfolio has a Schedule of Investments, then the net
asset value for each share class may be found in the Statement of Assets
and Liabilities.
o Statement of Operations - displays the components of each Portfolio's
investment income and provides a detailed look at each Portfolio's
expenses. The Statement of Operations also lists the aggregate change in
value of a Portfolio's securities due to market fluctuations and security
sales.
o Statement of Changes in Net Assets - compares Portfolio information from
the prior period to the current period. Specifically, it details
shareholder distributions by share class, aggregate realized gains and
losses, and the change in net assets from the beginning of the period to
the end of the period.
o Financial Highlights - include each Portfolio's expense ratios, net asset
values, total returns, distributions per share, and turnover ratios for the
current period and the last five years or since inception.
o Notes to Financial Statements - provide additional information on fees, a
summary of significant accounting policies, a list of affiliated
transactions, and a summary of purchases and sales of securities.
In addition to these items, a summary of shareholder privileges is listed
on the inside back cover of the report. Here, shareholders can find information
on how to access account balances, recent transactions, and share prices. It
also includes a summary of the Fund's various investment plans.
We hope you find the report informative, and we thank you for making
BlackRock part of your investment strategy.
Sincerely,
/s/ Anne Ackerley
Anne Ackerley
Managing Director
BlackRock Advisors,Inc.
1
TAX-FREE INCOME PORTFOLIO
Total Net Assets (3/31/04): $466.2 million
Investment Approach
Seeks to maximize total return consistent with income generation and
prudent investment management by investing 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 fund 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
municipal securities in the ten to twenty year maturity range.
Recent Portfolio Management Activity
o All share classes of the Portfolio underperformed relative to the
Lipper Peer Group (General Municipal Debt Funds) during the semi-annual period.
Late in December 2003, the Portfolio received approximately $93 million in new
assets, which shortened its duration by approximately 1.4 years. The Portfolio
maintained a shorter duration relative to its peers during the first quarter of
2004 in anticipation of rising interest rates, which hurt relative performance.
The Portfolio is particularly underweight the long-end of the yield curve and
par-to-discount coupons compared to the Lehman Municipal Bond Index. Although
its concentration in premium callable securities generates attractive levels of
income, it causes the Portfolio to underperform in a rallying marketplace. As
the Portfolio is structured for a correction in interest rates, we would expect
the Portfolio to outperform its peer group in a correction and lag in an
additional decline in interest rates.
o While demand remained robust for municipal securities throughout 2003,
the sources of demand changed from the previous year. With municipals trading
for the majority of 2003 at or near record cheap levels compared to Treasuries,
they witnessed a dramatic increase in demand from hedge funds and institutional
accounts. At the same time, the demand from retail investors declined as the
year went on and prospects in equities improved. Low absolute yield levels
continued to pressure demand during the first quarter of 2004. Additionally,
buyers of municipals were not convinced that rates would trend lower, and more
importantly, did not want to purchase bonds that were being printed in the new
issue market. The pace of supply declined in both October and November, but
December saw $30 billion in new supply, which was a 12% increase over the prior
year. For the first two months of 2004 new issue supply declined again versus
the same period last year, but March new issue supply increased 36%, totaling
$38 billion by month-end. Issuance was heaviest during the last week of the
month, which proved to be the heaviest week of supply year-to-date 2004. The
dramatically increased supply shift caught market participants off guard after
the decline in both January and February and contributed to the municipal
market's underperformance versus U.S. Treasuries during the first quarter of
2004. For the semi-annual period, municipals outperformed U.S. Treasuries.
o Consistent with improving economic conditions at the national level,
state budgets improved during the period. States have been reporting better
then expected tax collections for fiscal year 2004, which BlackRock believes is
a strong positive although some states are still projecting deficits for fiscal
year 2005. This is a reversal from much of 2003, when states were drawing on
reserves, raising taxes, cutting spending, increasing debt issuance and using
various types of accounting and fiscal changes to cover budget deficits.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE TAX-FREE INCOME
PORTFOLIO AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX FOR THE PAST TEN YEARS.
[LINE CHART]
Lehman Brothers
Institutional Investor A Municipal Bond Index
------------- ---------- ---------------------
03/31/1994 $ 10,000 $ 9,602 $ 10,000
06/30/1994 10,137 9,723 10,111
09/30/1994 10,171 9,746 10,180
12/31/1994 10,016 9,585 10,034
03/31/1995 10,835 10,358 10,743
06/30/1995 11,024 10,525 11,003
09/30/1995 11,345 10,817 11,319
12/31/1995 11,865 11,288 11,786
03/31/1996 11,764 11,190 11,644
06/30/1996 11,873 11,280 11,733
09/30/1996 12,190 11,567 12,003
12/31/1996 12,543 11,889 12,309
03/31/1997 12,533 11,865 12,280
06/30/1997 12,984 12,278 12,704
09/30/1997 13,420 12,676 13,087
12/31/1997 13,813 13,032 13,442
03/31/1998 13,995 13,187 13,596
06/30/1998 14,199 13,364 13,803
09/30/1998 14,608 13,733 14,227
12/31/1998 14,700 13,803 14,313
03/31/1999 14,776 13,858 14,439
06/30/1999 14,519 13,601 14,184
09/30/1999 14,363 13,439 14,127
12/31/1999 14,088 13,166 14,017
03/31/2000 14,492 13,528 14,428
06/30/2000 14,678 13,686 14,646
09/30/2000 15,053 14,019 15,000
12/31/2000 15,631 14,540 15,656
03/31/2001 15,935 14,806 16,003
06/30/2001 16,075 14,905 16,108
09/30/2001 16,529 15,323 16,560
12/31/2001 16,377 15,164 16,459
03/31/2002 16,533 15,277 16,614
06/30/2002 16,957 15,664 17,222
09/30/2002 17,369 16,026 18,040
12/31/2002 17,360 15,999 18,040
03/31/2003 17,363 15,983 18,257
06/30/2003 17,979 16,531 18,728
09/30/2003 17,959 16,493 18,743
12/31/2003 18,176 16,673 18,999
03/31/2004 18,361 16,823 19,327
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
----------- ---------- ---------- ----------
BlackRock Class 5.79% 4.85% 4.45% 6.27%
Institutional Class 5.75% 4.84% 4.44% 6.27%
Service Class 5.34% 4.50% 4.11% 5.95%
Investor A Class (Load Adjusted) 1.07% 2.94% 3.11% 5.34%
Investor A Class (NAV) 5.26% 4.35% 3.95% 5.77%
Investor B Class (Load Adjusted) (0.02)% 2.48% 2.84% 5.16%
Investor B Class (NAV) 4.48% 3.57% 3.18% 5.16%
Investor C Class (Load Adjusted) 3.48% 3.57% 3.18% 5.16%
Investor C Class (NAV) 4.48% 3.57% 3.18% 5.16%
- --------------------------------------------------------------------------------
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 8 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
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
Total Net Assets (3/31/04): $765.9 million
Investment Approach
Seeks to maximize total return consistent with income generation and
prudent investment management by investing 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 fund 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. The Portfolio's
shorter duration versus its peers hurt performance for the period. During the
first half of the period, the negative convexity on the long premium coupons
held in the Portfolio and its focus on higher quality securities also
contributed to relative underperformance. Convexity measures the rate at which
duration changes when interest rates rise or fall. The duration of a security
with negative convexity shortens more as interest rates fall. The Portfolio's
defensive positioning is designed to produce attractive levels of tax-free
income with lower interest rate exposure, but underperforms when interest rates
decline.
o A negative credit event in the second half of the period also negatively
impacted performance. One credit representing approximately 2% of the
Portfolio's assets was marked down approximately 15 percent during the first
quarter due to concerns about the long-term health of the issuer, contributing
about 40 basis points of underperformance. The bonds financed the construction
of the Hyatt Hotel at the Pittsburgh airport. Concerns associated with the
economic troubles facing both U.S. Airways (the primary service provider at the
airport) and the city of Pittsburgh contributed to the decline.
o While demand remained robust for municipal securities throughout 2003,
the sources of demand changed from the previous year. With municipals trading
for the majority of 2003 at or near record cheap levels compared to Treasuries,
they witnessed a dramatic increase in demand from hedge funds and institutional
accounts. At the same time, the demand from retail declined as the year went on
and prospects in equities improved. Low absolute yield levels continued to
pressure demand during the first quarter of 2004. Additionally, end buyers of
municipals were not convinced that rates would trend lower, and more
importantly, did not want to purchase bonds that were being printed in the new
issue market. The pace of supply declined in both October and November, but
December saw $30 billion in new supply, which was a 12% increase over the prior
year. For the first two months of 2004 new issue supply declined again versus
the same period last year, but March new issue supply increased 36%, totaling
$38 billion by month-end. Issuance was heaviest during the last week of the
month, which proved to be the heaviest week of supply year-to-date 2004. The
dramatically increased supply shift caught market participants off guard after
the decline in both January and February and contributed to the municipal
market's underperformance versus U.S. Treasuries during the first quarter of
2004. For the semi-annual period, municipals outperformed U.S. Treasuries.
o Consistent with improving economic conditions at the national level,
state budgets improved during the period. States have been reporting better then
expected tax collections for fiscal year 2004, which BlackRock believes is a
strong positive although some states are still projecting deficits for fiscal
year 2005. This is a reversal from much of 2003, when states were drawing on
reserves, raising taxes, cutting spending, increasing debt issuance and using
various types of accounting and fiscal changes to cover budget deficits.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PA TAX-FREE INCOME
PORTFOLIO AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX FOR THE PAST TEN YEARS.
[LINE CHART]
Lehman Brothers
Institutional Investor A Municipal Bond Index
------------- ---------- -------------------------
03/31/1994 $ 10,000 $ 9,603 $ 10,000
06/30/1994 10,125 9,723 10,111
09/30/1994 10,188 9,772 10,180
12/31/1994 9,935 9,519 10,034
03/31/1995 10,696 10,237 10,743
06/30/1995 10,943 10,461 11,003
09/30/1995 11,290 10,780 11,319
12/31/1995 11,765 11,219 11,786
03/31/1996 11,628 11,077 11,644
06/30/1996 11,732 11,163 11,733
09/30/1996 12,001 11,407 12,003
12/31/1996 12,307 11,684 12,309
03/31/1997 12,261 11,629 12,280
06/30/1997 12,638 11,973 12,704
09/30/1997 13,012 12,314 13,087
12/31/1997 13,377 12,646 13,442
03/31/1998 13,540 12,786 13,596
06/30/1998 13,756 12,976 13,803
09/30/1998 14,120 13,304 14,227
12/31/1998 14,195 13,360 14,313
03/31/1999 14,309 13,453 14,439
06/30/1999 14,072 13,215 14,184
09/30/1999 14,005 13,137 14,127
12/31/1999 13,870 12,997 14,017
03/31/2000 14,222 13,312 14,428
06/30/2000 14,428 13,489 14,646
09/30/2000 14,775 13,798 15,000
12/31/2000 15,252 14,227 15,656
03/31/2001 15,597 14,518 16,003
06/30/2001 15,645 14,546 16,108
09/30/2001 16,053 14,922 16,560
12/31/2001 15,972 14,815 16,459
03/31/2002 16,097 14,914 16,614
06/30/2002 16,635 15,409 17,222
09/30/2002 17,101 15,822 18,040
12/31/2002 17,140 15,825 18,040
03/31/2003 17,302 15,971 18,257
06/30/2003 17,738 16,340 18,728
09/30/2003 17,642 16,232 18,743
12/31/2003 17,867 16,419 18,999
03/31/2004 17,980 16,519 19,327
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
--------- -------- -------- --------
Institutional Class 3.92% 4.85% 4.67% 6.04%
Service Class 3.61% 4.55% 4.34% 5.72%
Investor A Class (Load Adjusted) (0.74)% 2.99% 3.34% 5.15%
Investor A Class (NAV) 3.43% 4.40% 4.19% 5.57%
Investor B Class (Load Adjusted) (1.78)% 2.55% 3.01% 4.87%
Investor B Class (NAV) 2.68% 3.65% 3.35% 4.87%
Investor C Class (Load Adjusted) 1.77% 3.64% 3.42% 4.90%
Investor C Class (NAV) 2.76% 3.64% 3.42% 4.90%
- --------------------------------------------------------------------------------
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 AND INVESTOR A SHARES, 12/1/92;
SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 10/3/94 AND INVESTOR C SHARES,
8/14/98. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 8 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, 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.
3
NEW JERSEY TAX-FREE INCOME PORTFOLIO
Total Net Assets (3/31/04): $196.7 million
Investment Approach
Seeks to maximize total return consistent with income generation and
prudent investment management by investing 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 fund 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 (including issuers located outside of New Jersey). 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
(New Jersey Municipal Debt Funds) for the semi-annual period. In line with
BlackRock's overall interest rate strategy, the Portfolio's duration shortened
versus its peers during the first half of the period. The Portfolio also
maintained its high quality, premium coupon, callable security bias. In
conjunction with the Portfolio's shorter duration, this bias led to the
Portfolio's relative underperformance.
o During the second half of the semi-annual period, the Portfolio received
approximately $35 million in additional assets. The Portfolio maintained its
duration of approximately 5.65 years with a bias towards higher coupon callable
securities. New Jersey new issue supply declined during the first quarter of
2004. Supply in New Jersey continues to be met by strong retail demand.
o For the semi-annual period as a whole, the Portfolio was structured
defensively for an anticipated rise in interest rates. In a declining interest
rate environment, the Portfolio will underperform.
o While demand remained robust for municipal securities throughout 2003,
the sources of demand changed from the previous year. With municipals trading
for the majority of 2003 at or near record cheap levels compared to Treasuries,
they witnessed a dramatic increase in demand from hedge funds and institutional
accounts. At the same time, the demand from retail declined as the year went on
and prospects in equities improved. Low absolute yield levels continued to
pressure demand during the first quarter of 2004. Additionally, end buyers of
municipals were not convinced that rates would trend lower, and more
importantly, did not want to purchase bonds that were being printed in the new
issue market. The pace of supply declined in both October and November, but
December saw $30 billion in new supply, which was a 12% increase over the prior
year. For the first two months of 2004 new issue supply declined again versus
the same period last year, but March new issue supply increased 36%, totaling
$38 billion by month-end. Issuance was heaviest during the last week of the
month, which proved to be the heaviest week of supply year-to-date 2004. The
dramatically increased supply shift caught market participants off guard after
the decline in both January and February and contributed to the municipal
market's underperformance versus U.S. Treasuries during the first quarter of
2004. For the semi-annual period, municipals outperformed U.S. Treasuries.
o Consistent with improving economic conditions at the national level,
state budgets improved during the period. States have been reporting better then
expected tax collections for fiscal year 2004, which BlackRock believes is a
strong positive although some states are still projecting deficits for fiscal
year 2005. This is a reversal from much of 2003, when states were drawing on
reserves, raising taxes, cutting spending, increasing debt issuance and using
various types of accounting and fiscal changes to cover budget deficits.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NJ TAX-FREE INCOME
PORTFOLIO AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX FOR THE PAST TEN YEARS.
[LINE CHART]
Lehman Brothers
Service Investor A Municipal Bond Index
---------- ---------- -------------------------
03/31/1994 $ 10,000 $ 9,601 $ 10,000
06/30/1994 10,109 9,705 10,111
09/30/1994 10,173 9,766 10,180
12/31/1994 10,050 9,649 10,034
03/31/1995 10,667 10,241 10,743
06/30/1995 10,876 10,442 11,003
09/30/1995 11,158 10,713 11,319
12/31/1995 11,551 11,090 11,786
03/31/1996 11,449 10,982 11,644
06/30/1996 11,481 11,008 11,733
09/30/1996 11,681 11,195 12,003
12/31/1996 11,972 11,471 12,309
03/31/1997 11,940 11,435 12,280
06/30/1997 12,274 11,750 12,704
09/30/1997 12,628 12,084 13,087
12/31/1997 12,961 12,397 13,442
03/31/1998 13,068 12,494 13,596
06/30/1998 13,259 12,671 13,803
09/30/1998 13,675 13,063 14,227
12/31/1998 13,735 13,115 14,313
03/31/1999 13,780 13,152 14,439
06/30/1999 13,497 12,877 14,184
09/30/1999 13,449 12,826 14,127
12/31/1999 13,353 12,729 14,017
03/31/2000 13,620 12,977 14,428
06/30/2000 13,815 13,158 14,646
09/30/2000 14,100 13,424 15,000
12/31/2000 14,649 13,941 15,656
03/31/2001 14,993 14,262 16,003
06/30/2001 15,072 14,319 16,108
09/30/2001 15,474 14,708 16,560
12/31/2001 15,296 14,532 16,459
03/31/2002 15,529 14,735 16,614
06/30/2002 16,064 15,249 17,222
09/30/2002 16,579 15,718 18,040
12/31/2002 16,593 15,737 18,040
03/31/2003 16,757 15,873 18,257
06/30/2003 17,177 16,278 18,728
09/30/2003 17,049 16,150 18,743
12/31/2003 17,264 16,333 18,999
03/31/2004 17,482 16,532 19,327
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------ ------ ------ -------
Institutional Class 4.64% 5.57% 5.19% 5.93%
Service Class 4.32% 5.25% 4.87% 5.74%
Investor A Class (Load Adjusted) (0.06)% 3.62% 3.83% 5.16%
Investor A Class (NAV) 4.15% 5.05% 4.68% 5.58%
Investor B Class(Load Adjusted) (1.02)% 3.21% 3.57% 4.99%
Investor B Class (NAV) 3.46% 4.29% 3.92% 4.99%
Investor C Class(Load Adjusted) 2.37% 4.29% 3.95% 4.99%
Investor C Class (NAV) 3.36% 4.29% 3.95% 4.99%
- --------------------------------------------------------------------------------
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: SERVICE SHARES, 7/1/91; INVESTOR A SHARES,
1/26/96; INVESTOR B SHARES, 7/2/96; INSTITUTIONAL SHARES, 5/4/98 AND INVESTOR C
SHARES, 12/9/98. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 8 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, 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
OHIO TAX-FREE INCOME PORTFOLIO
Total Net Assets (3/31/04): $119.5 million
Investment Approach
Seeks to maximize total return consistent with income generation and
prudent investment management by investing 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 fund 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 For the semi-annual period, all share classes of the Portfolio
underperformed the Lipper Peer Group (Ohio Municipal Debt Funds). The Portfolio
maintained a high quality, premium coupon, callable security bias for the
period. During the first half of the period, the Portfolio reduced its duration
to be shorter than its peers, in line with BlackRock's overall interest rate
strategy. The Portfolio was well structured for an anticipated rise in interest
rates, but underperformed when interest rates declined. Although there was
healthy issuance in Ohio during the second half of the period, the Portfolio had
relatively little turnover.
o While demand remained robust for municipal securities throughout 2003,
the sources of demand changed from the previous year. With municipals trading
for the majority of 2003 at or near record cheap levels compared to Treasuries,
they witnessed a dramatic increase in demand from hedge funds and institutional
accounts. At the same time, the demand from retail declined as the year went on
and prospects in equities improved. Low absolute yield levels continued to
pressure demand during the first quarter of 2004. Additionally, end buyers of
municipals were not convinced that rates would trend lower, and more
importantly, did not want to purchase bonds that were being printed in the new
issue market. The pace of supply declined in both October and November, but
December saw $30 billion in new supply, which was a 12% increase over the prior
year. For the first two months of 2004 new issue supply declined again versus
the same period last year, but March new issue supply increased 36%, totaling
$38 billion by month-end. Issuance was heaviest during the last week of the
month, which proved to be the heaviest week of supply year-to-date 2004. The
dramatically increased supply shift caught market participants off guard after
the decline in both January and February and contributed to the municipal
market's underperformance versus U.S. Treasuries during the first quarter of
2004. For the semi-annual period, municipals outperformed U.S. Treasuries.
o Consistent with improving economic conditions at the national level,
state budgets improved during the period. States have been reporting better then
expected tax collections for fiscal year 2004, which BlackRock believes is a
strong positive although some states are still projecting deficits for fiscal
year 2005. This is a reversal from much of 2003, when states were drawing on
reserves, raising taxes, cutting spending, increasing debt issuance and using
various types of accounting and fiscal changes to cover budget deficits.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE OH TAX-FREE INCOME
PORTFOLIO AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX FOR THE PAST TEN YEARS.
[LINE CHART]
Lehman Brothers
Institutional Investor A Municipal Bond Index
------------- ---------- -------------------------
03/31/1994 $ 10,000 $ 9,595 $ 10,000
06/30/1994 10,094 9,686 10,111
09/30/1994 10,148 9,737 10,180
12/31/1994 9,967 9,559 10,034
03/31/1995 10,706 10,263 10,743
06/30/1995 10,924 10,463 11,003
09/30/1995 11,240 10,757 11,319
12/31/1995 11,739 11,226 11,786
03/31/1996 11,551 11,033 11,644
06/30/1996 11,649 11,113 11,733
09/30/1996 11,927 11,366 12,003
12/31/1996 12,228 11,638 12,309
03/31/1997 12,196 11,594 12,280
06/30/1997 12,573 11,939 12,704
09/30/1997 12,945 12,278 13,087
12/31/1997 13,287 12,587 13,442
03/31/1998 13,408 12,688 13,596
06/30/1998 13,622 12,875 13,803
09/30/1998 14,053 13,267 14,227
12/31/1998 14,132 13,325 14,313
03/31/1999 14,231 13,403 14,439
06/30/1999 13,892 13,068 14,184
09/30/1999 13,859 13,022 14,127
12/31/1999 13,704 12,861 14,017
03/31/2000 14,087 13,205 14,428
06/30/2000 14,294 13,397 14,646
09/30/2000 14,623 13,676 15,000
12/31/2000 15,238 14,235 15,656
03/31/2001 15,648 14,600 16,003
06/30/2001 15,754 14,682 16,108
09/30/2001 16,292 15,166 16,560
12/31/2001 16,131 14,999 16,459
03/31/2002 16,323 15,159 16,614
06/30/2002 16,986 15,757 17,222
09/30/2002 17,661 16,364 18,040
12/31/2002 17,643 16,313 18,040
03/31/2003 17,817 16,470 18,257
06/30/2003 18,287 16,885 18,728
09/30/2003 18,153 16,741 18,743
12/31/2003 18,399 16,949 18,999
03/31/2004 18,626 17,138 19,327
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
------- ------ ------ -------
Institutional Class 4.54% 5.98% 5.53% 6.42%
Service Class 4.23% 5.66% 5.22% 6.11%
Investor A Class (Load Adjusted) (0.07)% 4.07% 4.18% 5.53%
Investor A Class (NAV) 4.05% 5.49% 5.04% 5.97%
Investor B Class (Load Adjusted) (1.23)% 3.63% 3.92% 5.23%
Investor B Class (NAV) 3.27% 4.70% 4.26% 5.23%
Investor C Class (Load Adjusted) 2.27% 4.70% 4.26% 5.23%
Investor C Class (NAV) 3.27% 4.70% 4.26% 5.23%
- --------------------------------------------------------------------------------
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: INSTITUTIONAL AND INVESTOR A SHARES, 12/1/92;
SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 10/13/94 AND INVESTOR C SHARES,
8/26/98. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 8 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, 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.
5
DELAWARE TAX-FREE INCOME PORTFOLIO
Total Net Assets (3/31/04): $91.2 million
Investment Approach
Seeks to maximize total return consistent with income generation and
prudent investment management by investing 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 fund 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) during the semi-annual period. Issuance
increased during 2003, although low absolute levels of supply limited choices
for new purchases. Duration continued to be the primary source of performance in
the Portfolio versus its peer group. The Portfolio maintained its high quality,
premium coupon bias and opportunistically managed its duration. At the same
time, it maintained a relatively high convexity, which measures the rate at
which the Portfolio's duration changes when interest rates rise or fall. This
contributed positively to performance, as positive convexity can translate into
greater price gains as interest rates fall, offsetting the effects of a
Portfolio's shorter duration.
o During the second half of the period, the Portfolio modestly increased
its duration to be more in-line with the average duration of its peers. This
duration extension was a result of placing some cash to work in order to enhance
the Portfolio's income generating capacity. The average duration of the Delaware
peer group appears to be moderately longer than that of other states where
BlackRock has mutual funds. Over the last nine months, the Portfolio had over
$10 million in net subscriptions, growing the fund by approximately 13%. During
the first quarter of 2004, Delaware witnessed the third largest net supply
issuance of any state. The Portfolio made relatively few purchases during the
quarter, however, as we felt most of the new issues did not offer attractive
return horizons.
o While demand remained robust for municipal securities throughout 2003,
the sources of demand changed from the previous year. With municipals trading
for the majority of 2003 at or near record cheap levels compared to Treasuries,
they witnessed a dramatic increase in demand from hedge funds and institutional
accounts. At the same time, the demand from retail declined as the year went on
and prospects in equities improved. Low absolute yield levels continued to
pressure demand during the first quarter of 2004. Additionally, end buyers of
municipals were not convinced that rates would trend lower, and more
importantly, did not want to purchase bonds that were being printed in the new
issue market. The pace of supply declined in both October and November, but
December saw $30 billion in new supply, which was a 12% increase over the prior
year. For the first two months of 2004 new issue supply declined again versus
the same period last year, but March new issue supply increased 36%, totaling
$38 billion by month-end. Issuance was heaviest during the last week of the
month, which proved to be the heaviest week of supply year-to-date 2004. The
dramatically increased supply shift caught market participants off guard after
the decline in both January and February and contributed to the municipal
market's underperformance versus U.S. Treasuries during the first quarter of
2004. For the semi-annual period, municipals outperformed U.S. Treasuries.
o Consistent with improving economic conditions at the national level,
state budgets improved during the period. States have been reporting better then
expected tax collections for fiscal year 2004, which BlackRock believes is a
strong positive although some states are still projecting deficits for fiscal
year 2005. This is a reversal from much of 2003, when states were drawing on
reserves, raising taxes, cutting spending, increasing debt issuance and using
various types of accounting and fiscal changes to cover budget deficits.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE DE TAX-FREE INCOME
PORTFOLIO AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX FOR THE PAST TEN YEARS.
[LINE CHART]
Lehman Brothers
Institutional Investor A Municipal Bond Index
------------- ---------- -------------------------
03/31/1994 $ 10,000 $ 9,600 $ 10,000
06/30/1994 10,159 9,742 10,111
09/30/1994 10,224 9,792 10,180
12/31/1994 10,133 9,693 10,034
03/31/1995 10,625 10,153 10,743
06/30/1995 10,868 10,372 11,003
09/30/1995 11,157 10,635 11,319
12/31/1995 11,460 10,911 11,786
03/31/1996 11,413 10,854 11,644
06/30/1996 11,461 10,887 11,733
09/30/1996 11,639 11,043 12,003
12/31/1996 11,877 11,256 12,309
03/31/1997 11,855 11,222 12,280
06/30/1997 12,148 11,486 12,704
09/30/1997 12,429 11,738 13,087
12/31/1997 12,640 11,923 13,442
03/31/1998 12,752 12,014 13,596
06/30/1998 12,954 12,191 13,803
09/30/1998 13,401 12,598 14,227
12/31/1998 13,485 12,661 14,313
03/31/1999 13,601 12,755 14,439
06/30/1999 13,299 12,457 14,184
09/30/1999 13,253 12,400 14,127
12/31/1999 13,167 12,304 14,017
03/31/2000 13,523 12,623 14,428
06/30/2000 13,710 12,782 14,646
09/30/2000 13,983 13,021 15,000
12/31/2000 14,507 13,494 15,656
03/31/2001 14,831 13,779 16,003
06/30/2001 14,893 13,821 16,108
09/30/2001 15,403 14,278 16,560
12/31/2001 15,206 14,079 16,459
03/31/2002 15,367 14,211 16,614
06/30/2002 16,011 14,790 17,222
09/30/2002 16,752 15,456 18,040
12/31/2002 16,675 15,352 18,040
03/31/2003 16,805 15,469 18,257
06/30/2003 17,314 15,919 18,728
09/30/2003 17,191 15,787 18,743
12/31/2003 17,400 15,975 18,999
03/31/2004 17,564 16,108 19,327
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
-------- -------- -------- ---------
Institutional Class 4.52% 5.80% 5.25% 5.79%
Service Class 4.21% 5.48% 4.94% 5.48%
Investor A Class (Load Adjusted) (0.05)% 3.91% 3.93% 4.88%
Investor A Class (NAV) 4.13% 5.34% 4.78% 5.31%
Investor B Class (Load Adjusted) (1.11)% 3.48% 3.65% 4.53%
Investor B Class (NAV) 3.36% 4.56% 4.00% 4.53%
Investor C Class (Load Adjusted) 2.26% 4.52% 3.98% 4.52%
Investor C Class (NAV) 3.25% 4.52% 3.98% 4.52%
- --------------------------------------------------------------------------------
IN CONNECTION WITH THE CONVERSION OF VARIOUS COMMON TRUST FUNDS MAINTAINED BY
PNC BANK AND PNC BANK, DELAWARE ("PNC-DE"), AN AFFILIATE OF PNC BANK, INTO THE
FUND BETWEEN MAY 1 AND MAY 15, 1998 (THE "CTF CONVERSION"), THE DELAWARE
TAX-FREE INCOME PORTFOLIO WAS ESTABLISHED TO RECEIVE THE ASSETS OF THE DE
TAX-FREE INCOME FUND OF PNC-DE. PERFORMANCE INFORMATION PRESENTED FOR THIS
PORTFOLIO INCLUDES PERFORMANCE FOR THE PREDECESSOR COMMON TRUST FUND WHICH
TRANSFERRED ITS ASSETS AND LIABILITIES TO THE RELATED PORTFOLIO PURSUANT TO THE
CTF CONVERSION. PERFORMANCE INFORMATION PRESENTED IS BASED UPON THE PERFORMANCE
OF THE DE TAX-FREE INCOME FUND FOR PERIODS PRIOR TO THE CTF CONVERSION. SEE
"NOTE ON PERFORMANCE INFORMATION" ON PAGE 8 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
KENTUCKY TAX-FREE INCOME PORTFOLIO
Total Net Assets (3/31/04): $115.0 million
Investment Approach
Seeks to maximize total return consistent with income generation and
prudent investment management by investing 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 fund 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, primarily as a
result of the Portfolio's shorter duration and negative convexity on long
callable bonds. Convexity measures the rate at which duration changes when
interest rates rise or fall. The duration of a security with negative convexity
shortens more as interest rates fall. During the first half of the period, the
Portfolio reduced its duration to a position shorter than its peers. It
maintained its high quality, premium coupon bias with a fair amount of
diversification across the yield curve.
o During the second half of the period, the Portfolio extended its duration
by approximately 20 basis points to get closer to the peer group average. As
rates experienced a modest decline in the long-end of the yield curve, the
Portfolio's exposure to premium coupon callable securities was a modest negative
for the quarter. Kentucky new issue supply during the first quarter of 2004
increased by 220% to $1.22 billion. Based on current portfolio design and the
structure of the new issue market, the Portfolio had relatively little turnover.
o While demand remained robust for municipal securities throughout 2003,
the sources of demand changed from the previous year. With municipals trading
for the majority of 2003 at or near record cheap levels compared to Treasuries,
they witnessed a dramatic increase in demand from hedge funds and institutional
accounts. At the same time, the demand from retail declined as the year went on
and prospects in equities improved. Low absolute yield levels continued to
pressure demand during the first quarter of 2004. Additionally, end buyers of
municipals were not convinced that rates would trend lower, and more
importantly, did not want to purchase bonds that were being printed in the new
issue market. The pace of supply declined in both October and November, but
December saw $30 billion in new supply, which was a 12% increase over the prior
year. For the first two months of 2004 new issue supply declined again versus
the same period last year, but March new issue supply increased 36%, totaling
$38 billion by month-end. Issuance was heaviest during the last week of the
month, which proved to be the heaviest week of supply year-to-date 2004. The
dramatically increased supply shift caught market participants off guard after
the decline in both January and February and contributed to the municipal
market's underperformance versus U.S. Treasuries during the first quarter of
2004. For the semi-annual period, municipals outperformed U.S. Treasuries.
o Consistent with improving economic conditions at the national level,
state budgets improved during the period. States have been reporting better then
expected tax collections for fiscal year 2004, which BlackRock believes is a
strong positive although some states are still projecting deficits for fiscal
year 2005. This is a reversal from much of 2003, when states were drawing on
reserves, raising taxes, cutting spending, increasing debt issuance and using
various types of accounting and fiscal changes to cover budget deficits.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE KY TAX-FREE INCOME
PORTFOLIO AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX FOR THE PAST TEN YEARS.
[LINE CHART]
Lehman Brothers
Institutional Investor A Municipal Bond Index
------------- ---------- -------------------------
03/31/1994 $ 10,000 $ 9,597 $ 10,000
06/30/1994 10,129 9,710 10,111
09/30/1994 10,222 9,787 10,180
12/31/1994 10,117 9,675 10,034
03/31/1995 10,660 10,183 10,743
06/30/1995 10,909 10,408 11,003
09/30/1995 11,204 10,677 11,319
12/31/1995 11,477 10,924 11,786
03/31/1996 11,442 10,878 11,644
06/30/1996 11,477 10,899 11,733
09/30/1996 11,667 11,066 12,003
12/31/1996 11,892 11,267 12,309
03/31/1997 11,915 11,275 12,280
06/30/1997 12,209 11,540 12,704
09/30/1997 12,504 11,805 13,087
12/31/1997 12,766 12,037 13,442
03/31/1998 12,876 12,127 13,596
06/30/1998 13,092 12,316 13,803
09/30/1998 13,503 12,688 14,227
12/31/1998 13,576 12,742 14,313
03/31/1999 13,650 12,796 14,439
06/30/1999 13,398 12,546 14,184
09/30/1999 13,337 12,474 14,127
12/31/1999 13,248 12,376 14,017
03/31/2000 13,510 12,606 14,428
06/30/2000 13,676 12,759 14,646
09/30/2000 13,958 12,994 15,000
12/31/2000 14,409 13,398 15,656
03/31/2001 14,756 13,705 16,003
06/30/2001 14,858 13,783 16,108
09/30/2001 15,201 14,085 16,560
12/31/2001 15,042 13,922 16,459
03/31/2002 15,270 14,101 16,614
06/30/2002 15,707 14,503 17,222
09/30/2002 16,022 14,762 18,040
12/31/2002 16,069 14,803 18,040
03/31/2003 16,211 14,916 18,257
06/30/2003 16,616 15,256 18,728
09/30/2003 16,561 15,202 18,743
12/31/2003 16,773 15,364 18,999
03/31/2004 16,979 15,550 19,327
FOR PERIOD ENDING MARCH 31, 2004
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year 3 Year 5 Year 10 Year
-------- -------- -------- ---------
Institutional Class 4.74% 4.79% 4.46% 5.44%
Service Class 4.42% 4.51% 4.17% 5.13%
Investor A Class (Load Adjusted) 0.07% 2.90% 3.13% 4.51%
Investor A Class (NAV) 4.25% 4.30% 3.97% 4.94%
Investor B Class (Load Adjusted) (1.01)% 2.44% 2.86% 4.16%
Investor B Class (NAV) 3.47% 3.52% 3.20% 4.16%
Investor C Class (Load Adjusted) 2.57% 3.55% 3.26% 4.19%
Investor C Class (NAV) 3.57% 3.55% 3.26% 4.19%
- --------------------------------------------------------------------------------
IN CONNECTION WITH THE CONVERSION OF VARIOUS COMMON TRUST FUNDS MAINTAINED BY
PNC BANK AND PNC BANK, DELAWARE ("PNC-DE "), AN AFFILIATE OF PNC BANK,INTO THE
FUND BETWEEN MAY 1 AND MAY 15,1998 (THE "CTF CONVERSION"), THE KENTUCKY
TAX-FREE INCOME PORTFOLIO WAS ESTABLISHED TO RECEIVE THE ASSETS OF THE KY
TAX-FREE INCOME FUND OF PNC BANK.PERFORMANCE INFORMATION PRESENTED FOR THIS
PORTFOLIO INCLUDES PERFORMANCE FOR THE PREDECESSOR COMMON TRUST FUND WHICH
TRANSFERRED ITS ASSETS AND LIABILITIES TO THE RELATED PORTFOLIO PURSUANT TO THE
CTF CONVERSION. PERFORMANCE INFORMATION PRESENTED IS BASED UPON THE PERFORMANCE
OF THE KY TAX-FREE INCOME FUND FOR PERIODS PRIOR TO THE CTF CONVERSION. SEE
"NOTE ON PERFORMANCE INFORMATION" ON PAGE 8 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.
7
BLACKROCK FUNDS
NOTE ON PERFORMANCE INFORMATION
The performance information above includes information for each class of
each Portfolio since the commencement of operations of the Portfolio, rather
than the date such class was introduced. Performance information for each class
introduced after the commencement of operations of a Portfolio is therefore
based on the performance history of a predecessor class or predecessor classes.
If a class of shares in a Portfolio (the "Subsequent Class") has more than one
predecessor class, the performance data predating the introduction of the
Subsequent Class is based initially on the performance of the Portfolio's first
operational predecessor class (the "Initial Class"); thereafter, the
performance of the Subsequent Class is based upon the performance of any other
predecessor class or classes which were introduced after the Initial Class and
which had total operating expenses more similar to those of the Subsequent
Class. In the case of Investor A, Investor B, Investor C and Service Shares,
the performance information for periods prior to their introduction dates has
not been restated to reflect the shareholder servicing and processing and/or
distribution fees and certain other expenses borne by these share classes
which, if reflected, would reduce the performance quoted. Accordingly, the
performance information may be used in assessing each Portfolio's performance
history but does not reflect how the distinct classes would have performed on a
relative basis prior to the introduction of these classes, which would require
an adjustment to the ongoing expenses.
Performance information is restated to reflect the current maximum
front-end sales charge (in the case of Investor A Shares) or the maximum
contingent deferred sales charge (in the case of Investor B and Investor C
Shares), and assumes the reinvestment of dividends and distributions. The
maximum front-end sales charges for Investor A Shares 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, 2005. 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 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.
8
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
ULTRASHORT MUNICIPAL PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- ------------
MUNICIPAL BONDS - 73.8%
Alaska - 3.6%
Alaska Hsg. Fin. Corp. Rev., St. Cap.
Prj., Ser. 98A-2
5.00% 12/01/04 $ 500 $ 509,445
Valdez Marine Term. Rev., Phillips
Trans., Inc. Prj., Ser. 85
1.50% 05/03/04 600 599,994
----------
1,109,439
----------
California - 1.6%
California Dept. Wtr. Res. Pwr. Sply.
Rev., Ser. 02E
3.58% 05/01/04 500 500,746
----------
Colorado - 3.7%
Denver City & Cnty. G.O., Ser. 99B
5.75% 08/01/08 1,000 1,141,660
----------
Connecticut - 1.6%
Connecticut Supplemental Tax Oblig.
Rev., Trans. Infra. Prj., Ser. 03A
2.00% 09/01/04 500 501,975
----------
Florida - 3.7%
Gainsville Util. Sys. Rev., Ser. 03C
5.00% 10/01/08 1,000 1,117,350
----------
Illinois - 4.2%
Chicago Pub. Bldg. Comm. Bldg.
Rev., Chicago Transit Auth. Prj.,
Ser. 03
5.00% 03/01/05 750 776,828
Chicago Trans. Auth. Cap. Gtd. Tr.
Receipts Rev., Ser. 03A
4.00% 06/01/06 500 501,994
----------
1,278,822
----------
Indiana - 4.1%
Indiana Bd. Bank Rev., Midyear Fdg.
Prog. Notes Prj., Ser. 03A
1.25% 04/15/04 1,000 1,000,090
Munster Sch. Bldg. Corp. Rev., First
Mtg. Prj., Prerefunded Ser. 96
5.70% 01/15/05 230 240,596
----------
1,240,686
----------
Louisiana - 1.8%
New Orleans Drain Sys. Rev., Ser.
02
6.00% 12/01/04 535 552,425
----------
Maryland - 3.7%
Maryland St. G.O., St. & Loc. Facs.
Ln. Prj., Ser. 03
5.00% 08/01/08 1,000 1,119,710
----------
Minnesota - 5.5%
Minneapolis & St. Paul Met. Arpts.
Comm. Arpt. Rev., Ser. 99B AMT
5.50% 01/01/10 500 556,415
Minnesota St. G.O., Ser. 03
5.00% 08/01/08 1,000 1,117,510
----------
1,673,925
----------
Nebraska - 3.3%
Nebraska Pub. Pwr. Dist. Rev., Pwr.
Sply. Sys. Prj., Prerefunded Ser.
93C
5.00% 07/01/04 1,000 1,019,720
----------
PAR
MATURITY (000) VALUE
---------- ---------- ------------
MUNICIPAL BONDS (Continued)
New Jersey - 3.7%
New Jersey Econ. Dev. Auth. Mkt.
Transition Fac. Rev., Sr. Lien Prj.,
Prerefunded Ser. 94A
5.80% 07/01/04 $ 700 $ 722,127
Newark G.O., Ser. 03
4.00% 07/15/08 385 412,656
----------
1,134,783
----------
New Mexico - 3.3%
Farmington Poll. Ctrl. Rev., Pub.
Svcs. San Juan Prj., Ser. 03B
2.10% 04/01/33 1,000 997,100
----------
New York - 10.5%
New York City G.O., Ser. 95E
6.60% 08/01/04 500 508,925
New York City G.O., Ser. 04I
5.00% 08/01/09 500 550,015
New York St. Dorm. Auth. Rev.,
Columbia Univ. Prj., Ser. 02B
5.00% 07/01/04 880 888,448
New York St. Med. Care Fac. Fin.
Agcy. Rev., New York Hosp. FHA
Ins. Mtg. Prj., Prerefunded Ser.
94A
6.90% 02/15/05 705 754,738
New York Urban Dev. Corp. Rev.,
Cmnty. Enhancement Fac. Prj.,
Ser. 01A
4.00% 05/01/04 500 500,000
----------
3,202,126
----------
Ohio - 0.8%
Ohio Bldg. Auth. Rev., St. Fac.
Admin. Bldg. Fd. Prj., Ser. 03A
4.50% 04/01/08 220 239,397
----------
Pennsylvania - 0.8%
Pennsylvania St. Tpke. Comm. Oil
Franchise Tax Rev., Prerefunded
Ser. 94A
6.00% 12/01/04 225 236,954
----------
Puerto Rico - 5.0%
Puerto Rico Cmwlth. G.O., Ser. 03
2.00% 07/30/04 1,000 1,003,390
Puerto Rico Pub. Bldg. Auth. Rev.,
Gtd. Govt. Fac. Prj., Ser. 02C
5.00% 07/01/05 500 521,010
----------
1,524,400
----------
Texas - 5.2%
Texas St. G.O., Ser. 03
2.00% 08/31/04 1,155 1,159,885
Texas St. Tpke. Auth. Ctr. Tpke. Sys.
Rev., Ser. 02
5.00% 06/01/08 385 426,611
----------
1,586,496
----------
Utah - 1.8%
Utah Assd. Mun. Pwr. Sys. Rev.,
Payson Pwr. Prj., Ser. 03A
5.00% 04/01/08 500 551,575
----------
Virginia - 1.0%
Portsmouth G.O., Ser. 96
5.00% 08/01/04 290 293,776
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
9
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
ULTRASHORT MUNICIPAL PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- -------------
MUNICIPAL BONDS (Continued)
Wisconsin - 4.9%
Wisconsin Clean Wtr. Rev.,
Prerefunded Ser. 93-1
5.12% 06/01/04 $1,500 $ 1,509,810
-----------
TOTAL MUNICIPAL BONDS
(Cost $22,565,352) 22,532,875
-----------
SHORT TERM INVESTMENTS - 28.3%
California Hlth. Fac. Fin. Auth. Rev.,
Ser. 99 DN
1.10%(b) 04/07/04 1,000 1,000,000
California Poll. Ctrl. Fin. Auth. Res.
Recovery Rev., Burney Forest
Products Prj., Ser. 88A DN
1.07%(b) 04/01/04 500 500,000
Charter Mac Equity Issuer Tr. Rev.,
Ser. 04 AMT DN
1.16%(b) 04/07/04 1,000 1,000,000
Dallas-Fort Worth Intl. Arpt. Fac. Imp.
Corp. Rev., United Parcel Service,
Inc. Prj., Ser. 02 AMT DN
1.10%(b) 04/01/04 1,000 1,000,000
Denver City & Cnty. Arpt. Rev., Ser.
04 AMT DN
1.12%(b) 04/07/04 1,000 1,000,000
Louisiana Pub. Fac. Auth. Rev., Tiger
Athletic Foundation Prj., Ser. 99
DN
1.07%(b) 04/07/04 1,000 1,000,000
McIntosh Ind. Dev. Bd. Env. Imp.
Rev., CIBC Spec. Prj., Ser. 98E
AMT DN
1.16%(b) 04/01/04 1,000 1,000,000
Minneapolis St. G.O., Library Prj.,
Ser. 03 DN
0.87%(b) 04/07/04 1,000 1,000,000
Wilmington Trust Tax-Free Money
Market Fund 1,147 1,146,677
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $8,646,677) 8,646,677
-----------
VALUE
--------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $31,212,029(a)) 102.1% $31,179,552
LIABILITIES IN EXCESS OF
OTHER ASSETS ( 2.1)% (643,984)
----- -----------
NET ASSETS (Applicable to
2,684,995 BlackRock shares,
372,505 Institutional shares, 10
Service shares and 10 Investor A
shares outstanding) 100.0% $30,535,568
===== ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
BLACKROCK SHARE
($26,818,610/2,684,995) $ 9.99
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($3,716,758/372,505) $ 9.98
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($100/10) $ 9.97
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($100/10) $ 9.97
=======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($9.97/0.970) $ 10.28
=======
- ------------------
(a) Also cost for Federal income tax purposes. The gross
unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $ 2,289
Gross unrealized depreciation (34,766)
--------
$(32,477)
========
(b) Rates shown are the rates as of March 31, 2004, and maturities shown are
the longer of the next interest readjustment date or the date the
principal owed can be recovered through demand.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
10
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS - 94.5%
Alabama - 3.9%
Alabama Hsg. Fin. Auth. Sgl. Fam.
Mtg. Rev., Cltrl. Home Mtg. Bd.
Prj., Ser. 94B-1
6.65% 10/01/25 $ 545 $ 559,204
Alabama Rev., Priv. Coll. & Tuskegee
Univ. Prj., Ser. 96A
5.90%(b) 09/01/16 1,000 1,111,450
Alabama St. Pub. Sch. & Coll. Auth.
Cap. Imp. Rev., Ser. 98
5.12% 11/01/09 1,000 1,123,480
Alabama St. Pub. Sch. & Coll. Auth.
Cap. Imp. Rev., Ser. 99C
5.75% 07/01/18 3,000 3,430,230
Alabama St. Pub. Sch. & Coll. Auth.
Cap. Imp. Rev., Ser. 99D
5.75%(b) 08/01/10 1,000 1,159,110
Courtland Ind. Dev. Solid Waste
Disp. Rev., Champion Intl. Corp.
Prj., Ser. 99 AMT
6.00% 08/01/29 1,500 1,561,275
Jefferson Cnty. Swr. Rev., Ref.
Warrants, Ser. 03B-8
5.25% 02/01/13 7,725 8,519,902
Shelby Cnty. Bd. of Ed. Rev., Ser. 95
5.70% 02/01/09 680 718,066
-----------
18,182,717
-----------
Alaska - 0.6%
Alaska Ind. Dev. & Expt. Auth.
Revolving Fd. Rev., Ser. 97A AMT
6.00% 04/01/07 2,500 2,783,325
-----------
Arizona - 0.8%
Arizona Sch. Fac. Bd. Rev., St. Sch.
Imp. Prj., Ser. 02
5.50% 07/01/12 1,180 1,378,311
Maricopa Cnty. Cmnty. Coll. Dist.
G.O., Ser. 02
5.25% 07/01/11 1,000 1,146,930
Yuma Mun. Property Corp. Rev.,
Mun. Fac. Prj., Ser. 03A
5.00% 07/01/10 1,010 1,140,017
-----------
3,665,258
-----------
California - 4.9%
Anaheim Uni. High Sch. Dist.
Election 2002 G.O., Ser. 03
5.00% 08/01/27 7,270 7,562,837
California St. G.O., Ser. 90
6.50% 11/01/06 340 377,533
Foothill Eastern Corridor Agcy. Toll
Rd. Rev., Ser. 99
5.75% 01/15/40 8,500 8,776,250
Golden St. Tobacco Securitization
Corp. Rev., Ser. 03B
5.00% 06/01/13 2,675 2,687,144
Los Altos Sch. Dist. Cap. Apprec.
G.O., Ser. 01B
5.87%(c) 08/01/21 3,380 1,344,834
Los Angeles G.O., Prerefunded Ser.
94A
5.80% 09/01/04 340 353,501
Sacramento Mun. Util. Dist. Elec.
Rev., Prerefunded Ser. 92C
5.75% 11/15/09 430 436,308
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
California (Continued)
Stockton-East Wtr. Dist. Rev., Ser.
02B
6.12%(c) 04/01/28 $4,495 $ 1,110,714
-----------
22,649,121
-----------
Colorado - 0.6%
Arapahoe Cnty. Cap. Imp. Tr. Fd.
Hwy. Rev., Prerefunded Ser.
86E-470
6.90% 08/31/05 750 833,558
Arapahoe Cnty. Cap. Imp. Tr. Fd.
Hwy. Rev., Ser. 86E-470
7.16%(c) 08/31/04 900 896,004
Colorado Dept. Trans. Rev., Ser. 02B
5.00% 06/15/11 1,000 1,128,650
-----------
2,858,212
-----------
Connecticut - 0.4%
Connecticut St. G.O., Ser. 03D
5.00% 08/01/09 1,500 1,688,640
-----------
District of Columbia - 0.0%
District of Columbia G.O.,
Prerefunded Ser. 93A-1
6.00% 06/01/11 50 59,700
-----------
Florida - 6.3%
Florida St. Bd. of Ed. Cap. Outlay
G.O., Ser. 00D
5.75% 06/01/22 7,800 8,966,802
Florida St. Bd. of Ed. G.O., Ser. 03J
5.00% 06/01/30 4,295 4,498,627
Florida St. Bd. of Ed. Lottery Rev.,
Ser. 00B
5.75% 07/01/09 1,000 1,156,830
Florida St. Dept. Gen. Svcs. Division
Fac. Management Rev., Fac. Pool
Prj., Ser. 03A
5.25% 09/01/10 1,400 1,602,482
Hillsborough Cnty. Ind. Dev. Auth.
Exempt Fac. Rev., Nat. Gypsum
Prj., Ser. 00A AMT
7.12% 04/01/30 2,000 2,082,940
Miami Hlth. Fac. Auth. Hlth. Sys.
Rev., Catholic Hlth. East Prj., Ser.
03B
5.12% 11/15/24 3,000 3,020,670
Miami Hlth. Fac. Auth. Hlth. Sys.
Rev., Catholic Hlth. East Prj., Ser.
03C
5.12% 11/15/24 2,050 2,064,124
St. Petersburg Excise Tax Rev., Ser.
93
5.15% 10/01/11 1,655 1,888,818
Tampa Wtr. & Swr. Rev., Ser. 02
6.00% 10/14-10/16 2,455 2,988,674
Tampa Wtr. & Swr. Rev., Ser. 02B
5.00% 07/01/10 1,000 1,126,890
-----------
29,396,857
-----------
Georgia - 1.7%
Atlanta Arpt. Fac. Rev., Ser. 94A
6.50% 01/01/10 1,000 1,202,490
Atlanta Arpt. Rev., Ser. 00A
5.88% 01/01/17 1,000 1,143,990
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
11
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Georgia (Continued)
Cobb Cnty. & Marietta Wtr. Auth.
Rev., Ser. 02
5.50% 11/01/14 $1,000 $ 1,175,280
Forsyth Cnty. Sch. Dist. G.O., Ser. 92
6.70% 07/01/12 1,000 1,213,800
Fulton Cnty. Fac. Corp. COP, Fulton
Cnty. Pub. Purp. Prj., Ser. 99
5.50% 11/01/18 1,000 1,137,730
Georgia Mun. Elec. Auth. Pwr. Rev.,
Ser. 93B
5.70% 01/01/19 1,000 1,159,870
Georgia St. G.O., Ser. 97C
6.25% 08/01/11 750 912,045
-----------
7,945,205
-----------
Hawaii - 1.1%
Hawaii St. G.O., Ser. 02CZ
5.25% 07/01/10 1,000 1,138,060
Hawaii St. Hbr. Cap. Imp. Rev., Ser.
97 AMT
5.50% 07/01/27 3,750 4,005,150
-----------
5,143,210
-----------
Illinois - 6.0%
Chicago Sales Tax Rev., Ser. 97
6.00% 01/01/09 1,000 1,143,530
Chicago Wtr. Rev., Ser. 97
5.50% 11/01/22 9,905 11,030,406
Cook Cnty. G.O., Prerefunded Ser.
96
5.88% 11/15/06 2,000 2,241,340
Du Page Wtr. Comm. Rev., Ser. 03
5.00% 05/01/09 1,000 1,114,610
Illinois Edl. Facs. Auth. Rev.,
Northwestern Univ. Prj., Ser. 03
5.00% 12/01/38 6,970 7,181,749
Illinois G.O., Prerefunded Ser. 94
5.50% 08/01/04 680 703,589
Illinois G.O., Prerefunded Ser. 02
5.25% 10/01/12 1,000 1,150,530
Illinois Hsg. Dev. Auth. Rev.,
Multi-Fam. Prj., Ser. 94-5
6.65% 09/01/14 3,000 3,087,030
Winnebago & Boone Cnty. G.O., Sch.
Dist. No. 205 Prj., Ser. 92C
5.90% 02/01/05 500 519,960
-----------
28,172,744
-----------
Kansas - 0.5%
Sedgwick Cnty. Uni. Sch. Dist. No.
259 Wichita G.O., Ser. 01
5.25% 09/01/09 2,250 2,549,655
-----------
Louisiana - 0.5%
Orleans Rev., Levee Dist. Pub. Imp.
Prj., Ser. 86
5.95% 11/01/15 2,295 2,525,670
-----------
Maryland - 0.7%
Maryland St. & Loc. Fac. G.O., Ser.
99-2
5.00% 07/15/08 1,000 1,119,390
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Maryland (Continued)
Univ. of Maryland Sys. Aux. Fac. &
Tuition Rev., Ser. 00A
5.00% 10/01/09 $1,050 $ 1,181,964
Washington Subn. Sanit. Dist. G.O.,
Wtr. Sply. Prj., Ser. 03
5.25% 06/01/10 1,000 1,144,270
-----------
3,445,624
-----------
Massachusetts - 2.4%
Massachusetts Bay Trans. Auth.
Rev., Ser. 95B
5.38% 03/01/20 1,000 1,046,249
Massachusetts St. Cons. Ln. G.O.,
Ser. 02D
5.25% 08/01/10 1,000 1,132,330
Massachusetts St. Cons. Ln. G.O.,
Ser. 02E
5.50% 01/01/10 1,500 1,707,975
Massachusetts St. Hlth. & Edl. Facs.
Auth. Rev., Newton-Wellesley
Hosp. Prj., Ser. 97G
6.12% 07/01/15 1,000 1,137,930
Massachusetts St. Tpke. Auth. Met.
Hwy. Sys. Rev., Ser. 97A
5.00% 01/01/37 4,000 4,080,920
Massachusetts St. Wtr. Res. Auth.
Rev., Prerefunded Ser. 94A
5.70% 08/01/04 680 700,638
New England Ed. Ln. Mktg. Corp.
Rev., Stud. Ln. Redemption Prj.,
Ser. 93F AMT
5.62% 07/01/04 1,350 1,364,702
-----------
11,170,744
-----------
Michigan - 3.5%
Detroit Sew. Disp. Rev., Ser. 03A
5.00% 07/01/32 5,800 6,005,146
Huron Vy. Sch. Dist. G.O.,
Prerefunded Ser. 96
5.88% 05/01/07 2,000 2,248,240
Michigan Mun. Bd. Auth. Rev.,
Drinking Wtr. Revolving Fd. Prj.,
Ser. 01
5.25% 10/01/17 1,000 1,104,140
Michigan St. Bldg. Auth. Rev., Ser. 03
5.00% 10/15/29 6,535 6,787,970
-----------
16,145,496
-----------
Mississippi - 0.3%
Mississippi St. G.O., Ser. 02A
5.38% 12/01/10 1,275 1,460,614
-----------
Missouri - 1.4%
Lake of The Ozarks Cmnty. Bldg.
Corp. Sys. Rev., Ser. 98
5.25% 12/01/14 4,915 4,918,784
Missouri St. Env. Imp. & Energy Res.
Auth. Wtr. Poll. Rev., Drinking Wtr.
Prj., Ser. 02B
5.25% 07/01/11 1,540 1,768,444
-----------
6,687,228
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
12
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
Nebraska - 0.5%
Nebraska Pub. Pwr. Dist. Rev., Ser.
02B
5.00% 01/01/10 $ 1,000 $ 1,116,840
Omaha Pub. Pwr. Dist. Elec. Rev.,
Ser. 92B
6.15% 02/01/12 1,000 1,185,310
-----------
2,302,150
-----------
Nevada - 0.9%
Clark Cnty. Bond Bank G.O., Ser. 02
5.00% 06/01/10 1,000 1,124,730
Truckee Meadows Wtr. Auth. Wtr.
Rev., Ser. 01A
5.50% 07/01/09 2,075 2,380,606
-----------
3,505,336
-----------
New Jersey - 4.8%
New Jersey Econ. Dev. Auth. Mkt.
Transition Fac. Rev., Prerefunded
Ser. 94A
5.80% 07/01/04 495 510,647
New Jersey St. Tpke. Auth. Rev.,
Ser. 00A
5.75% 01/10-01/16 4,000 4,583,558
New Jersey St. Trans. Tr. Fd. Auth.
Trans. Sys. Rev., Prerefunded Ser.
00A
6.00% 06/15/10 10,000 11,826,500
New Jersey St. Trans. Tr. Fd. Auth.
Trans. Sys. Rev., Ser. 99A
5.50% 06/15/09 1,930 2,196,822
Port Auth. New York & New Jersey
S.O., JFK Intl. Arpt. Term. Prj., Ser.
97-6 AMT
6.25% 12/01/09 2,680 3,100,814
-----------
22,218,341
New Mexico - 0.8%
Los Alamos Cnty. Util. Sys. Rev., Ser.
94A
5.80% 07/01/06 1,500 1,546,695
New Mexico St. Hwy. Comm. Rev.,
Sr. Subs. Lien Tax Prj., Ser. 00A
5.50% 06/15/09 1,000 1,146,630
New Mexico St. Hwy. Comm. Rev.,
Sr. Subs. Lien Tax Prj., Ser. 02A
5.25% 06/15/10 1,000 1,142,660
-----------
3,835,985
-----------
New York - 9.6%
Met. Trans. Auth. Rev., Ser. 02A
5.00% 11/15/30 10,000 10,384,200
Met. Trans. Auth. Svcs. Contract
Rev., Ser. 02A
5.50% 07/01/15 1,000 1,148,070
New York City G.O., Prerefunded
Ser. 94A
6.00% 08/01/04 990 1,020,829
New York City G.O., Prerefunded
Ser. 95B
6.38% 08/15/05 2,045 2,214,244
New York City G.O., Ser. 94A
6.00% 08/01/05 10 10,297
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
New York (Continued)
New York City G.O., Ser. 95B
6.38% 08/15/09 $ 1,795 $ 1,942,280
New York City G.O., Ser. 96A
6.00% 08/01/05 2,000 2,120,340
New York City G.O., Ser. 03I
5.75% 03/01/19 5,000 5,560,450
New York City Ind. Dev. Agcy. Rev.,
Term. One Grp. Assoc. Prj., Ser.
94 AMT
6.00% 01/08-01/19 860 877,691
New York City Transitional Fin. Auth.
Rev., Ser. 02A
5.25% 11/01/11 3,300 3,766,587
New York City Transitional Fin. Auth.
Rev., Ser. 02C
5.25% 08/01/10 1,300 1,493,882
New York St. G.O., Ser. 02D
5.10% 06/01/16 1,000 1,063,140
New York St. Hsg. Fin. Agcy. Rev.,
Ser. 96A
6.38% 11/01/04 4,000 4,113,200
New York St. Loc. Govt. Assistance
Corp. Rev., Prerefunded Ser. 95A
5.70% 04/01/05 340 362,525
Tobacco Settlement Fin. Corp. Rev.,
Ser. 03A-1
5.50% 06/01/14 6,075 6,587,973
Tobacco Settlement Fin. Corp. Rev.,
Ser. 03C-1
5.50% 06/01/20 2,000 2,198,100
-----------
44,863,808
-----------
North Carolina - 0.4%
Eastern Mun. Pwr. Agcy. Sys. Rev.,
Ser. 93C
5.38% 01/01/05 1,250 1,290,238
North Carolina Mun. Pwr. Agcy. Rev.,
Catawba Elec. Prj., Ser. 92A
6.00% 01/01/10 300 350,870
-----------
1,641,108
-----------
Ohio - 3.1%
Cleveland-Cuyahoga Cnty. Port Auth.
Rev., Ser. 97 AMT
6.00% 03/01/07 505 550,884
Middletown City Sch. Dist. G.O., Ser.
04
5.00% 12/01/31 5,000 5,207,400
Ohio St. Hgr. Edl. Facs. Rev., Case
Western Reserve Univ. Prj., Ser.
04A
5.00% 12/01/34 5,000 5,203,400
Ohio St. Infra. Impt. G.O., Ser. 02B
5.00% 03/01/10 1,000 1,123,500
Ohio Wtr. Dev. Auth. Poll. Ctrl. Rev.,
Ln. Fd. Prj., Ser. 03
5.00% 06/01/08 1,545 1,719,786
Ohio Wtr. Dev. Auth. Rev., Clean Wtr.
Prj., Ser. 92
5.65% 12/01/05 300 304,269
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
13
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Olentangy Loc. Sch. Dist. G.O.,
Prerefunded Ser. 95A
5.85% 12/01/04 $ 340 $ 357,731
-----------
14,466,970
-----------
Oregon - 3.1%
Clackamas Cnty. G.O., Sch. Dist. No.
62 Oregon City Prj., Prerefunded
Ser. 00C
5.50% 06/15/10 3,185 3,686,478
Klamath Falls Elec. Sr. Lien Rev.,
Klamath Cogen Prj., Ser. 99
6.00% 01/01/25 7,500 7,488,675
Oregon St. Dept. Admin. Svcs.
Lottery Rev., Ser. 03A
5.00% 04/01/11 1,035 1,165,431
Oregon St. Dept. Admin. Svcs. Rev.,
Ser. 03
5.00% 09/01/10 1,900 2,139,951
-----------
14,480,535
-----------
Pennsylvania - 8.9%
Beaver Cnty. G.O., Prerefunded Ser.
96A
5.75% 10/01/06 1,000 1,102,930
Dauphin Cnty. Gen. Auth. Rev., Hotel
& Conf. Ctr. Hyatt Regency Prj.,
Ser. 98
6.20% 01/19-01/29 6,500 4,612,075
Delaware Cnty. Auth. Rev., Mercy
Hlth. Corp. Prj., Ser. 96
5.75% 12/15/20 2,400 2,629,584
Delaware Vy. Regl. Fin. Auth. Loc.
Govt. Rev., Ser. 98A
5.50% 08/01/28 5,500 6,327,640
Delaware Vy. Regl. Fin. Auth. Loc.
Govt. RITES PA-1041 Rev., Ser.
02B
43.87%(d) 01/01/26 1,000 2,716,300
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Kidspeace Oblig. Prj., Ser. 98
6.00% 11/01/23 2,650 2,837,646
Northampton Cnty. Gen. Purp. Auth.
Rev., Cnty. Agreement Prj., Ser. 01
5.00% 10/01/10 2,130 2,395,547
Pennsylvania Con. Ctr. Auth. Rev.,
Ser. 94A
6.60% 09/01/09 4,250 4,427,990
Pennsylvania St. Hgr. Ed. Fac. Auth.
Hlth. Svcs. Rev., Univ. of
Pennsylvania Hlth. Svcs. Prj., Ser.
96A
5.88% 01/01/15 3,450 3,574,234
5.75% 01/01/17 3,535 3,690,718
Philadelphia Ind. Dev. Auth. Arpt.
Fac. Rev., Aero Philadelphia LLC
Prj., Ser. 99 AMT
5.25% 01/01/09 640 609,152
Philadelphia Ind. Dev. Auth. Rev.,
PGH Dev. Corp. Prj., Ser. 93
5.25% 07/01/17 1,935 1,956,343
Philadelphia Sch. Dist. G.O., Ser.
99C
5.75% 03/01/29 4,000 4,500,800
-----------
41,380,959
-----------
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
Puerto Rico - 3.7%
Puerto Rico Cmwlth. G.O., Pub. Imp.
Prj., Ser. 01
5.50% 07/01/19 $ 5,105 $ 5,984,949
Puerto Rico Cmwlth. Infra. Fin. Auth.
Spec. RITES PA-782 Rev., Ser.
01G
18.49%(d) 10/01/40 3,985 5,791,241
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 94S
7.00% 07/01/06 1,000 1,112,400
Puerto Rico Pub. Fin. Corp. Cmwlth.
Approp. Rev., Ser. 02E
5.50% 08/01/29 4,000 4,338,400
-----------
17,226,990
-----------
Rhode Island - 0.7%
Rhode Island Depositors Econ.
Protection Corp. S.O., Prerefunded
Ser. 93
5.62% 08/01/09 190 219,410
Rhode Island Depositors Econ.
Protection Corp. S.O., Ser. 93
5.62% 08/01/09 810 882,576
Rhode Island St. Hlth. & Ed. Bldg.
Corp. Rev., Hosp. Fin. Lifespan
Oblig. Grp. Prj., Ser. 96
5.50% 05/15/16 2,000 2,216,760
-----------
3,318,746
-----------
South Carolina - 0.2%
South Carolina Trans. Infra. Bank
Rev., Ser. 00A
5.50% 10/01/07 1,000 1,120,970
-----------
South Dakota - 0.1%
South Dakota St. Lease Rev., Trans.
Cert. Prj., Ser. 93A
6.38% 09/01/05 500 535,805
-----------
Tennessee - 1.0%
Chattanooga G.O., Ser. 02
5.38% 09/01/11 1,270 1,459,154
Maury Cnty. Ind. Dev. Poll. Ctrl. Rev.,
Saturn Corp. Prj., Ser. 94
6.50% 09/01/24 1,800 1,849,788
Memphis-Shelby Cnty. Arpt. Auth.
Spec. Fac. Rev., Federal Express
Corp. Prj., Ser. 02
5.05% 09/01/12 1,050 1,134,735
-----------
4,443,677
-----------
Texas - 12.6%
Brazos River Auth. Poll. Ctrl. Rev.,
Texas Util. Elec. Co. Prj.,
Prerefunded Ser. 95C AMT
5.55% 04/01/08 5,000 5,725,850
Cypress-Fairbanks Indpt. Sch. Dist.
G.O., Schoolhouse Prj., Ser. 02
5.00% 02/15/09 1,000 1,114,910
Dallas Cnty. Util. & Cap. Apprec.
Rev., Ser. 99A
6.19%(c) 02/15/21 17,225 6,539,471
6.21%(c) 02/15/22 18,405 6,548,683
Dallas Ind. Dev. Corp. Rev., CR/PL,
Inc. Prj., Ser. 87 AMT
7.50% 08/01/17 1,750 1,815,625
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
14
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
Texas (Continued)
Grand Prairie Indpt. Sch. Dist. G.O.,
Prerefunded Ser. 00A
5.80% 08/15/11 $ 4,925 $ 5,840,311
Harris Cnty. Rev., Toll Rd. Prj., Ser.
04
5.00% 08/15/33 5,710 5,932,119
Keller Indpt. Sch. Dist. G.O., Ser. 01
5.25% 08/15/22 1,000 1,071,790
Killeen Indpt. Sch. Dist. G.O., Ser. 02
5.00% 02/15/12 1,195 1,337,504
Port Corpus Christi Auth. Rev.,
Celanese Prj., Ser. 02B AMT
6.70% 11/01/30 5,000 5,315,500
Spring Branch Sch. Dist. G.O.,
Prerefunded Ser. 95
5.95% 02/01/05 2,245 2,335,361
Texas Affordable Hsg. Corp.
Multi-Fam. Hsg. Rev., Ser. 01A
4.75% 11/01/11 6,635 6,735,985
Texas St. Tpke. Auth. Ctr. Tpke. Sys.
Rev., Ser. 02
5.00% 06/01/08 2,000 2,216,160
Texas Wtr. Fin. Assist. G.O., Ser. 00
5.75% 08/01/22 3,445 3,937,601
Travis Cnty. Hlth. Fac. Dev. Corp.
Rev., Ascension Hlth. Credit Prj.,
Prerefunded Ser. 99A
5.88% 11/15/09 1,980 2,356,457
-----------
58,823,327
-----------
Utah - 0.0%
Salt Lake City Hosp. Rev., Ser. 88A
8.12% 05/15/15 100 132,911
-----------
Virginia - 1.8%
Hampton G.O., Prerefunded Ser. 95
6.00% 01/15/05 400 423,324
Pocahontas Pkwy. Toll Rd. Rev., Ser.
98B
5.85%(c) 08/15/23 14,300 3,510,650
Virginia Beach Dev. Auth. Pub. Fac.
Rev., Ser. 03A
5.00% 12/01/08 2,045 2,292,527
Virginia Cmwlth. Trans. Bd. Rev.,
Federal Hwy. Reimbursement
Notes Prj., Ser. 02
5.00% 10/01/11 1,000 1,133,440
Virginia Hsg. Dev. Auth. Rev.,
Multi-Fam. Prj., Ser. 95C
6.70% 11/01/15 1,000 1,036,120
-----------
8,396,061
-----------
Washington - 5.9%
King Cnty. G.O., Sch. Dist. No. 414
Lake Washington Prj., Ser. 00
5.75% 12/01/14 500 586,365
King Cnty. G.O., Ser. 03
5.00% 06/01/10 1,050 1,174,646
Pierce Cnty. G.O., Sch. Dist. No. 416
White River Prj., Ser. 00
6.00% 12/01/13 5,345 6,380,861
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
Washington (Continued)
Washington St. G.O., Ser. 00B
6.00% 01/01/25 $14,000 $16,172,940
Washington St. Pub. Pwr. Sply. Sys.
Rev., Nuclear Prj. No. 3, Ser. 96A
6.00% 07/01/06 3,000 3,282,120
------------
27,596,932
------------
West Virginia - 0.3%
West Virginia Pub. Energy Auth.
Rev., Morgantown Energy Assoc.
Prj., Ser. 90A AMT
5.05% 07/01/08 430 446,576
West Virginia St. Rd. G.O.,
Ser. 01
5.50% 06/01/09 1,000 1,141,790
------------
1,588,366
------------
Wisconsin - 0.5%
Kenosha G.O., Ser. 03B
5.00% 09/01/11 1,000 1,118,670
Wisconsin St. Trans. Rev., Ser. 00A
5.30% 07/01/18 1,000 1,090,010
------------
2,208,680
------------
TOTAL MUNICIPAL BONDS
(Cost $419,123,928) 440,617,677
------------
MORTGAGE PASS-THROUGHS - 0.0%
Government National Mortgage
Association
6.00%
(Cost $8,446) 11/15/31 8 8,483
------------
CUMULATIVE PREFERRED STOCK - 3.9%
Charter Mac Equity Issuer Tr.
6.62% (e) 06/30/49 3,000 3,395,700
7.60% (e) 11/30/50 9,000 10,559,700
MuniMae TE Bonds Subs., LLC
6.88% (e) 06/30/49 4,000 4,350,960
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $15,987,002) 18,306,360
------------
SHORT TERM INVESTMENTS - 0.9%
Wilmington Trust Tax-Free Money
Market Fund
(Cost $4,144,508) 4,145 4,144,508
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
15
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
VALUE
---------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $439,263,884(a)) 99.3% $463,077,028
OTHER ASSETS IN EXCESS OF
LIABILITIES 0.7% 3,086,912
----- ------------
NET ASSETS (Applicable to
9,105,698 BlackRock shares,
30,498,889 Institutional shares,
254,717 Service shares, 744,355
Investor A shares, 619,196
Investor B shares and 361,614
Investor C shares outstanding) 100.0% $466,163,940
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
BLACKROCK SHARE
($102,052,681/9,105,698) $ 11.21
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($341,918,572/30,498,889) $ 11.21
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($2,852,360/254,717) $ 11.20
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($8,346,349/744,355) $ 11.21
=======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($11.21/0.960) $ 11.68
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($6,941,223/619,196) $ 11.21
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($4,052,755/361,614) $ 11.21
=======
- -------------------
(a) Also cost for Federal income tax purposes.
The gross unrealized appreciation (depreciation)
on a tax basis is as follows:
Gross unrealized appreciation $28,026,447
Gross unrealized depreciation (4,213,303)
-----------
$23,813,144
===========
(b) Securities, or a portion thereof, pledged as collateral with a value of
$1,459,183 on 1,005 short U.S. Treasury Note futures contracts expiring
June 2004. The value of such contracts on March 31, 2004 was $115,983,281,
with an unrealized loss of $599,358.
(c) The rate shown is the effective yield on the zero coupon bonds.
(d) Rates shown are the rates as of March 31, 2004.
(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, 2004,
the fund held 3.9% of its net assets, with a current market value of
$18,306,360 in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
16
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS - 91.1%
Pennsylvania - 83.3%
Allegheny Cnty. Hosp. Dev. Auth.
Rev., Hlth. Ctr. Univ. of Pittsburgh
Med. Ctr. Prj., Ser. 97B
6.00% 07/01/25 $ 7,000 $ 8,331,470
Allegheny Cnty. Hosp. Dev. Auth.
Rev., Prerefunded Ser. 95A
6.00% 09/01/07 5,000 5,697,700
6.20% 09/01/07 1,000 1,146,120
Allegheny Cnty. Hosp. Dev. Auth.
Rev., Univ. of Pittsburgh Med. Ctr.
Prj., Ser. 95
5.35% 12/01/17 10,000 10,637,400
Beaver Cnty. Hosp. Auth. Rev.,
Prerefunded Ser. 96A
5.80% 10/01/06 5,830 6,437,136
Berks Cnty. G.O., Ser. 98
5.38% 11/15/28 6,685 6,968,310
Bradford Area Sch. Dist. G.O.,
Prerefunded Ser. 95
5.80% 10/01/05 1,465 1,566,407
Bucks Cnty. G.O., Prerefunded Ser.
95
5.88% 05/01/05 1,575 1,655,451
Central Bucks Sch. Dist. G.O.,
Prerefunded Ser. 94A
6.45% 11/15/04 1,000 1,033,420
6.70% 11/15/04 500 517,470
Crawford Central Sch. Dist. G.O.,
Prerefunded Ser. 95
5.75% 02/15/05 1,585 1,649,082
Crawford Central Sch. Dist. G.O.,
Ser. 95
7.00% 02/15/05 1,765 1,854,591
Dauphin Cnty. Gen. Auth. Hlth. Sys.
Rev., Pinnacle Hlth. Sys. Prj., Ser.
97
5.50% 05/15/17 3,500 3,841,390
Dauphin Cnty. Gen. Auth. Hosp.
Rev., Hapsco Western
Pennsylvania Hosp. Prj., Ser. 92
6.25% 07/01/16 1,000 1,206,260
Dauphin Cnty. Gen. Auth. Rev., Hotel
& Conf. Ctr. Hyatt Regency Prj.,
Ser. 98
6.20% 01/19-01/29 20,575 14,590,979
Delaware Cnty. Auth. Coll. Rev.,
Haverford Coll. Prj., Ser. 00
5.75% 11/15/25 6,795 7,701,181
Delaware Cnty. Auth. Hosp. Rev.,
Ser. 95
5.50% 08/15/15 6,480 6,938,266
Delaware Cnty. Auth. Rev., Mercy
Hlth. Corp. Prj., Ser. 96
5.75% 12/15/20 3,735 4,092,290
Delaware Cnty. Ind. Dev. Auth. Rev.,
Ser. 99 AMT
6.00% 06/01/29 3,400 3,833,806
Delaware Cnty. Mem. Hosp. Auth.
Rev., Ser. 95
5.50% 08/15/19 3,000 3,199,470
Delaware Cnty. Rev., Prerefunded
Ser. 95
5.50% 10/01/05 1,075 1,143,832
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Delaware River Port Auth.
Pennsylvania & New Jersey Rev.,
Port Dist. Prj., Ser. 99B
5.70% 01/01/22 $ 8,930 $10,110,367
Delaware River Port Auth.
Pennsylvania & New Jersey Rev.,
Ser. 99
5.75% 01/01/16 8,000 9,209,840
Delaware River Port Auth.
Pennsylvania & New Jersey RITES
Rev., Ser. 99
19.13%(b) 01/01/22 10,000 15,529,000
Delaware Vy. Regl. Fin. Auth. Loc.
Govt. Rev., Ser. 96A
5.90% 04/15/16 2,540 2,743,251
Delaware Vy. Regl. Fin. Auth. Loc.
Govt. Rev., Ser. 97B
5.60% 07/01/17 2,000 2,348,620
Delaware Vy. Regl. Fin. Auth. Loc.
Govt. Rev., Ser. 98A
5.50% 08/01/28 33,050 38,023,364
Delaware Vy. Regl. Fin. Auth. Loc.
Govt. RITES PA-1041 Rev., Ser.
02A
43.87%(b) 01/01/26 2,000 5,432,600
Dover Area Sch. Dist. G.O.,
Prerefunded Ser. 96
5.75% 04/01/06 2,445 2,652,898
Fairview Sch. Dist. G.O.,
Prerefunded Ser. 95
6.00% 02/15/05 1,000 1,042,570
Harrisburg Auth. Wtr. Rev., Ser. 94
5.30% 08/11/16 14,300 14,493,050
Indiana Cnty. Ind. Dev. Auth. Poll.
Ctrl. Rev., New York St. Elec. &
Gas Corp. Prj., Ser. 95A
6.00% 06/01/06 1,000 1,092,840
Kennett Cons. Sch. Dist. G.O., Ser.
02A
5.50% 02/15/14 1,245 1,418,727
Lancaster Cnty. Hosp. Auth. Rev.,
Hlth. Ctr. Masonic Homes Prj., Ser.
94
5.30% 11/15/08 500 516,560
Lancaster Swr. Auth. Sply. S.O., Ser.
98
5.25% 04/01/21 8,480 8,857,360
Langhorne Manor Boro Hgr. Ed. &
Hlth. Auth. Rev., Prerefunded Ser.
94
6.90% 11/15/04 1,000 1,036,470
Lebanon Cnty. Hosp. Auth. Rev.,
Good Samaritan Hosp. Prj., Ser.
93
5.55% 11/15/04 355 363,896
5.65% 11/15/05 760 779,129
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Kidspeace Oblig. Prj., Ser. 98
5.70% 11/01/09 3,000 3,348,360
6.00% 11/01/18 2,000 2,204,400
Luzerne Cnty. Flood Prot. Auth. Gtd.
Rev., Prerefunded Ser. 96
5.60% 07/15/06 4,720 5,162,783
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
17
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Lycoming Cnty. Auth. Hosp. Rev.,
Divine Providence Hosp. Prj., Ser.
95
5.38% 11/15/10 $ 6,480 $ 6,977,470
McKeesport Area Sch. Dist. G.O.,
Prerefunded Ser. 96A
5.75% 10/01/06 1,750 1,930,129
Methacton Sch. Dist. Auth. Rev.,
Prerefunded Ser. 78
6.50% 10/01/06 475 531,938
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Coll. Rev., Beaver Coll. Prj.,
Ser. 96
5.75% 04/01/12 1,690 1,850,347
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Rev., Holy Redeemer Hosp.
Prj., Ser. 97A
5.25% 10/01/27 9,000 9,402,390
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Rev., Pottstown Hlth. Care
Corp. Prj., Prerefunded Ser. 98
5.00% 01/01/09 6,235 7,027,468
Northampton Cnty. Hgr. Ed. Auth.
Rev., Moravian Coll. Prj., Ser. 94
6.10% 07/01/12 1,950 2,009,904
Northeastern Hosp. & Ed. Auth. Rev.,
Luzerne Cnty. Coll. Prj., Ser. 97
5.15% 08/15/16 3,245 3,458,878
Northeastern Hosp. & Ed. Auth. Rev.,
Wyoming Vy. Hlth. Care Prj., Ser.
94A
6.50% 01/01/07 1,000 1,056,200
Northgate Sch. Auth. Bldg. Rev., Ser.
78
6.38% 02/15/07 825 931,994
Parkland Sch. Dist. Rev.,
Prerefunded Ser. 96
5.75% 03/01/06 2,910 3,147,165
Pennsbury Sch. Dist. G.O.,
Prerefunded Ser. 94
6.65% 08/15/04 685 699,159
Pennsbury Sch. Dist. G.O., Ser. 02
5.50% 01/18-01/19 4,625 5,149,769
Pennsylvania Con. Ctr. Auth. Rev.,
Ser. 89A
6.70% 09/01/16 1,000 1,244,180
Pennsylvania Con. Ctr. Auth. Rev.,
Ser. 94A
6.60% 09/01/09 12,465 12,987,034
Pennsylvania Econ. Dev. Fin. Auth.
Sch. Rev., Baldwin Sch. Prj., Ser.
94A
6.35% 08/01/04 105 105,000
Pennsylvania Hgr. Ed. Assistance
Agcy. Rev., Cap. Acquisition Prj.,
Prerefunded Ser. 00
5.88% 12/15/10 16,400 19,546,504
Pennsylvania Hgr. Ed. Fac. Auth.
Rev., Univ. of Pennsylvania Prj.,
Ser. 98
5.75% 01/01/22 13,165 13,729,120
Pennsylvania Hsg. Fin. Agcy.
Multi-Fam. FHA Ins. Rev., Ser. 92
8.10% 07/01/13 2,000 2,005,500
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Pennsylvania Hsg. Fin. Agcy. Rev.,
Ser. 97-56A AMT
6.15% 10/01/27 $ 5,000 $ 5,173,100
Pennsylvania Hsg. Fin. Agcy. Rev.,
Ser. 98 AMT
5.50%(c) 04/01/30 13,300 3,209,290
Pennsylvania Hsg. Fin. Agcy. Rev.,
Ser. 99 AMT
5.85% 10/01/18 1,000 1,049,080
Pennsylvania Hsg. Fin. Agcy. Rev.,
Sgl. Fam. Mtg. Prj., Ser. 96A AMT
6.05% 10/01/16 2,500 2,606,800
Pennsylvania Hsg. Fin. Agcy. Rev.,
Sgl. Fam. Mtg. Prj., Ser. 99-66A
AMT
5.65% 04/01/29 10,000 10,240,000
Pennsylvania Infra. Investment Auth.
Rev., Pennvest Ln. Pool Prj., Ser.
94
6.00% 09/01/06 1,930 2,124,756
Pennsylvania Intergovtl. Coop. Auth.
Spec. Tax Rev., City of
Philadelphia Fdg. Prj., Ser. 94
7.00% 06/15/04 500 505,900
Pennsylvania Intergovtl. Coop. Auth.
Spec. Tax Rev., City of
Philadelphia Fdg. Prj., Ser. 96
5.60% 06/15/12 1,000 1,079,130
5.50% 06/16-06/20 10,500 11,308,395
Pennsylvania St. Dept. Gen. Svcs.
COP, Ser. 01
4.00% 05/04-11/04 3,535 3,569,250
4.25% 05/05-11/05 3,685 3,831,286
4.50% 05/10-11/10 4,590 5,030,113
5.00% 05/11-11/14 18,695 20,669,514
5.25% 05/15-05/16 7,740 8,566,179
Pennsylvania St. Fin. Auth. Cmnty.
Coll. Rev., Beaver Cnty. Coll. Prj.,
Prerefunded Ser. 94A
5.88% 12/01/04 825 851,755
Pennsylvania St. G.O., Prerefunded
Ser. 94
5.50% 06/15/04 1,000 1,023,870
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Bryn Mawr Coll.
Prj., Prerefunded Ser. 95
6.00% 12/01/05 1,200 1,319,748
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Lafayette Coll.
Prj., Ser. 00
6.00% 05/01/30 155 178,582
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Trustees Univ.
Prj., Ser. 98
5.50% 07/15/38 9,500 9,943,745
Pennsylvania St. Hgr. Ed. Fac. Auth.
Hlth. Svcs. Rev., Univ. of
Pennsylvania Hlth. Svcs. Prj., Ser.
96A
5.75% 01/01/17 12,250 12,789,612
Pennsylvania St. Ind. Dev. Auth.
Rev., Econ. Dev. Prj., Ser. 94
7.00% 01/01/06 1,000 1,094,750
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
18
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Pennsylvania St. Ind. Dev. Auth.
Rev., Econ. Dev. Prj., Ser. 02
5.50% 07/01/16 $ 8,000 $ 9,118,400
Pennsylvania St. Infra. Investment
Auth. Rev., Ser. 90
6.45% 09/01/04 1,600 1,622,128
Pennsylvania St. Tpke. Comm. Rev.,
Prerefunded Ser. 94A
5.88% 12/01/04 500 526,155
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 01
5.00% 06/01/10 2,100 2,361,933
5.50% 12/01/13 3,000 3,513,660
Pennsylvania Trafford Dist. G.O.,
Prerefunded Ser. 94
5.85% 05/01/04 1,000 1,003,590
Philadelphia Auth. Dev. Lease Rev.,
Ser. 01B
5.25% 10/01/09 1,750 1,987,440
Philadelphia G.O., Prerefunded Ser.
94B
5.90% 11/15/04 1,620 1,701,454
Philadelphia G.O., Ser. 93A
5.25% 05/15/04 300 301,407
Philadelphia G.O., Ser. 94
5.90% 11/15/09 980 1,027,716
Philadelphia Gas Works Rev., Ser. 93
5.50%(d) 07/01/04 5,000 5,053,550
Philadelphia Gas Works Rev., Ser. 94
5.25% 08/01/24 2,900 2,976,763
Philadelphia Gas Works Rev., Ser. 01
5.50% 08/14-08/18 7,415 8,340,507
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Frankford Hosp.
Prj., Ser. 95
5.50% 01/01/07 1,235 1,288,871
5.60% 01/01/08 1,245 1,303,440
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Nazareth Hosp.
Franciscan Prj., Prerefunded Ser.
96B
5.00% 07/01/06 4,590 5,041,840
Philadelphia Ind. Dev. Auth. Rev.,
American Coll. of Physicians Prj.,
Ser. 00
5.50% 06/20-06/25 14,685 16,151,482
Philadelphia Ind. Dev. Auth. Rev.,
Girard Estate Coal Mining Prj., Ser.
96
5.38% 11/15/12 3,945 4,338,159
5.50% 11/15/16 1,650 1,817,691
Philadelphia Ind. Dev. Auth. Rev.,
PGH Dev. Corp. Prj., Ser. 93
5.50% 07/01/10 1,035 1,072,933
Philadelphia Pk. Auth. Rev., Arpt. Pk.
Prj., Ser. 99
5.62% 09/01/18 4,430 4,983,972
Philadelphia Pk. Auth. Rev., Ser. 97
5.40% 09/01/15 5,900 6,452,535
Philadelphia Pk. Auth. Rev., Ser. 99
5.62% 09/13-09/17 5,885 6,652,483
Philadelphia Sch. Dist. G.O.,
Prerefunded Ser. 94A
5.80% 07/01/04 1,910 1,951,313
5.85% 07/01/04 1,710 1,751,450
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Philadelphia Sch. Dist. G.O.,
Prerefunded Ser. 95B
5.50% 09/01/05 $ 4,500 $ 4,863,960
Philadelphia Sch. Dist. G.O., Ser.
95A
6.25% 09/01/06 2,255 2,495,789
Philadelphia Sch. Dist. G.O., Ser.
95B
5.50% 09/01/18 4,890 5,209,562
Philadelphia Sch. Dist. G.O., Ser.
99C
5.75% 03/01/29 11,000 12,377,200
Philadelphia Sch. Dist. G.O., Ser.
00A
5.75% 02/12-02/13 10,215 11,780,401
Philadelphia Wtr. & Swr. Rev., Ser.
92
7.35%(d) 09/01/04 2,895 2,970,386
Philadelphia Wtr. & Waste Wtr. Rev.,
Ser. 93
5.50% 06/15/07 6,780 7,543,970
Pittsburgh Sch. Dist. G.O.,
Prerefunded Ser. 97
5.50% 09/01/05 4,500 4,775,355
Pleasant Vy. Sch. Dist. G.O.,
Prerefunded Ser. 95
5.60% 11/15/05 1,180 1,264,547
Pleasant Vy. Sch. Dist. G.O., Ser. 95
5.60% 11/15/14 205 218,190
Pottstown Borough Auth. Swr. Rev.,
Ser. 96
5.50% 11/01/16 1,360 1,481,244
Punxsutawney Area Sch. Dist. G.O.,
Prerefunded Ser. 95
5.80% 04/15/05 1,000 1,048,740
Ringgold Sch. Dist. Rev.,
Prerefunded Ser. 95
6.20% 02/01/05 500 521,145
Riverside Beaver Cnty. Sch. Dist.
Rev., Prerefunded Ser. 96
5.50% 02/15/06 3,725 4,004,524
Riverside Sch. Dist. G.O.,
Prerefunded Ser. 00
5.50% 10/15/10 3,300 3,823,908
Scranton Lackawanna Hlth. &
Welfare Auth. Rev., Hosp. Cmnty.
Med. Ctr. Prj., Ser. 98A
5.25% 07/01/04 2,215 2,236,995
South Fork Mun. Auth. Hosp. Rev.,
Good Samaritan Med. Ctr. Prj.,
Ser. 96B
5.38% 07/01/16 4,000 4,335,400
Southeastern Pennsylvania Trans.
Auth. Rev., Prerefunded Ser. 95
5.75% 03/01/05 1,285 1,352,360
5.88% 03/01/05 1,230 1,295,866
Southeastern Pennsylvania Trans.
Auth. Rev., Ser. 97
5.55% 03/01/13 3,500 3,895,990
5.38% 03/01/17 6,270 6,883,081
Springford Sch. Dist. G.O., Ser. 97
5.15% 02/01/18 10,010 10,403,193
Washington Cnty. Auth. Rev., Ser. 99
6.15% 12/01/29 13,250 16,011,432
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
19
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
MUNICIPAL BONDS (Continued)
Pennsylvania (Continued)
Washington Cnty. Ind. Dev. Auth.
Poll. Ctrl. Rev., West Penn Pwr.
Co. Prj., Ser. 95G
6.05% 04/01/14 $ 2,500 $ 2,664,625
West Mifflin Sanit. Swr. Mun. Auth.
Swr. Rev., Prerefunded Ser. 96
5.70% 08/01/06 1,445 1,586,451
Westmoreland Cnty. Ind. Dev. Auth.
Rev., Westmoreland Hlth. Sys. Prj.,
Ser. 93A
6.00% 07/01/11 200 204,370
Westview Mun. Auth. S.O., Ser. 85
9.25% 11/15/05 720 769,162
Williamsport Area Sch. Dist. Auth.
Rev., Ser. 78
6.00% 03/01/07 80 88,131
Wilson Sch. Dist. G.O., Prerefunded
Ser. 97
5.50% 05/15/07 8,015 8,931,355
------------
637,741,324
------------
Puerto Rico - 7.3%
Puerto Rico Cmwlth. G.O., Ser. 02
5.50% 07/11-07/12 22,000 25,675,880
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00A
17.99%(b) 10/01/16 400 616,488
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00B
18.49%(b) 10/01/17 500 778,850
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00C
18.49%(b) 10/01/18 500 773,810
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00D
18.49%(b) 10/01/19 690 1,050,553
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00E
18.49%(b) 10/01/20 250 376,275
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00F
17.99%(b) 10/01/24 250 371,545
Puerto Rico Elec. Pwr. Auth. Rev.,
Prerefunded Ser. 95X
6.00% 07/01/05 5,000 5,404,400
Puerto Rico Mun. Fin. Agy. Rev., Ser.
99
5.50% 08/01/18 6,500 7,382,180
Puerto Rico Pub. Fin. Corp. Cmwlth.
Approp. Rev., Ser. 02E
5.50% 08/01/29 12,500 13,557,500
------------
55,987,481
------------
PAR
MATURITY (000) VALUE
-------------- ---------- --------------
MUNICIPAL BONDS (Continued)
Virgin Islands - 0.5%
Tobacco Settlement Fdg. Corp. Rev.,
Ser. 01
4.40%(c) 05/15/09 $ 1,030 $ 861,605
4.50%(c) 05/15/10 1,100 913,374
4.60%(c) 05/15/11 1,165 960,403
4.75%(c) 05/15/12 1,240 1,015,597
------------
3,750,979
------------
TOTAL MUNICIPAL BONDS
(Cost $636,399,889)
697,479,784
------------
CUMULATIVE PREFERRED STOCK - 7.2%
Charter Mac Equity Issuer Tr.
6.62%(e) 06/30/49 25,000 28,297,500
7.60%(e) 11/30/50 10,000 11,733,000
MuniMae TE Bonds Subs., LLC
6.88%(e) 06/30/49 4,000 4,350,960
7.75%(e) 06/30/50 10,000 11,121,600
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $48,458,114) 55,503,060
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $684,858,003(a)) 98.3% 752,982,844
OTHER ASSETS IN EXCESS OF
LIABILITIES 1.7% 12,903,731
----- -----------
NET ASSETS (Applicable to
64,500,050
Institutional shares,
533,040 Service shares,
3,256,453
Investor A shares,
2,061,603 Investor
B shares and 223,144
Investor C
shares outstanding) 100.0% $765,886,575
===== ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
20
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
VALUE
---------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($700,146,573/64,500,050) $ 10.85
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($5,780,567/533,040) $ 10.84
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR
A SHARE
($35,336,318/3,256,453) $ 10.85
=======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.85/0.960) $ 11.30
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($22,211,314/2,061,603) $ 10.77
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($2,411,803/223,144) $ 10.81
=======
- -------------------
(a) Cost for Federal income tax purposes is $684,996,586.
The gross unrealized appreciation (depreciation) on
a tax basis is as follows:
Gross unrealized appreciation $73,483,062
Gross unrealized depreciation (5,496,804)
-----------
$67,986,258
===========
(b) Rates shown are the rates as of March 31, 2004.
(c) The rate shown is the effective yield on the zero coupon bonds.
(d) Securities, or a portion thereof, pledged as collateral with a value of
$1,539,060 on 979 short U.S. Treasury Note futures contracts expiring June
2004. The value of such contracts on March 31, 2004 was $112,982,719, with
an unrealized loss of $1,711,784.
(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, 2004,
the fund held 7.2% of its net assets, with a current market value of
$55,503,060 in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
21
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NEW JERSEY TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS - 88.0%
New Jersey - 70.4%
Delaware River Port Auth.
Pennsylvania & New Jersey RITES
PA-611 Rev., Ser. 00
14.28%(b) 01/01/26 $ 5,000 $6,918,750
Edison Twp. G.O., Ser. 91
6.50% 06/01/04 930 937,961
Essex Cnty. Imp. Auth. Lease Rev.,
Jail & Yth. Hsg. Prj., Prerefunded
Ser. 94
6.90% 12/01/04 500 529,500
Garden St. Preservation Tr. Cap.
Apprec. Rev., Ser. 03B
5.17%(c) 11/01/24 10,000 3,659,300
Gloucester Cnty. Srs. Hsg. Dev.
Corp. Rev., Sect. 8 Colonial Pk.
Prj., Ser. 94A
6.20% 09/15/11 1,250 1,285,088
Hopatcong Boro G.O., Ser. 03
5.75% 08/01/33 2,300 2,550,884
Jersey City G.O., Ser. 96A
6.00% 10/01/05 1,655 1,771,876
Knowlton Twp. Bd. of Ed. G.O., Ser.
91
6.60% 08/15/11 169 209,038
Middlesex Cnty. Imp. Auth. Rev., New
Brunswick Apts. Rental Hsg. Prj.,
Ser. 02 AMT
5.15% 02/01/24 3,000 3,073,200
Middlesex Cnty. Imp. Auth. Rev., Ser.
96
5.80% 09/15/13 1,725 1,900,088
Morristown Cnty. G.O., Ser. 95
6.40% 08/01/14 500 541,955
New Jersey Econ. Dev. Auth. Lease
Rev., Ser. 00
6.00% 06/01/21 4,780 5,565,593
New Jersey Econ. Dev. Auth. Mkt.
Transition Fac. Rev., Prerefunded
Ser. 94A
5.80%(d) 07/01/04 2,790 2,878,192
5.88% 07/01/04 4,000 4,127,120
New Jersey Econ. Dev. Auth. Rev.,
Kapkowski Rd. Landfill Prj., Ser. 02
6.50% 04/01/28 2,500 2,925,625
New Jersey Econ. Dev. Auth. Rev.,
Motor Vehicle Comm. Prj., Ser.
03A
3.52%(c) 07/01/12 4,000 2,954,600
New Jersey Econ. Dev. Auth. Rev.,
Performing Arts Ctr. Prj., Ser. 96C
5.75% 06/15/08 4,440 4,869,437
New Jersey Econ. Dev. Auth. Rev.,
Sch. Fac. Const. Prj., Ser. 03F
5.25% 06/15/13 5,000 5,693,200
New Jersey Econ. Dev. Auth. Rev.,
Ser. 99
6.20% 12/01/24 3,000 3,345,450
New Jersey Econ. Dev. Auth. Rev.,
St. Barnabas Med. Ctr. Prj., Ser.
97A
5.63%(c) 07/01/23 4,000 1,577,040
New Jersey Ed. Auth. Rev., Rowan
Coll. Prj., Prerefunded Ser. 96E
5.88% 07/01/06 2,185 2,420,893
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
New Jersey Hlth. Care Fac. Fin.
Auth. Rev., Kennedy Hlth. Sys.
Prj., Ser. 01
5.50% 07/01/21 $ 2,000 $2,078,360
5.62% 07/01/31 455 471,480
New Jersey Hlth. Care Fac. Fin.
Auth. Rev., Robert Wood Johnson
Univ. Prj., Ser. 96C
5.75% 07/01/07 2,595 2,835,972
New Jersey Sports & Expo. Auth.
Rev., Ser. 00A
5.50% 03/01/20 5,000 5,542,650
New Jersey St. Edl. Facs. Auth. Rev.,
Institute of Tech. Prj., Ser. 04B
5.00% 07/01/16 4,150 4,568,111
5.00% 07/01/21 2,750 2,945,772
New Jersey St. Edl. Facs. Auth. Rev.,
Ser. 02
5.25% 07/01/32 3,000 3,091,290
New Jersey St. G.O., Ser. 00
5.75% 05/01/12 2,500 2,933,575
New Jersey St. G.O., Ser. 01H
5.25% 07/01/14 4,975 5,684,634
New Jersey St. Hsg. & Mtg. Fin.
Agcy. Rev., Ser. 00B
6.25% 11/01/26 2,000 2,137,960
New Jersey St. Hwy. Auth. Rev.,
Garden St. Pkwy. Prj., Ser. 92
6.20% 01/01/10 750 874,148
New Jersey St. Tpke. Auth. Rev.,
Prerefunded Ser. 91C
6.50% 01/01/16 3,155 3,901,574
New Jersey St. Tpke. Auth. Rev.,
Ser. 91C
6.50% 01/01/16 845 1,047,700
New Jersey St. Trans. Tr. Fd. Admin.
Grant Rev., Prerefunded Ser. 00A
6.12% 09/15/09 2,500 2,958,575
New Jersey St. Trans. Tr. Fd. Auth.
Trans. Sys. Rev., Prerefunded Ser.
00A
6.00% 06/15/10 2,500 2,956,625
New Jersey St. Trans. Tr. Fd. Auth.
Trans. Sys. Rev., Prerefunded Ser.
01B
6.00% 12/15/11 2,500 3,017,500
New Jersey St. Trans. Tr. Fd. Auth.
Trans. Sys. Rev., Ser. 99A
5.75% 06/15/20 2,820 3,326,105
New Jersey St. Waste Wtr. Trtmnt.
Tr. Rev., Ser. 96C
6.25% 05/15/06 3,455 3,787,889
Newark Bd. of Ed. G.O., Prerefunded
Ser. 94
5.88% 12/15/04 1,000 1,054,220
North Hudson Swr. Auth. Rev., Ser.
01A
5.41%(c) 08/01/21 5,000 2,229,800
Ocean Cnty. Util. Auth. Rev.,
Prerefunded Ser. 95A
6.30% 01/01/05 1,005 1,053,531
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
22
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NEW JERSEY TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- --------- --------------
MUNICIPAL BONDS (Continued)
New Jersey (Continued)
Port Auth. New York & New Jersey
Rev., Ser. 95 AMT
5.75% 11/01/09 $3,275 $ 3,448,182
Port Auth. New York & New Jersey
S.O. Rev., JFK Intl. Arpt. Term.
Prj., Ser. 97-6 AMT
5.75% 12/01/22 2,000 2,203,560
Port Auth. New York & New Jersey
S.O., JFK Intl. Arpt. Term. Prj., Ser.
97-6 AMT
6.25% 12/01/09 7,000 8,099,140
Summit Cnty. G.O., Ser. 01
5.25% 06/01/14 1,145 1,322,017
------------
133,305,160
------------
Puerto Rico - 17.6%
Puerto Rico Cmwlth. G.O., Pub. Imp.
Prj., Ser. 01
5.50% 07/01/19 5,000 5,861,850
Puerto Rico Cmwlth. Hwy. & Trans.
Auth. Rev., Prerefunded Ser. 00B
6.00% 07/01/10 3,000 3,586,350
Puerto Rico Cmwlth. Hwy. & Trans.
Auth. Rev., Ser. 00C
6.00% 07/01/29 2,000 2,291,540
Puerto Rico Cmwlth. Hwy. & Trans.
Auth. Rev., Ser. 02D
5.38% 07/01/36 1,000 1,070,450
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00A
17.99%(b) 10/01/16 400 616,488
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00B
18.49%(b) 10/01/17 500 778,850
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00C
18.49%(b) 10/01/18 500 773,810
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00D
18.49%(b) 10/01/19 650 989,651
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00E
18.49%(b) 10/01/20 250 376,275
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00F
17.99%(b) 10/01/24 250 371,545
Puerto Rico Cmwlth. Infra. Fin. Auth.
Spec. RITES PA-569 Rev., Ser. 99
12.61%(b) 07/01/07 2,000 2,568,180
Puerto Rico Cmwlth. Pub. Imp. G.O.,
Prerefunded Ser. 00
5.75% 07/01/10 3,000 3,499,500
Puerto Rico Pub. Bldgs. Auth. Rev.,
Govt. Facs. Prj., Ser. 02
5.25% 07/01/25 4,535 5,138,699
Puerto Rico Pub. Fin. Corp. Cmwlth.
Approp. Rev., Ser. 02E
5.50% 08/01/29 5,000 5,423,000
------------
33,346,188
------------
TOTAL MUNICIPAL BONDS
(Cost $151,604,877) 166,651,348
------------
PAR/SHARES
MATURITY (000) VALUE
---------- ---------- ------------
CUMULATIVE PREFERRED STOCK - 6.6%
Charter Mac Equity Issuer Tr.
6.62%(e) 06/30/49 $ 1,000 $ 1,131,900
7.60%(e) 11/30/50 4,000 4,693,200
MuniMae TE Bonds Subs., LLC
6.88%(e) 06/30/49 4,000 4,350,960
7.75%(e) 06/30/50 2,000 2,224,320
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $10,992,201) 12,400,380
------------
SHORT TERM INVESTMENTS - 5.4%
Wilmington Trust Tax-Free Money
Market Fund
(Cost $10,176,198) 10,176 10,176,198
------------
TOTAL INVESTMENTS IN
SECURITIES - 100.0%
(Cost $172,773,276(a)) $189,227,926
============
- -------------------
(a) Also cost for Federal income tax purposes.
The gross unrealized appreciation (depreciation)
on a tax basis is as follows:
Gross unrealized appreciation $16,940,641
Gross unrealized depreciation (485,991)
-----------
$16,454,650
===========
(b) Rates shown are the rates as of March 31, 2004.
(c) The rate shown is the effective yield on the zero coupon bonds.
(d) Securities, or a portion thereof, pledged as collateral with a value of
$1,547,415 on 270 short U.S. Treasury Note futures contracts expiring June
2004. The value of such contracts on March 31, 2004 was $31,159,688, with
an unrealized loss of $275,017.
(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, 2004,
the fund held 6.3% of its net assets, with a current market value of
$12,400,380 in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
23
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
NEW JERSEY TAX-FREE INCOME PORTFOLIO
MARCH 31, 2004 (UNAUDITED)
ASSETS
Investments at value (Cost $172,773,276)................................... $ 189,227,926
Cash ...................................................................... 13,421,155
Interest receivable ....................................................... 2,596,544
Capital shares sold receivable ............................................ 113,795
Prepaid expenses .......................................................... 16,366
Futures margin receivable ................................................. 68,725
--------------
TOTAL ASSETS ........................................................... 205,444,511
--------------
LIABILITIES
Investments purchased payable ............................................. 7,613,890
Capital shares redeemed payable ........................................... 57,602
Distributions payable ..................................................... 673,446
Advisory fees payable ..................................................... 47,550
Administrative fees payable ............................................... 38,012
Transfer agent fees payable ............................................... 4,891
Other accrued expenses payable ............................................ 47,356
Futures margin payable .................................................... 151,875
Unrealized depreciation on interest rate swaps ............................ 94,686
--------------
TOTAL LIABILITIES ...................................................... 8,729,308
--------------
NET ASSETS (Applicable to 13,443,714 Institutional shares,1,390,516
Service shares, 529,027 Investor A shares, 1,058,641 Investor B shares
and 239,264 Investor C shares outstanding) ................................ $ 196,715,203
==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($158,720,709/13,443,714)......................... $11.81
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($16,417,292/1,390,516)................................. $11.81
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($6,245,126/529,027)................................. $11.80
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE ($11.80\d0.960)................. $12.29
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($12,501,332/1,058,641).............................. $11.81
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($2,830,744/239,264)................................. $11.83
======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
OHIO TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS - 89.2%
Ohio - 68.7%
Akron G.O., Ser. 01
5.50% 12/01/21 $1,000 $1,126,370
Akron Swr. Sys. Rev., Ser. 96
5.88% 12/01/16 500 554,455
Brunswick G.O., Ser. 94
6.30% 12/01/14 210 220,905
Butler Cnty. Trans. Imp. Dist. Rev.,
Ser. 97A
6.00%(b) 04/01/11 600 688,140
Cleveland COP, Cleveland Stadium
Prj., Ser. 97
5.25% 11/15/10 2,500 2,800,125
Cleveland G.O., Prerefunded Ser. 94
6.25% 11/15/04 1,915 2,015,365
Cleveland Pkg. Fac. Rev., Ser. 96
6.00% 09/15/06 1,275 1,407,332
Cleveland Pub. Pwr. Sys. Rev., First
Mtg. Prj., Prerefunded Ser. 94A
6.30% 11/15/04 4,000 4,210,840
Cleveland-Cuyahoga Cnty. Port Auth.
Rev., Ser. 97 AMT
6.00% 03/01/07 335 365,438
Columbus G.O., Ser. 86
7.38% 07/01/06 1,000 1,123,640
Columbus G.O., Ser. 94-2
5.60% 05/15/05 1,000 1,024,910
Columbus G.O., Ser. 02
5.00% 06/15/12 2,975 3,305,166
Cuyahoga Cnty. Multi-Fam. Rev., Ser.
02 AMT
5.35% 09/20/27 1,000 1,033,150
Fairfield City Sch. Dist. G.O., Ser. 94
7.45% 12/01/14 1,000 1,298,420
Greater Cleveland Regl. Trans. Auth.
Cap. Imp. Rev., Ser. 01A
5.12% 12/01/21 1,000 1,063,430
Greater Cleveland Regl. Trans. Auth.
G.O., Ser. 96
6.25% 12/01/06 2,935 3,284,294
Hamilton Cnty. Sales Tax Rev., Ser.
01B
5.25% 12/01/32 5,000 5,322,450
Kings Sch. Dist. G.O., Prerefunded
Ser. 94
7.60% 12/01/05 200 218,176
Lucas Cnty. G.O., Ser. 96
6.00% 12/01/05 500 538,700
Marysville Sch. Dist. G.O.,
Prerefunded Ser. 98
6.00% 12/01/10 1,910 2,304,931
Mason City Sch. Dist. G.O., Ser. 01
5.38% 12/01/18 3,000 3,328,440
New Albany Cmnty. Auth. Fac. Rev.,
Ser. 01B
5.12% 10/01/21 2,750 2,931,142
North Royalton City Sch. Dist. G.O.,
Ser. 94
6.62% 12/01/06 100 112,732
Northwestern Sch. Dist. Rev., Wayne
& Ashland Cntys. Prj., Ser. 94
7.20% 12/01/10 300 376,971
Ohio G.O., Prerefunded Ser. 95
6.00% 08/01/05 225 244,114
PAR
MATURITY (000) VALUE
---------- ---------- -------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Ohio Hsg. Fin. Agcy. Rev., Wind
River Prj., Ser. 94A AMT
5.55% 11/01/18 $ 300 $ 312,510
Ohio St. Bldg. Auth. Adult Corr. Fac.
Rev., Prerefunded Ser. 94
5.90% 10/01/04 2,000 2,088,500
Ohio St. Bldg. Auth. Disalle Govt. Ctr.
Rev., Ser. 96A
6.00% 10/01/05 1,000 1,070,000
Ohio St. Bldg. Data Ctr. Rev., Ser.
93A
5.90% 10/01/07 450 509,994
Ohio St. Comm. Sch. Cap. Fac. Rev.,
Prerefunded Ser. 94A
5.75% 06/15/09 1,000 1,162,650
Ohio St. Env. Imp. Rev., USX Corp.
Prj., Ser. 99
5.62% 05/01/29 1,000 1,023,530
Ohio St. Hgr. Ed. Fac. Denison Univ.
Rev., Ser. 01
5.12% 11/01/21 3,000 3,194,190
Ohio St. Nat. Res. Cap. Fac. G.O.,
Prerefunded Ser. 94A
5.40% 10/01/04 1,000 1,021,900
Ohio St. Univ. G.O., Ser. 02A
5.25% 12/01/18 3,290 3,624,593
Ohio St. Wtr. Dev. Auth. Poll. Ctrl.
Fac. Rev., Republic Steel Prj., Ser.
95
6.38% 06/01/07 1,680 1,802,842
Ohio St. Wtr. Dev. Auth. Poll. Ctrl.
Rev., Ser. 02
5.25% 12/01/15 3,415 3,836,548
Ohio St. Wtr. Dev. Auth. Rev., Pure
Wtr. Prj., Ser. 92
5.75% 06/01/04 305 307,242
Ohio St. Wtr. Dev. Auth. Rev.,
Steel-Cargill North Star Broken Hill
Prj., Ser. 95 AMT
6.30% 09/01/20 500 519,610
Ohio St. Wtr. Dev. Poll. Ctrl. Fac.
Rev., Wtr. Ctrl. St. Match Prj.,
Prerefunded Ser. 95
5.70% 06/01/05 1,300 1,382,537
Olentangy Sch. Dist. G.O.,
Prerefunded Ser. 95A
6.00% 12/01/04 225 236,954
Pickerington Loc. Sch. Dist. Fac.
Constr. & Imp. Rev., Ser. 01
5.25% 12/01/20 1,000 1,079,060
Scioto Cnty. Rev., Marine Term.
Norfolk Southern Corp. Prj., Ser.
98
5.30% 08/15/13 3,000 3,124,230
Springboro Wtr. Sys. Rev., Ser. 98
5.00% 12/01/18 2,500 2,649,050
Summit Cnty. Hosp. Rev., Cuyahoga
Falls Gen. Hosp. Prj., Ser. 94
6.65% 07/01/14 200 205,996
Toledo G.O., Ser. 96
6.00% 12/01/06 500 556,270
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
25
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
OHIO TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- --------- --------------
MUNICIPAL BONDS (Continued)
Ohio (Continued)
Trotwood-Madison City Sch. Dist.
G.O., Ser. 02
5.00% 12/01/30 $2,000 $ 2,077,140
Univ. of Cincinnati Rev., Ser. 01A
5.00% 06/01/31 2,000 2,071,940
Univ. of Toledo Rev., Ser. 02
5.25% 06/01/18 1,195 1,296,432
West Muskingum Loc. Sch. Dist.,
Sch. Fac. Constr. & Imp. G.O., Ser.
03
5.00% 12/01/24 3,000 3,148,500
Westerville City Sch. Dist. G.O., Ser.
87
6.25% 12/01/05 1,000 1,081,140
Westlake G.O., Ser. 96
6.40% 12/01/08 1,560 1,776,824
------------
82,059,818
------------
Puerto Rico - 20.5%
Puerto Rico Cmwlth. G.O., Ser. 02
5.50% 07/01/11 5,000 5,826,200
Puerto Rico Cmwlth. Hwy. & Trans.
Auth. RITES Rev., Ser. 98
10.82%(c) 07/01/18 5,000 5,953,950
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00A
17.99%(c) 10/01/16 400 616,488
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00B
18.49%(c) 10/01/17 500 778,850
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00C
18.49%(c) 10/01/18 500 773,810
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00D
18.49%(c) 10/01/19 650 989,651
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00E
18.49%(c) 10/01/20 250 376,275
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00F
17.99%(c) 10/01/24 250 371,545
Puerto Rico Pub. Bldgs. Auth. RITES
PA-577 Rev., Ser. 99
12.67%(c) 07/01/21 4,000 4,474,040
Puerto Rico Pub. Fin. Corp. Cmwlth.
Approp. Rev., Ser. 02E
5.50% 08/01/29 4,000 4,338,400
------------
24,499,209
------------
TOTAL MUNICIPAL BONDS
(Cost $96,029,710) 106,559,027
------------
CUMULATIVE PREFERRED STOCK - 5.6%
Charter Mac Equity Issuer Tr.
6.62%(d) 06/30/49 1,000 1,131,900
7.60%(d) 11/30/50 1,000 1,173,300
MuniMae TE Bonds Subs., LLC
6.88%(d) 06/30/49 2,000 2,175,480
7.75%(d) 06/30/50 2,000 2,224,320
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $5,997,400) 6,705,000
------------
NUMBER
OF SHARES VALUE
----------- -------------
SHORT TERM INVESTMENTS - 3.9%
Wilmington Trust
Tax-Free Money
Market Fund
(Cost $4,602,539) 4,602,539 $4,602,539
----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $106,629,649(a)) 98.7% 117,866,566
OTHER ASSETS IN EXCESS OF
LIABILITIES 1.3% 1,599,116
----- -----------
NET ASSETS (Applicable to
8,892,638
Institutional shares,
47,576 Service
shares, 493,745
Investor A shares,
979,831 Investor B
shares and
535,771 Investor C shares
outstanding) 100.0% $119,465,682
===== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($97,018,526/8,892,638) $ 10.91
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($519,263/47,576) $ 10.91
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($5,388,479/493,745) $ 10.91
=======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.91/0.960) $ 11.36
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($10,691,837/979,831) $ 10.91
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($5,847,577/535,771) $ 10.91
=======
- -------------------
(a) Also cost for Federal income tax purposes. The gross unrealized
appreciation on a tax basis is $11,236,917.
(b) Securities, or a portion thereof, pledged as collateral with a value of
$688,140 on 144 short U.S. Treasury Note futures contracts expiring June
2004. The value of such contracts on March 31, 2004 was $16,618,500, with
an unrealized loss of $251,750. (c) Rates shown are the rates as of March
31, 2004. (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, 2004, the fund held 5.6% of its net assets, with a current market value
of $6,705,000 in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
26
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
DELAWARE TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
------------- ---------- -------------
MUNICIPAL BONDS - 87.6%
Delaware - 65.4%
Delaware River & Bay Auth. Rev.,
Ser. 96
6.00% 01/05-01/06 $2,620 $ 2,765,001
Delaware River & Bay Auth. Rev.,
Ser. 03
5.25% 01/01/22 1,000 1,080,910
Delaware St. Econ. Dev. Auth. Poll.
Ctrl. Rev., Delmarva Pwr. Prj., Ser.
02B
5.20% 02/01/19 1,000 1,075,130
Delaware St. Econ. Dev. Auth. Rev.,
Del. Tech. Pk. Univ. Del. Prj., Ser.
00
6.00% 02/01/21 1,000 1,167,450
Delaware St. Econ. Dev. Auth. Rev.,
Delmarva Pwr. Prj., Ser. 00 AMT
5.65% 07/01/28 3,850 4,087,198
Delaware St. Econ. Dev. Auth. Rev.,
First Mtg. Gilpin ACA CBI Prj., Ser.
98
5.62% 07/01/19 2,000 2,168,360
Delaware St. Econ. Dev. Auth. Rev.,
United Wtr. Delaware, Inc. Prj.,
Ser. 95 AMT
6.20%(b) 06/01/25 2,000 2,138,600
Delaware St. Econ. Dev. Auth. Rev.,
Wtr. Dev. Prj., Ser. 92B
6.45% 12/01/07 1,165 1,329,137
Delaware St. G.O., Ser. 03A
5.00% 01/01/10 1,000 1,127,030
Delaware St. G.O., Ser. 03B
5.00% 07/08-07/11 2,600 2,934,494
Delaware St. Hlth. Fac. Auth. Rev.,
Catholic Hlth. East Prj., Ser. 03D
5.12% 11/15/24 1,750 1,768,725
5.25% 11/15/28 2,225 2,246,115
Delaware St. Hlth. Fac. Auth. Rev.,
Christiana Care Hlth. Svcs. Prj.,
Ser. 03
5.25% 10/01/12 3,000 3,402,510
Delaware St. Hlth. Fac. Auth. Rev.,
Med. Ctr. of Delaware Prj., Ser. 92
6.25% 10/01/04 1,885 1,934,085
6.25% 10/01/05 1,875 2,017,200
Delaware St. Hsg. Auth. Rev.,
Multi-Fam. Mtg. Prj., Ser. 92C
7.38% 01/01/15 2,000 2,021,280
Delaware St. Hsg. Auth. Rev.,
Multi-Fam. Mtg. Prj., Ser. 01A
5.40% 07/01/24 3,390 3,459,732
Delaware St. Hsg. Auth. Rev., Sr.
Sgl. Fam. Mtg. Prj., Ser. 00 AMT
5.90% 07/01/20 2,275 2,392,094
Delaware St. Hsg. Auth. Rev., Sr.
Sgl. Fam. Mtg. Prj., Ser. 02A AMT
5.40% 01/01/34 2,320 2,367,119
Delaware Trans. Auth. Trans. Sys.
Rev., Prerefunded Ser. 94
6.10% 07/01/04 1,000 1,032,320
Delaware Trans. Auth. Trans. Sys.
Rev., Ser. 93
5.10% 07/01/04 1,500 1,514,640
Dover Elec. Rev., Ser. 93
6.00% 07/01/07 500 506,820
PAR
MATURITY (000) VALUE
------------- ---------- -------------
MUNICIPAL BONDS (Continued)
Delaware (Continued)
Kent Cnty. Stud. Hsg. Rev., Del. St.
Univ. Prj., Ser. 04A
5.00% 07/25-07/30 $2,100 $ 2,117,587
New Castle Cnty. G.O., Ser. 02A
5.25% 10/01/12 1,745 2,015,318
New Castle Cnty. G.O., Ser. 04
5.00% 10/01/20 2,695 2,902,678
Sussex Cnty. G.O., Prerefunded Ser.
93
5.60% 04/15/05 225 227,734
5.70% 04/15/05 230 232,806
Sussex Cnty. G.O., Ser. 03
5.00% 10/15/08 2,270 2,540,675
Wilmington G.O., Ser. 02
5.38% 06/01/17 1,500 1,681,395
Wilmington Pk. Auth. Gtd. Pk. Rev.,
Ser. 92A
6.00% 09/15/06 25 25,337
Wilmington Pk. Auth. Gtd. Pk. Rev.,
Ser. 02
5.25% 09/14-09/15 2,965 3,390,658
-----------
59,670,138
-----------
Puerto Rico - 22.2%
Puerto Rico Cmwlth. G.O., Ser. 02
5.50% 07/01/11 3,000 3,495,720
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00A
17.99%(c) 10/01/16 400 616,488
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00B
18.49%(c) 10/01/17 500 778,850
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00C
18.49%(c) 10/01/18 500 773,810
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00D
18.49%(c) 10/01/19 650 989,651
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00E
18.49%(c) 10/01/20 250 376,275
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00F
17.99%(c) 10/01/24 250 371,545
Puerto Rico Pub. Fin. Corp. Cmwlth.
Approp. Rev., Ser. 98A
5.38% 06/01/14 50 58,169
Puerto Rico Pub. Fin. Corp. RITES
Rev., Ser. 98
11.32%(c) 06/01/09 5,000 6,916,450
Puerto Rico Pub. Fin. Corp. RITES
Rev., Ser. 99
12.69%(c) 06/01/14 4,025 5,908,096
-----------
20,285,054
-----------
TOTAL MUNICIPAL BONDS
(Cost $73,357,905)
79,955,192
-----------
CUMULATIVE PREFERRED STOCK - 7.4%
Charter Mac Equity Issuer Tr.
6.62% (d) 06/30/49 1,000 1,131,900
7.60% (d) 11/30/50 1,000 1,173,300
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
27
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
DELAWARE TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR/SHARES
MATURITY (000) VALUE
---------- ----------- -------------
CUMULATIVE PREFERRED STOCK (Continued)
MuniMae TE Bonds Subs., LLC
6.88% (d) 06/30/49 $2,000 $ 2,175,480
7.75% (d) 06/30/50 2,000 2,224,320
-----------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $5,958,088) 6,705,000
-----------
SHORT TERM INVESTMENTS - 2.8%
Wilmington Trust
Tax-Free Money
Market Fund
(Cost $2,515,300) 2,515 2,515,300
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $81,831,293(a)) 97.8% 89,175,492
OTHER ASSETS IN EXCESS OF
LIABILITIES 2.2% 2,006,807
----- ----------
NET ASSETS (Applicable to
5,428,856 Institutional shares,
1,130,993 Investor A shares,
849,991 Investor B shares and
1,537,477 Investor C shares
outstanding) 100.0% $91,182,299
===== ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($55,315,796/5,428,856) $ 10.19
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($11,530,752/1,130,993) $ 10.20
=======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.20/0.960) $ 10.63
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($8,665,769/849,991) $ 10.20
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($15,669,982/1,537,477) $ 10.19
=======
- -------------------
(a) Cost for Federal income tax purposes is $81,894,233. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $7,381,465
Gross unrealized depreciation (100,206)
----------
$7,281,259
==========
(b) Securities, or a portion thereof, pledged as collateral with a value of
$1,069,300 on 108 short U.S. Treasury Note futures contracts expiring June
2004. The value of such contracts on March 31, 2004 was $12,463,875, with
an unrealized loss of $188,844.
(c) Rates shown are the rates as of March 31, 2004.
(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, 2004,
the fund held 7.4% of its net assets, with a current market value of
$6,705,000 in securities restricted as to resale.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
28
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
KENTUCKY TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS - 85.2%
Kentucky - 64.5%
Boone Cnty. Sch. Dist. Fin. Corp.
Sch. Bldg. Rev., Ser. 00B
5.38% 08/01/20 $2,500 $ 2,716,775
Bowling Green Sch. Dist. Fin. Corp.
Rev., Ser. 00
5.75% 01/18-01/20 2,185 2,491,910
Frankfort Elec. & Wtr. Plant Bd. Rev.,
Ser. 99
5.60% 12/01/19 1,045 1,183,504
Grayson Cnty. Sch. Dist. Fin. Corp.
Sch. Bldg. Rev., Prerefunded Ser.
95B
5.95% 01/01/05 1,290 1,362,279
Hardin Cnty. Sch. Dist. Fin. Corp.
Sch. Bldg. Rev., Ser. 00
5.50% 02/01/16 1,675 1,888,964
Hopkins Cnty. G.O., Detention Fac.
Prj., Ser. 00
5.75% 02/01/20 1,800 2,065,032
Jefferson Cnty. Sch. Dist. Fin. Corp.
Sch. Bldg. Rev., Ser. 99A
5.25% 01/01/14 2,000 2,207,580
Kenton Cnty. Arpt. Brd. Arpt. Rev.,
Delta Airlines Prj., Ser. 92A AMT
7.50% 02/01/20 1,400 1,297,422
Kenton Cnty. Arpt. Rev., Cincinnati
Northern Kentucky Prj., Ser. 97A
AMT
5.95% 03/01/07 1,730 1,920,369
6.30% 03/01/15 1,000 1,123,230
Kentucky Econ. Dev. Fin. Auth. Hlth.
Sys. Rev., Norton Healthcare, Inc.
Prj., Ser. 00A
6.62% 10/01/28 1,750 1,851,920
Kentucky Econ. Dev. Fin. Auth. Hlth.
Sys. Rev., Norton Healthcare, Inc.
Prj., Ser. 00B
5.03%(b) 10/01/28 5,000 1,372,650
Kentucky Hsg. Corp. Hsg. Rev., Ser.
96D
5.80% 07/01/13 3,350 3,542,625
Kentucky Hsg. Corp. Hsg. Rev., Ser.
01F AMT
5.45% 01/01/32 2,990 3,045,195
Kentucky Hsg. Corp. Hsg. Rev., Ser.
03D AMT
5.10% 07/01/33 4,000 4,041,480
Kentucky St. Property & Bldg.
Comm. Rev., Prj. 65, Prerefunded
Ser. 00
5.95% 02/01/10 2,325 2,733,597
Kentucky St. Property & Bldg.
Comm. Rev., Prj. 73, Ser. 01
5.25% 11/01/11 1,750 2,001,492
Kentucky St. Property & Bldg.
Comm. Rev., Prj. 79, Prerefunded
Ser. 03
5.12% 10/01/13 3,000 3,260,550
Kentucky St. Tpke. Auth. Econ. Dev.
Rev., Revitalization Prj., Ser. 95
6.50% 07/01/08 3,000 3,520,800
Kentucky St. Tpke. Auth. Econ. Dev.
Rev., Revitalization Prj., Ser. 01A
5.50% 07/11-07/15 5,905 6,847,814
PAR
MATURITY (000) VALUE
-------------- ---------- -------------
MUNICIPAL BONDS (Continued)
Kentucky (Continued)
Lexington-Fayette Urban Cnty. Govt.
G.O., Ser. 00A
5.75% 02/01/20 $1,500 $ 1,716,540
Lexington-Fayette Urban Cnty. Govt.
Rev., Univ. of Kentucky Alumni
Assoc., Inc. Prj., Prerefunded Ser.
94
6.50%(c) 11/01/04 660 694,175
Lexington-Fayette Urban Cnty. Govt.
Swr. Sys. Rev., Ser. 01A
5.00% 07/20-07/21 3,775 4,004,029
Louisville & Jefferson Cnty. Met. Swr.
& Drain Sys. Rev., Ser. 97A
6.25% 05/15/26 1,015 1,145,773
Louisville & Jefferson Cnty. Met. Swr.
& Drain Sys. Rev., Ser. 99A
5.75% 05/15/33 3,750 4,260,000
Louisville & Jefferson Cnty. Regl.
Arpt. Auth. Arpt. Sys. Rev., Ser.
01A AMT
5.75% 07/01/15 1,755 1,959,598
Louisville & Jefferson Cnty. Regl.
Arpt. Auth. Spec. Fac. Rev., Ser.
99 AMT
5.50% 03/01/19 4,285 4,113,857
Louisville Wtrwks. Brd. Wtr. Sys.
Rev., Louisville Wtr. Co. Prj., Ser.
00
5.25% 11/15/16 2,590 2,829,730
McCracken Cnty. Hosp. Rev., Mercy
Hlth. Sys. Prj., Ser. 94A
6.10% 11/01/04 400 411,608
Univ. of Kentucky Rev., Cons. Edl.
Bldg. Prj., Prerefunded Ser. 94
4.60% 05/01/04 2,540 2,597,607
-----------
74,208,105
-----------
Puerto Rico - 20.7%
Puerto Rico Cmwlth. Hwy. & Trans.
Auth. Rev., Ser. 00C
6.00% 07/01/29 5,000 5,728,850
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00A
17.99%(d) 10/01/16 400 616,488
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00B
18.49%(d) 10/01/17 500 778,850
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00C
18.49%(d) 10/01/18 500 773,810
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00D
18.49%(d) 10/01/19 650 989,651
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00E
18.49%(d) 10/01/20 250 376,275
Puerto Rico Cmwlth. Infra. Fin. Auth.
S.O. RITES, Ser. 00F
17.99%(d) 10/01/24 250 371,545
Puerto Rico Cmwlth. Infra. Fin. Auth.
Spec. RITES PA-569 Rev., Ser. 99
12.61%(d) 07/01/07 1,335 1,714,260
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
29
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
KENTUCKY TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- --------- --------------
MUNICIPAL BONDS (Continued)
Puerto Rico (Continued)
Puerto Rico Cmwlth. Pub. Imp. G.O.,
Prerefunded Ser. 00
5.75% 07/01/10 $6,000 $ 6,999,000
Puerto Rico Pub. Fin. Corp. Cmwlth.
Approp. Rev., Ser. 02E
5.50% 08/01/29 5,000 5,423,000
------------
23,771,729
------------
TOTAL MUNICIPAL BONDS
(Cost $89,267,343) 97,979,834
------------
CUMULATIVE PREFERRED STOCK - 10.8%
Charter Mac Equity Issuer Tr.
6.62%(e) 06/30/49 1,000 1,131,900
7.60%(e) 11/30/50 4,000 4,693,200
MuniMae TE Bonds Subs., LLC
6.88%(e) 06/30/49 4,000 4,350,960
7.75%(e) 06/30/50 2,000 2,224,320
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $10,970,178) 12,400,380
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $100,237,521(a)) 96.0% 110,380,214
OTHER ASSETS IN EXCESS OF
LIABILITIES 4.0% 4,608,901
----- -----------
NET ASSETS (Applicable to
10,609,357 Institutional shares,
12,660 Service shares, 581,218
Investor A shares, 413,821
Investor B shares and 137,309
Investor C shares outstanding) 100.0% $114,989,115
===== ============
VALUE
----------
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($103,786,014/10,609,357) $ 9.78
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($123,947/12,660) $ 9.79
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($5,684,687/581,218) $ 9.78
=======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($9.78/0.960) $ 10.19
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($4,047,963/413,821) $ 9.78
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($1,346,504/137,309) $ 9.81
=======
- -------------------
(a) Cost for Federal income tax purposes is $100,265,238.
The gross unrealized appreciation (depreciation) on
a tax basis is as follows:
Gross unrealized appreciation $10,510,897
Gross unrealized depreciation (395,921)
-----------
$10,114,976
===========
(b) The rate shown is the effective yield on the zero coupon bonds.
(c) Securities, or a portion thereof, pledged as collateral with a value of
$694,175 on 147 short U.S. Treasury Note futures contracts expiring June
2004. The value of such contracts on March 31, 2004 was $16,964,718, with
an unrealized loss of $256,923.
(d) Rates shown are the rates as of March 31, 2004.
(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, 2004,
the fund held 10.8% of its net assets, with a current market value of
$12,400,380 in securities restricted as to resale.
INVESTMENT ABBREVIATIONS
AMT Alternative Minimum Tax
COP Certificates of Participation
DN Demand Notes
G.O. General Obligations
RITES Residual Interest Tax-Exempt Security - Note A
S.O. Special Obligations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
30
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 2004 (UNAUDITED)
PENNSYLVANIA
ULTRASHORT TAX-FREE TAX-FREE
MUNICIPAL INCOME INCOME
PORTFOLIO/1/ PORTFOLIO PORTFOLIO
------------ --------------- ---------------
Investment income:
Interest ....................................... $ 38,587 $ 10,109,870 $ 21,079,991
--------- ------------ ------------
Expenses:
Investment advisory fee ........................ 9,285 1,020,515 1,996,833
Administration fee ............................. 1,754 173,488 324,525
Administration fee - class specific ............ 754 266,192 567,541
Custodian fee .................................. 769 30,205 49,461
Transfer agent fee ............................. - 8,033 17,303
Transfer agent fee - class specific ............ 107 46,988 107,203
Shareholder servicing fees - class specific..... - 25,126 81,345
Shareholder processing fees - class
specific ...................................... - 15,959 50,613
Distribution fees - class specific ............. - 42,491 114,178
Legal and audit ................................ 3,860 18,700 30,916
Printing ....................................... 840 28,360 65,608
Registration fees and expenses ................. 1,400 19,824 8,013
Trustees' fees ................................. 280 4,202 9,976
Other .......................................... 1,680 20,264 36,910
--------- ------------ ------------
Total expenses ............................... 20,729 1,720,347 3,460,425
--------- ------------ ------------
Less investment advisory and
administration
fees waived ................................ (11,039) (442,495) (796,684)
Less administration fees waived -
class specific ............................. (680) (6,348) (9,628)
Less distribution fees waived - class
specific ................................... - (3,951) (17,489)
Less expenses reimbursed by
advisor .................................... (1,824) - -
--------- ------------ ------------
Net expenses ................................. 7,186 1,267,553 2,636,624
--------- ------------ ------------
Net investment income ........................... 31,401 8,842,317 18,443,367
--------- ------------ ------------
Realized and unrealized gain (loss) on
investments:
Net realized gain (loss) from:
Investment transactions ....................... 2,532 (267,462) 876,738
Futures contracts ............................. - (3,089,018) 6,840,017)
Swap contracts ................................ - 203,729 486,864
--------- ------------ ------------
2,532 (3,152,751) (5,476,415)
--------- ------------ ------------
Change in unrealized appreciation
(depreciation) from:
Investments ................................... (32,478) 2,018,838 700,421
Futures contracts ............................. - 1,201,583 2,534,415
Swap contracts ................................ - (258,303) (598,376)
--------- ------------ ------------
(32,478) 2,962,118 2,636,460
--------- ------------ ------------
Net gain (loss) on investments .................. (29,946) (190,633) (2,839,955)
--------- ------------ ------------
Net increase in net assets resulting from
operations ..................................... $ 1,455 $ 8,651,684 $ 15,603,412
========= ============ ============
- ---------
/1/ For the period 3/3/04 (commencement of operations) through 3/31/04.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
BLACKROCK FUNDS
NEW JERSEY OHIO DELAWARE KENTUCKY
TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME INCOME INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------- ----------------- --------------- ---------------
$ 4,448,574 $ 3,337,966 $ 2,330,116 $ 3,079,962
---------------- ------------ ----------- ------------
424,056 299,177 247,156 330,201
72,090 50,860 38,197 51,031
122,641 86,766 65,160 87,089
12,865 10,991 7,836 11,661
7,544 3,076 2,745 2,427
23,605 18,391 16,518 16,225
37,912 27,997 42,621 13,121
27,698 16,922 25,594 7,907
57,904 63,893 98,788 22,277
10,643 9,615 8,186 8,972
12,971 9,659 7,163 9,985
6,262 4,450 4,074 5,359
1,925 1,413 1,038 1,517
9,494 9,379 5,808 6,742
---------------- ------------ ----------- ------------
827,610 612,589 570,884 574,514
---------------- ------------ ----------- ------------
(192,074) (141,781) (83,544) (109,158)
- (2) - (109)
(2,813) (2,875) (9,074) (2,534)
- - - -
---------------- ------------- ----------- ------------
632,723 467,931 478,266 462,713
---------------- ------------- ----------- ------------
3,815,851 2,870,035 1,851,850 2,617,249
---------------- ------------- ----------- ------------
84,007 (37,879) - 334,816
(1,346,986) (1,036,498) (732,334) (1,030,123)
89,838 74,768 40,186 70,615
---------------- ------------- ----------- ------------
(1,173,141) (999,609) (692,148) (624,692)
---------------- ------------- ----------- ------------
956,593 750,180 494,904 679,182
532,680 418,262 241,128 385,287
(117,242) (89,372) (61,784) (88,666)
---------------- ------------- ----------- ------------
1,372,031 1,079,070 674,248 975,803
---------------- ------------- ----------- ------------
198,890 79,461 (17,900) 351,111
---------------- ------------- ----------- ------------
$ 4,014,741 $ 2,949,496 $ 1,833,950 $ 2,968,360
================ ============= =========== ============
33
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
ULTRASHORT
MUNICIPAL TAX-FREE PENNSYLVANIA TAX-FREE
PORTFOLIO INCOME PORTFOLIO INCOME PORTFOLIO
--------------- -------------------------------- ----------------------------------
FOR THE FOR THE FOR THE
PERIOD 3/3/04/1/ SIX MONTHS SIX MONTHS
THROUGH ENDED FOR THE ENDED FOR THE
3/31/04 3/31/04 YEAR ENDED 3/31/04 YEAR ENDED
(UNAUDITED) (UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
--------------- -------------------------------- ---------------- -----------------
Increase (decrease) in net assets:
Operations:
Net investment income ........................ $ 31,401 $ 8,842,317 $ 17,699,186 $ 18,443,367 $ 42,352,748
Net realized gain (loss) on investments,
futures contracts and swap contracts ........ 2,532 (3,152,751) (6,117,605) (5,476,415) 3,389,838
Net unrealized gain (loss) on investments,
futures contracts and swap contracts ........ (32,478) 2,962,118 803,243 2,636,460 (19,456,359)
------------ ------------- ------------- ------------- --------------
Net increase in net assets resulting
from operations .............................. 1,455 8,651,684 12,384,824 15,603,412 26,286,227
------------ ------------- ------------- ------------- --------------
Distributions to shareholders from:
Net investment income:
BlackRock Class .............................. (31,095) (1,235,414) - - -
Institutional Class .......................... (306) (7,672,197) (16,494,033) (17,246,561) (37,568,815)
Service Class ................................ - (63,559) (336,214) (133,139) (246,299)
Investor A Class ............................. - (167,607) (367,077) (761,815) (1,519,728)
Investor B Class ............................. - (119,897) (242,460) (416,228) (917,628)
Investor C Class ............................. - (53,841) (98,286) (37,521) (56,725)
------------ ------------- ------------- ------------- --------------
Total distributions from net investment income (31,401) (9,312,515) (17,538,070) (18,595,264) (40,309,195)
------------ ------------- ------------- ------------- --------------
Capital share transactions ..................... 30,565,514 110,875,714 (19,639,609) (52,081,147) (128,397,728)
------------ ------------- ------------- ------------- --------------
Total increase (decrease) in net assets ...... 30,535,568 110,214,883 (24,792,855) (55,072,999) (142,420,696)
Net assets:
Beginning of period .......................... - 355,949,057 380,741,912 820,959,574 963,380,270
------------ ------------- ------------- ------------- --------------
End of period ................................ $ 30,535,568 $ 466,163,940 $ 355,949,057 $ 765,886,575 $ 820,959,574
============ ============= ============= ============= ==============
End of period undistributed net investment
income (distributions in excess of net
investment income) .......................... $ - $ 178,077 $ 648,275 $ 2,042,845 $ 2,194,742
- ---------
/1/ Commencement of operations.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
34
BLACKROCK FUNDS
NEW JERSEY TAX-FREE OHIO TAX-FREE DELAWARE TAX-FREE KENTUCKY TAX-FREE
INCOME PORTFOLIO INCOME PORTFOLIO INCOME PORTFOLIO INCOME PORTFOLIO
- ----------------------------- ----------------------------- --------------------------- -----------------------------
FOR THE FOR THE FOR THE FOR THE
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED FOR THE ENDED FOR THE ENDED FOR THE ENDED FOR THE
3/31/04 YEAR ENDED 3/31/04 YEAR ENDED 3/31/04 YEAR ENDED 3/31/04 YEAR ENDED
(UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03 (UNAUDITED) 9/30/03
- ------------- ------------- ------------- ------------- ------------ ------------ ------------- -------------
$ 3,815,851 $ 8,078,531 $ 2,870,035 $ 5,990,885 $ 1,851,850 $ 3,864,510 $ 2,617,249 $ 6,414,854
(1,173,141) (580,421) (999,609) (472,842) (692,148) (319,735) (624,692) 349,346
1,372,031 (3,277,544) 1,079,070 (2,089,558) 674,248 (2,020,027) 975,803 (3,263,276)
- ------------- ------------- ------------- ------------- ------------ ------------ ------------- -------------
4,014,741 4,220,566 2,949,496 3,428,485 1,833,950 1,524,748 2,968,360 3,500,924
- ------------- ------------- ------------- ------------- ------------ ------------ ------------- -------------
- - - - - - - -
(3,384,418) (6,603,686) (2,145,173) (4,699,575) (1,470,017) (3,381,109) (2,629,842) (6,322,551)
(399,843) (830,791) (8,651) (17,245) - - (2,552) (4,891)
(134,577) (316,091) (117,941) (711,114) (241,968) (320,564) (110,945) (190,432)
(246,125) (441,412) (169,400) (347,856) (176,077) (230,922) (70,277) (114,879)
(41,473) (62,760) (91,175) (170,413) (308,079) (304,971) (23,227) (42,847)
- ------------- ------------- ------------- ------------- ------------ ------------ ------------- -------------
(4,206,436) (8,254,740) (2,532,340) (5,946,203) (2,196,141) (4,237,566) (2,836,843) (6,675,600)
- ------------- ------------- ------------- ------------- ------------ ------------ ------------- -------------
35,377,352 3,520,473 (2,954,843) (616,897) 5,341,130 6,015,424 (10,024,786) (14,932,118)
- ------------- ------------- ------------- ------------- ------------ ------------ ------------- -------------
35,185,657 (513,701) (2,537,687) (3,134,615) 4,978,939 3,302,606 (9,893,269) (18,106,794)
161,529,546 162,043,247 122,003,369 125,137,984 86,203,360 82,900,754 124,882,384 142,989,178
- ------------- ------------- ------------- ------------- ------------ ------------ ------------- -------------
$ 196,715,203 $ 161,529,546 $ 119,465,682 $ 122,003,369 $ 91,182,299 $ 86,203,360 $ 114,989,115 $ 124,882,384
============= ============= ============= ============= ============ ============ ============= =============
$ (429,452) $ (38,867) $ 185,404 $ (152,291) $ (343,993) $ 298 $ (698,593) $ (478,999)
- ------------------
/1/ Commencement of operations.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS
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 INCOME AND UNREALIZED) INCOME GAINS PERIOD
=========== ============ ================= =============== =============== ===========
------------------------------
UltraShort Municipal Portfolio
------------------------------
BlackRock Class
3/03/041 through 3/31/04 /8/ $ 10.00 $ 0.01 $ (0.01) $ (0.01) $ - $ 9.99
Institutional Class
3/19/041 through 3/31/04 /8/ $ 10.00 $ - $ (0.02) $ - $ - $ 9.98
Service Class
3/19/041 through 3/31/04 /8/ $ 10.00 $ - $ (0.03) $ - $ - $ 9.97
Investor A Class
3/19/041 through 3/31/04 /8/ $ 10.00 $ - $ (0.03) $ - $ - $ 9.97
-------------------------
Tax-Free Income Portfolio
-------------------------
BlackRock Class
12/22/031 through 3/31/04 /8/ $ 11.22 $ 0.13 $ - $ (0.14) $ - $ 11.21
Institutional Class
10/01/03 through 3/31/04 /8/ $ 11.22 $ 0.25 $ - $ (0.26) $ - $ 11.21
9/30/03 11.38 0.54 (0.17) (0.53) - 11.22
9/30/02 11.38 0.57 (0.01) (0.56) - 11.38
9/30/01 10.92 0.57 0.48 (0.59) - 11.38
9/30/00 10.96 0.57 (0.07) (0.54) - 10.92
9/30/99 11.73 0.52 (0.71) (0.52) (0.06) 10.96
Service Class
10/01/03 through 3/31/04 /8/ $ 11.21 $ 0.23 $ - $ (0.24) $ - $ 11.20
9/30/03 11.38 0.49 (0.16) (0.50) - 11.21
9/30/02 11.38 0.54 (0.01) (0.53) - 11.38
9/30/01 10.92 0.54 0.47 (0.55) - 11.38
9/30/00 10.96 0.54 (0.07) (0.51) - 10.92
9/30/99 11.73 0.49 (0.71) (0.49) (0.06) 10.96
Investor A Class
10/01/03 through 3/31/04 /8/ $ 11.22 $ 0.22 $ - $ (0.23) $ - $ 11.21
9/30/03 11.38 0.48 (0.16) (0.48) - 11.22
9/30/02 11.38 0.52 (0.01) (0.51) - 11.38
9/30/01 10.92 0.52 0.48 (0.54) - 11.38
9/30/00 10.96 0.51 (0.06) (0.49) - 10.92
9/30/99 11.73 0.47 (0.71) (0.47) (0.06) 10.96
Investor B Class
10/01/03 through 3/31/04 /8/ $ 11.22 $ 0.18 $ - $ (0.19) $ - $ 11.21
9/30/03 11.38 0.40 (0.16) (0.40) - 11.22
9/30/02 11.38 0.43 (0.01) (0.42) - 11.38
9/30/01 10.92 0.42 0.49 (0.45) - 11.38
9/30/00 10.96 0.44 (0.07) (0.41) - 10.92
9/30/99 11.73 0.38 (0.71) (0.38) (0.06) 10.96
Investor C Class
10/01/03 through 3/31/04 /8/ $ 11.21 $ 0.19 $ - $ (0.19) $ - $ 11.21
9/30/03 11.38 0.41 (0.18) (0.40) - 11.21
9/30/02 11.38 0.43 (0.01) (0.42) - 11.38
9/30/01 10.93 0.41 0.49 (0.45) - 11.38
9/30/00 10.96 0.46 (0.08) (0.41) - 10.93
9/30/99 11.73 0.38 (0.71) (0.38) (0.06) 10.96
--------------------------------------
Pennsylvania Tax-Free Income Portfolio
--------------------------------------
Institutional Class
10/01/03 through 3/31/04 /8/ $ 10.90 $ 0.26 $ (0.05) $ (0.26) $ - $ 10.85
9/30/03 11.06 0.53 (0.19) (0.50) - 10.90
9/30/02 10.89 0.53 0.16 (0.52) - 11.06
9/30/01 10.56 0.55 0.34 (0.56) - 10.89
9/30/00 10.52 0.54 0.02 (0.52) - 10.56
9/30/99 11.15 0.51 (0.59) (0.52) (0.03) 10.52
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36
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
=============== =========== ============== ==================== =================== ================== ==========
0.02% $ 26,819 0.35%/2/ 0.91%/2/ 1.53%/2/ 0.96%/2/ 7%
(0.18)% $ 3,717 0.45%/2/ 1.01%/2/ 1.43%/2/ 0.86%/2/ 7%
(0.23)% $ - 0.75%/2/ 1.31%/2/ 1.13%/2/ 0.56%/2/ 7%
(0.27)%/3/ $ - 0.80%/2/ 1.36%/2/ 1.08%/2/ 0.51%/2/ 7%
1.18% $ 102,053 0.45%/2/ 0.68%/2/ 4.14%/2/ 3.91%/2/ 32%
2.24% $ 341,919 0.60%/2/ 0.82%/2/ 4.40%/2/ 4.18%/2/ 32%
3.40 334,685 0.60 0.83 4.80 4.57 76
5.08 360,392 0.60 0.81 5.02 4.81 47
9.81 351,551 0.60 0.81 5.06 4.85 38
4.80 318,300 0.60 0.82 5.32 5.10 43
(1.68) 302,319 0.60 0.82 4.57 4.35 104
2.09% $ 2,852 0.90%/2/ 1.12%/2/ 4.12%/2/ 3.90%/2/ 32%
2.99 2,971 0.90 1.13 4.46 4.23 76
4.77 3,103 0.90 1.11 4.74 4.53 47
9.49 3,651 0.90 1.11 4.77 4.55 38
4.49 5,347 0.90 1.12 5.02 4.80 43
(1.97) 5,754 0.90 1.12 4.27 4.05 104
2.00%/3/ $ 8,346 1.04%/2/ 1.35%/2/ 3.97%/2/ 3.66%/2/ 32%
2.91/3/ 8,573 1.07 1.30 4.31 4.08 76
5.00/3/ 8,179 1.00 1.00 5.00 4.00 47
9.30/3/ 7,309 1.07 1.28 4.61 4.39 38
4.31/3/ 8,751 1.07 1.29 4.85 4.63 43
(2.14)/3/ 6,591 1.07 1.29 4.10 3.88 104
1.62%/4/ $ 6,941 1.79%/2/ 2.00%/2/ 3.23%/2/ 3.01%/2/ 32%
2.14/4/ 7,161 1.82 2.05 3.57 3.34 76
3.81/4/ 6,211 1.82 2.03 3.80 3.59 47
8.49/4/ 4,884 1.81 2.02 3.82 3.60 38
3.54/4/ 2,723 1.82 2.04 4.09 3.87 43
(2.87)/4/ 3,434 1.82 2.04 3.35 3.13 104
1.71%/4/ $ 4,053 1.78%/2/ 1.99%/2/ 3.15%/2/ 2.93%/2/ 32%
2.05/4/ 2,559 1.82 2.05 3.59 3.36 76
3.81/4/ 2,857 1.82 2.03 3.82 3.61 47
8.39/4/ 2,604 1.81 2.02 3.80 3.59 38
3.63/4/ 1,129 1.82 2.04 4.13 3.91 43
(2.87)/4/ 2,868 1.82 2.04 3.35 3.13 104
1.91% $ 700,147 0.60%/2/ 0.80%/2/ 4.68%/2/ 4.47%/2/ 0%
3.16 752,199 0.60 0.80 4.80 4.60 3
6.53 890,070 0.60 0.79 4.84 4.65 22
8.65 903,225 0.60 0.79 5.10 4.91 13
5.50 884,678 0.60 0.79 5.19 5.00 31
(0.82) 994,381 0.60 0.79 4.67 4.48 28
37
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 INCOME AND UNREALIZED) INCOME GAINS PERIOD
=========== ============ ================= =============== =============== ===========
Service Class
10/01/03 through 3/31/04 /8/ $ 10.89 $ 0.24 $ (0.05) $ (0.24) $ - $ 10.84
9/30/03 11.05 0.49 (0.18) (0.47) - 10.89
9/30/02 10.88 0.50 0.16 (0.49) - 11.05
9/30/01 10.55 0.52 0.34 (0.53) - 10.88
9/30/00 10.52 0.51 0.01 (0.49) - 10.55
9/30/99 11.15 0.47 (0.59) (0.48) (0.03) 10.52
Investor A Class
10/01/03 through 3/31/04 /8/ $ 10.89 $ 0.23 $ (0.04) $ (0.23) $ - $ 10.85
9/30/03 11.06 0.48 (0.20) (0.45) - 10.89
9/30/02 10.89 0.48 0.16 (0.47) - 11.06
9/30/01 10.56 0.49 0.35 (0.51) - 10.89
9/30/00 10.52 0.49 0.02 (0.47) - 10.56
9/30/99 11.15 0.46 (0.59) (0.47) (0.03) 10.52
Investor B Class
10/01/03 through 3/31/04 /8/ $ 10.82 $ 0.19 $ (0.05) $ (0.19) $ - $ 10.77
9/30/03 10.98 0.40 (0.19) (0.37) - 10.82
9/30/02 10.81 0.40 0.16 (0.39) - 10.98
9/30/01 10.48 0.42 0.34 (0.43) - 10.81
9/30/00 10.44 0.42 0.02 (0.40) - 10.48
9/30/99 11.15 0.38 (0.62) (0.44) (0.03) 10.44
Investor C Class
10/01/03 through 3/31/04 /8/ $ 10.85 $ 0.18 $ (0.03) $ (0.19) $ - $ 10.81
9/30/03 11.01 0.39 (0.18) (0.37) - 10.85
9/30/02 10.84 0.40 0.16 (0.39) - 11.01
9/30/01 10.51 0.41 0.35 (0.43) - 10.84
9/30/00 10.48 0.42 0.01 (0.40) - 10.51
9/30/99 11.15 0.39 (0.59) (0.44) (0.03) 10.48
------------------------------------
New Jersey Tax-Free Income Portfolio
------------------------------------
Institutional Class
10/01/03 through 3/31/04 /8/ $ 11.80 $ 0.28 $ 0.03 $ (0.30) $ - $ 11.81
9/30/03 12.10 0.62 (0.29) (0.63) - 11.80
9/30/02 11.83 0.60 0.29 (0.62) - 12.10
9/30/01 11.31 0.60 0.52 (0.60) - 11.83
9/30/00 11.30 0.58 (0.02) (0.55) - 11.31
9/30/99 12.07 0.54 (0.70) (0.55) (0.06) 11.30
Service Class
10/01/03 through 3/31/04 /8/ $ 11.80 $ 0.26 $ 0.04 $ (0.29) $ - $ 11.81
9/30/03 12.10 0.58 (0.29) (0.59) - 11.80
9/30/02 11.83 0.57 0.29 (0.59) - 12.10
9/30/01 11.31 0.57 0.51 (0.56) - 11.83
9/30/00 11.30 0.56 (0.03) (0.52) - 11.31
9/30/99 12.07 0.51 (0.70) (0.52) (0.06) 11.30
Investor A Class
10/01/03 through 3/31/04 /8/ $ 11.80 $ 0.26 $ 0.02 $ (0.28) $ - $ 11.80
9/30/03 12.10 0.56 (0.29) (0.57) - 11.80
9/30/02 11.83 0.54 0.30 (0.57) - 12.10
9/30/01 11.31 0.53 0.53 (0.54) - 11.83
9/30/00 11.30 0.53 (0.02) (0.50) - 11.31
9/30/99 12.07 0.48 (0.69) (0.50) (0.06) 11.30
Investor B Class
10/01/03 through 3/31/04 /8/ $ 11.80 $ 0.20 $ 0.04 $ (0.23) $ - $ 11.81
9/30/03 12.10 0.47 (0.29) (0.48) - 11.80
9/30/02 11.83 0.45 0.30 (0.48) - 12.10
9/30/01 11.31 0.43 0.54 (0.45) - 11.83
9/30/00 11.30 0.45 (0.02) (0.42) - 11.31
9/30/99 12.07 0.40 (0.70) (0.41) (0.06) 11.30
Investor C Class
10/01/03 through 3/31/04 /8/ $ 11.82 $ 0.21 $ 0.03 $ (0.23) $ - $ 11.83
9/30/03 12.13 0.46 (0.29) (0.48) - 11.82
9/30/02 11.85 0.44 0.32 (0.48) - 12.13
2/06/016 through 9/30/01 11.70 0.29 0.15 (0.29) - 11.85
10/1/99 through 3/3/00 11.30 0.18 (0.26) (0.18) - 11.04
12/9/981 through 9/30/99 11.98 0.32 (0.67) (0.33) - 11.30
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38
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
============= ============ ============== ==================== =================== ================== ==========
1.76% $ 5,781 0.90%/2/ 1.11%/2/ 4.38%/2/ 4.18%/2/ 0%
2.86 6,118 0.90 1.11 4.51 4.30 3
6.22 6,005 0.90 1.09 4.56 4.37 22
8.33 6,911 0.90 1.09 4.81 4.62 13
5.09 12,646 0.90 1.09 4.90 4.71 31
(1.11) 14,132 0.90 1.09 4.37 4.18 28
1.77%/3/ $ 35,336 1.04%/2/ 1.34%/2/ 4.25%/2/ 3.95%/2/ 0%
2.59/3/ 35,874 1.08 1.28 4.34 4.13 3
6.04/3/ 37,344 1.08 1.27 4.38 4.19 22
8.14/3/ 39,306 1.07 1.26 4.62 4.43 13
5.03/3/ 30,770 1.07 1.26 4.74 4.55 31
(1.25)/3/ 36,634 1.04 1.23 4.23 4.04 28
1.31%/4/ $ 22,211 1.79%/2/ 2.00%/2/ 3.23%/2/ 3.01%/2/ 0%
1.93/4/ 24,795 1.82 2.03 3.63 3.42 3
5.28/4/ 28,346 1.82 2.02 3.65 3.46 22
7.40/4/ 26,062 1.82 2.01 3.90 3.72 13
4.33/4/ 21,584 1.82 2.01 4.01 3.82 31
(2.21)/4/ 23,602 1.82 2.00 3.45 3.26 28
1.40%/4/ $ 2,412 1.78%/2/ 1.99%/2/ 3.15%/2/ 2.93%/2/ 0%
1.92/4/ 1,974 1.82 2.03 3.61 3.40 3
5.27/4/ 1,615 1.81 2.00 3.62 3.43 22
7.38/4/ 875 1.81 2.00 3.84 3.66 13
4.32/4/ 388 1.82 2.01 4.01 3.82 31
(1.93)/4/ 907 1.82 1.97 3.45 3.26 28
2.69% $ 158,721 0.60%/2/ 0.83%/2/ 4.64%/2/ 4.41%/2/ 9%
2.80 124,713 0.60 0.83 5.17 4.94 22
7.82 128,553 0.60 0.82 5.14 4.92 14
10.07 129,635 0.60 0.82 5.12 4.90 28
5.15 130,463 0.60 0.82 5.24 5.02 77
(1.35) 134,046 0.60 0.81 4.59 4.37 43
2.53% $ 16,417 0.90%/2/ 1.13%/2/ 4.38%/2/ 4.15%/2/ 9%
2.50 16,534 0.90 1.13 4.87 4.64 22
7.49 17,506 0.90 1.12 4.84 4.62 14
9.75 16,530 0.90 1.12 4.82 4.60 28
4.84 18,673 0.90 1.12 4.92 4.70 77
(1.65) 24,626 0.90 1.11 4.28 4.07 43
2.36%/3/ $ 6,245 1.04%/2/ 1.36%/2/ 4.25%/2/ 3.93%/2/ 9%
2.32/3/ 5,995 1.08 1.30 4.70 4.48 22
7.31/3/ 5,812 1.07 1.29 4.61 4.39 14
9.56/3/ 3,207 1.07 1.29 4.64 4.42 28
4.67/3/ 1,723 1.07 1.29 4.81 4.59 77
(1.82)/3/ 1,328 1.07 1.28 4.11 3.90 43
2.07%/4/ $ 12,501 1.79%/2/ 2.01%/2/ 3.49%/2/ 3.27%/2/ 9%
1.55/4/ 12,411 1.82 2.04 3.93 3.71 22
6.52/4/ 9,066 1.81 2.03 3.87 3.66 14
8.75/4/ 5,707 1.79 2.01 3.85 3.64 28
3.89/4/ 1,614 1.82 2.04 4.02 3.80 77
(2.55)/4/ 1,440 1.82 2.03 3.36 3.15 43
2.07%/4/ $ 2,831 1.78%/2/ 2.00%/2/ 3.42%/2/ 3.19%/2/ 9%
1.47/4/ 1,877 1.82 2.04 3.91 3.69 22
6.59/4/ 1,106 1.80 2.01 3.70 3.49 14
3.80/4/ 157 1.78/2/ 2.00/2/ 3.82/2/ 3.62/2/ 28
(0.73)/4/ -5 1.82/2/ 2.04/2/ 3.90/2/ 3.68/2/ 77
(3.02)/4/ 19 1.82/2/ 2.03/2/ 3.36/2/ 3.15/2/ 43
39
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 INCOME AND UNREALIZED) INCOME GAINS PERIOD
=========== ============ ================= =============== =============== ===========
------------------------------
Ohio Tax-Free Income Portfolio
------------------------------
Institutional Class
10/01/03 through 3/31/04 /8/ $ 10.87 $ 0.27 $ 0.01 $ (0.24) $ - $ 10.91
9/30/03 11.09 0.52 (0.22) (0.52) - 10.87
9/30/02 10.80 0.52 0.35 (0.58) - 11.09
9/30/01 10.22 0.57 0.57 (0.56) - 10.80
9/30/00 10.19 0.54 - (0.51) - 10.22
9/30/99 10.88 0.47 (0.65) (0.47) (0.04) 10.19
Service Class
10/01/03 through 3/31/04 /8/ $ 10.87 $ 0.23 $ 0.03 $ (0.22) $ - $ 10.91
9/30/03 11.09 0.52 (0.26) (0.48) - 10.87
9/30/02 10.80 0.47 0.37 (0.55) - 11.09
9/30/01 10.22 0.54 0.57 (0.53) - 10.80
9/30/00 10.19 0.51 - (0.48) - 10.22
9/30/99 10.88 0.47 (0.65) (0.47) (0.04) 10.19
Investor A Class
10/01/03 through 3/31/04 /8/ $ 10.87 $ 0.25 $ 0.01 $ (0.22) $ - $ 10.91
9/30/03 11.09 0.46 (0.21) (0.47) - 10.87
9/30/02 10.80 0.46 0.36 (0.53) - 11.09
9/30/01 10.22 0.52 0.57 (0.51) - 10.80
9/30/00 10.19 0.49 - (0.46) - 10.22
9/30/99 10.88 0.45 (0.65) (0.45) (0.04) 10.19
Investor B Class
10/01/03 through 3/31/04 /8/ $ 10.87 $ 0.20 $ 0.01 $ (0.17) $ - $ 10.91
9/30/03 11.09 0.39 (0.23) (0.38) - 10.87
9/30/02 10.80 0.38 0.36 (0.45) - 11.09
9/30/01 10.22 0.42 0.59 (0.43) - 10.80
9/30/00 10.19 0.42 - (0.39) - 10.22
9/30/99 10.88 0.37 (0.65) (0.37) (0.04) 10.19
Investor C Class
10/01/03 through 3/31/04 /8/ $ 10.87 $ 0.20 $ 0.01 $ (0.17) $ - $ 10.91
9/30/03 11.09 0.40 (0.24) (0.38) - 10.87
9/30/02 10.80 0.38 0.36 (0.45) - 11.09
9/30/01 10.22 0.41 0.60 (0.43) - 10.80
9/30/00 10.19 0.42 - (0.39) - 10.22
9/30/99 10.88 0.37 (0.65) (0.37) (0.04) 10.19
----------------------------------
Delaware Tax-Free Income Portfolio
----------------------------------
Institutional Class
10/01/03 through 3/31/04 /8/ $ 10.23 $ 0.23 $ - $ (0.27) $ - $ 10.19
9/30/03 10.54 0.52 (0.27) (0.56) - 10.23
9/30/02 10.20 0.55 0.31 (0.52) - 10.54
9/30/01 9.68 0.50 0.46 (0.44) - 10.20
9/30/00 9.62 0.47 0.04 (0.45) - 9.68
9/30/99 10.33 0.44 (0.54) (0.47) (0.14) 9.62
Service Class
10/01/01 through 5/2/02 $ 10.20 $ 0.29 $ (0.09) $ (0.28) $ - $ 10.12
9/30/01 9.68 0.48 0.45 (0.41) - 10.20
9/30/00 9.62 0.44 0.04 (0.42) - 9.68
9/30/99 10.33 0.44 (0.57) (0.44) (0.14) 9.62
Investor A Class
10/01/03 through 3/31/04 /8/ $ 10.24 $ 0.22 $ (0.01) $ (0.25) $ - $ 10.20
9/30/03 10.54 0.45 (0.24) (0.51) - 10.24
9/30/02 10.20 0.48 0.33 (0.47) - 10.54
9/30/01 9.68 0.45 0.47 (0.40) - 10.20
9/30/00 9.62 0.43 0.04 (0.41) - 9.68
9/30/99 10.33 0.39 (0.54) (0.42) (0.14) 9.62
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40
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
=============== ========== ============== ==================== =================== ================== ==========
2.61% $ 97,019 0.60%/2/ 0.83%/2/ 4.98%/2/ 4.74%/2/ 0%
2.79 97,589 0.60 0.83 4.78 4.55 18
8.40 96,974 0.60 0.81 4.89 4.67 28
11.41 92,047 0.60 0.84 5.42 5.18 19
5.52 89,239 0.60 0.85 5.41 5.16 23
(1.38) 92,455 0.60 0.81 4.75 4.54 23
2.45% $ 519 0.90%/2/ 1.14%/2/ 4.63%/2/ 4.39%/2/ 0%
2.48 727 0.90 1.12 4.58 4.36 18
8.08 205 0.90 1.12 4.54 4.32 28
11.08 40 0.89 1.13 5.13 4.89 19
5.20 38 0.90 1.15 5.09 4.84 23
(1.68) 254 0.90 1.11 4.45 4.24 23
2.37%/3/ $ 5,388 1.05%/2/ 1.38%/2/ 4.63%/2/ 4.30%/2/ 0%
2.31/3/ 7,494 1.08 1.31 4.32 4.09 18
7.90/3/ 15,587 1.06 1.28 4.32 4.11 28
10.89/3/ 3,674 1.07 1.31 4.97 4.73 19
5.03/3/ 3,243 1.07 1.32 4.94 4.69 23
(1.85)/3/ 3,036 1.07 1.28 4.28 4.07 23
1.99%/4/ $ 10,692 1.78%/2/ 2.02%/2/ 3.79%/2/ 3.55%/2/ 0%
1.54/4/ 10,453 1.82 2.05 3.55 3.32 18
7.10/4/ 8,740 1.81 2.03 3.60 3.39 28
10.08/4/ 4,277 1.80 2.04 4.20 3.97 19
4.25/4/ 1,668 1.82 2.07 4.19 3.94 23
(2.58)/4/ 1,426 1.82 2.03 3.53 3.32 23
1.99%/4/ $ 5,848 1.78%/2/ 2.03%/2/ 3.79%/2/ 3.56%/2/ 0%
1.54/4/ 5,740 1.82 2.05 3.55 3.32 18
7.09/4/ 3,632 1.80 2.01 3.55 3.34 28
10.08/4/ 1,496 1.80 2.04 4.05 3.82 19
4.25/4/ 412 1.82 2.07 4.19 3.94 23
(2.58)/4/ 192 1.82 2.03 3.53 3.32 23
2.27% $ 55,316 0.70%/2/ 0.89%/2/ 4.49%/2/ 4.30%/2/ 2%
2.53 54,512 0.70 0.90 5.06 4.86 34
8.75 71,516 0.70 0.89 5.34 5.16 17
10.16 79,535 0.70 0.90 4.99 4.79 14
5.50 94,865 0.70 0.91 4.90 4.69 27
(1.10) 104,683 0.70 0.86 4.38 4.22 31
1.95% $ -/7/ 1.00%/2/ 1.17%/2/ 5.26%/2/ 5.08%/2/ 17%
9.83 - 0.87 1.02 4.83 4.68 14
5.19 - 1.00 1.21 4.60 4.39 27
(1.40) - 1.00 1.16 4.08 3.92 31
2.03%/3/ $ 11,531 1.13%/2/ 1.49%/2/ 4.03%/2/ 3.67%/2/ 2%
2.15/3/ 8,634 1.17 1.36 4.48 4.30 34
8.25/3/ 5,106 1.18 1.36 4.85 4.66 17
9.65/3/ 4,304 1.17 1.37 4.53 4.34 14
5.01/3/ 3,741 1.17 1.38 4.45 4.24 27
(1.57)/3/ 4,468 1.17 1.33 3.91 3.75 31
41
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONCLUDED)
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 INCOME AND UNREALIZED) INCOME GAINS PERIOD
=========== ============ ================= =============== =============== ===========
Investor B Class
10/01/03 through 3/31/04 /8/ $ 10.24 $ 0.17 $ - $ (0.21) $ - $ 10.20
9/30/03 10.54 0.37 (0.23) (0.44) - 10.24
9/30/02 10.20 0.41 0.33 (0.40) - 10.54
9/30/01 9.68 0.37 0.47 (0.32) - 10.20
9/30/00 9.62 0.35 0.05 (0.34) - 9.68
9/30/99 10.33 0.32 (0.54) (0.35) (0.14) 9.62
Investor C Class
10/01/03 through 3/31/04 /8/ $ 10.24 $ 0.17 $ (0.01) $ (0.21) $ - $ 10.19
9/30/03 10.54 0.37 (0.23) (0.44) - 10.24
9/30/02 10.20 0.38 0.36 (0.40) - 10.54
9/30/01 9.68 0.36 0.48 (0.32) - 10.20
9/30/00 9.62 0.35 0.05 (0.34) - 9.68
9/30/99 10.33 0.32 (0.54) (0.35) (0.14) 9.62
----------------------------------
Kentucky Tax-Free Income Portfolio
----------------------------------
Institutional Class
10/01/03 through 3/31/04 /8/ $ 9.77 $ 0.21 $ 0.03 $ (0.23) $ - $ 9.78
9/30/03 9.99 0.48 (0.20) (0.50) - 9.77
9/30/02 9.94 0.49 0.07 (0.51) - 9.99
9/30/01 9.60 0.50 0.34 (0.50) - 9.94
9/30/00 9.63 0.48 (0.05) (0.46) - 9.60
9/30/99 10.31 0.45 (0.57) (0.46) (0.10) 9.63
Service Class
10/01/03 through 3/31/04 /8/ $ 9.78 $ 0.21 $ 0.02 $ (0.22) $ - $ 9.79
9/30/03 9.99 0.45 (0.19) (0.47) - 9.78
9/30/02 9.95 0.46 0.06 (0.48) - 9.99
9/30/01 9.60 0.47 0.35 (0.47) - 9.95
9/30/00 9.63 0.44 (0.04) (0.43) - 9.60
9/30/99 10.31 0.44 (0.59) (0.43) (0.10) 9.63
Investor A Class
10/01/03 through 3/31/04 /8/ $ 9.77 $ 0.20 $ 0.02 $ (0.21) $ - $ 9.78
9/30/03 9.99 0.44 (0.20) (0.46) - 9.77
9/30/02 9.94 0.44 0.07 (0.46) - 9.99
9/30/01 9.60 0.45 0.34 (0.45) - 9.94
9/30/00 9.63 0.44 (0.05) (0.42) - 9.60
9/30/99 10.31 0.40 (0.57) (0.41) (0.10) 9.63
Investor B Class
10/01/03 through 3/31/04 /8/ $ 9.77 $ 0.16 $ 0.02 $ (0.17) $ - $ 9.78
9/30/03 9.99 0.36 (0.20) (0.38) - 9.77
9/30/02 9.94 0.36 0.08 (0.39) - 9.99
9/30/01 9.60 0.37 0.35 (0.38) - 9.94
9/30/00 9.63 0.37 (0.05) (0.35) - 9.60
9/30/99 10.31 0.34 (0.58) (0.34) (0.10) 9.63
Investor C Class
10/01/03 through 3/31/04 /8/ $ 9.79 $ 0.16 $ 0.03 $ (0.17) $ - $ 9.81
9/30/03 10.02 0.36 (0.21) (0.38) - 9.79
9/30/02 9.97 0.36 0.08 (0.39) - 10.02
9/30/01 9.62 0.37 0.36 (0.38) - 9.97
9/30/00 9.63 0.41 (0.07) (0.35) - 9.62
9/30/99 10.31 0.33 (0.57) (0.34) (0.10) 9.63
/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/ Reissuance of shares.
/7/ There were no Service shares outstanding as of September 30, 2002.
/8/ Unaudited.
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
============== =========== ============== ==================== =================== ================== ==========
1.65%/4/ $ 8,665 1.88%/2/ 2.07%/2/ 3.30%/2/ 3.11%/2/ 2%
1.38/4/ 8,528 1.92 2.09 3.70 3.52 34
7.45/4/ 3,130 1.92 2.11 4.08 3.90 17
8.84/4/ 2,505 1.91 2.11 3.79 3.60 14
4.23/4/ 1,769 1.92 2.13 3.67 3.46 27
(2.31)/4/ 3,149 1.92 2.08 3.16 3.00 31
1.55%/4/ $ 15,670 1.88%/2/ 2.07%/2/ 3.30%/2/ 3.11%/2/ 2%
1.38/4/ 14,529 1.91 2.08 3.56 3.40 34
7.45/4/ 3,149 1.90 2.09 3.91 3.72 17
8.84/4/ 638 1.92 2.12 3.78 3.59 14
4.23/4/ 371 1.92 2.13 3.67 3.46 27
(2.31)/4/ 889 1.92 2.08 3.16 3.00 31
2.53% $ 103,786 0.70%/2/ 0.88%/2/ 4.43%/2/ 4.25%/2/ 3%
2.95 115,104 0.70 0.88 4.94 4.76 37
5.82 135,938 0.70 0.87 4.94 4.76 12
8.91 146,620 0.70 0.86 5.09 4.93 32
4.66 150,646 0.70 0.88 5.06 4.88 55
(1.23) 167,799 0.70 0.88 4.56 4.38 25
2.37% $ 124 0.99%/2/ 1.18%/2/ 4.12%/2/ 3.94%/2/ 3%
2.74 103 1.00 1.18 4.57 4.39 37
5.40 92 1.00 1.17 4.63 4.46 12
8.69 91 1.00 1.16 4.79 4.63 32
4.35 88 1.00 1.18 4.76 4.58 55
(1.52) - 1.00 1.18 4.26 4.08 25
2.29%/3/ $ 5,685 1.13%/2/ 1.41%/2/ 3.99%/2/ 3.71%/2/ 3%
2.46/3/ 4,701 1.17 1.35 4.42 4.24 37
5.33/3/ 3,612 1.18 1.35 4.46 4.29 12
8.40/3/ 3,214 1.17 1.33 4.64 4.47 32
4.17/3/ 3,686 1.17 1.35 4.63 4.45 55
(1.69)/3/ 1,856 1.17 1.35 4.09 3.91 25
1.91%/4/ $ 4,048 1.88%/2/ 2.07%/2/ 3.24%/2/ 3.06%/2/ 3%
1.70/4/ 3,795 1.92 2.09 3.64 3.46 37
4.55/4/ 2,311 1.91 2.08 3.65 3.48 12
7.60/4/ 978 1.89 2.05 3.79 3.62 32
3.40/4/ 279 1.92 2.10 3.86 3.68 55
(2.43)/4/ 203 1.92 2.10 3.34 3.16 25
2.01%/4/ $ 1,346 1.88%/2/ 2.06%/2/ 3.22%/2/ 3.04%/2/ 3%
1.59/4/ 1,179 1.92 2.10 3.69 3.50 37
4.53/4/ 1,036 1.90 2.08 3.55 3.38 12
7.69/4/ 236 1.91 2.07 3.75 3.57 32
3.61/4/ 69 1.92 2.10 3.78 3.60 55
(2.43)/4/ 571 1.92 2.10 3.34 3.16 25
43
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS
BlackRock Funds\SM\ (the "Fund") was organized on December 22, 1988, as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. The Fund
currently has 44 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. Shares of all classes of a
Portfolio represent equal pro rata interests in such Portfolio, except that
each class bears different expenses which reflect the difference in the range
of services provided to them. The following table provides a list of the
Portfolios included in this report along with a summary of their respective
class-specific fee arrangements as provided under the Fund's Amended and
Restated Distribution and Service Plan (the "Plan"). Fees are expressed as a
percentage of average daily net asset values of the respective classes.
- ------------------------------------------------------------------------------------------------------
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 0.30% 0.30%
Tax-Free Income None None None None 0.30% 0.30%
Pennsylvania Tax-Free Income N/A N/A None None 0.30% 0.30%
New Jersey Tax-Free Income N/A N/A None None 0.30% 0.30%
Ohio Tax-Free Income N/A N/A None None 0.30% 0.30%
Delaware Tax-Free Income N/A N/A None None 0.30% N/A
Kentucky Tax-Free Income N/A N/A None None 0.30% 0.30%
- ------------------------------------------------------------------------------------------------------
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 0.50% 0.40% N/A N/A N/A N/A
Tax-Free Income 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Pennsylvania Tax-Free Income 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
New Jersey Tax-Free Income 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Ohio Tax-Free Income 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Delaware Tax-Free Income 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
Kentucky Tax-Free Income 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------
(1) - the maximum annual contractual fees are comprised of a .15% service fee
and .15% shareholder processing fee.
(2) - the maximum annual contractual fees are comprised of a .10% distribution
fee, .25% service fee and .15% shareholder processing fee.
(3) - the maximum annual contractual fees are comprised of a .75% distribution
fee, .25% service fee and .15% shareholder processing fee.
(4) - the actual fees are as of March 31, 2004.
In addition, for the period 10/01/03 through 12/31/03 BlackRock shares bore
a Transfer Agent fee at an annual rate not to exceed .01%, Institutional and
Service shares bore a Transfer Agent fee at an annual rate not to exceed .03%
and Investor A, Investor B and Investor C shares bore a Transfer Agent fee at an
annual rate not to exceed .10% of the average daily net assets of such
respective classes. Effective January 1, 2004, the BlackRock share class bears a
Transfer Agent fee at an annual rate not to exceed .005% of its average daily
net assets, and each of the Institutional, Service, Investor A, Investor B and
Investor C share classes bear a Tranfer Agent fee at an annual rate not to
exceed .018% of the average daily net assets of such respective classes.
(A) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires the use of management estimates. Actual
results could differ from these estimates.
Security Valuation - Valuation of securities held by each Bond Portfolio is
as follows: fixed income securities are valued by using market quotations,
prices provided by market makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics
under the supervision of the Board of Trustees; a portion of the fixed income
securities are valued utilizing one or more pricing services approved by the
Board of Trustees; 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 is used with respect
to debt obligations with sixty days or less remaining to maturity; and
securities for which market quotations are not readily available are valued at
fair market value as determined in good faith by or under the direction of the
Fund's Board of Trustees. As of March 31, 2004, there were no securities valued
in accordance with such fair value procedures.
44
BLACKROCK FUNDS
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. 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 change in the fluctuation of interest and/or exchange rates.
At March 31, 2004, the following Portfolios had swap agreements
outstanding:
- -----------------------------------------------------------------------------------------------------------------------
Interest Interest Notional Amount Unrealized
Portfolio Counter-party Termination Date Receivable Rate Payable Rate (U.S. Dollars) Depreciation
- -----------------------------------------------------------------------------------------------------------------------
Tax-Free Income J.P. Morgan 05/17/09 N/A/1/ N/A/2/ $ 79,985,000 $(207,152)
Chase Bank
Pennsylvania J.P. Morgan 05/17/09 N/A/1/ N/A/2/ 183,845,000 (476,138)
Tax-Free Income Chase Bank
New Jersey J.P. Morgan 05/17/09 N/A/1/ N/A/2/ 36,560,000 (94,686)
Tax-Free Income Chase Bank
Ohio Tax-Free J.P. Morgan 05/17/09 N/A/1/ N/A/2/ 27,260,000 (70,600)
Income Chase Bank
Delaware J.P. Morgan 05/17/09 N/A/1/ N/A/2/ 19,960,000 (51,694)
Tax-Free Income Chase Bank
Kentucky J.P. Morgan 05/17/09 N/A/1/ N/A/2/ 27,390,000 (70,937)
Tax-Free Income Chase Bank
- -----------------------------------------------------------------------------------------------------------------------
/1/ Rate to be determined based on the 3 month LIBOR on May 17, 2004.
/2/ Rate to be determined based on the 1 week BMA Municipal Swap Index on May
17, 2004.
Security 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 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 fair
value caused by changes in prevailing market interest rates. 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 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.
45
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 Fund, evidencing ownership interests in
the trust. The remarketing agent for the trust sets a floating or variable rate
on typically a weekly basis. 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.
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 options, may have no control over
whether the underlying securities may be sold (call) or purchased (put) and as
a result bear the market risk of unfavorable change in the price of the
security underlying the written options. There were no options held by the
Portfolios at March 31, 2004.
Transfers In-Kind - For the period ended March 31, 2004, certain
shareholders of the UltraShort Municipal Portfolio and the Tax-Free Income
Portfolio transferred cash and securities with a value of $26,907,505 and
$93,607,559 respectively, in exchange for fund shares. The securities
contributed were subject to a taxable event prior to the in-kind transfers to
the Portfolios and had the same market value and cost basis as of the date of
transfer. Accordingly, for purposes of generally accepted accounting
principles, the book cost of any securities transferred in-kind to the
portfolios were equal to the market value of such securities on their date of
contribution to the Portfolios resulting in no difference between book cost and
tax cost.
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,
such as 12b-1 service fees, are borne by that class. 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. For the
period ended March 31, 2004, the following shows the various types of
class-specific expenses borne directly by each class of each fund and any
associated waivers of those expenses.
SHARE CLASSES
ADMINISTRATION FEES ---------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- --------------- --------- ------------ ------------ -----------
UltraShort Municipal ................. $ 712 $ 42 $ - $ - $ - $ -
Tax-Free Income ...................... 9,428 241,338 2,133 5,859 5,102 2,332
Pennsylvania Tax-Free Income ......... - 518,615 4,364 25,947 17,066 1,549
New Jersey Tax-Free Income ........... - 95,867 11,965 4,171 9,083 1,555
Ohio Tax-Free Income ................. - 70,408 299 4,277 7,658 4,124
Delaware Tax-Free Income ............. - 40,440 - 7,383 6,297 11,040
Kentucky Tax-Free Income ............. - 79,446 83 3,754 2,857 949
SHARE CLASSES
ADMINISTRATION FEES WAIVED -----------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- --------------- ----------- ------------ ------------ -----------
UltraShort Municipal ................. $ (665) $ (15) $ - $ - $ - $ -
Tax-Free Income ...................... (6,320) - (28) - - -
Pennsylvania Tax-Free Income ......... - (7,634) (172) (1,417) (373) (32)
Ohio Tax-Free Income ................. - (1) (1) - - -
Kentucky Tax-Free Income ............. - (109) - - - -
46
BLACKROCK FUNDS
SHARE CLASSES
TRANSFER AGENT FEES ---------------------------------------------------------------------------
BLACKROCK INSTITUTIONAL SERVICE INVESTOR A INVESTOR B INVESTOR C
----------- --------------- --------- ------------ ------------ -----------
UltraShort Municipal ................. $ 102 $ 5 $ - $ - $ - $ -
Tax-Free Income ...................... 1,463 39,898 353 2,368 2,083 823
Pennsylvania Tax-Free Income ......... - 88,132 721 10,636 7,090 624
New Jersey Tax-Free Income ........... - 15,651 1,980 1,678 3,691 605
Ohio Tax-Free Income ................. - 11,649 45 1,877 3,107 1,713
Delaware Tax-Free Income ............. - 6,683 - 2,850 2,557 4,428
Kentucky Tax-Free Income ............. - 13,219 13 1,465 1,149 379
SHARE CLASSES
SHAREHOLDER SERVICE FEES -----------------------------------------------------
SERVICE INVESTOR A INVESTOR B INVESTOR C
--------- ------------ ------------ -----------
Tax-Free Income ...................... $ 2,206 $ 10,103 $ 8,796 $ 4,021
Pennsylvania Tax-Free Income ......... 4,515 44,736 29,423 2,671
New Jersey Tax-Free Income ........... 12,379 7,191 15,661 2,681
Ohio Tax-Free Income ................. 310 7,373 13,204 7,110
Delaware Tax-Free Income ............. - 12,730 10,857 19,034
Kentucky Tax-Free Income ............. 86 6,472 4,926 1,637
SHARE CLASSES
SHAREHOLDER PROCESSING FEES -----------------------------------------------------
SERVICE INVESTOR A INVESTOR B INVESTOR C
--------- ------------ ------------ -----------
Tax-Free Income ...................... $ 2,206 $ 6,062 $ 5,278 $ 2,413
Pennsylvania Tax-Free Income ......... 4,514 26,842 17,654 1,603
New Jersey Tax-Free Income ........... 12,377 4,315 9,397 1,609
Ohio Tax-Free Income ................. 310 4,424 7,922 4,266
Delaware Tax-Free Income ............. - 7,659 6,514 11,421
Kentucky Tax-Free Income ............. 86 3,883 2,956 982
SHARE CLASSES
DISTRIBUTION FEES -----------------------------------------
INVESTOR A INVESTOR B INVESTOR C
------------ ------------ -----------
Tax-Free Income ........................... $ 4,041 $ 26,387 $ 12,063
Pennsylvania Tax-Free Income .............. 17,895 88,270 8,013
New Jersey Tax-Free Income ................ 2,877 46,983 8,044
Ohio Tax-Free Income ...................... 2,951 39,612 21,330
Delaware Tax-Free Income .................. 9,113 32,570 57,105
Kentucky Tax-Free Income .................. 2,589 14,778 4,910
SHARE CLASS
DISTRIBUTION FEES WAIVED -------------
INVESTOR A
-------------
Tax-Free Income ............................................................... $ (3,951)
Pennsylvania Tax-Free Income .................................................. (17,489)
New Jersey Tax-Free Income .................................................... (2,813)
Ohio Tax-Free Income .......................................................... (2,875)
Delaware Tax-Free Income ...................................................... (9,074)
Kentucky Tax-Free Income ...................................................... (2,534)
(B) Transactions with Affiliates and Related Parties
Pursuant to an Investment Advisory Agreement, BlackRock Advisors, Inc.
("BlackRock"), a wholly-owned subsidiary of BlackRock, Inc., serves as
investment adviser to the Portfolios. BlackRock Financial Management, Inc.
("BFM"), a wholly-owned subsidiary of BlackRock, serves as sub-adviser for all
of the Portfolios. BlackRock, Inc. is an indirect majority-owned subsidiary of
The PNC Financial Services Group, Inc.
47
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 DELAWARE TAX-FREE
TAX-FREE INCOME, 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 .500% .550%
$1 billion - $2 billion .450 .500
$2 billion - $3 billion .425 .475
greater than $3 billion .400 .450
The investment advisory fee for the UltraShort Municipal Portfolio is
..45%.
For the period ended March 31, 2004, advisory fees and waivers for each
Portfolio were as follows:
GROSS NET
ADVISORY ADVISORY
FEE WAIVER FEE
------------ ---------- ------------
UltraShort Municipal Portfolio ................. $ 9,285 $ 9,285 $ -
Tax-Free Income Portfolio ...................... 1,020,515 442,495 578,020
Pennsylvania Tax-Free Income Portfolio ......... 1,996,833 796,684 1,200,149
New Jersey Tax-Free Income Portfolio ........... 424,056 192,074 231,982
Ohio Tax-Free Income Portfolio ................. 299,177 141,781 157,396
Delaware Tax-Free Income Portfolio ............. 247,156 83,544 163,612
Kentucky Tax-Free Income Portfolio ............. 330,201 109,158 221,043
In the interest of limiting the expenses of the Portfolios, BlackRock and
the Fund have entered into a series of annual expense limitation agreements
beginning February 1, 1999. The agreements set a limit on certain of the
operating expenses of each Portfolio for the next year and requires BlackRock
to waive or reimburse fees or expenses if these operating expenses exceed that
limit. Effective February 1, 2004, these expense limits apply to the aggregate
expenses incurred on a Share Class (excluding: interest, taxes, brokerage
commissions, and other expenditures which are capitalized in accordance with
generally accepted accounting principles). Prior to February 1, 2004, the
expense limits applied to expenses charged on Portfolio assets as a whole, but
not expenses separately charged to the different share classes of a Portfolio.
If in the following two years the operating expenses of a Portfolio that
previously received a waiver or reimbursement from BlackRock are less than the
expense limit for that Portfolio, the Portfolio is required to repay BlackRock
up to the amount of fees waived or expenses reimbursed under the agreement if:
(1) the Portfolio has more than $50 million in assets, (2) BlackRock continues
to be the Portfolio's investment adviser and (3) the Board of Trustees of the
Fund has approved the payments to BlackRock on a quarterly basis.
At March 31, 2004, the amounts subject to possible future reimbursement
under the expense limitation agreement are as follows:
EXPIRING EXPIRING
JANUARY 31, 2005 JANAURY 31, 2006
------------------ ------------------
UltraShort Municipal Portfolio ................. $ - $ -
Tax-Free Income Portfolio ...................... 610,832 623,251
Pennsylvania Tax-Free Income Portfolio ......... 1,493,625 1,383,044
New Jersey Tax-Free Income Portfolio ........... 281,833 278,302
Ohio Tax-Free Income Portfolio ................. 167,924 174,280
Delaware Tax-Free Income Portfolio ............. 124,793 91,539
Kentucky Tax-Free Income Portfolio ............. 185,455 138,922
EXPIRING TOTAL WAIVERS SUBJECT
JANUARY 31, 2007 TO REIMBURSEMENT
------------------ ----------------------
UltraShort Municipal Portfolio ................. $ 13,543 $ 13,543
Tax-Free Income Portfolio ...................... 154,351 1,388,434
Pennsylvania Tax-Free Income Portfolio ......... 243,648 3,120,317
New Jersey Tax-Free Income Portfolio ........... 67,952 628,087
Ohio Tax-Free Income Portfolio ................. 46,447 388,651
Delaware Tax-Free Income Portfolio ............. 28,518 244,850
Kentucky Tax-Free Income Portfolio ............. 34,901 359,278
BlackRock pays BFM fees for its sub-advisory services.
48
BLACKROCK FUNDS
PFPC Inc. ("PFPC"), an indirect subsidiary of The PNC Financial Services
Group, Inc., and BlackRock act as co-administrators for the Fund. For these
services, the co-administrators receive a combined administration fee computed
daily and payable monthly, based on a percentage of the average daily net
assets of each Portfolio, at the following annual rates: .085% of the first
$500 million, .075% of the next $500 million and .065% of assets in excess of
$1 billion. In addition, each of the classes with the exception of the
BlackRock Class is charged an administration fee based on the following
percentage of average daily net assets of each respective class: .145% of the
first $500 million, .135% of the next $500 million and .125% of assets in
excess of $1 billion. The BlackRock Class is charged an administration fee
based on the following percentage of average daily net assets of each
respective class: .035% of the first $500 million, .025% of the next $500
million and .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.
For the period ended March 31, 2004, administration fees and waivers for
each Portfolio were as follows:
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
---------------- ---------- ---------------
UltraShort Municipal Portfolio ................. $ 2,508 $ 2,434 $ 74
Tax-Free Income Portfolio ...................... 439,680 6,348 433,332
Pennsylvania Tax-Free Income Portfolio ......... 892,066 9,629 882,437
New Jersey Tax-Free Income Portfolio ........... 194,731 - 194,731
Ohio Tax-Free Income Portfolio ................. 137,626 2 137,624
Delaware Tax-Free Income Portfolio ............. 103,358 - 103,358
Kentucky Tax-Free Income Portfolio ............. 138,120 109 138,011
PFPC Trust Co., 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.
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 Advisers, Inc. ("BlackRock") or any other affiliate of PNC
Bank 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 BlackRock or
any other affiliate of PNC Bank fees for the provision of personal services to
shareholders and the processing and administration of shareholder accounts.
BlackRock, in turn, determines the amount of the service fee and shareholder
processing fee to be paid to brokers, dealers, financial institutions and
industry professionals (including PNC Bank and its affiliates) that provide
services to their customers who own shares of the Fund. BlackRock may retain a
significant portion of the shareholder processing fees and may retain some of
the service fees paid by the Fund. Currently, only Investor A Shares, Investor
B Shares, Investor C Shares and Service Shares bear the expense of service fees
and shareholder processing fees under the Plan. Refer to the fee table in the
"Notes to Financial Statements" for fee information.
As of the period ended March 31, 2004, affiliated payables were as
follows:
PNC BANK
PFPC(1) BLACKROCK(2) AFFILIATES(3)
--------- -------------- --------------
UltraShort Municipal Portfolio ................. $ 2,516 $ - $ -
Tax-Free Income Portfolio ...................... 41,835 171,623 14,614
Pennsylvania Tax-Free Income Portfolio ......... 69,154 305,674 38,670
New Jersey Tax-Free Income Portfolio ........... 19,646 72,938 21,449
Ohio Tax-Free Income Portfolio ................. 10,824 44,001 18,140
Delaware Tax-Free Income Portfolio ............. 9,082 40,909 27,670
Kentucky Tax-Free Income Portfolio ............. 11,856 53,805 7,442
(1) - payables to PFPC are for Accounting, Administration, Custody and Transfer
Agent services provided as of March 31, 2004.
(2) - payables to BlackRock are for Advisory and Administration services
provided as of March 31, 2004.
(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, 2004, was $3,201,515, a portion of which is paid to
service organizations, including other PNC Bank affiliates.
49
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) Purchases and Sales of Securities
For the period ended March 31, 2004, purchases and sales of securities,
other than short-term and U.S. government securities, were as follows:
PURCHASES SALES
--------------- --------------
UltraShort Municipal Portfolio ................. $ 36,057,907 $ 5,472,580
Tax-Free Income Portfolio ...................... 228,331,484 130,140,595
Pennsylvania Tax-Free Income Portfolio ......... - 49,491,757
New Jersey Tax-Free Income Portfolio ........... 43,021,973 14,076,324
Ohio Tax-Free Income Portfolio ................. - 4,642,443
Delaware Tax-Free Income Portfolio ............. 8,935,832 1,560,000
Kentucky Tax-Free Income Portfolio ............. 3,822,773 23,592,508
(D) Capital Shares
Transactions in capital shares for each period were as follows:
ULTRASHORT MUNICIPAL PORTFOLIO
--------------------------------
FOR THE PERIOD 3/3/04 /1/
THROUGH 3/31/04
(UNAUDITED)
--------------------------------
SHARES VALUE
------------- ----------------
Shares sold:
BlackRock Class .................................. 2,831,170 $ 28,311,300/2/
Institutional Class .............................. 372,505 3,718,100
Service Class .................................... 10 100
Investor A Class ................................. 10 100
Shares redeemed:
BlackRock Class .................................. (146,175) (1,464,086)
--------- -------------
Net increase ....................................... 3,057,520 $ 30,565,514
========= =============
TAX-FREE INCOME PORTFOLIO
--------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
----------------------------------- ------------------------------------
SHARES VALUE SHARES VALUE
--------------- ----------------- ---------------- -----------------
Shares sold:
BlackRock Class ......................... 9,038,066 $ 101,457,613/3/ - $ -
Institutional Class ..................... 4,007,900 45,237,933 8,147,704 90,997,576
Service Class ........................... 3,531 39,652 1,330,301 14,815,637
Investor A Class ........................ 54,268 610,915 755,301 8,402,385
Investor B Class ........................ 46,344 520,413 207,446 2,322,545
Investor C Class ........................ 191,766 2,156,595 840,028 9,433,483
Shares issued in reinvestment of dividends:
BlackRock Class ......................... 67,632 762,118 - -
Institutional Class ..................... 12,270 137,634 50,644 566,565
Service Class ........................... 3,747 41,992 25,229 281,715
Investor A Class ........................ 10,265 115,173 19,768 220,967
Investor B Class ........................ 4,961 55,641 9,552 106,722
Investor C Class ........................ 2,213 24,850 3,402 38,016
Shares redeemed:
Institutional Class ..................... (3,346,168) (37,677,514) (10,028,609) (112,231,760)
Service Class ........................... (17,612) (197,839) (1,363,033) (15,302,986)
Investor A Class ........................ (84,088) (939,796) (729,757) (8,169,634)
Investor B Class ........................ (70,367) (790,194) (124,473) (1,388,017)
Investor C Class ........................ (60,569) (679,472) (866,195) (9,732,823)
---------- -------------- ----------- --------------
Net increase (decrease) ................... 9,864,159 $ 110,875,714 (1,722,692) $ (19,639,609)
========== ============== =========== ==============
/1/ Commencement of operations.
/2/ Includes 2,690,750 shares issued in exchange for cash and securities
transferred in-kind with a value of $26,907,505. See Note (A).
/3/ Includes 8,342,920 shares issued in exchange for cash and securities
transferred in-kind with a value of $93,607,559. See Note (A).
50
BLACKROCK FUNDS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
-----------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------------ --------------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ ---------------- -------------------
Shares sold:
Institutional Class .................... 1,674,124 $ 18,280,221 5,040,401 $ 54,989,036
Service Class .......................... 64,369 702,459 2,643,787 28,812,237
Investor A Class ....................... 208,629 2,278,246 543,721 5,930,593
Investor B Class ....................... 51,597 557,923 317,680 3,431,080
Investor C Class ....................... 54,854 596,297 123,877 1,347,540
Shares issued in reinvestment of dividends:
Institutional Class .................... 6,838 74,542 37,640 412,661
Service Class .......................... 7,096 77,293 11,789 128,586
Investor A Class ....................... 45,812 499,102 91,726 1,001,392
Investor B Class ....................... 24,088 260,588 54,316 588,656
Investor C Class ....................... 2,500 27,134 2,822 30,663
Shares redeemed:
Institutional Class .................... (6,193,431) (67,669,099) (16,516,068) (180,312,497)
Service Class .......................... (100,150) (1,091,822) (2,637,107) (28,797,453)
Investor A Class ....................... (291,157) (3,180,831) (719,368) (7,803,450)
Investor B Class ....................... (306,611) (3,317,606) (661,528) (7,164,415)
Investor C Class ....................... (16,171) (175,594) (91,356) (992,357)
---------- -------------- ----------- ---------------
Net decrease .............................. (4,767,613) $ (52,081,147) (11,757,668) $ (128,397,728)
========== ============== =========== ===============
NEW JERSEY TAX-FREE INCOME PORTFOLIO
---------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
--------------------------------- ---------------------------------
SHARES VALUE SHARES VALUE
--------------- --------------- --------------- ---------------
Shares sold:
Institutional Class .................... 6,310,146 $ 75,177,027 1,886,637 $ 22,338,004
Service Class .......................... 12,964 153,248 89,734 1,072,447
Investor A Class ....................... 123,123 1,456,588 283,877 3,375,720
Investor B Class ....................... 47,681 563,105 391,765 4,645,110
Investor C Class ....................... 83,535 994,750 105,191 1,248,017
Shares issued in reinvestment of dividends:
Institutional Class .................... 742 8,745 2,030 24,102
Service Class .......................... 20,845 245,937 43,851 519,831
Investor A Class ....................... 6,647 78,389 17,300 205,094
Investor B Class ....................... 13,186 155,571 21,773 257,856
Investor C Class ....................... 1,132 13,384 2,412 28,699
Shares redeemed:
Institutional Class .................... (3,435,296) (40,980,717) (1,940,656) (23,026,539)
Service Class .......................... (44,444) (525,038) (178,727) (2,124,194)
Investor A Class ....................... (108,929) (1,275,440) (273,239) (3,234,703)
Investor B Class ....................... (53,949) (639,047) (111,429) (1,324,629)
Investor C Class ....................... (4,127) (49,150) (40,031) (484,342)
---------- ------------- ---------- -------------
Net increase .............................. 2,973,256 $ 35,377,352 300,488 $ 3,520,473
========== ============= ========== =============
51
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OHIO TAX-FREE INCOME PORTFOLIO
---------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
--------------------------------- ---------------------------------
SHARES VALUE SHARES VALUE
------------- ----------------- --------------- ---------------
Shares sold:
Institutional Class .................... 525,907 $ 5,726,724 2,343,552 $ 25,416,855
Service Class .......................... 37,442 410,067 94,485 1,026,267
Investor A Class ....................... 92,915 1,013,656 403,985 4,392,900
Investor B Class ....................... 55,098 602,747 344,417 3,754,669
Investor C Class ....................... 108,727 1,187,549 289,559 3,155,906
Shares issued in reinvestment of dividends:
Institutional Class .................... 2,004 21,830 2,532 27,561
Service Class .......................... 436 4,771 366 3,980
Investor A Class ....................... 5,376 58,589 19,947 217,642
Investor B Class ....................... 3,074 33,500 6,549 71,262
Investor C Class ....................... 1,057 11,517 3,706 40,368
Shares redeemed:
Institutional Class .................... (612,301) (6,659,054) (2,116,370) (22,994,550)
Service Class .......................... (57,188) (623,409) (46,458) (502,702)
Investor A Class ....................... (293,789) (3,197,417) (1,140,670) (12,282,294)
Investor B Class ....................... (39,828) (435,199) (177,798) (1,924,567)
Investor C Class ....................... (101,864) (1,110,714) (92,962) (1,020,194)
-------- ------------- ---------- -------------
Net decrease .............................. (272,934) $ (2,954,843) (65,160) $ (616,897)
======== ============= ========== =============
DELAWARE TAX-FREE INCOME PORTFOLIO
------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------ ---------------------------------
SHARES VALUE SHARES VALUE
------------- -------------- --------------- ---------------
Shares sold:
Institutional Class .................... 522,928 $ 5,334,441 1,063,362 $ 10,862,999
Service Class .......................... - - - -
Investor A Class ....................... 365,041 3,727,094 447,494 4,645,100
Investor B Class ....................... 79,800 813,146 562,639 5,796,442
Investor C Class ....................... 216,293 2,210,736 1,280,407 13,297,842
Shares issued in reinvestment of dividends:
Institutional Class .................... 3,999 40,803 8,427 86,565
Service Class .......................... - - - -
Investor A Class ....................... 10,407 106,351 14,814 151,941
Investor B Class ....................... 3,978 40,649 5,485 56,245
Investor C Class ....................... 2,936 30,001 3,937 40,382
Shares redeemed:
Institutional Class .................... (424,157) (4,341,865) (2,531,138) (25,858,736)
Service Class .......................... - - - -
Investor A Class ....................... (87,753) (905,584) (103,553) (1,060,038)
Investor B Class ....................... (66,672) (680,522) (32,236) (329,963)
Investor C Class ....................... (101,105) (1,034,120) (163,801) (1,673,355)
-------- ------------ ---------- -------------
Net increase .............................. 525,695 $ 5,341,130 555,837 $ 6,015,424
======== ============ ========== =============
52
BLACKROCK FUNDS
KENTUCKY TAX-FREE INCOME PORTFOLIO
---------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
3/31/04 FOR THE YEAR ENDED
(UNAUDITED) 9/30/03
------------------------------------ ------------------------------------
SHARES VALUE SHARES VALUE
--------------- ------------------ --------------- ------------------
Shares sold:
Institutional Class .................... 428,810 $ 4,197,100 1,379,560 $ 13,488,527
Service Class .......................... 2,681 26,216 9,174 90,424
Investor A Class ....................... 124,301 1,213,954 142,998 1,404,002
Investor B Class ....................... 42,588 415,015 194,794 1,918,462
Investor C Class ....................... 15,071 146,749 16,426 162,377
Shares issued in reinvestment of dividends:
Institutional Class .................... 6,895 67,318 17,797 174,452
Service Class .......................... 49 478 6 59
Investor A Class ....................... 8,159 79,688 9,732 95,303
Investor B Class ....................... 4,907 47,922 7,683 75,219
Investor C Class ....................... 1,811 17,725 2,904 28,507
Shares redeemed:
Institutional Class .................... (1,606,446) (15,698,821) (3,221,522) (31,504,973)
Service Class .......................... (616) (6,093) (7,795) (76,153)
Investor A Class ....................... (32,484) (316,172) (33,086) (324,720)
Investor B Class ....................... (22,163) (215,865) (45,250) (440,356)
Investor C Class ....................... - - (2,377) (23,248)
---------- -------------- ---------- --------------
Net decrease .............................. (1,026,437) $ (10,024,786) (1,528,956) $ (14,932,118)
========== ============== ========== ==============
On March 31, 2004, four shareholders held approximately 63% of the
UltraShort Municipal Portfolio, one shareholder held approximately 91% of the
Tax-Free Income Portfolio, one shareholder held approximately 89% of the
Pennsylvania Tax-Free Income Portfolio, one shareholder held approximately 80%
of the New Jersey Tax-Free Income Portfolio, one shareholder held approximately
76% of the Ohio Tax-Free Income Portfolio, two shareholders held approximately
67% of the Delaware Tax-Free Income Portfolio and one shareholder held
approximately 83% of the Kentucky Tax-Free Income Portfolio. Some of the
shareholders are comprised of omnibus accounts, which are held on behalf of
several individual shareholders.
53
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(E) At March 31, 2004 net assets consisted of:
PENNSYLVANIA NEW JERSEY
ULTRASHORT TAX-FREE TAX-FREE TAX-FREE
MUNICIPAL INCOME INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ---------------- ---------------- ----------------
Capital paid-in ............................................. $ 30,565,514 $ 461,419,883 $ 736,687,868 $ 188,736,720
End of period undistributed net investment income
(distributions in excess of net investment income) ......... - 178,077 2,042,845 (429,452)
Accumulated net realized gain (loss) on investment
transactions, futures contracts and swap contracts ......... 2,532 (18,442,979) (38,783,211) (7,677,625)
Net unrealized appreciation (depreciation) on investment
transactions, futures contracts and swap contracts ......... (32,478) 23,008,959 65,939,073 16,085,560
------------ ------------- ------------- -------------
$ 30,535,568 $ 466,163,940 $ 765,886,575 $ 196,715,203
============ ============= ============= =============
OHIO DELAWARE KENTUCKY
TAX-FREE TAX-FREE TAX-FREE
INCOME INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
---------------- --------------- ----------------
Capital paid-in ............................................. $ 111,670,133 $ 86,822,671 $ 111,328,302
End of period undistributed net investment income
(distributions in excess of net investment income) ......... 185,404 (343,993) (698,593)
Accumulated net realized loss on investment transactions,
futures contracts and swap contracts ....................... (3,304,739) (2,400,277) (5,455,751)
Net unrealized appreciation on investment transactions,
futures contracts and swap contracts ....................... 10,914,884 7,103,898 9,815,157
------------- ------------ -------------
$ 119,465,682 $ 91,182,299 $ 114,989,115
============= ============ =============
54
BLACKROCK FUNDS
(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. Short-term capital gain distributions that are reported in the
Statement of Changes in Net Assets are reported as ordinary income for federal
tax purposes. There were no short-term or long-term capital gains distributions
for the year ended September 30, 2003.
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. 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 September 30, 2003, attributable to
market discount, were reclassified to the following accounts:
INCREASE DECREASE
ACCUMULATED UNDISTRIBUTED
DECREASE NET REALIZED NET INVESTMENT
PAID IN-CAPITAL GAIN INCOME
----------------- -------------- ---------------
Tax-Free Income Portfolio ...................... $ - $ 242 $ (242)
Pennsylvania Tax-Free Income Portfolio ......... - 12,137 (12,137)
New Jersey Tax-Free Income Portfolio ........... - 1,844 (1,844)
Ohio Tax-Free Income Portfolio ................. - 1,222 (1,222)
Kentucky Tax-Free Income Portfolio ............. (117,119) 221,290 (104,171)
The tax character of distributions paid during the last two fiscal years
were as follows:
TAX-FREE ORDINARY TOTAL
INCOME INCOME DISTRIBUTIONS
--------------- ---------- --------------
Tax-Free Income Portfolio
9/30/03 ............................. $ 17,537,914 $ 156 $ 17,538,070
9/30/02 ............................. 17,908,446 181,189 18,089,635
Pennsylvania Tax-Free Income Portfolio
9/30/03 ............................. 40,283,335 25,860 40,309,195
9/30/02 ............................. 44,784,293 461,425 45,245,718
New Jersey Tax-Free Income Portfolio
9/30/03 ............................. 8,236,488 18,252 8,254,740
9/30/02 ............................. 8,029,622 81,545 8,111,167
Ohio Tax-Free Income Portfolio
9/30/03 ............................. 5,946,203 - 5,946,203
9/30/02 ............................. 5,852,830 53,713 5,906,543
Delaware Tax-Free Income Portfolio
9/30/03 ............................. 4,237,566 - 4,237,566
9/30/02 ............................. 4,116,844 44,906 4,161,750
Kentucky Tax-Free Income Portfolio
9/30/03 ............................. 6,401,898 273,702 6,675,600
9/30/02 ............................. 7,379,848 80,733 7,460,581
55
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
As of September 30, 2003, the components of distributable
earnings/(accumulated losses) were as follows:
UNDISTRIBUTED CAPITAL POST-
TAX-FREE LOSS OCTOBER
INCOME CARRYFOWARDS LOSSES
--------------- ----------------- -----------------
Tax-Free Income Portfolio ...................... $ 2,033,896 $ (9,457,807) $ (7,632,026)
Pennsylvania Tax-Free Income Portfolio ......... 5,171,997 (37,414,592) -
New Jersey Tax-Free Income Portfolio ........... 572,246 (6,078,884) (1,233,128)
Ohio Tax-Free Income Portfolio ................. 222,634 (1,925,549) (1,049,645)
Delaware Tax-Free Income Portfolio ............. 365,276 (1,395,404) (679,756)
Kentucky Tax-Free Income Portfolio ............. - (5,445,581) -
Post-October losses represent losses realized on investment transactions
from November 1, 2002 through September 30, 2003 that, in accordance with
Federal income tax regulations, the Portfolios defer and treat as having arisen
in the following fiscal year. For Federal income tax purposes, capital loss
carryforwards may be carried forward and applied against future capital gains.
At September 30, 2003, 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 TOTAL
-------------- -------------- ------------ -------------- --------------
Tax-Free Income Portfolio .............. $ 3,717,571 $ 1,756,215 $ - $ 3,984,021 $ 9,457,807
Pennsylvania Tax-Free Income
Portfolio ............................. 5,817,038 7,641,061 8,626,794 15,329,699 37,414,592
New Jersey Tax-Free Income
Portfolio ............................. 733,444 2,652,175 162,686 2,530,579 6,078,884
Ohio Tax-Free Income Portfolio ......... 41,989 - - 1,883,560 1,925,549
Delaware Tax-Free Income
Portfolio ............................. 83,140 - - 1,312,264 1,395,404
Kentucky Tax-Free Income
Portfolio ............................. 1,316,142 1,556,368 129,603 2,443,468 5,445,581
(G) Contingencies
In the normal course of business, the Fund enters into contracts that
provide general indemnifications. The Funds' maximum exposure under these
arrangements is dependent on future claims that may be made against the Funds
and, therefore, cannot be estimated; however, based on experience, the risk of
loss from such claims is considered remote.
56
BLACKROCK FUNDS
ADDITIONAL INFORMATION
(A) PricewaterhouseCoopers LLP ("PwC"), the Fund's former independent auditor,
has been hired as an internal audit supporting service provider by The PNC
Financial Services Group, Inc. ("PNC"), the parent company of the Fund's
investment adviser and certain other service providers. In order to provide
certain services to PNC and its affiliates which would have caused PwC to
no longer be independent with respect to the Fund, PwC declined to stand
for re-election as independent auditor of the Fund after the completion of
the fiscal 2003 audit.
The Fund's Audit Committee approved engaging Deloitte & Touche LLP as the
independent auditor to audit the Fund's financial statements for fiscal
year 2004. 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 2004 audit on
November 21, 2003, 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.
(B) 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.
57
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK FUNDS
Investment Adviser Co-Administrator and Transfer Agent
BlackRock Advisors, Inc. PFPC Inc.
Wilmington, Delaware 19809 Wilmington, Delaware 19809
Sub-Adviser Distributor
BlackRock Financial Management, Inc. BlackRock Distributors, Inc.
New York, New York 10022 King of Prussia, Pennsylvania 19406
Custodian Co-Administrator
PFPC Trust Co. BlackRock Advisors, Inc.
Philadelphia, Pennsylvania 19153 Wilmington, Delaware 19809
Counsel
Simpson Thacher & Bartlett LLP
New York, New York 10017
Independent Auditors
Deloitte & Touche LLP
Philadelphia, Pennsylvania 19103
The Fund delivers only one copy of shareholder documents, including
prospectuses, shareholder reports and proxy statements to shareholders with
multiple accounts at the same address. This practice is known as "householding"
and is intended to eliminate duplicate mailings and reduce expenses. Mailings
of your BlackRock Funds 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 1-800-441-7762.
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
SEC's website at http://www.sec.gov.
BLACKROCK FUNDS
FUND SPECTRUM
BlackRock Funds is a leading mutual fund company currently managing
approximately $19 billion in the following portfolios designed to fit a broad
range of investment goals. Each portfolio is managed by recognized experts in
equity, fixed income, international, and tax-free investing.
STOCK PORTFOLIOS
- -------------------------------------
Large Cap Value Equity Global Science &Technology Opportunities
Large Cap Growth Equity European Equity
Mid-Cap Value Equity International Equity
Mid-Cap Growth Equity International Opportunities
Small Cap Value Equity Asia Pacific Equity
Small Cap Core Equity Select Equity
Small Cap Growth Equity Index Equity
U.S. Opportunities
STOCK & BOND PORTFOLIOS
- -------------------------------------
Balanced
BOND PORTFOLIOS
- -------------------------------------
Enhanced Income Managed Income
Low Duration Bond Core Bond Total Return
Intermediate Government Bond Core PLUS Total Return
Intermediate Bond International Bond
Government Income High Yield Bond
GNMA
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. Note: Institutional and Service Share
Class investors should call 1-800-441-7450. 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 1-888-825-2257.
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.
BND-SEMI2 BlackRock
FIXED INCOME LIQUIDITY EQUITIES ALTERNATIVES BLACKROCK SOLUTIONS
BlackRock Funds
Strategic Portfolio I
Semi - Annual Report to Shareholders
March 31, 2004 (Unaudited)
[GRAPHIC]
NOT FDIC INSURED
MAY LOSE VALUE BlackRock
NO BANK GUARANTEE
[THIS PAGE INTENTIONALLY LEFT BLANK.]
BLACKROCK STRATEGIC PORTFOLIO I
Total Net Assets (3/31/04): $104.6 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 foreign and U.S. issuers
denominated in foreign currencies, baskets of foreign currencies and the U.S.
dollar.
Recent Portfolio Management Activity
o Note: On January 28, 2004, the Portfolio changed its benchmark from the
Lehman Brothers U.S. Aggregate Index to the Citigroup Non-U.S. World Government
Bond Index (Hedged).
o The Portfolio outperformed the Citigroup Non-U.S. World Government Bond
Index (Hedged) for the semi-annual period, but underperformed the Lehman
Brothers U.S. Aggregate Index. During the first half of the period, the
Portfolio maintained an allocation to Canadian government bonds. In Europe,
yields generally tracked higher over the first half of the period. Although
inflation remained at or below central bank targets, signs of growth came from
the manufacturing sector and business confidence improved. The ECB kept rates
at 2% for the fourth quarter of 2004. As yields improved, the Portfolio's
allocation to European bonds benefited performance. Outside of the EMU,
strength in the Swedish Krona exacerbated the improving inflation trend,
increasing the chances of an independent Riksbank ease. The fund maintained a
position in Swedish Treasuries.
o During the second half of the period, the Portfolio's exposure to
intermediate maturity Hungarian government bonds contributed positively to
performance. Despite low inflation, a strong Euro, and a worsening employment
situation, the ECB held rates at 2% throughout the first quarter of 2004. We
maintain positions in Euroland through German bunds as well as French, Dutch
and Spanish Treasuries. The Portfolio remains bullish on European markets
relative to Japan and the U.S. The Portfolio currently has a small exposure to
Canadian bonds as the outlook for Canadian inflation continues to be very weak.
In Sweden, inflation remains low and unemployment continues to climb. We
maintain a position in Sweden in the 2 to 5-year portion of the yield curve.
o Relative to U.S. Treasuries, the Portfolio's performance was generally
neutral until mid-March when U.S. interest rates began to rise in anticipation
of favorable employment statistics. The Portfolio posted strong relative
performance during the last two weeks of the period.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE STRATEGIC
PORTFOLIO I, THE CITIGROUP NON-U.S. WORLD GOVERNMENT BOND INDEX (HEDGED) AND
THE LEHMAN BROTHERS U.S. AGGREGATE INDEX FROM INCEPTION AND AT EACH SEMI-ANNUAL
PERIOD END.
[LINE CHART]
Strategic Portfolio I Citigroup Non-U.S. World Government Bond Index (Hedged) Lehman Brothers U.S. Aggregate Index
--------------------- ------------------------------------------------------- -----------------------------------
10/06/1997 $ 10,000 $ 10,000 $ 10,000
12/31/1997 10,141 10,206 10,214
03/31/1998 10,303 10,248 10,371
06/30/1998 10,515 10,419 10,614
09/30/1998 11,084 11,420 11,062
12/31/1998 11,136 12,021 11,099
03/31/1999 11,131 11,440 11,043
06/30/1999 11,164 10,926 10,946
09/30/1999 11,290 11,594 11,021
12/31/1999 11,349 11,412 11,007
03/31/2000 11,478 11,279 11,250
06/30/2000 11,786 11,190 11,446
09/30/2000 12,245 10,684 11,791
12/31/2000 13,268 11,111 12,287
03/31/2001 13,709 10,566 12,660
06/30/2001 13,542 10,358 12,731
09/30/2001 14,144 11,161 13,318
12/31/2001 14,448 10,718 13,324
03/31/2002 14,484 10,518 13,337
06/30/2002 15,350 11,987 13,829
09/30/2002 15,521 12,328 14,463
12/31/2002 16,037 13,075 14,691
03/31/2003 16,070 13,563 14,895
06/30/2003 16,490 14,133 15,268
09/30/2003 16,512 14,522 15,246
12/31/2003 16,566 15,496 15,294
03/31/2004 16,949 15,739 15,700
PERFORMANCE AS OF 3/31/04
Strategic Portfolio I - Average Annual Return
1Year 3 Year 5 Year From Inception
- ------------ ---------- ---------- ---------------
5.47% 7.33% 8.77% 8.48%
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 portfolio holdings and
sectors listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary. On January 28, 2004, the
Portfolio changed its benchmark from the Lehman Brothers U.S. Aggregate Index
to the Citigroup Non-U.S. World Government Bond Index (Hedged). The new
benchmark more adequately reflects the universe of securities in which the
Portfolio will invest.
1
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BLACKROCK STRATEGIC PORTFOLIO I
AS OF MARCH 31, 2004 (UNAUDITED)
PAR
MATURITY (000) VALUE
---------- ---------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 28.0%
Federal Home Loan Mortgage Corp.
4.62%
(Cost $27,671,033) 02/15/07 $ 25,000 $32,392,165
-----------
FOREIGN BONDS - 66.7%
Canada - 14.2%
Government of Canada
5.25%(b) 06/01/13 20,245 16,471,736
-----------
France - 16.5%
France O.A.T.
4.00% 10/25/13 15,500 19,110,902
-----------
Germany - 11.1%
Bundesobligation
3.50% 10/10/08 6,460 8,117,432
Bundesrepublic Deutschland
3.75% 01/04/09 3,700 4,691,453
-----------
12,808,885
-----------
Hungary - 3.4%
Hungary Government Bonds
6.25% 06/12/08 875,000 3,918,739
-----------
Netherlands - 4.0%
Netherlands Government Bonds
2.75% 01/15/09 3,800 4,601,010
-----------
Spain - 3.6%
Bonos y Obligation del Estado
6.00% 01/31/08 3,000 4,110,207
-----------
Sweden - 13.9%
AB Spintab
6.00% 04/20/09 20,000 2,920,286
Kingdom of Sweden
3.50% 04/20/06 76,320 10,310,330
Statens Bostadsfinansier
5.50% 12/17/08 20,000 2,861,045
-----------
16,091,661
-----------
TOTAL FOREIGN BONDS
(Cost $74,479,477) 77,113,140
-----------
PAR/SHARES
(000) VALUE
----------- ---------
SHORT TERM INVESTMENTS - 5.3%
U.S. Treasury Bills
0.92% $ 600 $ 599,892
0.93% 2,800 2,799,496
Galileo Money Market
Fund
2,785 2,785,239
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $6,184,627) 6,184,627
------------
TOTAL INVESTMENTS IN
SECURITIES - 100.0%
(Cost $108,335,137(a)) $115,689,932
============
- -------------------
(a) Cost for Federal income tax purposes is $108,376,893. The
gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross unrealized appreciation $7,395,395
Gross unrealized depreciation (82,356)
----------
$7,313,039
==========
(b) Securities, or a portion thereof, with a market value of $15,214,693 have
been pledged as collateral for reverse repurchase agreements.
SEE ACCOMPANING NOTES TO FINANCIAL STATEMENTS.
2
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
BLACKROCK STRATEGIC PORTFOLIO I
MARCH 31, 2004 (UNAUDITED)
ASSETS
Investments at value (Cost $108,335,137)................................. $ 115,689,932
Cash denominated in foreign currencies (Cost $180,424)................... 181,886
Interest receivable ..................................................... 1,833,350
Investments sold receivable ............................................. 4,760,361
Capital shares sold receivable .......................................... 6,220
Prepaid expenses ........................................................ 469
Unrealized appreciation on forward foreign currency contracts ........... 2,943,714
--------------
TOTAL ASSETS ......................................................... 125,415,932
--------------
LIABILITIES
Reverse repurchase agreements payable ................................... 15,548,071
Investments purchased payable ........................................... 4,699,094
Distributions payable ................................................... 313,818
Administrative fees payable ............................................. 11,861
Transfer agent fees payable ............................................. 1,806
Other accrued expenses payable .......................................... 21,205
Unrealized depreciation on forward foreign currency contracts ........... 259,990
--------------
TOTAL LIABILITIES .................................................... 20,855,845
--------------
NET ASSETS (Applicable to 11,718,283 Institutional shares outstanding) ... $ 104,560,087
==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($104,560,087/11,718,283)....................... $ 8.92
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3
BLACKROCK FUNDS
STATEMENT OF OPERATIONS
BLACKROCK STRATEGIC PORTFOLIO I
FOR THE PERIOD ENDED MARCH 31, 2004 (UNAUDITED)
Investment income:
Interest ........................................................................... $ 1,733,144
------------
Expenses:
Investment advisory fee ............................................................ 82,503
Administration fee ................................................................. 94,879
Custodian fee ...................................................................... 12,700
Transfer agent fee ................................................................. 10,661
Legal and audit .................................................................... 6,533
Printing ........................................................................... 4,596
Trustees' fees ..................................................................... 547
Other .............................................................................. 2,066
------------
Total expenses excluding interest expense ........................................ 214,485
Interest expense ................................................................ 106,926
------------
Total expenses ................................................................... 321,411
------------
Less investment advisory and administration fees waived ......................... (107,230)
------------
Net expenses ..................................................................... 214,181
------------
Net investment income ............................................................... 1,518,963
------------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Net realized gain (loss) from:
Investment transactions (net of foreign taxes) ................................... 153,422
Foreign currency related transactions ............................................ (5,982,716)
------------
(5,829,294)
------------
Change in unrealized appreciation from:
Investments (net of foreign taxes) ............................................... 3,055,416
Foreign currency related transactions ............................................ 4,026,210
------------
7,081,626
------------
Net gain on investments and foreign currency transactions ........................... 1,252,332
------------
Net increase in net assets resulting from operations ................................ $ 2,771,295
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
BLACKROCK FUNDS
STATEMENT OF CHANGES IN NET ASSETS
BLACKROCK STRATEGIC PORTFOLIO I
FOR THE
SIX MONTHS ENDED FOR THE
3/31/04 YEAR ENDED
(UNAUDITED) 9/30/03
------------------ ----------------
Increase in net assets:
Operations:
Net investment income ................................................ $ 1,518,963 $ 1,389,333
Net realized loss on investments, futures contracts and foreign
currency related transactions ....................................... (5,829,294) (712,711)
Net unrealized gain on investments, futures contracts and foreign
currency related transactions ....................................... 7,081,626 1,659,517
------------- -------------
Net increase in net assets resulting from operations ................. 2,771,295 2,336,139
------------- -------------
Distributions to shareholders from:
Net investment income ................................................. (1,518,963) (2,261,168)
------------- -------------
Capital share transactions:
Shares sold .......................................................... 48,661,220 30,283,765
Shares issued in reinvestment of dividends ........................... 1,328,173 2,265,732
Shares redeemed ...................................................... (2,803,990) (7,755,256)
------------- -------------
47,185,403 24,794,241
------------- -------------
Total increase in net assets ......................................... 48,437,735 24,869,212
------------- -------------
Net assets:
Beginning of period .................................................. 56,122,352 31,253,140
------------- -------------
End of period ........................................................ $ 104,560,087 $ 56,122,352
============= =============
End of period distributions in excess of net investment income ......... $ (1,032,186) $ (1,032,186)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE
SIX MONTHS ENDED FOR THE
3/31/04 YEAR ENDED
(UNAUDITED) 9/30/03
------------------ ------------
Per share operating performance:
Net asset value, beginning of period ............................. $ 8.85 $ 8.87
--------- --------
Net investment income ........................................... 0.23 0.42
Net realized and unrealized gain (loss) on investments .......... - 0.13
--------- --------
Net increase from investment operations ........................ 0.23 0.55
--------- --------
Distributions from net investment income ........................ (0.16) (0.57)
Distributions from net realized gains ........................... - -
--------- --------
Total distributions ............................................ (0.16) (0.57)
--------- --------
Net asset value, end of period .................................. $ 8.92 $ 8.85
========= ========
Total Return ..................................................... 2.65% 6.39%
Ratios / Supplemental data
Net assets, end of period (in thousands) ......................... $ 104,560 $ 56,122
Ratio of expenses to average net assets .......................... 0.52% 0.26%
Ratio of expenses to average net assets (excluding interest
expense) ........................................................ 0.26% 0.26%
Ratio of expenses to average net assets (excluding waivers) ...... 0.78% 0.50%
Ratio of net investment income to average net assets ............. 3.68% 3.89%
Ratio of net investment income to average net assets (excluding
waivers) ........................................................ 3.42% 3.65%
Portfolio turnover ............................................... 84% 235%
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/02 9/30/01 9/30/00 9/30/99
------------ ------------ ------------ -----------
Per share operating performance:
Net asset value, beginning of period ............................. $ 9.20 $ 8.63 $ 8.51 $ 10.46
-------- ------- ------- --------
Net investment income ........................................... 0.42 0.72 0.57 0.43
Net realized and unrealized gain (loss) on investments .......... 0.40 0.58 0.12 (0.28)
-------- ------- ------- ---------
Net increase from investment operations ........................ 0.82 1.30 0.69 0.15
-------- ------- ------- ---------
Distributions from net investment income ........................ (1.15) (0.65) (0.57) (0.43)
Distributions from net realized gains ........................... - (0.08) - (1.67)
-------- -------- -------- ---------
Total distributions ............................................ (1.15) (0.73) (0.57) (2.10)
-------- -------- -------- ---------
Net asset value, end of period .................................. $ 8.87 $ 9.20 $ 8.63 $ 8.51
======== ======== ======== =========
Total Return ..................................................... 9.74% 15.51% 8.46% 1.86%
Ratios / Supplemental data
Net assets, end of period (in thousands) ......................... $ 31,253 $ 33,297 $ 29,367 $ 7,214
Ratio of expenses to average net assets .......................... 0.85% 0.27% 0.26% 0.31%
Ratio of expenses to average net assets (excluding interest
expense) ........................................................ 0.26% 0.26% 0.26% 0.26%
Ratio of expenses to average net assets (excluding waivers) ...... 1.15% 0.60% 0.68% 0.68%
Ratio of net investment income to average net assets ............. 4.73% 5.82% 6.67% 4.94%
Ratio of net investment income to average net assets (excluding
waivers) ........................................................ 4.43% 5.49% 6.25% 4.57%
Portfolio turnover ............................................... 180% 189% 324% 78%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS
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 44 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.
(A) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund in preparation of its financial statements. The preparation of
financial statements in conformity with accounting principles generally
accepted in the United States of America requires the use of management
estimates. Actual results could differ from the estimates.
Security Valuation: Valuation of securities held by the Portfolio is as
follows: fixed income securities are valued by using market quotations, prices
provided by market makers or estimates of market values obtained from yield
data relating to instruments or securities with similar characteristics under
the supervision of the Board of Trustees; a portion of the fixed income
securities are valued utilizing one or more pricing services approved by the
Board of Trustees; 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); and the amortized cost method of valuation is used with
respect to debt obligations with sixty days or less remaining to maturity. Any
securities that are denominated in a foreign currency are translated into U.S.
dollars at the prevailing market rates. Securities for which market quotations
are not readily available are valued at fair market value as determined in good
faith by or under the direction of the Fund's Board of Trustees. As of March
31, 2004, there were no securities valued in accordance with such fair value
procedures.
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 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
Portfolio intends to settle the contracts prior to delivery. Under the terms of
foreign currency contracts open at March 31, 2004, the Portfolio is obligated
to deliver or receive currency in exchange for U.S. dollars as indicated below:
7
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
UNREALIZED
FOREIGN
VALUE AT EXCHANGE
SETTLEMENT DATE CURRENCY AMOUNT CURRENCY SOLD CONTRACT AMOUNT MARCH 31, 2004 GAIN/(LOSS)
- ----------------- ----------------- ---------------------------- ----------------- ---------------- ---------------
04/15/04 126,400,000 Swedish Krona .............. $ 17,444,483 $ 16,752,122 $ 692,361
04/16/04 62,765,329 European Currency Unit ..... 79,095,525 77,182,348 1,913,177
04/21/04 21,080,600 Canadian Dollar ............ 16,371,242 16,058,852 312,390
04/22/04 832,600,000 Hungarian Forint ........... 3,856,781 4,079,738 (222,957)
------------- ------------- -----------
$ 116,768,031 $ 114,073,060 $ 2,694,971
============= ============= ===========
UNREALIZED
FOREIGN
VALUE AT EXCHANGE
SETTLEMENT DATE CURRENCY AMOUNT CURRENCY BOUGHT CONTRACT AMOUNT MARCH 31, 2004 GAIN/(LOSS)
- ----------------- ----------------- --------------------------------- ----------------- ---------------- --------------
04/15/04 1,000,000 Swedish Krona ................... $ 137,210 $ 132,533 $ (4,677)
04/16/04 2,600,000 European Currency Unit .......... 3,229,620 3,197,264 (32,356)
04/21/04 19,600,000 Canadian Dollar ................. 14,905,170 14,930,956 25,786
------------ ------------ ----------
$ 18,272,000 $ 18,260,753 $ (11,247)
============ ============ ==========
Security 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 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 Fund's Board of Trustees. 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.
Futures Transactions: The Portfolio invests in financial futures contracts
for the purpose of hedging its existing portfolio securities, or securities
that the Portfolio intends to purchase, against fluctuations in fair value
caused by changes in prevailing market interest rates. The Portfolio invests in
futures contracts and options on futures contracts to commit funds awaiting
investments in stocks or to maintain cash liquidity or for other hedging
purposes. 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
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 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.
Option Writing/Purchasing: The Portfolio may write or purchase financial
options contracts for the purpose of hedging its existing portfolio securities,
or securities that the Portfolio intends to purchase, against fluctuations in
fair value caused by changes in prevailing market interest rates. When the
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
8
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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) as a result bears the market
risk of an unfavorable change in the price of the security underlying the
written option. There were no options held by the Portfolio at March 31, 2004.
Financing Transactions: The Portfolios 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.
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.
(B) 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 all of its advisory fees for
the Portfolio until February 1, 2004, and may reimburse the Portfolio for
certain operating expenses. For the six months ended March 31, 2004, advisory
fees and waiver for the Portfolio were as follows:
GROSS NET
ADVISORY ADVISORY
FEE WAIVER FEE
- ------------- -------------- ---------
$ 82,503 $ (82,503) $-
PFPC Inc. ("PFPC"), an indirect subsidiary of The PNC Financial Services
Group, Inc. and BlackRock act as co-administrators for the Fund. 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, 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 is charged an administration fee based
on the following percentage of average daily net assets of the Portfolio:
0.145% of the first $500 million, 0.135% of the next $500 million and 0.125% of
assets in excess of $1 billion.
PFPC and BlackRock may, at their discretion, waive all or any portion of
their administration fees for the Portfolio. For the six months ended March 31,
2004, administration fees and waivers for the Portfolio were as follows:
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
- ---------------- -------------- ---------------
$ 94,879 $ (24,727) $ 70,152
In addition, PFPC Trust Co., an indirect subsidiary of The PNC Financial
Services Group, Inc., serves as custodian for the Portfolio. PFPC Inc. serves
as transfer and dividend disbursing agent.
9
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of the period ended March 31, 2004, affiliated payables were as
follows:
STRATEGIC
----------
PFPC(1) .............. $12,377
BlackRock(2) ......... 5,246
(1) - payables to PFPC are for Accounting, Administration, Custody and Transfer
Agent services provided as of March 31, 2004.
(2) - payables to BlackRock are for Advisory and Administration services
provided as of March 31, 2004.
(C) Purchase and Sales of Securities
For the six months ended March 31, 2004, purchases and sales of investment
securities, other than short-term investments and government securities, were
$56,760,132 and $41,308,213 respectively. For the six months ended March 31,
2004, purchases and sales of government securities were $42,891,095 and
$42,755,132 respectively.
(D) Capital Shares
Transactions in capital shares for each period were as follows:
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
3/31/04 (UNAUDITED) 9/30/03
--------------------- -------------
Shares Sold ........................................ 5,536,840 3,440,828
Shares issued in reinvestment of dividends ......... 151,227 256,206
Shares redeemed .................................... (313,509) (875,984)
--------- ---------
Net increase ....................................... 5,374,558 2,821,050
========= =========
On March 31, 2004, one shareholder held approximately 34% of the
outstanding shares of the Fund.
(E) At March 31, 2004, net assets consisted of:
Capital paid-in ............................................... $ 102,062,693
End of period distributions in excess of net investment income. (1,032,186)
Accumulated net realized loss on investment transactions,
futures contracts and foreign currency related transactions .. (6,441,255)
Net unrealized appreciation on investment transactions,
futures contracts and foreign currency related transactions .. 9,970,835
-------------
$ 104,560,087
=============
(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 tax purposes. There were no long-term capital gain
distributions for the year ended September 30, 2003.
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. 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 September 30, 2003, attributable to
realized foreign currency gains/(losses), bond bifurcation, and foreign futures
realized gains/(losses) were reclassified to the following accounts:
10
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
INCREASE/ ACCUMULATED UNDISTRIBUTED
(DECREASE) NET REALIZED NET INVESTMENT
PAID-IN-CAPITAL GAIN (LOSS) INCOME
----------------- -------------- -----------------
Strategic Portfolio I ......... $- $ 1,338,873 $ (1,338,873)
These reclassifications had no effect on net assets or net asset value per
share.
The tax character of distributions paid during the last two fiscal years
were as follows:
ORDINARY
INCOME
--------------
Strategic Portfolio I
9/30/03 ............. $ 2,261,168
9/30/02 ............. 4,077,762
As of September 30, 2003, the components of distributable
earnings/(accumulated losses) were as follows:
UNDISTRIBUTED UNDISTRIBUTED CAPITAL POST-
ORDINARY LONG-TERM LOSS OCTOBER
INCOME CAPITAL GAIN CARRYFOWARDS LOSSES
--------------- --------------- -------------- --------------------
Strategic Portfolio I ......... $ 69,771 $- $ (590,743) $ (2,169,752)1
1 Includes Post-October currency losses of $2,169,752.
Post-October losses represent losses realized on investment transactions
from November 1, 2002 through September 30, 2003 that, in accordance with
Federal income tax regulations, the Portfolios defer and treat as having arisen
in the following fiscal year. For Federal income tax purposes, capital loss
carryforwards may be carried forward and applied against future capital gains.
At September 30, 2003, the Portfolio had capital loss carryforwards
available to offset future realized capital gains through the indicated
expiration dates.
EXPIRING SEPTEMBER 30
--------------------------------------------------
2009 2010 2011 TOTAL
------------ ----------- ------------ ------------
Strategic Portfolio I ......... $ 276,180 $ 95,501 $ 219,062 $ 590,743
(G) Contingencies
In the normal course of business, the Fund enters into contracts that
provide general indemnifications. The Funds' maximum exposure under these
arrangements is dependent on future claims that may be made against the Funds
and, therefore, cannot be estimated; however, based on experience, the risk of
loss from such claims is considered remote.
11
BLACKROCK FUNDS
ADDITIONAL INFORMATION
(A) PricewaterhouseCoopers LLP ("PwC"), the Fund's former independent auditor,
has been hired as an internal audit supporting service provider by The PNC
Financial Services Group, Inc. ("PNC"), the parent company of the Fund's
investment adviser and certain other service providers. In order to provide
certain services to PNC and its affiliates which would have caused PwC to no
longer be independent with respect to the Fund, PwC declined to stand for
re-election as independent auditor of the Fund after the completion of the
fiscal 2003 audit.
The Fund's Audit Committee approved engaging Deloitte & Touche LLP as the
independent auditor to audit the Fund's financial statements for fiscal
year 2004. 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 2004 audit on
November 21, 2003, 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.
(B) 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.
12
BLACKROCK FUNDS
Investment Adviser
BlackRock Advisors, Inc.
Wilmington, Delaware 19809
Custodian
PFPC Trust Co.
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
New York, New York 10017
Independent Accountants
Deloitte & Touche LLP
Philadelphia, Pennsylvania 19103
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Fund shares.
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
Item 2. Code of Ethics.
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.
Not applicable for reports for periods ending before July 9, 2004.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. 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 10. 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) The Registrant's principal executive officer and principal financial
officer are aware of no changes in the Registrant's internal control over
financial reporting that occurred during the Registrant's most recent
fiscal half-year that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
Item 11. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive officer and principal financial
officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(a)(3) Not applicable.
(b) Certification of principal executive officer and principal financial
officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
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 Funds/SM/
--------------------------------------------------------------------
By (Signature and Title)* /s/ Laurence D. Fink
-------------------------------------------------------
Laurence D. Fink, President and Principal Executive
Officer
Date May 27, 2004
----------------------------------------------------------------------------
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/ Laurence D. Fink
-------------------------------------------------------
Laurence D. Fink, President and Principal Executive
Officer
Date May 27, 2004
----------------------------------------------------------------------------
By (Signature and Title)* /s/ Paul L. Audet
-------------------------------------------------------
Paul L. Audet, Treasurer and Principal Financial
Officer
Date May 27, 2004
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.