N-CSR 1 dncsr.htm BLACKROCK FUNDS, INC. BlackRock Funds, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

 

Investment Company Act file number 811-05742

 

 

BlackRock FundsSM

(Exact name of registrant as specified in charter)

 

 

100 Bellevue Parkway Wilmington, Delaware   19809
(Address of principal executive offices)   (Zip code)

 

 

Brian Kindelan, Esq.

BlackRock Advisors, Inc.

100 Bellevue Parkway

Wilmington, Delaware 19809

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: (800) 441-7762

 

 

Date of fiscal year end: September 30, 2004

 

 

Date of reporting period: September 30, 2004

 

 

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. § 3507.

 


Item 1. Reports to Stockholders.

 

The Report to Shareholders is attached herewith.



FIXED INCOME  LIQUIDITY  EQUITIES  ALTERNATIVESBLACKROCK SOLUTIONS BlackRock
Funds


Equity Portfolios


Annual Report to Shareholders

September 30, 2004

[GRAPHIC OMITTED]




[GRAPHIC OMITTED]



[GRAPHIC OMITTED]




NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE



                                BLACKROCK FUNDS
                               EQUITY PORTFOLIOS
*Large Cap Value Equity
*Large Cap Growth Equity
*Dividend Achievers (TM)
*Mid-Cap Value Equity
*Mid-Cap Growth Equity
                          *Small Cap Value Equity
                          *Small Cap Core Equity
                          *Small Cap Growth Equity
                          *U.S. Opportunities
                          *Global Science & Technology Opportunities
                          *International Equity
                                                     *International
                                                     Opportunities
                                                     *Select Equity
                                                     *Index Equity
                                                     *Balanced
                               TABLE OF CONTENTS

Shareholder Letter..........................................................1
Portfolio Summaries
  Large Cap Value Equity..................................................2-3
  Large Cap Growth Equity.................................................4-5
  Dividend Achievers (TM)...................................................6
  Mid-Cap Value Equity....................................................7-8
  Mid-Cap Growth Equity..................................................9-10
  Small Cap Value Equity................................................11-12
  Small Cap Core Equity.................................................13-14
  Small Cap Growth Equity...............................................15-16
  U.S. Opportunities....................................................17-18
  Global Science & Technology Opportunities.............................19-20
  International Equity..................................................21-22
  International Opportunities...........................................23-24
  Select Equity.........................................................25-26
  Index Equity..........................................................27-28
  Balanced..............................................................29-30
  Note on Performance Information..........................................31
Statement of Net Assets/Schedule of Investments..........................2-73
  Dividend AchieversTM Statement of Assets and Liabilities..................0
  Balanced Statement of Assets and Liabilities.............................73
Portfolio Financial Statements
  Statements of Operations..............................................74-76
  Statements of Changes in Net Assets...................................78-83
  Financial Highlights.................................................84-101
Notes to Financial Statements.........................................102-128
Report of Independent Registered Public Accounting Firm...................129
Fund Management.......................................................130-132
Additional Information....................................................133
DFA Investment Trust Company Annual Report............................135-155

                     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


September 30, 2004


Dear Shareholder:


     We are pleased to present the Annual Report to Shareholders of the
BlackRock Equity Portfolios for the year ended September 30, 2004. The 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   Fund Profile - displays characteristics of each Portfolio's holdings as of
    September 30, 2004.


o   Expense Example - discusses costs in a shareholder account and provides
    information for a shareholder to estimate his or her expenses by share
    class and to compare expenses of each share class to other funds.


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 September 30, 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.

o   Fund Management Table -  lists information regarding BlackRock Funds'
    Trustees and Officers.

     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.


     There were two notable developments for the BlackRock Funds family during
the annual period that we believe will have a favorable impact on BlackRock
Funds shareholders. Effective July 1, 2004, the Board of Trustees of BlackRock
Funds voted to eliminate the 0.15% shareholder processing fee applicable to
Hilliard Lyons and Investor A, B, and C shares. For the Service shares, the
Board of Trustees voted to eliminate the 0.15% shareholder processing fee and
increase the shareholder service fee from 0.15% to 0.25% for a net reduction of
up to 0.05% in net expenses after fee waivers and expense reimbursements.
Additionally, on August 25, 2004, BlackRock, Inc. entered into an agreement
with MetLife, Inc.(Reg. TM) to acquire the parent company of State Street
Research & Management Company, the investment adviser to the State Street
Research mutual funds. In connection with the transaction, it is being proposed
that most of the State Street Research mutual funds will be combined with
various BlackRock Portfolios. Should these fund reorganizations be approved by
shareholders of the State Street Research mutual funds, BlackRock Funds will
expand its fund offerings and services available to shareholders. These
reorganizations are expected to be completed in early 2005. In the event that
BlackRock, Inc. does not complete this proposed acquisition, the fund
reorganizations will not take place.


     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 (9/30/04): $240.0 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  All share classes of the Portfolio underperformed the benchmark for the
year ended September 30, 2004.



     o  After the initial rally in lower quality, higher risk stocks
experienced throughout the first part of calendar year 2003, the markets
continued to advance during the period under review, but the drivers behind
performance were significantly different. The market's overall advance in the
annual period (10/1/03 through 9/30/04) was strong, with the S&P 500 Index
gaining 13.9%, but not as robust as it was during the same time period in the
prior year when the index returned 24.4%. Stock prices continued to advance,
but investors' appetite for risk clearly changed. During the period, investors
favored a more cautious approach, as evidenced by poor returns among riskier,
high beta stocks. In terms of size, small cap stocks continued to dominate
large caps on the whole, with the Russell 2000 Index soundly outperforming the
Russell 1000 Index by almost 500 basis points. Also, there was a pronounced
difference in the performance of growth stocks vs. value stocks, with value
outperforming across all capitalization ranges.



     o  During the annual period, the Large Cap Value model was modestly
helpful in identifying outperforming stocks. The model's valuation component
was particularly strong, driven by factors including forecast
earnings-to-price, and book-to-price. In addition, price momentum was another
strong area for the model, which helped performance relative to the benchmark.



     o  From a sector perspective, the model worked well across most sectors,
with nine of the thirteen sectors posting outperformance relative to the
benchmark. The basic materials and the utilities sectors were the strongest
performing areas, led by gains from Louisiana Pacific (90%) and Texas Utilities
(107%).



     o  Unfortunately, the relatively few sectors that underperformed, namely
telecom, healthcare, and technology, offset the overall strength of the model,
leading to the Portfolio's underperformance relative to the benchmark. In
telecom, underperformance was driven by Cingular's announcement of its
acquisition of AT&T Wireless. In healthcare, the Portfolio's performance was
significantly hindered by its position in Merck, which announced the withdrawal
of Vioxx, a key Merck offering. Merck's shares sank 26% as a result of the
announcement. The technology sector was one of the few sectors in which the
model struggled, leading to poor stock selection in this sector throughout the
annual period.


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
                 -------------          ----------     ------------------------
09/30/1994          $ 10,000              $ 9,548              $ 10,000
12/31/1994            9,979                9,519                 9,842
03/31/1995            10,837               10,327                10,777
06/30/1995            11,693               11,131                11,743
09/30/1995            12,573               11,956                12,769
12/31/1995            13,459               12,784                13,616
03/31/1996            14,222               13,494                14,387
06/30/1996            14,711               13,948                14,635
09/30/1996            15,214               14,410                15,061
12/31/1996            16,715               15,827                16,563
03/31/1997            16,994               16,063                16,987
06/30/1997            19,326               18,238                19,492
09/30/1997            20,944               19,744                21,433
12/31/1997            21,503               20,261                22,390
03/31/1998            24,204               22,768                25,000
06/30/1998            23,841               22,404                25,112
09/30/1998            20,468               19,225                22,203
12/31/1998            23,757               22,280                25,889
03/31/1999            24,028               22,512                26,261
06/30/1999            26,770               25,044                29,222
09/30/1999            23,616               22,079                26,360
12/31/1999            24,622               23,011                27,794
03/31/2000            24,260               22,632                27,927
06/30/2000            23,142               21,564                26,618
09/30/2000            25,090               23,340                28,712
12/31/2000            27,078               25,178                29,745
03/31/2001            25,489               23,650                28,003
06/30/2001            26,233               24,331                29,370
09/30/2001            23,027               21,324                26,153
12/31/2001            24,432               22,596                28,082
03/31/2002            24,324               22,474                29,230
06/30/2002            20,371               18,795                26,741
09/30/2002            16,715               15,418                21,721
12/31/2002            18,579               17,099                23,724
03/31/2003            17,576               16,156                22,569
06/30/2003            20,422               18,769                26,468
09/30/2003            20,714               19,014                27,015
12/31/2003            23,368               21,406                30,848
03/31/2004            24,384               22,314                31,782
06/30/2004            24,461               22,356                32,062
09/30/2004            24,788               22,663                32,557










                      FOR PERIOD ENDING SEPTEMBER 30, 2004

                                 Average Annual Total Return
                                             1 Year       3 Year        5 Year        10 Year
                                          -----------   ----------   ------------   ----------
     Institutional Class                      19.67%        2.49%         0.97%         9.50%
     Service Class                            19.25%        2.16%         0.67%         9.19%
     Investor A Class (Load Adjusted)         13.81%        0.50%        (0.40)%        8.53%
     Investor A Class (NAV)                   19.19%        2.05%         0.52%         9.03%
     Investor B Class (Load Adjusted)         13.84%        0.12%        (0.57)%        8.30%
     Investor B Class (NAV)                   18.34%        1.27%        (0.25)%        8.30%
     Investor C Class (Load Adjusted)         17.36%        1.28%        (0.23)%        8.31%
     Investor C Class (NAV)                   18.36%        1.28%        (0.23)%        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: 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 31
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 VALUE EQUITY PORTFOLIO

FUND PROFILE


    Top Ten Holdings (% of long-term
              investments)
Exxon Mobil Corp.              5.7 %
Citigroup, Inc.                4.7
General Electric Co.           4.7
Bank of America Corp.          4.4
JPMorgan Chase & Co.           2.7
ChevronTexaco Corp.            2.5
Verizon Communications, Inc.   2.4
SBC Communications, Inc.       2.2
U.S. Bancorp                   2.0
Wachovia Corp.                 2.0
                               ---
     Total                     33.3 %
                               =======



 Top Ten Industries (% of long-term
            investments)
Banks                     14.8 %
Oil & Gas                 13.0
Finance                    9.9
Insurance                  5.8
Electronics                5.5
Energy & Utilities         5.5
Telecommunications         5.2
Manufacturing              5.1
Entertainment & Leisure    3.3
Real Estate                2.7
                          ----
     Total                70.8 %
                          ========


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,016.60        1,015.00        1,015.60        1,010.80        1,011.20
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       3.98            5.49            5.85           10.05            9.91



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,021.00        1,019.48        1,019.13        1,014.88        1,015.03
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       4.00            5.52            5.87           10.13            9.97

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.79%, 1.09%, 1.16%, 2.00%,  and 1.97% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).


                                                                               3



                       LARGE CAP GROWTH EQUITY PORTFOLIO



Total Net Assets (9/30/04): $95.1 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
year ended September 30, 2004.



     o  After the initial rally in lower quality, higher risk stocks
experienced throughout the first part of calendar year 2003, the markets
continued to advance during the period under review, but the drivers behind
performance were significantly different. The market's overall advance in the
annual period (10/1/03 through 9/30/04) was strong, with the S&P 500 Index
gaining 13.9%, but not as robust as it was during the same time period in the
prior year when the index returned 24.4%. Stock prices continued to advance,
but investors' appetite for risk clearly changed. During the period, investors
favored a more cautious approach, as evidenced by poor returns among riskier,
high beta stocks. In terms of size, small cap stocks continued to dominate
large caps on the whole, with the Russell 2000 Index soundly outperforming the
Russell 1000 Index by almost 500 basis points. Also, there was a pronounced
difference in the performance of growth stocks vs. value stocks, with value
outperforming across all capitalization ranges.



     o  During the annual period, the Large Cap Growth model was exceptionally
strong in identifying outperforming stocks. The model's valuation component was
particularly helpful, driven by factors including forecast earnings-to-price,
and book-to-price. In addition, the model's earnings expectations component
displayed marked improvement throughout the course of the annual period, and
its earnings revision component was also a significant contributor to
performance.



     o  From a sector perspective, the Portfolio's model worked well across
most sectors during the annual period with nine of the 13 sectors outperforming
the benchmark, led by gains in consumer cyclical and the financial sectors. In
the consumer cyclical sector, returns were propelled by the heady gains of
Black & Decker (94%) and Foot Locker (48%), while Capital One Financial (30%)
led the way in the financial sector.


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
                 -------------          ----------     -------------------------
09/30/1994          $ 10,000              $ 9,549               $ 10,000
12/31/1994            9,904                9,444                 10,075
03/31/1995            10,804               10,294                 11,034
06/30/1995            11,772               11,207                 12,119
09/30/1995            12,988               12,343                 13,219
12/31/1995            13,315               12,644                 13,821
03/31/1996            14,158               13,435                 14,563
06/30/1996            14,991               14,206                 15,489
09/30/1996            15,413               14,587                 16,047
12/31/1996            16,025               15,145                 17,016
03/31/1997            15,924               15,043                 17,108
06/30/1997            18,942               17,877                 20,343
09/30/1997            20,606               19,427                 21,872
12/31/1997            20,579               19,371                 22,204
03/31/1998            24,045               22,600                 25,569
06/30/1998            25,569               24,011                 26,729
09/30/1998            23,029               21,595                 24,301
12/31/1998            29,081               27,245                 30,801
03/31/1999            31,375               29,355                 32,758
06/30/1999            31,956               29,876                 34,020
09/30/1999            31,196               29,134                 32,772
12/31/1999            39,696               37,051                 41,013
03/31/2000            42,024               39,156                 43,935
06/30/2000            40,666               37,875                 42,749
09/30/2000            38,338               35,632                 40,450
12/31/2000            29,625               27,497                 31,818
03/31/2001            21,503               19,937                 25,168
06/30/2001            22,438               20,769                 27,287
09/30/2001            17,030               15,758                 21,990
12/31/2001            19,369               17,901                 25,319
03/31/2002            18,845               17,387                 24,665
06/30/2002            15,102               13,935                 20,059
09/30/2002            12,557               11,562                 17,041
12/31/2002            13,399               12,323                 18,259
03/31/2003            13,212               12,129                 18,064
06/30/2003            14,803               13,580                 20,649
09/30/2003            15,308               14,023                 21,457
12/31/2003            16,824               15,404                 23,691
03/31/2004            17,236               15,758                 23,877
06/30/2004            17,460               15,935                 24,340
09/30/2004            16,693               15,227                 23,068








                      FOR PERIOD ENDING SEPTEMBER 30, 2004

                                   Average Annual Total Return
                                            1 Year         3 Year          5 Year         10 Year
                                          ----------   -------------   --------------   ----------
     Institutional Class                      9.05%         (0.66)%         (11.75)%        5.26%
     Service Class                            8.59%         (1.01)%         (12.04)%        4.93%
     Investor A Class (Load Adjusted)         3.74%         (2.64)%         (12.97)%        4.29%
     Investor A Class (NAV)                   8.59%         (1.14)%         (12.17)%        4.78%
     Investor B Class (Load Adjusted)         3.26%         (3.06)%         (13.09)%        4.08%
     Investor B Class (NAV)                   7.76%         (1.90)%         (12.83)%        4.08%
     Investor C Class (Load Adjusted)         6.77%         (1.87)%         (12.85)%        4.07%
     Investor C Class (NAV)                   7.77%         (1.87)%         (12.85)%        4.07%

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 31
FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED, INCLUDING
IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.








PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Although the holdings and sectors
listed above were current as of the periods indicated, the Portfolio is
actively managed and its composition will vary.


4



                       LARGE CAP GROWTH EQUITY PORTFOLIO

FUND PROFILE


  Top Ten Holdings (% of long-term investments)
Pfizer, Inc.                            4.6 %
Microsoft Corp.                         4.6
Johnson & Johnson                       4.3
Procter & Gamble Co.                    2.9
International Business Machines Corp.   2.8
Intel Corp.                             2.3
American International Group, Inc.      2.2
The Home Depot, Inc.                    2.1
Wal-Mart Stores, Inc.                   2.0
Pepsico, Inc.                           1.8
                                        ---
     Total                              29.6 %
                                        =======



    Top Ten Industries (% of long-term
               investments)
Computer Software & Services     11.5 %
Pharmaceuticals                  10.3
Retail Merchandising              9.1
Medical Instruments & Supplies    7.7
Manufacturing                     6.6
Computer & Office Equipment       6.4
Electronics                       5.3
Finance                           5.2
Medical & Medical Services        4.7
Soaps & Cosmetics                 3.7
                                 ----
     Total                       70.5 %
                                 ========


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                     968.50          965.70          966.30          962.30          962.30
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       4.04            5.50            6.19            9.96            9.96



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        --------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,020.85        1,019.33        1,018.62        1,014.72        1,014.72
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       4.15            5.67            6.38           10.28           10.28

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.82%, 1.12%, 1.26%, 2.03%, and 2.03% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).


                                                                               5



                       DIVIDEND ACHIEVERS PORTFOLIO(TM)



Inception Date: September 8, 2004












Total Net Assets (9/30/04): $2.0 million












Performance Benchmark

     Russell 1000 Value Index
Investment Approach


     Seeks to provide total return through a combination of current income and
capital appreciation by investing primarily in U.S. large-capitalization common
stocks with long-term consistent dividend-paying histories. The Portfolio
normally invests at least 80% of its assets in common stocks included in the
universe of common stocks which Mergent(Reg. TM), a recognized provider of
financial information, has identified as Dividend Achievers(TM). To qualify for
the Dividend Achievers(TM) universe, an issuer must have raised its annual
regular cash dividend on a pre-tax basis for at least each of the last ten
consecutive years. These issuers are also subject to additional screening
criteria applied by Mergent(Reg. TM) such as liquidity, asset size and number
of shareholders. The Portfolio will be constructed from a broad universe of
stocks that the management team believes to be value stocks and all stocks in
the Dividend Achievers(TM) universe. The management team screens these issuers
utilizing BlackRock's proprietary Quantitative Equity Model, which uses
earnings momentum and valuation factors to rank stocks within a sector and
industry based upon their expected return, to continuously evaluate the
Portfolio's holdings. The Portfolio will be constructed with consideration of
the characteristics of the Russell 1000 Value Index, such as style, sector,
industry, capitalization and volatility. The Portfolio may invest up to 20% of
its assets in common stocks of issuers that are not included in the Dividend
Achievers(TM) universe, and in fixed income securities when, in the opinion of
the management team, it is advantageous for the Portfolio to do so.


--------------------------------------------------------------------------------
FUND PROFILE


    Top Ten Holdings (% of long-term
              investments)
Exxon Mobil Corp.              5.6 %
General Electric Co.           5.1
ChevronTexaco Corp.            4.3
Citigroup, Inc.                4.3
Bank of America Corp.          3.9
Wells Fargo & Co.              2.6
Altria Group, Inc.             2.4
SBC Communications, Inc.       2.4
Verizon Communications, Inc.   1.9
McDonald's Corp.               1.9
                               ---
     Total                     34.4 %
                               =======



   Top Ten Industries (% of
    long-term investments)
Finance              12.5 %
Oil & Gas            11.4
Banks                11.4
Insurance             6.4
Electronics           5.8
Energy & Utilities    5.0
Telecommunications    4.8
Real Estate           4.8
Chemicals             3.5
Manufacturing         3.4
                     ----
  Total              69.0 %
                     ========


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period September 8, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (9/8/04)          $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                     996.00          996.00          996.00          996.00          996.00
Expenses Incurred
 During Period
 (9/8/04 - 9/30/04)              0.54            0.72            0.78            1.23            1.23



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (9/8/04)          $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,024.45        1,024.27        1,024.21        1,023.75        1,023.75
Expenses Incurred
 During Period
 (9/8/04 - 9/30/04)              0.55            0.73            0.79            1.25            1.25

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.90%, 1.20%, 1.30%, 2.05%, and  2.05% for the Institutional, Service
Classes, Investor A, B, and C share classes, respectively, multiplied by the
average account value over the period, multiplied by 22/366 (to reflect the
period the fund was open during the one-half year period).


6



                        MID-CAP VALUE EQUITY PORTFOLIO



Total Net Assets (9/30/04): $34.5 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  All share classes of the Portfolio underperformed the benchmark for the
year ended September 30, 2004.



     o  For the first half of the annual period, the Portfolio rose sharply as
a result of the strong economic recovery. The Institutional share class of the
Portfolio outperformed its benchmark whereas the Service and Investor A share
classes performed in line with the benchmark. Investor B and C share classes
underperformed the benchmark. Positive stock selection in the consumer
discretionary and consumer staples sectors benefited performance. Within
consumer discretionary, our gaming holdings added substantial value, benefiting
from increased attendance at casinos and other gaming locations, and the
expansion of gaming into new jurisdictions. Robust consumer spending also aided
our holdings in the consumer staples sector, where we experienced broad
success.



     o  Holdings in the financial sector also boosted the Portfolio's
performance during this period, with the best results coming from our positions
in commercial banks. Our information technology holdings contributed to the
Portfolio's overall gain, but could not keep pace with those of the Index.
Sector allocation decisions did not contribute materially to performance during
this period.



     o  In the second half of the annual period, all share classes
underperformed the benchmark. The utilities sector was the top performing
sector in the Portfolio on good stock selection. Stock selection in the
information technology and consumer discretionary sectors also added value, but
were overshadowed by negative results in the consumer staples and financials
sectors. Our insurance holdings accounted for the poor performance in the
financial sector, with Allmerica Financial Corporation retreating after being a
top performer in 2003.



     o  In the third quarter of 2004, we increased our investments in the
materials and utilities sectors, while reducing our positions in the
industrials and consumer discretionary sectors. As of quarter-end, the
Portfolio's largest overweight was in the industrials sector. The largest
relative underweight was in the financials sector. In general, sector
allocation is a function of our bottom-up stock selection process, and is
therefore dependent on where we find attractive stocks within the universe.


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.




                                  [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            13,577               12,540                 18,496
12/31/2003            15,538               14,354                 21,311
03/31/2004            16,506               15,222                 22,450
06/30/2004            16,857               15,526                 22,838
09/30/2004            16,796               15,459                 23,234








                      FOR PERIOD ENDING SEPTEMBER 30, 2004

                                   Average Annual Total Return
                                             1 Year       3 Year       5 Year      From Inception
                                          -----------   ----------   ----------   ---------------
     Institutional Class                      23.82%        9.99%        6.96%          6.91%
     Service Class                            23.43%        9.66%        6.64%          6.59%
     Investor A Class (Load Adjusted)         17.69%        7.83%        5.50%          5.77%
     Investor A Class (NAV)                   23.28%        9.49%        6.46%          6.40%
     Investor B Class (Load Adjusted)         17.86%        7.69%        5.35%          5.66%
     Investor B Class (NAV)                   22.36%        8.68%        5.67%          5.66%
     Investor C Class (Load Adjusted)         21.36%        8.68%        5.67%          5.66%
     Investor C Class (NAV)                   22.36%        8.68%        5.67%          5.66%

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 31 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


                                                                               7



                        MID-CAP VALUE EQUITY PORTFOLIO

FUND PROFILE


  Top Ten Holdings (% of long-term investments)
Sovereign Bancorp, Inc.                 3.2 %
The Black & Decker Corp.                2.7
Talisman Energy, Inc.                   2.5
Fisher Scientific International, Inc.   2.4
Regis Corp.                             2.4
Popular, Inc.                           2.4
Briggs & Stratton Corp.                 2.3
Jarden Corp.                            2.3
Banknorth Group, Inc.                   2.3
McAfee, Inc.                            2.2
                                        ---
     Total                              24.7 %
                                        =======



   Top Ten Industries (% of long-term
              investments)
Manufacturing                  13.2 %
Banks                          12.6
Energy & Utilities              8.7
Retail Merchandising            7.9
Oil & Gas                       7.0
Insurance                       6.0
Computer Software & Services    5.9
Finance                         4.8
Entertainment & Leisure         4.5
Medical & Medical Services      3.9
                               ----
     Total                     74.5 %
                               ========


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,017.60        1,016.90        1,015.50        1,011.50        1,011.50
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       6.36            7.87            8.47           12.37           12.37



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,018.62        1,017.10        1,016.50        1,012.55        1,012.55
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       6.38            7.90            8.51           12.45           12.45

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.26%, 1.56%, 1.68%, 2.46%, and 2.46% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).


8



                        MID-CAP GROWTH EQUITY PORTFOLIO



Total Net Assets (9/30/04): $122.2 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
year ended September 30, 2004.



     o  During the fourth quarter of 2003, 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. Another area where stock selection was
strong was within the information technology sector. Conversely, despite
positive stock returns within the consumer staples sector, our holdings within
the sector underperformed those within the index. Holdings within the consumer
discretionary sector also detracted from relative performance.



     o  During the first quarter of 2004, 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. Stock
selection was also a benefit in the consumer discretionary sector. Holdings in
the specialty retail industry were particularly robust. In terms of sector
selection, the Portfolio's overweight in the energy and healthcare sectors also
contributed positively to performance. There were performance detractors,
however, with notable laggards being security selection within the
biotechnology and healthcare providers and services industries.



     o  In the second half of the annual period, sector selection contributed
negatively to relative performance, led by the Portfolio's overweight in the
health care sector and underweight in the financials sector. The Portfolio's
overweight in the energy sector, however, contributed positively to relative
performance. In general, sector allocation is a function of our bottom-up stock
selection process, and is therefore dependent on where we find attractive
stocks within the universe.


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.




                                   [LINE CHART]

                 Institutional          Investor A     Russell Midcap Growth Index
                 -------------          ----------     ---------------------------
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
06/30/2004            19,677               18,083                 16,919
09/30/2004            18,715               17,189                 16,186










                      FOR PERIOD ENDING SEPTEMBER 30, 2004

                                    Average Annual Total Return
                                             1 Year       3 Year         5 Year       From Inception
                                          -----------   ----------   -------------   ---------------
     Institutional Class                      15.72%        5.36%         (0.60)%          8.41%
     Service Class                            15.42%        5.04%         (0.90)%          8.08%
     Investor A Class (Load Adjusted)          9.99%        3.22%         (2.01)%          7.23%
     Investor A Class (NAV)                   15.20%        4.83%         (1.10)%          7.87%
     Investor B Class (Load Adjusted)          9.89%        2.98%         (1.99)%          7.12%
     Investor B Class (NAV)                   14.39%        4.07%         (1.81)%          7.12%
     Investor C Class (Load Adjusted)         13.39%        4.07%         (1.80)%          7.13%
     Investor C Class (NAV)                   14.39%        4.07%         (1.80)%          7.13%

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 31 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



                        MID-CAP GROWTH EQUITY PORTFOLIO

FUND PROFILE


 Top Ten Holdings (% of long-term investments)
Willis Group Holdings Ltd.             2.9 %
McAfee, Inc.                           2.6
BISYS Group, Inc.                      2.6
Laboratory Corp. of America Holdings   2.4
Staples, Inc.                          2.3
GTECH Holdings Corp.                   2.3
St. Jude Medical, Inc.                 2.3
Limited Brands, Inc.                   2.3
Manpower, Inc.                         2.3
Ceridian Corp.                         2.2
                                       ---
     Total                             24.2 %
                                       =======



     Top Ten Industries (% of long-term
                investments)
Computer Software & Services       14.9 %
Pharmaceuticals                    11.2
Retail Merchandising               11.1
Medical Instruments & Supplies     10.0
Medical & Medical Services          8.3
Oil & Gas                           7.2
Business Services                   6.2
Semiconductors & Related Devices    5.1
Telecommunications                  4.5
Restaurants                         3.0
                                   ----
     Total                         81.5 %
                                   ========


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                     962.60          960.30          959.30          956.10        1,024.90
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       6.03            7.50            8.08           11.93           12.40



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,018.77        1,017.25        1,016.65        1,012.65        1,012.60
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       6.23            7.75            8.35           12.35           12.40

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.23%, 1.53%, 1.65%, 2.44%, and 2.45% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).


10



                       SMALL CAP VALUE EQUITY PORTFOLIO



Total Net Assets (9/30/04): $132.1 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  All share classes of the Portfolio underperformed the benchmark for the
year ended September 30, 2004.



     o  During the first half of the annual period, the Portfolio rose sharply
as a result of the strong economic recovery. Institutional and Service share
classes of the Portfolio outperformed the benchmark. The other share classes
underperformed the benchmark. The consumer discretionary and consumer staples
sectors featured the best stock selection, but were somewhat offset by stock
selection decisions in the information technology and health care sectors.



     o  Within consumer discretionary, our gaming holdings added substantial
value, benefiting from increased attendance at casinos and other gaming
locations, and the expansion of gaming into new jurisdictions. Robust consumer
spending also aided our holdings in the consumer staples sector, where we
experienced broad success. Sector selection contributed positively, and our
underweight position in financials added value.



     o  In the second half of the annual period, all share classes of the
Portfolio underperformed the benchmark. The industrials sector posted the
strongest returns in the Portfolio, bolstered by positive stock selection
across multiple industries. This was overshadowed, however, by stock selection
in consumer discretionary and financials. Performance in these two sectors led
the Portfolio to fall short of the Index. Our gaming holdings which had
performed well in the first half, pulled back during this period and accounted
for the weakness in the consumer discretionary sector. Within financials, our
insurance holdings accounted for the poor performance in the sector, with
Allmerica Financial Corporation retreating after being a top performer in 2003.




     o  Our underweight in the information technology sector provided positive
results in the second half, and we maintain that position as we believe that
expectations for many of these stocks remain too high. During the third
quarter, we increased our investments in the financials and utilities sectors.
We reduced our holdings in the industrials sector and sold several stocks which
had reached our price targets, but still have an overweight in the sector. In
general, sector allocation is a function of our bottom-up stock selection
process, and is therefore dependent on where we find attractive stocks within
the universe. In addition to technology, we also remain underweight in the
financials sector, largely due to our underexposure to Real Estate Investment
Trusts.


COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP VALUE
                                EQUITY PORTFOLIO
            AND THE RUSSELL 2000VALUE INDEX FOR THE PAST TEN YEARS.





                                  [LINE CHART]

                 Institutional          Investor A     Russell 2000 Value Index
                 -------------          ----------     ------------------------
09/30/1994          $ 10,000              $ 9,550              $ 10,000
12/31/1994            9,814                9,369                 9,703
03/31/1995            10,139                9,672                10,062
06/30/1995            10,728               10,218                10,945
09/30/1995            11,743               11,169                11,856
12/31/1995            12,085               11,489                12,202
03/31/1996            12,732               12,084                12,737
06/30/1996            13,170               12,477                13,257
09/30/1996            13,227               12,517                13,455
12/31/1996            14,486               13,711                14,809
03/31/1997            14,370               13,578                14,772
06/30/1997            17,041               16,087                17,001
09/30/1997            19,491               18,380                19,193
12/31/1997            19,663               18,515                19,516
03/31/1998            21,207               19,941                21,147
06/30/1998            20,094               18,873                20,384
09/30/1998            16,171               15,177                16,741
12/31/1998            18,440               17,290                18,261
03/31/1999            15,732               14,721                16,491
06/30/1999            18,454               17,246                19,221
09/30/1999            17,015               15,892                17,718
12/31/1999            17,547               16,367                17,990
03/31/2000            17,988               16,757                18,676
06/30/2000            18,278               17,017                19,041
09/30/2000            19,934               18,529                20,438
12/31/2000            21,119               19,632                22,095
03/31/2001            20,454               18,992                22,310
06/30/2001            22,840               21,179                24,906
09/30/2001            20,027               18,545                21,585
12/31/2001            22,349               20,671                25,194
03/31/2002            24,256               22,409                27,609
06/30/2002            22,836               21,082                27,023
09/30/2002            18,375               16,929                21,270
12/31/2002            18,638               17,160                22,317
03/31/2003            18,402               16,926                21,183
06/30/2003            22,059               20,264                25,997
09/30/2003            23,879               21,902                28,005
12/31/2003            27,572               25,259                32,589
03/31/2004            29,772               27,245                34,844
06/30/2004            29,620               27,087                35,139
09/30/2004            28,862               26,366                35,192









                      FOR PERIOD ENDING SEPTEMBER 30, 2004

                                  Average Annual Total Return
                                             1 Year        3 Year        5 Year       10 Year
                                          -----------   -----------   -----------   -----------
     BlackRock Class                          20.95%        12.98%        11.16%        11.19%
     Institutional Class                      20.87%        12.95%        11.15%        11.18%
     Service Class                            20.45%        12.59%        10.82%        10.85%
     Investor A Class (Load Adjusted)         14.98%        10.74%         9.65%        10.18%
     Investor A Class (NAV)                   20.38%        12.45%        10.66%        10.69%
     Investor B Class (Load Adjusted)         14.95%        10.77%         9.56%         9.89%
     Investor B Class (NAV)                   19.45%        11.60%         9.83%         9.89%
     Investor C Class (Load Adjusted)         18.53%        11.60%         9.84%         9.89%
     Investor C Class (NAV)                   19.53%        11.60%         9.84%         9.89%

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 31
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



                       SMALL CAP VALUE EQUITY PORTFOLIO

FUND PROFILE


 Top Ten Holdings (% of long-term investments)
Handleman Co.                          2.6 %
Washington Group International, Inc.   2.4
Jarden Corp.                           2.2
Regis Corp.                            2.1
Briggs & Stratton Corp.                2.1
Sky Financial Group, Inc.              1.9
Cytec Industries, Inc.                 1.9
Ocular Sciences, Inc.                  1.8
Provident Bankshares Corp.             1.8
Sybron Dental Specialties, Inc.        1.8
                                       ---
     Total                             20.6 %
                                       =======



   Top Ten Industries (% of long-term
              investments)
Banks                          12.2 %
Oil & Gas                      11.2
Retail Merchandising            9.2
Manufacturing                   8.2
Entertainment & Leisure         6.7
Finance                         5.3
Computer Software & Services    4.7
Medical & Medical Services      4.2
Construction                    4.0
Food & Agriculture              3.6
                               ----
     Total                     69.3 %
                               ========


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                                Actual Expenses
                        -----------------------------------------------------------------------------------------------
                           BlackRock     Institutional      Service         Investor        Investor        Investor
                             Class           Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)        $  1,000.00     $  1,000.00     $  1,000.00     $  1,000.00     $  1,000.00     $  1,000.00
Ending Account Value
 (9/30/04)                  950.70          969.40          967.30          967.70          964.30          964.30
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                    5.01            4.78            6.25            6.54            9.92           10.17



                                                             Hypothetical Expenses
                                                          (5% return before expenses)
                        -----------------------------------------------------------------------------------------------
                           BlackRock     Institutional      Service         Investor        Investor        Investor
                             Class           Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)        $  1,000.00     $  1,000.00     $  1,000.00     $  1,000.00     $  1,000.00     $  1,000.00
Ending Account Value
 (9/30/04)                1,019.80        1,020.09        1,018.57        1,018.27        1,014.77        1,014.52
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                    5.20            4.91            6.43            6.73           10.23           10.48

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.10%, 0.97%, 1.27%, 1.33%, 2.02%, and 2.07% for BlackRock, the
Institutional, Service, Investor A, B, and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 183/366
(to reflect the one-half year period) except BlackRock class which was
multiplied by 171/366 (to reflect the period this class was open during the
one-half year period).


12



                        SMALL CAP CORE EQUITY PORTFOLIO



Total Net Assets (9/30/04): $9.5 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
year ended September 30, 2004.



     o  During the first half of the annual period the portfolio rose sharply,
benefiting from the strong economic recovery. Positive stock selection across
many sectors accounted for the Portfolio's outperformance of the benchmark.
Holdings in information technology (IT) produced the greatest results, led by
investments in communications equipment and internet software and services
stocks. Strong same-store sales numbers posted during this period propelled the
Portfolio's specialty retail stocks, making the consumer discretionary sector
another significant positive contributor to the Portfolio's performance.



     o  Stock selection in the financials, health care, and industrials sectors
also added value during the first half of the annual period, and there were no
major detractors. Sector allocation was flat for the period, with slightly
positive results in some sectors canceling out slightly negative effects in
others.



     o  In the second half of the annual period, small cap stocks receded from
their rapid ascent, and the Portfolio slightly underperformed the benchmark
during this period. IT stocks sold off as investors switched to a more
defensive stance amidst rising interest rates and oil prices. This sector was
the largest detractor in the Portfolio, though the Portfolio's underweight
positioning proved beneficial during the period. Stock selection in the
financials sector also hampered returns as some of the Portfolio's insurance
holdings performed relatively poorly. Specialty retail holdings boosted the
Portfolio again in the second half of the year, and we continue to find
attractive investments in this industry.



     o  Recently, we've added exposure to the financials, energy, and consumer
staples sectors, while trimming holdings in consumer discretionary and
information technology. As of the end of the third quarter of 2004, the
Portfolio remained underweight in financials, favoring stocks in the industrial
and healthcare sectors over interest-rate sensitive investments.


COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP CORE
                                EQUITY PORTFOLIO
                   AND THE RUSSELL 2000 INDEX FROM INCEPTION.




                              [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            11,990               11,387             10,245
12/31/2003            14,009               13,285             11,733
03/31/2004            15,566               14,744             12,467
06/30/2004            15,586               14,753             12,526
09/30/2004            14,929               14,120             12,168











                      FOR PERIOD ENDING SEPTEMBER 30, 2004

                      Average Annual Total Return
                                             1 Year      From Inception
                                          -----------   ---------------
     Institutional Class                      24.41%          15.73%
     Service Class                            24.07%          15.62%
     Investor A Class (Load Adjusted)         17.72%          13.41%
     Investor A Class (NAV)                   23.90%          15.56%
     Investor B Class (Load Adjusted)         18.56%          14.27%
     Investor B Class (NAV)                   23.06%          15.28%
     Investor C Class (Load Adjusted)         22.06%          15.28%
     Investor C Class (NAV)                   23.06%          15.28%

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 31 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.



PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares.  Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.


                                                                              13



                        SMALL CAP CORE EQUITY PORTFOLIO

FUND PROFILE


     Top Ten Holdings (% of long-term
               investments)
Inveresk Research Group, Inc.     2.4 %
Navigant Consulting, Inc.         2.2
TIBCO Software, Inc.              2.1
Harvest Natural Resources, Inc.   1.7
Hologic, Inc.                     1.7
Digitas, Inc.                     1.7
Nu Skin Enterprises, Inc.         1.5
Kerzner International, Ltd.       1.5
Laureate Education, Inc.          1.5
Jarden Corp.                      1.5
                                  ---
     Total                        17.8 %
                                  =======



   Top Ten Industries (% of long-term
              investments)
Oil & Gas                      9.9 %
Banks                          9.7
Medical & Medical Services     8.4
Business Services              6.8
Computer Software & Services   6.7
Entertainment & Leisure        5.9
Pharmaceuticals                5.7
Electronics                    4.3
Construction                   4.0
Retail Merchandising           3.6
                               ---
     Total                     65.0 %
                               =======


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                     959.10          955.90          957.70          954.30          954.30
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       6.37            7.82            8.52           12.17           12.07



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,018.42        1,016.90        1,016.19        1,012.39        1,012.50
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       6.58            8.10            8.81           12.61           12.50

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.30%, 1.60%, 1.74%, 2.49%, and 2.47% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).


14



                       SMALL CAP GROWTH EQUITY PORTFOLIO



Total Net Assets (9/30/04): $471.7 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
year ended September 30, 2004.



     o  During the fourth quarter of 2003, the Portfolio strongly outperformed
its benchmark index. 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. Strong security selection within the industrial,
commercial services and supplies and machinery industry sectors also added
value to the Portfolio.



     o  Also during the fourth quarter of 2003, the Portfolio suffered from
poor stock selection in the financial sector, as positions in the capital
markets industry lagged. Despite positive stock returns within the energy
sector, our holdings within the sector underperformed those within the index.
The Portfolio's underweight in the financial sector also negatively affected
relative performance.
     o  In the first quarter of 2004, all share classes outperformed the
benchmark. Stock selection within the healthcare and industrials sectors
benefited performance. Strong stock selection within the industrial,
commercial services and supplies, aerospace and defense industry sectors also
added value to the Portfolio, as did stock selection within information
technology, especially within the Internet software and services industry.



     o  In the second half of the annual period, security selection within the
consumer discretionary sector was the main detractor from relative performance,
with holdings in the media and specialty retail industries among the laggards.
However, stock selection within the consumer discretionary sector was one of
the strongest contributors to relative performance during the third quarter of
2004. During the quarter, we increased our positions in the consumer
discretionary, information technology, and materials sectors, while reducing
our exposure to the energy and industrials sectors.


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
                 -------------          ----------     -------------------------
09/30/1994          $ 10,000              $ 9,547               $ 10,000
12/31/1994            10,807               10,311                  9,926
03/31/1995            11,478               10,943                 10,470
06/30/1995            12,977               12,358                 11,509
09/30/1995            14,850               14,132                 12,818
12/31/1995            15,945               15,094                 13,007
03/31/1996            17,989               17,009                 13,754
06/30/1996            20,596               19,453                 14,558
09/30/1996            21,662               20,462                 14,434
12/31/1996            20,980               19,793                 14,472
03/31/1997            16,899               15,916                 12,954
06/30/1997            20,576               19,367                 15,228
09/30/1997            25,104               23,590                 17,805
12/31/1997            22,911               21,505                 16,346
03/31/1998            25,116               23,537                 18,288
06/30/1998            24,164               22,628                 17,238
09/30/1998            19,598               18,327                 13,384
12/31/1998            24,601               22,970                 16,548
03/31/1999            25,272               23,591                 16,270
06/30/1999            26,403               24,618                 18,670
09/30/1999            28,406               26,458                 17,752
12/31/1999            42,427               39,483                 23,680
03/31/2000            51,052               47,452                 25,879
06/30/2000            46,247               42,877                 23,972
09/30/2000            46,312               42,852                 23,019
12/31/2000            36,782               34,018                 18,369
03/31/2001            27,728               25,634                 15,576
06/30/2001            29,827               27,534                 18,376
09/30/2001            21,430               19,754                 13,216
12/31/2001            24,150               22,223                 16,674
03/31/2002            22,726               20,891                 16,347
06/30/2002            19,568               17,960                 13,781
09/30/2002            16,429               15,064                 10,816
12/31/2002            17,542               16,059                 11,627
03/31/2003            16,794               15,366                 11,176
06/30/2003            20,791               19,008                 13,875
09/30/2003            22,379               20,447                 15,328
12/31/2003            27,235               24,834                 17,272
03/31/2004            29,225               26,611                 18,236
06/30/2004            28,604               26,042                 18,253
09/30/2004            26,505               24,106                 17,155











                      FOR PERIOD ENDING SEPTEMBER 30, 2004

                                  Average Annual Total Return
                                             1 Year       3 Year         5 Year        10 Year
                                          -----------   ----------   -------------   -----------
     Institutional Class                      18.43%        7.34%         (1.38)%        10.24%
     Service Class                            18.07%        7.01%         (1.64)%         9.88%
     Investor A Class (Load Adjusted)         12.71%        5.25%         (2.75)%         9.20%
     Investor A Class (NAV)                   18.00%        6.86%         (1.84)%         9.70%
     Investor B Class (Load Adjusted)         12.50%        5.00%         (2.77)%         8.99%
     Investor B Class (NAV)                   17.00%        6.04%         (2.54)%         8.99%
     Investor C Class (Load Adjusted)         16.09%        6.07%         (2.52)%         9.00%
     Investor C Class (NAV)                   17.09%        6.07%         (2.52)%         9.00%

THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 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 31 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



                       SMALL CAP GROWTH EQUITY PORTFOLIO

FUND PROFILE


    Top Ten Holdings (% of long-term
              investments)
Navigant Consulting, Inc.       2.4 %
Laureate Education, Inc.        2.3
Too, Inc.                       2.0
Inveresk Research Group, Inc.   2.0
McDATA Corp.                    2.0
Airgas, Inc.                    1.9
DigitalNet Holdings, Inc.       1.8
Hologic, Inc.                   1.8
Forest Oil Corp.                1.8
Watson Wyatt & Co. Holdings     1.8
                                ---
     Total                      19.8 %
                                =======



     Top Ten Industries (% of long-term
                investments)
Computer Software & Services       17.6 %
Business Services                  15.0
Oil & Gas                           9.2
Retail Merchandising                8.6
Medical Instruments & Supplies      6.4
Pharmaceuticals                     6.2
Medical & Medical Services          5.7
Semiconductors & Related Devices    3.9
Broadcasting                        3.8
Chemicals                           2.9
                                   ----
     Total                         79.3 %
                                   ========


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                     906.90          905.70          905.90          901.70          901.80
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       4.53            5.72            6.10            9.79            9.94



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,020.19        1,018.93        1,018.52        1,014.57        1,014.42
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       4.81            6.08            6.48           10.43           10.58

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.95%, 1.20%, 1.28%, 2.06%, and 2.09% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).


16



                         U.S. OPPORTUNITIES PORTFOLIO



Total Net Assets (9/30/04): $100.9 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 its benchmark for the
year ended September 30, 2004.



     o  During the first half of the annual period, the Portfolio outperformed
its benchmark. The chief contributors to this outperformance were our
long-standing macro-strategy positions, which favors industrials and materials,
and strong stock selection. Materials stocks, particularly metals and mining,
were the strongest areas. Several factors contributed to this sector's
strength, including a weak U.S. dollar, lack of capacity expansion and
improving global demand. The Portfolio's allocation to financials also
contributed to its outperformance. The Portfolio had no exposure to REITs
during the period, which underperformed the index, and was overweight capital
markets-related companies, which rose sharply during the period.



     o  The information technology (IT) and healthcare sectors detracted from
performance during the first half of the annual period. After a strong
performance in January 2004, investing in the IT sector became more challenging
as growth slowed and companies began to miss earnings. The Portfolio's
overweight, combined with poor stock selection, hurt its performance relative
to the benchmark. Healthcare was also a relative underperformer due to poor
stock selection.



     o  In the second half of the annual period, the Portfolio's performance
was aided by the positions in the industrials, materials and utilities sectors.
Conversely, exposure to the financial services, energy and consumer
discretionary sectors hindered relative performance. The Portfolio benefited
from strong stock picking in the industrials sector. Elsewhere in the Portfolio
a lack of exposure to REITs was a negative contributor to performance. Despite
a selloff in the REIT sector in April 2004, the sector rebounded sharply as
investors continue to seek financial instruments that provide income and
interest rates remain at relatively low levels.


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.




                              [LINE CHART]

                 Institutional          Investor A     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              8,645
06/30/1999            20,950               19,810              9,897
09/30/1999            24,730               23,362              9,234
12/31/1999            41,897               39,519             11,107
03/31/2000            55,260               52,070             12,415
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             10,447
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             12,034
06/30/2002            25,578               23,840             11,072
09/30/2002            20,257               18,863              9,084
12/31/2002            20,381               18,951              9,693
03/31/2003            19,854               18,451              9,318
06/30/2003            23,732               22,014             11,230
09/30/2003            25,686               23,811             12,104
12/31/2003            30,122               27,890             13,843
03/31/2004            31,503               29,127             14,689
06/30/2004            31,782               29,362             14,773
09/30/2004            31,549               29,127             14,495









                      FOR PERIOD ENDING SEPTEMBER 30, 2004


                                   Average Annual Total Return
                                             1 Year       3 Year       5 Year      From Inception
                                          -----------   ----------   ----------   ---------------
     Institutional Class                      22.83%        5.26%        4.99%          19.61%
     Service Class                            22.50%        4.93%        4.64%          19.23%
     Investor A Class (Load Adjusted)         16.22%        3.01%        3.45%          18.13%
     Investor A Class (NAV)                   22.33%        4.79%        4.51%          19.08%
     Investor B Class (Load Adjusted)         16.85%        2.90%        3.46%          18.22%
     Investor B Class (NAV)                   21.35%        3.99%        3.73%          18.22%
     Investor C Class (Load Adjusted)         20.30%        3.99%        3.71%          18.21%
     Investor C Class (NAV)                   21.30%        3.99%        3.71%          18.21%

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 31 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.






PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares.  Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.


                                                                              17



                         U.S. OPPORTUNITIES PORTFOLIO

FUND PROFILE


  Top Ten Holdings (% of long-term
            investments)
Noble Energy, Inc.          1.5 %
Hilton Hotels Corp.         1.4
Chesapeake Energy Corp.     1.3
Joy Global, Inc.            1.3
UGI Corp.                   1.3
PPL Corp.                   1.3
Colonial Bancgroup, Inc.    1.3
EGL, Inc.                   1.3
Comverse Technology, Inc.   1.3
MDU Resources Group, Inc.   1.2
                            ---
     Total                  13.2 %
                            =======



   Top Ten Industries (% of long-term
              investments)
Business Services              7.4 %
Oil & Gas                      7.2
Banks                          6.6
Pharmaceuticals                6.3
Telecommunications             6.1
Energy & Utilities             6.0
Retail Merchandising           5.4
Computer Software & Services   5.1
Entertainment & Leisure        4.5
Insurance                      3.8
                               ---
     Total                     58.4 %
                               =======


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,001.50        1,000.50        1,000.00          995.80          995.20
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       8.01            9.35           10.20           13.97           14.07



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,016.90        1,015.53        1,014.67        1,010.83        1,010.72
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       8.10            9.47           10.33           14.18           14.28

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.60%, 1.87%, 2.04%, 2.80%, and 2.82% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).


18



              GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO



Total Net Assets (9/30/04): $27.2 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 benchmark for the
year ended September 30, 2004.



     o  During the first half of the annual period, the Global Science and
Technology Opportunities Portfolio outperformed the S&P 500(Reg. TM) Index, but
underperformed the Pacific Stock Exchange Technology Index. Notably, both the
information technology and healthcare sectors, which are the Portfolio's main
focus areas, underperformed the broader market as investors favored areas
biased to cyclical earnings recovery. The information technology sector's
underperformance was more pronounced in the first quarter of 2004 as investors
began to take profits, particularly in sub-industries that had performed well.

     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 annual period, the Portfolio
underperformed the S&P 500(Reg. TM) and the Pacific Stock Exchange Technology
Index. Again, both the information technology and healthcare sectors
significantly underperformed the broader market. In the information technology
sector, mixed enterprise spending resulted in an inventory correction period
that pressured earnings estimates and valuations. Unfavorable stock selection
in the Portfolio, combined with excess exposure to semiconductors and
semiconductor capital equipment stocks detracted from performance relative to
the benchmark. In healthcare, strong stock selection in the pharmaceutical
industry failed to offset select issues in the biotechnology industry.
Additionally, the Portfolio's underexposure to the more defensive healthcare
equipment industry detracted from performance relative to the benchmark.
Lastly, during the third quarter of 2004, the Portfolio's smaller
capitalization bias and exposure to Asian equities was a performance hindrance,
as these asset classes experienced weak absolute returns.



     o  As of the end of the third quarter of 2004, the Portfolio was exposed
to two key segments of the global economy - life sciences and information
technology. Throughout the fiscal year, the Porfolio was meaningfully
underweight the information technology sector due to a combination of
fundamental concerns and excess valuations. In contrast, the Porfolio was
marginally overweight the healthcare and telecommunication services sectors.


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.





                                                   [LINE CHART]

                 Institutional          Investor A     Pacific Stock Exchange Technology Index       S&P 500 Index
                 -------------          ----------     ---------------------------------------       -------------
05/15/2000          $ 10,000              $ 9,497                     $ 10,000                          $ 10,000
06/30/2000            11,400               10,826                       10,789                             9,734
09/30/2000            12,490               11,842                       10,178                             9,640
12/31/2000            9,490                8,993                        7,983                             8,886
03/31/2001            6,190                5,859                        6,494                             7,832
06/30/2001            6,830                6,448                        7,121                             8,291
09/30/2001            4,410                4,160                        5,077                             7,074
12/31/2001            5,850                5,518                        6,752                             7,830
03/31/2002            5,680                5,347                        6,732                             7,851
06/30/2002            4,520                4,245                        5,049                             6,799
09/30/2002            3,600                3,381                        3,795                             5,625
12/31/2002            3,820                3,580                        4,512                             6,099
03/31/2003            3,660                3,428                        4,497                             5,907
06/30/2003            4,760                4,454                        5,545                             6,817
09/30/2003            5,460                5,109                        6,084                             6,997
12/31/2003            6,070                5,670                        6,887                             7,849
03/31/2004            6,270                5,840                        7,059                             7,982
06/30/2004            5,820                5,423                        7,275                             8,119
09/30/2004            5,410                5,043                        6,736                             7,967









                      FOR PERIOD ENDING SEPTEMBER 30, 2004

                             Average Annual Total Return
                                              1 Year        3 Year      From Inception
                                          -------------   ----------   ---------------
     Institutional Class                       (1.10)%        7.05%         (13.09)%
     Service Class                             (1.29)%        6.73%         (13.31)%
     Investor A Class (Load Adjusted)          (6.18)%        4.83%         (14.48)%
     Investor A Class (NAV)                    (1.30)%        6.63%         (13.46)%
     Investor B Class (Load Adjusted)          (6.51)%        4.68%         (14.54)%
     Investor B Class (NAV)                    (2.10)%        5.73%         (14.14)%
     Investor C Class (Load Adjusted)          (3.08)%        5.73%         (14.14)%
     Investor C Class (NAV)                    (2.10)%        5.73%         (14.14)%

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 31 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 the periods indicated, the Portfolio is actively
managed and its composition will vary.


                                                                              19



              GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO

FUND PROFILE


  Top Ten Holdings (% of long-term investments)
Cisco Systems, Inc.                     2.2 %
KLA Tencor Corp.                        2.2
International Business Machines Corp.   2.1
Microsoft Corp.                         2.0
Boston Scientific Corp.                 1.9
Samsung Electronics Co., Ltd.           1.7
Genentech, Inc.                         1.7
Chiron Corp.                            1.6
Applied Materials, Inc.                 1.6
Accenture, Ltd.                         1.6
                                        ---
     Total                              18.6 %
                                        =======



     Top Ten Industries (% of long-term
                investments)
Computer Software & Service        23.5 %
Pharmaceuticals                    16.7
Semiconductors & Related Devices   10.6
Telecommunications                  7.6
Computer & Office Equipment         6.9
Electronics                         6.4
Medical Instruments & Supplies      4.6
Measuring & Controlling Devices     3.3
Business Services                   2.9
Medical & Medical Services          2.0
                                   ----
     Total                         84.5 %
                                   ========


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                     862.80          862.90          863.40          857.90          857.90
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       6.66            8.06            8.85           12.31           12.26



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,017.76        1,016.24        1,015.38        1,011.58        1,011.64
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       7.24            8.76            9.62           13.42           13.37

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.43%, 1.73%, 1.90%, 2.65%, and 2.64% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).


20



                        INTERNATIONAL EQUITY PORTFOLIO



Total Net Assets (9/30/04): $31.5 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
year ended September 30, 2004.\^



     o  During the last quarter of 2003, the International Equity Portfolio
marginally underperformed its benchmark, the MSCI EAFE Index. The primary
detractor from performance was the Portfolio's underexposure to more risky,
smaller cap, economically sensitive stocks, which led Index performance for the
quarter.



     o  During the first quarter of 2004, investors became more focused on
sustainable returns rather than just high price momentum stocks, which was a
factor that helped the Portfolio's performance versus the benchmark index.
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 remained modestly underweight in Japan primarily due to a cautious
view on the impact of currency strength on this country's leading exporters.
Overall, the Portfolio was modestly biased towards sectors that have higher
economic sensitivity with a notable bias towards industrials at the expense of
the technology sector.



     o  The second quarter of 2004 saw an inflection point in the interest rate
cycle as the Federal Reserve raised rates, thereby initiating the first
meaningful period of monetary tightening since 1994.  Aside from obvious
concerns about the highly leveraged U.S. economy, investors also began to fret
about the sustainability of the Chinese growth phenomenon.  In this
environment, investor preferences were heavily skewed towards the more
'defensive' areas of the market, such as oil, staples and utilities, where the
fund was not heavily represented.  In addition, the Emerging Markets asset
class suffered a severe bout of profit taking, which impacted our holdings in
Korea, Thailand, and Brazil.



     o  During the third quarter of 2004, performance was notably stronger
versus the benchmark, with a wide range of holdings providing these higher
returns. Sector allocation was also a contributing factor, primarily from being
close to zero weighted in technology stocks.


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
                 -------------          ----------          ----------
09/30/1994          $ 10,000              $ 9,497             $ 10,000
12/31/1994            9,587                9,096                9,898
03/31/1995            9,518                9,023               10,082
06/30/1995            9,862                9,336               10,155
09/30/1995            10,246                9,687               10,579
12/31/1995            10,540                9,969               11,007
03/31/1996            10,796               10,195               11,325
06/30/1996            11,282               10,640               11,504
09/30/1996            11,067               10,421               11,490
12/31/1996            11,439               10,764               11,673
03/31/1997            11,361               10,674               11,490
06/30/1997            12,593               11,811               12,981
09/30/1997            12,715               11,918               12,890
12/31/1997            12,036               11,260               11,881
03/31/1998            13,769               12,869               13,628
06/30/1998            13,867               12,927               13,773
09/30/1998            11,821               11,017               11,815
12/31/1998            13,894               12,950               14,256
03/31/1999            14,104               13,119               14,455
06/30/1999            14,724               13,655               14,822
09/30/1999            15,201               14,083               15,473
12/31/1999            18,216               16,852               18,101
03/31/2000            17,439               16,118               18,082
06/30/2000            16,696               15,414               17,365
09/30/2000            15,220               14,038               15,965
12/31/2000            14,678               13,511               15,536
03/31/2001            12,855               11,819               13,407
06/30/2001            12,516               11,466               13,267
09/30/2001            10,693                9,786               11,409
12/31/2001            11,365               10,391               12,205
03/31/2002            11,444               10,452               12,267
06/30/2002            11,405               10,403               12,007
09/30/2002            9,179                8,347                9,637
12/31/2002            9,349                8,506               10,259
03/31/2003            8,354                7,588                9,417
06/30/2003            9,781                8,873               11,231
09/30/2003            10,213                9,252               12,144
12/31/2003            11,922               10,783               14,218
03/31/2004            12,742               11,523               14,835
06/30/2004            12,980               11,745               14,867
09/30/2004            13,285               12,016               14,826








                      FOR PERIOD ENDING SEPTEMBER 30, 2004

                                 Average Annual Total Return\^
                                             1 Year       3 Year         5 Year        10 Year
                                          -----------   ----------   -------------   ----------
     Institutional Class                      30.20%        7.54%         (2.64)%        2.89%
     Service Class                            29.87%        7.20%         (2.93)%        2.58%
     Investor A Class (Load Adjusted)         23.34%        5.28%         (4.11)%        1.85%
     Investor A Class (NAV)                   29.87%        7.08%         (3.12)%        2.38%
     Investor B Class (Load Adjusted)         25.03%        5.39%         (3.98)%        1.74%
     Investor B Class (NAV)                   29.53%        6.43%         (3.70)%        1.74%
     Investor C Class (Load Adjusted)         28.32%        6.77%         (3.49)%        1.85%
     Investor C Class (NAV)                   29.32%        6.77%         (3.49)%        1.85%


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, 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 31
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 SEPTEMBER 30, 2004 WOULD HAVE BEEN
24.11%, 5.83%, -3.57%, AND 2.40% FOR THE INSTITUTIONAL CLASS (NAV), AND 17.40%,
3.56%, -5.06%, AND 1.35% FOR THE INVESTOR A CLASS (LOAD ADJUSTED).





THE BOARD OF TRUSTEES OF THE BLACKROCK FUNDS HAS VOTED TO CLOSE THE
INTERNATIONAL EQUITY PORTFOLIO TO NEW PURCHASES AND EXCHANGES EFFECTIVE AS OF
NOVEMBER 1, 2004 AND TO TERMINATE AND WIND UP THE AFFAIRS OF THE PORTFOLIO ON
OR ABOUT JANUARY 21, 2005.






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.


                                                                              21



                        INTERNATIONAL EQUITY PORTFOLIO

FUND PROFILE


    Top Ten Holdings (% of long-term investments)
Vodafone Group Ord (United Kingdom)          3.3 %
Shell Transport & Trading Co. Plc (United
  Kingdom)                                   2.8
Roche Holding AG (Switzerland)               2.8
Sanofi-Aventis (France)                      2.7
Syngenta AG (Switzerland)                    2.6
Toyota Motor Corp. (Japan)                   2.5
Eni SpA (Italy)                              2.5
Deutsche Telekom AG (Germany)                2.4
Bank of Austria Creditanstalt AG (Austria)   2.2
HSBC Holdings Plc (United Kingdom)           2.1
                                             ---
     Total                                   25.9 %
                                             =======




  Top Ten Countries (% of
  long-term investments)
Japan            20.6 %
United Kingdom   18.1
France           14.7
Germany           8.7
Switzerland       7.1
Netherlands       6.9
Australia         3.2
Hong Kong         2.7
Italy             2.5
Greece            2.3
                 ----
  Total          86.8 %
                 ========


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,043.60        1,043.30        1,042.80        1,043.60        1,041.90
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       5.98            7.05            8.38           11.29           12.00



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,019.08        1,018.01        1,016.70        1,013.81        1,013.10
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       5.92            6.99            8.30           11.19           11.90

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.17%, 1.38%, 1.64%, 2.21%, and 2.35% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).


22



                     INTERNATIONAL OPPORTUNITIES PORTFOLIO



Total Net Assets (9/30/04): $315.6 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
annual period.



     o  The Portfolio started the annual period strong on an absolute and
relative basis. The chief contributors to the outperformance were the cyclical
gearing of the portfolio and strong stock selection in the materials and
industrial sectors. Currency was also a strong feature in the fourth quarter of
2003 as the U.S. Dollar moved sharply lower. Forward currency contracts helped
insulate the Portfolio from the negative consequences of being underweight
markets with strong currencies, particularly the British Pound and the Canadian
and Australian Dollars.



     o  The market began the 2004 calendar year by consolidating the impressive
gains of the prior year. The consolidation accelerated in the second quarter of
2004, following a strong U.S. jobs report in April 2004 that triggered an
unwinding of cyclical trades, both sector-wise and geographically. The
Portfolio underperformed during this period of consolidation when energy,
healthcare and consumer staples were among the best performing sectors. The
biggest contributors to the poor performance in the first and second quarters
of 2004 on a relative basis were an overweight in basic materials, and
underweights coupled with poor stock selection in healthcare and consumer
staples. Net exposure to emerging markets also detracted from performance.



     o  The global economy proved to be stronger than consensus expectations,
however, and global GDP forecasts were revised upward throughout the annual
period. This set the stage for a strong cyclical advance during the third
quarter of 2004. Against this backdrop, the Portfolio outperformed its
benchmark. The chief contributors to this outperformance were overweights and
superior stock selection in energy, materials and industrials. Exposure to
emerging markets was also a positive contributor to performance.



     o  The Portfolio ended the annual period levered to continued, but
moderating, global economic expansion. The Portfolio is modestly overweight
industrials, materials, and emerging markets.


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.





                                    [LINE CHART]

                 Institutional          Investor A     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                   8,904
03/31/1998            11,384               10,788                  10,356
06/30/1998            11,997               11,350                  10,158
09/30/1998            9,614                9,092                   8,574
12/31/1998            10,538                9,935                   9,681
03/31/1999            10,764               10,127                   9,846
06/30/1999            12,722               11,963                  10,587
09/30/1999            14,601               13,702                  11,070
12/31/1999            26,522               24,889                  12,137
03/31/2000            33,056               30,958                  12,420
06/30/2000            28,509               26,693                  12,053
09/30/2000            28,037               26,213                  11,372
12/31/2000            24,365               22,749                  10,613
03/31/2001            21,041               19,625                   9,586
06/30/2001            21,601               20,118                   9,847
09/30/2001            18,501               17,205                   8,290
12/31/2001            20,182               18,744                   9,056
03/31/2002            22,684               21,046                   9,630
06/30/2002            22,821               21,140                   9,742
09/30/2002            18,961               17,546                   8,045
12/31/2002            19,572               18,098                   8,433
03/31/2003            18,812               17,370                   8,064
06/30/2003            21,825               20,130                   9,934
09/30/2003            24,850               22,890                  11,272
12/31/2003            29,217               26,892                  13,071
03/31/2004            30,974               28,478                  14,351
06/30/2004            29,828               27,397                  14,316
09/30/2004            30,451               27,949                  14,481









                      FOR PERIOD ENDING SEPTEMBER 30, 2004

                                    Average Annual Total Return
                                             1 Year        3 Year        5 Year      From Inception
                                          -----------   -----------   -----------   ---------------
     Institutional Class                      22.59%        18.09%        15.84%          17.22%
     Service Class                            22.20%        17.76%        15.46%          16.85%
     Investor A Class (Load Adjusted)         15.98%        15.56%        14.14%          15.79%
     Investor A Class (NAV)                   22.11%        17.55%        15.32%          16.65%
     Investor B Class (Load Adjusted)         16.68%        15.80%        14.24%          15.81%
     Investor B Class (NAV)                   21.18%        16.67%        14.48%          15.81%
     Investor C Class (Load Adjusted)         20.12%        16.67%        14.48%          15.81%
     Investor C Class (NAV)                   21.12%        16.67%        14.48%          15.81%

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 31 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED, INCLUDING IMPORTANT INFORMATION ON THE LINE GRAPH ABOVE.



PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares.  Although the holdings and sectors
listed above were current as the periods indicated, the Portfolio is actively
managed and its composition will vary.


                                                                              23



                     INTERNATIONAL OPPORTUNITIES PORTFOLIO

FUND PROFILE


   Top Ten Holdings (% of long-term investments)
Umicore (Belgium)                         1.4 %
JC Decaux SA (France)                     1.2
Alpha Bank A.E. (Greece)                  1.2
Wienerberger AG (Austria)                 1.2
Smedvig ASA (Norway)                      1.2
Nippon Electric Glass Co., Ltd. (Japan)   1.1
Saipem SpA (Italy)                        1.1
Continental AG (Germany)                  1.1
The Bank of Yokohama, Ltd. (Japan)        1.1
Euronext N.V. (Netherlands)               1.1
                                          ---
     Total                                11.7 %
                                          =======



  Top Ten Countries (% of
  long-term investments)
Japan            21.1 %
United Kingdom   12.0
Hong Kong         5.7
Germany           5.6
South Korea       4.1
Italy             3.9
Austria           3.5
Sweden            3.5
Spain             3.3
India             3.2
                 ----
  Total          65.9 %
                 ========


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                     983.50          981.50          981.40          977.30          977.30
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       7.19            8.67            9.31           13.20           13.10



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,017.66        1,016.14        1,015.48        1,011.48        1,011.58
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       7.34            8.86            9.52           13.52           13.42

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 1.45%, 1.75%, 1.88%, 2.67%, and 2.65% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).


24



                            SELECT EQUITY PORTFOLIO



Total Net Assets (9/30/04): $93.8 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
year ended September 30, 2004.



     o  After the initial rally in lower quality, higher risk stocks
experienced throughout the first part of calendar year 2003, the markets
continued to advance during the period under review, but the drivers behind
performance were significantly different. The market's overall advance in the
annual period (10/1/03 through 9/30/04) was strong, with the S&P 500(Reg. TM)
Index gaining 13.9%, but not as robust as it was during the same time period in
the prior year when the index returned 24.4%. Stock prices continued to
advance, but investors' appetite for risk clearly changed. During the period,
investors favored a more cautious approach, as evidenced by poor returns among
riskier, high beta stocks. In terms of size, small cap stocks continued to
dominate large caps on the whole, with the Russell 2000 Index soundly
outperforming the Russell 1000 Index by almost 500 basis points. Also, there
was a pronounced difference in the performance of growth stocks vs. value
stocks, with value outperforming across all capitalization ranges.



     o  The Select Equity Portfolio's model was exceptionally strong in
identifying outperforming stocks during the annual period. The model's
valuation component was particularly helpful, driven by factors including
forecast earnings-to-price, and cash flow-to-price. The model's earnings
expectation component displayed marked improvement throughout the annual
period, further aiding the Portfolio's stock selection.



     o  From a sector perspective, the model worked well across most sectors,
with 10 of the 13 sectors outperforming the benchmark, led by financials,
consumer cyclicals, and utilities. In those sectors, notable gains were posted
by Countrywide Financial (103%), Nordstrom (56%), and Texas Utilities (107%) in
the annual period.


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 Index
                 -------------          ----------      --------------
09/30/1994          $ 10,000              $ 9,548          $ 10,000
12/31/1994            9,842                9,388             9,998
03/31/1995            10,752               10,247            10,972
06/30/1995            11,532               10,971            12,019
09/30/1995            12,376               11,771            12,975
12/31/1995            13,115               12,451            13,756
03/31/1996            13,782               13,070            14,494
06/30/1996            14,413               13,654            15,145
09/30/1996            14,832               14,035            15,613
12/31/1996            16,226               15,351            16,914
03/31/1997            16,654               15,739            17,368
06/30/1997            19,565               18,461            20,400
09/30/1997            21,134               19,922            21,928
12/31/1997            21,331               20,085            22,557
03/31/1998            24,273               22,834            25,704
06/30/1998            24,808               23,313            26,553
09/30/1998            21,994               20,643            23,911
12/31/1998            26,581               24,914            29,003
03/31/1999            27,765               26,013            30,449
06/30/1999            29,899               27,974            32,595
09/30/1999            27,925               26,101            30,560
12/31/1999            32,102               29,969            35,107
03/31/2000            32,625               30,444            35,912
06/30/2000            31,231               29,100            34,958
09/30/2000            30,199               28,095            34,620
12/31/2000            27,341               25,393            31,911
03/31/2001            22,912               21,252            28,128
06/30/2001            23,867               22,110            29,774
09/30/2001            19,542               18,096            25,404
12/31/2001            21,505               19,877            28,118
03/31/2002            20,671               19,100            28,196
06/30/2002            17,562               16,202            24,418
09/30/2002            14,765               13,613            20,200
12/31/2002            15,900               14,628            21,904
03/31/2003            15,408               14,171            21,214
06/30/2003            17,639               16,196            24,480
09/30/2003            18,131               16,620            25,128
12/31/2003            20,327               18,606            28,187
03/31/2004            21,162               19,362            28,665
06/30/2004            21,375               19,526            29,158
09/30/2004            21,233               19,378            28,613









                      FOR PERIOD ENDING SEPTEMBER 30, 2004

                                  Average Annual Total Return
                                             1 Year       3 Year         5 Year        10 Year
                                          -----------   ----------   -------------   ----------
     Institutional Class                      17.11%        2.80%         (5.33)%        7.82%
     Service Class                            16.83%        2.49%         (5.62)%        7.50%
     Investor A Class (Load Adjusted)         11.35%        0.74%         (6.65)%        6.84%
     Investor A Class (NAV)                   16.60%        2.31%         (5.78)%        7.33%
     Investor B Class (Load Adjusted)         11.20%        0.45%         (6.76)%        6.65%
     Investor B Class (NAV)                   15.70%        1.60%         (6.47)%        6.65%
     Investor C Class (Load Adjusted)         14.78%        1.59%         (6.47)%        6.65%
     Investor C Class (NAV)                   15.78%        1.59%         (6.47)%        6.65%

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 31 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.


                                                                              25



                            SELECT EQUITY PORTFOLIO

FUND PROFILE


  Top Ten Holdings (% of long-term investments)
Microsoft Corp.                         3.4 %
Pfizer, Inc.                            2.9
General Electric Co.                    2.9
Citigroup, Inc.                         2.8
Exxon Mobil Corp.                       2.4
International Business Machines Corp.   2.3
Bank of America Corp.                   2.1
Johnson & Johnson                       2.0
American International Group, Inc.      1.9
Verizon Communications, Inc.            1.9
                                        ---
     Total                              24.6 %
                                        =======



   Top Ten Industries (% of long-term
              investments)
Banks                          7.8 %
Finance                        7.8
Manufacturing                  7.6
Oil & Gas                      7.2
Pharmaceuticals                6.4
Computer Software & Services   6.4
Retail Merchandising           5.3
Electronics                    5.2
Telecommunications             5.1
Insurance                      4.8
                               ---
     Total                     63.6 %
                               =======


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,003.40        1,002.50        1,000.90          998.20          998.20
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       4.06            5.11            6.15            9.94           10.09



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,020.90        1,019.84        1,018.77        1,014.93        1,014.77
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       4.10            5.16            6.23           10.07           10.23

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.81%, 1.02%, 1.23%, 1.99%, and 2.02% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).


26



                            INDEX EQUITY PORTFOLIO



Advisor to the Index Master Portfolio

     Dimensional Fund Advisors Inc.



Total Net Assets (9/30/04): $1.4 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  All share classes of the Portfolio underperformed the benchmark for the
year ended September 30, 2004.



     o  In the first half of the annual period, the stock market rally that
began in the spring of 2003 advanced into December 2003. Positive economic
data, the capture of Saddam Hussein, and a notable absence of bad news combined
to keep investors upbeat through the end of 2003. As prevailing opinion moved
to cyclical recovery, industry groups and sectors viewed as beneficiaries of
global growth - namely metals, autos, office electronics, and homebuilders -
significantly outperformed the broader market. 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 the
growth styles.

     o  During the first quarter of 2004, 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 first
quarter of 2004.



     o  In the second half of the annual period, economic figures released
during the second quarter of 2004 continued to indicate that the U.S. economy
was growing at a healthy annual rate of 4%. Core inflation increased but
remained under control. On June 30th, 2004, the Federal Reserve made its
long-awaited announcement of a 0.25% increase in the Federal Funds rate, from
1.00% to 1.25%.



     o  In the third quarter of 2004, economic data indicated that growth in
the U.S. economy slowed to a more moderate pace. Consumer spending appeared to
be slowing in response to fewer mortgage refinancings, the dissipation of tax
rebates, higher short term interest rates, and higher energy prices. While the
consumer appeared to withdraw in the third quarter of 2004, business spending
increased. Industrial production and capital goods sales both increased, as did
capital expenditures in technology and non-technology equipment. Also during
the third quarter, the Federal Reserve increased the Federal Funds rate twice,
for a total of 0.50%, bringing the rate to 1.75%.



     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. The return of each share class of the Portfolio
was less than the return of the S&P 500(Reg. TM) Index primarily because of
Portfolio and class-specific expenses.


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 Index
                 -------------          ----------       -------------
09/30/1994          $ 10,000              $ 9,698           $ 10,000
12/31/1994            9,999                9,690              9,998
03/31/1995            10,958               10,593             10,972
06/30/1995            12,007               11,616             12,019
09/30/1995            12,930               12,489             12,975
12/31/1995            13,701               13,230             13,756
03/31/1996            14,406               13,888             14,494
06/30/1996            15,038               14,483             15,145
09/30/1996            15,492               14,900             15,613
12/31/1996            16,766               16,120             16,914
03/31/1997            17,202               16,519             17,368
06/30/1997            20,181               19,360             20,400
09/30/1997            21,687               20,785             21,928
12/31/1997            22,285               21,321             22,557
03/31/1998            25,383               24,252             25,704
06/30/1998            26,205               25,033             26,553
09/30/1998            23,619               22,525             23,911
12/31/1998            28,649               27,295             29,003
03/31/1999            30,025               28,577             30,449
06/30/1999            32,085               30,493             32,595
09/30/1999            30,082               28,547             30,560
12/31/1999            34,555               32,755             35,107
03/31/2000            35,340               33,443             35,912
06/30/2000            34,315               32,422             34,958
09/30/2000            34,023               32,095             34,620
12/31/2000            31,362               29,550             31,911
03/31/2001            27,637               25,985             28,128
06/30/2001            29,224               27,439             29,774
09/30/2001            24,913               23,368             25,404
12/31/2001            27,559               25,802             28,118
03/31/2002            27,615               25,814             28,196
06/30/2002            23,910               22,316             24,418
09/30/2002            19,768               18,432             20,200
12/31/2002            21,434               19,946             21,904
03/31/2003            20,748               19,282             21,214
06/30/2003            23,928               22,204             24,480
09/30/2003            24,551               22,747             25,128
12/31/2003            27,534               25,464             28,187
03/31/2004            27,987               25,852             28,665
06/30/2004            28,457               26,254             29,158
09/30/2004            27,918               25,728             28,613








                      FOR PERIOD ENDING SEPTEMBER 30, 2004

                                  Average Annual Total Return
                                             1 Year       3 Year         5 Year        10 Year
                                          -----------   ----------   -------------   -----------
     Institutional Class                      13.71%        3.87%         (1.48)%        10.81%
     Service Class                            13.20%        3.41%         (1.91)%        10.41%
     Investor A Class (Load Adjusted)          9.71%        2.21%         (2.65)%         9.91%
     Investor A Class (NAV)                   13.10%        3.26%         (2.06)%        10.25%
     Investor B Class (Load Adjusted)          7.75%        1.37%         (3.17)%         9.55%
     Investor B Class (NAV)                   12.25%        2.49%         (2.78)%         9.55%
     Investor C Class (Load Adjusted)         11.26%        2.49%         (2.79)%         9.55%
     Investor C Class (NAV)                   12.26%        2.49%         (2.79)%         9.55%

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 31
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.


                                                                              27



                            INDEX EQUITY PORTFOLIO

FUND PROFILE


 Top Ten Holdings (% of long-term investments)1
General Electric Co.                    3.4 %
Exxon Mobil Corp.                       3.0
Microsoft Corp.                         2.8
Pfizer, Inc.                            2.2
Citigroup, Inc.                         2.2
Wal-Mart Stores, Inc.                   2.1
American International Group, Inc.      1.7
Bank of America Corp.                   1.7
Johnson & Johnson                       1.6
International Business Machines Corp.   1.4
                                        ---
     Total                              22.1 %
                                        =======

1  Represents the Top Ten Holdings of The U.S. Large Company Series of The DFA
     Investment Trust Company




2  Represents the Sector Allocation of The U.S. Large Company Series of The DFA
      Investment Trust Company.


    Sector Allocation (% of long-term
              investments)2
Financial                      20.2 %
Information Technology         15.7
Health Care                    13.1
Industrials                    11.6
Consumer Discretionary         11.1
Consumer Staples               10.7
Energy                          7.4
Telecom                         3.7
Materials                       3.1
Utilities                       2.9
Real Estate Investment Trust    0.5
                               ----
     Total                     100.0 %
                               ========


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                     997.50          995.40          995.20          991.30          991.20
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       0.90            3.04            3.19            7.02            7.02



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,024.09        1,021.91        1,021.76        1,017.86        1,017.86
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       0.91            3.09            3.24            7.14            7.14

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.18%, 0.61%, 0.64%, 1.41%, and 1.41% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).The Example reflects the expenses for both the Index Equity
Portfolio and the US Large Company Series of the DFA Investment Trust Company.



28



                              BALANCED PORTFOLIO



Total Net Assets (9/30/04): $122.1 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, by investing 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
year ended September 30, 2004.


     Equity
     o  After the initial rally in lower quality, higher risk stocks
experienced throughout the first part of calendar year 2003, the markets
continued to advance during the period under review, but the drivers behind
performance were significantly different. The market's overall advance in the
annual period (10/1/03 through 9/30/04) was strong, with the S&P 500(Reg. TM)
Index gaining 13.9%, but not as robust as it was during the same time period in
the prior year when the index returned 24.4%. Stock prices continued to
advance, but investors' appetite for risk clearly changed. During the period,
investors favored a more cautious approach, as evidenced by poor returns among
riskier, high beta stocks. In terms of size, small cap stocks continued to
dominate large caps on the whole, with the Russell 2000 Index soundly
outperforming the Russell 1000 Index by almost 500 basis points. Also, there
was a pronounced difference in the performance of growth stocks vs. value
stocks, with value outperforming across all capitalization ranges.

     o  The Balanced Portfolio's equity model was exceptionally strong in
identifying outperforming stocks during the annual period. The model's
valuation component was particularly helpful, driven by factors including
forecast earnings-to-price, and cash flow-to-price. The model's earnings
expectation component displayed marked improvement throughout the annual
period, further aiding the Portfolio's stock selection.



     o  From a sector perspective, the model worked well across most sectors,
with 10 of the 13 sectors outperforming the benchmark, led by financials,
consumer cyclicals, and utilities. In those sectors, notable gains were posted
by Countrywide Financial (103%), Nordstrom (56%), and Texas Utilities (107%) in
the annual period.


     Fixed Income
     o   While the net change in interest rates over the annual period was
modest, there was a significant shift in focus at the Federal Reserve from
fighting deflation with low short term interest rates over the first two
quarters to interest rate normalization over the second two quarters.  The
volatility which accompanied this transition was seen primarily during the
second quarter of 2004, when 10-year Treasury yields ranged between 3.84% and
4.87%.  On June 30th, the Federal Reserve increased the Federal Funds target
rate for the first time since May 2000.  By the end of the third quarter, the
FOMC tightened monetary policy twice more, at each of its meetings, to push the
money rate up to 1.75%.



     o  Duration positioning had marginal impact on the Portfolio during the
first half of the annual period. While the short duration position was largely
positive, an increase in the short position hurt the Portfolio, as yields ended
lower in the first quarter. Overall, yield curve positioning was a negative for
performance. The Portfolio was hurt from its underweight in the corporate and
mortgage sectors while security selection within these sectors helped returns.
The Portfolio's overweight in commercial mortgage-backed securities, as well as
its allocation to non-dollar also contributed to relative performance. In the
latter half of the annual period, the Portfolio benefited from its yield curve
flattening bias and corporate security selection.


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 Index, 35% Lehman Brothers U.S. Aggreate Inde
                 -------------          ----------     ----------------------------------------------------------
09/30/1994          $ 10,000              $ 9,553                               $ 10,000
12/31/1994            9,967                9,512                                 10,014
03/31/1995            10,622               10,130                                 10,823
06/30/1995            11,420               10,880                                 11,725
09/30/1995            12,032               11,450                                 12,410
12/31/1995            12,728               12,101                                 13,082
03/31/1996            13,052               12,397                                 13,452
06/30/1996            13,444               12,756                                 13,871
09/30/1996            13,768               13,051                                 14,245
12/31/1996            14,700               13,922                                 15,168
03/31/1997            14,882               14,080                                 15,409
06/30/1997            16,804               15,884                                 17,336
09/30/1997            17,682               16,697                                 18,392
12/31/1997            18,202               17,170                                 18,934
03/31/1998            19,872               18,719                                 20,739
06/30/1998            20,562               19,346                                 21,358
09/30/1998            19,594               18,397                                 20,316
12/31/1998            22,203               20,842                                 23,093
03/31/1999            22,832               21,403                                 23,798
06/30/1999            23,535               22,031                                 24,812
09/30/1999            22,495               21,046                                 23,857
12/31/1999            24,650               23,043                                 26,119
03/31/2000            25,210               23,533                                 26,740
06/30/2000            24,626               22,960                                 26,439
09/30/2000            24,318               22,655                                 26,566
12/31/2000            23,143               21,521                                 25,591
03/31/2001            20,859               19,380                                 23,868
06/30/2001            21,476               19,931                                 24,835
09/30/2001            19,228               17,830                                 22,798
12/31/2001            20,490               18,978                                 24,379
03/31/2002            19,846               18,359                                 24,442
06/30/2002            18,363               16,963                                 22,581
09/30/2002            16,622               15,331                                 20,338
12/31/2002            17,584               16,200                                 21,598
03/31/2003            17,316               15,947                                 21,261
06/30/2003            19,216               17,665                                 23,554
09/30/2003            19,572               17,971                                 23,956
12/31/2003            21,212               19,457                                 25,859
03/31/2004            21,939               20,103                                 26,386
06/30/2004            21,905               20,032                                 26,452
09/30/2004            22,025               20,134                                 26,426








                      FOR PERIOD ENDING SEPTEMBER 30, 2004

                                  Average Annual Total Return
                                             1 Year       3 Year         5 Year        10 Year
                                          -----------   ----------   -------------   ----------
     Institutional Class                      12.44%        4.63%         (0.42)%        8.22%
     Service Class                            12.04%        4.29%         (0.73)%        7.89%
     Investor A Class (Load Adjusted)          6.90%        2.56%         (1.79)%        7.25%
     Investor A Class (NAV)                   11.94%        4.13%         (0.88)%        7.74%
     Investor B Class (Load Adjusted)          6.57%        2.26%         (1.93)%        6.94%
     Investor B Class (NAV)                   11.07%        3.36%         (1.63)%        6.94%
     Investor C Class (Load Adjusted)         10.00%        3.34%         (1.64)%        6.93%
     Investor C Class (NAV)                   11.00%        3.34%         (1.64)%        6.93%

THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S
SHARE CLASSES WERE AS FOLLOWS: 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 31
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.


                                                                              29



                              BALANCED PORTFOLIO

FUND PROFILE


  Top Ten Holdings (% of long-term investments)
Microsoft Corp.                         2.4 %
Pfizer, Inc.                            2.0
General Electric Co.                    2.0
Citigroup, Inc.                         2.0
Exxon Mobil Corp.                       1.7
International Business Machines Corp.   1.6
Bank of America Corp.                   1.5
Johnson & Johnson                       1.4
American International Group, Inc.      1.3
Verizon Communications, Inc.            1.3
                                        ---
     Total                              17.2 %
                                        =======

1  Using the higher of Standard & Poor's ("S&P's") or Moody's Investors Service
     ("Moody's") rating.


 Credit Quality (% of
fixed income portfolio)1
AAA          81.9 %
AA           9.4
A            4.6
BBB          3.9
\qBBB        0.2
             ---
  Total      100.0 %
             ========


--------------------------------------------------------------------------------
EXPENSE EXAMPLE













As a shareholder of the Portfolio, you incur two types of costs: (1)
transaction costs, including front and back end sales charges (loads) or
redemption/exchange fees, where applicable; and (2) ongoing costs, including
advisory fees, distribution (12b-1) and service fees, where applicable; and
other Portfolio expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.



The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.













The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60) and multiply the result by the cost shown for
your share class, in the row entitled "Expenses Incurred During Period", to
estimate the expenses incurred on your account during this period.



The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.



Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front
and back end sales charges (loads) or redemption/exchange fees, where
applicable. Therefore, the hypothetical information is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.



                                                        Actual Expenses
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,003.90        1,002.40        1,001.60          997.80          997.20
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       4.31            5.76            6.51           10.24           10.29



                                                     Hypothetical Expenses
                                                  (5% return before expenses)
                        -------------------------------------------------------------------------------
                         Institutional      Service         Investor        Investor        Investor
                             Class           Class          A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- ---------------
Beginning Account
 Value (4/01/04)         $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00    $   1,000.00
Ending Account Value
 (9/30/04)                   1,020.65        1,019.18        1,018.42        1,014.62        1,014.57
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                       4.35            5.82            6.58           10.38           10.43

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.86%, 1.15%, 1.30%, 2.05%, and 2.06% for the Institutional, Service,
Investor A, B, and C share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).


30



                                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. Additionally, the performance
information above does not reflect accounting adjustments required under
accounting principles generally accepted in the United States of America and as
a result there may be variances between what is reported within this section
and that reported in the total return calculation in the Financial Highlights.

     Performance information is restated to reflect the current maximum
front-end sales charge (in the case of Investor A Shares) or the maximum
contingent deferred sales charge (in the case of Investor B and Investor C
Shares), and assumes the reinvestment of dividends and distributions. The
maximum front-end sales charges for Investor A Shares are as follows:Large Cap
Value Equity, Large Cap Growth Equity, Dividend AchieversTM,
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,
International Equity, and International Opportunities 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.

Important Tax Information for Shareholders of the BlackRock Equity Portfolios
   (unaudited)


     During the fiscal year ended September 30, 2004, the following Portfolios
of the BlackRock Funds declared the following dividends from net realized
capital gains:

                                                  SHORT-TERM       LONG-TERM
                                                 CAPITAL GAIN     CAPITAL GAIN
                                                   PER SHARE       PER SHARE
                                                --------------   -------------
   Small Cap Value Equity Portfolio .........     $  0.7193        $  1.0772
   Small Cap Core Equity Portfolio ..........        0.1205           0.0253

     Because each Portfolio's fiscal year is not the calendar year, another
notification will be sent with respect to calendar year 2004. The second
notification, which reflects the amounts to be used by calendar year taxpayers
on their U.S. federal income tax returns, has been made in conjunction with
Form 1099-DIV and will be mailed in January 2005.

For Corporate Shareholders Only:

     The percentage of dividends from net investment income declared in the
fiscal year ended September 30, 2004 which qualify for the corporate dividends
received deduction is as follows:

   Large Cap Value Equity Portfolio .........       100.0%
   Mid-Cap Value Equity Portfolio ...........       100.0
   Select Equity Portfolio ..................       100.0
   Balanced Portfolio .......................        92.4

Important Tax Information for Shareholders of the International Equity
   Portfolio.

     During the fiscal year ended September 30, 2004, the International Equity
Portfolio distributed $1,131,141 of foreign source income on which the
Portfolio paid foreign taxes of $107,537. This information is being furnished
to you pursuant to notice requirements of Sections 853(a) and 855(d) of the
Internal Revenue Code, as amended, and the Treasury Regulations thereunder.
Qualified Dividend Income:

     For taxable non-corporate shareholders, the net investment income and net
short-term capital gains representing qualified dividend income subject to the
15% tax rate category based on the Portfolios' tax year-ends as of September
30, 2004 are estimated as follows:

                                                                QUALIFIED
                                                                DIVIDENDS
                                                               ----------
   BlackRock Large Cap Value Equity Portfolio ..............       100%
   BlackRock Mid-Cap Value Equity Portfolio ................         8
   BlackRock Dividend AchieversTM Portfolio ................       100
   BlackRock Small Cap Value Equity Portfolio ..............         5
   BlackRock International Equity Portfolio ................       100
   BlackRock International Opportunities Portfolio .........       100
   BlackRock Select Equity Portfolio .......................       100
   BlackRock Index Equity Portfolio ........................       100
   BlackRock Balanced Portfolio ............................        91

     The final Qualified Dividend Income to be used by calendar year taxpayers
on their U.S. federal income tax returns, will be reflected on the Form
1099-DIV and will be mailed in January 2005.
-------------------------------------------------------------------------------


                                                                              31



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                        LARGE CAP VALUE EQUITY PORTFOLIO


AS OF SEPTEMBER 30, 2004





                                            NUMBER
                                          OF SHARES      VALUE
                                         ----------- -------------
COMMON STOCKS - 99.9%
Aerospace - 2.2%
  The Boeing Co.                           29,300     $ 1,512,466
  Northrop Grumman Corp.                   30,600       1,631,898
  United Technologies Corp.                22,900       2,138,402

                                                      ===========
                                                        5,282,766
                                                      -----------
Banks - 14.8%
  Bank of America Corp.(b)               244,200       10,581,186
  Golden West Financial Corp.             12,700        1,409,065
  Greenpoint Financial Corp.              26,900        1,248,429
  Huntington Bancshares, Inc.(b)          68,600        1,708,826
  J.P. Morgan Chase & Co., Inc.          160,068        6,359,502
  National City Corp.                     38,400        1,483,008
  SunTrust Banks, Inc.(b)                 43,200        3,041,712
  U.S. Bancorp                           168,000        4,855,200
  Wachovia Corp.                         103,200        4,845,240

                                                      ===========
                                                       35,532,168
                                                      -----------
Broadcasting - 1.0%
  Comcast Corp. - Class A(c)              81,600        2,304,384
                                                      -----------
Business Services - 1.1%
  Cendant Corp.(b)                       120,300        2,598,480
                                                      -----------
Chemicals - 2.2%
  Cytec Industries, Inc.                  51,200        2,506,240
  The Dow Chemical Co.                    59,400        2,683,692

                                                      ===========
                                                        5,189,932
                                                      -----------
Computer & Office Equipment - 2.8%
  International Business Machines
    Corp.                                 46,800        4,012,632
  Lexmark International, Inc.(c)          21,500        1,806,215
  Xerox Corp.(b)(c)                       69,700          981,376

                                                      ===========
                                                        6,800,223
                                                      -----------
Computer Software & Services - 0.8%
  Microsoft Corp.                         68,100        1,882,965
                                                      -----------
Construction - 0.8%
  Centex Corp.                            37,200        1,877,112
                                                      -----------
Electronics - 5.5%
  General Electric Co.                   334,400       11,229,152
  L-3 Communications Holdings, Inc.(b)    30,600        2,050,200

                                                      ===========
                                                       13,279,352
                                                      -----------
Energy & Utilities - 5.5%
  Constellation Energy Group, Inc.        65,900        2,625,456
  Exelon Corp.                            72,620        2,664,428
  PPL Corp.(b)                            48,600        2,292,948
  SCANA Corp.(b)                          73,300        2,737,022
  TXU Corp.(b)                            58,000        2,779,360

                                                      ===========
                                                       13,099,214
                                                      -----------
Entertainment & Leisure - 3.3%
  Caesars Entertainment, Inc.(c)          82,700        1,381,090
  Time Warner, Inc.(c)                   242,100        3,907,494
  The Walt Disney Co.                    121,400        2,737,570

                                                      ===========
                                                        8,026,154
                                                      -----------
Finance - 9.9%
  Capital One Financial Corp.(b)          16,400        1,211,960
  Citigroup, Inc.(d)                     256,500       11,316,780
  Countrywide Financial Corp.             49,098        1,933,970
  E*TRADE Financial Corp.(c)             131,800        1,505,156


                                            NUMBER
                                          OF SHARES      VALUE
                                         ----------- -------------
COMMON STOCKS (Continued)
Finance (Continued)
  Freddie Mac                             26,100      $ 1,702,764
  The Goldman Sachs Group, Inc.           21,500        2,004,660
  Lehman Brothers Holdings, Inc.          19,900        1,586,428
  Merrill Lynch & Co., Inc.               48,000        2,386,560

                                                      ===========
                                                       23,648,278
                                                      -----------
Food & Agriculture - 2.4%
  Archer-Daniels-Midland Co.             101,900        1,730,262
  Campbell Soup Co.(b)                    44,900        1,180,421
  H.J. Heinz Co.                          37,900        1,365,158
  Supervalu, Inc.(b)                      50,100        1,380,255

                                                      ===========
                                                        5,656,096
                                                      -----------
Insurance - 5.8%
  ACE Ltd.                                30,100        1,205,806
  The Allstate Corp.                      57,800        2,773,822
  American International Group, Inc.      51,300        3,487,887
  Fidelity National Financial, Inc.       35,000        1,333,500
  MetLife, Inc.                           57,800        2,233,970
  Nationwide Financial Services, Inc.     32,800        1,151,608
  W.R. Berkley Corp.                      40,450        1,705,372

                                                      ===========
                                                       13,891,965
                                                      -----------
Machinery & Heavy Equipment - 0.7%
  Deere & Co.                             27,100        1,749,305
                                                      -----------
Manufacturing - 5.1%
  The Black & Decker Corp.(b)             20,100        1,556,544
  Brunswick Corp.                         21,900        1,002,144
  Cooper Industries, Inc.                 25,700        1,516,300
  Cummins, Inc.(b)                        19,500        1,440,855
  Eaton Corp.                             25,000        1,585,250
  Fortune Brands, Inc.                    18,200        1,348,438
  The Sherwin-Williams Co.(b)             29,500        1,296,820
  Textron, Inc.                           19,100        1,227,557
  Tyco International Ltd. - ADR           39,600        1,214,136

                                                      ===========
                                                       12,188,044
                                                      -----------
Medical & Medical Services - 1.0%
  Coventry Health Care, Inc.(b)(c)        46,650        2,489,710
                                                      -----------
Metal & Mining - 0.8%
  Nucor Corp.(b)                          20,000        1,827,400
                                                      -----------
Motor Vehicles - 0.8%
  General Motors Corp.(b)                 53,400        2,268,432
                                                      -----------
Oil & Gas - 12.9%
  Amerada Hess Corp.                      30,300        2,696,700
  ChevronTexaco Corp.                    112,600        6,039,864
  ConocoPhillips                          57,900        4,797,015
  Exxon Mobil Corp.                      282,600       13,658,058
  Oneok, Inc.                             87,700        2,281,954
  Valero Energy Corp.(b)                  19,800        1,588,158

                                                      ===========
                                                       31,061,749
                                                      -----------
Paper & Forest Products - 1.7%
  Georgia Pacific Corp.(b)                54,500        1,959,275
  Louisiana-Pacific Corp.                 78,100        2,026,695

                                                      ===========
                                                        3,985,970
                                                      -----------
Pharmaceuticals - 2.1%
  Merck & Co., Inc.                      117,000        3,861,000

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                  LARGE CAP VALUE EQUITY PORTFOLIO (CONTINUED)


AS OF SEPTEMBER 30, 2004


                                             NUMBER
                                           OF SHARES       VALUE
                                          ----------- --------------
COMMON STOCKS (Continued)
Pharmaceuticals (Continued)
  Wyeth                                      30,300    $  1,133,220

                                                       ============
                                                          4,994,220
                                                       ------------
Publishing & Printing - 0.7%
  The McGraw-Hill Cos., Inc.                 20,500       1,633,645
                                                       ------------
Railroad & Shipping - 0.7%
  Burlington Northern Santa Fe Corp.         43,900       1,681,809
                                                       ------------
Real Estate - 2.7%
  General Growth Properties, Inc.            77,400       2,399,400
  Kimco Realty Corp.                         34,500       1,769,850
  Simon Property Group, Inc.(b)              42,600       2,284,638

                                                       ============
                                                          6,453,888
                                                       ------------
Restaurants - 0.9%
  McDonald's Corp.                           75,400       2,113,462
                                                       ------------
Retail Merchandising - 2.2%
  Claire's Stores, Inc.                      64,500       1,615,080
  J.C. Penney Co., Inc.(b)                   52,600       1,855,728
  The Neiman-Marcus Group Inc., -
    Class A(b)                               30,900       1,776,750

                                                       ============
                                                          5,247,558
                                                       ------------
Semiconductors & Related Devices - 0.3%
  Fairchild Semiconductor International,
    Inc.(c)                                  53,200         753,844
                                                       ------------
Soaps & Cosmetics - 0.5%
  The Procter & Gamble Co.                   23,400       1,266,408
                                                       ------------
Technology - 0.5%
  NCR Corp.(c)                               26,200       1,299,258
                                                       ------------
Telecommunications - 5.2%
  CenturyTel, Inc.(b)                        39,000       1,335,360
  SBC Communications, Inc.                  206,300       5,353,485
  Verizon Communications, Inc.              148,000       5,828,240

                                                       ============
                                                         12,517,085
                                                       ------------
Telephone Communications - 0.7%
  Alltel Corp.(b)                            28,600       1,570,426
                                                       ------------
Tobacco - 1.9%
  Altria Group, Inc.                         97,700       4,595,808
                                                       ------------
Transportation - 0.4%
  J.B. Hunt Transport Services, Inc.         26,600         987,924
                                                       ------------
TOTAL COMMON STOCKS
  (Cost $182,063,103)                                   239,755,034
                                                       ------------


                                                    PAR/SHARES
                                         MATURITY     (000)        VALUE
                                        ---------- ----------- -------------
SHORT TERM INVESTMENTS - 13.5%
  Banco Santander Puerto Rico,
    Certificate of Deposit
    1.67%(e)                            10/07/04      $  716    $   716,045
  Bear Stearns, Floating Rate Notes
    1.90%(e)(f)                         10/01/04       1,115      1,114,540
    1.90%(e)(f)                         10/01/04       1,199      1,198,686
  Canadian Imperial Bank International,
    Certificate of Deposit
    1.80%(e)                            10/29/04         381        380,813
  Eurohypo, Certificate of Deposit
    1.80%(e)                            10/22/04       1,095      1,095,130
  Foreningssparbanken AB, Floating
    Rate Notes
    1.72%(e)(f)                         10/15/04       1,704      1,704,020
  Goldman Sachs, Floating Rate Notes
    1.96%(e)(f)                         10/01/04       1,005      1,004,677
  Merrill Lynch, Floating Rate Master
    Notes
    2.00%(e)(f)                         10/01/04          77         76,913
  Morgan Stanley, Floating Rate Notes
    1.86%(e)(f)                         10/01/04       1,211      1,210,947
    1.96%(e)(f)                         10/01/04       1,725      1,725,144
  Natexis Banques International,
    Floating Rate Notes
    1.92%(e)(f)                         10/01/04       3,494      3,494,232
    1.98%(e)(f)                         10/01/04       2,403      2,402,913
  Svenska Handelsbank, Certificate of
    Deposit
    1.39%(e)                            10/27/04          78         77,815
  Union Bank of Switzerland, Time
    Deposit
    1.98%(e)                            10/01/04       2,770      2,770,414
  Westdeutsche Landsbank
    International, Floating Rate Notes
    1.70%(e)(f)                         10/12/04       1,521      1,521,040
  Galileo Money Market Fund                            4,836      4,836,124
  Institutional Money Market Trust(e)                  7,047      7,047,308

                                                                ===========
TOTAL SHORT TERM INVESTMENTS
  (Cost $32,376,761)                                             32,376,761
                                                                -----------

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              33



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                  LARGE CAP VALUE EQUITY PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                                             VALUE
                                        ---------------
TOTAL INVESTMENTS IN SECURITIES -
113.4%
  (Cost $214,439,864(a))                $272,131,795
LIABILITIES IN EXCESS OF
  OTHER ASSETS - (13.4)%
  (Including $27,540,637 of payable
  upon return of securities loaned)      (32,085,141)
                                        ------------
NET ASSETS - 100.0%
  (Applicable to 9,002,819
  Institutional shares, 3,642,633
  Service shares, 4,273,955
  Investor A shares, 1,459,122
  Investor B shares and 545,088
  Investor C shares outstanding)        $240,046,654
                                        ============


NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  INSTITUTIONAL SHARE
  ($114,374,324/9,002,819)               $ 12.70
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  SERVICE SHARE
   ($46,352,988/3,642,633)               $ 12.73
                                         =======
NET ASSET VALUE AND
  REDEMPTION PRICE PER
  INVESTOR A SHARE
   ($54,310,733/4,273,955)               $ 12.71
                                         =======
MAXIMUM OFFERING PRICE
  PER INVESTOR A SHARE
            ($12.71/0.955)               $ 13.31
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 4.5%)
  PER INVESTOR B SHARE
   ($18,203,240/1,459,122)               $ 12.48
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 1.0%)
  PER INVESTOR C SHARE
      ($6,805,369/545,088)               $ 12.48
                                         =======


-------------------

 (a) Cost for Federal income tax purposes is $217,280,685. The
     gross unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                      $60,640,440
      Gross unrealized depreciation                                       (5,789,330)
                                                                         -----------
                                                                         $54,851,110
                                                                         ===========

     (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
       $635,328 on 9 long S&P 500 futures contracts expiring December 2004.
       The value of such contracts on September 30, 2004 was $2,508,525, with
       an unrealized gain of $21,183 (including commissions of $33).
 (e) Securities purchased with the cash proceeds from securities loaned.
  (f) Rates shown are the rates as of September 30, 2004.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                       LARGE CAP GROWTH EQUITY PORTFOLIO


AS OF SEPTEMBER 30, 2004





                                            NUMBER
                                          OF SHARES      VALUE
                                         ----------- -------------
COMMON STOCKS - 96.7%
Aerospace - 1.3%
  The Boeing Co.                           12,800     $   660,736
  United Technologies Corp.                 4,700         438,886

                                                      ===========
                                                        1,099,622
                                                      -----------
Banks - 0.5%
  U.S. Bancorp                             16,400         473,960
                                                      -----------
Beverages & Bottling - 2.7%
  The Coca-Cola Co.                         9,500         380,475
  Pepsi Bottling Group, Inc.               20,900         567,435
  PepsiCo, Inc.                            34,200       1,663,830

                                                      ===========
                                                        2,611,740
                                                      -----------
Broadcasting - 0.7%
  Comcast Corp. - Class A(b)               19,400         547,856
                                                      -----------
Business Services - 2.1%
  Alliance Data Systems Corp.(b)           23,300         945,048
  Cendant Corp.                            29,800         643,680
  Investors Financial Services Corp.        9,000         406,170

                                                      ===========
                                                        1,994,898
                                                      -----------
Computer & Office Equipment - 6.2%
  Cisco Systems, Inc.(b)                   91,600       1,657,960
  Dell, Inc.(b)                            19,500         694,200
  International Business Machines
    Corp.                                  30,000       2,572,200
  Lexmark International, Inc.(b)(c)        11,700         982,917

                                                      ===========
                                                        5,907,277
                                                      -----------
Computer Software & Services - 11.1%
  Activision, Inc.(b)                      28,400         393,909
  Adobe Systems, Inc.(c)                   15,000         742,050
  Advanced Micro Devices, Inc.(b)(c)       56,800         738,400
  Checkfree Corp.(b)                       14,600         403,982
  Computer Sciences Corp.(b)(c)            19,100         899,610
  Microsoft Corp.                        151,600        4,191,740
  Storage Technology Corp.(b)             25,300          639,078
  Symantec Corp.(b)(c)                    22,500        1,234,800
  VeriSign, Inc.(b)                       24,300          483,084
  Yahoo!, Inc.(b)(c)                      25,000          847,750

                                                      ===========
                                                       10,574,403
                                                      -----------
Construction - 0.5%
  Lennar Corp.(c)                         10,400          495,040
                                                      -----------
Containers - 0.6%
  Ball Corp.                              15,400          576,422
                                                      -----------
Electronics - 5.1%
  Arrow Electronics, Inc.(b)              36,800          830,944
  General Electric Co.(d)                 21,600          725,328
  Intel Corp.                            105,700        2,120,342
  L-3 Communications Holdings, Inc.(c)    17,800        1,192,600

                                                      ===========
                                                        4,869,214
                                                      -----------
Entertainment & Leisure - 2.5%
  Hilton Hotels Corp.                     39,300          740,412
  Sabre Holdings Corp.                    21,600          529,848
  Time Warner, Inc.(b)                    34,000          548,760
  The Walt Disney Co.                     26,900          606,595

                                                      ===========
                                                        2,425,615
                                                      -----------
Finance - 5.0%
  American Express Co.                    12,900          663,834
  Capital One Financial Corp.(c)           9,500          702,050


                                            NUMBER
                                          OF SHARES      VALUE
                                         ----------- -------------
COMMON STOCKS (Continued)
Finance (Continued)
  Citigroup, Inc.                         15,500      $   683,860
  Doral Financial Corp.(c)                12,575          521,485
  E*TRADE Financial Corp.(b)              38,600          440,812
  Freddie Mac                             18,200        1,187,368
  Providian Financial Corp.(b)(c)         36,300          564,102

                                                      ===========
                                                        4,763,511
                                                      -----------
Food & Agriculture - 1.4%
  Campbell Soup Co.(c)                    20,000          525,800
  Hershey Foods Corp.                     18,200          850,122

                                                      ===========
                                                        1,375,922
                                                      -----------
Insurance - 3.2%
  American International Group, Inc.      29,200        1,985,308
  The Progressive Corp.                    6,400          542,400
  W.R. Berkley Corp.                      12,800          539,648

                                                      ===========
                                                        3,067,356
                                                      -----------
Machinery & Heavy Equipment - 0.9%
  Deere & Co.                             13,500          871,425
                                                      -----------
Manufacturing - 6.4%
  3M Co.                                   6,600          527,802
  The Black & Decker Corp.(c)             10,800          836,352
  Brunswick Corp.                         17,700          809,952
  Dade Behring Holdings, Inc.(b)          17,900          997,352
  Fortune Brands, Inc.                     6,500          481,585
  NIKE, Inc. - Class B                     7,900          622,520
  Parker-Hannifin Corp.                    9,000          529,740
  The Stanley Works                       13,500          574,155
  Tyco International Ltd. - ADR           22,900          702,114

                                                      ===========
                                                        6,081,572
                                                      -----------
Medical & Medical Services - 4.5%
  Amgen, Inc.(b)                          24,036        1,362,360
  Anthem, Inc.(b)(c)                       7,041          614,327
  Biogen Idec, Inc.(b)                     5,400          330,318
  UnitedHealth Group, Inc.                20,074        1,480,257
  WellPoint Health Networks, Inc.(b)       4,700          493,923

                                                      ===========
                                                        4,281,185
                                                      -----------
Medical Instruments & Supplies - 7.5%
  Bausch & Lomb, Inc.(c)                  13,400          890,430
  Becton, Dickinson & Co.                 23,000        1,189,100
  Johnson & Johnson                       70,000        3,943,100
  Medtronic, Inc.                         21,100        1,095,090

                                                      ===========
                                                        7,117,720
                                                      -----------
Metal & Mining - 0.9%
  Nucor Corp.(c)                           8,000          730,960
                                                      -----------
Oil & Gas - 1.3%
  Baker Hughes, Inc.                       8,800          384,736
  Devon Energy Corp.                       7,200          511,272
  Halliburton Co.(c)                      10,300          347,007

                                                      ===========
                                                        1,243,015
                                                      -----------
Paper & Forest Products - 1.1%
  Kimberly-Clark Corp.                    16,600        1,072,194
                                                      -----------
Pharmaceuticals - 9.9%
  Abbott Laboratories                      8,700          368,532
  AmerisourceBergen Corp.(c)              13,600          730,456
  Bristol-Myers Squibb Co.                38,000          899,460
  Genentech, Inc.(b)(c)                   13,500          707,670

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              35



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                 LARGE CAP GROWTH EQUITY PORTFOLIO (CONTINUED)


AS OF SEPTEMBER 30, 2004


                                             NUMBER
                                           OF SHARES      VALUE
                                          ----------- -------------
COMMON STOCKS (Continued)
Pharmaceuticals (Continued)
  Gilead Sciences, Inc.(b)(c)                19,300    $   721,434
  Merck & Co., Inc.                          36,000      1,188,000
  Pfizer, Inc.                              138,600      4,241,160
  Wyeth                                      15,700        587,180

                                                       ===========
                                                         9,443,892
                                                       -----------
Publishing & Printing - 0.7%
  The McGraw-Hill Cos., Inc.                  8,300        661,427
                                                       -----------
Railroad & Shipping - 0.6%
  FedEx Corp.                                 7,200        616,968
                                                       -----------
Restaurants - 0.7%
  Wendy's International, Inc.                21,100        708,960
                                                       -----------
Retail Merchandising - 8.8%
  American Eagle Outfitters, Inc.(c)         17,100        630,135
  Borders Group, Inc.(c)                     45,900      1,138,320
  Claire's Stores, Inc.                      45,400      1,136,816
  Coach, Inc.(b)                             12,900        547,218
  Costco Cos., Inc.(c)                       16,500        685,740
  The Home Depot, Inc.                       50,200      1,967,840
  Wal-Mart Stores, Inc.                      33,900      1,803,480
  Zale Corp.(b)                              16,700        469,270

                                                       ===========
                                                         8,378,819
                                                       -----------
Semiconductors & Related Devices - 1.8%
  Applied Materials, Inc.(b)(c)              32,700        539,223
  Fairchild Semiconductor International,
    Inc.(b)                                  21,500        304,655
  International Rectifier Corp.(b)           11,700        401,310
  Micron Technology, Inc.(b)(c)              38,300        460,749

                                                       ===========
                                                         1,705,937
                                                       -----------
Soaps & Cosmetics - 3.6%
  The Gillette Co.                           18,500        772,190
  The Procter & Gamble Co.                   49,200      2,662,704

                                                       ===========
                                                         3,434,894
                                                       -----------
Telecommunications - 3.5%
  Motorola, Inc.                             57,500      1,037,300
  Nextel Communications, Inc. - Class
    A(b)(c)                                  22,300        531,632
  QUALCOMM, Inc.                             33,800      1,319,552
  Verizon Communications, Inc.               12,000        472,560

                                                       ===========
                                                         3,361,044
                                                       -----------
Transportation - 1.6%
  J.B. Hunt Transport Services, Inc.         22,300        828,222
  Ryder Systems, Inc.                        14,900        700,896

                                                       ===========
                                                         1,529,118
                                                       -----------
TOTAL COMMON STOCKS
  (Cost $70,088,583)                                    92,021,966
                                                       -----------


                                                    PAR/SHARES
                                         MATURITY     (000)        VALUE
                                        ---------- ----------- -------------
SHORT TERM INVESTMENTS - 12.6%
  Banco Santander Puerto Rico,
    Certificate of Deposit
    1.80%(e)                            10/25/04      $  710    $   709,768
  Bear Stearns, Floating Rate Notes
    1.90%(e)(f)                         10/01/04         819        819,378
  Canadian Imperial Bank International,
    Certificate of Deposit
    1.80%(e)                            10/29/04         416        416,205
  Eurohypo, Certificate of Deposit
    1.80%(e)                            10/22/04          18         18,408
  Foreningssparbanken AB, Floating
    Rate Notes
    1.72%(e)(f)                         10/15/04         761        760,839
  Merrill Lynch, Floating Rate Master
    Notes
    2.00%(e)(f)                         10/01/04       1,125      1,124,894
    2.00%(e)(f)                         10/01/04         482        481,615
  Morgan Stanley, Floating Rate Notes
    1.86%(e)(f)                         10/01/04         292        292,221
    1.96%(e)(f)                         10/01/04       1,406      1,406,047
  Natexis Banques International,
    Floating Rate Notes
    1.92%(e)(f)                         10/01/04         483        483,436
    1.98%(e)(f)                         10/01/04         619        618,694
  Societe General, Floating Rate Notes
    1.95%(e)(f)                         10/01/04         133        132,986
  Union Bank of Switzerland, Time
    Deposit
    1.98%(e)                            10/01/04         434        433,864
  Westdeutsche Landsbank
    International, Floating Rate Notes
    1.70%(e)(f)                         10/12/04         634        633,721
  Galileo Money Market Fund                            2,157      2,156,995
  Institutional Money Market Trust(e)                  1,486      1,486,164

                                                                ===========
TOTAL SHORT TERM INVESTMENTS
  (Cost $11,975,235)                                             11,975,235
                                                                -----------


TOTAL INVESTMENTS IN SECURITIES - 109.3%
  (Cost $82,063,818(a))                    103,997,201
LIABILITIES IN EXCESS OF OTHER
  ASSETS - (9.3)%
  (Including $9,818,240 of payable
  upon return of securities loaned)         (8,854,548)
                                           -----------
NET ASSETS - 100.0% (Applicable to
  3,108,532 Institutional shares,
  3,803,693 Service shares, 2,208,046
  Investor A shares, 1,602,282 Investor
  B shares and 323,428 Investor C
  shares outstanding)                     $ 95,142,653
                                          ============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                 LARGE CAP GROWTH EQUITY PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                                            VALUE
                                         ----------
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  INSTITUTIONAL SHARE
  ($27,725,118/3,108,532)                  $ 8.92
                                           ======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  SERVICE SHARE
  ($33,181,946/3,803,693)                  $ 8.72
                                           ======
NET ASSET VALUE AND
  REDEMPTION PRICE PER
  INVESTOR A SHARE
  ($18,985,208/2,208,046)                  $ 8.60
                                           ======
MAXIMUM OFFERING PRICE
  PER INVESTOR A SHARE
            ($8.60/0.955)                  $ 9.01
                                           ======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 4.5%)
  PER INVESTOR B SHARE
  ($12,692,667/1,602,282)                  $ 7.92
                                           ======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 1.0%)
  PER INVESTOR C SHARE
     ($2,557,714/323,428)                  $ 7.91
                                           ======


-------------------

 (a) Cost for Federal income tax purposes is $82,577,487. The gross
     unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                   $23,827,074
      Gross unrealized depreciation                                    (2,407,360)
                                                                      -----------
                                                                      $21,419,714
                                                                      ===========

     (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
       $725,328 on 4 long Nasdaq 100 futures contracts and 7 long S&P 500
       futures contracts expiring December 2004.  The value of such contracts
       on September 30, 2004 was $2,518,075, with an unrealized gain of $6,966
       (including commissions of $38).
 (e) Securities purchased with the cash proceeds from securities loaned.
  (f) Rates shown are the rates as of September 30, 2004.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              37



                                BLACKROCK FUNDS
                            SCHEDULE OF INVESTMENTS
                         DIVIDEND ACHIEVERSTM PORTFOLIO


AS OF SEPTEMBER 30, 2004





                             NUMBER
                           OF SHARES     VALUE
                          ----------- -----------
COMMON STOCKS - 98.6%
Aerospace - 2.9%
  General Dynamics Corp.      275      $ 28,078
  United Technologies         300        28,014
Corp.

                                       ========
                                         56,092
                                       --------
Apparel - 0.5%
  V.F. Corp.                  200         9,890
                                       --------
Automotive - 0.4%
  Johnson Controls, Inc.      150         8,522
                                       --------
Banks - 11.2%
  Associated Banc-Corp.       350        11,224
  Bank of America Corp.   1,700          73,661
  BB&T Corp.                425          16,868
  Comerica, Inc.            275          16,321
  J.P. Morgan Chase &       475          18,872
Co., Inc.
  National City Corp.       500          19,310
  TCF Financial Corp.       300           9,087
  Wells Fargo & Co.         825          49,195

                                       ========
                                        214,538
                                       --------
Business Services - 1.5%
  Cendant Corp.             425           9,180
  R.R. Donnelley & Sons     650          20,358
Co.

                                       ========
                                         29,538
                                       --------
Chemicals - 3.4%
  The Dow Chemical Co.      450          20,330
  E.I. du Pont de Nemours   225           9,630
& Co.
  PPG Industries, Inc.      300          18,384
  RPM International, Inc.   950          16,768

                                       ========
                                         65,112
                                       --------
Computer & Office Equipment - 2.0%
  International Business
Machines
    Corp.                   200          17,148
  Pitney Bowes, Inc.        475          20,948

                                       ========
                                         38,096
                                       --------
Computer Software & Services - 1.7%
  Diebold, Inc.             425          19,848
  Microsoft Corp.           450          12,442

                                       ========
                                         32,290
                                       --------
Construction - 0.5%
  Masco Corp.               300          10,359
                                       --------
Containers - 1.0%
  Sonoco Products Co.       750          19,830
                                       --------
Electronics - 5.7%
  Emerson Electric Co.      200          12,378
  General Electric Co.    2,875          96,542

                                       ========
                                        108,920
                                       --------
Energy & Utilities - 4.9%
  Exelon Corp.              375          13,759
  MDU Resources Group,      500          13,164
Inc.
  Pinnacle West Capital     325          13,488
Corp.
  Progress Energy, Inc.     550          23,287
  UGI Corp.                 325          12,110
  WPS Resources Corp.       400          17,996

                                       ========
                                         93,804
                                       --------
Entertainment & Leisure - 0.5%
  The Walt Disney Co.       425           9,584
                                       --------


                             NUMBER
                           OF SHARES     VALUE
                          ----------- -----------
COMMON STOCKS (Continued)
Finance - 12.3%
  American Capital          225        $  7,052
Strategies, Ltd.
  Citigroup, Inc.         1,825          80,518
  Countrywide Financial Corp.
                            325          12,802
  Doral Financial Corp.
                            250          10,368
  Freddie Mac               425          27,726
  The Goldman Sachs         100           9,324
Group, Inc.
  KeyCorp                   600          18,960
  MBIA, Inc.                200          11,642
  Nuveen Investments - Class500          14,800
  Protective Life Corp.     250           9,828
  Regions Financial Corp.   600          19,836
  Washington Mutual, Inc.   300          11,724

                                       ========
                                        234,580
                                       --------
Fire, Marine & Casualty
Insurance - 0.7%
  Mercury General Corp.     200          10,578
                                       --------
Food & Agriculture - 1.9%
  Archer-Daniels-Midland Co.
                            700          11,885
  H.J. Heinz Co.
                            275           9,906
  Supervalu, Inc.           425          11,709

                                       ========
                                         33,500
                                       --------
Insurance - 6.3%
  American International Group, Inc.
                            175          11,898
  The CHUBB Corp.           300          21,084
  Cigna Corp.               175          12,185
  Fidelity National         425          16,192
Financial, Inc.
  Jefferson-Pilot Corp.     325          16,141
  Lincoln National Corp.    375          17,625
  Old Republic International Corp.
                            675          16,895
  UnumProvident Corp.
                            575           9,023

                                       ========
                                        121,043
                                       --------
Machinery & Heavy
Equipment - 0.9%
  Caterpillar, Inc.
                            225          18,101
                                       --------
Manufacturing - 3.3%
  Briggs & Stratton Corp.   200          16,239
  Brunswick Corp.           325          14,872
  Harley-Davidson, Inc.     150           8,916
  Reynold American, Inc.
                            125           8,505
  The Stanley Works
                            350          14,886

                                       ========
                                         63,418
                                       --------
Medical Instruments & Supplies - 0.6%
  Hillenbrand Industries,   225          11,369
                                       --------
Inc.
Metal & Mining - 0.8%
  Nucor Corp.               175          15,990
                                       --------
Motor Vehicles - 0.9%
  General Motors Corp.
                            400          16,992
                                       --------
Natural Gas Distribution - 1.2%
  National Fuel Gas Co.     425          12,040
  WGL Holdings, Inc.        400          11,304

                                       ========
                                         23,344
                                       --------
Oil & Gas - 11.4%
  Atmos Energy Corp.        450          11,336
  ChevronTexaco Corp.     1,525          81,800
  Exxon Mobil Corp.
                          2,200         106,326
  Marathon Oil Corp.
                            375          15,480

                                       ========
                                        214,942
                                       --------

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38



                                BLACKROCK FUNDS
                            SCHEDULE OF INVESTMENTS
                   DIVIDEND ACHIEVERSTM PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                             NUMBER
                           OF SHARES      VALUE
                          ----------- ------------
COMMON STOCKS (Continued)
Paper & Forest Products - 0.5%
  Kimberly-Clark Corp.         150     $    9,688
                                       ----------
Personal Services - 0.6%
  The Servicemaster Co.        950         12,217
                                       ----------
Pharmaceuticals - 2.0%
  Merck & Co., Inc.            750         24,750
  Pfizer, Inc.                 425         13,005

                                       ==========
                                           37,755
                                       ----------
Publishing & Printing - 1.4%
  Gannett Co., Inc.            125         10,470
  The McGraw-Hill Cos.,        200         15,938
Inc.

                                       ==========
                                           26,408
                                       ----------
Real Estate - 4.7%
  Archstone-Smith Trust        425         13,447
  Commercial Net Lease         525          9,567
Realty
  Federal Realty               250         11,000
Investment Trust
  General Growth               550         17,050
Properties, Inc.
  HRPT Properties Trust        875          9,616
  Kimco Realty Corp.           300         15,390
  United Dominion Realty       725         14,377
Trust, Inc.

                                       ==========
                                           90,447
                                       ----------
Restaurants - 1.8%
  McDonald's Corp.           1,250         35,038
                                       ----------
Retail Merchandising - 1.8%
  The Home Depot, Inc.         450         17,640
  The May Department           550         14,096
Stores Co.

                                       ==========
                                           31,736
                                       ----------
Semiconductors & Related Devices -
0.5%
  Linear Technology Corp.      250          9,060
                                       ----------
Soaps & Cosmetics - 0.4%
  The Procter & Gamble         150          8,118
                                       ----------
Co.
Telecommunications - 4.7%
  CenturyTel, Inc.             300         10,272
  SBC Communications,        1,725         44,764
Inc.
  Verizon Communications,      900         35,442
Inc.

                                       ==========
                                           90,478
                                       ----------
Telephone Communications - 1.0%
  Alltel Corp.                 350         19,218
                                       ----------
Tobacco - 2.7%
  Altria Group, Inc.           975         45,864
  Loews Corp. - Carolina       250          6,092
Group

                                       ==========
                                           51,956
                                       ----------
TOTAL COMMON STOCKS
  (Cost $1,889,731)                     1,882,551
                                       ----------


                            NUMBER
                          OF SHARES      VALUE
                         ----------- -------------
SHORT TERM INVESTMENTS - 1.4%
  Galileo Money Market Fund
  (Cost $26,416)           26,416     $   26,416
                                      ----------
TOTAL INVESTMENTS IN
  SECURITIES -  100.0%
  (Cost $1,916,147(a))                $1,908,967
                                      ==========


-------------------

 (a) Cost for Federal income tax purposes is $1,916,367. The gross
     unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                  $29,830
      Gross unrealized depreciation                                  (37,230)
                                                                     -------
                                                                     $(7,400)
                                                                     =======


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              39



                                BLACKROCK FUNDS
                      STATEMENT OF ASSETS AND LIABILITIES
                         DIVIDEND ACHIEVERSTM PORTFOLIO


SEPTEMBER 30, 2004



ASSETS
 Investments at value (Cost $1,916,147)..................................     $  1,908,967
 Dividends receivable ...................................................            2,181
 Receivable from advisor ................................................           62,817
 Prepaid expenses .......................................................           64,713
                                                                              ------------
    TOTAL ASSETS ........................................................        2,038,678
                                                                              ------------
LIABILITIES
 Transfer agent fees payable ............................................              132
 Other accrued expenses payable .........................................           46,572
                                                                              ------------
    TOTAL LIABILITIES ...................................................           46,704
                                                                              ------------
NET ASSETS (Applicable to 200,010 Institutional shares,10 Service shares,
 10 Investor A shares, 10 Investor B shares and
 10 Investor C shares outstanding) ......................................     $  1,991,974
                                                                              ============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
 PER INSTITUTIONAL SHARE ($1,991,574/200,010)............................     $       9.96
                                                                              ============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
 PER SERVICE SHARE ($100/10)(a)..........................................     $       9.95
                                                                              ============
NET ASSET VALUE AND REDEMPTION PRICE
 PER INVESTOR A SHARE ($100/10)(b).......................................     $       9.96
                                                                              ============
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE ($9.96/0.955)................     $      10.43
                                                                              ============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
 (subject to a maximum contingent deferred sales charge of 4.5%)
 PER INVESTOR B SHARE ($100/10)(c).......................................     $       9.96
                                                                              ============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
 (subject to a maximum contingent deferred sales charge of 1.0%)
 PER INVESTOR C SHARE ($100/10)(d).......................................     $       9.96
                                                                              ============

---------
(a) Exact net assets and shares outstanding at September 30, 2004 were $99.53
and 10.000, respectively.
(b) Exact net assets and shares outstanding at September 30, 2004 were $99.61
and 10.000, respectively.
(c) Exact net assets and shares outstanding at September 30, 2004 were $99.61
    and 10.000, respectively.
(d) Exact net assets and shares outstanding at September 30, 2004 were $99.61
    and 10.000, respectively.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       40



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                         MID-CAP VALUE EQUITY PORTFOLIO


AS OF SEPTEMBER 30, 2004





                                                NUMBER
                                              OF SHARES      VALUE
                                             ----------- ------------
COMMON STOCKS - 94.3%
Aerospace - 2.3%
  DRS Technologies, Inc.(b)                  11,300       $  423,072
  Goodrich Corp.                             11,900          373,184

                                                          ==========
                                                             796,256
                                                          ----------
Banks - 11.9%
  Banknorth Group, Inc.                      21,100          738,500
  Comerica, Inc.                              7,200          427,320
  North Fork Bancorporation, Inc.(c)         13,800          613,410
  Popular, Inc.                              29,100          765,330
  Sovereign Bancorp, Inc.                    48,200        1,051,724
  Trustmark Corp.                             8,300          257,964
  Washington Federal, Inc.                   10,300          259,045

                                                          ==========
                                                           4,113,293
                                                          ----------
Beverages & Bottling - 0.5%
  Constellation Brands, Inc. - Class
    A(b)                                      4,600          175,076
                                                          ----------
Chemicals - 4.0%
  Ashland, Inc.                              10,700          600,056
  Cytec Industries, Inc.                      8,600          420,970
  NOVA Chemicals Corp.(c)                     9,400          363,780

                                                          ==========
                                                           1,384,806
                                                          ----------
Computer Software & Services - 5.6%
  Ingram Micro, Inc. - Class A(b)            32,400          521,640
  McAfee, Inc.(b)                            35,800          719,580
  Seagate Technology(b)                      12,200          164,944
  Tech Data Corp.(b)                         13,500          520,425

                                                          ==========
                                                           1,926,589
                                                          ----------
Containers - 3.4%
  Ball Corp.                                  9,400          351,842
  Packaging Corp. of America                 17,600          430,672
  Sonoco Products Co.                        14,400          380,736

                                                          ==========
                                                           1,163,250
                                                          ----------
Electronics - 1.1%
  Amphenol Corp.(b)                          10,800          370,008
                                                          ----------
Energy & Utilities - 8.2%
  Constellation Energy Group, Inc.            7,400          294,816
  PPL Corp.                                  12,300          580,314
  Reliant Energy, Inc.(b)                    48,100          448,773
  Sempra Energy(c)                            7,900          285,901
  TXU Corp.(c)                               14,200          680,464
  Wisconsin Energy Corp.                     16,800          535,920

                                                          ==========
                                                           2,826,188
                                                          ----------
Entertainment & Leisure - 4.2%
  Gaylord Entertainment Co.(b)               12,200          378,200
  Kerzner International Ltd.(b)(c)            8,200          360,554
  Scientific Games Corp. - Class A(b)        17,600          336,160
  WMS Industries, Inc.(b)(c)                 14,500          372,505

                                                          ==========
                                                           1,447,419
                                                          ----------
Finance - 4.5%
  Affiliated Managers Group, Inc.(b)(c)       8,000          428,320
  The Bear Stearns Cos., Inc.(c)              5,900          567,403
  CIT Group, Inc.                             7,000          261,730
  Jackson Hewitt Tax Service, Inc.           14,500          293,335

                                                          ==========
                                                           1,550,788
                                                          ----------
Food & Agriculture - 3.0%
  Bunge Ltd.(c)                              11,400          455,772


                                                NUMBER
                                              OF SHARES      VALUE
                                             ----------- ------------
COMMON STOCKS (Continued)
Food & Agriculture (Continued)
  Del Monte Foods Co.(b)                     36,600       $  383,934
  The J. M. Smucker Co.                       4,200          186,522

                                                          ==========
                                                           1,026,228
                                                          ----------
Insurance - 5.6%
  Allmerica Financial Corp.(b)               17,600          473,088
  CNA Financial Corp.(b)                     15,600          374,556
  Fidelity National Financial, Inc.          10,600          403,860
  Radian Group, Inc.                         11,200          517,776
  RenaissanceRe Holdings Ltd.                 3,300          170,214

                                                          ==========
                                                           1,939,494
                                                          ----------
Manufacturing - 12.4%
  The Black & Decker Corp.(c)                11,200          867,328
  Briggs & Stratton Corp.(c)                  9,400          763,280
  Brunswick Corp.                            11,200          512,512
  Eaton Corp.                                 9,600          608,736
  ITT Industries, Inc.                        4,500          359,955
  Rinker Group Ltd. - ADR(c)                  6,000          375,840
  Thor Industries, Inc.                       8,200          217,054
  Timken Co.                                 23,400          576,108

                                                          ==========
                                                           4,280,813
                                                          ----------
Medical & Medical Services - 3.7%
  Apria Healthcare Group, Inc.(b)            17,400          474,150
  Laboratory Corp. of America
    Holdings(b)(c)                            9,500          415,340
  Select Medical Corp.                       28,700          385,441

                                                          ==========
                                                           1,274,931
                                                          ----------
Medical Instruments & Supplies - 2.3%
  Fisher Scientific International, Inc.(b)   13,600          793,288
                                                          ----------
Metal & Mining - 2.7%
  Peabody Energy Corp.(c)                     8,700          517,650
  United States Steel Corp.(c)               10,900          410,058

                                                          ==========
                                                             927,708
                                                          ----------
Motor Vehicles - 1.2%
  PACCAR, Inc.                                6,100          421,632
                                                          ----------
Oil & Gas - 6.6%
  EOG Resources, Inc.                         9,100          599,235
  Oneok, Inc.                                18,100          470,962
  Talisman Energy, Inc. - ADR                31,300          810,670
  Transocean, Inc.(b)                        11,400          407,892

                                                          ==========
                                                           2,288,759
                                                          ----------
Personal Services - 0.8%
  Service Corp. International(b)             44,600          276,966
                                                          ----------
Pharmaceuticals - 0.5%
  Watson Pharmaceuticals, Inc.(b)             5,700          167,922
                                                          ----------
Retail Merchandising - 7.4%
  BJ's Wholesale Club, Inc.(b)(c)            18,400          503,056
  Dillard's, Inc. - Class A                   8,800          173,712
  Jarden Corp.(b)                            20,800          758,992
  Polo Ralph Lauren Corp.                     9,500          345,515
  Regis Corp.                                19,200          772,224

                                                          ==========
                                                           2,553,499
                                                          ----------
Semiconductors & Related Devices - 0.8%
  Cypress Semiconductor Corp.(b)             31,300          276,692
                                                          ----------

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              41



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                   MID-CAP VALUE EQUITY PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                                      NUMBER
                                    OF SHARES      VALUE
                                   ----------- -------------
COMMON STOCKS (Continued)
Transportation - 1.6%
  Laidlaw International, Inc.(b)     32,500     $   534,625
                                                -----------
TOTAL COMMON STOCKS
  (Cost $29,290,602)                             32,516,230
                                                -----------


                                                     PAR/SHARES
                                          MATURITY     (000)
                                         ---------- -----------
SHORT TERM INVESTMENTS - 22.1%
  Banco Santander Puerto Rico,
    Certificate of Deposit
    1.67%(d)                             10/07/04      $    9           9,398
  Bear Stearns, Floating Rate Notes
    1.90%(d)(e)                          10/01/04         396         395,555
  Concord Minuteman, Asset Backed
    Commercial Paper
    1.66%(d)                             10/05/04         134         133,931
  Falcon, Asset Backed Commercial
    Paper
    1.66%(d)                             10/05/04         193         193,173
  Federal Home Loan Bank, Discount
    Notes
    1.65%                                10/01/04       1,000       1,000,000
  Goldman Sachs, Floating Rate Notes
    1.96%(d)(e)                          10/01/04         436         435,895
  Merrill Lynch, Floating Rate Master
    Notes
    2.00%(d)(e)                          10/01/04          54          53,772
  Morgan Stanley, Floating Rate Notes
    1.86%(d)(e)                          10/01/04         738         738,077
    1.96%(d)(e)                          10/01/04         280         279,949
  Natexis Banques International,
    Floating Rate Notes
    1.92%(d)(e)                          10/01/04         216         215,989
  Union Bank of Switzerland, Time
    Deposit
    1.98%(d)                             10/01/04         187         187,132
  Westdeutsche Landsbank
    International, Floating Rate Notes
    1.70%(d)(e)                          10/12/04         506         505,567
  Galileo Money Market Fund                               851         851,320
  Institutional Money Market Trust(d)                   2,630       2,630,225

                                                                    =========
TOTAL SHORT TERM INVESTMENTS
  (Cost $7,629,983)                                                 7,629,983
                                                                    ---------
TOTAL INVESTMENTS IN SECURITIES - 116.4%
  (Cost $36,920,585(a))                                            40,146,213
LIABILITIES IN EXCESS OF OTHER
  ASSETS - (16.4)%
  (Including $5,778,663 of payable
  upon return of securities loaned)                                (5,656,887)
                                                                   ----------
NET ASSETS - 100.0% (Applicable to
  1,224,850 Institutional shares,
  255,807 Service shares, 309,907
  Investor A shares, 548,690 Investor B
  shares and 186,949 Investor C
  shares outstanding)                                            $ 34,489,326
                                                                 ============


                                            VALUE
                                         -----------
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  INSTITUTIONAL SHARE
  ($17,002,504/1,224,850)                $ 13.88
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  SERVICE SHARE
     ($3,532,314/255,807)                $ 13.81
                                         =======
NET ASSET VALUE AND REDEMPTION
  PRICE PER INVESTOR A SHARE
     ($4,251,930/309,907)                $ 13.72
                                         =======
MAXIMUM OFFERING PRICE PER
  INVESTOR A SHARE
           ($13.72/0.955)                $ 14.37
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 4.5%)
  PER INVESTOR B SHARE
     ($7,236,814/548,690)                $ 13.19
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 1.0%)
  PER INVESTOR C SHARE
     ($2,465,764/186,949)                $ 13.19
                                         =======



-------------------

 (a) Cost for Federal income tax purposes is $37,004,599. The gross
     unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                    $3,565,728
      Gross unrealized depreciation                                      (424,114)
                                                                       ----------
                                                                       $3,141,614
                                                                       ==========

     (b) Non-income producing security.
     (c) Total or partial securities on loan.
 (d) Securities purchased with the cash proceeds from securities loaned.
 (e) Rates shown are the rates as of September 30, 2004.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                        MID-CAP GROWTH EQUITY PORTFOLIO


AS OF SEPTEMBER 30, 2004





                                             NUMBER
                                           OF SHARES      VALUE
                                          ----------- -------------
COMMON STOCKS - 97.9%
Advertising - 0.8%
  Lamar Advertising Co.(b)(c)               22,500     $   936,225
                                                       -----------
Banks - 0.0%
  Dime Bancorp, Inc. - Warrants
    (expiring 11/22/05)                     57,900           8,106
                                                       -----------
Broadcasting - 2.9%
  Cablevision Systems New York
    Group - Class A(b)(c)                   37,200         754,416
  Citadel Broadcasting Co.(c)             122,300        1,567,886
  Entercom Communications Corp.(c)         39,200        1,280,272

                                                       ===========
                                                         3,602,574
                                                       -----------
Business Services - 6.1%
  ChoicePoint, Inc.(c)                     30,200        1,288,030
  Fluor Corp.(b)                           38,500        1,714,020
  Manpower, Inc.                           60,700        2,700,543
  SEI Investments Co.                      52,300        1,761,464

                                                       ===========
                                                         7,464,057
                                                       -----------
Computer Software & Services - 14.6%
  BEA Systems, Inc.(b)(c)                 208,200        1,438,662
  The BISYS Group, Inc.(c)                213,696        3,122,100
  Ceridian Corp.(c)                       141,000        2,595,810
  Cognizant Technology Solutions
    Corp.(c)                               43,800        1,336,338
  DST Systems, Inc.(b)(c)                  51,800        2,303,546
  GTECH Holdings Corp.(b)                 108,400        2,744,688
  McAfee, Inc.(c)                         156,300        3,141,630
  MicroStrategy, Inc. - Warrants
    (expiring 06/24/07)(d)                     13                1
  Siebel Systems, Inc.(c)                 147,200        1,109,888

                                                       ===========
                                                        17,792,663
                                                       -----------
Containers - 1.8%
  Smurfit-Stone Container Corp.(c)        114,300        2,213,991
                                                       -----------
Electronics - 1.2%
  Intersil Corp. - Class A(b)              92,600        1,475,118
                                                       -----------
Entertainment & Leisure - 2.8%
  Hilton Hotels Corp.                      95,500        1,799,220
  Regal Entertainment Group - Class
    A(b)                                   37,600          718,160
  Station Casinos, Inc.(b)                 18,700          917,048

                                                       ===========
                                                         3,434,428
                                                       -----------
Food & Agriculture - 1.4%
  Dean Foods Co.(b)(c)                     58,200        1,747,164
                                                       -----------
Insurance - 2.8%
  Willis Group Holdings Ltd.               92,400        3,455,760
                                                       -----------
Manufacturing - 2.8%
  Brunswick Corp.                          47,900        2,191,904
  Energizer Holdings, Inc.(b)(c)           26,900        1,240,090

                                                       ===========
                                                         3,431,994
                                                       -----------
Medical & Medical Services - 8.1%
  Anthem, Inc.(b)(c)                       19,700        1,718,825
  Laboratory Corp. of America
    Holdings(b)(c)                         65,300        2,854,916
  Omnicare, Inc.(b)                        68,700        1,948,332
  Triad Hospitals, Inc.(c)                 47,975        1,652,259
  Universal Health Services, Inc. -
    Class B                                40,800        1,774,800

                                                       ===========
                                                         9,949,132
                                                       -----------


                                             NUMBER
                                           OF SHARES      VALUE
                                          ----------- -------------
COMMON STOCKS (Continued)
Medical Instruments & Supplies - 9.8%
  Alcon, Inc.                              32,200      $ 2,582,440
  C.R. Bard, Inc.                          43,400        2,457,742
  St. Jude Medical, Inc.(c)                36,200        2,724,774
  Varian Medical Systems, Inc.(c)          66,800        2,309,276
  Zimmer Holdings, Inc.(b)(c)              23,700        1,873,248

                                                       ===========
                                                        11,947,480
                                                       -----------
Oil & Gas - 7.0%
  BJ Services Co.(b)                       17,300          906,693
  ENSCO International, Inc.                42,800        1,398,276
  Nabors Industries Ltd.(b)(c)             29,711        1,406,816
  Patterson-UTI Energy, Inc.(b)            87,600        1,670,532
  Pioneer Natural Resources Co.(b)         56,200        1,937,776
  Talisman Energy, Inc. - ADR              49,800        1,289,820

                                                       ===========
                                                         8,609,913
                                                       -----------
Paper & Forest Products - 0.7%
  Pactiv Corp.(c)                          37,900          881,175
                                                       -----------
Pharmaceuticals - 11.0%
  Allergan, Inc.(b)                        23,500        1,704,925
  AmerisourceBergen Corp.(b)               44,200        2,373,982
  Celgene Corp.(b)(c)                      37,900        2,206,917
  Endo Pharmaceuticals Holdings,
    Inc.(c)                                98,400        1,806,624
  Gilead Sciences, Inc.(c)                 58,000        2,168,040
  Par Pharmaceutical Cos., Inc.(c)         51,300        1,843,209
  Shire Pharmaceuticals Group PLC -
    ADR                                    45,456        1,302,314

                                                       ===========
                                                        13,406,011
                                                       -----------
Restaurants - 3.0%
  Outback Steakhouse, Inc.                 48,500        2,014,205
  Wendy's International, Inc.              47,800        1,606,080

                                                       ===========
                                                         3,620,285
                                                       -----------
Retail Merchandising - 11.0%
  Abercrombie & Fitch Co. - Class A        56,500        1,779,750
  Dollar General Corp.                     99,296        2,000,814
  Limited Brands(b)                       122,040        2,720,272
  Reebok International Ltd.                39,000        1,432,080
  Staples, Inc.                            94,000        2,803,080
  Williams-Sonoma, Inc.(b)(c)              67,400        2,530,870

                                                       ===========
                                                        13,266,866
                                                       -----------
Semiconductors & Related Devices - 5.0%
  AMIS Holdings, Inc.(c)                   14,900          201,448
  Fairchild Semiconductor International,
    Inc.(c)                               102,600        1,453,842
  National Semiconductor Corp.(b)(c)      154,156        2,387,876
  Novellus Systems, Inc.(b)(c)             44,200        1,175,278
  NVIDIA Corp.(c)                          30,000          435,600
  Teradyne, Inc.(c)                        37,600          503,840

                                                       ===========
                                                         6,157,884
                                                       -----------
Telecommunications - 4.4%
  Amdocs Ltd.(b)(c)                        99,900        2,180,817
  Andrew Corp.(b)(c)                       78,900          965,736
  Harris Corp.                             40,600        2,230,564

                                                       ===========
                                                         5,377,117
                                                       -----------

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              43



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                  MID-CAP GROWTH EQUITY PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                              NUMBER
                            OF SHARES       VALUE
                           ----------- --------------
COMMON STOCKS (Continued)
Waste Management - 0.7%
  Stericycle, Inc.(b)(c)     17,700     $    812,430
                                        ------------
TOTAL COMMON STOCKS
  (Cost $89,654,680)                     119,590,373
                                        ------------


                                                     PAR/SHARES
                                          MATURITY     (000)
                                         ---------- -----------
SHORT TERM INVESTMENTS - 22.3%
  Banco Santander Puerto Rico,
    Certificate of Deposit
    1.67%(e)                             10/07/04      $  354          354,448
  Canadian Imperial Bank International,
    Certificate of Deposit
    1.80%(e)                             10/29/04       1,773        1,772,839
    1.72%(e)                             05/25/05       1,679        1,679,149
  Eurohypo, Certificate of Deposit
    1.80%(e)                             10/22/04       1,147        1,146,956
  Foreningssparbanken AB, Floating
    Rate Notes
    1.72%(e)(f)                          10/15/04       1,849        1,849,265
  Merrill Lynch, Floating Rate Master
    Notes
    2.00%(e)(f)                          10/01/04       4,233        4,232,993
  Natexis Banques International,
    Floating Rate Notes
    1.98%(e)(f)                          10/01/04       3,895        3,895,384
  Union Bank of Switzerland, Time
    Deposit
    1.98%(e)                             10/01/04         704          704,255
  Victory Rece, Asset Backed
    Commercial Paper
    1.80%(e)                             10/22/04       2,062        2,062,362
  Westdeutsche Landsbank
    International, Floating Rate Notes
    1.70%(e)(f)                          10/12/04          28           28,387
  Galileo Money Market Fund                             2,792        2,791,505
  Institutional Money Market Trust(e)                   6,716        6,715,830

                                                                     =========
TOTAL SHORT TERM INVESTMENTS
  (Cost $27,233,373)                                                27,233,373
                                                                    ----------
TOTAL INVESTMENTS IN SECURITIES - 120.2%
  (Cost $116,888,053(a))                                           146,823,746
LIABILITIES IN EXCESS OF OTHER
  ASSETS - (20.2)%
  (Including $24,441,869 of payable
  upon return of securities loaned)                                (24,669,884)
                                                                   -----------
NET ASSETS - 100.0% (Applicable to
  4,605,998 Institutional shares,
  1,284,929 Service shares, 3,362,602
  Investor A shares, 4,181,205 Investor
  B shares and 1,477,058 Investor C
  shares outstanding)                                            $ 122,153,862
                                                                 =============


                                            VALUE
                                         ----------
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  INSTITUTIONAL SHARE
  ($40,336,899/4,605,998)                  $ 8.76
                                           ======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  PER SERVICE SHARE
  ($10,870,737/1,284,929)                  $ 8.46
                                           ======
NET ASSET VALUE AND
  REDEMPTION PRICE PER
  INVESTOR A SHARE
  ($27,777,082/3,362,602)                  $ 8.26
                                           ======
MAXIMUM OFFERING PRICE PER
  INVESTOR A SHARE
            ($8.26/0.955)                  $ 8.65
                                           ======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 4.5%)
  PER INVESTOR B SHARE
  ($31,900,491/4,181,205)                  $ 7.63
                                           ======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 1.0%)
  PER INVESTOR C SHARE
  ($11,268,653/1,477,058)                  $ 7.63
                                           ======


-------------------

 (a) Cost for Federal income tax purposes is $119,205,380. The
     gross unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                      $33,560,890
      Gross unrealized depreciation                                       (5,942,524)
                                                                         -----------
                                                                         $27,618,366
                                                                         ===========

     (b) Total or partial securities on loan.
     (c) Non-income producing security.
 (d) Security valued at fair value as determined in good faith by or under the
       direction of the Trustees. As of September 30, 2004, this security had a
       total market value of $1 which represents less than 0.01% of net assets.

 (e) Securities purchased with the cash proceeds from securities loaned.
  (f) Rates shown are the rates as of September 30, 2004.


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                        SMALL CAP VALUE EQUITY PORTFOLIO


AS OF SEPTEMBER 30, 2004





                                             NUMBER
                                           OF SHARES      VALUE
                                          ----------- -------------
COMMON STOCKS - 95.4%
Aerospace - 2.0%
  DRS Technologies, Inc.(b)                 49,400     $ 1,849,536
  Herley Industries, Inc.(b)                45,300         846,657

                                                       ===========
                                                         2,696,193
                                                       -----------
Banks - 11.7%
  Central Pacific Financial Corp.           32,655         898,666
  First Niagara Financial Group, Inc.     151,800        2,031,083
  Oriental Financial Group, Inc.           77,100        2,086,326
  Provident Bankshares Corp.               67,181        2,253,923
  Sky Financial Group, Inc.                96,700        2,417,500
  Sterling Financial Corp.(b)              54,450        1,918,818
  Trustmark Corp.                          63,300        1,967,364
  Washington Federal, Inc.                 74,800        1,881,220

                                                       ===========
                                                        15,454,900
                                                       -----------
Beverages & Bottling - 0.9%
  The Robert Mondavi Corp., - Class
    A(b)                                   29,200        1,143,764
                                                       -----------
Broadcasting - 0.9%
  Cumulus Media, Inc. - Class A(b)         80,300        1,155,517
                                                       -----------
Business Services - 2.5%
  Handleman Co.                           162,800        3,330,888
                                                       -----------
Chemicals - 2.7%
  Cytec Industries, Inc.                   48,700        2,383,865
  Olin Corp.                               60,200        1,204,000

                                                       ===========
                                                         3,587,865
                                                       -----------
Computer & Office Equipment - 0.5%
  Maxtor Corp.(b)                         136,600          710,320
                                                       -----------
Computer Software & Services - 4.5%
  Borland Software Corp.(b)(c)            197,700        1,650,795
  Ingram Micro, Inc. - Class A(b)         125,600        2,022,160
  Polycom, Inc.(b)                         47,500          941,450
  TIBCO Software, Inc.(b)                 157,400        1,339,474

                                                       ===========
                                                         5,953,879
                                                       -----------
Construction - 3.8%
  URS Corp.(b)                             73,600        1,963,648
  Washington Group International,
    Inc.(b)                                88,600        3,067,332

                                                       ===========
                                                         5,030,980
                                                       -----------
Containers - 1.1%
  Packaging Corp. of America               58,000        1,419,260
                                                       -----------
Electronics - 0.5%
  TTM Technologies, Inc.(b)                78,200          695,198
                                                       -----------
Entertainment & Leisure - 6.4%
  Gaylord Entertainment Co.(b)             61,000        1,891,000
  Kerzner International Ltd.(b)(c)         30,200        1,327,894
  MTR Gaming Group, Inc.(b)               163,100        1,520,092
  Multimedia Games, Inc.(b)(c)             84,600        1,311,300
  Scientific Games Corp. - Class A(b)      61,000        1,165,100
  WMS Industries, Inc.(b)(c)               46,100        1,184,309

                                                       ===========
                                                         8,399,695
                                                       -----------
Finance - 5.1%
  Affiliated Managers Group, Inc.(b)(c)    36,700        1,964,918
  Indymac Bancorp, Inc.(c)                 57,900        2,095,980
  Jackson Hewitt Tax Service, Inc.         99,200        2,006,816
  MoneyGram International, Inc.            37,000          631,960

                                                       ===========
                                                         6,699,674
                                                       -----------


                                             NUMBER
                                           OF SHARES      VALUE
                                          ----------- -------------
COMMON STOCKS (Continued)
Food & Agriculture - 3.4%
  Del Monte Foods Co.(b)                  179,100      $ 1,878,759
  Hain Celestial Group, Inc.(b)            36,300          641,784
  Ralcorp Holdings, Inc.(b)                55,300        1,996,330

                                                       ===========
                                                         4,516,873
                                                       -----------
Furniture - 0.9%
  La-Z-Boy, Inc.                           74,100        1,124,838
                                                       -----------
Insurance - 3.3%
  Allmerica Financial Corp.(b)             66,800        1,795,584
  Aspen Insurance Holdings Ltd.            43,400          998,634
  Max Re Capital Ltd.                      30,700          614,000
  Montpelier Re Holdings Ltd.              24,700          905,996

                                                       ===========
                                                         4,314,214
                                                       -----------
Machinery & Heavy Equipment - 2.9%
  Bucyrus International, Inc. - Class
    A(b)                                   16,500          554,400
  K2, Inc.(b)                             123,400        1,765,854
  Kennametal, Inc.                         33,000        1,489,950

                                                       ===========
                                                         3,810,204
                                                       -----------
Manufacturing - 7.8%
  Aptargroup, Inc.                         26,800        1,178,396
  Briggs & Stratton Corp.(c)               32,500        2,639,000
  Crown Holdings, Inc.(b)                 130,600        1,346,486
  Fleetwood Enterprises, Inc.(b)          143,800        2,182,884
  Lennox International, Inc.               61,600          920,304
  Timken Co.(c)                            81,400        2,004,068

                                                       ===========
                                                        10,271,138
                                                       -----------
Medical & Medical Services - 4.0%
  Apria Healthcare Group, Inc.(b)(c)       67,300        1,833,925
  Magellan Health Services, Inc.(b)        57,000        2,083,920
  Select Medical Corp.                    100,000        1,343,000

                                                       ===========
                                                         5,260,845
                                                       -----------
Medical Instruments & Supplies - 3.4%
  Ocular Sciences, Inc.(b)                 47,969        2,301,073
  Sybron Dental Specialties, Inc.(b)       74,600        2,214,874

                                                       ===========
                                                         4,515,947
                                                       -----------
Metal & Mining - 1.7%
  Cleveland Cliffs, Inc.(b)                15,200        1,229,224
  Massey Energy Co.(c)                     36,900        1,067,517

                                                       ===========
                                                         2,296,741
                                                       -----------
Oil & Gas - 10.7%
  AGL Resources, Inc.                      54,400        1,673,888
  Airgas, Inc.                             77,200        1,858,204
  Energen Corp.                            40,500        2,087,775
  Magnum Hunter Resources, Inc.(b)        188,000        2,169,520
  Oceaneering International, Inc.(b)       40,500        1,492,020
  Oneok, Inc.                              84,600        2,201,292
  Tidewater, Inc.                          36,800        1,197,840
  Whiting Petroleum Corp.(b)               48,400        1,471,360

                                                       ===========
                                                        14,151,899
                                                       -----------
Publishing & Printing - 1.5%
  Banta Corp.                              48,800        1,939,800
                                                       -----------
Railroad & Shipping - 0.4%
  Genesee & Wyoming, Inc. - Class
    A(b)                                   19,700          498,804
                                                       -----------

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              45



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                  SMALL CAP VALUE EQUITY PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                                          NUMBER
                                        OF SHARES       VALUE
                                       ----------- --------------
COMMON STOCKS (Continued)
Restaurants - 0.4%
  O'Charley's, Inc.(b)                    28,400    $    462,920
                                                    ------------
Retail Merchandising - 8.8%
  BJ's Wholesale Club, Inc.(b)(c)         61,600       1,684,144
  Dillard's, Inc. - Class A               86,000       1,697,640
  Jarden Corp.(b)                         74,800       2,729,452
  Jo-Ann Stores, Inc.(b)                  41,200       1,155,248
  Regis Corp.                             67,100       2,698,762
  Too, Inc.(b)                            89,300       1,613,651

                                                    ============
                                                      11,578,897
                                                    ------------
Semiconductors & Related Devices - 0.7%
  Cypress Semiconductor Corp.(b)(c)      126,800       1,120,912
                                                    ------------
Telecommunications - 1.0%
  General Communication, Inc. - Class
    A(b)                                 139,000       1,257,950
                                                    ------------
Transportation - 1.9%
  Laidlaw International, Inc.(b)         113,000       1,858,850
  Yellow Roadway Corp.(b)                 14,000         656,460

                                                    ============
                                                       2,515,310
                                                    ------------
TOTAL COMMON STOCKS
  (Cost $110,656,435)                                125,915,425
                                                    ------------


                                                   PAR/SHARES
                                        MATURITY     (000)
                                       ---------- -----------
SHORT TERM INVESTMENTS - 13.9%
  Falcon, Asset Backed Commercial
    Paper
    1.66%(d)                           10/05/04      $  273          273,434
  Federal Home Loan Bank, Discount
    Notes
    1.65%                              10/01/04       1,000        1,000,000
  Goldman Sachs, Floating Rate Notes
    1.96%(d)(e)                        10/01/04         635          635,480
  Merrill Lynch, Floating Rate Master
    Notes
    2.00%(d)(e)                        10/01/04       1,683        1,683,360
  Morgan Stanley, Floating Rate Notes
    1.96%(d)(e)                        10/01/04         315          314,942
  Natexis Banques International,
    Floating Rate Notes
    1.92%(d)(e)                        10/01/04       1,237        1,236,671
    1.98%(d)(e)                        10/01/04       1,151        1,151,485
  Svenska Handelsbank, Certificate of
    Deposit
    1.39%(d)                           10/27/04         913          912,979
  Union Bank of Switzerland, Time
    Deposit
    1.98%(d)                           10/01/04         277          276,734
  Westdeutsche Landsbank
    International, Floating Rate Notes
    1.70%(d)(e)                        10/12/04          58           58,214
  Galileo Money Market Fund                           5,888        5,887,848
  Institutional Money Market Trust(d)                 4,985        4,985,496

                                                                   =========
TOTAL SHORT TERM INVESTMENTS
  (Cost $18,416,644)                                              18,416,644
                                                               -------------


                               VALUE
                          ---------------
TOTAL INVESTMENTS IN
SECURITIES - 109.3%
  (Cost $129,073,079(a))    $ 144,332,069
LIABILITIES IN EXCESS OF
OTHER
  ASSETS - (9.3)%
  (Including $11,528,796
of payable
  upon return of              (12,266,907)
                            -------------
securities loaned)
NET ASSETS - 100.0%
(Applicable to
  314,351 BlackRock
shares,
  4,342,142 Institutional
shares,
  218,143 Service shares,
2,349,465
  Investor A shares,
1,158,255 Investor
  B shares and 487,395
Investor C
  shares outstanding)       $ 132,065,162
                            =============


NET ASSET VALUE, OFFERING AND
  REDEMPTION PRICE PER
  BLACKROCK SHARE
     ($4,787,220/314,351)                $ 15.23
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  INSTITUTIONAL SHARE
  ($66,082,975/4,342,142)                $ 15.22
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  PER SERVICE SHARE
     ($3,288,138/218,143)                $ 15.07
                                         =======
NET ASSET VALUE AND
  REDEMPTION PRICE PER
  INVESTOR A SHARE
  ($35,240,328/2,349,465)                $ 15.00
                                         =======
MAXIMUM OFFERING PRICE
  PER INVESTOR A SHARE
           ($15.00/0.955)                $ 15.71
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 4.5%)
  PER INVESTOR B SHARE
  ($15,951,747/1,158,255)                $ 13.77
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 1.0%)
  PER INVESTOR C SHARE
     ($6,714,754/487,395)                $ 13.78
                                         =======


-------------------

 (a) Cost for Federal income tax purposes is $129,229,913. The
     gross unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                      $17,682,502
      Gross unrealized depreciation                                       (2,580,346)
                                                                         -----------
                                                                         $15,102,156
                                                                         ===========


     (b) Non-income producing security.
     (c) Total or partial securities on loan.
 (d) Securities purchased with the cash proceeds from securities loaned.
 (e) Rates shown are the rates as of September 30, 2004.


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
46



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                        SMALL CAP CORE EQUITY PORTFOLIO


AS OF SEPTEMBER 30, 2004





                                            NUMBER
                                          OF SHARES     VALUE
                                         ----------- -----------
COMMON STOCKS - 93.7%
Aerospace - 2.0%
  DRS Technologies, Inc.(b)                2,450      $ 91,728
  Herley Industries, Inc.(b)               5,450       101,860

                                                      ========
                                                       193,588
                                                      --------
Banks - 9.1%
  Central Pacific Financial Corp.          4,300       118,335
  First Niagara Financial Group, Inc.      6,550        87,639
  Main Street Banks, Inc.                  4,050       123,930
  Oriental Financial Group, Inc.           4,550       123,123
  Provident Bankshares Corp.               3,250       109,038
  Sterling Financial Corp.(b)              3,544       124,891
  Washington Federal, Inc.                 4,600       115,690
  WSFS Financial Corp.                     1,150        57,500

                                                      ========
                                                       860,146
                                                      --------
Broadcasting - 2.7%
  Alliance Atlantis Communications,
    Inc.(b)                                4,500        99,765
  Cumulus Media, Inc. - Class A(b)         3,100        44,609
  Gray Television, Inc.                    5,350        63,665
  Spanish Broadcasting System, Inc. -
    Class A(b)                             4,450        43,788

                                                      ========
                                                       251,827
                                                      --------
Business Services - 6.3%
  Aviall, Inc.(b)                          6,150       125,460
  Digitas, Inc.(b)                       19,000        146,870
  Gevity HR, Inc.                         3,400         52,292
  Navigant Consulting, Inc.(b)            8,750        192,150
  Watson Wyatt & Co. Holdings             3,200         84,160

                                                      ========
                                                       600,932
                                                      --------
Chemicals - 1.3%
  Cytec Industries, Inc.                  2,550        124,822
                                                      --------
Computer & Office Equipment - 1.0%
  Maxtor Corp.(b)                        17,900         93,080
                                                      --------
Computer Software & Services - 6.3%
  Ascential Software Corp.(b)             4,700         63,308
  Borland Software Corp.(b)              10,500         87,675
  EarthLink, Inc.(b)                      4,900         50,470
  Ingram Micro, Inc. - Class A(b)         4,700         75,670
  Internet Security Systems, Inc.(b)      2,850         48,450
  SkillSoft PLC - ADR(b)                 12,300         82,287
  TIBCO Software, Inc.(b)                21,850        185,944

                                                      ========
                                                       593,804
                                                      --------
Construction - 3.7%
  Chicago Bridge & Iron Co. N.V. -
    ADR                                   4,250        127,459
  URS Corp.(b)                            4,600        122,728
  Washington Group International,
    Inc.(b)                               2,900        100,398

                                                      ========
                                                       350,585
                                                      --------
Containers - 1.0%
  Packaging Corp. of America              4,050         99,105
                                                      --------
Electronics - 4.1%
  CommScope, Inc.(b)                      3,250         70,199
  Cubic Corp.                             4,200         96,180
  EDO Corp.                               3,650        101,288
  TiVo, Inc.(b)                           8,050         53,291


                                            NUMBER
                                          OF SHARES     VALUE
                                         ----------- -----------
COMMON STOCKS (Continued)
Electronics (Continued)
  TTM Technologies, Inc.(b)               7,200       $ 64,008

                                                      ========
                                                       384,966
                                                      --------
Entertainment & Leisure - 5.5%
  Gaylord Entertainment Co.(b)            2,650         82,150
  Kerzner International Ltd.(b)           3,050        134,108
  MTR Gaming Group, Inc.(b)               8,150         75,958
  Multimedia Games, Inc.(b)               2,800         43,400
  Orient Express Hotels Ltd. - Class A    6,650        108,661
  Scientific Games Corp. - Class A(b)     4,150         79,265

                                                      ========
                                                       523,542
                                                      --------
Finance - 0.8%
  Jefferies Group, Inc.                   2,300         79,281
                                                      --------
Food & Agriculture - 3.0%
  Delta & Pine Land Co.                   4,250        113,689
  NBTY, Inc.(b)                           2,850         61,446
  Ralcorp Holdings, Inc.(b)               3,000        108,300

                                                      ========
                                                       283,435
                                                      --------
Furniture - 1.0%
  Aaron Rents, Inc.                       4,287         93,285
                                                      --------
Insurance - 2.4%
  Allmerica Financial Corp.(b)            1,200         32,256
  Max Re Capital Ltd.                     4,600         92,000
  PXRE Group Ltd.                         3,800         88,958

                                                      ========
                                                       213,214
                                                      --------
Machinery & Heavy Equipment - 2.4%
  Albany International Corp. - Class A    3,450        102,844
  K2, Inc.(b)                             9,000        128,790

                                                      ========
                                                       231,634
                                                      --------
Manufacturing - 2.8%
  Aptargroup, Inc.                        2,750        120,918
  Lennox International, Inc.              2,450         36,602
  Roper Industries, Inc.                  1,800        103,428

                                                      ========
                                                       260,948
                                                      --------
Medical & Medical Services - 7.9%
  Accredo Health, Inc.(b)                 3,550         83,674
  Inveresk Research Group, Inc.(b)        5,750        212,118
  Magellan Health Services, Inc.(b)       3,450        126,132
  Select Medical Corp.                    9,300        124,899
  TLC Vision Corp.(b)                    13,350        117,080
  VCA Antech, Inc.(b)                     3,950         81,487

                                                      ========
                                                       745,390
                                                      --------
Medical Instruments & Supplies - 3.3%
  Hologic, Inc.(b)                        7,700        148,379
  Sybron Dental Specialties, Inc.(b)      4,400        130,636
  Wright Medical Group, Inc.(b)           1,400         35,168

                                                      ========
                                                       314,183
                                                      --------
Metal & Mining - 0.8%
  Massey Energy Co.                       2,700         78,111
                                                      --------
Oil & Gas - 9.3%
  Airgas, Inc.                            5,350        128,773
  Energen Corp.                           1,500         77,325
  Harvest Natural Resources, Inc.(b)      9,300        154,380

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              47



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                  SMALL CAP CORE EQUITY PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                                             NUMBER
                                           OF SHARES      VALUE
                                          ----------- ------------
COMMON STOCKS (Continued)
Oil & Gas (Continued)
  KCS Energy, Inc.(b)                         7,050    $   98,066
  Magnum Hunter Resources, Inc.(b)           11,100       128,094
  Oceaneering International, Inc.(b)          2,850       104,994
  Range Resources Corp.                       5,550        97,070
  Tidewater, Inc.                             2,800        91,140

                                                       ==========
                                                          879,842
                                                       ----------
Personal Services - 1.4%
  Laureate Education, Inc.(b)                 3,600       133,992
                                                       ----------
Pharmaceuticals - 5.3%
  Advancis Pharmaceutical Corp.(b)           10,950        89,242
  Angiotech Pharmaceuticals, Inc.(b)          5,150       104,390
  Medicis Pharmaceutical Corp. - Class
    A                                         2,100        81,985
  Nabi Biopharmaceuticals(b)                  4,950        66,231
  Par Pharmaceutical Cos., Inc.(b)            2,100        75,453
  Valeant Pharmaceuticals International       3,600        86,832

                                                       ==========
                                                          504,133
                                                       ----------
Publishing & Printing - 0.8%
  Banta Corp.                                 1,900        75,525
                                                       ----------
Restaurants - 0.3%
  O'Charley's, Inc.(b)                        1,700        27,710
                                                       ----------
Retail Merchandising - 3.4%
  Hot Topic, Inc.(b)                          2,800        47,712
  Jarden Corp.(b)                             3,600       131,364
  Stein Mart, Inc.(b)                         2,200        33,484
  Too, Inc.(b)                                5,950       107,516

                                                       ==========
                                                          320,076
                                                       ----------
Semiconductors & Related Devices - 1.0%
  Cypress Semiconductor Corp.(b)              5,800        51,272
  Rudolph Technologies, Inc.(b)               2,450        41,013

                                                       ==========
                                                           92,285
                                                       ----------
Soaps & Cosmetics - 1.4%
  NU Skin Enterprises, Inc.                   5,800       136,358
                                                       ----------
Telecommunications - 1.7%
  Arris Group, Inc.(b)                       13,450        70,209
  General Communication, Inc. - Class
    A(b)                                      9,800        88,690

                                                       ==========
                                                          158,899
                                                       ----------
Transportation - 1.7%
  Forward Air Corp.(b)                        2,450        98,049
  Laidlaw International, Inc.(b)              3,800        62,510

                                                       ==========
                                                          160,559
                                                       ----------
TOTAL COMMON STOCKS
  (Cost $8,321,874)                                     8,865,257
                                                       ----------


                                           NUMBER
                                         OF SHARES      VALUE
                                        ----------- -------------
SHORT TERM INVESTMENTS - 2.8%
  Galileo Money Market Fund
  (Cost $268,602)                        268,602     $  268,602
                                                     ----------
TOTAL INVESTMENTS IN SECURITIES - 96.5%
  (Cost $8,590,476(a))                                9,133,859
OTHER ASSETS IN EXCESS OF
  LIABILITIES - 3.5%                                    331,065
                                                     ----------
NET ASSETS - 100.0% (Applicable to
  122,016 Institutional shares, 10
  Service shares, 214,363 Investor A
  shares, 79,211 Investor B shares and
  229,527 Investor C shares
  outstanding)                                       $9,464,924
                                                     ==========


NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  INSTITUTIONAL SHARE
  ($1,801,781/122,016)                      $ 14.77
                                            =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  SERVICE SHARE
             ($149/10)(c)                   $ 14.73
                                            =======
NET ASSET VALUE AND REDEMPTION
  PRICE PER INVESTOR A SHARE
  ($3,153,710/214,363)                      $ 14.71
                                            =======
MAXIMUM OFFERING PRICE PER
  INVESTOR A SHARE
        ($14.71/0.950)                      $ 15.48
                                            =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 4.5%)
  PER INVESTOR B SHARE
   ($1,157,063/79,211)                      $ 14.61
                                            =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 1.0%)
  PER INVESTOR C SHARE
  ($3,352,221/229,527)                      $ 14.60
                                            =======


-------------------

 (a) Cost for Federal income tax purposes is $8,619,553. The gross
     unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                  $831,768
      Gross unrealized depreciation                                  (317,462)
                                                                     --------
                                                                     $514,306
                                                                     ========

     (b) Non-income producing security.
  (c) Exact net assets and shares outstanding at September 30, 2004 were
       $148.85 and 10.108, respectively.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                       SMALL CAP GROWTH EQUITY PORTFOLIO


AS OF SEPTEMBER 30, 2004





                                             NUMBER
                                           OF SHARES      VALUE
                                          ----------- -------------
COMMON STOCKS - 99.8%
Aerospace - 1.0%
  Herley Industries, Inc.(b)                 260,849   $ 4,875,268
  TIMCO Aviation Services, Inc. -
    Warrants (expiring 02/28/07)(c)              692             0

                                                       ===========
                                                         4,875,268
                                                       -----------
Air Transportation - 0.3%
  ExpressJet Holdings, Inc.(b)               129,200     1,293,292
                                                       -----------
Broadcasting - 3.8%
  Cumulus Media, Inc. - Class A(b)           279,059     4,015,659
  Radio One, Inc. - Class D(b)               307,200     4,371,456
  Sinclair Broadcast Group, Inc. -
    Class A                                  384,500     2,806,850
  Spanish Broadcasting System, Inc. -
    Class A(b)                               700,300     6,890,952

                                                       ===========
                                                        18,084,917
                                                       -----------
Business Services - 15.1%
  CDI Corp.                                   48,900     1,002,450
  The Corporate Executive Board
    Co.(d)                                    24,686     1,511,771
  DiamondCluster International, Inc.(b)      508,600     6,204,920
  Digitas, Inc.(b)                           943,100     7,290,163
  Gartner, Inc. - Class A(b)                 189,700     2,217,593
  Gevity HR, Inc.                            121,700     1,871,746
  Global Payments, Inc.                       53,200     2,848,860
  Heidrick & Struggles International,
    Inc.(b)(d)                               256,234     7,384,664
  Jacobs Engineering Group, Inc.(b)          112,000     4,288,480
  Labor Ready, Inc.(b)                       195,404     2,739,563
  Learning Tree International, Inc.(b)       365,507     5,153,649
  MPS Group, Inc.(b)                         545,911     4,591,112
  Navigant Consulting, Inc.(b)               509,300    11,184,228
  Tetra Tech, Inc.(b)                        312,900     3,964,443
  Watson Wyatt & Co. Holdings                315,400     8,295,020

                                                       ===========
                                                        70,548,662
                                                       -----------
Chemicals - 2.8%
  Agrium, Inc.                               311,100     5,525,136
  OM Group, Inc.(b)(d)                       216,000     7,896,960

                                                       ===========
                                                        13,422,096
                                                       -----------
Computer & Office Equipment - 0.7%
  Answerthink Consulting Group,
    Inc.(b)                                  648,600     3,470,010
                                                       -----------
Computer Software & Services - 17.6%
  Advanced Digital Information Corp.(b)      649,200     5,648,040
  Ascential Software Corp.(b)                196,000     2,640,120
  The BISYS Group, Inc.(b)                   481,798     7,039,069
  Borland Software Corp.(b)                  975,200     8,142,920
  DigitalNet Holding, Inc.(b)                285,500     8,626,382
  FileNET Corp.(b)(d)                        213,800     3,732,948
  Iomega Corp.(b)                         1,283,900      5,970,135
  Lawson Software, Inc.(b)                  547,521      3,066,118
  McDATA Corp. - Class A(b)(d)            1,838,078      9,245,532
  MicroStrategy, Inc. - Warrants
    (expiring 06/24/07)(c)                      638             57
  Modem Media, Inc.(b)                      862,300      4,639,174
  Pinnacle Systems, Inc.(b)                 327,756      1,366,743
  Progress Software Corp.(b)                137,300      2,732,270
  SkillSoft PLC - ADR(b)                    905,730      6,059,334
  SonicWALL, Inc.(b)                        304,700      2,059,772
  Take-Two Interactive Software,
    Inc.(b)(d)                              220,800      7,253,280


                                             NUMBER
                                           OF SHARES      VALUE
                                          ----------- -------------
COMMON STOCKS (Continued)
Computer Software & Services (Continued)
  Verity, Inc.(b)                           369,100    $ 4,754,008

                                                       ===========
                                                        82,975,902
                                                       -----------
Electronics - 1.8%
  Power-One, Inc.(b)(d)                      97,400        631,152
  TiVo, Inc.(b)(d)                        1,087,900      7,201,898

                                                       ===========
                                                         7,833,050
                                                       -----------
Entertainment & Leisure - 2.4%
  Argosy Gaming Co.(b)(d)                    69,506      2,724,635
  Multimedia Games, Inc.(b)(d)              201,800      3,127,900
  Scientific Games Corp. - Class A(b)       277,400      5,298,340

                                                       ===========
                                                        11,150,875
                                                       -----------
Finance - 0.5%
  Affiliated Managers Group, Inc.(b)(d)      47,000      2,516,380
                                                       -----------
Food & Agriculture - 0.4%
  United Natural Foods, Inc.(b)              46,500      1,236,900
                                                       -----------
Insurance - 0.4%
  Platinum Underwriters Holdings Ltd.        69,900      2,046,672
                                                       -----------
Machinery & Heavy Equipment - 2.2%
  Bucyrus International, Inc. - Class
    A(b)                                    115,600      3,884,160
  Flowserve Corp.(b)                        275,200      6,654,336

                                                       ===========
                                                        10,538,496
                                                       -----------
Manufacturing - 2.3%
  Actuant Corp. - Class A(b)(d)              56,600      2,332,486
  Quanex Corp.                               43,600      2,235,808
  Wilson Greatbatch Technologies,
    Inc.(b)                                 355,200      6,354,528

                                                       ===========
                                                        10,922,822
                                                       -----------
Medical & Medical Services - 5.6%
  Accredo Health, Inc.(b)(d)                189,500      4,466,515
  CryoLife, Inc.(b)(d)                      825,500      5,993,130
  Exact Sciences Corp.(b)                   647,900      2,138,070
  Henry Schein, Inc.(b)                      30,100      1,875,531
  Inveresk Research Group, Inc.(b)          253,100      9,336,859
  TLC Vision Corp.(b)                       318,080      2,789,562

                                                       ===========
                                                        26,599,667
                                                       -----------
Medical Instruments & Supplies - 6.4%
  Bruker BioSciences Corp.(b)               425,900      1,473,614
  CTI Molecular Imaging, Inc.(b)            405,700      3,273,999
  Hologic, Inc.(b)                          435,275      8,387,749
  Mentor Corp.(d)                           111,100      3,741,848
  Visx, Inc.(b)                             366,500      7,549,900
  Wright Medical Group, Inc.(b)             222,934      5,600,102

                                                       ===========
                                                        30,027,212
                                                       -----------
Metal & Mining - 1.8%
  Massey Energy Co.(d)                      179,700      5,198,721
  Pioneer Drilling Co.(b)                   380,000      3,192,000

                                                       ===========
                                                         8,390,721
                                                       -----------
Oil & Gas - 9.1%
  Airgas, Inc.                              365,800      8,804,806
  Energy Partners, Ltd.(b)                   89,200      1,452,176
  Forest Oil Corp.(b)(d)                    278,400      8,385,408
  KCS Energy, Inc.(b)                       167,800      2,334,098
  Key Energy Services, Inc.(b)              664,475      7,342,449

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              49



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                 SMALL CAP GROWTH EQUITY PORTFOLIO (CONTINUED)


AS OF SEPTEMBER 30, 2004


                                              NUMBER
                                            OF SHARES       VALUE
                                           ----------- --------------
COMMON STOCKS (Continued)
Oil & Gas (Continued)
  Oceaneering International, Inc.(b)         143,500    $  5,286,540
  Remington Oil & Gas Corp. - Class
    B(b)                                     139,243       3,655,129
  Tetra Technologies, Inc.(b)                187,600       5,824,980

                                                        ============
                                                          43,085,586
                                                        ------------
Paper & Forest Products - 0.9%
  Pope & Talbot, Inc.                        248,800       4,378,880
                                                        ------------
Personal Services - 2.6%
  Education Management Corp.(b)               52,900       1,409,256
  Laureate Education, Inc.(b)(d)             295,800      11,009,676

                                                        ============
                                                          12,418,932
                                                        ------------
Pharmaceuticals - 6.2%
  Advancis Pharmaceutical Corp.(b)           284,700       2,320,305
  Angiotech Pharmaceuticals, Inc.(b)(d)      282,552       5,727,328
  Medicis Pharmaceutical Corp. - Class
    A(d)                                     198,440       7,747,098
  Nabi Biopharmaceuticals(b)                 443,400       5,932,692
  Nektar Therapeutics(b)                     399,600       5,786,208
  Par Pharmaceutical Cos., Inc.(b)            49,063       1,762,834

                                                        ============
                                                          29,276,465
                                                        ------------
Publishing & Printing - 1.0%
  Playboy Enterprises, Inc. - Class B(b)     452,403       4,542,126
                                                        ------------
Restaurants - 0.3%
  RARE Hospitality International,
    Inc.(b)                                   57,250       1,525,712
                                                        ------------
Retail Merchandising - 8.5%
  Coldwater Creek, Inc.(b)                   113,550       2,369,788
  CSK Auto Corp.(b)(d)                       104,100       1,386,612
  GameStop Corp.(b)                          120,200       2,224,902
  Linens 'n Things, Inc.(b)(d)               196,600       4,555,222
  Reebok International Ltd.(d)                84,800       3,113,856
  Too, Inc.(b)                               521,700       9,427,119
  Tuesday Morning Corp.(b)                   141,652       4,379,880
  West Marine, Inc.(b)                       277,900       5,941,502
  Yankee Candle Co.(b)                       237,100       6,866,416

                                                        ============
                                                          40,265,297
                                                        ------------
Semiconductors & Related Devices - 3.9%
  Cirrus Logic, Inc.(b)                      648,600       3,093,822
  Microsemi Corp.(b)                         424,100       5,979,810
  Rudolph Technologies, Inc.(b)              319,530       5,348,932
  Zoran Corp.(b)                             257,100       4,041,612

                                                        ============
                                                          18,464,176
                                                        ------------
Telecommunications - 0.2%
  CSG Systems International, Inc.(b)          73,700       1,135,717
                                                        ------------
Transportation - 2.0%
  Laidlaw International, Inc.(b)             247,420       4,070,059
  Werner Enterprises, Inc.                   276,700       5,343,077

                                                        ============
                                                           9,413,136
                                                        ------------
TOTAL COMMON STOCKS
  (Cost $417,168,876)                                    470,438,969
                                                        ------------


                                                    PAR/SHARES
                                         MATURITY     (000)        VALUE
                                        ---------- ----------- -------------
CORPORATE BONDS - 0.0%
Aerospace - 0.0%
  TIMCO Aviation Services, Inc.(c)
    8.00%
  (Cost $384)                           01/02/07     $     1    $         0
                                                                -----------
SHORT TERM INVESTMENTS - 15.8%
  Canadian Imperial Bank International,
    Certificate of Deposit
    1.80%(e)                            10/29/04       1,232      1,232,328
  Concord Minuteman, Asset Backed
    Commercial Paper
    1.66%(e)                            10/05/04       1,370      1,369,767
  Federal Home Loan Bank, Discount
    Notes
    1.65%                               10/01/04       4,000      4,000,000
  Foreningssparbanken AB, Floating
    Rate Notes
    1.72%(e)(f)                         10/15/04         963        963,072
  Merrill Lynch, Floating Rate Master
    Notes
    2.00%(e)(f)                         10/01/04       1,887      1,887,391
    2.00%(e)(f)                         10/01/04       1,286      1,286,498
  Natexis Banques International,
    Floating Rate Notes
    1.92%(e)(f)                         10/01/04       2,957      2,957,385
    1.98%(e)(f)                         10/01/04       3,593      3,592,967
  Societe General, Floating Rate Notes
    1.95%(e)(f)                         10/01/04       4,454      4,454,252
  Union Bank of Switzerland, Time
    Deposit
    1.98%(e)                            10/01/04       1,131      1,131,494
  Victory Rece, Asset Backed
    Commercial Paper
    1.80%(e)                            10/22/04       1,255      1,254,944
  Westdeutsche Landsbank
    International, Floating Rate Notes
    1.70%(e)(f)                         10/12/04       1,939      1,938,758
  Galileo Money Market Fund                            6,035      6,035,009
  Institutional Money Market Trust(e)                 42,644     42,644,064

                                                                ===========
TOTAL SHORT TERM INVESTMENTS
  (Cost $74,747,929)                                             74,747,929
                                                                -----------


TOTAL INVESTMENTS IN SECURITIES - 115.6%
  (Cost $491,917,189(a))                 545,186,898
LIABILITIES IN EXCESS OF
  OTHER ASSETS - (15.6)%
  (Including $64,712,921 of payable
  upon return of securities loaned)      (73,527,200)
                                         -----------
NET ASSETS - 100.0%
  (Applicable to 18,753,287
  Institutional shares, 2,123,558
  Service shares, 9,713,690
  Investor A shares, 1,934,885
  Investor B shares and 1,128,314
  Investor C shares outstanding)        $471,659,698
                                        ============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                 SMALL CAP GROWTH EQUITY PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                                            VALUE
                                         -----------
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  PER INSTITUTIONAL SHARE
  ($272,323,729/18,753,287)              $ 14.52
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  PER SERVICE SHARE
    ($29,569,182/2,123,558)              $ 13.92
                                         =======
NET ASSET VALUE AND REDEMPTION
  PRICE PER INVESTOR A SHARE
   ($131,795,175/9,713,690)              $ 13.57
                                         =======
MAXIMUM OFFERING PRICE
  PER INVESTOR A SHARE
             ($13.57/0.955)              $ 14.21
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 4.5%)
  PER INVESTOR B SHARE
    ($23,982,518/1,934,885)              $ 12.39
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 1.0%)
  PER INVESTOR C SHARE
    ($13,989,094/1,128,314)              $ 12.40
                                         =======


-------------------

 (a) Cost for Federal income tax purposes is $494,943,641. The
     gross unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                      $85,165,324
      Gross unrealized depreciation                                      (34,922,067)
                                                                         -----------
                                                                         $50,243,257
                                                                         ===========

     (b) Non-income producing security.
  (c) Security valued at fair value as determined in good faith by or under
       the direction of the Trustees. As of September 30, 2004, the securities
       had a total market value of $57 which represents less than 0.01% of net
       assets.
     (d) Total or partial securities on loan.
 (e) Securities purchased with the cash proceeds from securities loaned.
  (f) Rates shown are the rates as of September 30, 2004.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              51



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                          U.S. OPPORTUNITIES PORTFOLIO


AS OF SEPTEMBER 30, 2004





                             NUMBER
                           OF SHARES      VALUE
                          ----------- ------------
COMMON STOCKS - 98.1%
United Kingdom - 0.6%
  Shire Pharmaceuticals
Group PLC -
    ADR                   23,200       $  664,680
                                       ----------
United States - 97.5%
Aerospace - 1.3%
  Goodrich Corp.          25,100          787,136
  Teledyne Technologies,  20,500          513,320
Inc.(b)

                                       ==========
                                        1,300,456
                                       ----------
Air Transportation - 1.1%
  EGL, Inc.(b)            41,500        1,255,790
                                       ----------
Banks - 6.5%
  City National Corp.     16,600        1,078,170
  Colonial BancGroup,     62,000        1,267,900
Inc.
  Comerica, Inc.          12,500          741,875
  Compass Bancshares,     27,000        1,183,140
Inc.
  Franklin Bank Corp.(b)  33,500          571,175
  MAF Bancorp, Inc.       12,000          517,560
  TCF Financial Corp.     40,000        1,211,600

                                       ==========
                                        6,571,420
                                       ----------
Broadcasting - 1.7%
  Hearst-Argyle           24,300          594,135
Television, Inc.
  Media General, Inc. -    9,200          514,740
Class A
  UnitedGlobalCom,        76,800          573,696
Inc.(b)

                                       ==========
                                        1,682,571
                                       ----------
Business Services - 7.2%
  Aquantive, Inc.(b)      70,800          683,220
  Cohen & Steers, Inc.    34,700          535,768
  Digitas, Inc.(b)        68,300          527,959
  Forrester Research,     22,100          336,804
Inc.(b)
  Global Payments, Inc.   18,900        1,012,095
  Korn/Ferry              65,000        1,184,950
International(b)
  Labor Ready, Inc.(b)    53,500          750,070
  Navigant Consulting,    52,300        1,148,508
Inc.(b)
  Sirva, Inc.(b)          30,800          705,320
  Spherion Corp.(b)       53,500          418,370

                                       ==========
                                        7,303,064
                                       ----------
Chemicals - 3.6%
  Church & Dwight Co.,    21,000          589,260
Inc.
  Cytec Industries, Inc.  12,100          592,295
  Georgia Gulf Corp.      11,500          512,785
  The Lubrizol Corp.      17,000          588,200
  NOVA Chemicals Corp.    14,900          576,630
  Olin Corp.              38,700          774,000

                                       ==========
                                        3,633,170
                                       ----------
Computer & Office Equipment - 1.4%
  Integrated Circuit      26,500          569,750
Systems, Inc.(b)
  Pitney Bowes, Inc.      18,000          793,800

                                       ==========
                                        1,363,550
                                       ----------
Computer Software & Services - 5.0%
  Borland Software        95,000          793,249
Corp.(b)
  Citrix Systems, Inc.(b) 43,000          753,360
  Computer Sciences       17,000          800,700
Corp.(b)
  DigitalNet Holding,     16,900          510,634
Inc.(b)
  Interwoven, Inc.(b)     64,500          466,980
  McAfee, Inc.(b)         25,500          512,550
  RSA Security, Inc.(b)   37,800          729,540


                             NUMBER
                           OF SHARES      VALUE
                          ----------- ------------
COMMON STOCKS (Continued)
Computer Software & Services (Continued)
  TIBCO Software, Inc.(b) 60,500       $  514,855

                                       ==========
                                        5,081,868
                                       ----------
Construction - 1.6%
  Beacon Roofing Supply,  26,700          437,880
Inc.(b)
  Pulte Homes, Inc.
                           8,000          490,960
  URS Corp.(b)
                          24,500          653,660

                                       ==========
                                        1,582,500
                                       ----------
Containers - 1.0%
  Smurfit-Stone Container 50,400          976,248
                                       ----------
Corp.(b)
Electronics - 2.4%
  Amphenol Corp.(b)       24,300          832,518
  GrafTech International  67,200          937,440
Ltd.(b)
  Intersil Corp. - Class  41,500          661,095
A

                                       ==========
                                        2,431,053
                                       ----------
Energy & Utilities - 5.9%
  Equitable Resources, Inc.
                          21,000        1,140,510
  MDU Resources Group, Inc46,800        1,232,244
  PPL Corp.               27,100        1,278,578
  Sempra Energy           27,200          984,368
  UGI Corp.               35,000        1,304,100

                                       ==========
                                        5,939,800
                                       ----------
Entertainment & Leisure - 4.4%
  Carmike Cinemas, Inc.   13,000          457,730
  Gaylord Entertainment   25,500          790,500
Co.(b)
  Hilton Hotels Corp.     75,000        1,413,000
  Penn National Gaming,   10,500          424,200
Inc.(b)
  Scientific Games Corp.  42,200          806,020
- Class A(b)
  WMS Industries, Inc.(b) 22,500          578,025

                                       ==========
                                        4,469,475
                                       ----------
Finance - 3.1%
  Capital One Financial   11,500          849,850
Corp.
  CapitalSource, Inc.(b)
                          22,400          500,416
  E*TRADE Financial Corp.(b)
                          83,900          958,138
  Jackson Hewitt Tax Servi38,500 .        778,855

                                       ==========
                                        3,087,259
                                       ----------
Food & Agriculture - 1.6%
  Hain Celestial Group,   26,400          466,752
Inc.(b)
  Ralcorp Holdings,       32,700        1,180,470
Inc.(b)

                                       ==========
                                        1,647,222
                                       ----------
Insurance - 3.7%
  Aspen Insurance Holdings26,200          602,862
  Assurant, Inc.          35,100          912,600
  Bristol West Holdings,  26,000          445,640
Inc.
  Endurance Specialty Holdings Ltd.
                          30,000          964,500
  The PMI Group, Inc.
                          20,200          819,716

                                       ==========
                                        3,745,318
                                       ----------
Machinery & Heavy
Equipment - 2.5%
  Bucyrus International,
Inc. - Class
    A(b)                  26,300          883,680
  Joy Global, Inc.        38,500        1,323,630
  Kadant, Inc.(b)         16,800          308,448

                                       ==========
                                        2,515,758
                                       ----------

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
52



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                    U.S. OPPORTUNITIES PORTFOLIO (CONTINUED)


AS OF SEPTEMBER 30, 2004




                             NUMBER
                           OF SHARES      VALUE
                          ----------- -------------
COMMON STOCKS (Continued)
Manufacturing - 3.3%
  Cooper Industries, Inc.     8,800    $   519,200
  General Cable Corp.(b)    87,300         928,872
  Kaydon Corp.              20,000         575,400
  Kellwood Co.              14,900         543,105
  Rockwell Automation,      19,400         750,780
Inc.

                                       ===========
                                         3,317,357
                                       -----------
Measuring & Controlling Devices -
0.6%
  Thermo Electron           23,200         626,864
                                       -----------
Corp.(b)
Medical & Medical Services - 3.3%
  Arqule, Inc.(b)         114,500          528,990
  Biomet, Inc.             15,000          703,200
  Health Management        25,000          510,750
Association
  Inveresk Research        17,900          660,331
Group, Inc.(b)
  Medco Health Solutions,  28,700          886,830
Inc.(b)

                                       ===========
                                         3,290,101
                                       -----------
Medical Instruments & Supplies - 0.0%
  Bioject Medical
Technologies, Inc. -
    Warrants (expiring     15,000              150
                                       -----------
05/22/06)(c)
Metal & Mining - 2.0%
  Arch Coal, Inc.          20,000          709,800
  Freeport-McMoRan Copper
& Gold,
    Inc. - Class B         20,400          826,200
  Nucor Corp.               5,700          520,809

                                       ===========
                                         2,056,809
                                       -----------
Motor Vehicles - 0.8%
  BorgWarner, Inc.         18,000          779,220
                                       -----------
Oil & Gas - 7.1%
  Chesapeake Energy Corp.  84,100        1,331,303
  ENSCO International,     24,000          784,080
Inc.
  Grant Prideco, Inc.(b)   34,200          700,758
  Magnum Hunter            62,100          716,634
Resources, Inc.(b)
  National-Oilwell,        28,400          933,224
Inc.(b)
  Noble Energy, Inc.       24,700        1,438,528
  Pioneer Natural          15,900          548,232
Resources Co.
  Weatherford              14,000          714,280
International Ltd.(b)

                                       ===========
                                         7,167,039
                                       -----------
Paper & Forest Products - 2.0%
  Caraustar Industries,    51,500          863,655
Inc.(b)
  Pactiv Corp.(b)          22,100          513,825
  Pope & Talbot, Inc.      34,000          598,400

                                       ===========
                                         1,975,880
                                       -----------
Personal Services - 0.8%
  Laureate Education,      21,300          792,786
                                       -----------
Inc.(b)
Pharmaceuticals - 6.2%
  AmerisourceBergen Corp.   9,000          483,391
  Andrx Corp.(b)            3,300           73,788
  Chiron Corp.(b)          16,000          707,200
  Dendreon Corp.(b)        21,300          179,133
  Eyetech                  15,200          516,648
Pharmaceuticals(b)
  First Horizon
Pharmaceutical
    Corp.(b)               45,000          900,450
  IVAX Corp.(b)            28,750          550,562
  Lexicon Genetics,        50,000          329,500
Inc.(b)
  Millennium               45,500          623,805
Pharmaceuticals, Inc.(b)
  Nitromed, Inc.(b)        33,100          789,104
  Nuvelo, Inc.(b)          52,700          520,676


                             NUMBER
                           OF SHARES      VALUE
                          ----------- -------------
COMMON STOCKS (Continued)
Pharmaceuticals (Continued)
  Transkaryotic            30,500      $   540,765
Therapies, Inc.(b)

                                       ===========
                                         6,215,022
                                       -----------
Publishing & Printing -
0.9%
  Meredith Corp.           18,400          945,392
                                       -----------
Railroad & Shipping - 0.5%
  Norfolk Southern Corp.
                           18,000          535,320
                                       -----------
Real Estate - 0.5%
  Archstone-Smith Trust    16,000          506,240
                                       -----------
Retail Merchandising - 5.3%
  Abercrombie & Fitch Co.  16,200          510,300
- Class A
  Albertson's, Inc.        17,500          418,775
  Best Buy Co., Inc.       13,700          743,088
  Genesco, Inc.(b)         31,500          741,825
  The Mills Corp.          10,000          518,700
  Polo Ralph Lauren Corp.
                           33,500        1,218,395
  Smart & Final, Inc.(b)
                           24,500          410,620
  The Sports Authority, Inc.8,600          199,520
  Tuesday Morning          18,500          572,020
Corp.(b)

                                       ===========
                                         5,333,243
                                       -----------
Security Brokers &
Dealers - 1.0%
  T. Rowe Price Group,     19,900        1,013,706
                                       -----------
Inc.
Semiconductors & Related Devices - 1.6%
  Exar Corp.(b)
                           33,600          475,776
  International Rectifier C13,600          466,480
  LAM Research Corp.(b)    31,600          691,408

                                       ===========
                                         1,633,664
                                       -----------
Telecommunications - 6.0%
  Alamosa Holdings,        71,700          547,788
Inc.(b)
  American Tower Corp.-    60,500          928,675
Class A(b)
  Avaya, Inc.(b)           47,000          655,180
  Comverse Technology,     66,500        1,252,195
Inc.(b)
  Nextel Partners, Inc. -  66,500        1,102,570
Class A(b)
  NII Holdings, Inc. -     21,900          902,499
Class B(b)
  Powerwave Technologies, Inc.(b)
                          100,100          616,616

                                       ===========
                                         6,005,523
                                       -----------
Transportation - 1.6%
  Overnite Corp.           24,000          754,320
  Trinity Industries,      26,100          813,537
Inc.

                                       ===========
                                         1,567,857
                                       -----------
                                        98,348,695
                                       -----------
TOTAL COMMON STOCKS
  (Cost $84,361,853)                    99,013,375
                                       -----------

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              53



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                    U.S. OPPORTUNITIES PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                             NUMBER
                           OF SHARES       VALUE
                          ----------- ---------------
SHORT TERM INVESTMENTS - 2.5%
  Galileo Money Market
Fund
  (Cost $2,487,575)       2,487,575    $  2,487,575
                                       ------------
TOTAL INVESTMENTS IN SECURITIES -
100.6%
  (Cost $86,849,428(a))                 101,500,950
LIABILITIES IN EXCESS OF
OTHER
  ASSETS - (0.6)%                          (586,483)
                                       ------------
NET ASSETS - 100.0%
(Applicable to
  298,601 Institutional
shares, 115,575
  Service shares,
1,581,761 Investor A
  shares, 2,172,432
Investor B shares
  and 1,074,700 Investor
C shares
  outstanding)                         $100,914,467
                                       ============


NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  INSTITUTIONAL SHARE
     ($6,073,881/298,601)                $ 20.34
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  SERVICE SHARE
     ($2,302,864/115,575)                $ 19.93
                                         =======
NET ASSET VALUE AND REDEMPTION
  PRICE PER INVESTOR A SHARE
  ($31,282,489/1,581,761)                $ 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
  ($40,994,390/2,172,432)                $ 18.87
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 1.0%)
  PER INVESTOR C SHARE
  ($20,260,843/1,074,700)                $ 18.85
                                         =======


-------------------

 (a) Cost for Federal income tax purposes is $86,904,588. The gross
     unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                   $17,436,568
      Gross unrealized depreciation                                    (2,840,206)
                                                                      -----------
                                                                      $14,596,362
                                                                      ===========


     (b) Non-income producing security.
  (c) Security valued at fair value as determined in good faith by or under
       the direction of the Trustees. As of September 30, 2004, this security
       had a total market value of $150 which represents less than 0.01% of net
       assets.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
              GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO


AS OF SEPTEMBER 30, 2004





                             NUMBER
                           OF SHARES      VALUE
                          ----------- ------------
COMMON STOCKS - 96.9%
Germany - 1.4%
  SAP AG - ADR                9,900    $  385,605
                                       ----------
India - 1.0%
  Satyam Computer           33,800        262,240
                                       ----------
Services Ltd.
Indonesia - 0.6%
  PT Telekomunikasi
Indonesia - SP
    ADR                      9,130        161,510
                                       ----------
Japan - 0.7%
  Nippon Electric Glass      8,500        188,949
                                       ----------
Co. Ltd.
Russia - 0.5%
  Mobile Telesystems -       1,000        144,990
                                       ----------
ADR
South Korea - 2.3%
  Samsung Electronics Co.    1,100        437,517
Ltd.
  Seoul Semiconductor Co.   17,200        179,244
Ltd.

                                       ==========
                                          616,761
                                       ----------
Taiwan - 3.8%
  Hon Hai Precision         56,099        194,045
Industry Co. Ltd.
  Lite-On Technology      252,928         237,039
Corp.
  Quanta Computer, Inc.   123,316         213,274
  Powerchip Semiconductor 183,000         138,501
Corp.(b)
  Taiwan Semiconductor
Manufacturing
    Co. Ltd.              201,721         258,227

                                       ==========
                                        1,041,086
                                       ----------
Turkey - 0.6%
  Turkcell Iletisim        14,780         165,684
                                       ----------
Hizmetleri AS - ADR
United Kingdom - 0.6%
  Shire Pharmaceuticals
Group PLC -
    ADR                     5,900         169,035
                                       ----------
United States - 85.4%
Broadcasting - 1.5%
  Mediacom Communications  28,700         187,411
Corp.(b)
  UnitedGlobalCom,         30,600         228,582
Inc.(b)

                                       ==========
                                          415,993
                                       ----------
Business Services - 2.8%
  Accenture Ltd.(b)        15,200         411,160
  Aquantive, Inc.(b)       20,900         201,685
  Digitas, Inc.(b)         20,400         157,692

                                       ==========
                                          770,537
                                       ----------
Computer & Office Equipment - 6.7%
  Cisco Systems, Inc.(b)   31,900         577,390
  Dell, Inc.(b)             8,400         299,040
  Hewlett-Packard Co.      14,200         266,250
  Integrated Circuit        6,300         135,450
Systems, Inc.(b)
  International Business
Machines
    Corp.                   6,400         548,736

                                       ==========
                                        1,826,866
                                       ----------
Computer Software & Services - 22.8%
  Adobe Systems, Inc.       4,100         202,827
  Ask Jeeves, Inc.(b)       6,000         196,260
  BMC Software, Inc.(b)    13,200         208,692
  Citrix Systems, Inc.(b)  11,800         206,736
  Computer Associates
International,
    Inc.                   11,000         289,300
  DIGI International,      14,300         163,449
Inc.(b)
  eBay, Inc.(b)             2,100         193,074
  Electronic Arts,          5,500         252,945
Inc.(b)
  EMC Corp.(b)             29,100         335,814


                             NUMBER
                           OF SHARES      VALUE
                          ----------- ------------
COMMON STOCKS (Continued)
Computer Software & Services (Continued)
  Emulex Corp.(b)          17,000      $  195,840
  iVillage, Inc.(b)        36,500         219,000
  Juniper Networks,        10,900         257,240
Inc.(b)
  Lawson Software, Inc.(b) 28,100         157,360
  Microsoft Corp.          19,300         533,645
  OpenTV Corp.(b)          51,100         155,855
  Oracle Corp.(b)          26,100         294,408
  PeopleSoft, Inc.(b)      16,800         333,480
  Sandisk Corp.(b)          7,700         224,224
  Siebel Systems, Inc.(b)  22,900         172,666
  Symantec Corp.(b)         6,200         340,256
  TIBCO Software, Inc.(b)  23,000         195,730
  VeriSign, Inc.(b)
                           14,200         282,296
  VERITAS Software Corp.(b)
                           15,300         272,340
  webMethods, Inc.(b)      28,300         150,556
  Yahoo!, Inc.(b)          10,700         362,837

                                       ==========
                                        6,196,830
                                       ----------
Electronics - 6.2%
  Agilent Technologies,    12,800         276,096
Inc.(b)
  Analog Devices, Inc.
                            7,600         294,728
  Broadcom Corp. - Class A(b)
                            5,300         144,637
  Intel Corp.              17,300         347,038
  Intersil Corp. - Class   11,300         180,009
A
  Maxim Integrated Products,6,100         257,969
  Sanmina-SCI Corp.(b)     26,500         186,825

                                       ==========
                                        1,687,302
                                       ----------
Entertainment & Leisure -
0.8%
  WMS Industries, Inc.(b)   8,400         215,796
                                       ----------
Manufacturing - 1.0%
  General Cable Corp.(b)
                           25,500         271,320
                                       ----------
Measuring & Controlling Devices -
3.3%
  KLA-Tencor Corp.(b)      13,800         572,424
  Thermo Electron          10,600         286,412
Corp.(b)

                                       ==========
                                          858,836
                                       ----------
Medical & Medical Services - 2.0%
  Arqule, Inc.(b)          37,600         173,712
  Inveresk Research         5,200         191,828
Group, Inc.(b)
  Medco Health Solutions,   5,600         173,040
Inc.(b)

                                       ==========
                                          538,580
                                       ----------
Medical Instruments &
Supplies - 4.5%
  Boston Scientific Corp.(b)
                           12,500         496,625
  Guidant Corp.
                            4,400         290,576
  Invitrogen Corp.(b)       2,600         142,974
  St. Jude Medical,         3,900         293,553
Inc.(b)

                                       ==========
                                        1,223,728
                                       ----------
Pharmaceuticals - 16.2%
  Amylin Pharmaceuticals,   5,100         104,652
Inc.(b)
  Andrx Corp.(b)              900          20,124
  Auxilium                 15,900         135,627
Pharmaceuticals, Inc.(b)
  Chiron Corp.(b)           9,400         415,480
  Corgentech, Inc.(b)       9,800         167,286
  Dendreon Corp.(b)        14,400         121,104
  Eyetech                   4,800         163,152
Pharmaceuticals(b)
  Forest Laboratories, Inc.(b)
                            6,100         274,378
  Genentech, Inc.(b)
                            8,300         435,086
  Gilead Sciences, Inc.(b)
                            6,000         224,280
  Guilford Pharmaceuticals, Inc.(b)
                           31,400         157,000

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              55



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
        GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                             NUMBER
                           OF SHARES      VALUE
                          ----------- -------------
COMMON STOCKS (Continued)
Pharmaceuticals (Continued)
  Lexicon Genetics,          26,800    $   176,612
Inc.(b)
  Medimmune, Inc.(b)         12,700        300,990
  Millennium                 10,800        148,068
Pharmaceuticals, Inc.(b)
  Nitromed, Inc.(b)           8,541        203,616
  Noven Pharmaceuticals,     10,200        212,568
Inc.(b)
  NPS Pharmaceuticals,        6,600        143,748
Inc.(b)
  Nuvelo, Inc.(b)            18,400        181,792
  Onyx Pharmaceuticals,       5,300        227,953
Inc.(b)
  Protein Design Labs,       11,700        229,086
Inc.(b)
  Transkaryotic              11,600        205,668
Therapies, Inc.(b)
  Vicuron                    10,000        146,800
Pharmaceuticals, Inc.(b)

                                       ===========
                                         4,395,070
                                       -----------
Semiconductors & Related Devices -
10.3%
  Applied Materials,         25,000        412,250
Inc.(b)
  Bookham, Inc.(b)           14,150         91,975
  Caliper Life Sciences,     29,100        204,573
Inc.(b)
  Fairchild Semiconductor
International,
    Inc.(b)                  14,600        206,882
  International Rectifier     5,700        195,510
Corp.(b)
  LAM Research Corp.(b)      13,000        284,440
  Linear Technology Corp.     7,400        268,176
  MEMC Electronic            21,400        181,472
Materials, Inc.(b)
  Skyworks Solutions,        22,600        214,700
Inc.(b)
  Texas Instruments, Inc.    13,500        287,280
  Varian Semiconductor
Equipment
    Associates, Inc.(b)       6,000        185,400
  Xilinx, Inc.               10,000        270,000

                                       ===========
                                         2,802,658
                                       -----------
Telecommunications - 7.3%
  ADC Telecommunications,    77,500        140,275
Inc.(b)
  Alamosa Holdings,          28,000        213,920
Inc.(b)
  Andrew Corp.(b)            18,600        227,664
  Avaya, Inc.(b)             13,100        182,614
  Nextel Communications,
Inc. - Class
    A(b)                     12,400        295,616
  Powerwave Technologies,    22,800        140,448
Inc.(b)
  QUALCOMM, Inc.              5,400        210,816
  Scientific-Atlanta,         7,500        194,400
Inc.
  Tekelec(b)                 17,200        286,896
  Telesystem
Intlernational Wireless,
    Inc.(b)                  10,304         97,476

                                       ===========
                                         1,990,125
                                       -----------
                                        23,193,641
                                       -----------
TOTAL COMMON STOCKS
  (Cost $25,068,339)                    26,329,501
                                       -----------
SHORT TERM INVESTMENTS - 0.9%
  Galileo Money Market
Fund
  (Cost $237,460)           237,460        237,460
                                       -----------


                                          VALUE
                                     --------------
TOTAL INVESTMENTS IN SECURITIES -
97.8%
  (Cost $25,305,799(a))              $26,566,961
OTHER ASSETS IN EXCESS OF
  LIABILITIES - 2.2%                     599,842
                                     -----------
NET ASSETS - 100.0%
  (Applicable to 293,959
  Institutional shares, 16,020
  Service shares, 1,871,041
  Investor A shares, 2,398,501
  Investor B shares and 631,784
  Investor C shares outstanding)     $27,166,803
                                     ===========


NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  INSTITUTIONAL SHARE
     ($1,592,124/293,959)                $ 5.42
                                         ======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  SERVICE SHARE
         ($85,743/16,020)                $ 5.35
                                         ======
NET ASSET VALUE AND REDEMPTION
  PRICE PER INVESTOR A SHARE
   ($9,929,419/1,871,041)                $ 5.31
                                         ======
MAXIMUM OFFERING PRICE PER
  INVESTOR A SHARE
            ($5.31/0.950)                $ 5.59
                                         ======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 4.5%)
  PER INVESTOR B SHARE
  ($12,315,294/2,398,501)                $ 5.13
                                         ======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 1.0%)
  PER INVESTOR C SHARE
     ($3,244,223/631,784)                $ 5.14
                                         ======
-------------------



 (a) Cost for Federal income tax purposes is $25,505,282. The gross
     unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                   $2,967,147
      Gross unrealized depreciation                                   (1,909,912)
                                                                      ----------
                                                                      $1,057,235
                                                                      ==========

 (b) Non-income producing security.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
56



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                         INTERNATIONAL EQUITY PORTFOLIO


AS OF SEPTEMBER 30, 2004





                                              NUMBER
                                            OF SHARES      VALUE
                                           ----------- -------------
COMMON STOCKS - 111.4%
Australia - 3.6%
  CSL Ltd.                                   16,247     $   334,225
  Lend Lease Corp. Ltd.                      45,091         372,996
  WMC Resources Ltd.                       107,923          419,012

                                                        ===========
                                                          1,126,233
                                                        -----------
Austria - 2.5%
  Bank Austria Creditanstalt                11,040          782,940
                                                        -----------
Canada - 1.1%
  Shoppers Drug Mart Corp.(b)               13,303          359,498
                                                        -----------
Finland - 0.6%
  Stora Enso Oyj - Class R                  14,077          190,224
                                                        -----------
France - 16.3%
  Axa                                       30,832          623,801
  Carrefour SA                              15,142          712,200
  Essilor International SA                   4,329          278,241
  Lafarge SA                                 7,716          675,144
  PSA Peugeot Citroen                       10,094          621,825
  Sanofi-Aventis(c)                         13,064          947,572
  Vinci SA                                   5,861          674,435
  Vivendi Universal(b)                      23,704          607,357

                                                        ===========
                                                          5,140,575
                                                        -----------
Germany - 9.7%
  Allianz AG(c)                              6,286          633,089
  BASF AG                                    3,226          190,118
  Deutsche Postbank AG(b)                   17,559          684,782
  Deutsche Telekom AG(b)                    44,872          832,625
  Siemens AG                                 9,831          722,963

                                                        ===========
                                                          3,063,577
                                                        -----------
Greece - 2.6%
  EFG Eurobank Ergasias                     15,994          375,441
  Hellenic Telecommunication
    Organization SA                         32,960          442,933

                                                        ===========
                                                            818,374
                                                        -----------
Hong Kong - 3.1%
  Hutchison Whampoa Ltd.                    55,000          430,236
  Hutchison Whampoa Rights (expiring
    10/29/04)(d)                               733                0
  Swire Pacific Ltd. - Class A              72,000          500,894

                                                        ===========
                                                            931,130
                                                        -----------
Italy - 2.7%
  Eni SpA                                   38,365          859,597
                                                        -----------
Japan - 22.9%
  Daiwa House Industry Co. Ltd.             38,000          371,329
  East Japan Railway Co.                       101          522,343
  Fuji Electric Holdings Co. Ltd.           89,000          220,451
  Hokkaido Electric Power Co., Inc.         25,600          458,275
  Komatsu Ltd.                              51,000          327,614
  Marui Co. Ltd.                            14,900          187,239
  Mitsubishi Tokyo Financial Group,
    Inc.                                        61          508,633
  Mitsui & Co. Ltd.                         79,000          661,589
  Mitsui Fudosan Co. Ltd.                   44,000          457,506
  Nippon Oil Corp.                          86,000          542,304
  Obayashi Corp.                            71,000          353,019
  Sanyo Shinpan Finance Co. Ltd.             6,900          369,369
  Sumitomo Metal Industries Ltd.           493,000          585,973


                                              NUMBER
                                            OF SHARES      VALUE
                                           ----------- -------------
COMMON STOCKS (Continued)
Japan (Continued)
  Suzuki Motor Corp.                        21,700      $   354,989
  Tokyo Tatemono Co., Ltd.                  52,000          259,021
  Toyota Motor Corp.                        22,500          861,498
  UFJ Holdings, Inc.(b)                         42          184,057

                                                        ===========
                                                          7,225,209
                                                        -----------
Luxembourg - 0.7%
  Arcelor                                   11,387          210,443
                                                        -----------
Netherlands - 7.7%
  ING Groep NV                              32,786          827,438
  Koninklijke Ahold NV(b)                   72,305          461,587
  Reed Elsevier NV                          43,942          565,955
  TNT Post Group NV                         23,096          564,241

                                                        ===========
                                                          2,419,221
                                                        -----------
Russia - 1.4%
  Mobile Telesystems - ADR                   3,051          442,364
                                                        -----------
Singapore - 2.5%
  Jardine Matheson Holdings Ltd.(e)         22,400          315,840
  Keppel Corp. Ltd.                         99,800          468,294

                                                        ===========
                                                            784,134
                                                        -----------
South Korea - 1.3%
  Honam Petrochemical Corp.                  5,140          203,546
  Samsung Electronics Co. Ltd.                 556          221,145

                                                        ===========
                                                            424,691
                                                        -----------
Spain - 2.2%
  Banco Bilbao Vizcaya Argentaria SA        51,503          708,754
                                                        -----------
Switzerland - 7.9%
  ABB Ltd.(b)                               95,658          583,739
  Roche Holding AG                           9,397          970,781
  Syngenta AG(b)                             9,737          927,927

                                                        ===========
                                                          2,482,447
                                                        -----------
Thailand - 2.4%
  Kasikornbank Public Co. Ltd.
    (Foreign Shares)(b)                    276,100          309,925
  Siam Cement Public Co. Ltd.
    (Foreign Shares)                        67,717          434,827

                                                        ===========
                                                            744,752
                                                        -----------
United Kingdom - 20.2%
  British Land Co. PLC                      42,309          569,612
  Centrica PLC                             160,744          730,099
  Glaxosmithkline PLC                       26,894          579,616
  HSBC Holdings PLC                         47,153          748,311
  Kingfisher PLC                            60,451          337,194
  Prudential PLC                            82,466          672,269
  Scottish & Southern Energy PLC            41,595          586,342
  Shell Transport & Trading Co. PLC        132,554          972,651
  Vodafone Group PLC                       487,826        1,167,438

                                                        ===========
                                                          6,363,532
                                                        -----------
TOTAL COMMON STOCKS
  (Cost $30,728,859)                                     35,077,695
                                                        -----------
SHORT TERM INVESTMENTS - 2.9%
  Institutional Money Market Trust(e)
  (Cost $924,000)                          924,000          924,000
                                                        -----------

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              57



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                   INTERNATIONAL EQUITY PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                                           VALUE
                                      --------------
TOTAL INVESTMENTS IN SECURITIES - 114.3%
  (Cost $31,652,859(a))               $36,001,695
LIABILITIES IN EXCESS OF
  OTHER ASSETS - (14.3)%
  (Including $924,000 of payable
  upon return of securities loaned
  and $4,058,321 of capital shares
  redeemed payable)                    (4,496,878)
                                      -----------
NET ASSETS - 100.0%
  (Applicable to 1,164,266
  Institutional shares, 463,905
  Service shares, 1,096,710
  Investor A shares, 260,540
  Investor B shares and 222,615
  Investor C shares outstanding)      $31,504,817
                                      ===========


NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  INSTITUTIONAL SHARE
  ($11,684,380/1,164,266)                $ 10.04
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE PER
  SERVICE SHARE
     ($4,589,511/463,905)                $  9.89
                                         =======
NET ASSET VALUE AND REDEMPTION
  PRICE PER INVESTOR A SHARE
  ($10,695,541/1,096,710)                $  9.75
                                         =======
MAXIMUM OFFERING PRICE PER
  INVESTOR A SHARE
            ($9.75/0.950)                $ 10.26
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 4.5%)
  PER INVESTOR B SHARE
     ($2,432,722/260,540)                $  9.34
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 1.0%)
  PER INVESTOR C SHARE
     ($2,102,663/222,615)                $  9.45
                                         =======


-------------------

 (a) Cost for Federal income tax purposes is $32,073,094. The gross
     unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                    $4,698,714
      Gross unrealized depreciation                                      (770,113)
                                                                       ----------
                                                                       $3,928,601
                                                                       ==========

     (b) Non-income producing security.
     (c) Total or partial securities on loan.
 (d) Security valued at fair value as determined in good faith by or under the
       direction of the Trustees. As of September 30, 2004, this security had a
       total market value of $0 which represents less than 0.01% of net assets.

 (e) Securities purchased with the cash proceeds from securities loaned.


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
58



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                     INTERNATIONAL OPPORTUNITIES PORTFOLIO


AS OF SEPTEMBER 30, 2004





                                           NUMBER
                                         OF SHARES       VALUE
                                       ------------- -------------
COMMON STOCKS - 95.0%
Australia - 1.5%
  Hardman Resources Ltd.(b)              1,299,400    $ 2,061,270
  WMC Resources Ltd.                       684,600      2,657,967

                                                      ===========
                                                        4,719,237
                                                      -----------
Austria - 3.4%
  Andritz AG                                36,800      2,059,046
  Erste Bank der oesterreichischen
    Sparkassen AG                           66,700      2,775,197
  VA Technologie AG(b)                      38,000      2,241,818
  Wienerberger AG                           94,483      3,543,919

                                                      ===========
                                                       10,619,980
                                                      -----------
Belgium - 2.0%
  Delhaize Group                            32,900      2,090,089
  Umicore                                   58,616      4,277,079

                                                      ===========
                                                        6,367,168
                                                      -----------
Brazil - 0.8%
  Votorantim Celulose e Papel SA       34,537,036       2,380,494
                                                      -----------
Canada - 3.0%
  Dofasco, Inc.                            63,100       2,124,025
  Falconbridge Ltd.                        55,800       1,481,474
  Inmet Mining Corp.(b)                   133,800       2,315,374
  Niko Resources Ltd.                      12,472         391,736
  Teck Cominco Ltd.                       150,400       3,233,680

                                                      ===========
                                                        9,546,289
                                                      -----------
Finland - 2.3%
  Kesko Oyj - Class B                     127,600       2,792,414
  Metso Oyj                               163,900       2,102,822
  Rautaruukki Oyj                         235,200       2,293,138

                                                      ===========
                                                        7,188,374
                                                      -----------
France - 2.9%
  Imerys SA                                48,200       3,205,750
  JC Decaux SA(b)                         164,500       3,738,869
  Neopost SA                               32,800       2,106,142
  SEB SA                                        8             802

                                                      ===========
                                                        9,051,563
                                                      -----------
Germany - 5.4%
  Adidas-Salomon AG                        16,500       2,302,397
  Bilfinger Berger AG                      82,000       2,840,441
  Continental AG                           61,400       3,337,860
  Freenet.De AG(b)                        101,800       1,816,886
  MAN AG                                   45,700       1,562,592
  Puma AG Rudolf Dassler Sport              7,900       2,116,609
  ThyssenKrupp AG                         149,900       2,921,109

                                                      ===========
                                                       16,897,894
                                                      -----------
Greece - 1.2%
  Alpha Bank AE                           144,260       3,676,601
                                                      -----------
Hong Kong - 5.4%
  Cosco Pacific Ltd.                    1,065,800       1,776,778
  Global Bio-chem Technology Group
    Co. Ltd.                            1,828,000       1,394,785
  Hang Lung Properties Ltd              1,376,000       2,029,225
  Harbin Power Equipment Co. Ltd.       6,780,800       1,617,364
  Hysan Development Co. Ltd.              751,800       1,325,620
  Industrial and Commercial Bank of
    China (Asia) Ltd.                   1,248,800       1,705,519
  Lee & Man Paper Manufacturing Ltd.      621,200         473,983
  New World Development Co. Ltd.        1,740,400       1,640,401


                                           NUMBER
                                         OF SHARES       VALUE
                                       ------------- -------------
COMMON STOCKS (Continued)
Hong Kong (Continued)
  Playmates Holdings Ltd.               1,728,800     $   323,677
  Ports Design Ltd.                        86,200         159,178
  Regal Hotels International Holdings
    Ltd.(b)                            51,000,000       2,354,435
  Sino Land Co. Ltd.                    3,025,100       2,249,996

                                                      ===========
                                                       17,050,961
                                                      -----------
India - 3.1%
  Bharti Tele-Ventures Ltd.(b)            875,300       2,780,029
  Cadila Healthcare Ltd.                   47,400         496,480
  Divi's Laboratories Ltd.                 20,100         544,703
  Grasim Industries Ltd.                   75,500       1,880,375
  Ipca Laboratories Ltd.                   32,800         444,707
  Kojam Finivest Ltd.(b)                    7,750           5,432
  Lupin Ltd.                               33,362         504,108
  Maruti Udyog Ltd.                       293,700       2,208,277
  Matrix Laboratories Ltd.                  3,753         117,218
  Nicholas Piramal Ltd.                    36,700         663,776

                                                      ===========
                                                        9,645,105
                                                      -----------
Indonesia - 2.2%
  PT Bank Central Asia Tbk              8,819,500       1,925,656
  PT Bank Mandiri                      11,110,500       1,758,758
  PT Telekomunikasi Indonesia           6,883,200       3,118,480

                                                      ===========
                                                        6,802,894
                                                      -----------
Ireland - 0.8%
  Depfa Bank PLC                          190,400       2,596,525
                                                      -----------
Italy - 3.7%
  Autostrada Torino-Milano SpA            103,400       2,131,826
  Banco Popolare di Verona e Novara
    SpA                                    72,800       1,276,701
  Italcementi SpA                         172,300       2,546,569
  Lottomatica SpA                          87,300       2,414,669
  Saipem SpA                              299,400       3,365,298

                                                      ===========
                                                       11,735,063
                                                      -----------
Japan - 20.1%
  Aica Kogyo Co. Ltd.                     193,700       2,425,314
  Asahi Diamond Industry Co. Ltd.         331,600       1,708,922
  The Bank of Yokohama Ltd.               605,600       3,252,871
  Central Glass Co. Ltd.                  191,600       1,404,644
  Goldgrest Co. Ltd.                       36,600       2,138,584
  Haseko Corp.(b)                         862,200       1,541,110
  Ichiyoshi Securities Co. Ltd.           162,700       1,226,727
  Japan Airlines System Corp.(b)          652,000       1,786,543
  Joint Corp.                             117,300       2,272,245
  The Joyo Bank Ltd.                      453,000       1,824,906
  Juki Corp.(b)                           204,200         624,374
  Kobe Steel Ltd.                       1,183,000       1,717,371
  Komatsu Ltd.                            320,000       2,055,619
  Kose Corp.                               39,400       1,508,579
  Leopalace21 Corp.                        32,800         605,616
  Matsui Securities Co. Ltd.               58,800       1,475,135
  Nippon Electric Glass Co. Ltd.          153,700       3,416,640
  Nissan Shatai Co. Ltd.                  382,000       2,225,142
  Nitori Co. Ltd.                          40,148       2,302,184
  Nitto Denko Corp.                        41,200       1,895,241
  NOK Corp.                                53,900       1,652,969
  Orix Corp.                               28,600       2,932,269
  Promise Co. Ltd.                         33,200       2,171,864
  Sanyo Shinpan Finance Co. Ltd.           42,900       2,296,511

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              59



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
               INTERNATIONAL OPPORTUNITIES PORTFOLIO (CONTINUED)


AS OF SEPTEMBER 30, 2004




                                           NUMBER
                                         OF SHARES       VALUE
                                        ----------- --------------
COMMON STOCKS (Continued)
Japan (Continued)
  Sumitomo Heavy Industries Ltd.(b)        800,100   $  2,366,580
  Sumitomo Metal Industries Ltd.        1,505,100       1,788,941
  Suzuki Motor Corp.                      137,800       2,254,261
  Takefuji Corp.                           27,300       1,746,269
  Tokai Carbon Co. Ltd.                   489,000       1,570,621
  Tosoh Corp.                             452,100       1,829,484
  Toyo Radiator Co. Ltd.                  406,000       2,132,868
  Yamada Denki Co. Ltd.                    64,200       2,213,492
  YASKAWA Electric Corp.                  228,400       1,108,688

                                                     ============
                                                       63,472,584
                                                     ------------
Malaysia - 0.8%
  Maxis Communications Berhad           1,098,300       2,456,724
                                                     ------------
Netherlands - 3.1%
  Euronext NV                             113,800       3,238,102
  Koninklijke Wessanen NV                 188,700       2,514,750
  Randstad Holding NV                      45,689       1,654,712
  Vedior NV                               155,000       2,396,757

                                                     ============
                                                        9,804,321
                                                     ------------
Norway - 2.0%
  Prosafe ASA                             108,700       2,761,302
  Smedvig ASA - Class A                   268,800       3,513,986

                                                     ============
                                                        6,275,288
                                                     ------------
Portugal - 1.4%
  Brisa Auto Estradas de Portugal SA      206,700       1,678,963
  PT Multimedia - Servicos de
    Telecomunicacoes e Multimedia
    SGPS SA                               143,900       3,208,104

                                                     ============
                                                        4,887,067
                                                     ------------
Singapore - 0.4%
  Singapore Petroleum Co. Ltd.            535,700       1,151,838
                                                     ------------
South Korea - 4.0%
  Dongkuk Steel Mill Co., Ltd.            236,600       2,547,841
  Hanjin Heavy Industries Co. Ltd.        455,600       2,267,118
  Hanjin Shipping Co. Ltd.                136,800       2,334,451
  Honam Petrochemical Corp.                30,000       1,188,016
  Hyundai Development Co.                 206,700       2,252,788
  LG Chemical Ltd.                         49,500       1,878,550

                                                     ============
                                                       12,468,764
                                                     ------------
Spain - 3.1%
  ACS, Actividades de Construccion y
    Servicios SA                          118,500       2,159,095
  Grupo Ferrovial SA                       54,400       2,428,964
  Iberia Lineas Aereas de Espana SA       989,700       2,741,143
  NH Hoteles SA                           228,100       2,527,046

                                                     ============
                                                        9,856,248
                                                     ------------
Sweden - 3.3%
  Alfa Laval AB                           118,200       1,720,997
  Lindex AB                                87,900       2,378,547
  Scania AB                                54,300       1,838,542
  SKF AB - Class B                         64,700       2,457,288
  SSAB Svenskt Stal AB                    109,700       2,079,421

                                                     ============
                                                       10,474,795
                                                     ------------
Switzerland - 2.2%
  Micronas Semiconductor Holding
    AG(b)                                  45,700       1,939,697
  PubliGroupe SA                            9,700       2,819,813


                                           NUMBER
                                         OF SHARES       VALUE
                                        ----------- --------------
COMMON STOCKS (Continued)
Switzerland (Continued)
  Sauer AG(b)                              48,200    $  2,624,810

                                                     ============
                                                        7,384,320
                                                     ------------
Taiwan - 1.8%
  Quanta Computer, Inc.                   844,624       1,454,533
  Taishin Financial Holdings Co. Ltd.   2,842,678       2,292,887
  Vanguard International
    Semiconductor Corp.(b)(c)           3,077,574       1,816,104

                                                     ============
                                                        5,563,524
                                                     ------------
Thailand - 1.9%
  Advanced Info Service Public Co.
    Ltd. (Foreign Shares)(c)            1,228,500       2,925,070
  Banpu Public Co. Ltd.(c)                933,400       3,494,595

                                                     ============
                                                        6,419,665
                                                     ------------
United Kingdom - 11.5%
  Aegis Group PLC                         857,300       1,500,918
  Alliance Unichem PLC                    170,928       2,061,515
  Antofagasta PLC                         103,400       2,116,198
  Burberry Group PLC                      300,900       2,028,251
  The Carphone Warehouse Group
    PLC                                   250,000         674,061
  Catlin Group Ltd. PLC                   282,800       1,773,192
  EMI Group PLC                           529,200       2,113,945
  Exel PLC                                171,200       2,119,010
  Hilton Group PLC                        301,500       1,509,900
  InterContinental Hotels Group PLC       264,400       3,007,045
  Michael Page International PLC          673,600       2,255,004
  Millennium & Copthorne Hotels PLC       345,700       2,001,810
  Severn Trent PLC                        120,000       1,906,553
  Taylor Nelson Sofres PLC                544,600       2,187,781
  Taylor Woodrow PLC                      510,000       2,429,471
  Trinity Mirror PLC                      208,200       2,479,019
  Tullow Oil PLC                          599,400       1,559,187
  Xstrata PLC                             149,100       2,451,183

                                                     ============
                                                       36,174,043
                                                     ------------
United States - 1.7%
  Autoliv, Inc.                            57,000       2,302,800
  NII Holdings, Inc. - Class B(b)(d)       74,400       3,066,024

                                                     ============
                                                        5,368,824
                                                     ------------
TOTAL COMMON STOCKS
  (Cost $267,055,402)
                                                      300,036,153
                                                     ------------
PREFERRED STOCKS - 0.4%
Brazil - 0.4%
  Gerdau SA
  (Cost $347,978)                          74,800       1,215,696
                                                     ------------

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
               INTERNATIONAL OPPORTUNITIES PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                                                  PAR/SHARES
                                       MATURITY     (000)        VALUE
                                      ---------- ----------- -------------
SHORT TERM INVESTMENTS - 6.0%
  Federal Home Loan Bank, Discount
    Notes
    1.65%                             10/01/04      $9,000    $ 9,000,000
  Galileo Money Market Fund                          6,664      6,664,445
  Institutional Money Market Trust(e)                3,125      3,124,800

                                                              ===========
TOTAL SHORT TERM INVESTMENTS
  (Cost $18,789,245)                                           18,789,245
                                                              -----------


TOTAL INVESTMENTS IN SECURITIES - 101.4%
  (Cost $286,192,625(a))               320,041,094
LIABILITIES IN EXCESS OF
  OTHER ASSETS - (1.4)%                 (4,399,462)
                                       -----------
NET ASSETS - 100.0%
  (Applicable to 3,949,394
  Institutional shares, 801,048
  Service shares, 4,200,341
  Investor A shares, 1,981,409
  Investor B shares and 2,407,534
  Investor C shares outstanding)      $315,641,632
                                      ============


NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  PER INSTITUTIONAL SHARE
  ($96,534,906/3,949,394)                $ 24.44
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  PER SERVICE SHARE
    ($19,166,526/801,048)                $ 23.93
                                         =======
NET ASSET VALUE AND
  REDEMPTION PRICE PER
  INVESTOR A SHARE
  ($99,879,318/4,200,341)                $ 23.78
                                         =======
MAXIMUM OFFERING PRICE PER
  INVESTOR A SHARE
           ($23.78/0.950)                $ 25.03
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 4.5%)
  PER INVESTOR B SHARE
  ($45,167,373/1,981,409)                $ 22.80
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 1.0%)
  PER INVESTOR C SHARE
  ($54,893,509/2,407,534)                $ 22.80
                                         =======



-------------------

 (a) Cost for Federal income tax purposes is $286,318,475. The
     gross unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                      $41,868,547
      Gross unrealized depreciation                                       (8,145,928)
                                                                         -----------
                                                                         $33,722,619
                                                                         ===========

     (b) Non-income producing security.
  (c) Security valued at fair value as determined in good faith by or under
       the direction of the Trustees. As of September 30, 2004, the securities
       had a total market value of $8,235,769 which represents 2.61% of net
       assets.
     (d) Total or partial securities on loan.
 (e) Securities purchased with the cash proceeds from securities loaned.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              61



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                            SELECT EQUITY PORTFOLIO


AS OF SEPTEMBER 30, 2004





                                            NUMBER
                                          OF SHARES      VALUE
                                         ----------- ------------
COMMON STOCKS - 100.2%
Aerospace - 2.1%
  The Boeing Co.                           16,100     $  831,082
  Northrop Grumman Corp.                    9,100        485,303
  United Technologies Corp.                 5,500        513,590

                                                      ==========
                                                       1,829,975
                                                      ----------
Banks - 7.8%
  Bank of America Corp.(b)                 46,600      2,019,178
  Golden West Financial Corp.               4,100        454,895
  Huntington Bancshares, Inc.(b)           20,900        520,619
  J.P. Morgan Chase & Co., Inc.            42,852      1,702,511
  SunTrust Banks, Inc.(b)                   7,800        549,198
  U.S. Bancorp                             33,000        953,700
  Wachovia Corp.                           24,500      1,150,275

                                                      ==========
                                                       7,350,376
                                                      ----------
Beverages & Bottling - 1.8%
  The Coca-Cola Co.                         9,200        368,460
  Constellation Brands, Inc. - Class
    A(c)                                   12,200        464,332
  PepsiCo, Inc.                            18,000        875,700

                                                      ==========
                                                       1,708,492
                                                      ----------
Broadcasting - 0.6%
  Comcast Corp. - Class A(c)               20,900        590,216
                                                      ----------
Business Services - 0.8%
  Cendant Corp.                            35,400        764,640
                                                      ----------
Chemicals - 1.0%
  The Dow Chemical Co.                     20,500        926,190
                                                      ----------
Computer & Office Equipment - 4.8%
  Cisco Systems, Inc.(c)                   45,100        816,310
  Dell, Inc.(c)                            24,500        872,200
  International Business Machines
    Corp.                                  25,500      2,186,370
  Lexmark International, Inc.(c)            7,300        613,273

                                                      ==========
                                                       4,488,153
                                                      ----------
Computer Software & Services - 6.4%
  Checkfree Corp.(c)                       22,600        625,342
  Computer Sciences Corp.(b)(c)            13,400        631,140
  Microsoft Corp.                        117,000       3,235,050
  Oracle Corp.(c)                         51,700         583,176
  Symantec Corp.(b)(c)                    17,200         943,936

                                                      ==========
                                                       6,018,644
                                                      ----------
Construction - 0.4%
  Centex Corp.                             8,100         408,726
                                                      ----------
Electronics - 5.2%
  Arrow Electronics, Inc.(b)(c)           29,500         666,110
  General Electric Co.                    79,800       2,679,684
  Intel Corp.                             43,200         866,592
  L-3 Communications Holdings, Inc.(b)    10,500         703,500

                                                      ==========
                                                       4,915,886
                                                      ----------
Energy & Utilities - 3.0%
  Exelon Corp.                            25,500         935,595
  PPL Corp.(b)                            21,800       1,028,524
  TXU Corp.(b)                            18,500         886,520

                                                      ==========
                                                       2,850,639
                                                      ----------
Entertainment & Leisure - 2.3%
  MGM Mirage(c)                            9,600         476,640


                                            NUMBER
                                          OF SHARES      VALUE
                                         ----------- ------------
COMMON STOCKS (Continued)
Entertainment & Leisure (Continued)
  Time Warner, Inc.(c)                    55,500      $  895,770
  The Walt Disney Co.                     33,200         748,660

                                                      ==========
                                                       2,121,070
                                                      ----------
Finance - 7.8%
  The Bear Stearns Cos., Inc.              5,400         519,318
  Capital One Financial Corp.(b)           8,100         598,590
  Citigroup, Inc.                         59,800       2,638,376
  Countrywide Financial Corp.             20,598         811,355
  E*TRADE Financial Corp.(c)              44,000         502,480
  Freddie Mac                             13,600         887,264
  The Goldman Sachs Group, Inc.            8,000         745,920
  Providian Financial Corp.(c)            38,500         598,290

                                                      ==========
                                                       7,301,593
                                                      ----------
Food & Agriculture - 2.2%
  Archer-Daniels-Midland Co.              30,800         522,984
  Campbell Soup Co.(b)                    21,200         557,348
  H.J. Heinz Co.                          14,800         533,096
  Supervalu, Inc.(b)                      16,300         449,065

                                                      ==========
                                                       2,062,493
                                                      ----------
Insurance - 4.8%
  ACE Ltd.                                11,000         440,660
  The Allstate Corp.                      16,300         782,237
  American International Group, Inc.      26,300       1,788,137
  MetLife, Inc.                           25,100         970,115
  W.R. Berkley Corp.                      13,100         552,296

                                                      ==========
                                                       4,533,445
                                                      ----------
Machinery & Heavy Equipment - 0.5%
  Deere & Co.                              7,800         503,490
                                                      ----------
Manufacturing - 7.6%
  The Black & Decker Corp.(b)             12,600         975,744
  Brunswick Corp.                         18,100         828,256
  Eaton Corp.                             14,100         894,081
  Fortune Brands, Inc.                     9,000         666,810
  NIKE, Inc. - Class B                     9,500         748,600
  The Sherwin-Williams Co.(b)             17,400         764,904
  The Stanley Works                       18,100         769,793
  Tyco International Ltd. - ADR(b)        48,900       1,499,274

                                                      ==========
                                                       7,147,462
                                                      ----------
Medical & Medical Services - 2.1%
  Amgen, Inc.(c)                           6,600         374,088
  Anthem, Inc.(b)(c)                       8,100         706,725
  UnitedHealth Group, Inc.                11,800         870,132

                                                      ==========
                                                       1,950,945
                                                      ----------
Medical Instruments & Supplies - 4.2%
  Bausch & Lomb, Inc.                     11,400         757,530
  Becton, Dickinson & Co.                 12,600         651,420
  Johnson & Johnson                       32,600       1,836,358
  Medtronic, Inc.                         12,500         648,750

                                                      ==========
                                                       3,894,058
                                                      ----------
Metal & Mining - 0.7%
  Nucor Corp.(b)                           7,400         676,138
                                                      ----------
Motor Vehicles - 0.8%
  General Motors Corp.(b)                  8,100         344,088

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
62



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                      SELECT EQUITY PORTFOLIO (CONTINUED)


AS OF SEPTEMBER 30, 2004




                                             NUMBER
                                           OF SHARES      VALUE
                                          ----------- -------------
COMMON STOCKS (Continued)
Motor Vehicles (Continued)
  Lear Corp.(b)                             7,800      $   424,710

                                                       ===========
                                                           768,798
                                                       -----------
Oil & Gas - 7.2%
  Amerada Hess Corp.                        7,800          694,200
  Baker Hughes, Inc.                      21,700           948,724
  ChevronTexaco Corp.                     18,000           965,520
  ConocoPhillips                          16,700         1,383,595
  Exxon Mobil Corp.                       47,200         2,281,176
  Valero Energy Corp.(b)                   6,300           505,323

                                                       ===========
                                                         6,778,538
                                                       -----------
Paper & Forest Products - 1.4%
  Kimberly-Clark Corp.                    10,400           671,736
  Louisiana-Pacific Corp.                 26,500           687,675

                                                       ===========
                                                         1,359,411
                                                       -----------
Pharmaceuticals - 6.4%
  AmerisourceBergen Corp.(b)               7,500           402,825
  Bristol-Myers Squibb Co.                21,500           508,905
  Gilead Sciences, Inc.(c)                13,700           512,106
  Merck & Co., Inc.                       37,100         1,224,300
  Pfizer, Inc.                            87,800         2,686,680
  Wyeth                                   18,500           691,900

                                                       ===========
                                                         6,026,716
                                                       -----------
Publishing & Printing - 0.7%
  The McGraw-Hill Cos., Inc.               8,600           685,334
                                                       -----------
Railroad & Shipping - 1.7%
  Burlington Northern Santa Fe Corp.      20,900           800,679
  FedEx Corp.                              8,800           754,072

                                                       ===========
                                                         1,554,751
                                                       -----------
Real Estate - 0.4%
  Simon Property Group, Inc.(b)            6,300           337,869
                                                       -----------
Restaurants - 0.8%
  McDonald's Corp.                        26,300           737,189
                                                       -----------
Retail Merchandising - 5.3%
  Barnes & Noble, Inc.(c)                 16,600           614,200
  The Home Depot, Inc.                    38,500         1,509,200
  J.C. Penney Co., Inc.(b)                21,000           740,880
  Nordstrom, Inc.                         15,600           596,544
  Target Corp.                             9,400           425,350
  Wal-Mart Stores, Inc.                   20,000         1,064,000

                                                       ===========
                                                         4,950,174
                                                       -----------
Semiconductors & Related Devices - 1.2%
  Fairchild Semiconductor International,
    Inc.(c)                               20,900           296,153
  LAM Research Corp.(c)                   15,800           345,704
  Micron Technology, Inc.(b)(c)           39,200           471,576

                                                       ===========
                                                         1,113,433
                                                       -----------
Soaps & Cosmetics - 1.5%
  The Procter & Gamble Co.                25,600         1,385,472
                                                       -----------
Telecommunications - 5.1%
  CenturyTel, Inc.(b)                     16,000           547,840
  Motorola, Inc.                          46,400           837,056
  Nextel Communications, Inc. - Class
    A(c)                                  10,200           243,168
  QUALCOMM, Inc.                          13,500           527,040
  SBC Communications, Inc.                35,600           923,820


                                             NUMBER
                                           OF SHARES      VALUE
                                          ----------- -------------
COMMON STOCKS (Continued)
Telecommunications (Continued)
  Verizon Communications, Inc.            44,200       $ 1,740,596

                                                       ===========
                                                         4,819,520
                                                       -----------
Tobacco - 1.0%
  Altria Group, Inc.                      19,800           931,392
                                                       -----------
Transportation - 0.6%
  Ryder Systems, Inc.                     11,000           517,440
                                                       -----------
TOTAL COMMON STOCKS
  (Cost $68,913,673)
                                                        94,008,668
                                                       -----------


                                                    PAR/SHARES
                                         MATURITY     (000)
                                        ---------- -----------
SHORT TERM INVESTMENTS - 9.8%
  Banco Santander Puerto Rico,
    Certificate of Deposit
    1.80%(d)                            10/25/04      $  457      457,204
  Bear Stearns, Floating Rate Notes
    1.90%(d)(e)                         10/01/04         566      565,972
  Canadian Imperial Bank International,
    Certificate of Deposit
    1.80%(d)                            10/29/04         457      456,974
  Eurohypo, Certificate of Deposit
    1.80%(d)                            10/22/04         295      295,295
  Foreningssparbanken AB, Floating
    Rate Notes
    1.72%(d)(e)                         10/15/04         472      472,491
  Merrill Lynch, Floating Rate Master
    Notes
    2.00%(d)(e)                         10/01/04         430      430,246
    2.00%(d)(e)                         10/01/04         423      422,513
  Morgan Stanley, Floating Rate Notes
    1.86%(d)(e)                         10/01/04         174      173,627
    1.96%(d)(e)                         10/01/04       1,414    1,414,223
  Natexis Banques International,
    Floating Rate Notes
    1.92%(d)(e)                         10/01/04         849      849,474
    1.98%(d)(e)                         10/01/04         893      893,347
  Societe General, Floating Rate Notes
    1.95%(d)(e)                         10/01/04          36       36,425
  Svenska Handelsbank, Certificate of
    Deposit
    1.39%(d)                            10/27/04          99       99,115
  Union Bank of Switzerland, Time
    Deposit
    1.98%(d)                            10/01/04       1,044    1,044,449
  Westdeutsche Landsbank
    International, Floating Rate Notes
    1.70%(d)(e)                         10/12/04         873      872,558
  Galileo Money Market Fund                                9        9,177


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              63



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                      SELECT EQUITY PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                                                  SHARES
                                       MATURITY   (000)      VALUE
                                      ---------- ------- ------------
SHORT TERM INVESTMENTS (Continued)
  Institutional Money Market Trust(d)              680    $  679,522

                                                          ==========
TOTAL SHORT TERM INVESTMENTS
  (Cost $9,172,612)                                        9,172,612
                                                          ----------


TOTAL INVESTMENTS IN SECURITIES - 110.0%
  (Cost $78,086,285(a))                    103,181,280
LIABILITIES IN EXCESS OF OTHER
  ASSETS - (10.0)%
  (Including $9,163,436 of payable
  upon return of securities loaned)         (9,381,022)
                                           -----------
NET ASSETS - 100.0% (Applicable to
  4,315,819 Institutional shares,
  143,131 Service shares, 1,495,708
  Investor A shares, 1,809,333 Investor
  B shares and 213,338 Investor C
  shares outstanding)                     $ 93,800,258
                                          ============


NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  PER INSTITUTIONAL SHARE
  ($51,593,220/4,315,819)                $ 11.95
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  PER SERVICE SHARE
     ($1,713,688/143,131)                $ 11.97
                                         =======
NET ASSET VALUE AND
  REDEMPTION PRICE PER
  INVESTOR A SHARE
  ($17,631,853/1,495,708)                $ 11.79
                                         =======
MAXIMUM OFFERING PRICE
  PER INVESTOR A SHARE
           ($11.79/0.955)                $ 12.35
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 4.5%)
  PER INVESTOR B SHARE
  ($20,448,194/1,809,333)                $ 11.30
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 1.0%)
  PER INVESTOR C SHARE
     ($2,413,303/213,338)                $ 11.31
                                         =======


-------------------

 (a) Cost for Federal income tax purposes is $79,203,399. The gross
     unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                   $26,362,850
      Gross unrealized depreciation                                    (2,384,969)
                                                                      -----------
                                                                      $23,977,881
                                                                      ===========

     (b) Total or partial securities on loan.
     (c) Non-income producing security.
 (d) Securities purchased with the cash proceeds from securities loaned.
 (e) Rates shown are the rates as of September 30, 2004.


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                             INDEX EQUITY PORTFOLIO


AS OF SEPTEMBER 30, 2004


                                            VALUE
                                      -----------------

Investment in The U.S. Large Company
  Series of The DFA Investment Trust
  Company - 100.2%
  (Cost $1,268,492,401)                $1,394,523,619


LIABILITIES IN EXCESS OF OTHER
  ASSETS - (0.2)%                         (3,446,290)
                                          ----------
NET ASSETS - 100.0% (Applicable to
  25,455,034 Institutional shares,
  3,495,497 Service shares,
  14,650,506 Investor A shares,
  8,474,264 Investor B shares and
  13,311,950 Investor C shares
  outstanding)                        $1,391,077,329
                                      ==============


NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  PER INSTITUTIONAL SHARE
  ($546,946,643/25,455,034)              $ 21.49
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  PER SERVICE SHARE
    ($74,641,211/3,495,497)              $ 21.35
                                         =======
NET ASSET VALUE AND
  REDEMPTION PRICE
  PER INVESTOR A SHARE
  ($312,605,650/14,650,506)              $ 21.34
                                         =======
MAXIMUM OFFERING PRICE
  PER INVESTOR A SHARE
             ($21.34/0.970)              $ 22.00
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 4.5%)
  PER INVESTOR B SHARE
   ($177,754,098/8,474,264)              $ 20.98
                                         =======
NET ASSET VALUE, OFFERING
  AND REDEMPTION PRICE
  (subject to a maximum contingent
  deferred sales charge of 1.0%)
  PER INVESTOR C SHARE
  ($279,129,727/13,311,950)              $ 20.97
                                         =======


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS AND ACCOMPANYING FINANCIAL
      STATEMENTS AND RELATED NOTES FOR THE DFA INVESTMENT TRUST COMPANY.
                                                                              65



                                BLACKROCK FUNDS
                            SCHEDULE OF INVESTMENTS
                               BALANCED PORTFOLIO


AS OF SEPTEMBER 30, 2004





                                            NUMBER
                                          OF SHARES      VALUE
                                         ----------- ------------
COMMON STOCKS - 65.6%
Aerospace - 1.3%
  The Boeing Co.                           14,700     $  758,814
  Northrop Grumman Corp.                    8,500        453,305
  United Technologies Corp.                 5,100        476,238

                                                      ==========
                                                       1,688,357
                                                      ----------
Banks - 5.1%
  Bank of America Corp.(b)                 43,000      1,863,190
  Golden West Financial Corp.               3,800        421,610
  Huntington Bancshares, Inc.(b)           18,900        470,799
  J.P. Morgan Chase & Co., Inc.            39,588      1,572,831
  SunTrust Banks, Inc.                      7,100        499,911
  U.S. Bancorp                             30,400        878,560
  Wachovia Corp.                           22,800      1,070,460

                                                      ==========
                                                       6,777,361
                                                      ----------
Beverages & Bottling - 1.2%
  The Coca-Cola Co.                         8,500        340,425
  Constellation Brands, Inc. - Class
    A(c)                                   11,200        426,272
  PepsiCo, Inc.                            16,300        792,995

                                                      ==========
                                                       1,559,692
                                                      ----------
Broadcasting - 0.4%
  Comcast Corp. - Class A(c)               18,800        530,912
                                                      ----------
Business Services - 0.5%
  Cendant Corp.                            32,800        708,480
                                                      ----------
Chemicals - 0.6%
  The Dow Chemical Co.                     18,800        849,384
                                                      ----------
Computer & Office Equipment - 3.1%
  Cisco Systems, Inc.(c)                   41,498        751,114
  Dell, Inc.(c)                            22,700        808,120
  International Business Machines
    Corp.                                  23,000      1,972,020
  Lexmark International, Inc.(b)(c)         6,900        579,669

                                                      ==========
                                                       4,110,923
                                                      ----------
Computer Software & Services - 4.2%
  Checkfree Corp.(c)                       21,300        589,371
  Computer Sciences Corp.(b)(c)            12,500        588,750
  Microsoft Corp.                        108,000       2,986,200
  Oracle Corp.(c)                         46,600         525,648
  Symantec Corp.(b)(c)                    15,900         872,592

                                                      ==========
                                                       5,562,561
                                                      ----------
Construction - 0.3%
  Centex Corp.                             7,700         388,542
                                                      ----------
Electronics - 3.4%
  Arrow Electronics, Inc.(c)              27,100         611,918
  General Electric Co.                    72,800       2,444,624
  Intel Corp.                             39,300         788,358
  L-3 Communications Holdings, Inc.(b)     9,600         643,200

                                                      ==========
                                                       4,488,100
                                                      ----------
Energy & Utilities - 1.9%
  Exelon Corp.                            22,500         825,525
  PPL Corp.(b)                            19,500         920,010
  TXU Corp.(b)                            17,100         819,432

                                                      ==========
                                                       2,564,967
                                                      ----------
Entertainment & Leisure - 1.5%
  MGM Mirage(c)                            8,900         441,885
  Time Warner, Inc.(c)                    51,600         832,824


                                            NUMBER
                                          OF SHARES      VALUE
                                         ----------- ------------
COMMON STOCKS (Continued)
Entertainment & Leisure (Continued)
  The Walt Disney Co.                     30,200      $  681,010

                                                      ==========
                                                       1,955,719
                                                      ----------
Finance - 5.1%
  The Bear Stearns Cos., Inc.              5,400         519,318
  Capital One Financial Corp.(b)           7,700         569,030
  Citigroup, Inc.                         55,400       2,444,248
  Countrywide Financial Corp.             18,800         740,532
  E*TRADE Financial Corp.(c)              40,700         464,794
  Freddie Mac                             12,600         822,024
  The Goldman Sachs Group, Inc.            7,700         717,948
  Providian Financial Corp.(b)(c)         35,400         550,116

                                                      ==========
                                                       6,828,010
                                                      ----------
Food & Agriculture - 1.4%
  Archer-Daniels-Midland Co.              27,300         463,554
  Campbell Soup Co.                       19,600         515,284
  H.J. Heinz Co.                          13,700         493,474
  Supervalu, Inc.(b)                      14,900         410,495

                                                      ==========
                                                       1,882,807
                                                      ----------
Insurance - 3.2%
  ACE Ltd.                                 9,900         396,594
  The Allstate Corp.                      15,500         743,845
  American International Group, Inc.      24,200       1,645,358
  MetLife, Inc.                           23,000         888,950
  W.R. Berkley Corp.                      12,200         514,352

                                                      ==========
                                                       4,189,099
                                                      ----------
Machinery & Heavy Equipment - 0.4%
  Deere & Co.                              7,400         477,670
                                                      ----------
Manufacturing - 5.0%
  The Black & Decker Corp.(b)             11,800         913,792
  Brunswick Corp.                         17,000         777,920
  Eaton Corp.                             12,900         817,989
  Fortune Brands, Inc.                     8,400         622,356
  NIKE, Inc. - Class B                     8,700         685,560
  The Sherwin-Williams Co.(b)             16,200         712,152
  The Stanley Works                       16,800         714,504
  Tyco International Ltd. - ADR           43,700       1,339,842

                                                      ==========
                                                       6,584,115
                                                      ----------
Medical & Medical Services - 1.2%
  Amgen, Inc.(b)(c)                        6,100         345,748
  Anthem, Inc.(b)(c)                       7,400         645,650
  UnitedHealth Group, Inc.                10,800         796,392

                                                      ==========
                                                       1,787,790
                                                      ----------
Medical Instruments & Supplies - 3.2%
  Bausch & Lomb, Inc.(b)                  10,500         697,725
  Beckman Coulter, Inc.(b)                10,950         614,514
  Becton, Dickinson & Co.                 11,900         615,230
  Johnson & Johnson                       30,100       1,695,533
  Medtronic, Inc.                         11,700         607,230

                                                      ==========
                                                       4,230,232
                                                      ----------
Metal & Mining - 0.5%
  Nucor Corp.                              6,800         621,316
                                                      ----------
Motor Vehicles - 0.5%
  General Motors Corp.(b)                  7,700         327,096

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
66



                                BLACKROCK FUNDS
                            SCHEDULE OF INVESTMENTS
                         BALANCED PORTFOLIO (CONTINUED)


AS OF SEPTEMBER 30, 2004




                                             NUMBER
                                           OF SHARES      VALUE
                                          ----------- -------------
COMMON STOCKS (Continued)
Motor Vehicles (Continued)
  Lear Corp.(b)                             7,200      $   392,040

                                                       ===========
                                                           719,136
                                                       -----------
Oil & Gas - 4.7%
  Amerada Hess Corp.                        7,300          649,700
  Baker Hughes, Inc.                      20,000           874,400
  ChevronTexaco Corp.                     16,800           901,152
  ConocoPhillips                          15,200         1,259,320
  Exxon Mobil Corp.                       43,700         2,112,021
  Valero Energy Corp.                      5,800           465,218

                                                       ===========
                                                         6,261,811
                                                       -----------
Paper & Forest Products - 0.9%
  Kimberly-Clark Corp.                     9,600           620,064
  Louisiana-Pacific Corp.                 24,300           630,585

                                                       ===========
                                                         1,250,649
                                                       -----------
Pharmaceuticals - 4.2%
  AmerisourceBergen Corp.(b)               7,000           375,970
  Bristol-Myers Squibb Co.                19,800           468,666
  Gilead Sciences, Inc.(b)(c)             12,600           470,988
  Merck & Co., Inc.                       32,800         1,082,400
  Pfizer, Inc.                            81,800         2,503,080
  Wyeth                                   17,000           635,800

                                                       ===========
                                                         5,536,904
                                                       -----------
Publishing & Printing - 0.5%
  The McGraw-Hill Cos., Inc.               7,900           629,551
                                                       -----------
Railroad & Shipping - 1.1%
  Burlington Northern Santa Fe Corp.      19,300           739,383
  FedEx Corp.                              8,100           694,089

                                                       ===========
                                                         1,433,472
                                                       -----------
Real Estate - 0.2%
  Simon Property Group, Inc.(b)            5,800           311,054
                                                       -----------
Restaurants - 0.5%
  McDonald's Corp.                        23,200           650,296
                                                       -----------
Retail Merchandising - 3.4%
  Barnes & Noble, Inc.(c)                 15,400           569,800
  The Home Depot, Inc.                    35,600         1,395,520
  J.C. Penney Co., Inc.                   19,300           680,904
  Nordstrom, Inc.                         14,500           554,480
  Target Corp.                             8,700           393,675
  Wal-Mart Stores, Inc.                   18,300           973,560

                                                       ===========
                                                         4,567,939
                                                       -----------
Semiconductors & Related Devices - 0.8%
  Fairchild Semiconductor International,
    Inc.(c)                               18,800           266,396
  LAM Research Corp.(c)                   14,200           310,696
  Micron Technology, Inc.(b)(c)           35,900           431,877

                                                       ===========
                                                         1,008,969
                                                       -----------
Soaps & Cosmetics - 1.0%
  The Procter & Gamble Co.                23,700         1,282,644
                                                       -----------
Telecommunications - 3.3%
  CenturyTel, Inc.                        14,700           503,328
  Motorola, Inc.                          43,100           777,524
  Nextel Communications, Inc. - Class
    A(b)(c)                               10,100           240,784
  QUALCOMM, Inc.                          12,500           488,000
  SBC Communications, Inc.                32,700           848,565


                                             NUMBER
                                           OF SHARES      VALUE
                                          ----------- -------------
COMMON STOCKS (Continued)
Telecommunications (Continued)
  Verizon Communications, Inc.            40,200       $ 1,583,076

                                                       ===========
                                                         4,441,277
                                                       -----------
Tobacco - 0.6%
  Altria Group, Inc.                      18,000           846,720
                                                       -----------
Transportation - 0.4%
  Ryder Systems, Inc.                     10,200           479,808
                                                       -----------
TOTAL COMMON STOCKS
  (Cost $65,992,150)
                                                        87,206,267
                                                       -----------




                                      PAR
                       MATURITY      (000)
                    -------------- --------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 7.2%
  Federal Home Loan Mortgage
Corp.,
  Unsecured Notes
       2.40%            03/29/07    $  125     123,196
       3.88%         11/08-01/09       665     664,510
       4.75%            12/08/10       400     403,266
       4.12%            02/24/11       325     319,854
       4.62%            05/28/13       150     148,815
  Federal National Mortgage
  Association, Unsecured Notes
       1.75%            06/16/06        90      88,621
       2.35%            04/05/07       440     433,074
       7.12%            06/15/10       290     336,451
  Resolution Funding Corp. Strip
  Bonds
       6.30%(d)      07/18-10/18       300     148,615
  Small Business Administration
  Participation Certificates,
Series
  97-20F, Class 1
       7.20%            06/01/17     1,007   1,098,319
  Small Business Investment Cos.
  Pass-Through, Series 97-P10C,
  Class 1
       6.85%            08/01/07       333     357,051
  U.S. Treasury Bonds
      10.38%            11/15/12       295     359,301
       8.12%            08/15/19       825   1,129,444
       6.12%            11/15/27       215     249,602
       5.38%(e)         02/15/31     1,115   1,194,444
  U.S. Treasury Inflation
Protected
  Notes
       2.00%            07/15/14       400     410,854
  U.S. Treasury Notes
       4.25%(e)         08/15/14     2,115   2,137,142

                                             =========
TOTAL U.S. GOVERNMENT & AGENCY
  OBLIGATIONS
  (Cost $9,333,004)                          9,602,559
                                             ---------

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              67



                                BLACKROCK FUNDS
                            SCHEDULE OF INVESTMENTS
                         BALANCED PORTFOLIO (CONTINUED)


AS OF SEPTEMBER 30, 2004




                                                               PAR
                                                MATURITY      (000)       VALUE
                                             ------------- ---------- -------------
MORTGAGE PASS-THROUGHS - 10.2%
  Federal Home Loan Mortgage Corp.
    Gold
     8.00%                                    08/08-08/27    $   56    $    61,143
     4.00%                                    05/10-05/19       263        260,719
     6.00%                                    04/13-12/33       381        399,725
     4.50%                                       10/20/18       300        298,781
     7.50%                                       09/01/27         1            718
     6.50%                                    01/29-08/32       214        225,232
     5.50%                                    08/33-10/33       163        165,956
     5.00%                                    10/33-05/34       292        289,431
  Federal National Mortgage
    Association
     7.00%                                    08/08-10/32       409        434,303
     6.50%                                    11/10-11/33     2,371      2,489,850
     6.00%                                    09/11-11/33       909        954,182
     5.50%                                    04/17-09/34     2,431      2,489,404
     5.00%                                    03/18-04/34     1,757      1,771,897
     4.00%                                    07/18-05/19       489        476,958
     4.50%                                    09/18-07/19       513        508,744
     7.50%                                       02/01/30        15         15,949
  Government National Mortgage
    Association
     6.00%                                    10/23-06/32       513        535,492
     6.50%                                    01/24-10/34       789        834,858
     7.50%                                    11/29-12/29         4          4,467
     7.00%                                    09/31-05/32       126        134,158
     5.50%                                    04/33-10/34       872        887,971
  Government National Mortgage
    Association 1 Year CMT
     3.75%                                       05/20/34       295        293,248
  MLCC Mortgage Investors, Inc.,
    Series 95-C2 (IO)
    10.40%(d)                                    06/15/21     3,179         56,471

                                                                       ===========
TOTAL MORTGAGE PASS-THROUGHS
  (Cost $13,143,340)                                                    13,589,657
                                                                       -----------
MULTIPLE CLASS MORTGAGE PASS-THROUGHS - 0.3%
  Federal Home Loan Mortgage Corp.,
    Series 2864, Class NA
     5.50%                                       01/15/31       190        199,292
  Salomon Brothers Mortgage
    Securities VI, Series 87-1 (IO)
     7.00%(d)                                    02/17/17        74         20,590
  Salomon Brothers Mortgage
    Securities VI, Series 87-1 (PO)
     7.00%(d)                                    02/17/17        82         73,331
  Salomon Brothers Mortgage
    Securities VI, Series 87-2 (IO)
     6.00%(d)                                    03/06/17        63         18,155
  Salomon Brothers Mortgage
    Securities VI, Series 87-2 (PO)
     6.00%(d)                                    03/06/17        63         55,087
  Structured Asset Securities Corp.,
    Series 96-CFL, Class X1 (IO)
     5.05%(d)                                    02/25/28     1,359         74,730

                                                                       ===========
TOTAL MULTIPLE CLASS MORTGAGE
  PASS-THROUGHS
  (Cost $542,127)                                                          441,185
                                                                       -----------
COMMERCIAL MORTGAGE BACKED SECURITIES - 1.8%
  Bank of America Alternative Loan
    Trust, Series 04-6, Class 4A1
     5.00%                                       07/25/19        98         98,251


                                                               PAR
                                                MATURITY      (000)       VALUE
                                             ------------- ---------- -------------
COMMERCIAL MORTGAGE BACKED SECURITIES (Continued)
  Citicorp Mortgage Securities, Inc.,
    Series 01-11, Class 2A
     6.25%                                       07/25/16    $   68    $    68,225
  Commercial Mortgage Pass-Through
    Certificates, Series 00-C1, Class
    A2
     7.42%                                       08/15/33       180        206,124
  Countrywide Alternative Loan Trust,
    Series 04-2CB, Class 4A1
     5.00%                                       03/25/19       181        181,280
  GMAC Commercial Mortgage
    Securities, Inc., Series 99-C3,
    Class A2
     7.18%                                       08/15/36       184        207,215
  Master Alternative Loans Trust,
    Series 04-4, Class 1A1
     5.50%                                       05/25/34       186        186,611
  Mortgage Capital Funding, Inc.,
    Series 98-MC2, Class B
     6.55%                                       06/18/30       295        320,940
  Salomon Brothers Mortgage
    Securities VII, Series 00-C1, Class
    A2
     7.52%                                       12/18/09       460        526,148
  Washington Mutual Mortgage
    Securities Corp., Series 02-MS12,
    Class A
     6.50%                                       05/25/32        20         20,594
  Wells Fargo Mortgage Backed
    Securities Trust, Series 04-K,
    Class 1A2
     4.49%                                       07/25/34       545        541,676

                                                                       ===========
TOTAL COMMERCIAL MORTGAGE BACKED
  SECURITIES
  (Cost $2,300,969)
                                                                         2,357,064
                                                                       -----------
ASSET BACKED SECURITIES - 2.0%
  Citibank Credit Card Issuance Trust,
    Series 03-A6, Class A6
     2.90%                                       05/17/10       250        244,180
  Citibank Credit Card Issuance Trust,
    Series 04-1, Class A1
     2.55%(f)                                    01/20/09       450        445,482
  First Union Commercial Mortgage
    Trust, Series 98-C2, Class A2
     6.56%                                       11/18/08       180        195,606
  Green Tree Financial Corp., Series
    96-6, Class A6
     7.95%                                       09/15/27       530        585,896
  Green Tree Financial Corp., Series
    96-7, Class A6
     7.65%                                       10/15/27       511        553,572
  MBNA Credit Card Master Note
    Trust, Series 04-A4, Class A4
     2.70%                                       09/15/09       350        345,461
  Structured Asset Receivables Trust,
    Series 03-2
     1.55%                                       01/21/09       238        238,118

                                                                       ===========
TOTAL ASSET BACKED SECURITIES
  (Cost $2,549,837)                                                      2,608,315
                                                                       -----------

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68



                                BLACKROCK FUNDS
                            SCHEDULE OF INVESTMENTS
                         BALANCED PORTFOLIO (CONTINUED)


AS OF SEPTEMBER 30, 2004




                                                      PAR
                                        MATURITY     (000)       VALUE
                                       ---------- ---------- ------------
CORPORATE BONDS - 5.9%
Aerospace - 0.2%
  Lockheed Martin Corp., Debentures
    7.65%                              05/01/16     $   45    $   54,629
  Lockheed Martin Corp., Senior
    Debentures
    8.50%                              12/01/29         45        59,238
  Northrop Grumman Corp.,
    Debentures
    7.88%                              03/01/26         75        91,706
  Northrop Grumman Corp., Senior
    Unsecured Notes
    4.08%                              11/16/06         55        55,769

                                                              ==========
                                                                 261,342
                                                              ----------
Banks - 1.9%
  Bank of America Corp., Senior Notes
    5.88%                              02/15/09         45        48,719
    4.38%                              12/01/10         25        25,189
  Bank of America Corp., Senior
    Unsecured Notes
    5.25%                              02/01/07         25        26,199
    3.25%                              08/15/08         75        74,021
    5.38%                              06/15/14         45        46,802
  Bank of America Corp., Subordinated
    Notes
    7.40%                              01/15/11         55        64,099
  Barclays Bank PLC, Capital
    Securities
    8.55%(g)(h)                        09/29/49         80        97,988
  Depfa ACS Bank, Senior Notes
    3.62%(f)                           10/29/08        300       300,906
  Fleetboston Financial Corp., Senior
    Notes
    3.85%                              02/15/08         60        60,696
  HBOS Treasury Services PLC,
    Senior Unsecured Notes
    3.60%(h)                           08/15/07         35        35,332
  HSBC Bank USA, Senior Notes
    1.98%                              09/21/07        250       249,751
  HSBC Bank USA, Subordinated
    Notes
    4.62%                              04/01/14        100        97,849
  J.P. Morgan Chase & Co., Senior
    Unsecured Notes
    5.35%                              03/01/07         50        52,523
    5.25%                              05/30/07         25        26,272
    3.62%                              05/01/08         35        35,063
    6.00%                              08/01/08        155       167,717
    2.16%(g)                           10/02/09        100       100,083
  J.P. Morgan Chase & Co.,
    Subordinated Notes
    6.75%                              02/01/11         20        22,461
  SunTrust Banks, Inc., Senior
    Unsecured Notes
    3.62%                              10/15/07        170       172,076
  U.S. Bancorp, Senior Unsecured
    Notes
    3.95%                              08/23/07         15        15,380
  U.S. Bank N.A., Senior Bank Notes
    2.13%(g)                           10/01/07        250       249,780
  Wachovia Corp., Unsecured Notes
    3.62%                              02/17/09         35        34,778
  Wells Fargo & Co., Senior Notes
    2.03%(g)                           09/28/07         50        50,000


                                                      PAR
                                        MATURITY     (000)       VALUE
                                       ---------- ---------- ------------
CORPORATE BONDS (Continued)
Banks (Continued)
  Wells Fargo & Co., Senior Unsecured
    Notes
    4.00%                              08/15/08     $  250    $  252,972
    1.98%(g)                           09/15/09        160       159,880
  Wells Fargo & Co., Subordinated
    Notes
    7.80%(g)                           06/15/10         50        51,705
  Wells Fargo & Co., Unsecured
    Notes(b)
    3.50%                              04/04/08         50        50,090

                                                              ==========
                                                               2,568,331
                                                              ----------
Energy & Utilities - 0.2%
  Dominion Resources, Inc., Senior
    Notes
    5.70%                              09/17/12         50        52,576
  FirstEnergy Corp., Senior Unsecured
    Notes
    7.38%                              11/15/31         30        33,778
  Florida Power Corp., First Mortgage
    Bonds
    6.65%                              07/15/11        100       112,188
  Ontario Electricity Financial Corp.,
    Senior Notes
    6.10%                              01/30/08         40        43,401
  Pennsylvania Electric Co., Senior
    Unsecured Notes
    5.12%                              04/01/14         50        49,836

                                                              ==========
                                                                 291,779
                                                              ----------
Entertainment & Leisure - 0.1%
  Time Warner Cos., Inc., Debentures
    6.95%                              01/15/28         85        90,704
  Time Warner Cos., Inc., Senior
    Debentures
    7.57%                              02/01/24         30        33,889
    7.70%                              05/01/32         30        34,669

                                                              ==========
                                                                 159,262
                                                              ----------
Finance - 2.1%
  Anadarko Finance Co., Senior
    Unsecured Notes
    7.50%                              05/01/31         30        36,563
  ASIF Global Finance, Unsecured
    Notes
    3.85%(h)                           11/26/07         25        25,286
    3.90%(h)                           10/22/08        225       226,829
  Citigroup, Inc., Senior Unsecured
    Notes
    3.50%                              02/01/08        150       150,494
    2.00%(g)                           06/09/09        375       375,174
  Citigroup, Inc., Subordinated Notes
    5.00%(h)                           09/15/14         64        64,080
  Conoco Global Funding Co., Senior
    Unsecured Notes
    6.35%                              10/15/11         90       100,214
  Devon Financing Corp., Senior
    Unsecured Notes
    7.88%                              09/30/31         15        18,410
  Encana Holdings Finance Corp.,
    Senior Unsecured Notes
    5.80%                              05/01/14         65        68,840

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              69



                                BLACKROCK FUNDS
                            SCHEDULE OF INVESTMENTS
                         BALANCED PORTFOLIO (CONTINUED)


AS OF SEPTEMBER 30, 2004




                                                        PAR
                                          MATURITY     (000)       VALUE
                                         ---------- ---------- ------------
CORPORATE BONDS (Continued)
Finance (Continued)
  EOP Operating LP, Senior Notes
    7.25%                                06/15/28     $   25    $   27,152
  EOP Operating LP, Senior Unsecured
    Notes
    7.50%                                04/19/29         30        33,614
  EOP Operating LP, Unsecured Notes
    4.75%                                03/15/14         20        19,303
  General Electric Capital Corp., Senior
    Unsecured Notes
    5.88%                                02/15/12        100       108,553
  General Electric Capital Corp.,
    Unsecured Notes
    3.45%                                07/16/07        280       281,378
    1.76%(g)                             07/28/08        150       149,767
  General Motors Acceptance Corp.,
    Senior Unsecured Notes
    6.88%                                09/15/11         10        10,500
  General Motors Acceptance Corp.,
    Unsecured Notes
    5.62%                                05/15/09        210       213,738
  Household Finance Corp., Notes
    6.38%                                11/27/12         25        27,660
  Household Finance Corp., Senior
    Unsecured Notes
    6.38%                                10/15/11         60        66,132
  Household Finance Corp., Unsecured
    Notes
    4.12%                                12/15/08         50        50,497
  MassMutual Global Funding II,
    Senior Secured Notes
    2.55%(h)                             07/15/08         50        48,462
  Monumental Global Funding II,
    Senior Secured Notes
    4.38%(h)                             07/30/09         50        50,736
  Nationwide Building Society, Senior
    Unsecured Notes
    3.50%(h)                             07/31/07         75        75,266
  Protective Life Secured Trust,
    Secured Notes
    3.70%                                11/24/08         60        59,738
  Qwest Capital Funding, Inc., Senior
    Unsecured Notes(b)
    7.90%                                08/15/10         30        27,600
  SLM Corp., Unsecured Notes
    5.00%                                10/01/13         25        25,142
  Sun Life of Canada Capital Trust,
    Capital Securities
    8.53%(h)                             05/29/49        195       223,203
  Swedish Export Credit Corp.,
    Unsecured Notes
    2.88%                                01/26/07         75        74,903
  TIAA Global Markets, Senior
    Unsecured Notes
    3.88%(h)                             01/22/08         55        55,741
  UBS Preferred Funding Trust I,
    Capital Securities
    8.62%(g)                             10/29/49         35        42,255
  Western & Southern Financial Group,
    Inc., Senior Notes
    5.75%(h)                             07/15/33         20        19,290

                                                                ==========
                                                                 2,756,520
                                                                ----------


                                                        PAR
                                          MATURITY     (000)       VALUE
                                         ---------- ---------- ------------
CORPORATE BONDS (Continued)
Food & Agriculture - 0.1%
  General Mills, Inc., Senior Unsecured
    Notes
    5.12%                                02/15/07     $   65    $   67,712
    6.00%                                02/15/12         35        37,686
  Kraft Foods, Inc., Senior Unsecured
    Notes
    5.62%                                11/01/11         55        58,094

                                                                ==========
                                                                   163,492
                                                                ----------
Medical Instruments & Supplies - 0.0%
  Boston Scientific Corp., Senior
    Unsecured Notes
    5.45%                                06/15/14         30        31,424
                                                                ----------
Motor Vehicles - 0.1%
  DaimlerChrysler North America
    Holding Corp., Unsecured Notes
    6.50%                                11/15/13         85        92,226
                                                                ----------
Oil & Gas - 0.2%
  Consolidated Natural Gas, Inc.,
    Senior Notes
    5.00%                                03/01/14         75        74,933
  Devon Energy Corp., Senior
    Debentures
    7.95%                                04/15/32         25        31,013
  Pioneer Natural Resource, Senior
    Notes
    5.88%                                07/15/16         25        26,089
  Statoil Asa, Unsecured Notes
    5.12%(h)                             04/30/14         50        51,191
  Suncor Energy, Inc., Bonds
    5.95%                                12/01/34         20        20,306

                                                                ==========
                                                                   203,532
                                                                ----------
Pharmaceuticals - 0.0%
  Bristol-Myers Squibb Co., Senior
    Debentures
    6.88%                                08/01/97         25        28,161
  Wyeth, Unsecured Notes
    6.50%                                02/01/34         35        35,734

                                                                ==========
                                                                    63,895
                                                                ----------
Publishing & Printing - 0.1%
  News America, Inc., Debentures
    7.28%                                06/30/28         50        56,304
  News America, Inc., Senior
    Debentures
    7.75%                                01/20/24         25        29,182

                                                                ==========
                                                                    85,486
                                                                ----------
Real Estate - 0.0%
  The Rouse Co., Unsecured Notes
    3.62%                                03/15/09         50        46,683
                                                                ----------
Telecommunications - 0.5%
  AT&T Broadband Corp., Unsecured
    Notes
    8.38%                                03/15/13         30        36,330
  BellSouth Corp., Senior Unsecured
    Notes
    5.20%                                09/15/14         25        25,233

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70



                                BLACKROCK FUNDS
                            SCHEDULE OF INVESTMENTS
                         BALANCED PORTFOLIO (CONTINUED)


AS OF SEPTEMBER 30, 2004


                                                       PAR
                                         MATURITY     (000)      VALUE
                                      -------------- ------- ------------
CORPORATE BONDS (Continued)
Telecommunications (Continued)
  Comcast Cable Communications
    Corp., Senior Unsecured Notes
    7.05%                                 03/15/33    $ 25    $   27,426
  MCI, Inc., Senior Notes(b)
    7.74%                                 05/01/14      16        15,160
  MCI, Inc., Senior Unsecured Notes
    5.91%                                 05/01/07      19        18,834
    6.69%                                 05/01/09      19        18,311
  New England Telephone & Telegraph
    Co., Debentures
    7.88%                                 11/15/29      25        30,144
  SBC Communications, Inc.,
    Unsecured Notes
    6.45%                                 06/15/34      15        15,381
  TCI Communications, Inc., Senior
    Debentures
    7.88%                              08/13-02/26      67        78,633
  TCI Communications, Inc., Senior
    Notes
    7.12%                                 02/15/28      35        38,002
  Verizon New Jersey, Inc., Senior
    Debentures
    5.88%                                 01/17/12     145       154,279
  Vodafone Group PLC, Senior
    Unsecured Notes
    7.75%                                 02/15/10     120       140,766

                                                              ==========
                                                                 598,499
                                                              ----------
Yankee - 0.4%
  British Telecommunications Group
    PLC, Senior Unsecured Notes
    8.88%                                 12/15/30       5         6,569
  Deutsche Telekom International
    Finance BV, Senior Unsecured
    Notes
    8.75%                                 06/15/30      40        51,703
  Province of Quebec, Unsecured
    Notes
    5.00%                                 07/17/09      25        26,276
  State of Israel, Unsecured Notes
    5.50%                              04/24-09/33     185       191,271
  Tyco International Group SA, Senior
    Unsecured Notes
    6.12%                                 11/01/08      25        27,022
  United Mexican States, Bonds
    8.12%                                 12/30/19     180       207,450

                                                              ==========
                                                                 510,291
                                                              ----------
TOTAL CORPORATE BONDS
  (Cost $7,684,144)                                            7,832,762
                                                              ----------
TAXABLE MUNICIPAL BONDS - 0.1%
  California Department of Water
    Resources Revenue Bonds, Series
    02, Class E
    3.98%                                 05/01/05     100       100,730
  Ohana Military Communities LLC,
    Military Housing Revenue Bonds,
    Series 04-A, Class I
    6.19%                                 04/01/49      25        26,602

                                                              ==========
TOTAL TAXABLE MUNICIPAL BONDS
  (Cost $124,998)                                                127,332
                                                              ----------


                                                                 PAR/SHARES
                                                      MATURITY     (000)         VALUE
                                                     ---------- ----------- ---------------
SHORT TERM INVESTMENTS - 6.1%
  Banco Santander Puerto Rico,
    Certificate of Deposit
    1.67%(i)                                         10/07/04      $  551    $    551,091
    1.80%(i)                                         10/25/04          75          75,205
  Bear Stearns, Floating Rate Notes
    1.90%(g)(i)                                      10/01/04          18          17,528
  Eurohypo, Certificate of Deposit
    1.80%(i)                                         10/22/04         293         293,049
  Federal Home Loan Bank, Discount
    Notes
    1.65%                                            10/01/04       1,800       1,800,000
  Merrill Lynch, Floating Rate Master
    Notes
    2.00%(g)(i)                                      10/01/04         705         704,611
    2.00%(g)(i)                                      10/01/04         451         451,435
  Morgan Stanley, Floating Rate Notes
    1.86%(g)(i)                                      10/01/04         846         845,565
    1.96%(g)(i)                                      10/01/04         844         843,756
  Natexis Banques International,
    Floating Rate Notes
    1.92%(g)(i)                                      10/01/04         577         576,878
    1.98%(g)(i)                                      10/01/04         704         703,972
  Societe General, Floating Rate Notes
    1.95%(g)(i)                                      10/01/04          78          78,054
  Union Bank of Switzerland, Time
    Deposit
    1.98%(i)                                         10/01/04         292         291,625
  Victory Rece, Asset Backed
    Commercial Paper
    1.80%(i)                                         10/22/04          45          45,402
  Westdeutsche Landsbank
    International, Floating Rate Notes
    1.70%(g)(i)                                      10/12/04          97          97,221
  Galileo Money Market Fund                                           115         114,511
  Institutional Money Market Trust(i)                                 554         553,700

                                                                             ============
TOTAL SHORT TERM INVESTMENTS
  (Cost $8,043,603)                                                             8,043,603
                                                                             ------------
REPURCHASE AGREEMENTS - 0.8%
  Credit Suisse First
    Boston Corp.
    1.50%                                            10/05/04          65          65,175
  (Agreement dated 09/22/04 to be repurchased at
    $65,210. Collateralized by $60,000 U.S. Treasury
    Bonds 5.375% due 02/15/31. The value of the
    collateral is $64,678.)
  Lehman Brothers, Inc.
    0.95%                                            10/04/04         908         908,425
  (Agreement dated 09/30/04 to be repurchased at
    $908,496. Collateralized by $895,000 U.S.
    Treasury Notes 4.25% due 08/15/14. The value of
    the collateral is $909,124.)
    1.45%                                            10/05/04          71          71,256
  (Agreement dated 09/23/04 to be repurchased at
    $71,290. Collateralized by $65,000 U.S. Treasury
    Bonds 5.375% due 02/15/31. The value of the
    collateral is $70,068.)

                                                                             ============
TOTAL REPURCHASE AGREEMENTS
  (Cost $1,044,856)                                                             1,044,856
                                                                             ------------
TOTAL INVESTMENTS IN
  SECURITIES -  100.0%
  (Cost $110,759,028(a))                                                     $132,853,600
                                                                             ============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                                                              71



                                BLACKROCK FUNDS
                            SCHEDULE OF INVESTMENTS
                         BALANCED PORTFOLIO (CONCLUDED)


AS OF SEPTEMBER 30, 2004


                             NUMBER OF
                             CONTRACTS        VALUE
                          --------------- ------------
CALL OPTIONS WRITTEN - 0.0%
  December 30 year U.S.
Treasury
    Notes futures, Strike
Price 114,
    Expires 11/26/04
  (Premiums received                (2)    $  (1,750)
                                           ---------
$1,182)
CALL SWAPTIONS PURCHASED - 0.0%
  Merrill Lynch, Strike
Price 4.70,
    Expires 11/19/04
  (Cost $4,800)                  120(j)        5,106
                                           ---------
CALL SWAPTIONS WRITTEN - 0.0%
  Merrill Lynch, Strike
Price 5.05,
    Expires 02/23/05
  (Premiums received            (120)(j)     (30,636)
                                           ---------
$11,280)
PUT OPTIONS WRITTEN - 0.0%
  December 30 year U.S.
Treasury
    Notes futures, Strike
Price 107,
    Expires 11/26/04
  (Premiums received                (2)         (406)
                                           ---------
$1,468)
PUT SWAPTIONS PURCHASED - 0.0%
  Merrill Lynch, Strike
Price 6.25,
    Expires 11/19/04
  (Cost $2,880)                  120(j)          240
                                           ---------
PUT SWAPTIONS WRITTEN - 0.0%
  Merrill Lynch, Strike
Price 6.05,
    Expires 02/23/05
  (Premiums received            (120)(j)      (2,240)
                                           ---------
$13,320)


-------------------

 (a) Cost for Federal income tax purposes is $111,520,530. The
     gross unrealized appreciation (depreciation) on a tax basis is as
     follows:
      Gross unrealized appreciation                                      $23,255,204
      Gross unrealized depreciation                                       (1,922,134)
                                                                         -----------
                                                                         $21,333,070
                                                                         ===========

     (b) Total or partial securities on loan.
     (c) Non-income producing security.
     (d) Rates shown are the effective yields as of September 30, 2004.
     (e) Securities, or a portion thereof, subject to financing transactions.
  (f) Securities, or a portion thereof, pledged as collateral with a value of
       $746,388 on 42 short U.S. Treasury Notes futures contracts, and 32 long
       U.S. Treasury Bonds futures contracts expiring December 2004.  The value
       of such contracts on September 30, 2004 was $8,243,719, with an
       unrealized gain of $16,149 (including commissions of $164).
     (g) Rates shown are the rates as of September 30, 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 September 30,
       2004, the fund held 0.8% of its net assets, with a market value of
       $973,404 in securities restricted as to resale.
  (i) Securities purchased with the cash proceeds from securities loaned.
  (j) Each swaption contract is equivalent to $10,000 in notional amount.



           INVESTMENT ABBREVIATIONS
  ADR      American Depository Receipts
  CMT      Constant Maturity Treasury
  IO       Interest Only
  NVDR     Non Voting Depository Receipts
  PLC      Public Limited Company
  PO       Principal Only


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72



                                BLACKROCK FUNDS
                      STATEMENT OF ASSETS AND LIABILITIES
                               BALANCED PORTFOLIO


SEPTEMBER 30, 2004



ASSETS
 Investments at value (Cost $110,759,028).........................................     $  132,853,600
 Dividends receivable ............................................................             99,400
 Interest receivable .............................................................            290,970
 Investments sold receivable .....................................................          9,192,629
 Capital shares sold receivable ..................................................             53,849
 Prepaid expenses ................................................................             22,611
 Swaptions purchased, at fair value (Premiums paid on swaptions purchased $7,680).              5,346
 Unrealized appreciation on interest rate swaps ..................................             41,737
                                                                                       --------------
    TOTAL ASSETS .................................................................        142,560,142
                                                                                       --------------
LIABILITIES
 Reverse repurchase agreements payable ...........................................            908,425
 Payable upon return of securities loaned ........................................          6,129,092
 Investments purchased payable ...................................................          8,116,926
 Capital shares redeemed payable .................................................            663,964
 Advisory fees payable ...........................................................             43,702
 Administrative fees payable .....................................................             21,700
 Transfer agent fees payable .....................................................             11,372
 Other accrued expenses payable ..................................................             99,701
 Payable for financing transactions ..............................................          4,276,948
 Options written, at fair value (Premiums received $2,650)........................              2,156
 Swaptions written, at fair value (Premiums received $24,600).....................             32,876
 Futures margin payable ..........................................................             10,699
 Unrealized depreciation on interest rate swaps ..................................            107,508
                                                                                       --------------
    TOTAL LIABILITIES ............................................................         20,425,069
                                                                                       --------------
NET ASSETS (Applicable to 780,800 Institutional shares, 161,405 Service shares,
 4,555,379 Investor A shares, 2,874,597 Investor B shares and
 355,528 Investor C shares outstanding) ..........................................     $  122,135,073
                                                                                       ==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
 PER INSTITUTIONAL SHARE ($10,977,166/780,800)....................................     $        14.06
                                                                                       ==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
 PER SERVICE SHARE ($2,266,806/161,405)...........................................     $        14.04
                                                                                       ==============
NET ASSET VALUE AND REDEMPTION PRICE
 PER INVESTOR A SHARE ($63,938,781/4,555,379).....................................     $        14.04
                                                                                       ==============
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE ($14.04/0.955)........................     $        14.70
                                                                                       ==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
 (subject to a maximum contingent deferred sales charge of 4.5%)
 PER INVESTOR B SHARE ($40,005,722/2,874,597).....................................     $        13.92
                                                                                       ==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
 (subject to a maximum contingent deferred sales charge of 1.0%)
 PER INVESTOR C SHARE ($4,946,598/355,528)........................................     $        13.91
                                                                                       ==============



SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       73



                                BLACKROCK FUNDS
                            STATEMENTS OF OPERATIONS


FOR THE PERIOD ENDED SEPTEMBER 30, 2004



                                                  LARGE CAP        LARGE CAP                      MID-CAP         MID-CAP
                                                    VALUE           GROWTH         DIVIDEND        VALUE           GROWTH
                                                   EQUITY           EQUITY       ACHIEVERSTM       EQUITY          EQUITY
                                                  PORTFOLIO        PORTFOLIO      PORTFOLIO      PORTFOLIO       PORTFOLIO
                                              ---------------- ---------------- ------------- --------------- ---------------
Investment income:
 Interest ...................................   $     10,490    $       7,005     $     309     $     5,811    $     14,820
 Securities lending income ..................         19,334            9,901             -           7,403          35,552
 Dividends ..................................      6,241,476        1,126,392         2,465         447,668         743,295
 Foreign taxes withheld .....................              -                -             -               -               -
                                                ------------    -------------     ---------     -----------    ------------
    Total investment income .................      6,271,300        1,143,298         2,774         460,882         793,667
                                                ------------    -------------     ---------     -----------    ------------
Expenses:
 Investment advisory fee ....................      1,537,217          617,380           661         311,919       1,095,761
 Administration fee .........................        237,570           95,413           102          33,141         116,425
 Administration fee - class specific ........        405,432          162,833           174          56,559         198,708
 Custodian fee ..............................         62,172           45,435            14          13,094          19,236
 Transfer agent fee .........................         91,348           89,337           110          27,037         155,207
 Transfer agent fee - class specific ........         75,573           32,219            22          10,765          42,275
 Shareholder servicing fees - class
   specific .................................        311,221          168,333             -          43,451         222,903
 Shareholder processing fees - class
   specific .................................        166,372           92,527             -          21,842         107,377
 Distribution fees - class specific .........        260,707          155,791             -          80,309         404,252
 Legal and audit ............................         28,119           23,606        36,270          16,862          25,813
 Printing ...................................         52,651           24,888        23,512          11,130          38,844
 Registration fees and expenses .............         55,719           45,060         2,200          42,015          54,859
 Trustees' fees .............................          6,276            3,219             -           1,109           3,842
 Licensing fees .............................              -                -           120               -               -
 Other ......................................          9,871            4,207         1,651           6,521           9,452
                                                ------------    -------------     ---------     -----------    ------------
    Total expenses ..........................      3,300,248        1,560,248        64,836         675,754       2,494,954
                                                ------------    -------------     ---------     -----------    ------------
     Less investment advisory and
      administration fees waived ............       (115,217)        (114,659)         (763)         (6,178)              -
     Less administration fees waived -
      class specific ........................       (175,780)         (70,644)         (174)        (22,549)        (34,006)
     Less distribution fees waived -
      class specific ........................        (63,888)         (24,550)            -          (4,235)        (28,475)
     Less expenses reimbursed by
      advisor ...............................              -                -       (62,817)              -               -
                                                ------------    -------------     ---------     -----------    ------------
    Net expenses ............................      2,945,363        1,350,395         1,082         642,792       2,432,473
                                                ------------    -------------     ---------     -----------    ------------
 Net investment income (loss) ...............      3,325,937         (207,097)        1,692        (181,910)     (1,638,806)
                                                ------------    -------------     ---------     -----------    ------------
Realized and unrealized gain (loss) on
 investments and foreign currency
 transactions:
 Net realized gain (loss) from:
   Investment transactions (net of
    foreign taxes) ..........................     42,293,946       26,369,339        (3,038)      8,739,429      15,836,766
   Futures and options contracts ............         24,765           44,146             -               -               -
   Foreign currency related transactions.....              -                -             -               -               -
                                                ------------    -------------     ---------     -----------    ------------
                                                  42,318,711       26,413,485        (3,038)      8,739,429      15,836,766
                                                ------------    -------------     ---------     -----------    ------------
Change in unrealized appreciation
 (depreciation) from:
   Investments (net of foreign taxes) .......      6,384,681      (14,969,139)       (7,180)        161,105       5,337,808
   Futures and options contracts ............        122,067           76,886             -               -               -
   Foreign currency related transactions.....              -                -             -               -               -
                                                ------------    -------------     ---------     -----------    ------------
                                                   6,506,748      (14,892,253)       (7,180)        161,105       5,337,808
                                                ------------    -------------     ---------     -----------    ------------
Net gain (loss) on investments and foreign
 currency transactions ......................     48,825,459       11,521,232       (10,218)      8,900,534      21,174,574
                                                ------------    -------------     ---------     -----------    ------------
Net increase (decrease) in net assets
 resulting from operations ..................   $ 52,151,396    $  11,314,135     $  (8,526)    $ 8,718,624    $ 19,535,768
                                                ============    =============     =========     ===========    ============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       74



                                BLACKROCK FUNDS


                                                                             GLOBAL SCIENCE
    SMALL CAP        SMALL CAP        SMALL CAP                               & TECHNOLOGY     INTERNATIONAL      INTERNATIONAL
  VALUE EQUITY      CORE EQUITY     GROWTH EQUITY     U.S. OPPORTUNITIES     OPPORTUNITIES         EQUITY         OPPORTUNITIES
    PORTFOLIO        PORTFOLIO        PORTFOLIO            PORTFOLIO           PORTFOLIO         PORTFOLIO          PORTFOLIO
----------------   -------------   ---------------   --------------------   ---------------   ---------------   ----------------
  $     18,995       $   1,691      $    139,732         $     18,356        $      6,468      $      11,009      $    135,223
        21,650               -            82,169                    -                   -             10,028            14,204
     1,060,911          19,441           593,612              703,885             122,636          1,102,990         4,929,253
             -               -                 -                    -             (19,807)          (107,537)         (546,603)
  ------------       ---------      ------------         ------------        ------------      -------------      ------------
     1,101,556          21,132           815,513              722,241             109,297          1,016,490         4,532,077
  ------------       ---------      ------------         ------------        ------------      -------------      ------------
       756,437          50,207         2,397,602            1,167,054             303,566            470,250         2,544,526
       116,904           4,268           370,538               90,181              28,670             53,295           216,285
       199,010           7,243           630,857              153,962              48,951             91,237           368,525
        29,220          20,537            83,613               24,902              20,421            100,783           410,858
        61,766           3,990           151,338              171,689              59,064             33,193           190,510
        40,162           1,044           117,349               39,453              13,104             17,814            71,064
       167,760           8,365           487,465              255,167              81,167             60,273           422,146
        78,257           2,630           228,167              116,773              38,561             32,273           177,907
       211,350          14,128           450,137              534,016             162,435             42,667           733,220
        27,035          15,032            46,121               26,885              18,029             18,648            51,867
        68,187           2,374           170,440               31,895               9,501             14,852           106,557
        53,542          44,156            59,903               53,656              46,615             44,645            55,627
         3,402             122            11,922                2,961                 768              1,824             6,835
             -               -                 -                    -                   -                  -                 -
        10,041           5,919            18,939               10,286               9,042             17,380            31,837
  ------------       ---------      ------------         ------------        ------------      -------------      ------------
     1,823,073         180,015         5,224,391            2,678,880             839,894            999,134         5,387,764
  ------------       ---------      ------------         ------------        ------------      -------------      ------------
       (34,574)        (51,058)                -                    -             (41,767)           (89,009)         (119,323)
        (8,059)         (2,754)           (6,742)             (14,002)            (13,229)           (29,309)         (114,818)
       (39,380)         (1,690)         (129,014)             (31,959)            (11,755)           (12,854)          (72,522)
             -         (32,212)                -                    -                   -                  -                 -
  ------------       ---------      ------------         ------------        ------------      -------------      ------------
     1,741,060          92,301         5,088,635            2,632,919             773,143            867,962         5,081,101
  ------------       ---------      ------------         ------------        ------------      -------------      ------------
      (639,504)        (71,169)       (4,273,122)          (1,910,678)           (663,846)           148,528          (549,024)
  ------------       ---------      ------------         ------------        ------------      -------------      ------------
    27,881,364          53,507        58,198,019           21,382,725           4,237,497         32,477,304        24,588,882
             -               -                 -                    -             (27,724)           781,308                 -
             -               -                 -                    -              19,450             (3,726)        2,624,566
  ------------       ---------      ------------         ------------        ------------      -------------      ------------
    27,881,364          53,507        58,198,019           21,382,725           4,229,223         33,254,886        27,213,448
  ------------       ---------      ------------         ------------        ------------      -------------      ------------
    (1,229,217)        339,684         2,050,695            1,106,908          (3,663,554)       (11,516,649)       10,995,765
             -               -                 -                    -                   -                  -                 -
             -               -                 -                    -             (18,678)            (5,107)          167,183
  ------------       ---------      ------------         ------------        ------------      -------------      ------------
    (1,229,217)        339,684         2,050,695            1,106,908          (3,682,232)       (11,521,756)       11,162,948
  ------------       ---------      ------------         ------------        ------------      -------------      ------------
    26,652,147         393,191        60,248,714           22,489,633             546,991         21,733,130        38,376,396
  ------------       ---------      ------------         ------------        ------------      -------------      ------------
  $ 26,012,643       $ 322,022      $ 55,975,592         $ 20,578,955        $   (116,855)     $  21,881,658      $ 37,827,372
  ============       =========      ============         ============        ============      =============      ============

                       75



                                BLACKROCK FUNDS
                      STATEMENTS OF OPERATIONS (CONCLUDED)





FOR THE PERIOD ENDED SEPTEMBER 30, 2004


                                                     SELECT EQUITY       INDEX EQUITY         BALANCED
                                                       PORTFOLIO          PORTFOLIO           PORTFOLIO
                                                    ---------------   -----------------   ----------------
Investment income:
 Interest .......................................    $      7,098       $           -       $  2,147,257
 Securities lending income ......................           7,233                   -              5,820
 Dividends ......................................       1,673,924                   -          1,558,493
 Net investment income from master ..............               -          26,032,724                  -
                                                     ------------       -------------       ------------
   Total investment income ......................       1,688,255          26,032,724          3,711,570
                                                     ------------       -------------       ------------
Expenses:
 Investment advisory fee ........................         570,700                   -            762,454
 Administration fee .............................          88,199           1,153,030            117,834
 Administration fee - class specific ............         150,523           2,226,101            201,163
 Custodian fee ..................................          31,283               2,052             77,227
 Transfer agent fee .............................          56,834             372,690             99,472
 Transfer agent fee - class specific ............          29,758             467,677             53,010
 Shareholder servicing fees - class specific.....         111,715           2,195,142            317,276
 Shareholder processing fees - class
  specific ......................................          51,458           1,071,263            147,950
 Distribution fees - class specific .............         201,042           4,133,869            433,959
 Legal and audit ................................          19,378             169,343             34,714
 Printing .......................................          32,813             599,156             39,489
 Registration fees and expenses .................          42,728              82,087             47,120
 Trustees' fees .................................           2,282              43,573              3,935
 Other ..........................................          12,303              58,571             17,712
                                                     ------------       -------------       ------------
   Total expenses excluding interest
    expense .....................................       1,401,016          12,574,554          2,353,315
                                                     ------------       -------------       ------------
    Interest expense ............................               -                   -                 39
                                                     ------------       -------------       ------------
   Total expenses ...............................       1,401,016          12,574,554          2,353,354
                                                     ------------       -------------       ------------
    Less investment advisory and
     administration fees waived .................         (96,938)           (897,405)          (111,760)
    Less administration fees waived -
     class specific .............................         (60,910)           (949,394)           (50,182)
    Less distribution fees waived - class
     specific ...................................         (19,203)           (307,441)           (76,367)
                                                     ------------       -------------       ------------
   Net expenses .................................       1,223,965          10,420,314          2,115,045
                                                     ------------       -------------       ------------
 Net investment income ..........................         464,290          15,612,410          1,596,525
                                                     ------------       -------------       ------------
Realized and unrealized gain (loss) on
 investments and foreign currency
 transactions:
 Net realized gain (loss) from:
  Investment transactions (net of foreign
   taxes) .......................................      15,515,658          (1,365,561)        14,016,310
  Futures and options contracts .................         180,917           5,860,074            330,999
  Swap and swaption contracts ...................               -                   -            (46,327)
                                                     ------------       -------------       ------------
                                                       15,696,575           4,494,513         14,300,982
                                                     ------------       -------------       ------------
 Change in unrealized appreciation
  (depreciation) from:
  Investments (net of foreign taxes) ............         578,721         170,474,642            320,523
  Futures and options contracts .................          12,896             375,989             27,446
  Swap and swaption contracts ...................               -                   -            (66,550)
                                                     ------------       -------------       ------------
                                                          591,617         170,850,631            281,419
                                                     ------------       -------------       ------------
Net gain on investments and foreign currency
 transactions ...................................      16,288,192         175,345,144         14,582,401
                                                     ------------       -------------       ------------
Net increase in net assets resulting from
 operations .....................................    $ 16,752,482       $ 190,957,554       $ 16,178,926
                                                     ============       =============       ============



SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       76



                     [THIS PAGE INTENTIONALLY LEFT BLANK.]



                                BLACKROCK FUNDS
                      STATEMENTS OF CHANGES IN NET ASSETS



                                                                                   LARGE CAP
                                                                             VALUE EQUITY PORTFOLIO
                                                                       ----------------------------------
                                                                            FOR THE           FOR THE
                                                                           YEAR ENDED       YEAR ENDED
                                                                            9/30/04           9/30/03
                                                                       ----------------- ----------------
Increase (decrease) in net assets:
 Operations:
  Net investment income (loss) .......................................  $    3,325,937    $    4,489,510
  Net realized gain (loss) on investments, futures and options .......      42,318,711       (27,226,586)
  Net unrealized gain (loss) on investments, futures and options .....       6,506,748       126,249,305
                                                                        --------------    --------------
  Net increase in net assets resulting from operations ...............      52,151,396       103,512,229
                                                                        --------------    --------------
Distributions to shareholders from:
 Net investment income:
  BlackRock Class ....................................................               -                 -
  Institutional Class ................................................      (1,933,922)       (3,079,207)
  Service Class ......................................................        (624,913)         (854,501)
  Investor A Class ...................................................        (688,191)         (704,895)
  Investor B Class ...................................................         (61,593)          (36,556)
  Investor C Class ...................................................         (22,492)          (10,751)
                                                                        --------------    --------------
  Total distributions from net investment income .....................      (3,331,111)       (4,685,910)
                                                                        --------------    --------------
 Net realized gains:
  BlackRock Class ....................................................               -                 -
  Institutional Class ................................................               -                 -
  Service Class ......................................................               -                 -
  Investor A Class ...................................................               -                 -
  Investor B Class ...................................................               -                 -
  Investor C Class ...................................................               -                 -
                                                                        --------------    --------------
  Total distributions from net realized gains ........................               -                 -
                                                                        --------------    --------------
  Total distributions to shareholders ................................      (3,331,111)       (4,685,910)
                                                                        --------------    --------------
Capital share transactions ...........................................    (108,979,335)     (401,555,023)
                                                                        --------------    --------------
Redemption fees ......................................................          14,983                 -
                                                                        --------------    --------------
  Total increase (decrease) in net assets ............................     (60,144,067)     (302,728,704)
Net assets:
  Beginning of period ................................................     300,190,721       602,919,425
                                                                        --------------    --------------
  End of period ......................................................  $  240,046,654    $  300,190,721
                                                                        ==============    ==============
  End of period undistributed net investment income ..................  $       42,074    $       47,248




                                                                                   LARGE CAP
                                                                            GROWTH EQUITY PORTFOLIO
                                                                       ---------------------------------
                                                                           FOR THE          FOR THE
                                                                          YEAR ENDED       YEAR ENDED
                                                                           9/30/04          9/30/03
                                                                       --------------- -----------------
Increase (decrease) in net assets:
 Operations:
  Net investment income (loss) .......................................  $    (207,097)  $     (211,419)
  Net realized gain (loss) on investments, futures and options .......     26,413,485       (1,180,978)
  Net unrealized gain (loss) on investments, futures and options .....    (14,892,253)      42,103,830
                                                                        -------------   --------------
  Net increase in net assets resulting from operations ...............     11,314,135       40,711,433
                                                                        -------------   --------------
Distributions to shareholders from:
 Net investment income:
  BlackRock Class ....................................................              -                -
  Institutional Class ................................................              -                -
  Service Class ......................................................              -                -
  Investor A Class ...................................................              -                -
  Investor B Class ...................................................              -                -
  Investor C Class ...................................................              -                -
                                                                        -------------   --------------
  Total distributions from net investment income .....................              -                -
                                                                        -------------   --------------
 Net realized gains:
  BlackRock Class ....................................................              -                -
  Institutional Class ................................................              -                -
  Service Class ......................................................              -                -
  Investor A Class ...................................................              -                -
  Investor B Class ...................................................              -                -
  Investor C Class ...................................................              -                -
                                                                        -------------   --------------
  Total distributions from net realized gains ........................              -                -
                                                                        -------------   --------------
  Total distributions to shareholders ................................              -                -
                                                                        -------------   --------------
Capital share transactions ...........................................    (41,160,092)    (198,447,545)
                                                                        -------------   --------------
Redemption fees ......................................................          2,387                2
                                                                        -------------   --------------
  Total increase (decrease) in net assets ............................    (29,843,570)    (157,736,110)
Net assets:
  Beginning of period ................................................    124,986,223      282,722,333
                                                                        -------------   --------------
  End of period ......................................................  $  95,142,653   $  124,986,223
                                                                        =============   ==============
  End of period undistributed net investment income ..................  $           -   $            -

---------
1 Commencement of operations.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       78



                          BLACKROCK FUNDS


     DIVIDEND
   ACHIEVERSTM             MID-CAP VALUE                    MID-CAP GROWTH                         SMALL CAP
    PORTFOLIO            EQUITY PORTFOLIO                  EQUITY PORTFOLIO                 VALUE EQUITY PORTFOLIO
----------------- ------------------------------- ----------------------------------- -----------------------------------
     FOR THE          FOR THE         FOR THE          FOR THE           FOR THE           FOR THE           FOR THE
 PERIOD 9/08/041     YEAR ENDED      YEAR ENDED       YEAR ENDED        YEAR ENDED        YEAR ENDED        YEAR ENDED
 THROUGH 9/30/04      9/30/04         9/30/03          9/30/04           9/30/03           9/30/04           9/30/03
----------------- --------------- --------------- ----------------- ----------------- ----------------- -----------------
   $     1,692     $    (181,910)  $     194,772    $  (1,638,806)    $  (1,436,712)    $    (639,504)    $    (292,599)
        (3,038)        8,739,429        (671,268)      15,836,766       (11,966,597)       27,881,364        13,228,991
        (7,180)          161,105       7,664,155        5,337,808        43,642,406        (1,229,217)       19,817,428
   -----------     -------------   -------------    -------------     -------------     -------------     -------------
        (8,526)        8,718,624       7,187,659       19,535,768        30,239,097        26,012,643        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)
   -----------     -------------   -------------    -------------     -------------     -------------     -------------
     2,000,500       (16,730,595)    (45,498,300)     (30,635,659)      (70,932,381)      (10,393,367)      (66,564,870)
   -----------     -------------   -------------    -------------     -------------     -------------     -------------
             -             3,574             839           14,939               635             4,681               596
   -----------     -------------   -------------    -------------     -------------     -------------     -------------
     1,991,974        (8,202,767)    (43,757,083)     (11,084,952)      (40,692,649)         (624,600)      (61,682,814)
             -        42,692,093      86,449,176      133,238,814       173,931,463       132,689,762       194,372,576
   -----------     -------------   -------------    -------------     -------------     -------------     -------------
   $ 1,991,974     $  34,489,326   $  42,692,093    $ 122,153,862     $ 133,238,814     $ 132,065,162     $ 132,689,762
   ===========     =============   =============    =============     =============     =============     =============
   $     1,692     $           -   $     194,298    $           -     $           -     $           -     $           -

                       79



                                BLACKROCK FUNDS
                STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)


                                                                             SMALL CAP
                                                                            CORE EQUITY
                                                                             PORTFOLIO
                                                                  --------------------------------
                                                                       FOR THE         FOR THE
                                                                     YEAR ENDED       YEAR ENDED
                                                                       9/30/04         9/30/03
                                                                  ---------------- ---------------
Increase (decrease) in net assets:
 Operations:
  Net investment income (loss) ..................................   $  (71,169)      $    (6,028)
  Net realized gain (loss) on investments, futures, options and
   foreign currency related transactions ........................       53,507           150,011
  Net unrealized gain (loss) on investments, futures, options and
   foreign currency related transactions ........................      339,684           219,165
                                                                    ------------     -----------
  Net increase in net assets resulting from operations ..........      322,022           363,148
                                                                    ------------     -----------
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 ......................................    7,908,888            47,000
                                                                    ------------     -----------
Redemption fees .................................................       18,007                 -
                                                                    ------------     -----------
  Total increase (decrease) in net assets .......................    8,219,386           410,148
Net assets:
  Beginning of period ...........................................    1,245,538           835,390
                                                                    ------------     -----------
  End of period .................................................   $ 9,464,924      $ 1,245,538
                                                                    ============     ===========
  End of period undistributed net investment income (accumulated
   net investment loss) .........................................   $        -       $         -



                                                                               SMALL CAP
                                                                        GROWTH EQUITY PORTFOLIO
                                                                  -----------------------------------
                                                                       FOR THE           FOR THE
                                                                      YEAR ENDED        YEAR ENDED
                                                                       9/30/04           9/30/03
                                                                  ----------------- -----------------
Increase (decrease) in net assets:
 Operations:
  Net investment income (loss) ..................................   $  (4,273,122)    $  (3,154,899)
  Net realized gain (loss) on investments, futures, options and
   foreign currency related transactions ........................      58,198,019        10,949,272
  Net unrealized gain (loss) on investments, futures, options and
   foreign currency related transactions ........................       2,050,695        81,932,839
                                                                    -------------     -------------
  Net increase in net assets resulting from operations ..........      55,975,592        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 ...........................................               -                 -
  Service Class .................................................               -                 -
  Investor A Class ..............................................               -                 -
  Investor B Class ..............................................               -                 -
  Investor C Class ..............................................               -                 -
                                                                    -------------     -------------
  Total distributions from net realized gains ...................               -                 -
                                                                    -------------     -------------
  Total distributions to shareholders ...........................               -                 -
                                                                    -------------     -------------
Capital share transactions ......................................      89,115,438       (96,488,377)
                                                                    -------------     -------------
Redemption fees .................................................          41,261           164,784
                                                                    -------------     -------------
  Total increase (decrease) in net assets .......................     145,132,291        (6,596,381)
Net assets:
  Beginning of period ...........................................     326,527,407       333,123,788
                                                                    -------------     -------------
  End of period .................................................   $ 471,659,698     $ 326,527,407
                                                                    =============     =============
  End of period undistributed net investment income (accumulated
   net investment loss) .........................................   $           -     $           -

---------
1 Refer to Section C of the Notes to Financial Statements.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       80



                                BLACKROCK FUNDS


                                                  GLOBAL SCIENCE
         U.S. OPPORTUNITIES                 & TECHNOLOGY OPPORTUNITIES                   INTERNATIONAL
              PORTFOLIO                             PORTFOLIO                           EQUITY PORTFOLIO
-------------------------------------   ----------------------------------   --------------------------------------
     FOR THE             FOR THE            FOR THE            FOR THE             FOR THE              FOR THE
    YEAR ENDED          YEAR ENDED         YEAR ENDED        YEAR ENDED           YEAR ENDED          YEAR ENDED
     9/30/04             9/30/03            9/30/04            9/30/03             9/30/04              9/30/03
-----------------   -----------------   ---------------   ----------------   -------------------   ----------------
  $  (1,910,678)      $  (1,725,661)     $   (663,846)      $   (563,751)      $      148,528       $    1,093,425
     21,382,725          (2,544,978)        4,229,223          1,411,161           33,254,886          (40,615,693)
      1,106,908          26,647,708        (3,682,232)        11,135,522          (11,521,756)          55,288,237
  -------------       -------------      ------------       ------------       --------------       --------------
     20,578,955          22,377,069          (116,855)        11,982,932           21,881,658           15,765,969
  -------------       -------------      ------------       ------------       --------------       --------------
              -                   -                 -                  -             (787,345)                   -
              -                   -                 -                  -             (144,003)                   -
              -                   -                 -                  -              (89,783)                   -
              -                   -                 -                  -               (2,473)                   -
  -------------       -------------      ------------       ------------       --------------       --------------
              -                   -                 -                  -           (1,023,604)                   -
  -------------       -------------      ------------       ------------       --------------       --------------
              -                   -                 -                  -                    -                    -
              -                   -                 -                  -                    -                    -
              -                   -                 -                  -                    -                    -
              -                   -                 -                  -                    -                    -
              -                   -                 -                  -                    -                    -
  -------------       -------------      ------------       ------------       --------------       --------------
              -                   -                 -                  -                    -                    -
  -------------       -------------      ------------       ------------       --------------       --------------
              -                   -                 -                  -           (1,023,604)                   -
  -------------       -------------      ------------       ------------       --------------       --------------
    (18,603,484)        (29,427,952)       (7,732,472)        (4,451,394)        (109,876,796)1       (205,867,299)
  -------------       -------------      ------------       ------------       ----------------     --------------
          4,220                   -            11,289                  -               84,001              130,499
  -------------       -------------      ------------       ------------       ----------------     --------------
      1,979,691          (7,050,883)       (7,838,038)         7,531,538          (88,934,741)        (189,970,831)
     98,934,776         105,985,659        35,004,841         27,473,303          120,439,558          310,410,389
  -------------       -------------      ------------       ------------       ----------------     --------------
  $ 100,914,467       $  98,934,776      $ 27,166,803       $ 35,004,841       $   31,504,817       $  120,439,558
  =============       =============      ============       ============       ================     ==============
  $           -       $           -      $          -       $    (10,570)      $      144,699       $    1,023,501

                       81



                                BLACKROCK FUNDS
                STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)


                                                                                 INTERNATIONAL
                                                                                 OPPORTUNITIES
                                                                                   PORTFOLIO
                                                                      -----------------------------------
                                                                           FOR THE           FOR THE
                                                                          YEAR ENDED        YEAR ENDED
                                                                           9/30/04           9/30/03
                                                                      ----------------- -----------------
Increase (decrease) in net assets:
 Operations:
  Net investment income (loss) ......................................   $    (549,024)    $    (115,152)
  Net realized gain (loss) on investments, futures, options, swap
   and swaption contracts and foreign currency related
   transactions .....................................................      27,213,448         1,658,159
  Net unrealized gain on investments, futures, options, swap and
   swaption contracts and foreign currency related transactions .....      11,162,948        34,517,739
                                                                        -------------     -------------
  Net increase in net assets resulting from operations ..............      37,827,372        36,060,746
                                                                        -------------     -------------
Distributions to shareholders from:
 Net investment income:
  Institutional Class ...............................................         (52,346)                -
  Service Class .....................................................          (2,626)                -
  Investor A Class ..................................................         (38,301)                -
  Investor B Class ..................................................         (31,274)                -
  Investor C Class ..................................................         (29,065)                -
                                                                        -------------     -------------
  Total distributions from net investment income ....................        (153,612)                -
                                                                        -------------     -------------
Capital share transactions ..........................................     122,058,194        (5,661,958)
                                                                        -------------     -------------
Redemption fees .....................................................          86,362           105,117
                                                                        -------------     -------------
  Total increase (decrease) in net assets ...........................     159,818,316        30,503,905
Net assets:
  Beginning of period ...............................................     155,823,316       125,319,411
                                                                        -------------     -------------
  End of period .....................................................   $ 315,641,632     $ 155,823,316
                                                                        =============     =============
  End of period undistributed net investment income (accumulated
   net investment loss) .............................................   $   1,566,230     $    (355,700)



                                                                                    SELECT
                                                                               EQUITY PORTFOLIO
                                                                      ----------------------------------
                                                                           FOR THE          FOR THE
                                                                         YEAR ENDED        YEAR ENDED
                                                                           9/30/04          9/30/03
                                                                      ---------------- -----------------
Increase (decrease) in net assets:
 Operations:
  Net investment income (loss) ......................................  $     464,290    $      893,591
  Net realized gain (loss) on investments, futures, options, swap
   and swaption contracts and foreign currency related
   transactions .....................................................     15,696,575        11,723,087
  Net unrealized gain on investments, futures, options, swap and
   swaption contracts and foreign currency related transactions .....        591,617        17,874,054
                                                                       -------------    --------------
  Net increase in net assets resulting from operations ..............     16,752,482        30,490,732
                                                                       -------------    --------------
Distributions to shareholders from:
 Net investment income:
  Institutional Class ...............................................       (709,723)       (1,248,052)
  Service Class .....................................................        (17,360)                -
  Investor A Class ..................................................       (136,214)         (212,107)
  Investor B Class ..................................................        (30,018)                -
  Investor C Class ..................................................           (379)                -
                                                                       -------------    --------------
  Total distributions from net investment income ....................       (893,694)       (1,460,159)
                                                                       -------------    --------------
Capital share transactions ..........................................    (27,355,965)     (111,251,132)
                                                                       -------------    --------------
Redemption fees .....................................................          4,192                 -
                                                                       -------------    --------------
  Total increase (decrease) in net assets ...........................    (11,492,985)      (82,220,559)
Net assets:
  Beginning of period ...............................................    105,293,243       187,513,802
                                                                       -------------    --------------
  End of period .....................................................  $  93,800,258    $  105,293,243
                                                                       =============    ==============
  End of period undistributed net investment income (accumulated
   net investment loss) .............................................  $     464,010    $      893,414

---------
1 Refer to Section B of the Notes to Financial Statements.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       82



                          BLACKROCK FUNDS


                  INDEX
            EQUITY PORTFOLIO                        BALANCED PORTFOLIO
-----------------------------------------   -----------------------------------
      FOR THE               FOR THE              FOR THE            FOR THE
     YEAR ENDED            YEAR ENDED          YEAR ENDED         YEAR ENDED
      9/30/04               9/30/03              9/30/04           9/30/031
-------------------   -------------------   ----------------   ----------------
  $    15,612,410       $    15,441,682      $   1,596,525      $   3,010,796
        4,494,513          (176,394,967)        14,300,982          4,082,790
      170,850,631           463,518,151            281,419         18,839,880
  ---------------       ---------------      -------------      -------------
      190,957,554           302,564,866         16,178,926         25,933,466
  ---------------       ---------------      -------------      -------------
       (9,484,238)          (10,205,877)          (215,645)          (488,552)
         (960,810)             (820,036)           (35,759)           (67,477)
       (3,441,512)           (2,855,488)        (1,067,813)        (2,236,825)
         (616,709)             (658,664)          (292,106)          (649,457)
         (966,846)           (1,015,680)           (35,981)           (73,797)
  ---------------       ---------------      -------------      -------------
      (15,470,115)          (15,555,745)        (1,647,304)        (3,516,108)
  ---------------       ---------------      -------------      -------------
     (247,163,288)         (297,723,651)       (37,508,972)       (66,041,145)
  ---------------       ---------------      -------------      -------------
           44,920                     -              6,992                  -
  ---------------       ---------------      -------------      -------------
      (71,630,929)          (10,714,530)       (22,970,358)       (43,623,787)
    1,462,708,258         1,473,422,788        145,105,431        188,729,218
  ---------------       ---------------      -------------      -------------
  $ 1,391,077,329       $ 1,462,708,258      $ 122,135,073      $ 145,105,431
  ===============       ===============      =============      =============
  $       829,772       $       687,477      $     126,316      $     109,751



                                       83



                                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
     9/30/04                   $   10.77   $   0.1825         $   1.93        $   (0.18)         $     -        $   12.70
     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
     Service Class
     9/30/04                   $   10.79   $   0.1425         $   1.94        $   (0.14)         $     -        $   12.73
     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
     Invester A Class
     9/30/04                   $   10.78   $   0.1325         $   1.93        $   (0.13)         $     -        $   12.71
     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
     Investor B Class
     9/30/04                   $   10.58   $   0.0325         $   1.91        $   (0.04)         $     -        $   12.48
     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
     Investor C Class
     9/30/04                   $   10.59   $   0.0325         $   1.90        $   (0.04)         $     -        $   12.48
     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
     -------------
     Large Cap Growth Equity
     -------------
     Institutional Class
     9/30/04                   $    8.18   $   0.0225         $   0.72        $       -          $     -        $    8.92
     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
     Service Class
     9/30/04                   $    8.03   $    (0.01)25      $   0.70        $       -          $     -        $    8.72
     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
     Investor A Class
     9/30/04                   $    7.92   $    (0.02)25      $   0.70        $       -          $     -        $    8.60
     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

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
======================== ============ ================= ===================== =================== ================== ==========

           19.67%11       $  114,374          0.79%              0.91%                1.45%               1.33%           75%
           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

           19.35%11       $   46,353          1.09%              1.22%                1.15%               1.03%           75%
           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
           19.19%3,11     $   54,311          1.19%              1.36%                1.05%               0.88%           75%
           23.323             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
            5.713             56,689          1.23               1.23                 0.66                0.66           121

           18.34%4,11     $   18,203          1.99%              2.08%                0.25%               0.16%           75%
           22.424             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
            4.934             31,208          2.00               2.00                (0.11)             ( 0.11)          121
           18.27%4,11     $    6,805          1.99%              2.05%                0.26%               0.20%           75%
           22.404              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
            4.934              7,608          2.00               2.00                (0.13)             ( 0.13)          121
            9.05%11       $   27,725          0.82%              1.01%                0.20%               0.01%           70%
           21.9111            36,686          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

            8.59%11       $   33,182          1.12%              1.30%               (0.10)%            ( 0.27)%          70%
           21.6711            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
            8.59%3,11     $   18,985          1.27%              1.50%               (0.26)%            ( 0.49)%          70%
           21.293,13          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
           22.313             87,375          1.25               1.25                (0.70)             ( 0.70)          121

                       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 CAPITAL     END OF
                                 OF PERIOD    INCOME (LOSS)    AND UNREALIZED)       INCOME            GAINS          PERIOD
                                =========== ================= ================= =============== ================== ===========
     --------------------
     Large Cap Growth Equity (Continued)
     --------------------
     Investor B Class
     9/30/04                     $   7.35     $     (0.08)25      $   0.65         $      -          $     -        $   7.92
     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
     Investor C Class
     9/30/04                     $   7.34     $     (0.08)25      $   0.65         $      -          $     -        $   7.91
     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
     ---------
     Dividend Achievers(TM)
     ---------
     Institutional Class
     9/08/041 through 9/30/04    $  10.00     $   0.0125         $   (0.05)        $      -          $     -        $   9.96
     Service Class
     9/08/041 through 9/30/04    $  10.00     $       -25        $   (0.05)        $      -          $     -        $   9.95
     Investor A Class
     9/08/041 through 9/30/04    $  10.00     $   0.0125         $   (0.05)        $      -          $     -        $   9.96
     Investor B Class
     9/08/041 through 9/30/04    $  10.00     $   0.0125         $   (0.05)        $      -          $     -        $   9.96
     Investor C Class
     9/08/041 through 9/30/04    $  10.00     $   0.0125         $   (0.05)        $      -          $     -        $   9.96
     -----------
     Mid-Cap Value Equity
     -----------
     Institutional Class
     9/30/04                     $  11.30     $     (0.01)25     $    2.68        $   (0.09)         $     -        $  13.88
     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
     Service Class
     9/30/04                     $  11.22     $     (0.04)25     $    2.67        $   (0.04)         $     -        $  13.81
     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
     Investor A Class
     9/30/04                     $  11.17     $     (0.07)25     $    2.67        $   (0.05)         $     -        $  13.72
     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
     Investor B Class
     9/30/04                     $  10.78     $     (0.17)25     $    2.58        $       -          $     -        $  13.19
     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
     Investor C Class
     9/30/04                     $  10.78     $     (0.17)25     $    2.58        $       -          $     -        $  13.19
     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

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
======================== =========== ================= ===================== =================== ================== ==========
            7.76%4,11     $ 12,693        2.03%               2.16%                 (1.01)%             (1.14)%          70%
           20.304,13        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
           21.374           65,977        2.01                2.01                  (1.46)              (1.46)          121

            7.77%4,11     $  2,558        2.03%               2.18%                 (1.01)%             (1.16)%          70%
           20.334,13         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
           21.214           11,799        2.01                2.01                  (1.47)              (1.47)          121
           (0.40)%        $  1,992        0.90%2              1.68%2                 1.41%2              0.63%2           9%

           (0.50)%        $      -        1.20%2              1.98%2                 1.11%2              0.33%2           9%
           (0.40)%3       $      -        1.30%2              2.08%2                 1.01%2              0.23%2           9%

           (0.40)%4       $      -        2.05%2              2.58%2                 0.51%2              0.27%2           9%
           (0.40)%4       $      -        2.05%2              2.58%2                 0.51%2              0.27%2           9%
           23.71%11       $ 17,003        1.26%               1.35%                 (0.05)%             (0.15)%         223%
           16.6311          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

           23.43%11       $  3,532        1.56%               1.65%                 (0.37)%             (0.46)%         223%
           16.2811           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
           23.28%3,11     $  4,252        1.70%               1.84%                 (0.55)%             (0.69)%         223%
          (16.01)3,11        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
           14.173            3,805        1.60                1.60                   0.19                0.19           205

           22.36%4,11     $  7,237        2.46%               2.50%                 (1.31)%             (1.35)%         223%
           15.204,11         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
           13.354            4,871        2.34                2.34                  (0.55)              (0.55)          205
           22.36%4,11     $  2,466        2.46%               2.50%                 (1.31)%             (1.35)%         223%
           15.204,11         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
           13.354              946        2.34                2.34                  (0.58)              (0.58)          205

                       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)      INCOME10           GAINS          PERIOD
                                =========== =================== ================= =============== ================== ===========
     ------------
     Mid-Cap Growth Equity
     ------------
     Institutional Class
     9/30/04                     $   7.57       $    (0.06)25       $   1.25          $     -          $      -       $   8.76
     9/30/03                         6.06          (  0.05)             1.56                -                 -           7.57
     9/30/02                         7.49          (  0.06)25        (  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
     Service Class
     9/30/04                     $   7.33       $    (0.08)25       $   1.21          $     -          $      -       $   8.46
     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
     Investor A Class
     9/30/04                     $   7.17       $    (0.09)25       $   1.18          $     -          $      -       $   8.26
     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
     Investor B Class
     9/30/04                     $   6.67       $    (0.14)25       $   1.10          $     -          $      -       $   7.63
     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
     Investor C Class
     9/30/04                     $   6.67       $    (0.14)25       $   1.10          $     -          $      -       $   7.63
     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
     ------------
     Small Cap Value Equity
     ------------
     Blackrock
     4/12/041 through 9/30/04    $  16.02       $      -25         $   (0.79)         $     -          $      -       $  15.23
     Institutional Class
     9/30/04                     $  14.17       $    (0.02)25      $    2.86          $     -         $   (1.79)      $  15.22
     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
     Service Class
     9/30/04                     $  14.09       $    (0.07)25      $    2.84          $     -         $   (1.79)      $  15.07
     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
     Investor A Class
     9/30/04                     $  14.04       $    (0.09)25      $    2.84          $     -         $   (1.79)      $  15.00
     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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       88



                                BLACKROCK FUNDS


                                                           RATIO OF TOTAL                          RATIO OF NET
                               NET                          EXPENSES TO          RATIO OF        INVESTMENT INCOME
                              ASSETS        RATIO OF          AVERAGE         NET INVESTMENT        TO AVERAGE
                              END OF      NET EXPENSES       NET ASSETS         INCOME TO           NET ASSETS        PORTFOLIO
          TOTAL               PERIOD       TO AVERAGE        (EXCLUDING        AVERAGE NET          (EXCLUDING        TURNOVER
         RETURN               (000)        NET ASSETS         WAIVERS)            ASSETS             WAIVERS)           RATE
========================   ===========   ==============   ===============   =================   ==================   ==========
           15.72%11         $ 40,337         1.23%            1.28%               (0.65)%              (0.69)%            29%
           24.9211            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

           15.42%11         $ 10,871         1.53%            1.56%               (0.97)%              (0.99)%            29%
           24.4511            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
           15.20%3,11       $ 27,777         1.67%            1.77%               (1.09)%              (1.19)%            29%
           24.263,11          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
           90.623             83,152         1.57             1.57                (0.80)               (0.80)            425

           14.39%4,11       $ 31,900         2.44%            2.45%               (1.86)%              (1.87)%            29%
           23.294,11          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
           89.384            122,726         2.31             2.31                (1.53)               (1.53)            425
           14.39%4,11       $ 11,269         2.44%            2.45%               (1.86)%              (1.87)%            29%
           23.294,11          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
           89.234             61,542         2.30             2.30                (1.51)               (1.51)            425
           (4.93)%11        $  4,787         1.10%2           1.33%2              (0.17)%2             (0.40)%2          154%

           20.87%11         $ 66,083         0.95%            0.98%               (0.15)%              (0.18)%           154%
           29.9611             4,139         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
           20.45%11         $  3,288         1.25%            1.29%               (0.45)%              (0.48)%           154%
           29.7011             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

           20.38%3,11       $ 35,240         1.35%            1.47%               (0.55)%              (0.67)%           154%
           29.373,11          69,641         1.38             1.41                (0.37)               (0.40)            240
           (8.71)3            43,884         1.35             1.37                (0.62)               (0.64)            260
            0.093             28,195         1.34             1.34                 0.38                 0.38             184
           16.603             25,719         1.32             1.32                 0.31                 0.31             168

                       89



                                BLACKROCK FUNDS
                        FINANCIAL HIGHLIGHTS (CONTINUED)

                 FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD


                                   NET                            NET GAIN
                                  ASSET                          (LOSS) ON
                                  VALUE           NET           INVESTMENTS
                                BEGINNING      INVESTMENT      (BOTH REALIZED
                                OF PERIOD    INCOME (LOSS)    AND UNREALIZED)
                               =========== ================= =================
     ------------------
     Small Cap Value Equity (Continued)
     ------------------
     Investor B Class
     9/30/04                    $   13.11    $     (0.19)25      $   2.64
     9/30/03                        12.11        (  0.13)            3.09
     9/30/02                        15.58        (  0.20)          ( 0.94)
     9/30/01                        16.56        (  0.06)          ( 0.07)
     9/30/00                        14.31        (  0.23)            2.48
     Investor C Class
     9/30/04                    $   13.11    $     (0.19)25      $   2.65
     9/30/03                        12.12        (  0.14)            3.09
     9/30/02                        15.59        (  0.20)          ( 0.94)
     9/30/01                        16.57        (  0.05)          ( 0.08)
     9/30/00                        14.31        (  0.28)            2.54
     ------------
     Small Cap Core Equity
     ------------
     Institutional Class
     9/30/04                    $   11.99    $     (0.13)25      $   3.01
     9/30/03                         8.35        (  0.06)            3.70
     1/2/021 through 9/30/02        10.00        (  0.04)          ( 1.61)
     Service Class
     9/30/04                    $   11.99    $     (0.20)25      $   3.04
     9/30/03                         8.35              -             3.64
     1/2/021 through 9/30/02        10.00              -           ( 1.65)
     Investor A Class
     9/30/04                    $   11.99    $     (0.24)25      $   3.04
     9/30/03                         8.35              -             3.64
     1/2/021 through 9/30/02        10.00              -           ( 1.65)
     Investor B Class
     9/30/04                    $   11.99    $     (0.37)25      $   3.07
     9/30/03                         8.35              -             3.64
     1/2/021 through 9/30/02        10.00              -           ( 1.65)
     Investor C Class
     9/30/04                    $   11.99    $     (0.28)25      $   2.99
     9/30/03                         8.35              -             3.64
     1/2/021 through 9/30/02        10.00              -           ( 1.65)
     -------------
     Small Cap Growth Equity
     -------------
     Institutional Class
     9/30/04                    $   12.26    $     (0.11)25      $   2.37
     9/30/03                         9.00        (  0.09)            3.35
     9/30/02                        11.74        (  0.17)          ( 2.57)
     9/30/01                        35.76        0.09              (15.38)
     9/30/00                        25.38        0.07               14.45
     Service Class
     9/30/04                    $   11.79    $     (0.15)25      $   2.28
     9/30/03                         8.67        (  0.12)            3.24
     9/30/02                        11.36        (  0.19)          ( 2.50)
     9/30/01                        34.91        0.03              (14.89)
     9/30/00                        24.93        (  0.03)           14.15
     Investor A Class
     9/30/04                    $   11.51    $     (0.16)25      $   2.22
     9/30/03                         8.48        (  0.13)            3.16
     9/30/02                        11.12        (  0.14)          ( 2.50)
     9/30/01                        34.47        (  0.01)          (14.65)
     9/30/00                        24.73        (  0.06)           13.94



                                                                DISTRIBUTIONS                    NET
                                DISTRIBUTIONS                      FROM NET     REDEMPTION      ASSET
                                   FROM NET     DISTRIBUTIONS      REALIZED     FEES ADDED      VALUE
                                  INVESTMENT         FROM          CAPITAL      TO PAID-IN     END OF
                                   INCOME10        CAPITAL          GAINS         CAPITAL      PERIOD
                               =============== =============== =============== ============ ============
     ------------------
     Small Cap Value Equity
(Continued)
     ------------------
     Investor B Class
     9/30/04                      $      -        $      -       $   (1.79)      $     -     $   13.77
     9/30/03                             -               -         (  1.96)            -         13.11
     9/30/02                             -               -         (  2.33)            -         12.11
     9/30/01                         (0.01)              -         (  0.84)            -         15.58
     9/30/00                             -               -               -             -         16.56
     Investor C Class
     9/30/04                      $      -        $      -       $   (1.79)      $     -     $   13.78
     9/30/03                             -               -         (  1.96)            -         13.11
     9/30/02                             -               -         (  2.33)            -         12.12
     9/30/01                         (0.01)              -         (  0.84)            -         15.59
     9/30/00                             -               -               -             -         16.57
     ------------
     Small Cap Core Equity
     ------------
     Institutional Class
     9/30/04                      $      -        $      -       $   (0.15)      $  0.05     $   14.77
     9/30/03                             -               -               -             -         11.99
     1/2/021 through 9/30/02             -               -               -             -          8.35
     Service Class
     9/30/04                      $      -        $      -       $   (0.15)      $  0.05     $   14.73
     9/30/03                             -               -               -             -         11.99
     1/2/021 through 9/30/02             -               -               -             -          8.35
     Investor A Class
     9/30/04                      $      -        $      -       $   (0.15)      $  0.07     $   14.71
     9/30/03                             -               -               -             -         11.99
     1/2/021 through 9/30/02             -               -               -             -          8.35
     Investor B Class
     9/30/04                      $      -        $      -       $   (0.15)      $  0.07     $   14.61
     9/30/03                             -               -               -             -         11.99
     1/2/021 through 9/30/02             -               -               -             -          8.35
     Investor C Class
     9/30/04                      $      -        $      -       $   (0.15)      $  0.05     $   14.60
     9/30/03                             -               -               -             -         11.99
     1/2/021 through 9/30/02             -               -               -             -          8.35
     -------------
     Small Cap Growth Equity
     -------------
     Institutional Class
     9/30/04                      $      -        $      -       $       -       $     -     $   14.52
     9/30/03                             -               -               -             -         12.26
     9/30/02                             -               -               -             -          9.00
     9/30/01                         (0.12)          (0.10)        (  8.51)            -         11.74
     9/30/00                             -               -         (  4.14)            -         35.76
     Service Class
     9/30/04                      $      -        $      -       $       -       $     -     $   13.92
     9/30/03                             -               -               -             -         11.79
     9/30/02                             -               -               -             -          8.67
     9/30/01                         (0.08)          (0.10)        (  8.51)            -         11.36
     9/30/00                             -               -         (  4.14)            -         34.91
     Investor A Class
     9/30/04                      $      -        $      -       $       -       $     -     $   13.57
     9/30/03                             -               -               -             -         11.51
     9/30/02                             -               -               -             -          8.48
     9/30/01                         (0.08)          (0.10)        (  8.51)            -         11.12
     9/30/00                             -               -         (  4.14)            -         34.47

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       90



                                BLACKROCK FUNDS


                                                                                               RATIO OF NET
                             NET                        RATIO OF TOTAL         RATIO OF      INVESTMENT INCOME
                           ASSETS       RATIO OF     EXPENSES TO AVERAGE    NET INVESTMENT      TO AVERAGE
                           END OF     NET EXPENSES        NET ASSETS          INCOME TO         NET ASSETS      PORTFOLIO
         TOTAL             PERIOD      TO AVERAGE         (EXCLUDING         AVERAGE NET        (EXCLUDING      TURNOVER
         RETURN             (000)      NET ASSETS          WAIVERS)             ASSETS           WAIVERS)         RATE
======================= ============ ============== ===================== ================= ================== ==========
           19.45%4,11    $   15,952       2.07%             2.09%               (1.28)%            (1.30)%         154%
           28.524,11         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
           15.724            11,831       2.08              2.08                (0.43)             (0.43)          168

           19.53%4,11    $    6,715       2.09%             2.11%               (1.30)%            (1.32)%         154%
           28.424,11          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
           15.794             4,666       2.08              2.08                (0.43)             (0.43)          168
           24.51%24      $    1,802       1.30%             2.37%               (0.89)%            (1.96)%          78%
           43.59              1,238       1.30              2.96                (0.62)             (2.28)          218
          (16.50)               835       1.302             2.532               (0.60)2            (1.83)2         233

           24.17%23      $        -       1.60%             2.67%               (1.19)%            (2.26)%          78%
           43.59                  -       1.60              3.26                (0.92)             (2.58)          218
          (16.50)                 -       1.602             2.832               (0.90)2            (2.13)2         233
           24.01%3,24    $    3,154       1.74%             2.89%               (1.32)%            (2.48)%          78%
           43.593                 7       1.77              3.43                (1.09)             (2.75)          218
          (16.50)3                -       1.772             3.002               (1.07)2            (2.30)2         233

           23.17%4,24    $    1,157       2.49%             3.56%               (2.07)%            (3.15)%          78%
           43.594                 -       2.52              4.18                (1.84)             (3.50)          218
          (16.50)4                -       2.522             3.752               (1.82)2            (3.05)2         233
           23.08%4,24    $    3,352       2.47%             3.56%               (2.03)%            (3.11)%          78%
           43.594                 -       2.52              4.18                (1.84)             (3.50)          218
          (16.50)4                -       2.522             3.752               (1.82)2            (3.05)2         233
           18.43%15      $  272,324       0.92%             0.93%               (0.73)%            (0.74)%          81%
           36.2211          164,856       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

           18.07%16      $   29,569       1.20%             1.20%               (1.02)%            (1.02)%          81%
           35.9911           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
           17.90%3,16    $  131,795       1.30%             1.40%               (1.12)%            (1.22)%          81%
           35.733,11        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
           61.963           175,112       1.23              1.23                (0.21)             (0.21)          218

                       91



                                BLACKROCK FUNDS
                        FINANCIAL HIGHLIGHTS (CONTINUED)

                 FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD


                                    NET                              NET GAIN
                                   ASSET                            (LOSS) ON
                                   VALUE            NET            INVESTMENTS
                                 BEGINNING       INVESTMENT       (BOTH REALIZED
                                 OF PERIOD     INCOME (LOSS)     AND UNREALIZED)
                                =========== =================== =================
     --------------------
     Small Cap Growth Equity (Continued)
     --------------------
     Investor B Class
     9/30/04                     $   10.59      $    (0.24)25       $   2.04
     9/30/03                          7.86         (  0.19)             2.92
     9/30/02                         10.39         (  0.23)           ( 2.30)
     9/30/01                         33.05         (  0.12)           (13.85)
     9/30/00                         23.97         (  0.26)            13.48
     Investor C Class
     9/30/04                     $   10.60      $    (0.25)25       $   2.05
     9/30/03                          7.86         (  0.18)             2.92
     9/30/02                         10.39         (  0.23)           ( 2.30)
     9/30/01                         33.05         (  0.12)           (13.85)
     9/30/00                         23.97         (  0.22)            13.44
     ---------
     U. S. Opportunities
     ---------
     Institutional Class
     9/30/04                     $   16.56      $    (0.17)25       $   3.95
     9/30/03                         13.06         (  0.16)             3.66
     9/30/02                         17.76         (  0.23)25         ( 4.06)
     9/30/01                         45.41         0.04               (17.61)
     9/30/00                         24.73         0.03                23.95
     Service Class
     9/30/04                     $   16.27      $    (0.22)25       $   3.88
     9/30/03                         12.88         (  0.19)             3.58
     9/30/02                         17.51         (  0.51)           ( 3.79)
     9/30/01                         45.08         (  0.05)           (17.44)
     9/30/00                         24.64         (  0.07)            23.81
     Investor A Class
     9/30/04                     $   16.17      $    (0.26)25       $   3.87
     9/30/03                         12.81         (  0.21)             3.57
     9/30/02                         17.41         (  0.42)           ( 3.89)
     9/30/01                         44.93         (  0.09)           (17.35)
     9/30/00                         24.60         (  0.17)            23.80
     Investor B Class
     9/30/04                     $   15.55      $    (0.39)25       $   3.71
     9/30/03                         12.41         (  0.32)             3.46
     9/30/02                         16.86         (  0.54)           ( 3.78)
     9/30/01                         44.15         (  0.28)           (16.93)
     9/30/00                         24.38         (  0.45)            23.52
     Investor C Class
     9/30/04                     $   15.53      $    (0.38)25       $   3.70
     9/30/03                         12.40         (  0.32)             3.45
     9/30/02                         16.85         (  0.55)           ( 3.77)
     9/30/01                         44.14         (  0.29)           (16.92)
     9/30/00                         24.38         (  0.44)            23.50
     ----------------------
     Global Science & Technology Opportunities
     ----------------------
     Institutional Class
     9/30/04                     $    5.46      $    (0.07)25       $   0.03
     9/30/03                          3.59         (  0.05)             1.92
     9/30/02                          4.41         (  0.06)25         ( 0.76)
     9/30/01                         12.49         0.01               ( 8.09)
     5/15/001 through 9/30/00        10.00         (  0.01)             2.50
     Service Class
     9/30/04                     $    5.41      $    (0.08)25       $   0.02
     9/30/03                          3.57         (  0.06)25           1.90
     9/30/02                          4.39         (  0.06)25         ( 0.76)
     9/30/01                         12.47               -            ( 8.08)
     5/15/001 through 9/30/00        10.00         (  0.01)             2.48



                                                                 DISTRIBUTIONS       NET
                                 DISTRIBUTIONS                      FROM NET        ASSET
                                    FROM NET     DISTRIBUTIONS      REALIZED        VALUE
                                   INVESTMENT         FROM          CAPITAL        END OF
                                    INCOME10        CAPITAL          GAINS         PERIOD
                                =============== =============== =============== ============
     --------------------
     Small Cap Growth Equity
(Continued)
     --------------------
     Investor B Class
     9/30/04                       $      -        $      -        $       -     $   12.39
     9/30/03                              -               -                -         10.59
     9/30/02                              -               -                -          7.86
     9/30/01                          (0.08)          (0.10)          ( 8.51)        10.39
     9/30/00                              -               -           ( 4.14)        33.05
     Investor C Class
     9/30/04                       $      -        $      -        $       -     $   12.40
     9/30/03                              -               -                -         10.60
     9/30/02                              -               -                -          7.86
     9/30/01                          (0.08)          (0.10)          ( 8.51)        10.39
     9/30/00                              -               -           ( 4.14)        33.05
     ---------
     U. S. Opportunities
     ---------
     Institutional Class
     9/30/04                       $      -        $      -        $       -     $   20.34
     9/30/03                              -               -                -         16.56
     9/30/02                          (0.41)              -                -         13.06
     9/30/01                              -               -           (10.08)        17.76
     9/30/00                              -               -           ( 3.30)        45.41
     Service Class
     9/30/04                       $      -        $      -        $       -     $   19.93
     9/30/03                              -               -                -         16.27
     9/30/02                          (0.33)              -                -         12.88
     9/30/01                              -               -           (10.08)        17.51
     9/30/00                              -               -           ( 3.30)        45.08
     Investor A Class
     9/30/04                       $      -        $      -        $       -     $   19.78
     9/30/03                              -               -                -         16.17
     9/30/02                          (0.29)              -                -         12.81
     9/30/01                              -               -           (10.08)        17.41
     9/30/00                              -               -           ( 3.30)        44.93
     Investor B Class
     9/30/04                       $      -        $      -        $       -     $   18.87
     9/30/03                              -               -                -         15.55
     9/30/02                          (0.13)              -                -         12.41
     9/30/01                              -               -           (10.08)        16.86
     9/30/00                              -               -           ( 3.30)        44.15
     Investor C Class
     9/30/04                       $      -        $      -        $       -     $   18.85
     9/30/03                              -               -                -         15.53
     9/30/02                          (0.13)              -                -         12.40
     9/30/01                              -               -           (10.08)        16.85
     9/30/00                              -               -           ( 3.30)        44.14
     ----------------------
     Global Science &
Technology Opportunities
     ----------------------
     Institutional Class
     9/30/04                       $      -        $      -        $       -     $    5.42
     9/30/03                              -               -                -          5.46
     9/30/02                              -               -                -          3.59
     9/30/01                              -               -                -          4.41
     5/15/001 through 9/30/00             -               -                -         12.49
     Service Class
     9/30/04                       $      -        $      -        $       -     $    5.35
     9/30/03                              -               -                -          5.41
     9/30/02                              -               -                -          3.57
     9/30/01                              -               -                -          4.39
     5/15/001 through 9/30/00             -               -                -         12.47

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       92



                                BLACKROCK FUNDS


                                                                                              RATIO OF NET
                                                                                               INVESTMENT
                            NET                           RATIO OF TOTAL      RATIO OF NET       INCOME
                           ASSETS        RATIO OF      EXPENSES TO AVERAGE     INVESTMENT      TO AVERAGE
                           END OF    NET EXPENSES TO        NET ASSETS           INCOME        NET ASSETS   PORTFOLIO
         TOTAL             PERIOD      AVERAGE NET          (EXCLUDING       TO AVERAGE NET    (EXCLUDING   TURNOVER
         RETURN            (000)          ASSETS             WAIVERS)            ASSETS         WAIVERS)      RATE
======================= =========== ================= ===================== ================ ============= ==========
           17.00%4,17    $ 23,983         2.07%               2.07%               (1.89)  %      (1.89)  %      81%
           34.734,11       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
           61.074          95,922         1.98                1.98                (0.96)         (0.96)        218

           16.98%4,16    $ 13,989         2.08%               2.08%               (1.90)  %      (1.90)  %      81%
           34.864,11       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
           61.074          49,276         1.99                1.99                (0.92)         (0.92)        218
           22.83%11      $  6,074         1.60%               1.65%               (0.92)  %      (0.97)  %     106%
           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

           22.50%11      $  2,303         1.90%               1.97%               (1.15)  %      (1.22)  %     106%
           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
           22.33%3,11    $ 31,282         2.04%               2.15%               (1.36)  %      (1.46)  %     106%
           26.233          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
          102.683         151,588         1.91                1.91                (0.41)         (0.41)        445

           21.35%4,11    $ 40,994         2.80%               2.81%               (2.12)  %      (2.13)  %     106%
           25.304          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
          101.174         213,237         2.66                2.66                (1.14)         (1.14)        445
           21.38%4,11    $ 20,261         2.81%               2.83%               (2.13)  %      (2.15)  %     106%
           25.244          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
          101.124         133,540         2.65                2.65                (1.12)         (1.12)        445
         (  0.73)%11     $  1,592         1.43%               1.63%               (1.12)  %      (1.32)  %     115%
           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         1.202               2.192               (0.21)2        (1.20)2       175

           (1.11)%11     $     86         1.73%               1.94%               (1.41)  %      (1.61)  %     115%
           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         1.502               2.492               (0.51)2        (1.50)2       175

                       93



                                BLACKROCK FUNDS
                        FINANCIAL HIGHLIGHTS (CONTINUED)

                 FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD


                                    NET                            NET GAIN
                                   ASSET                          (LOSS) ON
                                   VALUE           NET           INVESTMENTS
                                 BEGINNING      INVESTMENT      (BOTH REALIZED
                                 OF PERIOD    INCOME (LOSS)    AND UNREALIZED)
                                =========== ================= =================
     -----------------------------
     Global Science & Technology Opportunities (Continued)
     -----------------------------
     Investor A Class
     9/30/04                     $   5.38     $     (0.09)25      $  0.02
     9/30/03                         3.55         (  0.07)           1.90
     9/30/02                         4.38         (  0.09)           ( 0.74)
     9/30/01                        12.47         (  0.03)           ( 8.06)
     5/15/001 through 9/30/00       10.00         (  0.02)           2.49
     Investor B Class
     9/30/04                     $   5.24     $     (0.13)25      $  0.02
     9/30/03                         3.49         (  0.10)           1.85
     9/30/02                         4.33         (  0.14)           ( 0.70)
     9/30/01                        12.44         (  0.09)           ( 8.02)
     5/15/001 through 9/30/00       10.00         (  0.03)           2.47
     Investor C Class
     9/30/04                     $   5.24     $     (0.13)25      $  0.03
     9/30/03                         3.49         (  0.10)           1.85
     9/30/02                         4.33         (  0.15)           ( 0.69)
     9/30/01                        12.44         (  0.10)           ( 8.01)
     5/15/001 through 9/30/00       10.00         (  0.03)           2.47
     ----------
     International Equity
     ----------
     Institutional Class
     9/30/04                     $   7.80     $   0.0125          $  2.3127
     9/30/03                         7.01         0.07               0.71
     9/30/02                         8.21         0.31               ( 1.46)
     9/30/01                        13.92         0.06               ( 3.63)
     9/30/00                        15.94         0.07               0.09
     Service Class
     9/30/04                     $   7.66     $       -25         $  2.2827
     9/30/03                         6.90         0.04               0.71
     9/30/02                         8.12         0.21               ( 1.38)
     9/30/01                        13.82         0.03               ( 3.59)
     9/30/00                        15.84         0.04               0.08
     Investor A Class
     9/30/04                     $   7.56     $   0.0425          $  2.2027
     9/30/03                         6.83         0.05               0.67
     9/30/02                         8.04         0.2025             ( 1.36)
     9/30/01                        13.76         0.01               ( 3.59)
     9/30/00                        15.79               -            0.08
     Investor B Class
     9/30/04                     $   7.21     $     (0.02)25      $  2.1527
     9/30/03                         6.56         (  0.02)           0.66
     9/30/02                         7.79         0.16               ( 1.34)
     9/30/01                        13.45         (  0.08)           ( 3.44)
     9/30/00                        15.55         (  0.10)           0.08
     Investor C Class
     9/30/04                     $   7.30     $     (0.01)25      $  2.1627
     9/30/03                         6.54         0.02               0.73
     9/30/02                         7.80         0.05               ( 1.26)
     9/30/01                        13.45         (  0.06)           ( 3.45)
     9/30/00                        15.55         (  0.06)           0.04



                                                                                    NET
                                 DISTRIBUTIONS     DISTRIBUTIONS    REDEMPTION     ASSET
                                    FROM NET         FROM NET        FEE ADDED     VALUE
                                   INVESTMENT    REALIZED CAPITAL   TO PAID-IN     END OF
                                    INCOME10           GAINS          CAPITAL      PERIOD
                                =============== ================== ============ ===========
     -----------------------------
     Global Science & Technology Opportunities
(Continued)
     -----------------------------
     Investor A Class
     9/30/04                       $      -          $      -        $      -    $   5.31
     9/30/03                              -                 -               -        5.38
     9/30/02                              -                 -               -        3.55
     9/30/01                              -                 -               -        4.38
     5/15/001 through 9/30/00             -                 -               -       12.47
     Investor B Class
     9/30/04                       $      -          $      -        $      -    $   5.13
     9/30/03                              -                 -               -        5.24
     9/30/02                              -                 -               -        3.49
     9/30/01                              -                 -               -        4.33
     5/15/001 through 9/30/00             -                 -               -       12.44
     Investor C Class
     9/30/04                       $      -          $      -        $      -    $   5.14
     9/30/03                              -                 -               -        5.24
     9/30/02                              -                 -               -        3.49
     9/30/01                              -                 -               -        4.33
     5/15/001 through 9/30/00             -                 -               -       12.44
     ----------
     International Equity
     ----------
     Institutional Class
     9/30/04                      $   (0.09)         $      -        $   0.01    $  10.04
     9/30/03                              -                 -            0.01        7.80
     9/30/02                              -             (0.05)              -        7.01
     9/30/01                              -             (2.14)              -        8.21
     9/30/00                        (  0.05)            (2.13)              -       13.92
     Service Class
     9/30/04                      $   (0.06)         $      -        $   0.01    $   9.89
     9/30/03                              -                 -            0.01        7.66
     9/30/02                              -             (0.05)              -        6.90
     9/30/01                              -             (2.14)              -        8.12
     9/30/00                        (  0.01)            (2.13)              -       13.82
     Investor A Class
     9/30/04                      $   (0.06)         $      -        $   0.01    $   9.75
     9/30/03                              -                 -            0.01        7.56
     9/30/02                              -             (0.05)              -        6.83
     9/30/01                              -             (2.14)              -        8.04
     9/30/00                              -             (2.11)              -       13.76
     Investor B Class
     9/30/04                      $   (0.01)         $      -        $   0.01    $   9.34
     9/30/03                              -                 -            0.01        7.21
     9/30/02                              -             (0.05)              -        6.56
     9/30/01                              -             (2.14)              -        7.79
     9/30/00                              -             (2.08)              -       13.45
     Investor C Class
     9/30/04                      $       -          $      -        $      -    $   9.45
     9/30/03                              -                 -            0.01        7.30
     9/30/02                              -             (0.05)              -        6.54
     9/30/01                              -             (2.14)              -        7.80
     9/30/00                              -             (2.08)              -       13.45

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       94



                                BLACKROCK FUNDS


                                                                                              RATIO OF NET
                                                         RATIO OF TOTAL                        INVESTMENT
                                 NET                        EXPENSES          RATIO OF           INCOME
                               ASSETS       RATIO OF       TO AVERAGE      NET INVESTMENT      TO AVERAGE
                               END OF     NET EXPENSES     NET ASSETS        INCOME TO         NET ASSETS     PORTFOLIO
           TOTAL               PERIOD      TO AVERAGE      (EXCLUDING       AVERAGE NET        (EXCLUDING     TURNOVER
           RETURN               (000)      NET ASSETS       WAIVERS)           ASSETS           WAIVERS)        RATE
=========================== ============ ============== ================ ================= ================= ==========
           (  1.30)%3,11     $    9,929       1.89%           2.14%            (1.56)  %         (1.81)  %       115%
             51.553              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
             24.703              41,474       1.672           2.662            (0.68)2           (1.67)2         175

             (2.10)%4,11     $   12,315       2.65%           2.82%            (2.33)  %         (2.50)  %       115%
             50.144              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
             24.404              60,094       2.422           3.412            (1.43)2           (2.42)2         175
           (  1.91)%4,11     $    3,244       2.65%           2.80%            (2.33)  %         (2.48)  %       115%
             50.144               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
             24.404              13,057       2.422           3.412            (1.43)2           (2.42)2         175
             30.07%20        $   11,684       1.17%           1.34%             0.27   %          0.10   %       114%
             11.2718             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

             30.01%21        $    4,590       1.45%           1.62%             0.03   %         (0.14)  %       114%
             11.0219             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
             29.87%3,21      $   10,696       1.62%           1.96%             0.43   %          0.08   %       114%
             10.693,19           12,054       1.60            1.68              0.58              0.50           132
           ( 14.59)3             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

             29.67%4,22      $    2,433       2.27%           2.50%            (0.17)  %         (0.40)  %       114%
              9.914,19            2,411       2.35            2.43             (0.21)            (0.29)          132
            (15.31)4              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
             29.45%4,21      $    2,103       2.34%           2.58%            (0.11)  %         (0.35)  %       114%
             11.624,19              939       2.34            2.42              0.17              0.09           132
           ( 15.68)4              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

                       95



                                BLACKROCK FUNDS
                        FINANCIAL HIGHLIGHTS (CONTINUED)

                 FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD


                                      NET                               NET GAIN
                                     ASSET                             (LOSS) ON
                                     VALUE             NET            INVESTMENTS
                                   BEGINNING       INVESTMENT        (BOTH REALIZED
                                   OF PERIOD      INCOME (LOSS)     AND UNREALIZED)
                                  =========== ==================== =================
     --------------
     International Opportunities
     --------------
     Institutional Class
     9/30/04                       $   19.96       $   0.0825          $   4.41
     9/30/03                           15.22               -               4.73
     9/30/02                           14.86          0.05                 0.27
     9/30/01                           22.54          0.30               ( 7.93)
     9/30/00                           12.90          0.13                10.91
     Service Class
     9/30/04                       $   19.59       $   0.0625          $   4.30
     9/30/03                           14.98          0.05                 4.55
     9/30/02                           14.66         (  0.02)              0.30
     9/30/01                           22.36          0.29               ( 7.94)
     9/30/00                           12.84          0.08                10.84
     Investor A Class
     9/30/04                       $   19.49       $   (0.02)25        $   4.32
     9/30/03                           14.94          0.01                 4.53
     9/30/02                           14.65         (  0.03)              0.28
     9/30/01                           22.34          0.13               ( 7.77)
     9/30/00                           12.84          0.08                10.82
     Investor B Class
     9/30/04                       $   18.83       $   (0.21)25        $   4.19
     9/30/03                           14.54         (  0.12)              4.40
     9/30/02                           14.37         (  0.16)              0.29
     9/30/01                           22.06          0.01               ( 7.65)
     9/30/00                           12.78         (  0.04)             10.72
     Investor C Class
     9/30/04                       $   18.84       $   (0.21)25        $   4.18
     9/30/03                           14.54         (  0.11)25            4.40
     9/30/02                           14.36         (  0.15)              0.29
     9/30/01                           22.06          0.01               ( 7.66)
     9/30/00                           12.78         (  0.04)             10.72
     ------
     Select Equity
     ------
     Institutional Class
     9/30/04                       $   10.32       $   0.0925          $   1.67
     9/30/03                            8.50          0.10                 1.83
     9/30/02                           11.25          0.11               ( 2.86)
     9/30/01                           20.77          0.06               ( 6.46)
     9/30/00                           20.77          0.07                 1.61
     Service Class
     9/30/04                       $   10.33       $   0.0625          $   1.67
     9/30/03                            8.44          0.10                 1.79
     9/30/02                           11.21          0.01               ( 2.78)
     9/30/01                           20.73          0.01               ( 6.43)
     9/30/00                           20.76          0.01                 1.61
     Investor A Class
     9/30/04                       $   10.18       $   0.0425          $   1.64
     9/30/03                            8.41          0.06                 1.79
     9/30/02                           11.17         (  0.01)            ( 2.75)
     9/30/01                           20.69         (  0.02)            ( 6.42)
     9/30/00                           20.75         (  0.02)              1.60
     Investor B Class
     9/30/04                       $    9.78       $   (0.04)25        $   1.57
     9/30/03                            8.06         (  0.02)              1.74
     9/30/02                           10.79         (  0.10)            ( 2.63)
     9/30/01                           20.21         (  0.13)            ( 6.22)
     9/30/00                           20.44         (  0.18)              1.58



                                                                   DISTRIBUTIONS                    NET
                                   DISTRIBUTIONS                      FROM NET     REDEMPTION      ASSET
                                      FROM NET     DISTRIBUTIONS      REALIZED      FEE ADDED      VALUE
                                     INVESTMENT         FROM          CAPITAL      TO PAID-IN     END OF
                                       INCOME         CAPITAL          GAINS         CAPITAL      PERIOD
                                  =============== =============== =============== ============ ============
     --------------
     International Opportunities
     --------------
     Institutional Class
     9/30/04                        $   (0.02)       $      -        $      -       $   0.01    $   24.44
     9/30/03                                -               -               -           0.01        19.96
     9/30/02                                -               -               -           0.04        15.22
     9/30/01                                -               -           (0.05)             -        14.86
     9/30/00                                -               -           (1.40)             -        22.54
     Service Class
     9/30/04                        $   (0.02)       $      -        $      -       $      -    $   23.93
     9/30/03                                -               -               -           0.01        19.59
     9/30/02                                -               -               -           0.04        14.98
     9/30/01                                -               -           (0.05)             -        14.66
     9/30/00                                -               -           (1.40)             -        22.36
     Investor A Class
     9/30/04                        $   (0.02)       $      -        $      -       $   0.01    $   23.78
     9/30/03                                -               -               -           0.01        19.49
     9/30/02                                -               -               -           0.04        14.94
     9/30/01                                -               -           (0.05)             -        14.65
     9/30/00                                -               -           (1.40)             -        22.34
     Investor B Class
     9/30/04                        $   (0.02)       $      -        $      -       $   0.01    $   22.80
     9/30/03                                -               -               -           0.01        18.83
     9/30/02                                -               -               -           0.04        14.54
     9/30/01                                -               -           (0.05)             -        14.37
     9/30/00                                -               -           (1.40)             -        22.06
     Investor C Class
     9/30/04                        $   (0.02)       $      -        $      -       $   0.01    $   22.80
     9/30/03                                -               -               -           0.01        18.84
     9/30/02                                -               -               -           0.04        14.54
     9/30/01                                -               -           (0.05)             -        14.36
     9/30/00                                -               -           (1.40)             -        22.06
     ------
     Select Equity
     ------
     Institutional Class
     9/30/04                        $   (0.13)       $      -        $      -       $      -    $   11.95
     9/30/03                          (  0.11)              -               -              -        10.32
     9/30/02                                -               -               -              -         8.50
     9/30/01                          (  0.05)          (0.02)          (3.05)             -        11.25
     9/30/00                          (  0.05)              -           (1.63)             -        20.77
     Service Class
     9/30/04                        $   (0.09)       $      -        $      -       $      -    $   11.97
     9/30/03                                -               -               -              -        10.33
     9/30/02                                -               -               -              -         8.44
     9/30/01                          (  0.03)          (0.02)          (3.05)             -        11.21
     9/30/00                          (  0.02)              -           (1.63)             -        20.73
     Investor A Class
     9/30/04                        $   (0.07)       $      -        $      -       $      -    $   11.79
     9/30/03                          (  0.08)              -               -              -        10.18
     9/30/02                                -               -               -              -         8.41
     9/30/01                          (  0.01)          (0.02)          (3.05)             -        11.17
     9/30/00                          (  0.01)              -           (1.63)             -        20.69
     Investor B Class
     9/30/04                        $   (0.01)       $      -        $      -       $      -    $   11.30
     9/30/03                                -               -               -              -         9.78
     9/30/02                                -               -               -              -         8.06
     9/30/01                                -           (0.02)          (3.05)             -        10.79
     9/30/00                                -               -           (1.63)             -        20.21

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       96



                                BLACKROCK FUNDS


                                                                                                       RATIO OF NET
                                                                                                        INVESTMENT
                                NET                            RATIO OF TOTAL          RATIO OF           INCOME
                              ASSETS         RATIO OF       EXPENSES TO AVERAGE     NET INVESTMENT      TO AVERAGE
                              END OF       NET EXPENSES          NET ASSETS            INCOME TO        NET ASSETS     PORTFOLIO
          TOTAL               PERIOD        TO AVERAGE           (EXCLUDING           AVERAGE NET       (EXCLUDING     TURNOVER
         RETURN                (000)        NET ASSETS            WAIVERS)              ASSETS           WAIVERS)        RATE
========================   ============   ==============   =====================   ================   =============   ==========
       22.54%12             $   96,535          1.45%               1.58%                 0.31%            0.17%           98%
       31.1413                  57,950          1.41                1.51                  0.42             0.32            72
        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

       22.25%12             $   19,167          1.75%               1.91%                 0.21%            0.05%           98%
       30.7814                   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
       22.11%3,12           $   99,879          1.89%               2.06%                (0.06)%          (0.24)%          98%
       30.453,13                37,934          1.89                1.98                  0.05            (0.04)           72
        1.983,11                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
       91.043                   40,545          1.79                1.85                  0.45             0.39           296

       21.18%4,12           $   45,167          2.65%               2.72%                (0.94)%          (1.00)%          98%
       29.514,13                31,454          2.63                2.72                 (0.74)           (0.83)           72
        1.184,11                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
       89.644                   56,136          2.52                2.60                 (0.27)           (0.33)          296
       21.12%4,12           $   54,894          2.65%               2.72%                (0.86)%          (0.93)%          98%
       29.574,13                26,912          2.63                2.72                 (0.71)           (0.80)           72
        1.254,11                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
       89.644                   43,722          2.52                2.58                 (0.27)           (0.32)          296
       17.11     %          $   51,593          0.81%               0.99%                 0.81%            0.63%           72%
       22.80                    60,886          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

       16.83     %          $    1,714          1.07%               1.23%                 0.56%            0.40%           72%
       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
       16.60%3              $   17,632          1.26%               1.47%                 0.37%            0.16%           72%
       22.093                   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

       15.70%4              $   20,448          2.01%               2.13%                (0.39)%          (0.50)%          72%
       21.344                   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
        6.824                   81,562          2.01                2.01                 (0.87)           (0.87)          103

                       97



                                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)26   AND UNREALIZED)26       INCOME            GAINS          PERIOD
                           =========== ================= =================== =============== ================== ============
     -------------
     Select Equity (Continued)
     -------------
     Investor C Class
     9/30/04                $   9.77      $    (0.04)25       $   1.58          $      -          $     -        $   11.31
     9/30/03                    8.06         (  0.02)25           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
     ------
     Index Equity
     ------
     Institutional Class
     9/30/04                $  19.19      $   0.3425          $   2.29         $   (0.33)         $     -        $   21.49
     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
     Service Class
     9/30/04                $  19.08      $   0.2525          $   2.27         $   (0.25)         $     -        $   21.35
     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
     Investor A Class
     9/30/04                $  19.07      $   0.2225          $   2.28         $   (0.23)         $     -        $   21.34
     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
     Investor B Class
     9/30/04                $  18.75      $   0.0625          $   2.24         $   (0.07)         $     -        $   20.98
     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
     Investor C Class
     9/30/04                $  18.74      $   0.0625          $   2.24         $   (0.07)         $     -        $   20.97
     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
     ----
     Balanced
     ----
     Institutional Class
     9/30/04                $  12.73      $   0.2525          $   1.34         $   (0.26)         $     -        $   14.06
     9/30/03                   11.12         0.32                 1.63           (  0.34)               -            12.73
     9/30/02                   13.28         0.56               ( 2.33)          (  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
     Service Class
     9/30/04                $  12.72      $   0.2125          $   1.33         $   (0.22)         $     -        $   14.04
     9/30/03                   11.11         0.28                 1.64           (  0.31)               -            12.72
     9/30/02                   13.26         0.2625             ( 2.06)          (  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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       98



                                BLACKROCK FUNDS


                                                       RATIO OF                                     RATIO OF NET
                                                     NET EXPENSES      RATIO OF                      INVESTMENT
                             NET                      TO AVERAGE    TOTAL EXPENSES   RATIO OF NET     INCOME TO
                           ASSETS       RATIO OF      NET ASSETS      TO AVERAGE      INVESTMENT       AVERAGE
                           END OF     NET EXPENSES    (EXCLUDING      NET ASSETS       INCOME TO     NET ASSETS    PORTFOLIO
         TOTAL             PERIOD      TO AVERAGE      INTEREST       (EXCLUDING        AVERAGE      (EXCLUDING    TURNOVER
         RETURN             (000)      NET ASSETS      EXPENSE)        WAIVERS)      NET ASSETS26    WAIVERS)26      RATE
======================= ============ ============== ============== ================ ============== ============== ==========
           15.78%4,11    $   2,413         2.03%          2.14%           2.14%         ( 0.39)%       ( 0.50)%       72%
           21.224            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
            6.774           11,108         2.01           2.01            2.01          ( 0.87)        ( 0.87)       103
           13.71%11      $ 546,947         0.18%|P^       0.18%|P^        0.36%|P^        1.56%          1.38%         2%9
           24.20           618,249         0.18|P^        0.18|P^         0.37|P^         1.63           1.44        108
         ( 20.65)          741,161         0.18|P^        0.18|P^         0.33|P^         1.35           1.20         67
         ( 26.78)          557,845         0.18|P^        0.18|P^         0.33|P^         1.11           0.96         86
           13.10           665,743         0.18|P^        0.18|P^         0.33|P^         0.98           0.83         85

           13.20%11      $  74,641         0.56%|P^       0.56%|P^        0.67%|P^        1.17%          1.06%         2%9
           23.68            72,505         0.61|P^        0.61|P^         0.67|P^         1.19           1.13        108
          (21.02)           63,468         0.61|P^        0.61|P^         0.67|P^         0.87           0.81         67
          (27.10)          292,389         0.61|P^        0.61|P^         0.63|P^         0.68           0.66         86
           12.66           378,997         0.59|P^        0.59|P^         0.63|P^         0.57           0.54         85
           13.10%3,11    $ 312,606         0.70%|P^       0.70%|P^        0.84%|P^        1.04%          0.90%         2%9
           23.413          281,505         0.79|P^        0.79|P^         0.85|P^         1.01           0.96        108
         ( 21.09)3         222,736         0.79|P^        0.79|P^         0.78|P^         0.72           0.72         67
         ( 27.23)3          76,363         0.79|P^        0.79|P^         0.81|P^         0.50           0.48         86
           12.433           93,935         0.78|P^        0.78|P^         0.81|P^         0.38           0.35         85

           12.25%4,11    $ 177,754         1.46%|P^       1.46%|P^        1.50%|P^        0.28%          0.24%         2%9
           22.594          192,614         1.54|P^        1.54|P^         1.59|P^         0.27           0.21        108
          (21.72)4         175,100         1.53|P^        1.53|P^         1.55|P^        (0.04)         (0.05)        67
          (27.77)4         262,027         1.53|P^        1.53|P^         1.55|P^        (0.25)         (0.26)        86
           11.614          360,792         1.51|P^        1.51|P^         1.54|P^        (0.35)         (0.38)        85
           12.26%4,11    $ 279,130         1.46%|P^       1.46%|P^        1.50%|P^        0.28%          0.24%         2%9
           22.524          297,835         1.54|P^        1.54|P^         1.59|P^         0.27           0.21        108
         ( 21.72)4         270,958         1.53|P^        1.53|P^         1.55|P^       ( 0.04)        ( 0.05)        67
         ( 27.77)4         382,356         1.53|P^        1.53|P^         1.55|P^       ( 0.25)        ( 0.26)        86
           11.614          530,586         1.53|P^        1.53|P^         1.56|P^       ( 0.37)        ( 0.40)        85
           12.53%11      $  10,977         0.86%          0.86%           1.03%           1.82%          1.65%       159%
           17.75            12,261         0.92           0.86            1.02            2.53           2.43        399
         ( 13.62)           24,055         0.92           0.86            0.93            2.30           2.28        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

           12.13%11      $   2,267         1.16%          1.16%           1.31%           1.52%          1.37%       159%
           17.41             2,205         1.22           1.16            1.32            2.19           2.09        399
          (13.83)            3,379         1.21           1.16            1.26            1.95           1.91        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

                       99



                                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)26   AND UNREALIZED)26       INCOME            GAINS          PERIOD
                           =========== ================= =================== =============== ================== ============
     -----------
     Balanced (Continued)
     -----------
     Investor A Class
     9/30/04                $   12.71     $   0.1925          $   1.34         $   (0.20)         $     -        $   14.04
     9/30/03                    11.10         0.25                1.64           (  0.28)               -            12.71
     9/30/02                    13.25         0.27              ( 2.09)          (  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
     Investor B Class
     9/30/04                $   12.61     $   0.0925          $   1.32         $   (0.10)         $     -        $   13.92
     9/30/03                    11.01         0.17                1.63           (  0.20)               -            12.61
     9/30/02                    13.14         0.19              ( 2.09)          (  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
     Investor C Class
     9/30/04                $   12.61     $   0.0825          $   1.32         $   (0.10)         $     -        $   13.91
     9/30/03                    11.01         0.16                1.64           (  0.20)               -            12.61
     9/30/02                    13.14         0.20              ( 2.10)          (  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


    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 period 12/1/99 through 11/30/00.
    6 For period 12/1/00 through 9/30/01.
    7 For period 12/1/01 through 9/30/02.
    8 For period 12/1/02 through 9/30/03.
    9 For period 12/1/03 through 9/30/04.
    10 Certain prior year amounts were reclassified to conform to current year
presentation.
    11 Redemption fee of 2.00% is reflected in total return calculations.
    12 Redemption fee of 2.00% is reflected in total return calculations. The
impact to the return is 1 basis point.
    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.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                      100



                                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 ASSETS26    EXPENSE)26     WAIVERS)        ASSETS         WAIVERS)       RATE
======================= =========== ============== ============== ============ ================ ============== ==========
           12.03%3,11    $  63,939        1.31%          1.30%         1.52%          1.37%           1.16%       159%
           17.223           85,538        1.39           1.33          1.49           2.02            1.91        399
         ( 14.01)3         115,667        1.42           1.34          1.44           2.19            2.16        232
         ( 21.26)3         108,795        1.34           1.34          1.36           1.75            1.74        210
            7.593          149,594        1.30           1.29          1.30           1.86            1.86        176

           11.16%4,11    $  40,006        2.06%          2.04%         2.18%          0.62%           0.51%       159%
           16.424           40,432        2.13           2.08          2.23           1.26            1.15        399
          (14.67)4          40,717        2.16           2.08          2.19           1.42            1.39        232
          (21.84)4          67,732        2.08           2.09          2.10           1.01            1.00        210
            6.724          102,530        2.07           2.07          2.07           1.09            1.09        176
           11.09%4,11    $   4,947        2.06%          2.04%         2.18%          0.61%           0.50%       159%
           16.424            4,669        2.13           2.08          2.23           1.25            1.15        399
         ( 14.67)4           4,911        2.16           2.08          2.19           1.41            1.38        232
         ( 21.84)4           9,425        2.09           2.09          2.11           0.97            0.96        210
            6.734           11,967        2.07           2.06          2.07           1.09            1.09        176


    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 Redemption fee of 2.00% is reflected in total return calculations. The
impact to the return is 22 basis points.
    21 Redemption fee of 2.00% is reflected in total return calculations. The
impact to the return is 23 basis points.
    22 Redemption fee of 2.00% is reflected in total return calculations. The
impact to the return is 24 basis points.
    23 Redemption fee of 2.00% is reflected in total return calculations. The
impact to the return is 33 basis points.
    24 Redemption fee of 2.00% is reflected in total return calculations. The
impact to the return is 34 basis points.
    25 Calculated using the average shares outstanding method.
    26 Refer to Section B of the Notes to Financial Statements.
    27 Refer to Section C of the Notes to Financial Statements.
    |P^  Including expenses allocated from the U.S. Large Company Series of The
         DFA Investment Trust Company of 0.06% for the years ended 9/30/00
         through 9/30/04.


                                      101



                                BLACKROCK FUNDS
                         NOTES TO FINANCIAL STATEMENTS


(A) Organization

     BlackRock FundsSM (the "Fund") was organized on December 22, 1988, as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. The Fund
currently has 44 registered portfolios, 15 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 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.

     Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts with its vendors and others that provide for general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund.
However, based on experience, the Fund considers the risk of loss from such
claims to be remote.

(B) Summary of Significant Accounting Policies

     The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.

     Investment Valuation - Valuation of investments held by each Portfolio is
as follows: investments traded on a national securities exchange or on the
NASDAQ National Market System are valued at the last reported sale price that
day or the NASDAQ official closing price, if applicable; investments traded on
a national securities exchange for which there were no sales on that day and
investments traded on other over-the-counter markets for which market
quotations are readily available are valued at the mean of the bid and asked
prices; and an option or futures contract is valued at the last sales price
prior to 4:00 p.m. (Eastern time), as quoted on the principal exchange or board
of trade on which such option or contract is traded, or in the absence of a
sale, the mean between the last bid and asked prices prior to 4:00 p.m.
(Eastern time). The amortized cost method of valuation will be used with
respect to debt obligations with sixty days or less remaining to maturity
unless the investment adviser and/or sub-adviser under the supervision of the
Board of Trustees determines such method does not represent fair value. Any
assets which are denominated in a non-U.S. currency are translated into U.S.
dollars at the prevailing market rates. In the event that application of these
methods of valuation results in a price for an investment which is deemed not
to be representative of the market value of such investment, the investment
will be valued by, under the direction of or in accordance with a method
specified by the Board of Trustees as reflecting fair value ("Fair Value
Assets"). The investment adviser and/or sub-adviser will submit its
recommendations regarding the valuation and/or valuation methodologies for Fair
Value Assets to a valuation committee. Such valuation committee may accept,
modify or reject any recommendations. The pricing of all Fair Value Assets
shall be subsequently reported to and ratified by the Board of Trustees.

     When determining the price for a Fair Value Asset, the investment adviser
and/or sub-adviser shall seek to determine the price that the Portfolio might
reasonably expect to receive from the current sale of that asset in an
arm's-length transaction. Fair value determinations shall be based upon all
available factors that BlackRock Advisors deems relevant.

     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.


102



                                BLACKROCK FUNDS

     The Portfolios do not isolate that portion of gains and losses on
investment securities which is due to changes in the foreign exchange rates
from that which is due to changes in the market prices of such securities. The
Portfolios report forward foreign currency related transactions as components
of realized gains for financial reporting purposes, whereas such components are
treated as ordinary income for federal income tax purposes.

     Forward Foreign Currency Contracts - Certain Portfolios may enter into
forward foreign currency contracts as a hedge against either specific
transactions or portfolio positions. These contracts are adjusted by the daily
forward exchange rate of the underlying currency and any gains or losses are
recorded as unrealized until the contract settle-ment date. Such contracts,
which protect the value of the Portfolios' investment securities against a
decline in the value of currency, do not eliminate fluctuations in the
underlying prices of the securities. They simply establish an exchange rate at
a future date. Also, although such contracts tend to minimize the risk of loss
due to a decline in the value of a hedged currency, at the same time they tend
to limit any potential gain that might be realized should the value of such
foreign currency increase. Risks may arise upon entering into these contracts
from the potential inability of counterparts to meet the terms of their
contracts and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.

     The aggregate principal amounts of the contracts are not recorded as the
Portfolios intend to settle the contracts prior to delivery. Under the terms of
foreign currency contracts open at September 30, 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        SEPTEMBER 30,        EXCHANGE
    DATE          AMOUNT                     SOLD                      AMOUNT             2004               LOSS
------------   ------------   ---------------------------------   ---------------   ----------------   ---------------
International Opportunities
 12/15/04      11,000,000     European Currency Unit ..........    $ 13,502,062     $ 13,656,115         $  (154,053)
                                                                   ============     ============         ===========
                                                                                                         UNREALIZED
                                                                                       VALUE AT           FOREIGN
SETTLEMENT      CURRENCY              CURRENCY                      CONTRACT        SEPTEMBER 30,         EXCHANGE
    DATE         AMOUNT                BOUGHT                         AMOUNT             2004               GAIN
 --------      ----------     ----------------------------------  ------------       ------------        -----------
International Opportunities
 12/15/04      12,000,000     Australian Dollar ...............    $  8,428,550     $  8,627,676         $   199,126
 12/15/04      15,000,000     British Pound ...................      26,824,351       26,976,477             152,126
 12/15/04      14,000,000     Canadian Dollar .................      10,767,905       11,059,150             291,245
 12/15/04      11,000,000     Swiss Franc .....................       8,783,417        8,846,335              62,918
                                                                   ------------     ------------         -----------
                                                                   $ 54,804,223     $ 55,509,638         $   705,415
                                                                   ============     ============         ===========

     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.


                                                                             103



                                BLACKROCK FUNDS
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     At September 30, 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   Merrill Lynch                   01/31/05              8.50%            1.87%        $  700,000       $   3,022
            Morgan Stanley                  06/14/06             3.22             1.871          2,145,000          33,374
            Union Bank of Switzerland       08/14/06             2.64             1.721          1,500,000          (4,633)
            Morgan Stanley                  06/14/14             1.871            5.31             600,000         (46,689)
            Merrill Lynch                   07/22/14             1.631            4.93             600,000         (22,971)
            Goldman Sachs                   10/01/14             2.011            4.51             600,000           2,100
            Merrill Lynch                   07/29/19             1.671            5.36             100,000          (5,035)
            Merrill Lynch                   08/13/19             5.16             1.711            125,000           3,241
            Deutsche Bank                   08/15/23             1.711            5.23           1,550,000         (28,180)

1 Rate shown is based on the 3 month LIBOR as of the most recent payment date.

     As a result of a recent FASB Emerging Issues Task Force consensus and
subsequent SEC staff guidance, the Fund has reclassified periodic payments made
under interest rate swap agreements, previously included within interest
income, as a component of realized gain (loss) in the statement of operations.
For consistency, similar reclassifications have been made to amounts appearing
in the previous year's statement of changes in net assets and the per share
amounts in prior year financial highlights. Prior year net investment income
ratios in the financial highlights have also been modified accordingly. This
reclassification had no effect on the Fund's net asset value, either in total
or per share, or its total increase (decrease) in net assets from operations
during any period. This reclassification had the following effect on net
investment income, net realized gains and net unrealized gains:


                              INCREASE        INCREASE        INCREASE
                             (DECREASE)      (DECREASE)      (DECREASE)
                           NET INVESTMENT   NET REALIZED   NET UNREALIZED
                               INCOME           GAINS          GAINS
                          ---------------- -------------- ---------------
    Balanced Portfolio
     9/30/2003 .........    $  (221,969)      $ 218,775       $ 3,194

     As a result of recent changes in GAAP, the Funds have reclassified
periodic payments made under interest rate swap agreements, previously included
within interest income, as a component of realized gain (loss) in the statement
of operations. The effects of these reclassifications are as follows:


                                                                      BALANCED PORTFOLIO
                                             --------------------------------------------------------------------
                                              INSTITUTIONAL     SERVICE    INVESTOR A   INVESTOR B    INVESTOR C
                                             --------------- ------------ ------------ ------------ -------------
        Net Investment Income Ratio .......
         9/30/2003 ........................      (   .14)%     (   .13)%    (   .14)%    (   .14)%     (   .14)%
         9/30/2002 ........................      (  0.06)      (  0.05)     (  0.06)     (  0.06)      (  0.06)
        Net Investment Income per Share....
         9/30/2003 ........................     $  (0.03)     $  (0.02)    $  (0.02)    $  (0.01)     $  (0.02)
         9/30/2002 ........................      (  0.02)      (  0.01)     (  0.01)     (  0.01)      (  0.01)

     Investment Transactions and Investment Income - Investment transactions
are accounted for on the trade date. The cost of investments sold and the
related gain or loss thereon is determined by use of the specific
identification method for both financial reporting and federal income tax
purposes. Interest income is recorded on the accrual basis. Discounts and
premiums on debt securities are accreted or amortized, respectively, for book
and tax purposes using the effective yield-to-maturity method over the term of
the instrument. Dividends are recorded on the ex-dividend date. Paydown gains
and losses on mortgage and asset-backed securities are presented as an
adjustment to interest income.

     Repurchase Agreements - Money market instruments may be purchased from
banks and non-bank dealers subject to the seller's agreement to repurchase them
at an agreed upon date and price. Collateral for repurchase agreements may have
longer maturities than the maximum permissible remaining maturity of portfolio
investments. The seller is required on a daily basis to maintain the value of
the securities subject to the agreement at not less than the


104



                                BLACKROCK FUNDS

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.

     Stripped Mortgage Backed Securities - The Funds may invest in stripped
mortgage-backed securities issued by the U.S. Government, its agencies and
instrumentalities. Stripped mortgage-backed securities are usually structured
with two classes that receive different proportions of the interest and
principal distributions on a pool of mortgage assets. In certain cases, one
class will receive all of the interest (the interest-only or "IO" class), while
the other class will receive all of the principal (the principal-only or "PO"
class). During the period ended September 30, 2004, certain interest only
securities were held as part of the overall mortgage portfolio holdings. The
yield to maturity on IOs is sensitive to the rate of principal repayments
(including prepayments) on the related underlying mortgage assets, and
principal payments may have a material effect on yield to maturity. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, a Fund may not fully recoup its initial investment in IOs. Such
securities will be considered liquid only if so determined in accordance with
guidelines established by the Trustees. The Funds also may invest in stripped
mortgage-backed securities that are privately issued. These securities will be
considered illiquid for purposes of each Fund's limit on illiquid securities.

     Investing in Government Sponsored Enterprises - The Fund invests in
securities issued by the Federal Home Loan Mortgage Corporation ("Freddie Mac")
and similar United States Government sponsored entities such as Federal
National Mortgage Association ("Fannie Mae") and the Federal Home Loan Banks
("FHLB's"). Freddie Mac, Fannie Mae, and FHLB's, although chartered and
sponsored by Congress, are not funded by Congressional appropriations and the
debt and mortgage-backed securities issued by Freddie Mac, Fannie Mae and
FHLB's are neither guaranteed nor insured by the United States Government.

     Option Writing/Purchasing - The Portfolios may write or purchase financial
options contracts for the purpose of hedging or earning additional income,
which may be deemed speculative. When the 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


                                                                             105



                                BLACKROCK FUNDS
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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 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 year
ended September 30, 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 ............................       (66)        5,499      (1,056)        190,439
  Purchased ..........................       466       (33,223)        390         (16,016)
  Expired ............................      (400)       27,724          46         (19,496)
  Closed .............................         -             -         633        (158,389)
  Exercised ..........................         -             -           -               -
                                            ----     ---------      ------      ----------
  Balance at 09/30/04 ................         -     $       -            (4)   $   19,570
                                            ====     =========      =========   ==========

     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 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 receives 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


106



                                BLACKROCK FUNDS

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.

     Inflation-indexed Bonds - Inflation-indexed bonds are fixed income
securities whose principal value is periodically adjusted according to the rate
of inflation. If the index measuring inflation falls, the principal value of
inflation-indexed bonds will be adjusted downward, and consequently the
interest payable on these securities (calculated with respect to a smaller
principal amount) will be reduced. Repayment of the original bond principal
upon maturity (as adjusted for inflation) is guaranteed in the case of U.S.
Treasury inflation-indexed bonds. For bonds that do not provide a similar
guarantee, the adjusted principal value of the bond repaid at maturity may be
less than the original principal.

     Securities Lending - Through an agreement with PFPC Trust Company, the
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 securities on loan. However, due to market fluctuations, the
value of the securities lent may exceed the value of the collateral. On the
next business day, the collateral is adjusted based on the prior day's market
fluctuations and the current day's lending activity. Cash collateral received
in connection with the securities lending is invested in short-term investments
by the lending agent. The lending agent has hired BlackRock Capital Management,
Inc., a wholly-owned subsidiary of BlackRock, Inc., to provide advisory
services with respect to the collateral of all of the clients of its securities
lending program. The lending agent may invest such collateral in short-term
investments, including the Institutional Money Market Trust (the "Trust"), a
portfolio of money market securities, or high-quality, short-term instruments
with a maturity date not to exceed 397 days. BlackRock Capital Management, Inc.
serves as investment adviser to the Trust, but receives no fees from the Trust
for these services. Administrative and accounting services are provided by PFPC
Inc., an indirect wholly-owned subsidiary of The PNC Financial Services Group,
Inc. PFPC, Inc. is paid a fee from the Trust at an annual rate not to exceed
0.10% of the Trust's average daily net assets. At September 30, 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 ..............   $ 26,943,502         $ 7,047,308           $ 27,540,637
 Large Cap Growth Equity Portfolio .............      9,516,089           1,486,164              9,818,240
 Mid-Cap Value Equity Portfolio ................      5,653,247           2,630,225              5,778,663
 Mid-Cap Growth Equity Portfolio ...............     23,631,875           6,715,830             24,441,868
 Small Cap Value Equity Portfolio ..............     11,214,958           4,985,496             11,528,796
 Small Cap Growth Equity Portfolio .............     62,313,824          42,644,064             64,712,920
 International Equity Portfolio ................        870,397             924,000                924,000
 International Opportunities Portfolio .........      3,066,024           3,124,800              3,124,800
 Select Equity Portfolio .......................      8,896,580             679,522              9,163,435
 Balanced Portfolio ............................      5,966,226             553,700              6,129,092

     In the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings.

     Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
"generally accepted accounting principles" requires the use of management
estimates. Actual results could differ from these estimates.

     Other - Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in exchange rates.


                                                                             107



                                BLACKROCK FUNDS
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     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.

     Expenses that are directly related to one of the Portfolios are charged
directly to that Portfolio. Other operating expenses are prorated to the
Portfolios on the basis of relative net assets. Class-specific expenses are
borne by that class. Differences in net expense ratios between classes of a
portfolio are due to class-specific expenses, waivers and accrual adjustments.
Income, other expenses and realized and unrealized gains and losses of a
Portfolio are allocated to the respective class on the basis of the relative
net assets each day.

     The 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 (1)    Fees (4)       Fees      Fees (4)     Fees (1)    Fees (4)
 Large Cap Value Equity            N/A          N/A          None        None    0.25%         0.25%
 Large Cap Growth Equity           N/A          N/A          None        None    0.25%         0.25%
 Dividend AchieversTM              N/A          N/A          None        None    0.25%         0.25%
 Mid-Cap Value Equity              N/A          N/A          None        None    0.25%         0.25%
 Mid-Cap Growth Equity             N/A          N/A          None        None    0.25%         0.25%
 Small Cap Value Equity        0.25%         0.25%           None        None    0.25%         0.25%
 Small Cap Core Equity             N/A          N/A          None        None    0.25%         0.25%
 Small Cap Growth Equity           N/A          N/A          None        None    0.25%         0.25%
 U.S. Opportunities                N/A          N/A          None        None    0.25%         0.25%
 Global Science & Technology       N/A          N/A          None        None    0.25%         0.25%
  Opportunities
 International Equity              N/A          N/A          None        None    0.25%         0.25%
 International Opportunities       N/A          N/A          None        None    0.25%         0.25%
 Select Equity                     N/A          N/A          None        None    0.25%         0.25%
 Index Equity                      N/A          N/A          None        None    0.25%         0.25%
 Balanced                          N/A          N/A          None        None    0.25%         0.25%



           Portfolio                                         Share Classes
                                      Investor A               Investor B              Investor C
                                Contractual    Actual    Contractual    Actual    Contractual    Actual
                                  Fees (2)    Fees (4)     Fees (3)    Fees (4)     Fees (3)    Fees (4)
 Large Cap Value Equity        0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
 Large Cap Growth Equity       0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
 Dividend AchieversTM          0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
 Mid-Cap Value Equity          0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
 Mid-Cap Growth Equity         0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
 Small Cap Value Equity        0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
 Small Cap Core Equity         0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
 Small Cap Growth Equity       0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
 U.S. Opportunities            0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
 Global Science & Technology   0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
  Opportunities
 International Equity          0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
 International Opportunities   0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
 Select Equity                 0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
 Index Equity                  0.35%         0.25%      1.00%         1.00%      1.00%         1.00%
 Balanced                      0.35%         0.25%      1.00%         1.00%      1.00%         1.00%

(1) - the maximum annual contractual fees are comprised of a .25% service fee.
(2) - the maximum annual contractual fees are comprised of a .10% distribution
fee and a .25% service fee.
(3) - the maximum annual contractual fees are comprised of a .75% distribution
fee and a .25% service fee.
(4) - the actual fees are as of September 30, 2004.

     On June 21, 2004, the Board of Trustees approved effective July 1, 2004,
the elimination of the shareholder processing fee of 0.15% on Service, Investor
A, B, C and Hilliard Lyons Shares and increased the shareholder service fee on
the Service Shares from 0.15% to 0.25%.

     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 plus per account fees and


108



                                BLACKROCK FUNDS

disbursements, 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 plus
per account fees and disbursements.

     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 the Index Equity Portfolio.

     For the year ended September 30, 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
                                     ----------- --------------- ----------- ------------ ------------ -----------
   Large Cap Value Equity ..........     $  -       $ 194,536     $ 80,684     $ 93,792     $ 27,580    $  8,840
   Large Cap Growth Equity .........        -          48,679       53,093       36,087       21,035       3,939
   Dividend AchieversTM ............        -             174            -            -            -           -
   Mid-Cap Value Equity ............        -          29,318        6,480        6,212       11,081       3,468
   Mid-Cap Growth Equity ...........        -          67,672       19,193       41,759       51,704      18,380
   Small Cap Value Equity ..........      146         101,420        5,649       57,799       24,284       9,712
   Small Cap Core Equity ...........        -           2,395            -        2,451          836       1,561
   Small Cap Growth Equity .........        -         336,157       45,258      188,633       39,585      21,224
   U.S. Opportunities ..............        -           9,795        1,959       46,884       63,785      31,539
   Global Science & Technology
    Opportunities ..................        -           3,593          153       17,263       22,245       5,697
   International Equity ............        -          53,182       12,857       18,858        4,163       2,177
   International Opportunities .....        -         122,654       14,093      105,705       60,832      65,241
   Select Equity ...................        -          84,693        2,669       28,116       32,019       3,026
   Index Equity ....................        -         903,647      119,649      465,682      288,088     449,035
   Balanced ........................        -          17,007        3,284      112,237       61,302       7,333


                                                                            SHARE CLASSES
ADMINISTRATION FEES WAIVED               ------------------------------------------------------------------------------------
                                          BLACKROCK   INSTITUTIONAL      SERVICE      INVESTOR A    INVESTOR B    INVESTOR C
                                         ----------- --------------- -------------- -------------- ------------ -------------
   Large Cap Value Equity ..............   $    -      $  (100,764)    $  (45,588)    $  (17,881)   $  (9,828)    $  (1,719)
   Large Cap Growth Equity .............        -          (30,610)       (26,498)        (7,451)      (4,614)       (1,471)
   Dividend AchieversTM ................        -             (174)             -              -            -             -
   Mid-Cap Value Equity ................        -          (15,658)        (3,385)        (1,063)      (1,853)         (590)
   Mid-Cap Growth Equity ...............        -          (21,086)        (3,540)          (505)      (4,500)       (4,375)
   Small Cap Value Equity ..............     (146)          (7,432)          (481)             -            -             -
   Small Cap Core Equity ...............        -           (1,684)             -           (602)        (209)         (259)
   Small Cap Growth Equity .............        -           (6,742)             -              -            -             -
   U.S. Opportunities ..................        -           (3,384)          (907)        (2,408)      (3,282)       (4,021)
   Global Science & Technology
    Opportunities ......................        -           (1,797)           (75)        (3,014)      (7,219)       (1,124)
   International Equity ................        -          (16,916)        (3,832)        (7,088)        (985)         (488)
   International Opportunities .........        -          (73,031)        (8,967)       (15,424)      (8,157)       (9,239)
   Select Equity .......................        -          (46,959)        (1,173)        (6,022)      (6,137)         (619)
   Index Equity ........................        -         (894,442)       (54,952)             -            -             -
   Balanced ............................        -          (10,930)        (1,700)       (22,979)     (13,025)       (1,548)


                                                                             109



                                BLACKROCK FUNDS
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


                                                                         SHARE CLASSES
TRANSFER AGENT FEES                      -----------------------------------------------------------------------------
                                          BLACKROCK   INSTITUTIONAL    SERVICE    INVESTOR A   INVESTOR B   INVESTOR C
                                         ----------- --------------- ----------- ------------ ------------ -----------
   Large Cap Value Equity ..............     $ -         $ 28,699     $ 11,895     $ 25,466      $ 7,259    $  2,254
   Large Cap Growth Equity .............       -            7,154        7,891       10,447        5,676       1,051
   Dividend AchieversTM ................       -               22            -            -            -           -
   Mid-Cap Value Equity ................       -            4,378          963        1,611        2,921         892
   Mid-Cap Growth Equity ...............       -            9,844        2,827       10,861       13,787       4,956
   Small Cap Value Equity ..............      21           14,784          832       15,646        6,360       2,519
   Small Cap Core Equity ...............       -              340            -          377          121         206
   Small Cap Growth Equity .............       -           47,333        6,446       47,755       10,478       5,337
   U.S. Opportunities ..................       -            1,438          257       12,281       17,026       8,451
   Global Science & Technology
    Opportunities ......................       -              533           22        4,721        6,241       1,587
   International Equity ................       -            9,116        2,213        4,965        1,040         480
   International Opportunities .........       -           17,186        1,827       22,327       15,007      14,717
   Select Equity .......................       -           12,402          394        7,643        8,537         782
   Index Equity ........................       -          133,160       17,158      120,151       77,155     120,053
   Balanced ............................       -            2,482          476       31,897       16,216       1,939


                                                                        SHARE CLASSES
SHAREHOLDER SERVICE FEES                   -----------------------------------------------------------------------
                                            BLACKROCK       SERVICE      INVESTOR A     INVESTOR B     INVESTOR C
                                           -----------   ------------   ------------   ------------   ------------
   Large Cap Value Equity ..............      $    -      $ 100,042      $ 148,182       $ 47,551       $ 15,446
   Large Cap Growth Equity .............           -         61,766         62,864         36,695          7,008
   Mid-Cap Value Equity ................           -          7,840         10,408         19,194          6,009
   Mid-Cap Growth Equity ...............           -         22,537         74,536         92,479         33,351
   Small Cap Value Equity ..............       1,043          7,049        100,964         41,953         16,751
   Small Cap Core Equity ...............           -              -          4,221          1,442          2,702
   Small Cap Growth Equity .............           -         52,504        328,202         69,152         37,607
   U.S. Opportunities ..................           -          3,406         82,961        112,488         56,312
   Global Science & Technology
    Opportunities ......................           -            182         30,762         40,018         10,205
   International Equity ................           -         13,178         35,597          7,734          3,764
   International Opportunities .........           -         18,751        183,191        106,719        113,485
   Select Equity .......................           -          2,776         48,205         55,405          5,329
   Index Equity ........................           -        152,414        767,303        496,879        778,546
   Balanced ............................           -          3,835        194,898        105,790         12,753


                                                            SHARE CLASSES
SHAREHOLDER PROCESSING FEES            --------------------------------------------------------
                                         SERVICE      INVESTOR A     INVESTOR B     INVESTOR C
                                       -----------   ------------   ------------   ------------
   Large Cap Value Equity ..........    $ 71,674       $ 66,242       $ 21,590        $ 6,866
   Large Cap Growth Equity .........      42,321         30,000         17,044          3,162
   Mid-Cap Value Equity ............       5,491          4,917          8,755          2,679
   Mid-Cap Growth Equity ...........      15,472         33,553         42,748         15,604
   Small Cap Value Equity ..........       4,906         46,663         19,145          7,543
   Small Cap Core Equity ...........           -          1,504            492            634
   Small Cap Growth Equity .........      33,632        144,899         32,408         17,228
   U.S. Opportunities ..............         392         38,102         52,112         26,167

110



                          BLACKROCK FUNDS


                                                                SHARE CLASSES
SHAREHOLDER PROCESSING FEES                -------------------------------------------------------
                                             SERVICE     INVESTOR A     INVESTOR B     INVESTOR C
                                           ----------   ------------   ------------   ------------
   Global Science & Technology
    Opportunities ......................    $    124      $ 14,741       $ 19,358       $  4,338
   International Equity ................      10,288        16,848          3,627          1,510
   International Opportunities .........       8,383        73,839         47,498         48,187
   Select Equity .......................       1,715        22,115         25,349          2,279
   Index Equity ........................     102,345       385,063        228,918        354,937
   Balanced ............................       2,433        91,891         47,894          5,732


                                                         SHARE CLASSES
DISTRIBUTION FEES                          ------------------------------------------
                                            INVESTOR A     INVESTOR B     INVESTOR C
                                           ------------   ------------   ------------
   Large Cap Value Equity ..............     $ 64,645      $  150,098     $   45,964
   Large Cap Growth Equity .............       24,878         109,883         21,030
   Mid-Cap Value Equity ................        4,281          57,922         18,106
   Mid-Cap Growth Equity ...............       28,771         275,322        100,159
   Small Cap Value Equity ..............       39,845         121,243         50,262
   Small Cap Core Equity ...............        1,694           8,106          4,328
   Small Cap Growth Equity .............      130,334         206,974        112,829
   U.S. Opportunities ..................       32,301         332,450        169,265
   Global Science & Technology
    Opportunities ......................       11,895         119,879         30,661
   International Equity ................       12,998          18,370         11,299
   International Opportunities .........       73,015         319,564        340,641
   Select Equity .......................       19,409         165,624         16,009
   Index Equity ........................      311,710       1,494,836      2,327,323
   Balanced ............................       77,278         318,481         38,200


                                            SHARE CLASSES
DISTRIBUTION FEES WAIVED                   ---------------
                                              INVESTOR A
                                           ---------------
   Large Cap Value Equity ..............     $   (63,888)
   Large Cap Growth Equity .............         (24,550)
   Mid-Cap Value Equity ................          (4,235)
   Mid-Cap Growth Equity ...............         (28,475)
   Small Cap Value Equity ..............         (39,380)
   Small Cap Core Equity ...............          (1,690)
   Small Cap Growth Equity .............        (129,014)
   U.S. Opportunities ..................         (31,959)
   Global Science & Technology
    Opportunities ......................         (11,755)
   International Equity ................         (12,854)
   International Opportunities .........         (72,522)
   Select Equity .......................         (19,203)
   Index Equity ........................        (307,441)
   Balanced ............................         (76,367)

(C) 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 the
Index Equity Portfolio. 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 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.


                                                                             111



                                BLACKROCK FUNDS
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     For its advisory services, BlackRock is entitled to receive fees at the
following annual rates, computed daily and payable monthly, based on each
Portfolio's average daily net assets:

     Large Cap Value Equity, Large Cap Growth Equity, Dividend AchieversTM,
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 - .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 period ended September 30, 2004, advisory fees and waivers for
   each portfolio were as follows:


                                                                      GROSS                        NET
                                                                    ADVISORY                    ADVISORY
                                                                       FEE         WAIVER          FEE
                                                                 -------------- ------------ --------------
     Large Cap Value Equity Portfolio .........................   $ 1,537,217    $ 115,217    $ 1,422,000
     Large Cap Growth Equity Portfolio ........................       617,380      114,659        502,721
     Dividend AchieversTM .....................................           661          661              -
     Mid-Cap Value Equity Portfolio ...........................       311,919        6,178        305,741
     Mid-Cap Growth Equity Portfolio ..........................     1,095,761            -      1,095,761
     Small Cap Value Equity Portfolio .........................       756,437       34,574        721,863
     Small Cap Core Equity Portfolio ..........................        50,207       47,609          2,598
     Small Cap Growth Equity Portfolio ........................     2,397,602            -      2,397,602
     U.S. Opportunities Portfolio .............................     1,167,054            -      1,167,054
     Global Science & Technology Opportunities Portfolio ......       303,566       41,767        261,799
     International Equity Portfolio ...........................       470,250       89,009        381,241
     International Opportunities Portfolio ....................     2,544,526      118,546      2,425,980
     Select Equity Portfolio ..................................       570,700       91,554        479,146
     Balanced Portfolio .......................................       762,454      111,760        650,694

     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 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, other expenditures which are capitalized in accordance with
generally accepted accounting principles and other extraordinary expenses).
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. At September 30, 2004, the receivable
from BlackRock in the Small Cap Core Equity Portfolio and Index Equity
Portfolio was $5,317 and $142,917, respectively.

     If in the following two years the operating expenses of a share class that
previously received a waiver or reimbursement from BlackRock or BIL are less
than the expense limit for that share class, the share class is required to
repay BlackRock or BIL up to the amount of fees waived or expenses reimbursed
under the agreement if: (1) the Portfolio of which the share class is a part
has more than $50 million in assets, (2) BlackRock 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 at the previous quarterly meeting.


112



                                BLACKROCK FUNDS

     At September 30, 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            $ 172,077        $ 1,140,874
   Large Cap Growth Equity Portfolio.....          274,930              154,813              118,870            548,613
   Dividend AchieversTM Portfolio .......                -                    -               63,754             63,754
   Mid-Cap Value Equity Portfolio .......           23,495                    8               27,968             51,471
   Mid-Cap Growth Equity Portfolio ......           30,063                5,005               30,400             65,468
   Small Cap Value Equity Portfolio .....           86,158                    -               20,870            107,028
   Small Cap Core Equity Portfolio ......           13,541               12,634               25,591             51,766
   Small Cap Growth Equity Portfolio.....          227,030                    -                6,742            233,772
   U.S. Opportunities Portfolio .........          107,597                    -               14,002            121,599
   Global Science & Technology
    Opportunities Portfolio .............          101,278               23,534               50,662            175,474
   International Equity Portfolio .......          113,051              114,674               90,691            318,416
   International Opportunities
    Portfolio ...........................          178,760               41,722              185,320            405,802
   Select Equity Portfolio ..............          310,818              169,360               94,392            574,570
   Index Equity Portfolio ...............                -                    -              968,789            968,789
   Balanced Portfolio ...................          146,109              156,776               77,939            380,824

     BlackRock pays BIL and BFM fees for their sub-advisory services.

     PFPC Inc. ("PFPC"), an indirect wholly-owned subsidiary of The PNC
Financial Services Group, Inc., and BlackRock act as co-administrators for the
Fund. For these services, the co-administrators receive a combined
administration fee computed daily and payable monthly, based on a percentage of
the average daily net assets of each Portfolio, at the following annual rates:
.085% of the first $500 million, .075% of the next $500 million and .065% of
assets in excess of $1 billion. In addition, each of the share 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: .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 or share class.

     For the year ended September 30, 2004, administration fees and waivers for
each Portfolio were as follows:


                                                                     GROSS                         NET
                                                                ADMINISTRATION                ADMINISTRATION
                                                                      FEE          WAIVER          FEE
                                                               ---------------- ------------ ---------------
    Large Cap Value Equity Portfolio ........................     $  643,002     $  175,780     $  467,222
    Large Cap Growth Equity Portfolio .......................        258,246         70,644        187,602
    Dividend AchieversTM Portfolio ..........................            276            276              -
    Mid-Cap Value Equity Portfolio ..........................         89,700         22,549         67,151
    Mid-Cap Growth Equity Portfolio .........................        315,133         34,006        281,127
    Small Cap Value Equity Portfolio ........................        315,914          8,059        307,855
    Small Cap Core Equity Portfolio .........................         11,511          6,203          5,308
    Small Cap Growth Equity Portfolio .......................      1,001,395          6,742        994,653
    U.S. Opportunities Portfolio ............................        244,143         14,002        230,141
    Global Science & Technology Opportunities Portfolio .....         77,621         13,229         64,392
    International Equity Portfolio ..........................        144,532         29,309        115,223
    International Opportunities Portfolio ...................        584,810        115,595        469,215
    Select Equity Portfolio .................................        238,722         66,294        172,428
    Index Equity Portfolio ..................................      3,379,131      1,846,799      1,532,332
    Balanced Portfolio ......................................        318,997         50,182        268,815

                               113



                                BLACKROCK FUNDS
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     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 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 brokers, dealers, financial institutions and
industry professionals (including PNC Bank and its affiliates) ("service
organizations") fees for the provision of personal services to shareholders.
BlackRock may receive some of the service fees paid by the Fund in return for
providing services to shareholders. Currently, only Investor A Shares, Investor
B Shares, Investor C Shares, Service Shares and BlackRock Shares of the Small
Cap Value Equity Portfolio bear the expense of service fees under the Plan.

     As of the period ended September 30, 2004, affiliated payables were as
follows:


                                                                                                       PNC BANK
                                                                       PFPC(1)      BLACKROCK(2)     AFFILIATES(3)
                                                                     -----------   --------------   --------------
   Large Cap Value Equity Portfolio ..............................    $ 30,615        $ 137,474        $ 42,431
   Large Cap Growth Equity Portfolio .............................      15,604           37,957          23,192
   Dividend AchieversTM Portfolio ................................       1,435                -               -
   Mid-Cap Value Equity Portfolio ................................       5,315           25,016           9,496
   Mid-Cap Growth Equity Portfolio ...............................      22,680           91,765          43,307
   Small Cap Value Equity Portfolio ..............................      16,219           45,845          26,891
   Small Cap Core Equity Portfolio ...............................       2,503                -           3,973
   Small Cap Growth Equity Portfolio .............................      55,430          274,994          66,108
   U.S. Opportunities Portfolio ..................................      22,986          104,178          56,953
   Global Science and Technology Opportunities Portfolio .........      11,487           26,637          14,783
   International Equity Portfolio ................................       6,748           21,614           7,103
   International Opportunities Equity Portfolio ..................      75,777          222,175         104,122
   Select Equity Portfolio .......................................      14,497           57,047          23,112
   Index Equity Portfolio ........................................     117,931                -         462,222
   Balanced Portfolio ............................................      23,073           57,602          51,331

(1) - payables to PFPC are for Accounting, Administration, Custody and Transfer
   Agent services provided as of September 30, 2004.
(2) - payables to BlackRock are for Advisory and Administration services
   provided as of September 30, 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 September 30, 2004, was $2,244,494, 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.


114



                                BLACKROCK FUNDS

(D) Purchases and Sales of Securities

     For the year ended September 30, 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 ............................    $207,126,639      $314,426,359
   Large Cap Growth Equity Portfolio ...........................      77,206,471       119,341,377
   Dividend AchieversTM Portfolio ..............................       1,978,364            85,595
   Mid-Cap Value Equity Portfolio ..............................      85,138,184       103,601,068
   Mid-Cap Growth Equity Portfolio .............................      38,913,519        71,356,525
   Small Cap Value Equity Portfolio ............................     205,604,582       233,426,940
   Small Cap Core Equity Portfolio .............................      10,973,365         3,722,224
   Small Cap Growth Equity Portfolio ...........................     446,099,397       339,448,586
   U.S. Opportunities Portfolio ................................     109,219,414       128,846,334
   Global Science & Technology Opportunities Portfolio .........      37,162,785        44,077,506
   International Equity Portfolio ..............................      69,242,810       173,497,483
   International Opportunities Portfolio .......................     350,841,128       233,654,129
   Select Equity Portfolio .....................................      73,816,549        99,864,706
   Balanced Portfolio ..........................................     137,458,645       159,278,422

     For the year ended September 30, 2004, purchases and sales of U.S.
government securities were as follows:


                                                        PURCHASES          SALES
                                                     --------------   --------------
   Dividend AchieversTM Portfolio ................    $  1,899,614     $  1,899,922
   Mid-Cap Value Equity Portfolio ................       1,499,241                -
   Small Cap Growth Equity Portfolio .............      54,981,129        7,098,365
   International Equity Portfolio ................      18,894,426        9,897,147
   International Opportunities Portfolio .........      59,990,776                -
   Balanced Portfolio ............................     105,274,159       73,132,670

                               115



                                BLACKROCK FUNDS
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(E) Capital Shares

     Transactions in capital shares for each period were as follows:


                                                                     LARGE CAP VALUE EQUITY PORTFOLIO
                                              ------------------------------------------------------------------------------
                                                       FOR THE YEAR ENDED                       FOR THE YEAR ENDED
                                                             9/30/04                                 9/30/03
                                              -------------------------------------   --------------------------------------
                                                   SHARES              VALUE               SHARES               VALUE
                                              ---------------   -------------------   ----------------   -------------------
Shares sold:
 Institutional Class ......................         316,937       $     3,903,308          3,240,434       $    32,600,164
 Service Class ............................         493,431             6,007,440          2,412,581            23,128,752
 Investor A Class .........................         636,019             7,793,537         15,720,338           153,834,517
 Investor B Class .........................         156,179             1,857,657            150,055             1,488,845
 Investor C Class .........................         218,843             2,628,823            341,106             3,289,890
Shares issued in reinvestment of dividends:
 Institutional Class ......................          31,312               385,701             68,375               692,743
 Service Class ............................          49,696               613,098             81,996               837,562
 Investor A Class .........................          45,966               567,650             60,511               618,470
 Investor B Class .........................           3,582                43,292              2,443                25,868
 Investor C Class .........................             659                 8,032                325                 3,449
Shares redeemed:
 Institutional Class ......................      (5,418,443)          (65,488,958)       (31,146,651)         (309,049,186)
 Service Class ............................      (2,654,757)          (32,310,859)       (11,902,499)         (117,928,399)
 Investor A Class .........................      (2,322,080)          (28,657,371)       (18,483,067)         (181,349,877)
 Investor B Class .........................        (366,792)           (4,399,303)          (484,506)           (4,659,827)
 Investor C Class .........................        (159,711)           (1,931,382)          (532,942)           (5,087,994)
                                                 ----------       ---------------        -----------       ---------------
Net decrease ..............................      (8,969,159)      $  (108,979,335)       (40,471,501)      $  (401,555,023)
                                                 ==========       ===============        ===========       ===============

116



                          BLACKROCK FUNDS


                                                       LARGE CAP GROWTH EQUITY PORTFOLIO
                                 -----------------------------------------------------------------------------
                                          FOR THE YEAR ENDED                      FOR THE YEAR ENDED
                                               9/30/04                                 9/30/03
                                 ------------------------------------   --------------------------------------
                                      SHARES              VALUE              SHARES               VALUE
                                 ---------------   ------------------   ----------------   -------------------
Shares sold:
 Institutional Class .........         414,248       $    3,748,569          1,197,575       $     8,930,536
 Service Class ...............       1,491,678           12,963,992          2,826,351            20,523,510
 Investor A Class ............         408,084            3,544,786          3,759,123            27,625,991
 Investor B Class ............         141,746            1,142,700            188,606             1,308,926
 Investor C Class ............          65,005              522,781            149,153             1,030,367
Shares redeemed:
 Institutional Class .........      (1,789,964)         (16,165,845)       (11,694,044)          (87,824,058)
 Service Class ...............      (3,123,574)         (27,376,334)       (17,217,920)         (124,274,818)
 Investor A Class ............      (1,701,982)         (14,854,493)        (5,543,015)          (40,528,446)
 Investor B Class ............        (491,755)          (3,942,213)          (583,492)           (3,938,732)
 Investor C Class ............         (92,909)            (744,035)          (195,489)           (1,300,821)
                                    ----------       --------------        -----------       ---------------
Net decrease .................      (4,679,423)      $  (41,160,092)       (27,113,152)      $  (198,447,545)
                                    ==========       ==============        ===========       ===============
                                 DIVIDEND ACHIEVERSTM PORTFOLIO
                                 ------------------------------------
                                        FOR THEPERIOD 9/08/041
                                 THROUGH 9/30/04
                                 ------------------------------------
                                     SHARES              VALUE
                                 -------------       --------------
Shares sold:
 Institutional Class .........         200,010       $    2,000,100
 Service Class ...............              10                  100
 Investor A Class ............              10                  100
 Investor B Class ............              10                  100
 Investor C Class ............              10                  100
                                 -------------       --------------
Net increase .................         200,050       $    2,000,500
                                 =============       ==============

1 Commencement of operations.

                                                                             117



                                BLACKROCK FUNDS
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


                                                                    MID-CAP VALUE EQUITY PORTFOLIO
                                              ---------------------------------------------------------------------------
                                                       FOR THE YEAR ENDED                     FOR THE YEAR ENDED
                                                            9/30/04                                9/30/03
                                              ------------------------------------   ------------------------------------
                                                   SHARES              VALUE              SHARES              VALUE
                                              ---------------   ------------------   ---------------   ------------------
Shares sold:
 Institutional Class ......................          58,942       $      776,996           407,956       $    4,171,195
 Service Class ............................          67,615              874,377           354,341            3,503,382
 Investor A Class .........................          78,062            1,012,222           352,927            3,631,868
 Investor B Class .........................          83,192            1,045,146           128,878            1,292,549
 Investor C Class .........................          49,604              618,544            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 ......................      (1,006,622)         (13,001,327)       (4,070,716)         (41,114,441)
 Service Class ............................        (283,844)          (3,676,680)       (1,294,414)         (13,141,520)
 Investor A Class .........................        (113,038)          (1,472,256)         (535,756)          (5,449,310)
 Investor B Class .........................        (184,832)          (2,317,835)         (249,737)          (2,438,054)
 Investor C Class .........................         (53,675)            (670,511)         (101,121)            (978,978)
                                                 ----------       --------------        ----------       --------------
Net decrease ..............................      (1,298,178)      $  (16,730,595)       (4,495,997)      $  (45,498,300)
                                                 ==========       ==============        ==========       ==============
                                                                     MID-CAP GROWTH EQUITY PORTFOLIO
                                              ------------------------------------------------------------------------------
                                              FOR THE YEAR ENDED                                FORTHE YEAR ENDED
                                                  9/30/04                                            9/30/03
                                               -------------                         -------------
                                                  SHARES              VALUE              SHARES              VALUE
                                              -------------       --------------     -------------       --------------
Shares sold:
 Institutional Class ......................       1,138,699       $   10,071,810        11,990,415       $   76,914,117
 Service Class ............................         290,419            2,373,896         1,099,693            7,259,681
 Investor A Class .........................         728,127            5,999,086        14,096,827           85,022,085
 Investor B Class .........................         346,652            2,637,708           716,542            4,466,221
 Investor C Class .........................         120,482              898,547           364,293            2,166,396
Shares redeemed:
 Institutional Class ......................      (2,741,486)         (23,538,563)      (18,600,646)        (119,752,716)
 Service Class ............................        (931,008)          (7,817,212)       (3,261,434)         (20,780,159)
 Investor A Class .........................        (987,595)          (8,047,211)      (15,022,266)         (90,612,224)
 Investor B Class .........................      (1,259,848)          (9,597,814)       (1,874,359)         (11,125,906)
 Investor C Class .........................        (474,226)          (3,615,906)         (769,364)          (4,489,876)
                                              -------------       --------------     -------------       --------------
Net decrease ..............................      (3,769,784)      $  (30,635,659)      (11,260,299)      $  (70,932,381)
                                              =============       ==============     =============       ==============

118



                          BLACKROCK FUNDS


                                                                   SMALL CAP VALUE EQUITY PORTFOLIO
                                              --------------------------------------------------------------------------
                                                       FOR THE YEAR ENDED                    FOR THE YEAR ENDED
                                                            9/30/04                                9/30/03
                                              ------------------------------------   -----------------------------------
                                                   SHARES              VALUE              SHARES             VALUE
                                              ---------------   ------------------   ---------------   -----------------
Shares sold:
 BlackRock Class ..........................         315,702       $    4,770,100                 -      $            -
 Institutional Class ......................         521,530            7,823,358         3,944,811          46,350,668
 Service Class ............................          65,337              975,578           577,917           7,424,957
 Investor A Class .........................         547,652            8,197,136         8,259,359         100,775,276
 Investor B Class .........................         231,497            3,164,522           316,893           3,634,187
 Investor C Class .........................         135,519            1,856,956           180,810           2,008,295
Shares issued in reinvestment of dividends:
 BlackRock Class ..........................               -                    -                 -                   -
 Institutional Class ......................         478,137            6,837,365         1,133,758          12,709,428
 Service Class ............................          33,951              482,112            93,937           1,049,275
 Investor A Class .........................         309,675            4,375,692           525,274           5,856,804
 Investor B Class .........................         103,156            1,346,196           133,767           1,400,541
 Investor C Class .........................          29,701              387,903            37,741             395,145
Shares redeemed:
 BlackRock Class ..........................          (1,351)             (20,000)                -                   -
 Institutional Class ......................      (1,571,511)         (23,832,897)       (9,747,842)       (114,700,710)
 Service Class ............................        (174,903)          (2,606,851)         (944,977)        (10,853,006)
 Investor A Class .........................      (1,218,073)         (18,004,283)       (9,513,889)       (113,871,126)
 Investor B Class .........................        (322,299)          (4,438,190)         (493,538)         (5,622,067)
 Investor C Class .........................        (123,055)          (1,708,064)         (277,861)         (3,122,537)
                                                 ----------       --------------        ----------      --------------
Net decrease ..............................        (639,335)      $  (10,393,367)       (5,773,840)     $  (66,564,870)
                                                 ==========       ==============        ==========      ==============


                                                          SMALL CAP CORE EQUITY PORTFOLIO
                                              -------------------------------------------------------
                                                    FOR THE YEAR ENDED           FOR THE YEAR ENDED
                                                         9/30/04                      9/30/03
                                              ------------------------------   ----------------------
                                                  SHARES           VALUE        SHARES       VALUE
                                              -------------   --------------   --------   -----------
Shares sold:
 Institutional Class ......................       124,804      $  1,824,326     3,226      $ 40,000
 Service Class ............................             -                 -         -             -
 Investor A Class .........................       320,205         4,683,838       569         7,000
 Investor B Class .........................        81,510         1,178,698         -             -
 Investor C Class .........................       233,839         3,405,315         -             -
Shares issued in reinvestment of dividends:
 Institutional Class ......................           103             1,401         -             -
 Service Class ............................             -                 1         -             -
 Investor A Class .........................           648             8,857         -             -
 Investor B Class .........................           188             2,550         -             -
 Investor C Class .........................            82             1,114         -             -
Shares redeemed:
 Institutional Class ......................      (106,127)       (1,545,748)        -             -
 Service Class ............................             -                 -         -             -
 Investor A Class .........................      (107,069)       (1,552,486)        -             -
 Investor B Class .........................        (2,497)          (34,973)        -             -
 Investor C Class .........................        (4,404)          (64,005)        -             -
                                                 --------      ------------     -----      --------
Net increase ..............................       541,282      $  7,908,888     3,795      $ 47,000
                                                 ========      ============     =====      ========

                               119



                                BLACKROCK FUNDS
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


                                                         SMALL CAP GROWTH EQUITY PORTFOLIO
                                    ----------------------------------------------------------------------------
                                             FOR THE YEAR ENDED                     FOR THE YEAR ENDED
                                                  9/30/04                                 9/30/03
                                    ------------------------------------   -------------------------------------
                                         SHARES              VALUE              SHARES               VALUE
                                    ---------------   ------------------   ----------------   ------------------
Shares sold:
 Institutional Class ............       9,110,273       $  136,169,237         15,119,579       $  146,717,197
 Service Class ..................         931,862           13,440,785            822,670            8,273,163
 Investor A Class ...............       4,817,353           65,691,548         30,151,339          272,707,262
 Investor B Class ...............         287,742            3,759,718            339,176            3,070,849
 Investor C Class ...............         398,471            5,122,745            212,894            2,033,597
Shares redeemed:
 Institutional Class ............      (3,801,835)         (55,800,303)       (21,336,459)        (204,727,307)
 Service Class ..................        (797,925)         (11,305,544)        (2,178,713)         (20,447,745)
 Investor A Class ...............      (4,023,966)         (55,474,563)       (32,508,994)        (293,644,669)
 Investor B Class ...............        (634,790)          (8,164,011)          (850,772)          (7,314,402)
 Investor C Class ...............        (345,714)          (4,324,174)          (366,285)          (3,156,322)
                                       ----------       --------------        -----------       --------------
Net increase (decrease) .........       5,941,471       $   89,115,438        (10,595,565)      $  (96,488,377)
                                       ==========       ==============        ===========       ==============
                                                             U.S. OPPORTUNITIES PORTFOLIO
                                    -------------------------------------------------------------------------------
                                    FOR THE YEAR ENDED                                 FORTHE YEAR ENDED
                                        9/30/04                                            9/30/03
                                     -------------                         --------------
                                        SHARES              VALUE               SHARES              VALUE
                                    -------------       --------------     --------------       --------------
Shares sold:
 Institutional Class ............         117,054       $    2,283,248          1,322,689       $   19,070,228
 Service Class ..................         101,311            1,970,021             61,397              786,516
 Investor A Class ...............         223,876            4,273,087          3,998,697           57,999,840
 Investor B Class ...............          77,348            1,397,751             53,915              740,982
 Investor C Class ...............          86,540            1,571,088            231,728            2,987,138
Shares redeemed:
 Institutional Class ............        (255,355)          (4,914,411)        (1,717,933)         (24,642,834)
 Service Class ..................         (11,639)            (221,344)           (72,961)            (930,897)
 Investor A Class ...............        (451,932)          (8,551,449)        (4,432,489)         (64,426,558)
 Investor B Class ...............        (559,049)         (10,148,159)          (936,669)         (12,265,692)
 Investor C Class ...............        (348,429)          (6,263,316)          (671,356)          (8,746,675)
                                    -------------       --------------     --------------       --------------
Net decrease ....................      (1,020,275)      $  (18,603,484)        (2,162,982)      $  (29,427,952)
                                    =============       ==============     ==============       ==============

120



                          BLACKROCK FUNDS


                                            GLOBAL SCIENCE & TECHNOLOGY OPPORTUNITIES PORTFOLIO
                                 -------------------------------------------------------------------------
                                         FOR THE YEAR ENDED                    FOR THE YEAR ENDED
                                               9/30/04                               9/30/03
                                 -----------------------------------   -----------------------------------
                                      SHARES             VALUE              SHARES             VALUE
                                 ---------------   -----------------   ---------------   -----------------
Shares sold:
 Institutional Class .........          67,134       $     397,026           144,352       $     710,403
 Service Class ...............           4,538              29,200            12,501              69,100
 Investor A Class ............         361,677           2,123,218           790,622           3,418,280
 Investor B Class ............         177,136           1,045,059           291,119           1,349,139
 Investor C Class ............          83,807             487,728           116,929             566,443
Shares redeemed:
 Institutional Class .........        (289,383)         (1,640,289)         (291,516)         (1,200,643)
 Service Class ...............          (8,508)            (47,856)           (1,008)             (5,045)
 Investor A Class ............        (611,686)         (3,519,972)       (1,230,586)         (5,222,922)
 Investor B Class ............        (953,314)         (5,358,747)         (822,694)         (3,297,441)
 Investor C Class ............        (219,524)         (1,247,839)         (211,051)           (838,708)
                                      --------       -------------        ----------       -------------
Net decrease .................      (1,388,123)      $  (7,732,472)       (1,201,332)      $  (4,451,394)
                                    ==========       =============        ==========       =============


                                                                     INTERNATIONAL EQUITY PORTFOLIO
                                               ---------------------------------------------------------------------------
                                                          FOR YEAR ENDED                       FOR YEAR ENDED
                                                             9/30/04                              9/30/03
                                               ------------------------------------ ------------------------------------
                                                    SHARES             VALUE               SHARES             VALUE
                                               ---------------- -------------------   ---------------- -------------------
Shares sold:
 Institutional Class .........................        852,245     $     8,914,481          9,618,776     $    68,184,428
 Service Class ...............................        249,578           2,361,950          2,596,540          18,212,051
 Investor A Class ............................        230,884           2,766,366          1,568,305          10,940,045
 Investor B Class ............................        147,549           1,507,090             44,012             294,243
 Investor C Class ............................        117,809           1,143,746         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 .........................    (10,405,187)        (95,374,055)       (31,464,512)       (222,969,612)
 Service Class ...............................     (2,598,553)        (22,429,974)        (8,792,033)        (62,289,223)
 Investor A Class ............................       (738,981)         (6,781,197)        (2,330,682)        (16,331,169)
 Investor B Class ............................       (221,431)         (1,950,365)          (127,942)           (853,642)
 Investor C Class ............................        (23,743)           (206,875)       (10,826,274)        (72,344,017)
                                                  -----------     ---------------        -----------     ---------------
Net decrease .................................    (12,369,644)    $  (109,876,796)       (28,964,502)    $  (205,867,299)
                                                  ===========     ===============        ===========     ===============

                               121



                                BLACKROCK FUNDS
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


                                                               INTERNATIONAL OPPORTUNITIES PORTFOLIO
                                              -----------------------------------------------------------------------
                                                       FOR YEAR ENDED                       FOR YEAR ENDED
                                                           9/30/04                              9/30/03
                                              ---------------------------------   -----------------------------------
                                                  SHARES            VALUE              SHARES             VALUE
                                              -------------   -----------------   ---------------   -----------------
Shares sold:
 Institutional Class ......................     1,675,872       $  39,545,723           764,579       $  12,682,119
 Service Class ............................       926,448          21,482,231            74,911           1,266,507
 Investor A Class .........................     3,199,383          73,871,653         1,612,494          26,197,040
 Investor B Class .........................       686,235          14,936,708           400,375           6,502,997
 Investor C Class .........................     1,411,947          31,064,713         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 .........................         1,346              29,462                 -                   -
 Investor B Class .........................           975              20,582                 -                   -
 Investor C Class .........................           738              15,558                 -                   -
Shares redeemed:
 Institutional Class ......................      (631,675)        (14,723,802)       (1,419,637)        (22,932,388)
 Service Class ............................      (205,804)         (4,765,889)          (39,316)           (695,180)
 Investor A Class .........................      (946,356)        (21,631,960)       (1,405,223)        (22,938,271)
 Investor B Class .........................      (375,821)         (8,266,369)         (512,651)         (8,009,654)
 Investor C Class .........................      (433,956)         (9,552,592)       (2,288,952)        (36,140,913)
                                                ---------       -------------        ----------       -------------
Net increase (decrease) ...................     5,310,769       $ 122,058,194          (374,936)      $  (5,661,958)
                                                =========       =============        ==========       =============


                                                                          SELECT EQUITY PORTFOLIO
                                              --------------------------------------------------------------------------------
                                              FOR THE YEAR ENDED                                FOR THE YEAR ENDED
                                                9/30/04                                               9/30/03
                                              ----------                             -----------
                                                SHARES              VALUE               SHARES               VALUE
                                              ----------              -------        -----------               -------
Shares sold:
 Institutional Class ......................         216,622       $    2,456,412            521,531       $     4,865,325
 Service Class ............................           8,197               93,107             21,077               195,032
 Investor A Class .........................         183,221            2,109,353          1,459,269            13,743,445
 Investor B Class .........................         139,593            1,538,514            106,032               970,101
 Investor C Class .........................          85,616              944,576            389,772             3,398,309
Shares issued in reinvestment of dividends:
 Institutional Class ......................          13,608              152,539             24,966               230,189
 Service Class ............................           1,287               14,481                  -                     -
 Investor A Class .........................          11,067              122,834             21,270               194,195
 Investor B Class .........................           2,456               26,280                  -                     -
 Investor C Class .........................              18                  197                  -                     -
Shares redeemed:
 Institutional Class ......................      (1,814,412)         (21,040,940)       (10,509,640)          (98,572,330)
 Service Class ............................         (58,824)            (678,027)          (278,591)           (2,569,175)
 Investor A Class .........................        (604,302)          (6,941,701)        (2,526,610)          (23,804,985)
 Investor B Class .........................        (499,549)          (5,498,048)          (684,156)           (6,003,582)
 Investor C Class .........................         (59,437)            (655,542)          (441,304)           (3,897,656)
                                              -------------       --------------     --------------       ---------------
Net decrease ..............................      (2,374,839)      $  (27,355,965)       (11,896,384)      $  (111,251,132)
                                              =============       ==============     ==============       ===============

122



                          BLACKROCK FUNDS


                                                                         INDEX EQUITY PORTFOLIO
                                               ---------------------------------------------------------------------------
                                                        FOR THE YEAR ENDED                   FOR THE YEAR ENDED
                                                             9/30/04                              9/30/03
                                               ------------------------------------ ------------------------------------
                                                    SHARES             VALUE               SHARES             VALUE
                                               ---------------- -------------------   ---------------- -------------------
Shares sold:
 Institutional Class .........................      3,269,684     $    69,335,844         10,753,266     $   188,083,555
 Service Class ...............................      1,299,490          27,524,523          1,589,476          27,936,332
 Investor A Class ............................      3,945,583          83,560,549         14,775,471         260,644,245
 Investor B Class ............................        411,956           8,501,106          1,331,953          23,222,797
 Investor C Class ............................      1,143,687          23,613,472          2,586,777          44,810,145
Shares issued in reinvestment of dividends:
 Institutional Class .........................        209,619           4,493,609            296,627           5,262,591
 Service Class ...............................         44,696             951,634             43,558             778,813
 Investor A Class ............................        155,141           3,301,221            155,655           2,770,630
 Investor B Class ............................         17,517             364,388             22,140             381,689
 Investor C Class ............................         18,164             377,866             22,224             382,928
Shares redeemed:
 Institutional Class .........................    (10,233,505)       (220,082,336)       (26,070,177)       (447,897,902)
 Service Class ...............................     (1,649,576)        (35,098,252)        (1,894,676)        (33,113,285)
 Investor A Class ............................     (4,210,051)        (89,446,482)       (14,435,136)       (254,284,050)
 Investor B Class ............................     (2,229,229)        (46,418,387)        (2,483,973)        (42,178,613)
 Investor C Class ............................     (3,739,728)        (78,142,043)        (4,370,115)        (74,523,526)
                                                  -----------     ---------------        -----------     ---------------
Net decrease .................................    (11,546,552)    $  (247,163,288)       (17,676,930)    $  (297,723,651)
                                                  ===========     ===============        ===========     ===============
                                                                            BALANCED PORTFOLIO
                                               ----------------------------------------------------------------------------
                                               FOR THE YEAR ENDED                              FOR THE YEAR ENDED
                                                   9/30/04                                           9/30/03
                                                --------------                        --------------
                                                    SHARES             VALUE               SHARES             VALUE
                                               --------------     ---------------     --------------     ---------------
Shares sold:
 Institutional Class .........................         52,932     $       739,654            105,145     $     1,219,336
 Service Class ...............................          3,647              50,138             24,229             288,213
 Investor A Class ............................        525,029           7,234,050          5,084,653          60,535,218
 Investor B Class ............................        437,251           5,971,088            449,738           5,428,904
 Investor C Class ............................        143,449           1,954,645             71,963             873,214
Shares issued in reinvestment of dividends:
 Institutional Class .........................          7,318             101,598             13,243             159,993
 Service Class ...............................          2,255              31,254              4,839              58,244
 Investor A Class ............................         69,353             958,463            163,387           1,969,272
 Investor B Class ............................         16,515             226,344             42,794             510,817
 Investor C Class ............................          1,040              14,257              2,117              25,342
Shares redeemed:
 Institutional Class .........................       (242,466)         (3,328,691)        (1,318,912)        (15,829,300)
 Service Class ...............................        (17,859)           (246,883)          (159,926)         (1,919,782)
 Investor A Class ............................     (2,768,234)        (38,303,161)        (8,939,008)       (106,005,605)
 Investor B Class ............................       (786,156)        (10,731,589)          (982,764)        (11,586,934)
 Investor C Class ............................       (159,297)         (2,180,139)          (149,707)         (1,768,077)
                                               --------------     ---------------     --------------     ---------------
Net decrease .................................     (2,715,223)    $   (37,508,972)        (5,588,209)    $   (66,041,145)
                                               ==============     ===============     ==============     ===============

      There is a 2% redemption fee on shares of the Portfolio redeemed or
exchanged which have been held 90 days or less. The redemption fees are
collected and retained by the Fund for the benefit of the remaining
shareholders. The redemption fees are recorded as a credit to paid in capital.


                                                                             123



                                BLACKROCK FUNDS
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     On September 30, 2004, three shareholders held approximately 55% of the
outstanding shares of the Large Cap Value Equity Portfolio, three shareholders
held approximately 56% of Large Cap Growth Equity Portfolio, one shareholder
held approximately 100% of the Dividend AchieversTM Portfolio, two shareholders
held approximately 52% of the Mid-Cap Value Equity Portfolio, three
shareholders held approximately 38% of the Mid-Cap Growth Equity Portfolio, two
shareholders held approximately 49% of the Small Cap Value Equity Portfolio,
two shareholders held 30% of the Small Cap Core Equity Portfolio, five
shareholders held approximately 55% of the Small Cap Growth Equity Portfolio,
two shareholders held approximately 15% of the U.S. Opportunities Portfolio,
one shareholder held approximately 8% of the Global Science & Technology
Opportunities Portfolio, three shareholders held approximately 51% of the
International Equity Portfolio, four shareholders held approximately 31% of the
International Opportunities Portfolio, two shareholders held approximately 50%
of the Select Equity Portfolio, three shareholders held approximately 56% of
the Index Equity Portfolio and three shareholders held approximately 26% of the
Balanced Portfolio. Some of the shareholders are comprised of omnibus accounts,
which are held on behalf of several individual shareholders.

(F) At September 30, 2004, net assets consisted of:


                                                                     LARGE CAP
                                                                    VALUE EQUITY
                                                                     PORTFOLIO
                                                                 -----------------
Capital paid in ................................................  $ 247,324,736
End of period undistributed net investment income
 (distributions in excess of net investment income or
 accumulated net investment loss) ..............................         42,074
Accumulated net realized gain (loss) on investment
 transactions and futures contracts ............................    (65,033,270)
Net unrealized appreciation (depreciation) on investment
 transactions and futures contracts ............................     57,713,114
                                                                  -------------
                                                                  $ 240,046,654
                                                                  =============
                                                                     MID-CAP
                                                                  GROWTH EQUITY
                                                                    PORTFOLIO
                                                                 -------------
Capital paid in ................................................  $ 498,919,048
Accumulated net realized gain (loss) on investment
 transactions ..................................................   (406,700,877)
Net unrealized appreciation on investment transactions .........     29,935,691
                                                                 --------------
                                                                  $ 122,153,862
                                                                 ==============



                                                                     LARGE CAP         DIVIDEND          MID-CAP
                                                                   GROWTH EQUITY     ACHIEVERSTM      VALUE EQUITY
                                                                     PORTFOLIO        PORTFOLIO         PORTFOLIO
                                                                 ----------------- --------------- ------------------
Capital paid in ................................................  $ 470,990,617     $ 2,000,500       $   25,001,230
End of period undistributed net investment income
 (distributions in excess of net investment income or
 accumulated net investment loss) ..............................              -           1,692                    -
Accumulated net realized gain (loss) on investment
 transactions and futures contracts ............................   (397,788,313)         (3,038)           6,262,458
Net unrealized appreciation (depreciation) on investment
 transactions and futures contracts ............................     21,940,349          (7,180)           3,225,638
                                                                  -------------     -----------       --------------
                                                                  $  95,142,653     $ 1,991,974       $   34,489,326
                                                                  =============     ===========       ==============
                                                                    SMALL CAP        SMALL CAP         SMALL CAP
                                                                   VALUE EQUITY     CORE EQUITY      GROWTH EQUITY
                                                                    PORTFOLIO        PORTFOLIO         PORTFOLIO
                                                                 -------------     -----------     -----------------
Capital paid in ................................................  $  94,313,491     $ 8,924,628    $ 1,111,182,654
Accumulated net realized gain (loss) on investment
 transactions ..................................................     22,492,660          (3,086)     (692,792,667)
Net unrealized appreciation on investment transactions .........     15,259,011         543,382        53,269,711
                                                                 --------------    ------------    -----------------
                                                                  $ 132,065,162     $ 9,464,924    $  471,659,698
                                                                 ==============    ============    =================


124



                          BLACKROCK FUNDS


                                                                    GLOBAL SCIENCE
                                                    U.S.             & TECHNOLOGY        INTERNATIONAL       INTERNATIONAL
                                               OPPORTUNITIES        OPPORTUNITIES            EQUITY          OPPORTUNITIES
                                                 PORTFOLIO            PORTFOLIO            PORTFOLIO           PORTFOLIO
                                             -----------------   -------------------   -----------------   ----------------
Capital paid in ..........................    $  203,019,382       $   106,169,073      $  252,143,826      $ 313,912,211
End of period undistributed net investment
 income (distributions in excess of net
 investment income or accumulated net
 investment loss) ........................                 -                     -             144,699          1,566,230
Accumulated net realized loss on
 investment transactions, futures and
 options contracts and foreign currency
 related transactions ....................      (116,756,437)          (80,264,435)       (225,169,329)       (34,244,984)
Net unrealized appreciation on investment
 transactions, futures and options
 contracts and foreign currency related
 transactions ............................        14,651,522             1,262,165           4,385,621         34,408,175
                                              --------------       ---------------      --------------      -------------
                                              $  100,914,467       $    27,166,803      $   31,504,817      $ 315,641,632
                                              ==============       ===============      ==============      =============
                                                  SELECT                INDEX
                                                  EQUITY               EQUITY              BALANCED
                                                PORTFOLIO             PORTFOLIO           PORTFOLIO
                                             --------------        ---------------     --------------
Capital paid in ..........................    $  163,578,251       $ 1,344,952,884      $  143,549,106
End of period undistributed net investment
 income (distributions in excess of net
 investment income or accumulated net
 investment loss) ........................           464,010               829,772             126,316
Accumulated net realized loss on
 investment transactions, futures,
 options, swap contracts and foreign
 currency related transactions ...........       (95,337,000)         (301,003,588)        (43,575,680)
Net unrealized appreciation on investment
 transactions, futures, options, swap
 contracts and foreign currency related
 transactions ............................        25,094,997           346,298,261          22,035,331
                                              --------------       ---------------      --------------
                                              $   93,800,258       $ 1,391,077,329      $  122,135,073
                                              ==============       ===============      ==============

(G) Federal Tax Information

     No provision is made for Federal taxes as it is the Fund's intention to
have each Portfolio continue to qualify for and elect the tax treatment
applicable to regulated investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended, and to make the requisite distributions to
its shareholders which will be sufficient to relieve it from federal income and
excise taxes. Short-term capital gain and foreign currency distributions that
are reported in the Statement of Changes in Net Assets are reported as ordinary
income for federal tax purposes.


                                                                             125



                                BLACKROCK FUNDS
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     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, 2004, 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:


                                                                                          INCREASE          INCREASE
                                                                                         (DECREASE)        (DECREASE)
                                                                                         ACCUMULATED     UNDISTRIBUTED
                                                                        DECREASE        NET REALIZED     NET INVESTMENT
                                                                    PAID IN-CAPITAL      GAIN (LOSS)         INCOME
                                                                   -----------------   --------------   ---------------
   Large Cap Growth Equity Portfolio ...........................     $   (207,097)      $          -      $  207,097
   Mid-Cap Value Equity Portfolio ..............................                -           (181,982)        181,982
   Mid-Cap Growth Equity Portfolio .............................       (1,638,806)                 -       1,638,806
   Small Cap Value Equity Portfolio ............................                -           (639,504)        639,504
   Small Cap Core Equity Portfolio .............................          (39,429)           (31,740)         71,169
   Small Cap Growth Equity Portfolio ...........................       (4,273,122)                 -       4,273,122
   U.S. Opportunities Portfolio ................................       (1,910,678)                 -       1,910,678
   Global Science & Technology Opportunities Portfolio .........         (654,966)           (19,450)        674,416
   International Equity Portfolio ..............................                -              3,726          (3,726)
   International Opportunities Portfolio .......................                -         (2,624,566)      2,624,566
   Balanced Portfolio ..........................................                -            (67,344)         67,344

     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         LONG-TERM          TOTAL
                                               INCOME        CAPITAL GAIN     DISTRIBUTIONS
                                           --------------   --------------   --------------
   Large Cap Value Equity Portfolio
    9/30/04 ............................    $ 3,331,111      $         -      $ 3,331,111
    9/30/03 ............................      4,685,910                -        4,685,910
   Mid-Cap Value Equity Portfolio
    9/30/04 ............................        194,370                -          194,370
    9/30/03 ............................              -        5,447,281        5,447,281
   Small Cap Value Equity Portfolio
    9/30/04 ............................      6,523,912        9,724,645       16,248,557
    9/30/03 ............................              -       27,872,360       27,872,360
   Small Cap Core Equity Portfolio
    9/30/04 ............................              -           29,531           29,531
   International Equity Portfolio
    9/30/04 ............................      1,023,604                -        1,023,604
   International Opportunities Portfolio
    9/30/04 ............................        153,612                -          153,612
   Select Equity Portfolio
    9/30/04 ............................        893,694                -          893,694
    9/30/03 ............................      1,460,159                -        1,460,159
   Index Equity Portfolio*
    11/30/03 ...........................     15,555,745                -       15,555,745
    11/30/02 ...........................     12,850,989                -       12,850,989
   Balanced Portfolio
    9/30/04 ............................      1,647,304                -        1,647,304
    9/30/03 ............................      3,516,108                -        3,516,108

* BlackRock Index Equity Portfolio has a tax year end of 11/30. Therefore,
these amounts are reflective of the 11/30/03 and 11/30/02 tax year.

126



                                BLACKROCK FUNDS

     As of September 30, 2004, 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 ..............     $    42,074        $        -       $  (62,171,298)       $-
   Large Cap Growth Equity Portfolio .............               -                 -         (397,267,716)        -
   Dividend AchieversTM Portfolio ................           1,692                 -               (2,818)        -
   Mid-Cap Value Equity Portfolio ................       4,766,173         1,580,308                    -         -
   Mid-Cap Growth Equity Portfolio ...............               -                 -         (404,383,550)        -
   Small Cap Value Equity Portfolio ..............      15,513,687         7,135,807                    -         -
   Small Cap Core Equity Portfolio ...............               -            25,990                    -         -
   Small Cap Growth Equity Portfolio .............               -                 -         (689,766,214)        -
   U.S. Opportunities Portfolio ..................               -                 -         (116,701,279)        -
   Global Science & Technology
    Opportunities Portfolio.......................               -                 -          (80,064,951)        -
   International Equity Portfolio ................         144,699                 -         (224,749,091)        -
   International Opportunities Portfolio .........       2,117,592                 -          (34,119,135)        -
   Select Equity Portfolio .......................         464,010                 -          (94,219,887)        -
   Index Equity Portfolio1 .......................       3,319,638                 -         (206,405,604)        -
   Balanced Portfolio ............................         129,474                 -          (42,797,697)        -

1 BlackRock Index Equity Portfolio has a tax year end of 11/30. Therefore,
 these amounts are reflective of the 11/30/03 tax year.

     Post-October losses represent losses realized on investment transactions
from November 1, 2003 through September 30, 2004 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, 2004, the Portfolios had capital loss carryforwards
available to offset future realized capital gains through the indicated
expiration dates:

                                                    EXPIRING SEPTEMBER 30
                                          ------------------------------------------
                                               2008         2009           2010
                                          ------------- ------------ ---------------
   Large Cap Value Equity Portfolio ..... $        -    $        -   $ 16,764,384
   Large Cap Growth Equity Portfolio.....          -             -    391,628,132
   Dividend AchieversTM Portfolio .......          -             -              -
   Mid-Cap Growth Equity Portfolio ......          -     7,951,583    364,728,815
   Small Cap Growth Equity Portfolio.....          -             -    584,779,122
   U.S. Opportunities Portfolio .........          -             -    100,187,768
   Global Science & Technology
    Opportunities Portfolio .............    861,796     7,130,245     72,072,910
   International Equity Portfolio .......          -             -    155,266,135
   International Opportunities
    Portfolio ...........................          -     5,406,283     28,712,852
   Select Equity Portfolio ..............          -             -     78,286,446
   Balanced Portfolio ...................          -             -     17,967,754
                                                     EXPIRING NOVEMBER 30
                                          ------------------------------------------
                                             2008          2009          2010
                                          ----------    ----------   ------------
   Index Equity Portfolio ............... $1,523,612    $8,460,342   $ 79,252,195




                                                        EXPIRING SEPTEMBER 30
                                          --------------------------------------------------
                                                2011             2012             TOTAL
                                          --------------- ------------------ ---------------
   Large Cap Value Equity Portfolio ..... $ 45,406,914    $          -       $ 62,171,298
   Large Cap Growth Equity Portfolio.....    5,639,584               -        397,267,716
   Dividend AchieversTM Portfolio .......            -           2,818              2,818
   Mid-Cap Growth Equity Portfolio ......   31,703,152               -        404,383,550
   Small Cap Growth Equity Portfolio.....  104,987,092               -        689,766,214
   U.S. Opportunities Portfolio .........   16,513,511               -        116,701,279
   Global Science & Technology
    Opportunities Portfolio .............            -               -         80,064,951
   International Equity Portfolio .......   56,618,690      12,864,266        224,749,091
   International Opportunities
    Portfolio ...........................            -               -         34,119,135
   Select Equity Portfolio ..............   15,933,441               -         94,219,887
   Balanced Portfolio ...................   24,829,943               -         42,797,697

                                              2011              TOTAL
                                          ------------    -----------
   Index Equity Portfolio ............... $117,169,455    $206,405,604



                                                                             127



                                BLACKROCK FUNDS
                   NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

(H) Subsequent Events

     On September 10, 2004, the Board of Trustees of the Fund voted to
terminate and wind up the affairs of the International Equity Portfolio. The
Portfolio was closed to new purchases and exchanges effective as of November 1,
2004 and will be terminated on or about January 21, 2005.

     On August 25, 2004, BlackRock, Inc., the parent of BlackRock Advisors,
Inc., the Portfolios' investment adviser, entered into an agreement with
MetLife, Inc.(Reg. TM) ("MetLife") to acquire SSRM Holdings, Inc., the parent
of State Street Research & Management Company ("SSRM"), the investment adviser
to the State Street Research mutual funds. In connection with the transaction,
it is proposed that most of the State Street Research mutual funds will be
combined with certain Portfolios of the Fund, including the Money Market, High
Yield Bond, Intermediate Government Bond, Large Cap Value Equity, Mid-Cap Value
Equity, Mid-Cap Growth Equity, Select Equity and Balanced Portfolios (the "Fund
Reorganizations"), subject in each case to approval by the shareholders of the
relevant State Street Research mutual fund. These Fund Reorganizations are
expected to be completed in early 2005 and are scheduled to close
contemporaneously with BlackRock, Inc.'s acquisition of SSRM Holdings, Inc. and
its subsidiary SSRM. In the event that BlackRock, Inc. does not complete its
proposed acquisition of SSRM Holdings, Inc. for any reason, the Fund
Reorganizations will not take place.


128



                                BLACKROCK FUNDS
            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Trustees and Shareholders of
BlackRock Funds:

We have audited the accompanying statements of net assets of Large Cap Value
Equity, Large Cap Growth Equity, Mid-Cap Value Equity, Mid-Cap Growth Equity,
Small Cap Value Equity, Small Cap Core Equity, Small Cap Growth Equity, U.S.
Opportunities, Global Science & Technology Opportunities, International Equity,
International Opportunities, Select Equity, Index Equity Portfolios [thirteen
of the forty-four portfolios constituting BlackRock Funds (the "Fund")], and
the statements of assets and liabilities, including the schedules of
investments, of Dividend AchieversTM and Balanced Portfolios [two of the
forty-four portfolios constituting the Fund, collectively the "Portfolios"], as
of September 30, 2004 and the related statements of operations, statements of
changes in net assets and the financial highlights for the period in the year
then ended.  These financial statements and financial highlights are the
responsibility of the Fund's management.  Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.  The statement of changes in net asstes of the Portfolios for the year
ended September 30, 2003 and the financial highlights of the Portfolios for the
periods ended September 30, 2003, September 30, 2002, September 30, 2001 and
September 30, 2000 were audited by other auditors whose report, dated November
26, 2003, expressed an unqualified opinion on those financial statement and
financial highlights.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of September 30, 2004, by
correspondence with the custodians and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Portfolios as of September 30, 2004, the results of their operations, the
changes in their net assets, and their financial highlights for the respective
stated periods, in conformity with accounting principles generally accepted in
the United States of America.


DELOITTE & TOUCHE LLP


Philadelphia, Pennsylvania
November 24, 2004

                                                                             129



                                BLACKROCK FUNDS
                                FUND MANAGEMENT


Information pertaining to the Trustees and officers of the Fund is set forth
below. The statement of additional information (SAI) includes additional
information about the Trustees and is available without charge, upon request,
by calling (888) 825-2257. Institutional and service share class investors
should call (800) 441-7450.





                                       TERM OF
                       POSITION(S)    OFFICE(2)
    NAME, ADDRESS,      HELD WITH    AND LENGTH
         AGE               FUND        OF TIME
                INTERESTED TRUSTEES
 Laurence D. Fink(1)  Trustee and   Since 2000
 BlackRock, Inc.      President
 40 E. 52nd Street
 New York, NY 10022
 Age: 51



                                                               NUMBER OF        OTHER
                                                              PORTFOLIOS    DIRECTORSHIPS    TOTAL FUND
                                                                IN FUND       OF PUBLIC     COMPENSATION
                                                                COMPLEX       COMPANIES       FOR THE
    NAME, ADDRESS,            PRINCIPAL OCCUPATION(S)          OVERSEEN        HELD BY      YEAR ENDING
         AGE                  DURING PAST FIVE YEARS          BY TRUSTEE       TRUSTEE        9/30/04
                                            INTERESTED TRUSTEES
 Laurence D. Fink(1)  Director, Chairman and Chief               44       Director,             N/A
 BlackRock, Inc.      Executive Officer of BlackRock, Inc.                BlackRock, Inc.
 40 E. 52nd Street    since its formation in 1998 and of
 New York, NY 10022   BlackRock, Inc.'s predecessor
 Age: 51              entities since 1988; Chairman of the
                      Management Committee; formerly,
                      Managing Director of the First
                      Boston Corporation, Member of its
                      Management Committee, Co-head of
                      its Taxable Fixed Income Division
                      and Head of its Mortgage and Real
                      Estate Products Group; Chairman of
                      the Board of Nomura BlackRock
                      Asset Management and several of
                      BlackRock's alternative investment
                      vehicles; Director of several of
                      BlackRock's offshore funds;
                      Co-Chairman of the Board of
                      Trustees of Mount Sinai-NYU;
                      Co-Chairman of the Board of
                      Trustees of NYU Hospitals Center;
                      and a Member of the Board of
                      Trustees of NYU, Member of the
                      Board of Executives of the New York
                      Stock Exchange, Trustee of the
                      American Folk Art Museum.

130



                                BLACKROCK FUNDS
                          FUND MANAGEMENT (CONTINUED)


                                                 TERM OF
                                POSITION(S)     OFFICE(2)
       NAME, ADDRESS,            HELD WITH     AND LENGTH
             AGE                   FUND          OF TIME
                   DISINTERESTED TRUSTEES
 Honorable Stuart E. EizenstaTrustee and      Since 2001
 Covington & Burling         Chairman of
 1201 Pennsylvania Avenue,   the Nominating
 NW                          Committee
 Washington, DC 20004
 Age: 61
 Robert M. Hernandez         Trustee, Vice    Since 1996
 c/o BlackRock Funds         Chairman of
 100 Bellevue Parkway        the Board and
 Wilmington, DE 19809        Chairman of
 Age: 60                     the Audit
                             Committee
 Matina S. Horner, Ph.D(3)   Trustee and      Since 2004
 75 Cambridge Pkwy.          Chairperson of
 Cambridge, MA 02142         the Governance
 Age: 65                     Committee
 David R. Wilmerding, Jr.    Trustee and      Since 1996
 Rosemont Business Campus    Chairman of
 Building One, Suite 100     the Board
 919 Conestoga Road
 Rosemont, PA 19010
 Age: 69



                                                                       NUMBER OF            OTHER
                                                                      PORTFOLIOS        DIRECTORSHIPS        TOTAL FUND
                                                                        IN FUND           OF PUBLIC         COMPENSATION
                                                                        COMPLEX           COMPANIES           FOR THE
       NAME, ADDRESS,                PRINCIPAL OCCUPATION(S)           OVERSEEN            HELD BY          YEAR ENDING
             AGE                      DURING PAST FIVE YEARS          BY TRUSTEE           TRUSTEE            9/30/04
                                                  DISINTERESTED TRUSTEES
 Honorable Stuart E. EizenstaPartner, Covington & Burling (law       44           Director, Mirant         $112,300
 Covington & Burling         firm) (2001-Present); Sr. Advisor                    Corporation; Advisory
 1201 Pennsylvania Avenue,   Kissinger McLarty Associates;                        Board member, The
 NW                          Deputy Secretary of the Treasury                     Coca-Cola Company;
 Washington, DC 20004        (1999-2001), Under Secretary of                      Advisory Board
 Age: 61                     State for Economic, Business and                     member, Group
                             Agricultural Affairs (1997-1999);                    Menatep.
                             Chairman, International Board of
                             Governors, Weizmann Institute of
                             Science.
 Robert M. Hernandez         Retired; Director of USX Corporation    44           Director, ACE Limited    $122,300
 c/o BlackRock Funds         (a diversified company principally                   (insurance company);
 100 Bellevue Parkway        engaged in energy and steel                          Director and Chairman
 Wilmington, DE 19809        businesses), 1991 to 2001; Vice                      of the Board, RTI
 Age: 60                     Chairman and Chief Financial Officer                 International Metals,
                             1994-2001, Executive Vice President                  Inc.; Director, Eastman
                             - Accounting and Finance and Chief                   Chemical Company.
                             Financial Officer from 1991 to 1994.
 Matina S. Horner, Ph.D(3)   President Emerita, Radcliffe College,   44           Director and Audit       $      0
 75 Cambridge Pkwy.          former Executive Vice President of                   Committee Chair for
 Cambridge, MA 02142         TIAA/CREF, Chair of MGH Institute of                 NSTAR, Director of
 Age: 65                     Health Professions Board, Chair of                   Neiman Marcus Group
                             Greenwall Foundation Board, Trustee
                             of Century Foundation Board.
 David R. Wilmerding, Jr.    Chairman, Wilmerding & Associates,       45(4)                                $117,300
 Rosemont Business Campus    Inc. (investment advisers) since
 Building One, Suite 100     1989; Director, Beaver Management
 919 Conestoga Road          Corporation (land management
 Rosemont, PA 19010          corporation); Managing General
 Age: 69                     Partner, Chestnut Street Exchange
                             Fund; Director Emeritus, The Mutual
                             Fire, Marine and Inland Insurance
                             Company.

                               131



                                BLACKROCK FUNDS
                          FUND MANAGEMENT (CONCLUDED)


                                                    TERM OF                                                         TOTAL FUND
                                                   OFFICE(2)                                                       COMPENSATION
                                   POSITION(S)     AND LENGTH                                                        FOR THE
         NAME, ADDRESS,             HELD WITH       OF TIME                  PRINCIPAL OCCUPATION(S)               YEAR ENDING
              AGE                     FUND           SERVED                  DURING PAST FIVE YEARS                  9/30/04
                                                  OFFICERS WHO ARE NOT TRUSTEES
     Paul Audet                 Treasurer        Since 2002    Managing Director and Chief Financial Officer of        N/A
     BlackRock, Inc.                                           BlackRock, Inc. since 1998; Treasurer of
     40 E. 52nd Street                                         BlackRock Liquidity Funds since 2001; Senior
     New York, NY 10022                                        Vice President of PNC Bank Corp. from 1991 to
     Age: 51                                                   1998.
     Anne Ackerley              Vice President   Since 2003    Managing Director, BlackRock, Inc. since May            N/A
     BlackRock, Inc.                             (previously   2000; First Vice President and Operating
     40 E. 52nd Street                           served as     Officer, Mergers and Acquisitions Group
     New York, NY 10022                          Assistant     (1997-2000), First Vice President and Operating
     Age: 42                                     Secretary     Officer, Public Finance Group (1995-1997), and
                                                 since         First Vice President, Emerging Markets Fixed
                                                 2000)         Income Research (1994-1995), Merrill Lynch &
                                                               Co.
     Bart Battista              Chief            Since 2004    Chief Compliance Officer and Anti-Money                 N/A
     BlackRock, Inc.            Compliance                     Laundering Compliance Officer of BlackRock,
     40 E. 52nd Street          Officer and                    Inc. since 2004; Managing Director (since
     New York, NY 10022         Anti-Money                     2003), and Director (1998-2002) of BlackRock,
     Age: 45                    Laundering                     Inc.; Compliance Officer at Moore Capital
                                Compliance                     Management from 1995 to 1998.
                                Office
     Ellen L. Corson            Assistant        Since 1998    Senior Director and Vice President of Fund              N/A
     PFPC Inc.                  Treasurer                      Accounting and Administration, PFPC since
     301 Bellevue Parkway                                      2003. Vice President and Director of Mutual
     Wilmington, DE 19809                                      Fund Accounting and Administration, PFPC Inc.
     Age: 40                                                   since November 1997; Assistant Vice President,
                                                               PFPC Inc. from March 1997 to November 1997;
                                                               Senior Accounting Officer, PFPC Inc. from
                                                               March 1993 to March 1997.
     Brian P. Kindelan          Secretary        Since 1997    Director and Senior Counsel (since January              N/A
     BlackRock Advisors, Inc.                                  2001), and Vice President and Senior Counsel
     100 Bellevue Parkway                                      (1998-2000), BlackRock Advisors, Inc.; Senior
     Wilmington, DE 19809                                      Counsel, PNC Bank Corp. from May 1995 to
     Age: 45                                                   April 1998.
     Vincent Tritto             Assistant        Since 2003    Director and Assistant Secretary of BlackRock,          N/A
     BlackRock, Inc.            Secretary                      Inc. since 2002. Formerly, Executive Director
     40 E. 52nd Street                                         (2000-2002) and Vice President (1998-2000),
     New York, NY 10022                                        Morgan Stanley & Co. Incorporated and
     Age: 43                                                   Morgan Stanley Asset Management Inc. and
                                                               officer of various Morgan Stanley-sponsored
                                                               investment vehicles; Counsel (1998) and
                                                               Associate (1988-1997), Rogers & Wells LLP,
                                                               New York, NY.


(1) Mr. Fink is an interested person of the Fund due to his position at
    BlackRock, Inc.
(2) Each Trustee holds office for an indefinite term until the earlier of (1)
    the next meeting of shareholders at which Trustees are elected and until
    his or her successor is elected and qualified and (2) such time as such
    Trustee resigns or his or her term as a Trustee is terminated in
    accordance with the Fund's code of regulations and Declaration of Trust.
    Each officer holds office for an indefinite term until the earlier of (1)
    the next meeting of trustees at which his or her successor is appointed
    and (2) such time as such officer resigns or his or her term as an officer
    is terminated in accordance with the Fund's code of regulations and
    Declaration of Trust.
(3) On September 10, 2004, the Board of Trustees accepted the resignation of
    Dr. Judith Rodin from the Board and appointed Matina Horner as a Trustee.
(4) Includes 44 Portfolios of the Fund and one Portfolio of Chestnut Street
    Exchange Fund, which is managed by BlackRock Financial Management, Inc.
    and BlackRock Institutional Management Corporation.


132



                                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.


                                                                             133




                       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
     Schedule of Investments as of September 30, 2004 (Unaudited)..... 137

     Statement of Assets & Liabilities as of September 30, 2004
         (Unaudited).................................................. 142

     Financial Statements as of and for the year ended November 30,
         2003 (Audited):

     Schedule of Investments.......................................... 143

     Statement of Assets and Liabilities.............................. 148

     Statement of Operations.......................................... 149

     Statements of Changes in Net Assets.............................. 150

     Financial Highlights............................................. 151

     Notes to Financial Statements.................................... 152

     Report of Independent Registered Certified Public Accounting Firm 155


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



                                                      September 30, 2004
                                                  -----------------------
                                                         (Unaudited)
                                                  Shares        Value+
                                                  ------- ---------------
     COMMON STOCKS -- (89.1%)
      3M Co...................................... 244,500 $    19,552,665
      Abbott Laboratories........................ 487,600      20,654,736
      Ace, Ltd...................................  88,700       3,553,322#
      ADC Telecommunications, Inc................ 252,600         457,206*
      Adobe Systems, Inc.........................  74,900       3,705,303#
      Advanced Micro Devices, Inc................ 110,900       1,441,700#*
      AES Corp................................... 201,900       2,016,981*
      Aetna, Inc.................................  48,000       4,796,640
      Affiliated Computer Services, Inc. Class A.  40,000       2,226,800#*
      AFLAC, Inc................................. 158,400       6,210,864
      Agilent Technologies, Inc.................. 151,700       3,272,169*
      Air Products & Chemicals, Inc..............  71,000       3,860,980
      Alberto-Culver Co. Class B.................  28,300       1,230,484
      Albertson's, Inc........................... 114,900       2,749,557#
      Alcoa, Inc................................. 271,700       9,126,403#
      Allegheny Energy, Inc......................  39,700         633,612# *
      Allegheny Technologies, Inc................  29,800         543,850
      Allergan, Inc..............................  41,100       2,981,805
      Allied Waste Industries, Inc...............  99,400         879,690# *
      Allstate Corp.............................. 216,400      10,385,036#
      Alltel Corp................................  96,300       5,287,833
      Altera Corp................................ 116,100       2,272,077#*
      Altria Group, Inc.......................... 640,800      30,143,232#
      Ambac Financial Group, Inc.................  33,900       2,710,305#
      Amerada Hess Corp..........................  28,500       2,536,500
      Ameren Corp................................  60,700       2,801,305
      American Electric Power Co., Inc........... 123,600       3,950,256
      American Express Co........................ 396,000      20,378,160
      American International Group, Inc.......... 813,800      55,330,262
      American Power Conversion Corp.............  62,600       1,088,614#
      American Standard Companies, Inc...........  66,800       2,599,188*
      AmerisourceBergen Corp.....................  35,100       1,885,221
      Amgen, Inc................................. 395,400      22,411,272#*
      AmSouth Bancorporation..................... 110,500       2,696,200
      Anadarko Petroleum Corp....................  78,200       5,189,352
      Analog Devices, Inc........................ 118,200       4,583,796
      Andrew Corp................................  50,200         614,448#*
      Anheuser-Busch Companies, Inc.............. 250,200      12,497,490
      Anthem, Inc................................  43,600       3,804,100#*
      AON Corp...................................  98,600       2,833,764
      Apache Corp................................ 101,800       5,101,198
      Apartment Investment & Management Co.
       Class A...................................  29,600       1,029,488#
      Apollo Group, Inc. (Class A)...............  60,200       4,416,874#*
      Apple Computer, Inc........................ 121,200       4,696,500*
      Applera Corporation -- Applied Biosystems
       Group.....................................  63,000       1,188,810
      Applied Materials, Inc..................... 530,400       8,746,296#*
      Applied Micro Circuits Corp................  97,800         306,114*
      Archer-Daniels Midland Co.................. 203,300       3,452,034
      Ashland, Inc...............................  22,200       1,244,976
      AT&T Corp.................................. 248,200       3,554,224
      AT&T Wireless Services, Inc................ 852,500      12,599,950*
      Autodesk, Inc..............................  35,500       1,726,365
      Automatic Data Processing, Inc............. 182,500       7,540,900
      AutoNation, Inc............................  83,300       1,422,764*
      Autozone, Inc..............................  26,000       2,008,500#*
      Avaya, Inc................................. 141,400       1,971,116*
      Avery Dennison Corp........................  34,500       2,269,410
      Avon Products, Inc......................... 147,700       6,451,536
      B B & T Corp............................... 173,200       6,874,308
      Baker Hughes, Inc.......................... 104,200       4,555,624
                                                    September 30, 2004
                                                -------------------------
                                                        (Unaudited)
                                                 Shares        Value+
                                                --------- ---------------
       Ball Corp...............................    35,100 $     1,313,793
       Bank of America Corp.................... 1,270,500      55,050,765
       Bank of New York Co., Inc...............   243,000       7,088,310
       Bard (C.R.), Inc........................    32,700       1,851,801
       Bausch & Lomb, Inc......................    16,600       1,103,070
       Baxter International, Inc...............   192,000       6,174,720
       Bear Stearns Companies, Inc.............    32,200       3,096,674#
       Becton Dickinson & Co...................    78,300       4,048,110
       Bed, Bath and Beyond, Inc...............    93,900       3,484,629*
       Bellsouth Corp..........................   571,800      15,507,216
       Bemis Co., Inc..........................    33,400         887,772
       Best Buy Co., Inc.......................   101,500       5,505,360#
       Big Lots, Inc...........................    36,000         440,280#*
       Biogen Idec, Inc........................   105,700       6,465,669#*
       Biomet, Inc.............................    79,300       3,717,584#
       BJ Services, Co.........................    50,400       2,641,464*
       Black & Decker Corp.....................    25,000       1,936,000#
       Block (H.&R.), Inc......................    51,500       2,545,130#
       BMC Software, Inc.......................    69,700       1,101,957*
       Boeing Co...............................   262,200      13,534,764
       Boise Cascade Corp......................    27,500         915,200
       Boston Scientific Corp..................   263,000      10,448,990#*
       Bristol Myers Squibb Co.................   607,600      14,381,892
       Broadcom Corp...........................   100,600       2,745,374#*
       Brown-Forman Corp. Class B..............    37,900       1,735,820
       Brunswick Corp..........................    29,900       1,368,224
       Burlington Northern Santa Fe Corp.......   116,300       4,455,453
       Burlington Resources, Inc...............   123,300       5,030,640
       Calpine Corp............................   138,600         401,940#*
       Campbell Soup Co........................   128,200       3,370,378
       Capital One Financial Corp..............    75,400       5,572,060#
       Cardinal Health, Inc....................   134,400       5,882,688
       Caremark Rx, Inc........................   145,500       4,666,185*
       Carnival Corp...........................   197,700       9,349,233#
       Caterpillar, Inc........................   107,000       8,608,150#
       Cendant Corp............................   329,700       7,121,520
       CenterPoint Energy, Inc.................    96,100         995,596
       Centex Corp.............................    38,600       1,947,756
       CenturyTel, Inc.........................    42,200       1,444,928#
       ChevronTexaco Corp......................   665,300      35,686,692#
       Chiron Corp.............................    58,600       2,590,120*
       Chubb Corp..............................    59,700       4,195,716
       CIENA Corp..............................   177,800         352,044#*
       CIGNA Corp..............................    43,000       2,994,090
       Cincinnati Financial Corp...............    52,600       2,168,172
       Cinergy Corp............................    56,400       2,233,440#
       Cintas Corp.............................    53,500       2,249,140#
       Circuit City Stores, Inc................    62,100         952,614
       Cisco Systems, Inc...................... 2,111,900      38,225,390*
       Citigroup, Inc.......................... 1,618,000      71,386,160
       Citizens Communications Co..............   103,600       1,387,204
       Citrix Systems, Inc.....................    52,800         925,056#*
       Clear Channel Communications, Inc.......   184,300       5,744,631
       Clorox Co...............................    66,500       3,544,450
       CMS Energy Corp.........................    50,400         479,808#*
       Coach, Inc..............................    58,800       2,494,296*
       Coca-Cola Co............................   757,800      30,349,890
       Coca-Cola Enterprises, Inc..............   146,500       2,768,850
       Colgate-Palmolive Co....................   165,900       7,495,362
       Comcast Corp. Class A...................   698,000      19,711,520#*
       Comerica, Inc...........................    53,500       3,175,225
       Computer Associates International, Inc..   182,800       4,807,640#
       Computer Sciences Corp..................    58,900       2,774,190*

See accompanying notes to financial statements.


                                                                            137




 SCHEDULE OF INVESTMENTS                        THE DFA INVESTMENT TRUST COMPANY

 The U.S. Large Company Series (Continued)



                                                   September 30, 2004
                                               -------------------------
                                                       (Unaudited)
                                                Shares        Value+
                                               --------- ---------------
        Compuware Corp........................   120,600 $       621,090*
        Comverse Technology, Inc..............    61,100       1,150,513#*
        Conagra, Inc..........................   165,000       4,242,150#
        ConocoPhillips........................   215,100      17,821,035
        Consolidated Edison, Inc..............    75,400       3,169,816
        Constellation Energy Group............    54,800       2,183,232
        Convergys Corp........................    44,500         597,635*
        Cooper Industries, Ltd................    29,600       1,746,400
        Cooper Tire & Rubber Co...............    23,400         471,978#
        Coors (Adolph) Co. Class B............    11,700         794,664
        Corning, Inc..........................   435,300       4,823,124*
        Costco Wholesale Corp.................   144,000       5,984,640#
        Countrywide Financial Corp............   175,900       6,928,701
        Crane Co..............................    18,400         532,128
        CSX Corp..............................    67,100       2,227,720
        Cummins, Inc..........................    13,800       1,019,682
        CVS Corp..............................   124,700       5,253,611#
        Dana Corp.............................    46,600         824,354
        Danaher Corp..........................    96,300       4,938,264#
        Darden Restaurants, Inc...............    49,300       1,149,676
        Deere & Co............................    77,500       5,002,625#
        Dell, Inc.............................   779,800      27,760,880#*
        Delphi Automotive Systems Corp........   175,300       1,628,537#
        Delta Air Lines, Inc..................    39,200         128,968#*
        Deluxe Corp...........................    15,600         639,912#
        Devon Energy Corp.....................    75,500       5,361,255
        Dillards, Inc. Class A................    26,100         515,214
        Disney (Walt) Co......................   641,700      14,470,335#
        Dollar General Corp...................   102,600       2,067,390
        Dominion Resources, Inc...............   103,100       6,727,275
        Donnelley (R.R.) & Sons Co............    68,400       2,142,288#
        Dover Corp............................    63,500       2,468,245#
        Dow Chemical Co.......................   293,400      13,255,812#
        Dow Jones & Co., Inc..................    25,600       1,039,616
        DTE Energy Co.........................    54,300       2,290,917
        Duke Energy Corp......................   292,900       6,704,481#
        DuPont (E.I.) de Nemours & Co., Inc...   311,700      13,340,760
        Dynegy, Inc...........................   118,500         591,315#*
        E Trade Group, Inc....................   116,600       1,331,572*
        Eastman Chemical Co...................    24,300       1,155,465#
        Eastman Kodak Co......................    89,500       2,883,690
        Eaton Corp............................    47,300       2,999,293
        eBay, Inc.............................   206,500      18,985,610#*
        Ecolab, Inc...........................    80,400       2,527,776
        Edison International..................   101,800       2,698,718
        El Paso Corp..........................   200,200       1,839,838#
        Electronic Arts, Inc..................    94,800       4,359,852#*
        Electronic Data Systems Corp..........   160,000       3,102,400#
        EMC Corp..............................   751,100       8,667,694*
        Emerson Electric Co...................   131,200       8,119,968
        Engelhard Corp........................    38,800       1,099,980
        Entergy Corp..........................    70,900       4,297,249#
        EOG Resources, Inc....................    36,800       2,423,280#
        Equifax, Inc..........................    42,500       1,120,300#
        Equity Office Properties Trust........   125,800       3,428,050#
        Equity Residential Corp...............    87,700       2,718,700
        Exelon Corp...........................   206,200       7,565,478
        Express Scripts, Inc. Class A.........    24,200       1,581,228#*
        Exxon Mobil Corp...................... 2,031,900      98,201,727#
        Family Dollar Stores, Inc.............    52,600       1,425,460
        Federal Home Loan Mortgage
         Corporation..........................   214,600      14,000,504
        Federal National Mortgage Association.   302,300      19,165,820#
        Federated Department Stores, Inc......    56,200       2,553,166
                                                    September 30, 2004
                                                -------------------------
                                                        (Unaudited)
                                                 Shares        Value+
                                                --------- ---------------
      Federated Investors, Inc.................    33,900 $       964,116
      FedEx Corp...............................    93,800       8,037,722#
      Fifth Third Bancorp......................   178,000       8,761,160#
      First Data Corp..........................   267,800      11,649,300#
      First Horizon National Corp..............    38,600       1,673,696#
      FirstEnergy Corp.........................   103,000       4,231,240#
      Fiserv, Inc..............................    61,000       2,126,460*
      Fisher Scientific International, Inc.....    35,900       2,094,047#*
      Fluor Corp...............................    26,100       1,161,972#
      Ford Motor Co............................   571,500       8,029,575#
      Forest Laboratories, Inc.................   115,700       5,204,186*
      Fortune Brands, Inc......................    45,000       3,334,050#
      FPL Group, Inc...........................    57,900       3,955,728#
      Franklin Resources, Inc..................    77,900       4,343,704
      Freeport McMoran Copper & Gold, Inc.
       Class B.................................    55,300       2,239,650
      Gannett Co., Inc.........................    83,100       6,960,456#
      Gap, Inc.................................   282,300       5,279,010#
      Gateway, Inc.............................   116,400         576,180*
      General Dynamics Corp....................    62,400       6,371,040
      General Electric Co...................... 3,297,700     110,736,766
      General Mills, Inc.......................   118,700       5,329,630#
      General Motors Corp......................   176,400       7,493,472#
      Genuine Parts Co.........................    54,700       2,099,386
      Genzyme Corp.............................    71,200       3,873,992#*
      Georgia-Pacific Corp.....................    80,600       2,897,570
      Gilead Sciences, Inc.....................   134,500       5,027,610*
      Gillette Co..............................   312,900      13,060,446
      Golden West Financial Corp...............    47,700       5,292,315
      Goodrich (B.F.) Co.......................    37,100       1,163,456
      Goodyear Tire & Rubber Co................    54,800         588,552#*
      Grainger (W.W.), Inc.....................    28,400       1,637,260
      Great Lakes Chemical Corp................    15,900         407,040#
      Guidant Corp.............................    98,300       6,491,732
      Halliburton Co...........................   137,900       4,645,851
      Harley-Davidson, Inc.....................    92,200       5,480,368#
      Harrahs Entertainment, Inc...............    35,000       1,854,300
      Hartford Financial Services Group, Inc...    91,600       5,672,788#
      Hasbro, Inc..............................    55,200       1,037,760
      HCA, Inc.................................   150,800       5,753,020
      Health Management Associates, Inc........    76,000       1,552,680
      Heinz (H.J.) Co..........................   109,100       3,929,782
      Hercules, Inc............................    34,900         497,325#*
      Hershey Foods Corp.......................    76,900       3,591,999#
      Hewlett-Packard Co.......................   943,200      17,685,000#
      Hilton Hotels Corp.......................   120,200       2,264,568#
      Home Depot, Inc..........................   685,700      26,879,440#
      Honeywell International, Inc.............   268,500       9,628,410
      Hospira, Inc.............................    48,700       1,490,220*
      Humana, Inc..............................    49,800         995,004*
      Huntington Bancshares, Inc...............    71,700       1,786,047#
      Illinois Tool Works, Inc.................    94,400       8,795,248#
      IMS Health, Inc..........................    73,000       1,746,160
      Ingersoll-Rand Co., Ltd. Class A.........    54,100       3,677,177
      Intel Corp............................... 2,003,600      40,192,216#
      International Business Machines Corp.....   523,200      44,859,168#
      International Flavors & Fragrances, Inc..    29,400       1,123,080
      International Game Technology............   107,600       3,868,220
      International Paper Co...................   151,900       6,138,279
      Interpublic Group of Companies, Inc......   131,800       1,395,762#*
      Intuit, Inc..............................    59,800       2,714,920*
      ITT Industries, Inc......................    28,800       2,303,712#
      Jabil Circuit, Inc.......................    62,800       1,444,400*

See accompanying notes to financial statements.


138




 SCHEDULE OF INVESTMENTS                        THE DFA INVESTMENT TRUST COMPANY

 The U.S. Large Company Series (Continued)



                                                  September 30, 2004
                                              -------------------------
                                                      (Unaudited)
                                               Shares        Value+
                                              --------- ---------------
        Janus Capital Group, Inc.............    74,800 $     1,018,028#
        JDS Uniphase Corp....................   449,800       1,515,826#*
        Jefferson-Pilot Corp.................    42,600       2,115,516
        Johnson & Johnson....................   927,000      52,217,910
        Johnson Controls, Inc................    59,400       3,374,514
        Jones Apparel Group, Inc.............    39,000       1,396,200
        JP Morgan Chase & Co................. 1,112,500      44,199,625#
        KB Home Corp.........................    14,500       1,225,105#
        Kellogg Co...........................   129,100       5,507,406
        Kerr-McGee Corp......................    47,200       2,702,200
        KeyCorp..............................   127,100       4,016,360#
        KeySpan Corp.........................    50,000       1,960,000#
        Kimberly Clark Corp..................   154,500       9,979,155
        Kinder Morgan, Inc...................    38,600       2,424,852
        King Pharmaceuticals, Inc............    75,400         900,276#*
        KLA-Tencor Corp......................    61,300       2,542,724*
        Knight Ridder, Inc...................    24,200       1,583,890
        Kohls Corp...........................   106,700       5,141,873#*
        Kroger Co............................   230,800       3,582,016#*
        Leggett and Platt, Inc...............    59,900       1,683,190
        Lehman Brothers Holdings, Inc........    84,700       6,752,284
        Lexmark International Group, Inc.....    40,500       3,402,405*
        Lilly (Eli) & Co.....................   353,100      21,203,655
        Limited Brands, Inc..................   147,600       3,290,004#
        Lincoln National Corp................    55,000       2,585,000#
        Linear Technology Corp...............    96,000       3,479,040#
        Liz Claiborne, Inc...................    33,600       1,267,392
        Lockheed Martin Corp.................   139,000       7,753,420#
        Loews Corp...........................    57,900       3,387,150
        Louisiana-Pacific Corp...............    34,100         884,895#
        Lowe's Companies, Inc................   243,500      13,234,225#
        LSI Logic Corp.......................   120,200         518,062*
        Lucent Technologies, Inc............. 1,346,000       4,266,820#*
        M & T Bank Corp......................    36,600       3,502,620
        Manor Care, Inc......................    27,300         817,908
        Marathon Oil Corp....................   108,100       4,462,368
        Marriott International, Inc. Class A.    71,500       3,715,140#
        Marsh & McLennan Co., Inc............   162,600       7,440,576
        Marshall & Isley Corp................    69,600       2,804,880
        Masco Corp...........................   135,300       4,671,909
        Mattel, Inc..........................   129,300       2,344,209#
        Maxim Integrated Products, Inc.......   101,400       4,288,206#
        May Department Stores Co.............    91,000       2,332,330
        Maytag Corp..........................    24,700         453,739
        MBIA, Inc............................    44,700       2,601,987
        MBNA Corp............................   399,100      10,057,320
        McCormick & Co., Inc.................    42,800       1,469,752
        McDonalds Corp.......................   392,400      10,998,972#
        McGraw-Hill Companies, Inc...........    59,300       4,725,617
        McKesson Corp........................    91,700       2,352,105
        MeadWestavco Corp....................    63,000       2,009,700
        Medco Health Solutions, Inc..........    85,000       2,626,500*
        Medimmune, Inc.......................    77,800       1,843,860#*
        Medtronic, Inc.......................   377,700      19,602,630
        Mellon Financial Corp................   132,400       3,666,156
        Merck & Co., Inc.....................   693,000      22,869,000
        Mercury Interactive Corp.............    29,100       1,015,008#*
        Meredith Corp........................    15,700         806,666
        Merrill Lynch & Co., Inc.............   293,400      14,587,848#
        MetLife, Inc.........................   234,300       9,055,695
        MGIC Investment Corp.................    30,800       2,049,740
        Micron Technology, Inc...............   191,000       2,297,730#*
        Microsoft Corp....................... 3,395,900      93,896,635
                                                  September 30, 2004
                                              -------------------------
                                                      (Unaudited)
                                               Shares        Value+
                                              --------- ---------------
         Millipore Corp......................    15,500 $       741,675*
         Molex, Inc..........................    59,200       1,765,344#
         Monsanto Co.........................    83,400       3,037,428
         Monster Worldwide, Inc..............    37,000         911,680*
         Moody's Corp........................    46,200       3,384,150
         Morgan Stanley Dean Witter & Co.....   343,100      16,914,830
         Motorola, Inc.......................   737,900      13,311,716#
         Mylan Laboratories, Inc.............    83,900       1,510,200#
         Nabors Industries, Ltd..............    46,500       2,201,775*
         National City Corp..................   207,000       7,994,340
         National Semiconductor Corp.........   111,800       1,731,782*
         Navistar International Corp.........    21,800         810,742*
         NCR Corp............................    29,400       1,457,946*
         Network Appliance Corp..............   111,700       2,569,100#*
         New York Times Class A..............    45,900       1,794,690
         Newell Rubbermaid, Inc..............    85,900       1,721,436
         Newmont Mining Corp.................   138,500       6,305,905#
         Nextel Communications Corp. Class A.   347,800       8,291,552*
         Nicor, Inc..........................    13,800         506,460
         Nike, Inc. Class B..................    82,300       6,485,240#
         NiSource, Inc.......................    82,300       1,729,123
         Noble Corp..........................    41,800       1,878,910*
         Nordstrom, Inc......................    43,900       1,678,736#
         Norfolk Southern Corp...............   123,000       3,658,020
         North Fork Bancorporation, Inc......    53,900       2,395,855#
         Northern Trust Corp.................    68,700       2,802,960
         Northrop Grumman Corp...............   112,000       5,972,960
         Novell, Inc.........................   120,800         762,248*
         Novellus Systems, Inc...............    44,600       1,185,914*
         Nucor Corp..........................    24,800       2,265,976
         Nvidia Corp.........................    52,000         755,040*
         Occidental Petroleum Corp...........   122,300       6,840,239#
         Office Depot, Inc...................    97,800       1,469,934#*
         Omnicom Group, Inc..................    58,500       4,274,010#
         Oracle Systems Corp................. 1,615,000      18,217,200*
         Paccar, Inc.........................    54,200       3,746,304
         Pactiv Corp.........................    46,900       1,090,425*
         Pall Corp...........................    39,100         957,168#
         Parametric Technology Corp..........    84,100         444,048*
         Parker-Hannifin Corp................    37,300       2,195,478
         Paychex, Inc........................   118,100       3,560,715
         Penney (J.C.) Co., Inc..............    90,000       3,175,200
         Peoples Energy Corp.................    11,800         491,824
         Peoplesoft, Inc.....................   114,600       2,274,810*
         Pepsi Bottling Group, Inc...........    79,400       2,155,710
         Pepsico, Inc........................   529,100      25,740,715
         PerkinElmer, Inc....................    40,000         688,800
         Pfizer, Inc......................... 2,358,400      72,167,040
         PG&E Corp. (Holding Co.)............   125,200       3,806,080*
         Phelps Dodge Corp...................    29,400       2,705,682#
         Pinnacle West Capital Corp..........    28,500       1,182,750
         Pitney Bowes, Inc...................    72,200       3,184,020#
         Plum Creek Timber Co., Inc..........    57,300       2,007,219
         PMC Sierra, Inc.....................    55,300         487,193#*
         PNC Financial Services Group........    88,200       4,771,620
         Power-One, Inc......................    26,200         169,776*
         PPG Industries, Inc.................    53,600       3,284,608
         PPL Corp............................    59,000       2,783,620
         Praxair, Inc........................   101,500       4,338,110#
         Principal Financial Group, Inc......    97,900       3,521,463
         Procter & Gamble Co.................   794,000      42,971,280
         Progress Energy, Inc................    77,100       3,264,414
         Progressive Corp....................    67,800       5,746,050

See accompanying notes to financial statements.


                                                                            139




 SCHEDULE OF INVESTMENTS                        THE DFA INVESTMENT TRUST COMPANY

 The U.S. Large Company Series (Continued)



                                                   September 30, 2004
                                               -------------------------
                                                       (Unaudited)
                                                Shares        Value+
                                               --------- ---------------
       ProLogis...............................    56,800 $     2,001,632#
       Providian Financial Corp...............    91,400       1,420,356*
       Prudential Financial, Inc..............   162,100       7,625,184#
       Public Service Enterprise Group, Inc...    74,100       3,156,660#
       Pulte Homes, Inc.......................    39,600       2,430,252
       Q Logic Corp...........................    28,800         852,768#*
       Qualcomm, Inc..........................   508,400      19,847,936#
       Quest Diagnostics, Inc.................    31,800       2,805,396#
       Qwest Communications International,
        Inc...................................   566,900       1,887,777*
       Radioshack Corp........................    49,900       1,429,136
       Raytheon Co............................   140,900       5,351,382
       Reebok International, Ltd..............    18,500         679,320#
       Regions Financial Corp.................   144,300       4,770,558#
       Reynolds American, Inc.................    46,200       3,143,448#
       Robert Half International, Inc.........    53,800       1,386,426
       Rockwell Collins, Inc..................    55,300       2,053,842
       Rockwell International Corp............    57,600       2,229,120
       Rohm & Haas Co.........................    70,100       3,012,197
       Rowan Companies, Inc...................    33,400         881,760*
       Ryder System, Inc......................    20,100         945,504#
       Sabre Holdings Corp....................    42,900       1,052,337
       Safeco Corp............................    43,500       1,985,775
       Safeway, Inc...........................   139,600       2,695,676*
       Saint Jude Medical, Inc................    55,300       4,162,431*
       Saint Paul Companies, Inc..............   208,900       6,906,234#
       Sanmina Corp...........................   162,800       1,147,740*
       Sara Lee Corp..........................   247,800       5,664,708
       SBC Communications, Inc................ 1,035,000      26,858,250
       Schering-Plough Corp...................   459,900       8,765,694#
       Schlumberger, Ltd......................   184,400      12,411,964#
       Schwab (Charles) Corp..................   426,800       3,922,292#
       Scientific-Atlanta, Inc................    47,800       1,238,976
       Sealed Air Corp........................    26,200       1,214,370#*
       Sears, Roebuck & Co....................    66,200       2,638,070#
       Sempra Energy..........................    72,400       2,620,156#
       Sherwin-Williams Co....................    44,500       1,956,220#
       Siebel Systems, Inc....................   157,900       1,190,566*
       Sigma-Aldrich Corp.....................    21,600       1,252,800#
       Simon Property Group, Inc..............    65,000       3,485,950#
       SLM Corp...............................   136,200       6,074,520
       Snap-On, Inc...........................    18,100         498,836
       Solectron Corp.........................   300,400       1,486,980*
       Southern Co............................   230,600       6,913,388
       SouthTrust Corp........................   104,000       4,332,640
       Southwest Airlines Co..................   246,800       3,361,416#
       Sovereign Bancorp, Inc.................   107,200       2,339,104
       Sprint Corp............................   453,700       9,132,981
       Stanley Works..........................    25,600       1,088,768#
       Staples, Inc...........................   155,400       4,634,028#
       Starbucks Corp.........................   124,100       5,641,586*
       Starwood Hotels and Resorts Worldwide,
        Inc...................................    65,000       3,017,300
       State Street Corp......................   105,000       4,484,550
       Stryker Corp...........................   125,300       6,024,424
       Sun Microsystems, Inc.................. 1,038,900       4,197,156#*
       Sungard Data Systems, Inc..............    90,100       2,141,677*
       Sunoco, Inc............................    23,500       1,738,530
       Suntrust Banks, Inc....................    88,300       6,217,203#
       Supervalu, Inc.........................    42,500       1,170,875
       Symantec Corp..........................    98,400       5,400,192#*
       Symbol Technologies, Inc...............    74,800         945,472
       Synovus Financial Corp.................    96,600       2,526,090
                                                   September 30, 2004
                                               -------------------------
                                                       (Unaudited)
                                                Shares        Value+
                                               --------- ---------------
       Sysco Corp.............................   199,700 $     5,975,024#
       T. Rowe Price Group, Inc...............    39,700       2,022,318
       Target Corp............................   282,100      12,765,025#
       Teco Energy, Inc.......................    62,100         840,213#
       Tektronix, Inc.........................    26,300         874,475
       Tellabs, Inc...........................   130,000       1,194,700*
       Temple-Inland, Inc.....................    17,400       1,168,410
       Tenet Healthcare Corp..................   145,600       1,571,024#*
       Teradyne, Inc..........................    60,600         812,040*
       Texas Instruments, Inc.................   540,700      11,506,096#
       Textron, Inc...........................    43,300       2,782,891
       The Goldman Sachs Group, Inc...........   151,800      14,153,832#
       Thermo-Electron Corp...................    51,000       1,378,020*
       Tiffany & Co...........................    45,600       1,401,744#
       Time Warner, Inc....................... 1,428,100      23,049,534*
       TJX Companies, Inc.....................   152,700       3,365,508
       Torchmark Corp.........................    34,300       1,824,074
       Toys R Us, Inc.........................    66,800       1,185,032#*
       Transocean, Inc........................   100,200       3,585,156#*
       Tribune Co.............................    99,400       4,090,310
       TXU Corp...............................    92,700       4,442,184
       Tyco International, Ltd................   627,400      19,236,084#
       U.S. Bancorp...........................   587,000      16,964,300
       Union Pacific Corp.....................    81,000       4,746,600#
       Unisys Corp............................   104,600       1,079,472*
       United Parcel Service, Inc.............   351,200      26,663,104
       United States Steel Corp...............    35,400       1,331,748
       United Technologies Corp...............   159,800      14,922,124#
       Unitedhealth Group, Inc................   207,600      15,308,424
       Univision Communications, Inc. Class A.   100,700       3,183,127#*
       Unocal Corp............................    82,700       3,556,100
       UnumProvident Corp.....................    92,600       1,452,894#
       UST, Inc...............................    51,600       2,077,416#
       Valero Energy Corp.....................    39,900       3,200,379
       Veritas Software Co....................   135,200       2,406,560*
       Verizon Communications, Inc............   864,700      34,051,886
       VF Corp................................    34,400       1,701,080#
       Viacom, Inc. Class B...................   541,900      18,186,164#
       Visteon Corp...........................    40,500         323,595#
       Vulcan Materials Co....................    31,900       1,625,305#
       Wachovia Corp..........................   409,000      19,202,550#
       Walgreen Co............................   320,000      11,465,600
       Wal-Mart Stores, Inc................... 1,325,100      70,495,320
       Washington Mutual, Inc.................   272,500      10,649,300
       Waste Management, Inc..................   181,100       4,951,274#
       Waters Corp............................    36,900       1,627,290*
       Watson Pharmaceuticals, Inc............    34,200       1,007,532*
       Wellpoint Health Networks, Inc.........    49,100       5,159,919*
       Wells Fargo & Co.......................   527,400      31,448,862
       Wendy's International, Inc.............    35,500       1,192,800
       Weyerhaeuser Co........................    74,800       4,972,704#
       Whirlpool Corp.........................    20,700       1,243,863
       Williams Companies, Inc................   163,200       1,974,720
       Winn-Dixie Stores, Inc.................    44,400         137,196#
       Worthington Industries, Inc............    27,300         582,855
       Wrigley (Wm.) Jr. Co...................    70,200       4,444,362
       Wyeth..................................   416,600      15,580,840
       XCEL Energy, Inc.......................   124,900       2,163,268#
       Xerox Corp.............................   262,100       3,690,368#*
       Xilinx, Inc............................   108,400       2,926,800#
       XL Capital, Ltd........................    43,200       3,196,368#
       Yahoo!, Inc............................   425,000      14,411,750#*
       Yum! Brands, Inc.......................    90,800       3,691,928#

See accompanying notes to financial statements.


140




 SCHEDULE OF INVESTMENTS                        THE DFA INVESTMENT TRUST COMPANY

 The U.S. Large Company Series (Continued)



                                                                  September 30, 2004
                                                              --------------------------
                                                                      (Unaudited)
                                                                Shares        Value+
                                                              ----------- --------------
  Zimmer Holdings, Inc.......................................    76,500   $    6,046,560*
  Zions Bancorp..............................................    28,000        1,709,120#
                                                                          --------------
TOTAL COMMON STOCKS
  (Cost $2,598,294,655)......................................              3,247,794,201
                                                                          --------------
                                                              Face Amount
                                                                 (000)
                                                              -----------
TEMPORARY CASH INVESTMENTS -- (10.9%)
  Repurchase Agreement, Merrill Lynch Triparty Repo 1.70%,
  10/01/04 (Collateralized by $333,957,000 U.S. Treasury
  Obligations, rates ranging from 2.75% to 4.75%,
  maturities ranging from 07/31/06 to 08/15/14, valued at
  $346,458,435) to be repurchased at $339,678,330 (Cost
  $339,662,290)(delta).......................................  $339,662      339,662,290
  Repurchase Agreement, PNC Capital Markets, Inc. 1.75%,
  10/01/04 (Collateralized by $56,890,000 FHLMC Notes
  2.00%, 02/23/06, valued at $56,472,214) to be repurchased
  at $55,700,708 (Cost $55,698,000)..........................    55,698       55,698,000
                                                                          --------------
TOTAL TEMPORARY CASH INVESTMENTS
  (Cost $395,360,290)........................................                395,360,290
                                                                          --------------
TOTAL INVESTMENTS -- (100.0%)
  (Cost $2,993,654,945)++....................................             $3,643,154,491
                                                                          ==============
-------------
+ See Note B to Financial Statements.
# Total or Partial Securities on Loan.
* Non-Income Producing Securities.
(delta)Security purchased with cash proceeds from securities on loan.
++The cost for federal income tax purposes is $3,155,697,455.

See accompanying notes to financial statements.


                                                                            141




 STATEMENT OF ASSETS AND LIABILITIES            THE DFA INVESTMENT TRUST COMPANY

 The U.S. Large Company Series
                                                         (Amounts in thousands)

                                                        September 30, 2004
                                                        ------------------
                                                           (Unaudited)
     Assets:
       Investments at Value (including $329,470 of
        securities on loan)............................     $3,643,154
       Cash............................................          3,264
       Receivables:
        Dividends and Interest.........................          3,733
        Securities Lending Income......................             33
       Prepaid Expenses and Other Assets...............              9
                                                            ----------
          Total Assets.................................      3,650,193
                                                            ----------
     Liabilities:
       Payables:
        Collateral on Securities Loaned................        339,662
        Due to Advisor.................................             69
        Futures Margin Variation.......................             13
       Accrued Expenses and Other Liabilities..........            253
                                                            ----------
          Total Liabilities............................        339,997
                                                            ----------
     Net Assets........................................     $3,310,196
                                                            ==========
       Investments at Cost.............................     $2,993,655
                                                            ==========

See accompanying notes to financial statements.


142




 SCHEDULE OF INVESTMENTS                        THE DFA INVESTMENT TRUST COMPANY

 The U.S. Large Company Series



                                                     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.


                                                                            143




 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.


144




 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.


                                                                            145




 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.


146




 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
  Repurchase Agreements, 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)(delta).............................................   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
(delta)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.


                                                                            147




 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 and 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.


148




 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.


                                                                            149




 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.


150




(For a share outstanding throughout each period)

 FINANCIAL HIGHLIGHTS                           THE DFA INVESTMENT TRUST COMPANY

 The U.S. Large Company Series

                                             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.

See accompanying notes to financial statements.


                                                                            151




 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 Series enters into contracts that
contain a variety of representations and warranties and which provide general
indemnification. The Series' maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the
Series and/or its affiliates that have not yet occurred. However, based on
experience, the Series 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 Series 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.  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.

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.


152




 NOTES TO FINANCIAL STATEMENTS (Continued)      THE DFA INVESTMENT TRUST COMPANY


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 funds including BlackRock Index Equity Portfolio.

   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:

   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.

   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.


                                                                            153




 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, PNC Bank, 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.

   Cash collateral of the Series received from securities on loan is invested
along with cash collateral from other Portfolios of the Trust in repurchase
agreements collateralized by U.S. government securities. These investments are
accounted for separately for each Portfolio of the Trust. Securities pledged as
collateral for the repurchase agreements are held by a custodian bank until the
agreements mature.


154




 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


                                                                            155



                                BLACKROCK FUNDS



Investment Adviser - Large Cap Value Equity Portfolio, Large Cap Growth Equity
Portfolio, Dividend AchieversTM 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




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 Registered Public Accountant




     Deloitte & Touche LLP

     Philadelphia, Pennsylvania 19103



The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it is intended to reduce expenses and
eliminate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be combined
with those for other members of your household, please contact the Fund at
(800) 441-7762.

The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Trustees. A
description of the policies and procedures that BlackRock and its affiliates
use to determine how to vote proxies relating to portfolio securities is
available without charge, upon request, by calling 1-800-441-7762, or on the
website of the Securities and Exchange Commission (the "Commission") at
http://www.sec.gov.

Information on how proxies relating to the Fund's voting securities were voted
(if any) by the Advisor during the most recent 12-month period ended June 30th
is available, upon request and without charge, by calling (800) 441-7762 or on
the website of the Commission at http://www.sec.gov.

Commencing in the fiscal year ended September 30, 2005, the Fund will file its
complete schedule of portfolio holdings for the first and third quarters of its
fiscal year with the Commission on Form N-Q. The Fund's Form N-Q will be
available on the Commission's website at http://www.sec.gov. The Fund's Form
N-Q, when available, may be reviewed and copied at the Commission's Public
Reference Room in Washington, D.C. Information regarding the operation of the
Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's
Form N-Q, when available, may also be obtained, upon request, by calling (800)
441-7762.



                                BLACKROCK FUNDS
                                 FUND SPECTRUM

 BlackRock Funds is a leading mutual fund company currently managing
approximately $16 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                Small Cap Growth Equity
   Large Cap Growth Equity               U.S. Opportunities
   Dividend AchieversTM                  Global Science & Technology Opportunities
   Mid-Cap Value Equity                  International Equity
   Mid-Cap Growth Equity                 International Opportunities
   Small Cap Value Equity                Select Equity
   Small Cap Core Equity                 Index Equity
STOCK & BOND PORTFOLIOS
--------------------------------------
   Balanced
BOND PORTFOLIOS
--------------------------------------
   Enhanced Income                       Government Income
   Low Duration Bond                     Inflation Protected Bond
   Intermediate Government Bond          GNMA
   Intermediate Bond                     Managed Income
   Intermediate PLUS Bond                International Bond
   Core Bond Total Return                High Yield Bond
   Core PLUS Total Return
TAX-FREE BOND PORTFOLIOS
--------------------------------------
   UltraShort Municipal                  Ohio Tax-Free Income
   Tax-Free Income                       Delaware Tax-Free Income
   Pennsylvania Tax-Free Income          Kentucky Tax-Free Income
   New Jersey Tax-Free Income
MONEY MARKET PORTFOLIOS
--------------------------------------
   Money Market                          North Carolina Municipal Money Market
   U.S. Treasury Money Market            Ohio Municipal Money Market
   Municipal Money Market                Pennsylvania Municipal Money Market
   New Jersey Municipal Money Market     Virginia Municipal Money Market

                             SHAREHOLDER PRIVILEGES

ACCOUNT INFORMATION
Call us at 1-800-441-7762 to get information about your account balances,
recent transactions and share prices.
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.
[GRAPHIC OMITTED]





EQ-ANNUAL



FIXED INCOME  LIQUIDITY  EQUITIES  ALTERNATIVES BLACKROCK SOLUTIONS

BlackRock Funds
Money Market Portfolios
Annual Report to Shareholders

September 30, 2004

[GRAPHIC OMITTED]

[GRAPHIC OMITTED]

[GRAPHIC OMITTED]

NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE



                                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
Fund Profile/Expense Example
  Money Market..............................................................2
  U.S. Treasury Money Market................................................3
  Municipal Money Market....................................................4
  New Jersey Municipal Money Market.........................................5
  North Carolina Municipal Money Market.....................................6
  Ohio Municipal Money Market...............................................7
  Pennsylvania Municipal Money Market.......................................8
  Virginia Municipal Money Market...........................................9
Statement of Net Assets.................................................10-38
  Key to Investment Abbreviations..........................................39
Portfolio Financial Statements
  Statements of Operations..............................................40-41
  Statements of Changes in Net Assets...................................42-43
  Financial Highlights..................................................44-51
Notes to Financial Statements...........................................52-64
Report of Independent Registered Public Accounting Firm....................65
Fund Management.........................................................66-68
Additional Information.....................................................69

                     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

September 30, 2004

Dear Shareholder:

     We are pleased to present the Annual Report to Shareholders of the
BlackRock Funds' Money Market Portfolios for the year ended September 30, 2004.
The Annual Report includes important information on each Portfolio, and is
organized as follows:

.    Fund Profile - displays characteristics of each Portfolio's holdings as of
     September 30, 2004.

.    Expense Example - discusses costs in a shareholder account and provides
     information for a shareholder to estimate his or her expenses by share
     class and to compare expenses of each share class to other funds.

.    Statement of Net Assets - lists portfolio holdings and includes each
     holding's market value and par amount/ number of shares as of September 30,
     2004. The Statement of Net Assets also contains the net asset value for
     each share class of a Portfolio.

.    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.

.    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.

.    Financial Highlights - include each Portfolio's expense ratios, net asset
     values, total returns, distributions per share, and net investment income
     per share for the last five years or since inception.

.    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.

.    Fund Management Table - lists information regarding BlackRock Funds'
     Trustees and Officers.

     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.

     There were two notable developments for the BlackRock Funds family during
the annual period that we believe will have a favorable impact on BlackRock
Funds shareholders. Effective July 1, 2004, the Board of Trustees of BlackRock
Funds voted to eliminate the 0.15% shareholder processing fee applicable to
Hilliard Lyons and Investor A, B, and C shares. For the Service shares, the
Board of Trustees voted to eliminate the 0.15% shareholder processing fee and
increase the shareholder service fee from 0.15% to 0.25% for a net reduction of
up to 0.05% in net expenses after fee waivers and expense reimbursements.
Additionally, on August 25, 2004, BlackRock, Inc. entered into an agreement with
MetLife, Inc.(Reg. TM) to acquire the parent company of State Street Research &
Management Company, the investment adviser to the State Street Research mutual
funds. In connection with the transaction, it is being proposed that most of the
State Street Research mutual funds will be combined with various BlackRock
Portfolios. Should these Fund reorganizations be approved by shareholders of the
State Street Research mutual funds, BlackRock Funds will expand its fund
offerings and services available to shareholders. These reorganizations are
expected to be completed in early 2005. In the event that BlackRock, Inc. does
not complete this proposed acquisition, the Fund reorganizations will not take
place.

     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



                            MONEY MARKET PORTFOLIO

FUND PROFILE
Portfolio Diversification (% of portfolio)
Variable Rate Obligations             31.4%
Commercial Paper                      25.0
Repurchase Agreements                 17.9
Certificates of Deposit               14.8
Agency Obligations                     5.8
Master Notes                           5.1
                                     -----
     Total                           100.0%
                                     =====

             Maturity Information
----------------------------------------------
    Maturity            Par         Percentage
---------------   --------------   -----------
     1-7 Days       437,180,000         29.9%
    8-14 Days        50,000,000          3.4
   15-30 Days       293,870,000         20.1
   31-60 Days       164,500,000         11.3
   61-90 Days       339,780,000         23.3
  91-120 Days                 -            -
 121-150 Days                 -            -
over 150 Days       175,500,000         12.0
                                       -----
                                       100.0%
                                       =====

      Average Weighted Maturity - 51 days

--------------------------------------------------------------------------------
EXPENSE EXAMPLE

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction
costs, including front and back end sales charges (loads) or redemption/exchange
fees, where applicable; and (2) ongoing costs, including advisory fees,
distribution (12b-1) and service fees, where applicable; and other Portfolio
expenses. This Example is intended to help you understand your ongoing costs (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other mutual funds.

The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.

The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.60) and multiply the result by the cost shown for your
share class, in the row entitled "Expenses Incurred During Period", to estimate
the expenses incurred on your account during this period.

The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front and
back end sales charges (loads) or redemption/exchange fees, where applicable.
Therefore, the hypothetical information is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.

                                                                 Actual Expenses
                        ---------------------------------------------------------------------------------------------
                                                           Hilliard
                         Institutional      Service          Lyons        Investor        Investor        Investor
                             Class           Class           Class        A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- --------------- -------------
Beginning Account
 Value (4/01/04)        $  1,000.00     $  1,000.00     $  1,000.00     $  1,000.00     $  1,000.00     $  1,000.00
Ending Account Value
 (9/30/04)                 1,004.60        1,003.10        1,002.90        1,003.00        1,001.10        1,001.10
Expenses Incurred
 During Period
 (4/01/04 - 9/30/04)           2.10            3.56            4.01            3.96            5.85            5.80

                                                             Hypothetical Expenses
                                                          (5% return before expenses)
                        ---------------------------------------------------------------------------------------------
                                                           Hilliard
                         Institutional      Service          Lyons        Investor        Investor        Investor
                             Class           Class           Class        A Class         B Class         C Class
                        --------------- --------------- --------------- --------------- --------------- -------------
Beginning Account
 Value (4/01/04)        $  1,000.00     $  1,000.00     $  1,000.00     $  1,000.00     $  1,000.00     $  1,000.00
Ending Account Value
 (9/30/04)                 1,022.87        1,021.41        1,020.95        1,021.00        1,019.08        1,019.13
Expenses Incurred
 During Period
 (4/01/04 - 9/30/04)           2.13            3.59            4.05            4.00            5.92            5.87

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.42%, 0.71%, 0.80%, 0.79%, 1.17%, and 1.16% for the Institutional,
Service, Hilliard Lyons, Investor A, B, and C share classes, respectively,
multiplied by the average account value over the period, multiplied by 183/366
(to reflect the one-half year period).

2



                      U.S. TREASURY MONEY MARKET PORTFOLIO

FUND PROFILE
Portfolio Diversification (% of portfolio)
Repurchase Agreements                 82.8%
Treasuries/Agencies                   17.2
                                     -----
  Total                              100.0%
                                     =====

            Maturity Information
---------------------------------------------
    Maturity           Par         Percentage
---------------   -------------   -----------
     1-7 Days      362,008,000        82.8%
    8-14 Days                -           -
   15-30 Days                -           -
   31-60 Days       10,000,000         2.3
   61-90 Days       10,000,000         2.3
  91-120 Days       10,000,000         2.3
 121-150 Days                -           -
over 150 Days       45,000,000        10.3
                                     -----
                                     100.0%
                                     =====

       Average Weighted Maturity - 23 days

--------------------------------------------------------------------------------
EXPENSE EXAMPLE

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction
costs, including front and back end sales charges (loads) or redemption/exchange
fees, where applicable; and (2) ongoing costs, including advisory fees,
distribution (12b-1) and service fees, where applicable; and other Portfolio
expenses. This Example is intended to help you understand your ongoing costs (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other mutual funds.

The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.

The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.60) and multiply the result by the cost shown for your
share class, in the row entitled "Expenses Incurred During Period", to estimate
the expenses incurred on your account during this period.

The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front and
back end sales charges (loads) or redemption/exchange fees, where applicable.
Therefore, the hypothetical information is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.

                                              Actual Expenses
                        --------------------------------------------------------
                         Institutional Class   Service Class   Investor A Class
                        --------------------- --------------- ------------------
Beginning Account
 Value (4/01/04)            $   1,000.00       $   1,000.00      $   1,000.00
Ending Account Value
 (9/30/04)                      1,004.00           1,002.50          1,002.30
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                          2.05               3.55              4.05

                                         Hypothetical Expenses
                                      (5% return before expenses)
                        -------------------------------------------------------
                         Institutional Class   Service Class   Investor A Class
                        --------------------- --------------- -----------------
Beginning Account
 Value (4/01/04)            $   1,000.00       $   1,000.00      $   1,000.00
Ending Account Value
 (9/30/04)                      1,022.92           1,021.41          1,020.90
Expenses Incurred
 During Period
 (4/01/04 - 9/30/04)                2.08               3.59              4.10

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.41%, 0.71%, and 0.81% for the Institutional, Service, and Investor A
share classes, respectively, multiplied by the average account value over the
period, multiplied by 183/366 (to reflect the one-half year period).

                                                                               3



                       MUNICIPAL MONEY MARKET PORTFOLIO

FUND PROFILE
Largest State Concentration (% of portfolio)
Virginia                               8.9%
Maryland                               8.3
North Carolina                         6.0
Indiana                                4.9
California                             4.8
Texas                                  4.7
Massachusetts                          4.3
Louisiana                              3.9
New Jersey                             3.8
Illinois                               3.7
                                     -----
  Total                               53.3%
                                     =====

            Maturity Information
---------------------------------------------
    Maturity           Par         Percentage
---------------   -------------   -----------
     1-7 Days      228,924,000        70.2%
    8-14 Days                -           -
   15-30 Days        4,800,000         1.5
   31-60 Days        9,500,000         2.9
   61-90 Days        9,700,000         3.0
  91-120 Days       12,405,000         3.8
 121-150 Days        8,170,000         2.5
over 150 Days       52,384,347        16.1
                                     -----
                                     100.0%
                                     =====

       Average Weighted Maturity - 57 days

--------------------------------------------------------------------------------
EXPENSE EXAMPLE

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction
costs, including front and back end sales charges (loads) or redemption/exchange
fees, where applicable; and (2) ongoing costs, including advisory fees,
distribution (12b-1) and service fees, where applicable; and other Portfolio
expenses. This Example is intended to help you understand your ongoing costs (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other mutual funds.

The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.

The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.60) and multiply the result by the cost shown for your
share class, in the row entitled "Expenses Incurred During Period", to estimate
the expenses incurred on your account during this period.

The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front and
back end sales charges (loads) or redemption/exchange fees, where applicable.
Therefore, the hypothetical information is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.

                                                       Actual Expenses
                        ----------------------------------------------------------------------------
                                                                                         Investor
                         Institutional Class   Service Class   Hilliard Lyons Class      A Class
                        --------------------- --------------- ---------------------- ---------------
Beginning Account
 Value (4/01/04)            $   1,000.00       $   1,000.00        $   1,000.00       $   1,000.00
Ending Account Value
 (9/30/04)                      1,004.00           1,002.40            1,003.40           1,002.50
Expenses Incurred
 During Period
 (4/01/04 - 9/30/04)                2.10               3.60                2.80               3.70

                                                   Hypothetical Expenses
                                                (5% return before expenses)
                        ----------------------------------------------------------------------------
                                                                                         Investor
                         Institutional Class   Service Class   Hilliard Lyons Class      A Class
                        --------------------- --------------- ---------------------- ---------------
Beginning Account
 Value (4/01/04)            $   1,000.00       $   1,000.00        $   1,000.00       $   1,000.00
Ending Account Value
 (9/30/04)                      1,022.87           1,021.36            1,022.17           1,021.25
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                          2.13               3.65                2.84               3.75

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.42%, 0.72%, 0.56%, and 0.74% for the Institutional, Service, Hilliard
Lyons, and Investor A share classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half
year period).

4



                   NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO

FUND PROFILE
Portfolio Diversification (% of portfolio)
Variable Rate Demand Notes            67.8%
General Market Notes                  22.9
Municipal Put Bonds                    6.0
Municipal Bonds                        3.3
                                     -----
     Total                           100.0%
                                     =====

            Maturity Information
---------------------------------------------
    Maturity           Par         Percentage
---------------   -------------   -----------
     1-7 Days      107,244,000        70.2%
    8-14 Days                -           -
   15-30 Days        2,800,000         1.8
   31-60 Days        8,095,000         5.3
   61-90 Days        4,675,000         3.1
  91-120 Days        7,850,000         5.2
 121-150 Days        4,000,000         2.6
over 150 Days       18,007,543        11.8
                                     -----
                                     100.0%
                                     =====

       Average Weighted Maturity - 56 days

--------------------------------------------------------------------------------
EXPENSE EXAMPLE

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction
costs, including front and back end sales charges (loads) or redemption/exchange
fees, where applicable; and (2) ongoing costs, including advisory fees,
distribution (12b-1) and service fees, where applicable; and other Portfolio
expenses. This Example is intended to help you understand your ongoing costs (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other mutual funds.

The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.

The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.60) and multiply the result by the cost shown for your
share class, in the row entitled "Expenses Incurred During Period", to estimate
the expenses incurred on your account during this period.

The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front and
back end sales charges (loads) or redemption/exchange fees, where applicable.
Therefore, the hypothetical information is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.

                                              Actual Expenses
                        --------------------------------------------------------
                         Institutional Class   Service Class   Investor A Class
                        --------------------- --------------- ------------------
Beginning Account
 Value (4/01/04)            $   1,000.00       $   1,000.00      $   1,000.00
Ending Account Value
 (9/30/04)                      1,004.00           1,002.50          1,002.60
Expenses Incurred
 During Period
 (4/01/04 - 9/30/04)                1.95               3.45              3.55

                                         Hypothetical Expenses
                                      (5% return before expenses)
                        -------------------------------------------------------
                         Institutional Class   Service Class   Investor A Class
                        --------------------- --------------- -----------------
Beginning Account
 Value (4/01/04)            $   1,000.00       $   1,000.00     $   1,000.00
Ending Account Value
 (9/30/04)                      1,023.03           1,021.51         1,021.41
Expenses Incurred
 During Period
 (4/01/04 - 9/30/04)                1.97               3.49             3.59

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.39%, 0.69%, and 0.71% for the Institutional, Service, and Investor A
share classes, respectively, multiplied by the average account value over the
period, multiplied by 183/366 (to reflect the one-half year period).

                                                                               5



                 NORTH CAROLINA MUNICIPAL MONEY MARKET PORTFOLIO

FUND PROFILE
Portfolio Diversification (% of portfolio)
Variable Rate Demand Notes          80.8%
Municipal Bonds                     13.8
Municipal Put Bonds                  4.8
General Market Notes                 0.6
                                   -----
     Total                         100.0%
                                   =====

            Maturity Information
--------------------------------------------
    Maturity           Par        Percentage
---------------   ------------   -----------
     1-7 Days      48,400,000       82.3%
    8-14 Days               -          -
   15-30 Days               -          -
   31-60 Days       2,835,000        4.8
   61-90 Days               -          -
  91-120 Days               -          -
 121-150 Days               -          -
over 150 Days       7,555,000       12.9
                                   -----
                                   100.0%
                                   =====

    Average Weighted Maturity - 33 days

--------------------------------------------------------------------------------
EXPENSE EXAMPLE

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction
costs, including front and back end sales charges (loads) or redemption/exchange
fees, where applicable; and (2) ongoing costs, including advisory fees,
distribution (12b-1) and service fees, where applicable; and other Portfolio
expenses. This Example is intended to help you understand your ongoing costs (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other mutual funds.

The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.

The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.60) and multiply the result by the cost shown for your
share class, in the row entitled "Expenses Incurred During Period", to estimate
the expenses incurred on your account during this period.

The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front and
back end sales charges (loads) or redemption/exchange fees, where applicable.
Therefore, the hypothetical information is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.

                                              Actual Expenses
                        --------------------------------------------------------
                         Institutional Class   Service Class   Investor A Class
                        --------------------- --------------- ------------------
Beginning Account
 Value (4/01/04)            $   1,000.00       $   1,000.00      $   1,000.00
Ending Account Value
 (9/30/04)                      1,004.40           1,002.90          1,003.10
Expenses Incurred
 During Period
 (4/01/04 - 9/30/04)                1.50               3.00              3.05

                                         Hypothetical Expenses
                                      (5% return before expenses)
                        -------------------------------------------------------
                         Institutional Class   Service Class   Investor A Class
                        --------------------- --------------- -----------------
Beginning Account
 Value (4/01/04)            $   1,000.00       $   1,000.00      $   1,000.00
Ending Account Value
 (9/30/04)                      1,023.48           1,021.96          1,021.91
Expenses Incurred
 During Period
 (4/01/04 - 9/30/04)                1.52               3.04              3.09

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.30%, 0.60%, and 0.61% for the Institutional, Service, and Investor A
share classes, respectively, multiplied by the average account value over the
period, multiplied by 183/366 (to reflect the one-half year period).

6



                      OHIO MUNICIPAL MONEY MARKET PORTFOLIO

FUND PROFILE
Portfolio Diversification (% of portfolio)
Variable Rate Demand Notes          71.9%
General Market Notes                25.0
Municipal Bonds                      2.5
Municipal Put Bonds                  0.6
                                   -----
     Total                         100.0%
                                   =====

            Maturity Information
---------------------------------------------
    Maturity           Par        Percentage
---------------   -------------  -----------
     1-7 Days      125,490,000      73.0%
    8-14 Days                -         -
   15-30 Days        1,070,000       0.6
   31-60 Days        4,905,000       2.9
   61-90 Days        2,848,000       1.7
  91-120 Days        4,351,250       2.5
 121-150 Days        2,450,000       1.4
over 150 Days       30,720,000      17.9
                                   -----
                                   100.0%
                                   =====

     Average Weighted Maturity - 62 days

--------------------------------------------------------------------------------
EXPENSE EXAMPLE

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction
costs, including front and back end sales charges (loads) or redemption/exchange
fees, where applicable; and (2) ongoing costs, including advisory fees,
distribution (12b-1) and service fees, where applicable; and other Portfolio
expenses. This Example is intended to help you understand your ongoing costs (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other mutual funds.

The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.

The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.60) and multiply the result by the cost shown for your
share class, in the row entitled "Expenses Incurred During Period", to estimate
the expenses incurred on your account during this period.

The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front and
back end sales charges (loads) or redemption/exchange fees, where applicable.
Therefore, the hypothetical information is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.

                                             Actual Expenses
                        --------------------------------------------------------
                         Institutional Class   Service Class   Investor A Class
                        --------------------- --------------- ------------------
Beginning Account
 Value (4/01/04)            $   1,000.00       $   1,000.00      $   1,000.00
Ending Account Value
 (9/30/04)                      1,004.60           1,003.00          1,002.80
Expenses Incurred
 During Period
 (4/01/04 - 9/30/04)                1.95               3.46              4.01

                                         Hypothetical Expenses
                                      (5% return before expenses)
                        -------------------------------------------------------
                         Institutional Class   Service Class   Investor A Class
                        --------------------- --------------- -----------------
Beginning Account
 Value (4/01/04)            $   1,000.00       $   1,000.00      $   1,000.00
Ending Account Value
 (9/30/04)                      1,023.03           1,021.51          1,020.95
Expenses Incurred
 During Period
 (4/01/04 - 9/30/04)                1.97               3.49              4.05

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.39%, 0.69%, and 0.80% for the Institutional, Service, and Investor A
share classes, respectively, multiplied by the average account value over the
period, multiplied by 183/366 (to reflect the one-half year period).

                                                                               7



                  PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO

FUND PROFILE
Portfolio Diversification (% of portfolio)
Variable Rate Demand Notes          75.6%
Municipal Put Bonds                  9.7
Tax-Exempt Commerical Paper          8.4
General Market Notes                 3.3
Municipal Bonds                      3.0
                                   -----
     Total                         100.0%
                                   =====

            Maturity Information
---------------------------------------------
    Maturity           Par         Percentage
---------------   -------------   -----------
     1-7 Days      375,295,000        76.2%
    8-14 Days       13,435,000         2.7
   15-30 Days                -           -
   31-60 Days       27,715,000         5.6
   61-90 Days       38,475,000         7.8
  91-120 Days       14,495,000         2.9
 121-150 Days          500,000         0.1
over 150 Days       22,930,000         4.7
                                     -----
                                     100.0%
                                     =====

    Average Weighted Maturity - 32 days

--------------------------------------------------------------------------------
EXPENSE EXAMPLE

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction
costs, including front and back end sales charges (loads) or redemption/exchange
fees, where applicable; and (2) ongoing costs, including advisory fees,
distribution (12b-1) and service fees, where applicable; and other Portfolio
expenses. This Example is intended to help you understand your ongoing costs (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other mutual funds.

The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.

The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.60) and multiply the result by the cost shown for your
share class, in the row entitled "Expenses Incurred During Period", to estimate
the expenses incurred on your account during this period.

The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front and
back end sales charges (loads) or redemption/exchange fees, where applicable.
Therefore, the hypothetical information is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.

                                             Actual Expenses
                        --------------------------------------------------------
                         Institutional Class   Service Class   Investor A Class
                        --------------------- --------------- ------------------
Beginning Account
 Value (4/01/04)            $   1,000.00       $   1,000.00      $   1,000.00
Ending Account Value
 (9/30/04)                      1,003.90           1,002.40          1,002.70
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                          2.10               3.60              3.55

                                         Hypothetical Expenses
                                      (5% return before expenses)
                        -------------------------------------------------------
                         Institutional Class   Service Class   Investor A Class
                        --------------------- --------------- -----------------
Beginning Account
 Value (4/01/04)            $   1,000.00       $   1,000.00      $   1,000.00
Ending Account Value
 (9/30/04)                      1,022.87           1,021.36          1,021.41
Expenses Incurred
 During Period
 (4/01/04 -
  9/30/04)                          2.13               3.65              3.59

For each class of the Portfolio, expenses are equal to the annualized expense
ratio of 0.42%, 0.72%, and 0.71% for the Institutional, Service, and Investor A
share classes, respectively, multiplied by the average account value over the
period, multiplied by 183/366 (to reflect the one-half year period).

8



                   VIRGINIA MUNICIPAL MONEY MARKET PORTFOLIO

FUND PROFILE
Portfolio Diversification (% of portfolio)
Variable Rate Demand Notes          76.0%
Municipal Bonds                     15.0
Municipal Put Bonds                  4.5
Tax-Exempt Commerical Paper          3.9
General Market Notes                 0.6
                                   -----
     Total                         100.0%
                                   =====

            Maturity Information
--------------------------------------------
    Maturity           Par        Percentage
---------------   ------------   -----------
     1-7 Days      13,638,000        76.3%
    8-14 Days               -           -
   15-30 Days               -           -
   31-60 Days         600,000         3.4
   61-90 Days         700,000         3.9
  91-120 Days         500,000         2.8
 121-150 Days         600,000         3.4
over 150 Days       1,830,000        10.2
                                    -----
                                    100.0%
                                    =====

   Average Weighted Maturity - 40 days

--------------------------------------------------------------------------------
EXPENSE EXAMPLE

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction
costs, including front and back end sales charges (loads) or redemption/exchange
fees, where applicable; and (2) ongoing costs, including advisory fees,
distribution (12b-1) and service fees, where applicable; and other Portfolio
expenses. This Example is intended to help you understand your ongoing costs (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other mutual funds.

The Example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period April 1, 2004 to September 30,
2004.

The information under "Actual Expenses," together with the amount you invested,
allows you to estimate actual expenses incurred over the reporting period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.60) and multiply the result by the cost shown for your
share class, in the row entitled "Expenses Incurred During Period", to estimate
the expenses incurred on your account during this period.

The information under "Hypothetical Expenses" provides information about
hypothetical account values and hypothetical expenses based on the Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expense you incurred for the period. You may use this information to
compare the ongoing costs of investing in the Portfolio and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front and
back end sales charges (loads) or redemption/exchange fees, where applicable.
Therefore, the hypothetical information is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.

                                                                                    Hypothetical Expenses
                                                           Actual Expenses       (5% return before expenses)
                                                        ---------------------   ----------------------------
                                                         Institutional Class         Institutional Class
                                                        ---------------------   ----------------------------
Beginning Account Value (4/01/04)                           $   1,000.00                $   1,000.00
Ending Account Value (9/30/04)                                  1,004.40                    1,023.48
Expenses Incurred During Period (4/01/04 - 9/30/04)                 1.50                        1.52

For the Institutional share class of the Portfolio, expenses are equal to the
annualized expense ratio of 0.30%, multiplied by the average account value over
the period, multiplied by 183/ 366 (to reflect the one-half year period).

                                                                               9



                                BLACKROCK FUNDS
                            STATEMENT OF NET ASSETS
                             MONEY MARKET PORTFOLIO

AS OF SEPTEMBER 30, 2004

                                                         PAR
                                       MATURITY         (000)         VALUE
                                    --------------    ----------  -------------
AGENCY OBLIGATIONS - 5.8%
Federal Home Loan Bank Bonds - 3.9%
    1.38%                                03/28/05     $  30,000   $  30,000,000
    1.42%                                04/04/05        26,000      26,000,000
                                                                  =============
                                                                     56,000,000
                                                                  -------------
Federal Home Loan Mortgage Corporation
  Bonds - 1.9%
    1.29%                                03/23/05        28,000      28,000,000
                                                                  -------------
TOTAL AGENCY OBLIGATIONS
  (Cost $84,000,000)                                                 84,000,000
                                                                  -------------
CERTIFICATES OF DEPOSIT - 14.8%
Domestic - 5.0%
  Washington Mutual Bank FA (A-1, P-1)
    1.64%                                11/03/04        44,000      44,000,000
    1.66%                                11/10/04        30,000      30,000,000
                                                                  =============
                                                                     74,000,000
                                                                  -------------
Euro Dollar - 7.7%
  Foreningssparbanken AB (Swedbank) (A-1, P-1)
    1.44%                                03/01/05        61,500      61,496,195
  Toronto-Dominion Bank (A-1, P-1)
    1.90%                                12/23/04        52,000      52,000,597
                                                                  =============
                                                                    113,496,792
                                                                  -------------
Yankee Dollar - 2.1%
  Societe Generale (A-1+, P-1)
    1.44%                                05/09/05        30,000      29,997,293
                                                                  -------------
TOTAL CERTIFICATES OF DEPOSIT
  (Cost $217,494,085)                                               217,494,085
                                                                  -------------
COMMERCIAL PAPER - 25.0%
Asset Backed Securities - 13.2%
  Amstel Funding Corp. (A-1+, P-1)
    1.84%                                12/15/04        50,000      49,808,333
  Atomium Funding Corp. (A-1, P-1)
    1.79%                                10/21/04        49,297      49,247,977
    1.80%                                10/26/04        23,070      23,041,162
  Concord Minutemen Capital Co. LLC (A-1)
    1.83%                                11/17/04         8,500       8,479,692
  Emerald Certificates (A-1+, P-1)
    1.65%                                10/27/04        26,000      25,969,017
  Jupiter Securitization Corp. (A-1, P-1)
    1.78%                                10/18/04        36,307      36,276,482
                                                                  =============
                                                                    192,822,663
                                                                  -------------
Banks - 5.1%
  Deutsche Bank Financial LLC (A-1+, P-1)
    1.90%                                10/01/04        75,000      75,000,000
                                                                  -------------
Finance Services - 0.7%
  UBS Finance Delaware (A-1+, P-1)
    1.88%                                10/01/04         8,100       8,100,000
                                                                  -------------
Insurance - 2.6%
  Irish Life & Permanent PLC (A-1, P-1)
    1.60%                                10/28/04        38,500      38,453,801
                                                                  -------------
Miscellaneous Business Credit Institution - 2.7%
  National Rural Utilities Cooperative (A-1, P-1)
    1.78%                                10/25/04        14,875      14,857,348
    1.78%                                10/27/04        24,461      24,429,554
                                                                  =============
                                                                     39,286,902
                                                                  -------------

                                                         PAR
                                       MATURITY         (000)         VALUE
                                    --------------    ----------  -------------
COMMERCIAL PAPER (Continued)
Security Brokers & Dealers - 0.7%
  Morgan Stanley & Co. (A-1, P-1)
    1.78%                                10/27/04     $  10,000   $   9,987,144
                                                                  -------------
TOTAL COMMERCIAL PAPER
  (Cost $363,650,510)
                                                                    363,650,510
                                                                  -------------
MASTER NOTES - 5.1%
Security Brokers & Dealers
  Merrill Lynch Mortgage Capital,
  Inc. (A-1, P-1)(b)
    1.92%                                10/04/04        24,320      24,320,000
  Morgan Stanley Mortgage Capital,
  Inc. (A-1, P-1)(b)
    2.04%                                10/01/04        50,000      50,000,000
                                                                  =============
TOTAL MASTER NOTES
  (Cost $74,320,000)
                                                                     74,320,000
                                                                  -------------
VARIABLE RATE OBLIGATIONS - 31.4%
Asset Backed Securities - 1.6%
  Racers XL (A-1, P-1)
    1.83%(c)                             10/22/04        11,360      11,360,000
  SMM Trust Series 2004G (P-1)
    1.80%(c)                             12/03/04        10,043      10,042,887
                                                                  =============
                                                                     21,402,887
                                                                  -------------
Banks - 6.1%
  HBOS Treasury Services PLC (A-1+, P-1)
    1.96%(c)                             12/27/04        65,000      65,000,000
  Westpac Banking Corp. (AA-, Aa3)
    1.85%(c)                             12/13/04        24,250      24,250,000
                                                                  =============
                                                                     89,250,000
                                                                  -------------
Federal Home Loan Bank Variable Rate
    Notes - 5.1%
    1.74%(c)                             12/13/04        75,000      74,957,242
                                                                  -------------
Federal National Mortgage Association
  Variable Rate Notes - 5.6%
    1.64%(c)                             11/18/04        82,000      81,992,229
                                                                  -------------
Insurance - 1.0%
  MetLife Global Funding I (AA, Aa2)
    1.88%(c)                             10/28/04        15,000      15,000,000
                                                                  -------------
Life Insurance - 4.1%
  Transamerica Occidental Life
  Insurance (A-1+, P-1)
    1.93%(c)                             12/29/04        60,000      60,000,000
                                                                  -------------
Municipal Bonds - 1.3%
  De Kalb County Development Authority
    University RB Series 1995B DN (A-1+, VMIG-1)
    1.83%(d)                             10/07/04         4,260       4,260,000
  South Central Texas IDRB Series 1990
    DN (Bank One N.A. LOC) (P-1)
    1.84%(d)                             10/07/04        14,800      14,800,000