BlackRock Funds Inc - Bond Investor Shares

497 1 d497.htm BLACKROCK FUNDS INC - BOND INVESTOR SHARES BlackRock Funds Inc - Bond Investor Shares


ALTERNATIVES		BLACKROCK SOLUTIONS		EQUITIES		FIXED INCOME		LIQUIDITY		REAL ESTATE

BlackRock Funds

Bond Portfolios

Investor Shares

Prospectus

January 31, 2006, as supplemented October 2, 2006

This Prospectus contains information you should know before investing, including information about risks. Please read it before you invest and keep it for future reference.

Enhanced Income

Low Duration Bond

Intermediate Government Bond

Intermediate Bond II

Intermediate Bond

Total Return II

Total Return

Government Income

Inflation Protected Bond

GNMA Portfolio

Managed Income

International Bond

High Yield Bond

AMT-Free Municipal Bond

Delaware Municipal Bond

Ohio Municipal Bond

Kentucky Municipal Bond

NOT FDIC INSURED

MAY LOSE VALUE

NO BANK GUARANTEE

The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

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Table of

Contents


*How to Find the Information You Need* *How to Find the Information You Need*		1

THE BLACKROCK BOND PORTFOLIOS

*Enhanced Income*		2

*Low Duration Bond*		10

*Intermediate Government Bond*		21

*Intermediate Bond II*		31

*Intermediate Bond*		41

*Total Return II*		51

*Total Return*		62

*Government Income*		74

*Inflation Protected Bond*		83

*GNMA Portfolio*		93

*Managed Income*		*103*

*International Bond*		*113*

*High Yield Bond*		*123*

*AMT-Free Municipal Bond*		*134*

*Delaware Municipal Bond*		*144*

*Ohio Municipal Bond*		*154*

*Kentucky Municipal Bond*		*165*
*About Your Investment* *How to Buy/Sell Shares*		*175*

*Dividends/Distributions/Taxes*		*197*

*Services for Shareholders*		*199*

How to Find the

Information You Need

About BlackRock Funds

This is the BlackRock Bond Portfolios Prospectus. It has been written to provide you with the information you need to make an informed decision about whether to invest in BlackRock Funds (the Fund). The Fund’s investment adviser is BlackRock Advisors, LLC (BlackRock).

This Prospectus contains information on 17 of the BlackRock Bond funds. The Prospectus has been organized so that each fund has its own short section. Simply turn to the section for any particular fund to read about important fund facts. Also included are sections that tell you about buying and selling shares, certain fees and expenses, shareholder features of the funds and your rights as a shareholder. These sections apply to all the funds.

If you have questions after reading the Prospectus, ask your registered representative for assistance. Your investment professional has been trained to help you decide which investments are right for you.

Effective October 2, 2006, the names of certain funds have been changed as follows:


Previous Name		New Name
Intermediate Bond Portfolio		Intermediate Bond Portfolio II
Intermediate PLUS Bond Portfolio		Intermediate Bond Portfolio
Core Bond Total Return Portfolio		Total Return Portfolio II
Core PLUS Total Return Portfolio		Total Return Portfolio
Tax-Free Income Portfolio		AMT-Free Municipal Bond Portfolio
Delaware Tax-Free Income Portfolio		Delaware Municipal Bond Portfolio
Ohio Tax-Free Income Portfolio		Ohio Municipal Bond Portfolio
Kentucky Tax-Free Income Portfolio		Kentucky Municipal Bond Portfolio

BlackRock

Enhanced Income Portfolio

IMPORTANT DEFINITIONS

Asset-Backed Securities: Bonds that are backed by a pool of assets, usually loans such as installment sale contracts or credit card receivables.

Bonds: Debt obligations such as bonds and debentures, U.S. Government securities, debt obligations of domestic and non-U.S. corporations, debt obligations of non-U.S. governments and their political subdivisions, asset-backed securities, various mortgage-backed securities (both residential and commercial), other floating or variable rate obligations, municipal obligations and zero coupon debt securities.

Citigroup 1-Year Treasury Index: An unmanaged index that measures total return for the one-year on-the-run coupon Treasury security. The index consists of existing U.S. Treasury bonds with approximately one year to maturity with each issue having at least $1 billion public amount outstanding.

Collateralized Mortgage Obligations (CMO): Bonds that are backed by cash flows from pools of mortgages. CMOs may have multiple classes with different payment rights and protections.

Commercial Mortgage-Backed Securities (CMBS): Bonds that are backed by a mortgage loan or pool of loans secured by commercial property, not residential mortgages.

Commercial Paper: Short-term securities with maturities of 1 to 270 days which are issued by banks, corporations and others.

Credit Default Swaps: In entering into a credit default swap, one party would pay a counterparty a periodic stream of payments over the term of the contract, provided that no event of default on a specific bond has occurred. In return, upon any event of default on such bond, the first party would receive from the counterparty a payment equal to the par (or other agreed-upon) value of such bond.

Dollar Rolls: A dollar roll transaction involves a sale by the fund of a mortgage-backed or other security concurrently with an agreement by the fund to repurchase a similar security at a later date at an agreed-upon price. The securities that are repurchased will bear the same interest rate and stated maturity as those sold, but pools of mortgages collateralizing those securities may have different prepayment histories than those sold.

Investment Goal

The fund seeks to maximize total return, consistent with income generation and prudent investment management.

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in bonds diversified among several categories. The fund’s dollar-weighted effective duration will be between 0 and 18 months during normal market conditions. Individual investments will be restricted to those securities whose maximum effective duration at the time of purchase is less than 5 years.

The management team evaluates sectors of the bond market and individual securities within these sectors. The management team selects bonds from several sectors including: U.S. Treasuries and agency securities, commercial and residential mortgage-backed securities, CMOs, asset-backed securities, corporate bonds and non-U.S. Government securities. The fund may also invest in money market instruments, such as U.S. dollar-denominated obligations issued or supported by the credit of U.S. or foreign banks or savings institutions with total assets of more than $1 billion (including obligations of foreign branches of such banks) and high quality commercial paper and other obligations issued or guaranteed by U.S. and foreign corporations and other issuers rated (at the time of purchase) A-2 or higher by Standard and Poor’s, Prime-2 or higher by Moody’s or F-2 or higher by Fitch. The fund may invest in unrated notes, paper and other instruments that are determined by the fund management team to be of comparable quality to the instruments described above. Securities are purchased for the fund when the management team determines that they have the potential for above-average total return.

The fund may only buy securities rated investment grade at the time of purchase by at least one major rating agency or, if unrated, determined by the management team to be of similar quality. Split rated bonds will be considered to have the higher credit rating. The fund may also invest up to 25% of its assets in non-dollar denominated bonds of issuers located outside of the United States. The fund’s investment in non-dollar denominated bonds may be on a currency hedged or unhedged basis.

If a security’s rating falls below investment grade, the management team will decide whether to continue to hold the security. A security will be sold if, in the opinion of the

IMPORTANT DEFINITIONS

Duration: A mathematical calculation of the average life of a bond (or bonds in a bond fund) that serves as a useful measure of its price risk. Each year of duration represents an expected 1% change in the net asset value of a bond fund for every 1% immediate change in interest rates. For example, if a bond fund has an average duration of four years, its net asset value will fall about 4% when interest rates rise by one percentage point. Conversely, the bond fund’s net asset value will rise about 4% when interest rates fall by one percentage point. Duration, which measures price sensitivity to interest rate changes, is not necessarily equal to average maturity.

Investment Grade: Securities which are rated in the four highest categories by at least one of the major rating agencies or determined by the management team to be of similar quality. Generally, the higher the rating of a bond, the higher the likelihood that interest and principal payments will be made on time.

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Mortgage-Backed Securities: Asset-backed securities based on a particular type of asset, a mortgage. There is a wide variety of mortgage backed securities involving commercial or residential, fixed rate or adjustable rate mortgages and mortgages issued by banks or government agencies.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

Total Return: A way of measuring fund performance. Total return is based on a calculation that takes into account income dividends, capital gain distributions and the increase or decrease in share price.

management team, the risk of continuing to hold the security is unacceptable when compared to its total return potential.

The management team may, when consistent with the fund’s investment goal, buy or sell options or futures on a security or an index of securities, or enter into credit default swaps and interest rate or foreign currency transactions, including swaps (collectively, commonly known as derivatives). An option is the right to buy or sell a security or an index of securities at a specific price on or before a specific date. A future is an agreement to buy or sell a security or an index of securities at a specific price on a specific date. A swap is an agreement whereby one party exchanges its right to receive or its obligation to pay one type of interest or currency with another party for that other party’s obligation to pay or its right to receive another type of interest or currency in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate or currency risk. From time to time, the fund will use derivatives for leverage purposes, in which case their use would involve leveraging risk. The fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements or dollar rolls).

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

Two of the main risks of investing in the fund are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds such as those held by the fund. Market interest rates have in recent years declined significantly below historical average rates. This decline may have increased the risk that these rates will rise in the future. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments when due.

and interest payments in difficult economic climates. Investment grade ratings do not guarantee that bonds will not lose value.

The fund may invest up to 25% of its assets in non-dollar denominated bonds of issuers located outside of the United States. Non-dollar and non-U.S. securities involve risks not typically associated with investing in U.S. securities. These risks include but are not limited to: currency risks (the risk that the value of interest paid on non- U.S. securities, or the value of the securities themselves, may fall if currency exchange rates change), the risk that a security’s value will be hurt by changes in non-U.S. political or social conditions, including changes in policies restricting investment, the possibility of heavy taxation, nationalization or expropriation of assets and more difficulty obtaining information on non-U.S. securities or companies. In addition, non-U.S. securities may be harder to sell and may be subject to wider price movements than comparable investments in U.S. companies. There is also less government regulation of non-U.S. securities markets.

The fund also makes investments in residential and commercial mortgage-backed securities and other asset-backed securities. The characteristics of these mortgage-backed and asset-backed securities differ from traditional fixed income securities.

Certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults.

Treasury obligations may differ in their interest rates, maturities, times of issuance and other characteristics. Obligations of U.S. Government agencies and authorities are supported by varying degrees of credit but generally are not backed by the full faith and credit of the U.S. Government. No assurance can be given that the U.S. Government will provide financial support to its agencies and authorities if it is not obligated by law to do so.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

The fund’s use of derivatives may reduce the fund’s returns and/or increase volatility. Volatility is defined as the characteristic of a

security, an index or a market to fluctuate significantly in price within a short time period. A risk of the fund’s use of derivatives is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. In addition, some derivatives are more sensitive to interest rate changes and market price fluctuations than other securities. The possible lack of a liquid secondary market for derivatives and the resulting inability of the fund to sell or otherwise close a derivatives position could expose the fund to losses. The fund could also suffer losses related to its derivatives positions as a result of unanticipated market movements, which losses are potentially unlimited. Finally, BlackRock may not be able to predict correctly the direction of securities prices, interest rates and other economic factors, which could cause the fund’s derivatives positions to lose value. Credit default swaps involve special risks in addition to those mentioned above because they are difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty).

Some transactions may give rise to a form of leverage. These transactions may include, among others, derivatives, reverse repurchase agreements and dollar rolls and may expose the fund to greater risk and increase its costs. To mitigate leverage risk, the management team will segregate liquid assets on the books of the fund or otherwise cover the transactions. The use of leverage may cause the fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Increases and decreases in the value of the fund’s portfolio will be magnified when the fund uses leverage. The fund will also have to pay interest on its borrowings, reducing the fund’s return. This interest expense may be greater than the fund’s return on the underlying investment.

High portfolio turnover (more than 100%) may result in increased transaction costs to the fund, including brokerage commissions, dealer mark-ups and other transaction costs on the sale of the securities and on reinvestment in other securities. The sale of fund securities may result in the recognition of capital gain or loss. Given the frequency of sales, such gain or loss will likely be short-term capital gain or loss. These effects of higher than normal portfolio turnover may adversely affect fund performance.

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares. The information shows you how the fund’s performance will vary and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Citigroup 1-Year Treasury Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year	Since Inception	Inception Date¹
Enhanced Income; Inv A
Return Before Taxes	-1.01%	-0.45%	03/04/04
Return After Taxes on Distributions	-2.03%	-1.20%
Return After Taxes on Distributions and Sale of Shares	-0.66%	-0.81%
Citigroup 1-Yr. Treasury (Reflects no deduction for fees, expenses or taxes)	2.31%	1.52%	N/A

The chart and the table both assume reinvestment of dividends and distributions. Source: BlackRock Advisors, LLC

Inception date of the fund’s oldest class(es).

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown, and the after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Interest Expense: The cost of borrowing money to buy additional securities, primarily through reverse repurchase agreements (under which the fund sells securities and agrees to buy them back at a particular date and price).

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Expenses and Fees

The tables below describe the fees and expenses that you may pay if you buy and hold Investor A Shares of the fund. The “Annual Fund Operating Expenses” table is based on expenses for the most recent fiscal year (restated to reflect current fees) and may not reflect expenses of the fund after February 1, 2007.

Shareholder Fees

(Fees paid directly from your investment)


	A Shares
Maximum Sales Charge (Load) Imposed on Purchases*	3.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%
(as percentage of offering price)

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


		A Shares
Advisory fees		.40%
Interest expense		.03%
Other expenses		1.49%
Service fees		.25%
Other		1.24%
Total annual fund operating expenses		1.92%
Fee waivers and expense reimbursements¹		1.09%
Net expenses¹		.83%

Reduced front-end sales charges may be available (see the section “Can the Sales Charge Be Reduced or Eliminated?” for more information regarding the reduction of front-end sales charges). A CDSC of 0.15% is assessed on certain redemptions of Investor A Shares that are purchased with no initial sales charge as part of an investment of $1,000,000 or more.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to .80% (excluding interest expense) of average daily net assets until February 1, 2007. The fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. See the “Management” section for a discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses and redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year		3 Years		5 Years		10 Years
A Shares*	$	382	$	782	$	1,207	$	2,390

*	Reflects imposition of sales charge.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

Fund Management

The fund management team is led by a team of investment professionals at BlackRock Financial Management, Inc. (BFM), including the following individuals who have day-to-day responsibility: Scott Amero, Managing Director of BFM since 1990, Keith Anderson, Managing Director of BFM since 1988, and Todd Kopstein, Managing Director of BFM since 2003.

Mr. Amero is a senior strategist and portfolio manager with responsibility for overseeing all fixed income sector strategy and the overall management of client portfolios. He is also the head of Global Credit research and a member of BlackRock’s Management Committee and Investment Strategy Group.

Mr. Anderson is responsible for global fixed income strategy, asset allocation and the overall management of client portfolios. In this capacity, he coordinates BlackRock’s team of portfolio managers and credit analysts who specialize in the government, agency, corporate and mortgage sectors and sub-sectors, worldwide. He is the Chief Investment Officer for Fixed Income, a member of BlackRock’s Management Committee and Chairman of the Investment Strategy Group.

With BlackRock since 1994, Mr. Kopstein is a member of the Investment Strategy Group and his primary responsibility is managing total return portfolios, with a sector emphasis on short duration securities.

Mr. Anderson, Mr. Amero and Mr. Kopstein have been portfolio co-managers of the fund since inception.

The Statement of Additional Information (SAI) provides additional information about the fund managers’ compensation, other accounts managed by the fund managers, and the fund managers’ ownership of securities in the fund.

Financial Highlights

The financial information in the table below shows the fund’s financial performance for the periods indicated. Certain information reflects results for a single fund share. The term “Total Return” indicates how much your investment would have increased or decreased during this period of time and assumes that you have reinvested all dividends and distributions. These figures have been audited by Deloitte & Touche LLP. Deloitte & Touche LLP has been appointed as the Fund’s independent registered public accountant for the current fiscal year. Deloitte & Touche LLP’s report, and the Fund’s audited financial statements, are included in the Fund’s 2005 annual report as filed on Form N-CSR, as it may be amended from time to time, which is available upon request (see back cover for ordering instructions).

FINANCIAL HIGHLIGHTS

(For an Investor A Share Outstanding Throughout Each Period)

Enhanced Income Portfolio


	INVESTOR A SHARES
	Year Ended 9/30/05			For the Period 3/19/04¹through 9/30/04
Net asset value at beginning of period	$	9.93		$	10.00

Income from investment operations
Net investment income		0.28	²		0.06	²
Net loss on investments (both realized and unrealized)		(0.12	)		(0.07	)

Total from investment operations		0.16			(0.01	)

Less distributions
Distributions from net investment income		(0.24	)		(0.06	)

Total distributions		(0.24	)		(0.06	)

Net asset value at end of period	$	9.85		$	9.93

Total return³		1.62	%		(0.12	)%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	2			– –
Ratios of expenses to average net assets
Net expenses		0.74	%		0.71	%⁴
Net expenses (excluding interest expenses)		0.71	%		0.71	%⁴
Total expenses		1.19	%		1.61	%⁴
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers		2.77	%		1.46	%⁴
Before advisory/administration and other fee waivers		2.32	%		0.56	%⁴
Portfolio turnover rate		147	%		208	%

Commencement of operations of share class.

Calculated using the average shares outstanding method.

Sales load not reflected in total return.

⁴

Annualized.

BlackRock

Low Duration Bond Portfolio

IMPORTANT DEFINITIONS

Asset-Backed Securities: Bonds that are backed by a pool of assets, usually loans such as installment sale contracts or credit card receivables.

Collateralized Mortgage Obligations (CMO): Bonds that are backed by cash flows from pools of mortgages. CMOs may have multiple classes with different payment rights and protections.

Commercial Mortgage-Backed Securities (CMBS): Bonds that are backed by a mortgage loan or pool of loans secured by commercial property, not residential mortgages.

Investment Goal

The fund seeks to realize a rate of return that exceeds the total return of the Merrill Lynch 1-3 Year Treasury Index (the benchmark).

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in investment grade bonds and maintains an average portfolio duration that is within ±20% of the duration of the benchmark.

The fund may also invest up to 5% of its assets in non-investment grade bonds (high yield or junk bonds) or convertible securities with a minimum rating of B and up to 10% of its assets in non-dollar denominated bonds of issuers located outside of the United States. Split rated bonds will be considered to have the higher credit rating. The fund’s investment in non-dollar denominated bonds may be on a currency hedged or unhedged basis.

If a security’s rating falls below B, the management team will decide whether to continue to hold the security. A security will be sold if, in the opinion of the management team, the risk of continuing to hold the security is unacceptable when compared to its total return potential.

IMPORTANT DEFINITIONS

High Yield Bonds: Sometimes referred to as “junk bonds”, these are debt securities which are rated lower than investment grade (below the fourth highest rating of the major rating agencies). These securities generally pay more interest than higher rated securities. The higher yield is an incentive to investors who otherwise may be hesitant to purchase the debt of such a low rated issuer.

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Merrill Lynch 1-3 Year Treasury Index: An unmanaged index comprised of Treasury securities with maturities from 1 to 2.99 years.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate or currency risk. From time to time, the fund will use derivatives for leverage purposes, in which case their use would involve leveraging risk. The fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements or dollar rolls).

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

the prepayment proceeds by the management team will generally be at lower rates of return than the return on the assets which were prepaid. Certain commercial mortgage-backed securities are issued in several classes with different levels of yield and credit protection. The fund’s investments in commercial mortgage-backed securities with several classes may be in the lower classes

that have greater risks than the higher classes, including greater interest rate, credit and prepayment risks.

Certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

The fund’s use of derivatives may reduce the fund’s returns and/or increase volatility. Volatility is defined as the characteristic of a security, an index or a market to fluctuate significantly in price within a short time period. A risk of the fund’s use of derivatives is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. In addition, some derivatives are more sensitive to interest rate changes and market price fluctuations than other securities. The possible lack of a liquid secondary market for derivatives and the resulting inability of the fund to sell or otherwise close a derivatives position could expose the fund to losses. The fund could also suffer losses related to its derivatives positions as a result of unanticipated market movements, which losses are potentially unlimited. Finally, BlackRock may not be able to predict correctly the direction of securities prices, interest rates and other economic factors, which could cause the fund’s derivatives positions to lose value. Credit default swaps involve special risks in addition to those mentioned above because they are difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty).

the fund’s portfolio will be magnified when the fund uses leverage. The fund will also have to pay interest on its borrowings, reducing the fund’s return. This interest expense may be greater than the fund’s return on the underlying investment.

The fund may invest up to 10% of its assets in non-dollar denominated bonds of issuers located outside of the United States. Non-dollar and non-U.S. securities involve risks not typically associated with investing in U.S. securities. These risks include but are not limited to: currency risks (the risk that the value of interest paid on non-dollar and non-U.S. securities, or the value of the securities themselves, may fall if currency exchange rates change), the risk that a security’s value will be hurt by changes in non-U.S. political or social conditions, including changes in policies restricting investment, the possibility of heavy taxation, nationalization or expropriation of assets and more difficulty obtaining information on non-U.S. securities or companies. In addition, non-dollar and non-U.S. securities may be harder to sell and may be subject to wider price movements than comparable investments in U.S. companies. There is also less government regulation of non-U.S. securities markets.

The fund may invest in non-investment grade or “high yield” fixed income or convertible securities commonly known to investors as “junk bonds.” The fund may not invest more than 5% of its assets in high yield securities and all such securities must be rated B or higher at the time of purchase by at least one major rating agency. A B rating generally indicates that while the issuer can currently make its interest and principal payments, it probably will not be able to do so in times of financial difficulty. Non-investment grade securities carry greater risks than securities which have higher credit ratings, including a high risk of default. The yields of non-investment grade securities will move up and down over time.

The credit rating of a high yield security does not necessarily address its market value risk. Ratings and market values may change from time to time, positively or negatively, to reflect new developments regarding the issuer. These companies are often young and growing and have a lot of debt. High yield securities are considered speculative, meaning there is a significant risk that companies issuing these securities may not be able to repay principal and pay interest or dividends on time. In addition, other creditors of a high yield issuer may have the right to be paid before the high yield bond holder. During an economic downturn, a period of rising interest rates or a recession, issuers of high yield securities who have a lot of debt may experience financial problems. They may not have enough cash to make their principal and interest payments. An economic downturn could also hurt the market for lower-rated securities and the fund. Also, the market for high yield securities is not as liquid as the market for higher

rated securities. This means that it may be harder to buy and sell high yield securities, especially on short notice. The market could also be hurt by legal or tax changes.

Securities rated in the fourth highest category by the rating agencies are considered investment grade but they may also have some speculative characteristics, meaning that they carry more risk than higher rated securities and may have problems making principal and interest payments in difficult economic climates. Investment grade ratings do not guarantee that bonds will not lose value.

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance has varied year by year and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Merrill Lynch 1-3 Year Treasury Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

The performance for the period before Investor A Shares were launched is based upon performance for Institutional Shares of the fund, which were first issued in July 1992. Investor A Shares were launched in January 1996, Investor B Shares were launched in November 1996 and Investor C Shares were launched in February 1997. The performance for Investor B Shares for the period before they were launched is based upon performance for Institutional and Investor A Shares, and the performance for Investor C Shares for the period before they were launched is based upon performance for Institutional, Investor A and Investor B Shares. The actual return of Investor A Shares would have been lower

than shown for the period before they were launched because Investor A Shares have higher expenses than Institutional Shares. Also, the actual returns of Investor B and C Shares would have been lower compared to Investor A Shares because Investor B and C Shares have higher expenses than Investor A Shares. Investor A Shares of the fund are expected to have expenses of .81% of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year and Investor B Shares and Investor C Shares of the fund are expected to have expenses of 1.56% and 1.54%, respectively, of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year. Institutional Shares of the fund are expected to have expenses of .44% of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year	3 Years	5 Years	10 Years	Inception Date¹
Low Duration Bond; Inv A
Return Before Taxes	-1.76%	0.25%	2.64%	4.06%	07/17/92
Return After Taxes on Distributions	-2.87%	-0.65%	1.38%	2.33%
Return After Taxes on Distributions and Sale of Shares	-1.14%	-0.30%	1.49%	2.38%
Low Duration Bond; Inv B
Return Before Taxes	-3.90%	-0.60%	2.14%	3.67%	07/17/92
Low Duration Bond; Inv C
Return Before Taxes	-0.47%	0.49%	2.49%	3.66%	07/17/92
ML 1-3 Yr. Treasury (Reflects no deduction for fees, expenses or taxes)	1.67%	1.49%	3.67%	4.79%	N/A

The chart and the table both assume reinvestment of dividends and distributions. Source: BlackRock Advisors, LLC

Inception date of the fund’s oldest class(es).

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

the investor’s tax situation and may differ from those shown, and the after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Investor A Shares only, and the after-tax returns for Investor B and C Shares will vary.

Expenses and Fees

The tables below explain your pricing options and describe the fees and expenses that you may pay if you buy and hold Investor A, B and C Shares of the fund. The “Annual Fund Operating Expenses” table is based on expenses for the most recent fiscal year (restated to reflect current fees) and may not reflect expenses of the fund after February 1, 2007.

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases* (as percentage of offering price)	3.0	%	0.0	%	0.0	%
Maximum Deferred Sales Charge (Load) (as percentage of offering price)	0.0	%	4.5	%**	1.00	%***

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.48	%	.48	%	.48	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Interest expense¹	– –		– –		– –
Other expenses	.58	%	.55	%	.52	%
Service fees	.25%		.25%		.25%
Other	.33%		.30%		.27%
Total annual fund operating expenses	1.06	%	1.78	%	1.75	%
Fee waivers and expense reimbursements²	.25	%	.22	%	.19	%
Net expenses²	.81	%	1.56	%	1.56	%

Reduced front-end sales charges may be available (see the section “Can the Sales Charge be Reduced or Eliminated?” for more information regarding the reduction of front-end sales charges). A CDSC of 0.50% is assessed on certain redemptions of Investor A Shares that are purchased with no initial sales charge as part of an investment of $1,000,000 or more.

The CDSC is 4.5% if shares are redeemed in less than one year. The CDSC for Investor B Shares decreases for redemptions made in subsequent years. After six years there is no CDSC on B Shares. (See the section “Purchase of Investor B Shares” for complete schedule of CDSCs.)

***

There is no CDSC on C Shares after one year.

The fund periodically engages in certain investment transactions which generate interest expense. For the year ended September 30, 2005 the interest expense on the fund for such transactions was less than .01%.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to .81% (excluding interest expense) (for Investor A Shares) and 1.56% (excluding interest expense) (for Investor B and C Shares) of average daily net assets until February 1, 2007. The fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. Including voluntary waivers, the net expenses for Investor C Shares of the fund are estimated to be 1.54% (excluding interest expense). These voluntary waivers may be terminated at any time. See the “Management” section for a discussion of these waivers and reimbursements. In addition, BlackRock has agreed to voluntarily waive or reimburse fees or expenses such that net expenses would not exceed 0.81% for Investor A Shares. This voluntary waiver or reimbursement may be reduced or discontinued at any time; however, BlackRock has agreed not to reduce or

discontinue this waiver or reimbursement for a period of two years after the closing of the reorganization of the fund and a mutual fund formerly managed by Merrill Lynch Investment Managers unless approved by the Fund’s trustees, including a majority of the non-interested trustees.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year		3 Years		5 Years		10 Years
A Shares*	$	380	$	603	$	844	$	1,533
B Shares**
Redemption	$	609	$	889	$	1,144	$	1,797	***
B Shares
No Redemption	$	159	$	539	$	944	$	1,797	***
C Shares**
Redemption	$	259	$	533	$	931	$	2,047
C Shares
No Redemption	$	159	$	533	$	931	$	2,047

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your Shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

1990, Keith Anderson, Managing Director of BFM since 1988, and Todd Kopstein, Managing Director of BFM since 2003.

Mr. Amero and Mr. Anderson have been members of the team managing the fund since 1992, and Mr. Kopstein since 1998. Mr. Amero has been a portfolio co-manager since inception, Mr. Anderson since 1999 and Mr. Kopstein since January 2003.

Financial Highlights

The financial information in the tables below shows the fund’s financial performance for the periods indicated. Certain information reflects results for a single fund share. The term “Total Return” indicates how much your investment would have increased or decreased during this period of time and assumes that you have reinvested all dividends and distributions. These figures have been audited by Deloitte & Touche LLP (for the fiscal years ended September 30, 2004 and later, and for the reclassifications noted in the table below) and PricewaterhouseCoopers LLP (for the other fiscal years shown except for the reclassifications noted in the table below). Deloitte & Touche LLP has been appointed as the Fund’s independent registered public accountant for the current fiscal year. Deloitte & Touche LLP’s report, and the Fund’s audited financial statements, are included in the Fund’s 2005 annual report as filed on Form N-CSR, as it may be amended from time to time, which is available upon request (see back cover for ordering instructions).

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Low Duration Bond Portfolio


	INVESTOR A SHARES															INVESTOR B SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹			Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	10.10		$	10.24		$	10.26		$	10.21		$	9.82		$	10.09		$	10.23		$	10.25		$	10.21		$	9.82

Income from investment operations
Net investment income²		0.28	³		0.18	³		0.21			0.36			0.52			0.21	³		0.10	³		0.15			0.29			0.44
Net gain (loss) on investments² (both realized and unrealized)		(0.17	)		(0.12	)		0.04			0.13			0.41			(0.17	)		(0.11	)		0.03			0.12			0.41

Total from investment operations		0.11			0.06			0.25			0.49			0.93			0.04			(0.01	)		0.18			0.41			0.85

Less distributions
Distributions from net investment income		(0.28	)		(0.16	)		(0.26	)		(0.39	)		(0.54	)		(0.20	)		(0.09	)		(0.19	)		(0.32	)		(0.46	)
Distributions from net realized gains		– –			(0.04	)		(0.01	)		(0.05	)		– –			– –			(0.04	)		(0.01	)		(0.05	)		– –

Total distributions		(0.28	)		(0.20	)		(0.27	)		(0.44	)		(0.54	)		(0.20	)		(0.13	)		(0.20	)		(0.37	)		(0.46	)

Net asset value at end of period	$	9.93		$	10.10		$	10.24		$	10.26		$	10.21		$	9.93		$	10.09		$	10.23		$	10.25		$	10.21

Total return⁴		1.07	%⁵		0.69	%		2.47	%		4.93	%		9.70	%		0.41	%⁵		(0.06	)%		1.70	%		4.05	%		8.89	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	75,652		$	87,317		$	102,047		$	69,211		$	12,808		$	45,942		$	66,253		$	83,937		$	53,087		$	20,485
Ratios of expenses to average net assets
Net expenses		0.81	%		0.88	%		0.90	%		1.02	%		1.43	%		1.56	%		1.63	%		1.65	%		1.77	%		2.28	%
Net expenses (excluding interest expense)		0.81	%		0.88	%		0.90	%		1.02	%		1.00	%		1.56	%		1.63	%		1.65	%		1.77	%		1.76	%
Total expenses		1.15	%		1.27	%		1.20	%		1.27	%		1.70	%		1.81	%		1.92	%		1.95	%		2.02	%		2.55	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²		2.81	%		1.74	%		1.91	%⁶		3.18	%		4.91	%⁶		2.06	%		1.00	%		1.17	%⁶		2.48	%		4.29	%⁶
Before advisory/administration and other fee waivers²		2.47	%		1.35	%		1.61	%⁶		2.93	%		4.64	%⁶		1.81	%		0.71	%		0.87	%⁶		2.23	%		4.02	%⁶
Portfolio turnover rate		127	%		216	%		195	%		195	%		168	%		127	%		216	%		195	%		195	%		168	%

Continued

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Low Duration Bond Portfolio


	INVESTOR C SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	10.09		$	10.23		$	10.25		$	10.21		$	9.82

Income from investment operations
Net investment income²		0.21	³		0.10	³		0.15			0.30			0.44
Net gain (loss) on investments (both realized and unrealized)²		(0.17	)		(0.11	)		0.03			0.11			0.41

Total from investment operations		0.04			(0.01	)		0.18			0.41			0.85

Less distributions
Distributions from net investment income		(0.20	)		(0.09	)		(0.19	)		(0.32	)		(0.46	)
Distributions from net realized gains		– –			(0.04	)		(0.01	)		(0.05	)		– –

Total distributions		(0.20	)		(0.13	)		(0.20	)		(0.37	)		(0.46	)

Net asset value at end of period	$	9.93		$	10.09		$	10.23		$	10.25		$	10.21

Total return⁴		0.41	%⁵		(0.06	)%		1.70	%		4.05	%		8.89	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	72,085		$	124,548		$	198,234		$	118,851		$	9,282
Ratios of expenses to average net assets
Net expenses		1.57	%		1.63	%		1.65	%		1.77	%		1.99	%
Net expenses (excluding interest expense)		1.57	%		1.63	%		1.65	%		1.77	%		1.72	%
Total expenses		1.81	%		1.93	%		1.95	%		2.00	%		2.26	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²		2.06	%		0.98	%		1.16	%⁶		2.30	%		4.04	%⁶
Before advisory/administration and other fee waivers²		1.82	%		0.69	%		0.86	%⁶		2.05	%		3.77	%⁶
Portfolio turnover rate		127	%		216	%		195	%		195	%		168	%

Audited by other auditors.

The Fund has reclassified periodic payments made under interest rate swap agreements, previously included within interest income or expense, as a component of realized gain (loss) in the statement of operations. For consistency, similar reclassifications have been made to amounts appearing in the 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.

Calculated using the average shares outstanding method.

⁴

Neither front-end sales load nor contingent deferred sales load is reflected.

⁵

Redemption fee of 2.00% is reflected in total return calculation.

⁶

Amounts reclassified and audited by Deloitte & Touche LLP as part of the audit for the fiscal year ended September 30, 2004. See Note C to the BlackRock Taxable Bond Portfolios Annual Report for the fiscal year ended September 30, 2004, for full explanations of such reclassifications.

BlackRock

Intermediate Government Bond Portfolio

IMPORTANT DEFINITIONS

Asset-Backed Securities: Bonds that are backed by a pool of assets, usually loans such as installment sale contracts or credit card receivables.

Collateralized Mortgage Obligations (CMO): Bonds that are backed by cash flows from pools of mortgages. CMOs may have multiple classes with different payment rights and protections.

Commercial Mortgage-Backed Securities (CMBS): Bonds that are backed by a mortgage loan or pools of loans secured by commercial property, not residential mortgages.

Dollar-Weighted Average Maturity: The average maturity of the fund is the average amount of time until the organizations that issued the debt securities in the fund’s portfolio must pay off the principal amount of the debt. “Dollar-weighted” means the larger the dollar value of debt security in the fund, the more weight it gets in calculating this average.

Investment Goal

The fund’s investment goal is to seek to maximize total return, consistent with income generation and prudent investment management.

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in the highest rated government and agency bonds and maintains an average portfolio duration that is within ±20% of the Lehman Brothers Intermediate Government Index (the benchmark). The fund normally invests at least 80% of its assets in bonds that are issued or guaranteed by the U.S. Government and its agencies.

Securities purchased by the fund are rated in the highest rating category (AAA or Aaa) at the time of purchase by at least one major rating agency or are determined by the fund management team to be of similar quality. Split rated bonds will be considered to have the higher credit rating. In addition, the fund’s dollar-weighted average maturity will be between 3 and 10 years.

The management team evaluates sectors of the bond market and individual securities within those sectors. The management team selects bonds from several sectors including: U.S. Treasuries and agency securities, commercial and residential mortgage-backed securities, CMOs, asset-backed securities and corporate bonds. Securities are purchased for the fund when the management team determines that they have the potential for above-average total return. The fund measures its performance against the benchmark.

If a security falls below the highest rating category, the management team will decide whether to continue to hold the security. A security will be sold if, in the opinion of the management team, the risk of continuing to hold the security is unacceptable when compared to its total return potential.

IMPORTANT DEFINITIONS

Lehman Brothers Intermediate Government Index: An unmanaged index comprised of U.S. Government securities from the more comprehensive Lehman Brothers U.S. Aggregate Index. This index concentrates on intermediate maturity bonds and thus excludes all maturities from the broader index that are 10 years or greater.

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

other party’s obligation to pay or its right to receive another type of interest in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate risk. From time to time, the fund will use derivatives for leverage purposes, in which case their use would involve leveraging risk. The fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements or dollar rolls).

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

A main risk of investing in the fund is interest rate risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds such as those held by the fund. Market interest rates have in recent years declined significantly below historical average rates. This decline may have increased the risk that these rates will rise in the future.

refinance at new lower rates. During such periods, reinvestment of the prepayment proceeds by the management team will generally be at lower rates of return than the return on the assets which were prepaid.

Certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults.

There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association (GNMA) are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA securities also are supported by the right of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC) are solely the obligations of FNMA or FHLMC, as the case may be, are not backed by or entitled to the full faith and credit of the United States but are supported by the right of the issuer to borrow from the Treasury.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty).

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance has varied year by year and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Lehman Brothers Intermediate Government Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

Investor A Shares were launched in May 1992 and Investor B and C Shares were launched in October 1996. The performance for Investor B and C Shares for the period before they were launched

is based upon performance for Investor A Shares. The actual returns of Investor B and C Shares would have been lower compared to Investor A Shares because Investor B and C Shares have higher expenses than Investor A Shares. Investor A Shares of the fund are expected to have expenses of 1.03% of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year and Investor B Shares and Investor C Shares of the fund are expected to have expenses of 1.82% and 1.80%, respectively, of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURN*

These returns assume payment of applicable sales charges.


	1 Year		3 Years		5 Years		10 Years		Inception Date¹
Intermediate Govt. Bond; Inv A
Return Before Taxes	-2.83	%	0.24	%	3.45	%	4.53	%	04/20/92
Return After Taxes on Distributions	-3.72	%	-0.90	%	1.96	%	2.65	%
Return After Taxes on Distributions and Sale of Shares	-1.84	%	-0.44	%	2.05	%	2.69	%
Intermediate Govt. Bond; Inv B
Return Before Taxes	-3.98	%	-0.27	%	3.13	%	4.21	%	04/20/92
Intermediate Govt. Bond; Inv C
Return Before Taxes	-0.55	%	0.86	%	3.50	%	4.22	%	04/20/92
LB Intermediate Govt. (Reflects no deduction for fees, expenses or taxes)	1.69	%	2.10	%	4.82	%	5.50	%	N/A

The information for the fund in the chart and the table assumes reinvestment of dividends and distributions. The information for the benchmark does not assume reinvestment of dividends and distributions. Source: BlackRock Advisors, LLC

Inception date of the fund’s oldest class(es).

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

the after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Investor A Shares only, and the after-tax returns for Investor B and C Shares will vary.

Expenses and Fees

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.0	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.50	%	.50	%	.50	%
Distribution (12b-1) fees	– –	%	.75	%	.75	%
Interest expense¹	– –		– –		– –
Other expenses	.59	%	.68	%	.61	%
Service fees	.25%		.25%		.25%
Other	.34%		.43%		.36%
Total annual fund operating expenses	1.09	%	1.93	%	1.86	%
Fee waivers and expense reimbursements²	.02	%	.11	%	.04	%
Net expenses²	1.07	%	1.82	%	1.82	%

***

There is no CDSC on C Shares after one year.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to 1.07% (excluding interest expense) (for Investor A Shares) and 1.82% (excluding interest expense) (for Investor B and C Shares) of average daily net assets until February 1, 2007. Including voluntary waivers, the net expenses for Investor A Shares of the fund are estimated to be 1.03% (excluding interest expense) and for Investor C Shares of the fund are estimated to be 1.80% (excluding interest expense). These voluntary waivers may be terminated at any time. See the “Management” section for a discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year		3 Years		5 Years		10 Years
A Shares*	$	505	$	731	$	975	$	1,674
B Shares**
Redemption	$	635	$	945	$	1,232	$	1,924	***
B Shares
No Redemption	$	185	$	595	$	1,032	$	1,924	***
C Shares**
Redemption	$	285	$	581	$	1,002	$	2,177
C Shares
No Redemption	$	185	$	581	$	1,002	$	2,177

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

The fund management team is led by a team of investment professionals at BlackRock Financial Management, Inc. (BFM), including the following individuals who have day-to-day responsibility: Keith Anderson, Managing Director of BFM since 1988, Scott Amero, Managing Director of BFM since 1990, Matthew Marra, Managing Director of BlackRock since 2006, and Andrew J. Phillips, Managing Director of BFM since 1999.

With BlackRock since 1995, Mr. Marra is a member of the Investment Strategy Group and his primary responsibility is the consistent implementation of investment strategies across all total return accounts with an emphasis on interest rate products. Mr. Marra has been a member of BlackRock’s fixed income team since 1997.

Mr. Phillips is a member of the Investment Strategy Group and his primary responsibility is the consistent implementation of investment strategies across all total return accounts, with a sector emphasis on mortgage securities. Mr. Phillips has been a member of BlackRock’s fixed income team since 1991.

Mr. Amero and Mr. Anderson have been members of the team managing the fund since 1995 and Mr. Marra and Mr. Phillips since 2006. Mr. Amero has been a portfolio co-manager of the fund since 1995, Mr. Anderson since 1999 and Mr. Marra and Mr. Phillips since 2006.

Financial Highlights

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Intermediate Government Bond Portfolio


	INVESTOR A SHARES															INVESTOR B SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹			Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	10.47		$	10.65		$	10.84		$	10.57		$	9.91		$	10.45		$	10.62		$	10.82		$	10.55		$	9.91

Income from investment operations
Net investment income²		0.35	³		0.33	³		0.44	⁵		0.51	⁵		0.56			0.27	³		0.25	³		0.34			0.43	⁵		0.49	⁵
Net gain (loss) on investments (both realized and unrealized)²		(0.24	)		(0.17	)		(0.16	)⁵		0.25	⁵		0.65			(0.24	)		(0.16	)		(0.15	)		0.25	⁵		0.63	⁵

Total from investment operations		0.11			0.16			0.28			0.76			1.21			0.03			0.09			0.19			0.68			1.12

Less distributions
Distributions from net investment income		(0.23	)		(0.34	)		(0.47	)		(0.49	)		(0.55	)		(0.18	)		(0.26	)		(0.39	)		(0.41	)		(0.48	)
Distribution from capital		(0.07	)		– –			– –			– –			– –			(0.05	)		– –			– –			– –			– –
Distributions from net realized gains		(0.05	)		– –			– –			– –			– –			(0.05	)		– –			– –			– –			– –

Total distributions		(0.35	)		(0.34	)		(0.47	)		(0.49	)		(0.55	)		(0.28	)		(0.26	)		(0.39	)		(0.41	)		(0.48	)

Net asset value at end of period	$	10.23		$	10.47		$	10.65		$	10.84		$	10.57		$	10.20		$	10.45		$	10.62		$	10.82		$	10.55

Total return⁴		1.07	%		1.54	%		2.60	%		7.46	%		12.58	%		0.22	%		0.88	%		1.75	%		6.68	%		11.55	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	345,132		$	43,500		$	54,693		$	52,507		$	14,033		$	75,182		$	10,533		$	12,312		$	8,197		$	3,518
Ratios of expenses to average net assets
Net expenses		0.99	%		1.05	%		1.07	%		1.08	%		1.64	%		1.75	%		1.80	%		1.82	%		1.81	%		2.34	%
Net expenses (excluding interest expense)		0.99	%		1.05	%		1.07	%		1.07	%		1.04	%		1.75	%		1.80	%		1.82	%		1.81	%		1.81	%
Total expenses		1.25	%		1.33	%		1.32	%		1.30	%		1.85	%		1.90	%		1.98	%		2.06	%		2.04	%		2.56	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²		3.43	%		3.17	%		3.99	%⁵		4.83	%⁵		5.30	%⁵		2.69	%		2.43	%		3.22	%⁵		4.00	%⁵		4.68	%⁵
Before advisory/administration and other fee waivers²		3.17	%		2.89	%		3.75	%⁵		4.61	%⁵		5.09	%⁵		2.54	%		2.25	%		2.97	%⁵		3.78	%⁵		4.47	%⁵
Portfolio turnover rate		194	%		200	%		143	%		183	%		157	%		194	%		200	%		143	%		183	%		157	%

Continued

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Intermediate Government Bond Portfolio


	INVESTOR C SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	10.46		$	10.63		$	10.83		$	10.55		$	9.91

Income from investment operations
Net investment income²		0.27	³		0.26	³		0.34			0.42⁵			0.49⁵
Net gain (loss) on investments (both realized and unrealized)²		(0.24	)		(0.17	)		(0.15	)		0.27⁵			0.63⁵

Total from investment operations		0.03			0.09			0.19			0.69			1.12

Less distributions
Distributions from net investment income		(0.18	)		(0.26	)		(0.39	)		(0.41	)		(0.48	)
Distribution from capital		(0.05	)		– –			– –			– –			– –
Distributions from net realized gains		(0.05	)		– –			– –			– –			– –

Total distributions		(0.28	)		(0.26	)		(0.39	)		(0.41	)		(0.48	)

Net asset value at end of period	$	10.21		$	10.46		$	10.63		$	10.83		$	10.55

Total return⁴		0.22	%		0.88	%		1.75	%		6.77	%		11.55	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	20,154		$	14,194		$	18,028		$	7,389		$	1,677
Ratios of expenses to average net assets
Net expenses		1.75	%		1.80	%		1.82	%		1.81	%		2.24	%
Net expenses (excluding interest expense)		1.75	%		1.80	%		1.82	%		1.81	%		1.77	%
Total expenses		1.90	%		1.98	%		2.06	%		2.03	%		2.45	%
Ratios of net investment income to average net assets
After advisory/administration fee waivers²		2.66	%		2.45	%		3.13	%⁵		3.93	%⁵		4.58	%⁵
Before advisory/administration fee waivers²		2.51	%		2.27	%		2.89	%⁵		3.71	%⁵		4.37	%⁵
Portfolio turnover rate		194	%		200	%		143	%		183	%		157	%

Audited by other auditors.

Calculated using the average shares outstanding method.

⁴

Neither front-end sales load nor contingent deferred sales load is reflected.

⁵

Amounts reclassified and audited by Deloitte & Touche LLP as part of the audit for the fiscal year ended September 30, 2004. See Note C to the BlackRock Taxable Bond Portfolios Annual Report for the fiscal year ended September 30, 2005, for full explanations of such reclassifications.

BlackRock

Intermediate Bond Portfolio II

IMPORTANT DEFINITIONS

Asset-Backed Securities: Bonds that are backed by a pool of assets, usually loans such as installment sale contracts or credit card receivables.

Collateralized Mortgage Obligations (CMO): Bonds that are backed by cash flows from pools of mortgages. CMOs may have multiple classes with different payment rights and protections.

Commercial Mortgage-Backed Securities (CMBS): Bonds that are backed by a mortgage loan or pools of loans secured by commercial property, not residential mortgages.

Investment Goal

The fund’s investment goal is to seek to maximize total return, consistent with income generation and prudent investment management.

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in bonds and maintains an average portfolio duration that is within ±20% of the duration of the Lehman Brothers Intermediate Government/Credit Index (the benchmark). The fund normally invests at least 80% of its assets in bonds. The fund only buys securities that are rated investment grade at the time of purchase by at least one major rating agency or determined by the fund management team to be of similar quality. Split rated bonds will be considered to have the higher credit rating. In addition, the fund’s dollar-weighted average maturity will be between 3 and 10 years.

If a security falls below investment grade, the management team will decide whether to continue to hold the security. A security will be sold if, in the opinion of the management team, the risk of continuing to hold the security is unacceptable when compared to its total return potential.

IMPORTANT DEFINITIONS

Lehman Brothers Intermediate Government/Credit Index: An unmanaged index comprised of U.S. Government securities or investment grade credit securities from the more comprehensive Lehman Brothers U.S. Aggregate Index. This index concentrates on intermediate maturity bonds and thus excludes all maturities from the broader index that are 10 years or greater.

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate risk. The fund may also use derivatives for leverage, in which case their use would involve leveraging risk. The fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements or dollar rolls).

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

the prepayment proceeds by the management team will generally be at lower rates of return than the return on the assets which were prepaid.

Certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

advantageous to do so to satisfy its obligations or to meet segregation requirements. Increases and decreases in the value of the fund’s portfolio will be magnified when the fund uses leverage. The fund will also have to pay interest on its borrowings, reducing the fund’s return. This interest expense may be greater than the fund’s return on the underlying investment.

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance has varied year by year and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Lehman Brothers Intermediate Government/Credit Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

Investor A Shares were launched in May 1994, Investor B Shares were launched in February 1998 and Investor C Shares were launched in October 1998. The performance for Investor B Shares for the period before they were launched is based upon performance for Investor A Shares, and the performance for Investor C Shares for the period before they were launched is based upon performance for Investor A and Investor B Shares. The actual returns of Investor B and C Shares would have been lower compared to Investor A Shares because Investor B and C Shares have higher expenses than Investor A Shares. Investor A Shares of the fund are expected to have expenses of .87% of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year and Investor B Shares and Investor C Shares of the fund are expected to have

expenses of 1.66% and 1.59%, respectively, of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year	3 Years	5 Years	10 Years	Inception Date¹
Intermediate Bond II; Inv A
Return Before Taxes	-2.83%	1.26%	4.28%	4.95%	09/17/93
Return After Taxes on Distributions	-4.02%	-0.22%	2.43%	2.80%
Return After Taxes on Distributions and Sale of Shares	-1.85%	0.29%	2.57%	2.89%
Intermediate Bond II; Inv B
Return Before Taxes	-3.98%	0.81%	3.99%	4.76%	09/17/93
Intermediate Bond II; Inv C
Return Before Taxes	-0.56%	1.87%	4.32%	4.77%	09/17/93
LB Intermediate Govt./Cred. (Reflects no deduction for fees, expense or taxes)	1.58%	2.97%	5.50%	5.80%	N/A

Inception date of the fund’s oldest class(es).

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Expenses and Fees

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.0	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.50	%	.50	%	.50	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Other expenses	.56	%	.60	%	.52	%
Service fees	.25%		.25%		.25%
Other	.31%		.35%		.27%
Total annual fund operating expenses	1.06	%	1.85	%	1.77	%
Fee waivers and expense reimbursements¹	.11	%	.15	%	.07	%
Net expenses¹	.95	%	1.70	%	1.70	%

***

There is no CDSC on C Shares after one year.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to .95% (for Investor A Shares) and 1.70% (for Investor B and C Shares) of average daily net assets until February 1, 2007. The fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. Including voluntary waivers, the net expenses for Investor A Shares of the fund are estimated to be .87%, for Investor B Shares of the fund are estimated to be 1.66%, and for Investor C Shares of the fund are estimated to be 1.59%. These voluntary waivers may be terminated at any time. See the “Management” section for a discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time

period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year		3 Years		5 Years		10 Years
A Shares*	$	493	$	713	$	951	$	1,633

B Shares**
Redemption	$	623	$	917	$	1,187	$	1,853	***
B Shares
No Redemption	$	173	$	567	$	987	$	1,853	***
C Shares**
Redemption	$	273	$	550	$	953	$	2,078
C Shares
No Redemption	$	173	$	550	$	953	$	2,078

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

The fund management team is led by a team of investment professionals at BlackRock Financial Management, Inc. (BFM), including the following individuals who have day-to-day responsibility: Keith Anderson, Managing Director of BFM since 1988, Scott Amero, Managing Director of BFM since 1990, Matthew Marra, Managing Director of BlackRock since 2006, and Andrew J. Phillips, Managing Director of BFM since 1999.

member of BlackRock’s Management Committee and Chairman of the Investment Strategy Group.

Financial Highlights

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Intermediate Bond Portfolio II


	INVESTOR A SHARES															INVESTOR B SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹			Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	9.57		$	9.88		$	9.81		$	9.71		$	9.12		$	9.57		$	9.89		$	9.81		$	9.72		$	9.13

Income from investment operations
Net investment income²		0.32	³		0.31	³		0.43	⁴		0.49	⁴		0.52⁴			0.24	³		0.23	³		0.36	⁴		0.43			0.45
Net gain (loss) on investments (both realized and unrealized)²		(0.20	)		(0.09	)		0.14	⁴		0.19	⁴		0.61⁴			(0.20	)		(0.09	)		0.14	⁴		0.17			0.61

Total from investment operations		0.12			0.22			0.57			0.68			1.13			0.04			0.14			0.50			0.60			1.06

Less distributions
Distributions from net investment income		(0.29	)		(0.31	)		(0.48	)		(0.48	)		(0.54	)		(0.21	)		(0.24	)		(0.40	)		(0.41	)		(0.47	)
Distributions from net realized gains		(0.08	)		(0.22	)		(0.02	)		(0.10	)		– –			(0.08	)		(0.22	)		(0.02	)		(0.10	)		– –

Total distributions		(0.37	)		(0.53	)		(0.50	)		(0.58	)		(0.54	)		(0.29	)		(0.46	)		(0.42	)		(0.51	)		(0.47	)

Net asset value at end of period	$	9.32		$	9.57		$	9.88		$	9.81		$	9.71		$	9.32		$	9.57		$	9.89		$	9.81		$	9.72

Total return⁵		1.20	%		2.33	%		5.92	%		7.32	%		12.58	%		0.44	%		1.46	%		5.24	%		6.41	%		11.87	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	31,272		$	33,977		$	38,547		$	26,805		$	7,106		$	10,594		$	14,106		$	12,850		$	6,291		$	2,933
Ratios of expenses to average net assets
Net expenses		0.86	%		0.93	%		0.94	%		1.12	%		1.33	%		1.61	%		1.68	%		1.69	%		1.86	%		2.05	%
Net expenses (excluding interest expense)		0.86	%		0.93	%		0.94	%		1.07	%		1.06	%		1.61	%		1.68	%		1.69	%		1.81	%		1.80	%
Total expenses		1.18	%		1.29	%		1.21	%		1.33	%		1.54	%		1.83	%		1.94	%		1.96	%		2.07	%		2.25	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²		3.34	%		3.20	%		4.46	%⁴		5.22	%⁴		5.44	%⁴		2.59	%		2.45	%		3.67	%⁴		4.45	%⁴		4.67	%⁴
Before advisory/administration and other fee waivers²		3.02	%		2.83	%		4.19	%⁴		5.01	%⁴		5.24	%⁴		2.37	%		2.18	%		3.40	%⁴		4.24	%⁴		4.47	%⁴
Portfolio turnover rate		194	%		216	%		220	%		239	%		250	%		194	%		216	%		220	%		239	%		250	%

Continued

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Intermediate Bond Portfolio II


	INVESTOR C SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	9.57		$	9.89		$	9.82		$	9.72		$	9.14

Income from investment operations
Net investment income²		0.25	³		0.23	³		0.35⁴			0.42			0.45
Net gain (loss) on investments² (both realized and unrealized)		(0.20	)		(0.09	)		0.14⁴			0.19			0.60

Total from investment operations		0.05			0.14			0.49			0.61			1.05

Less distributions
Distributions from net investment income		(0.21	)		(0.24	)		(0.40	)		(0.41	)		(0.47	)
Distributions from net realized gains		(0.08	)		(0.22	)		(0.02	)		(0.10	)		– –

Total distributions		(0.29	)		(0.46	)		(0.42	)		(0.51	)		(0.47	)

Net asset value at end of period	$	9.33		$	9.57		$	9.89		$	9.82		$	9.72

Total return⁵		0.54	%		1.46	%		5.13	%		6.52	%		11.74	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	9,204		$	14,334		$	13,046		$	3,950		$	885
Ratios of expenses to average net assets
Net expenses		1.61	%		1.67	%		1.68	%		1.85	%		2.11	%
Net expenses (excluding interest expense)		1.61	%		1.67	%		1.68	%		1.80	%		1.81	%
Total expenses		1.83	%		1.93	%		1.95	%		2.06	%		2.31	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²		2.59	%		2.45	%		3.51	%⁴		4.37	%⁴		4.74	%⁴
Before advisory/administration and other fee waivers²		2.37	%		2.18	%		3.25	%⁴		4.16	%⁴		4.54	%⁴
Portfolio turnover rate		194	%		216	%		220	%		239	%		250	%

Audited by other auditors.

Calculated using the average shares outstanding method.

⁴

Amounts reclassified and audited by Deloitte & Touche LLP as part of the audit for the fiscal year ended September 30, 2004. See Note C to the BlackRock Taxable Bond Portfolios Annual Report for the fiscal year ended September 30, 2005, for full explanations of such reclassifications.

⁵

Neither front-end sales load nor contingent deferred sales load is reflected.

BlackRock

Intermediate Bond Portfolio

IMPORTANT DEFINITIONS

Asset-Backed Securities: Bonds that are backed by a pool of assets, usually loans such as installment sale contracts or credit card receivables.

Collateralized Mortgage Obligations (CMO): Bonds that are backed by cash flows from pools of mortgages. CMOs may have multiple classes with different payment rights and protections.

Commercial Mortgage-Backed Securities (CMBS): Bonds that are backed by a mortgage loan or pool of loans secured by commercial property, not residential mortgages.

Investment Goal

The fund seeks to maximize total return, consistent with income generation and prudent investment management.

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in bonds and maintains an average portfolio duration that is within ±20% of the duration of the Lehman Brothers Intermediate Aggregate Index (the benchmark). The fund normally invests at least 80% of its assets in bonds. The fund’s dollar-weighted average maturity will be between 3 and 10 years.

The fund invests primarily in dollar-denominated investment grade bonds, but may invest up to 20% of its assets in any combination of non-investment grade bonds (high yield or junk bonds), non-dollar denominated bonds and bonds of emerging market issuers. The fund’s investment in non-dollar denominated bonds may be on a currency hedged or unhedged basis.

Non-investment grade bonds acquired by the fund will generally be in the lower rating categories of the major rating agencies (BB or lower by Standard & Poor’s or Ba or lower by Moody’s) or will be determined by the management team to be of similar quality. Split rated bonds will be considered to have the higher credit rating.

A security will be sold if, in the opinion of the management team, the risk of continuing to hold the security is unacceptable when compared to its total return potential.

IMPORTANT DEFINITIONS

Lehman Brothers Intermediate Aggregate Index: An unmanaged index comprised of U.S. investment grade fixed income securities including, government and corporate securities, mortgage pass-through securities, and asset-backed securities from the more comprehensive Lehman Brothers U.S. Aggregate Index. The index concentrates on intermediate maturity bonds and thus excludes all maturities from the broader index below one year and above 9.9 years.

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

specific price on a specific date. A swap is an agreement whereby one party exchanges its right to receive or its obligation to pay one type of interest or currency with another party for that other party’s obligation to pay or its right to receive another type of interest or currency in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate or currency risk. The fund may also use derivatives for leverage, in which case their use would involve leveraging risk. The fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements or dollar rolls).

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

The fund makes investments in residential and commercial mortgage-backed securities and other asset-backed securities. The characteristics of these mortgage-backed and asset-backed securities differ from traditional fixed income securities.

be at lower rates of return than the return on the assets which were prepaid. Certain commercial mortgage-backed securities are issued in several classes with different levels of yield and credit protection. The fund’s investments in commercial mortgage-backed securities with several classes may be in the lower classes that have greater risks than the higher classes, including greater interest rate, credit and prepayment risks.

Certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults.

The fund may invest up to 20% of its assets in any combination of non-investment grade bonds (high yield or junk bonds), non-dollar denominated bonds and bonds of emerging market issuers. Non-dollar and non-U.S. securities involve risks not typically associated with investing in U.S. securities. These risks include but are not limited to: currency risks (the risk that the value of interest paid on non-dollar and non-U.S. securities, or the value of the securities themselves, may fall if currency exchange rates change), the risk that a security’s value will be hurt by changes in non-U.S. political or social conditions, including changes in policies restricting non-U.S. investment, the possibility of heavy taxation, nationalization or expropriation of assets and more difficulty obtaining information on non-U.S. securities or companies. In addition, non-dollar and non-U.S. securities may be harder to sell and may be subject to wider price movements than comparable investments in U.S. companies. There is also less government regulation of non-U.S. securities markets.

In addition, political and economic structures in emerging market countries may be undergoing rapid change and these countries may lack the social, political and economic stability of more developed countries. As a result, some of the risks described above, including the risks of nationalization or expropriation of assets and the existence of smaller, more volatile and less regulated markets, may be increased. The value of many investments in emerging market countries has declined significantly in the past, and may do so again in the future, as a result of economic and political turmoil in many of these countries.

Non-investment grade securities carry greater risks than securities which have higher credit ratings, including a high risk of default. The yields of non-investment grade securities will move up and down over time. The credit rating of a high yield security does not necessarily address its market value risk. Ratings and market value may change from time to time, positively or negatively, to reflect new developments regarding the issuer. These companies are often young and growing and have a lot of debt. High yield securities are considered speculative, meaning there is a significant

risk that companies issuing these securities may not be able to repay principal and pay interest or dividends on time. In addition, other creditors of a high yield issuer may have the right to be paid before the high yield bond holder.

The market for high yield bonds is not as liquid as the markets for higher rated securities. This means that it may be harder to buy and sell high yield bonds, especially on short notice. The market could also be hurt by legal or tax changes.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

unlimited. Finally, BlackRock may not be able to predict correctly the direction of securities prices, interest rates and other economic factors, which could cause the fund’s derivatives positions to lose value. Credit default swaps involve special risks in addition to those mentioned above because they are difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty).

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance will vary and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Lehman Brothers Intermediate Aggregate Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and

its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year	Since Inception	Inception Date¹
Intermediate Bond; Inv A
Return Before Taxes	-2.70%	-1.23%	08/18/04
Return After Taxes on Distributions	-3.66%	-1.96%
Return After Taxes on Distributions and Sale of Shares	-1.76%	-1.46%
Intermediate Bond; Inv B
Return Before Taxes	-3.75%	-1.75%	08/18/04
Intermediate Bond; Inv C
Return Before Taxes	-0.36%	1.12%	08/18/04
Lehman Brothers Intermediate Agg. (Reflects no deduction for fees, expenses or taxes)	2.01%	2.51%	N/A

Inception date of the fund’s oldest class(es).

Expenses and Fees

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.0	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.50	%	.50	%	.50	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Other expenses	1.35	%	1.72	%	1.12	%
Service fees	.25%		.25%		.25%
Other	1.10%		1.47%		.87%
Total annual fund operating expenses	1.85	%	2.97	%	2.37	%
Fee waivers and expense reimbursements¹	.95	%	1.32	%	.72	%
Net expenses¹	.90	%	1.65	%	1.65	%

Reduced front-end sales charges may be available (See the section “Can the Sales Charge be Reduced or Eliminated?” for more information regarding the reduction of front-end sales charges). A CDSC of .50% is assessed on certain redemptions of Investor A Shares that are purchased with no initial sales charge as part of an investment of $1,000,000 or more.

***

There is no CDSC on C Shares after one year.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to .90% (for Investor A Shares) and 1.65% (for Investor B and C Shares) of average daily net assets until February 1, 2007. The fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. See the “Management” section for a discussion of these waivers and reimbursements

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year	3 Years		5 Years		10 Years
A Shares*	$488	$	870	$	1,276	$	2,408
B Shares**
Redemption	$618	$	1,144	$	1,646	$	2,803	***
B Shares
No Redemption	$168	$	794	$	1,446	$	2,803	***
C Shares**
Redemption	$268	$	671	$	1,200	$	2,651
C Shares
No Redemption	$168	$	671	$	1,200	$	2,651

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of Investor B Shares to Investor A Shares after seven years.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

The fund management team is led by a team of investment professionals at BlackRock Financial Management, Inc. (BFM), including the following individuals who have day-to-day responsibility: Keith Anderson, Managing Director of BFM since 1988, Scott Amero, Managing Director of BFM since 1990, Matthew Marra, Managing Director of BlackRock since 2006, and Andrew J. Phillips, Managing Director of BFM since 1999.

Mr. Phillips is a member of the Investment Strategy Group and his primary responsibility is the consistent implementation of

investment strategies across all total return accounts, with a sector emphasis on mortgage securities. Mr. Phillips has been a member of BlackRock’s fixed income team since 1991.

Mr. Anderson and Mr. Amero have been portfolio co-managers of the fund since inception and Mr. Marra and Mr. Phillips since 2006.

Financial Highlights

The financial information in the tables below shows the fund’s financial performance for the periods indicated. Certain information reflects results for a single fund share. The term “Total Return” indicates how much your investment would have increased or decreased during this period of time and assumes that you have reinvested all dividends and distributions. These figures have been audited by Deloitte & Touche LLP. Deloitte & Touche LLP has been appointed as the Fund’s independent registered public accountant for the current fiscal year. Deloitte & Touche LLP’s report, and the Fund’s audited financial statements, are included in the Fund’s 2005 annual report as filed on Form N-CSR, as it may be amended from time to time, which is available upon request (see back cover for ordering instructions).

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Intermediate Bond Portfolio


	INVESTOR A SHARES						INVESTOR B SHARES						INVESTOR C SHARES
	Year Ended 9/30/05			For the Period 8/18/04¹ through 9/30/04			Year Ended 9/30/05			For the Period 8/18/04¹ through 9/30/04			Year Ended 9/30/05			For the Period 8/18/04¹ through 9/30/04
Net asset value at beginning of period	$	10.06		$	10.00		$	10.06		$	10.00		$	10.06		$	10.00

Income from investment operations
Net investment income		0.33	²		0.06	²		0.23	²		0.06²			0.19	²		0.06	²
Net loss on investments (both realized and unrealized)		(0.17	)		– –			(0.15	)		– –			(0.11	)		– –

Total from investment operations		0.16			0.06			0.08			0.06			0.08			0.06

Less distributions
Distributions from net investment income		(0.19	)		– –			(0.12	)		– –			– –			– –
Distributions from net realized gains		(0.01	)		– –			(0.01	)		– –			(0.01	)		– –

Total distributions		(0.20	)		– –			(0.13	)		– –			(0.01	)		– –

Net asset value at end of period	$	10.02		$	10.06		$	10.01		$	10.06		$	10.13		$	10.06

Total return³		1.60	%		0.60	%		0.81	%		0.60	%		0.78	%		0.60	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	20			– –		$	2			– –		$	– –			– –
Ratios of expenses to average net assets
Net expenses		0.80	%		0.81	%⁴		1.55	%		1.56	%⁴		1.55	%		1.56	%⁴
Net expenses (excluding interest expenses)		0.80	%		0.81	%⁴		1.55	%		1.56	%⁴		1.55	%		1.56	%⁴
Total expenses		1.52	%		3.87	%⁴		2.17	%		4.52	%⁴		2.17	%		4.52	%⁴
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers		3.37	%		3.50	%⁴		2.62	%		2.75	%⁴		2.62	%		2.75	%⁴
Before advisory/administration and other fee waivers		2.65	%		0.44	%⁴		2.00	%		(0.21	)%⁴		2.00	%		(0.21	)%⁴
Portfolio turnover rate		217	%		114	%		217	%		114	%		217	%		114	%

Commencement of operations of share class.

Calculated using the average shares outstanding method.

Neither front-end sales load nor contingent deferred sales load is reflected.

⁴

Annualized.

BlackRock

Total Return Portfolio II

IMPORTANT DEFINITIONS

Asset-Backed Securities: Bonds that are backed by a pool of assets, usually loans such as installment sale contracts or credit card receivables.

Collateralized Mortgage Obligations (CMO): Bonds that are backed by cash flows from pools of mortgages. CMOs may have multiple classes with different payment rights and protections.

Commercial Mortgage-Backed Securities (CMBS): Bonds that are backed by a mortgage loan or pools of loans secured by commercial property, not residential mortgages.

Investment Goal

The fund seeks to realize a total return that exceeds that of the Lehman Brothers U.S. Aggregate Index (the benchmark).

Primary Investment Strategies

In pursuit of this goal, the fund normally invests at least 80% of its assets in bonds and maintains an average portfolio duration that is within ±20% of the duration of the benchmark.

The fund may invest up to 10% of its assets in non-dollar denominated bonds of issuers located outside of the United States. The fund’s investment in non-dollar denominated bonds may be on a currency hedged or unhedged basis.

The fund only buys securities that are rated investment grade at the time of purchase by at least one major rating agency or determined by the fund management team to be of similar quality. Split rated bonds will be considered to have the higher credit rating.

IMPORTANT DEFINITIONS

Lehman Brothers U.S. Aggregate Index: An unmanaged index comprised of more than 5,000 taxable bonds. This is an index of investment grade bonds. All securities included must be rated investment grade by Moody’s, Standard & Poor’s or Fitch.

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

currency in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate or currency risk. The fund may also use derivatives for leverage, in which case their use would involve leveraging risk. The fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements or dollar rolls).

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

Certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

cause the fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Increases and decreases in the value of the fund’s portfolio will be magnified when the fund uses leverage. The fund will also have to pay interest on its borrowings, reducing the fund’s return. This interest expense may be greater than the fund’s return on the underlying investment.

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

The performance for the period before Investor A Shares were launched is based upon performance for Institutional Shares of the fund, which were first issued in December 1992. Investor A Shares were launched in January 1996, Investor B Shares were launched in March 1996 and Investor C Shares were launched in February 1997. The performance for Investor B Shares for the period before they were launched is based upon performance for Institutional and Investor A Shares, and the performance for Investor C Shares for the period before they were launched is based upon performance for Institutional, Investor A and Investor B Shares. The actual return of Investor A Shares would have been lower than shown for the period before they were launched because Investor A Shares have higher expenses than Institutional Shares. Also, the actual returns of Investor B and C Shares would have been lower compared to Investor A Shares because Investor B and C Shares have higher expenses than Investor A Shares. Investor A Shares of the fund are expected to have expenses of .81% of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year and Investor B Shares and Investor C Shares of the fund are expected to have expenses of 1.61% and 1.57%, respectively of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year. Institutional Shares of the fund are expected to have expenses of .43% of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year		3 Years		5 Years		10 Years		Inception Date¹
Total Return II; Inv A
Return Before Taxes	-2.02	%	1.97	%	4.54	%	5.21	%	12/09/92
Return After Taxes on Distributions	-3.48	%	0.32	%	2.53	%	2.84	%
Return After Taxes on Distributions and Sales of Shares	-1.27	%	0.77	%	2.68	%	2.96	%
Total Return II; Inv B
Return Before Taxes	-3.16	%	1.50	%	4.28	%	4.86	%	12/09/92
Total Return II; Inv C
Return Before Taxes	0.25	%	2.56	%	4.61	%	4.87	%	12/09/92
Lehman Brothers U.S. Aggregate (Reflects no deduction for fees, expense or taxes)	2.43	%	3.62	%	5.87	%	6.16	%	N/A

Inception date of the fund’s oldest class(es).

Expenses and Fees

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.0	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.46	%	.46	%	.46	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Other expenses	.61	%	.58	%	.55	%
Service fees	.25%		.25%		.25%
Other	.36%		.33%		.30%
Total annual fund operating expenses	1.07	%	1.79	%	1.76	%
Fee waivers and expense reimbursements¹	.26	%	.14	%	.11	%
Net expenses¹	.81	%	1.65	%	1.65	%

***

There is no CDSC on C Shares after one year.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to .81% (for Investor A Shares) and 1.65% (for Investor B and C Shares) of average daily net assets until February 1, 2007. The fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. Including voluntary waivers, the net expenses for Investor B Shares of the fund are estimated to be 1.61%, and for Investor C Shares of the fund are estimated to be 1.57%. These voluntary waivers may be terminated at any time. See the “Management” section for a discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year		3 Years		5 Years		10 Years
A Shares*	$	479	$	702	$	942	$	1,631

B Shares**
Redemption	$	618	$	900	$	1,157	$	1,815	***
B Shares
No Redemption	$	168	$	550	$	957	$	1,815	***
C Shares**
Redemption	$	268	$	543	$	944	$	2,064
C Shares
No Redemption	$	168	$	543	$	944	$	2,064

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

The fund management team is led by a team of investment professionals at BlackRock Financial Management, Inc. (BFM), including the following individuals who have day-to-day responsibility: Keith Anderson, Managing Director of BFM since 1988, Scott Amero, Managing Director of BFM since 1990, Matthew Marra, Managing Director of BlackRock since 2006, and Andrew J. Phillips, Managing Director of BFM since 1999.

Mr. Phillips is a member of the Investment Strategy Group and his primary responsibility is the consistent implementation of

investment strategies across all total return accounts, with a sector emphasis on mortgage securities. Mr. Phillips has been a member of BlackRock’s fixed income team since 1991.

Mr. Anderson and Mr. Amero have been members of the team managing the fund since 1992 and Mr. Marra and Mr. Phillips since 2006. Mr. Anderson has been a portfolio co-manager of the fund since 1997, Mr. Amero since 1999 and Mr. Marra and Mr. Phillips since 2006.

Financial Highlights

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Total Return Portfolio II


	INVESTOR A SHARES															INVESTOR B SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹			Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	9.75		$	10.01		$	10.00		$	9.99		$	9.36		$	9.75		$	10.01		$	10.00		$	9.98		$	9.35

Income from investment operations
Net investment income²		0.36	³		0.35	³		0.40			0.47	⁴		0.53	⁴		0.29	³		0.28	³		0.33			0.41			0.46
Net gain (loss) on investments (both realized and unrealized)²		(0.11	)		(0.02	)		0.16			0.18	⁴		0.62	⁴		(0.13	)		(0.02	)		0.16			0.18			0.62

Total from investment operations		0.25			0.33			0.56			0.65			1.15			0.16			0.26			0.49			0.59			1.08

Less distributions
Distributions from net investment income		(0.35	)		(0.34	)		(0.50	)		(0.52	)		(0.52	)		(0.27	)		(0.27	)		(0.43	)		(0.45	)		(0.45	)
Distributions from net realized gains		(0.02	)		(0.25	)		(0.05	)		(0.12	)		– –			(0.02	)		(0.25	)		(0.05	)		(0.12	)		– –

Total distributions		(0.37	)		(0.59	)		(0.55	)		(0.64	)		(0.52	)		(0.29	)		(0.52	)		(0.48	)		(0.57	)		(0.45	)

Net asset value at end of period	$	9.63		$	9.75		$	10.01		$	10.00		$	9.99		$	9.62		$	9.75		$	10.01		$	10.00		$	9.98

Total returns⁵		2.54	%		3.44	%		5.81	%		6.75	%		12.63	%		1.67	%		2.66	%		5.03	%		6.06	%		11.69	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	214,196		$	132,561		$	113,190		$	90,460		$	22,123		$	49,389		$	56,758		$	70,550		$	56,047		$	36,314
Ratios of expenses to average net assets
Net expenses		0.81	%		0.88	%		0.90	%		1.08	%		1.07	%		1.56	%		1.63	%		1.65	%		1.83	%		1.81	%
Net expenses (excluding interest expense)		0.81	%		0.88	%		0.90	%		1.02	%		1.02	%		1.56	%		1.63	%		1.65	%		1.76	%		1.75	%
Total expenses		1.13	%		1.23	%		1.25	%		1.30	%		1.28	%		1.78	%		1.88	%		2.00	%		2.04	%		2.02	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²		3.72	%		3.65	%		4.01	%⁴		4.89	%⁴		5.34	%⁴		2.97	%		2.88	%		3.26	%⁴		4.14	%⁴		4.62	%⁴
Before advisory/administration and other fee waivers²		3.40	%		3.30	%		3.66	%⁴		4.67	%⁴		5.13	%⁴		2.75	%		2.63	%		2.91	%⁴		3.92	%⁴		4.41	%⁴
Portfolio turnover rate		351	%		360	%		659	%⁶		359	%		304	%		351	%		360	%		659	%⁶		359	%		304	%


	INVESTOR C SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	9.75		$	10.02		$	10.01		$	9.99		$	9.35

Income from investment operations
Net investment income²		0.29	³		0.28	³		0.33			0.42			0.46
Net gain (loss) on investments (both realized and unrealized)²		(0.12	)		(0.03	)		0.16			0.17			0.63

Total from investment operations		0.17			0.25			0.49			0.59			1.09

Less distributions
Distributions from net investment income		(0.27	)		(0.27	)		(0.43	)		(0.45	)		(0.45	)
Distributions from net realized gains		(0.02	)		(0.25	)		(0.05	)		(0.12	)		– –

Total distributions		(0.29	)		(0.52	)		(0.48	)		(0.57	)		(0.45	)

Net asset value at end of period	$	9.63		$	9.75		$	10.02		$	10.01		$	9.99

Total returns⁵		1.77	%		2.56	%		5.02	%		6.06	%		11.80	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	73,954		$	85,717		$	81,478		$	47,326		$	21,678
Ratios of expenses to average net assets
Net expenses		1.56	%		1.62	%		1.65	%		1.82	%		1.79	%
Net expenses (excluding interest expense)		1.56	%		1.62	%		1.65	%		1.76	%		1.75	%
Total expenses		1.78	%		1.87	%		2.00	%		2.04	%		2.00	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²		2.93	%		2.89	%		3.22	%⁴		4.14	%⁴		4.57	%⁴
Before advisory/administration and other fee waivers²		2.71	%		2.64	%		2.87	%⁴		3.92	%⁴		4.36	%⁴
Portfolio turnover rate		351	%		360	%		659	%⁶		359	%		304	%

Audited by other Auditors.

Calculated using the average shares outstanding method.

⁴

Amounts reclassified and audited by Deloitte & Touche LLP as part of the audit for the fiscal year ended September 30, 2004. See Note C to the BlackRock Taxable Bond Portfolios Annual Report for the fiscal year ended September 30, 2005, for full explanations of such reclassifications.

⁵

Neither front-end sales load nor contingent deferred sales load is reflected.

⁶

Includes dollar roll transactions, excluding these transactions the portfolio turnover would have been 257%.

BlackRock

Total
Return Portfolio

IMPORTANT DEFINITIONS

Asset-Backed Securities: Bonds that are backed by a pool of assets, usually loans such as installment sale contracts or credit card receivables.

Collateralized Mortgage Obligations (CMO): Bonds that are backed by cash flows from pools of mortgages. CMOs may have multiple classes with different payment rights and protections.

Commercial Mortgage-Backed Securities (CMBS): Bonds that are backed by a mortgage loan or pool of loans secured by commercial property, not residential mortgages.

Investment Goal

The fund seeks to realize a total return that exceeds that of the Lehman Brothers U.S. Aggregate Index (the benchmark).

Primary Investment Strategies

In pursuit of this goal, the fund normally invests at least 80% of its assets in bonds and maintains an average portfolio duration that is within ± 20% of the duration of the benchmark.

A security will be sold if, in the opinion of the management team, the risk of continuing to hold the security is unacceptable when compared to its total return potential.

IMPORTANT DEFINITIONS

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

one type of interest or currency with another party for that other party’s obligation to pay or its right to receive another type of interest or currency in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate or currency risk. The fund may also use derivatives for leverage, in which case their use would involve leveraging risk. The fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements or dollar rolls).

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

issued in several classes with different levels of yield and credit protection. The fund’s investments in commercial mortgage- backed securities with several classes may be in the lower classes that have greater risks than the higher classes, including greater interest rate, credit and prepayment risks.

Certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty).

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance has varied year by year and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Lehman Brothers U.S. Aggregate Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year	3 Years	Since Inception	Inception Date¹
Total Return; Inv A
Return Before Taxes	-1.95%	2.08%	3.80%	12/07/01
Return After Taxes on Distributions	-3.39%	0.67%	2.23%
Return After Taxes on Distributions and Sale of Shares	-1.24%	0.98%	2.33%
Total Return; Inv B
Return Before Taxes	-3.15%	1.57%	3.67%	12/07/01
Total Return; Inv C
Return Before Taxes	0.46%	2.67%	4.11%	12/07/01
Lehman Brothers U.S. Aggregate (Reflects no deduction for fees, expenses or taxes)	2.43%	3.62%	5.37%	N/A

The information for the fund in the chart and table assumes reinvestment of dividends and distributions. The information for the benchmark does not assume reinvestment of dividends and distributions. Source: BlackRock Advisors, LLC

Inception date of the fund’s oldest class(es).

Expenses and Fees

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.0	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.50	%	.50	%	.50	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Other expenses	1.63	%	.83	%	1.43	%
Service fees	.25	%	.25	%	.25	%
Other	1.38	%	.58	%	1.18	%
Total annual fund operating expenses	2.13	%	2.08	%	2.68	%
Fee waivers and expense reimbursements¹	1.23	%	.43	%	1.03	%
Net expenses¹	.90	%	1.65	%	1.65	%

***

There is no CDSC on C Shares after one year.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year	3 Years	5 Years		10 Years
A Shares*	$488	$926	$	1,390	$	2,670

B Shares**
Redemption	$618	$960	$	1,279	$	2,395	^***
B Shares
No Redemption	$168	$610	$	1,079	$	2,395	^***
C Shares**
Redemption	$268	$735	$	1,328	$	2,937
C Shares
No Redemption	$168	$735	$	1,328	$	2,937

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

Fund Management

The fund management team is led by a team of investment professionals at BlackRock Financial Management, Inc. (BFM), including the following individuals who have day-to-day responsibility: Keith Anderson, Managing Director of BFM since 1988, Scott Amero, Managing Director of BFM since 1990, Matthew Marra, Managing Director of BlackRock since 2006, and Andrew J. Phillips, Managing Director of BFM since 1999.

Mr. Phillips is a member of the Investment Strategy Group and his primary responsibility is the consistent implementation of

investment strategies across all total return accounts, with a sector emphasis on mortgage securities. Mr. Phillips has been a member of BlackRock’s fixed income team since 1991.

Mr. Anderson and Mr. Amero have been portfolio co-managers of the fund since inception and Mr. Marra and Mr. Phillips since 2006.

Financial Highlights

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Total Return Portfolio


	INVESTOR A SHARES												INVESTOR B SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			For the period 12/7/01^1,2 through 9/30/02			Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			For the period 12/7/01^1,2 through 9/30/02
Net asset value at beginning of period	$	10.35		$	10.46		$	10.31		$	10.00		$	10.34		$	10.46		$	10.31		$	10.00

Income from investment operations
Net investment income³		0.36	⁴		0.33	⁴		0.37			0.08			0.29	⁴		0.25	⁴		0.29			0.43
Net gain (loss) on investments (both realized and unrealized)³		(0.07	)		– –			0.29			0.59			(0.08	)		– –			0.29			0.21

Total from investment operations		0.29			0.33			0.66			0.67			0.21			0.25			0.58			0.64

Less distributions
Distributions from net investment income		(0.36	)		(0.31	)		(0.45	)		(0.36	)		(0.28	)		(0.24	)		(0.37	)		(0.33	)
Distributions from net realized gains		– –			(0.13	)		(0.06	)		– –			– –			(0.13	)		(0.06	)		– –

Total distributions		(0.36	)		(0.44	)		(0.51	)		(0.36	)		(0.28	)		(0.37	)		(0.43	)		(0.33	)

Net asset value at end of period	$	10.28		$	10.35		$	10.46		$	10.31		$	10.27		$	10.34		$	10.46		$	10.31

Total return⁵		2.79	%		3.25	%		6.47	%		6.88	%		2.02	%		2.38	%		5.68	%		6.46	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	88		$	9		$	8		$	2		$	137		$	103		$	80		$	– –
Ratios of expenses to average net assets
Net expenses		0.80	%		0.86	%		0.90	%		0.99	%⁶		1.56	%		1.63	%		1.65	%		1.74	%⁶
Net expenses (excluding interest expense)		0.80	%		0.86	%		0.90	%		0.99	%⁶		1.56	%		1.63	%		1.65	%		1.74	%⁶
Total expenses		1.19	%		1.28	%		1.25	%		1.40	%⁶		1.84	%		1.97	%		2.00	%		2.15	%⁶
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers³		3.56	%		3.21	%		3.12	%⁷		3.33	%⁶		2.84	%		2.46	%		2.36	%⁷		2.58	%⁶
Before advisory/administration and other fee waivers³		3.17	%		2.79	%		2.77	%⁷		2.91	%⁶		2.56	%		2.12	%		2.01	%⁷		2.16	%⁶
Portfolio turnover rate		358	%		412	%		1,021	%⁸		330	%		358	%		412	%		1,021	%⁸		330	%

Audited by other auditors.

Commencement of operations of share class.

⁴

Calculated using the average shares outstanding method.

⁵

Neither front-end sales load nor contingent deferred sales load is reflected.

⁶

Annualized.

⁷

Amounts reclassified and audited by Deloitte & Touche LLP as part of the audit for the fiscal year ended September 30, 2004. See Note C to the BlackRock Taxable Bond Portfolios Annual Report for the fiscal year ended September 30, 2005, for full explanations of such reclassifications.

⁸

Includes dollar roll transactions, excluding these transactions the portfolio turnover would have been 319%.

Continued

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Total Return Portfolio


	INVESTOR C SHARES
	Year ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			For the period 12/7/01^1,2 through 9/30/02
Net asset value at beginning of period	$	10.33		$	10.46		$	10.31		$	10.00

Income from investment operations
Net investment income³		0.28	⁴		0.27⁴			0.29			0.43
Net gain (loss) on investments (both realized and unrealized)³		(0.07	)		(0.03	)		0.29			0.21

Total from investment operations		0.21			0.24			0.58			0.64

Less distributions
Distributions from net investment income		(0.28	)		(0.24	)		(0.37	)		(0.33	)
Distributions from net realized gains		– –			(0.13	)		(0.06	)		– –

Total distributions		(0.28	)		(0.37	)		(0.43	)		(0.33	)

Net asset value at end of period	$	10.26		$	10.33		$	10.46		$	10.31

Total return⁵		2.02	%		2.28	%		5.68	%		6.46	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	53		$	– –		$	– –		$	– –
Ratios of expenses to average net assets
Net expenses		1.55	%		1.63	%		1.65	%		1.74	%⁶
Net expenses (excluding interest expense)		1.56	%		1.63	%		1.65	%		1.74	%⁶
Total expenses		1.84	%		1.97	%		2.00	%		2.15	%⁶
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers³		2.78	%		2.46	%		2.37	%⁷		2.58	%⁶
Before advisory/administration and other fee waivers³		2.49	%		2.12	%		2.02	%⁷		2.16	%⁶
Portfolio turnover rate		358	%		412	%		1,021	%⁸		330	%

Audited by other auditors.

Commencement of operations of share class.

⁴

Calculated using the average shares outstanding method.

⁵

Neither front-end sales load nor contingent deferred sales load is reflected.

⁶

Annualized.

⁷

Amounts reclassified and audited by Deloitte & Touche LLP as part of the audit for the fiscal year ended September 30, 2004. See Note C to the BlackRock Taxable Bond Portfolios Annual Report for the fiscal year ended September 30, 2005, for full explanations of such reclassifications.

⁸

Includes dollar roll transactions, excluding these transactions the portfolio turnover would have been 319%.

BlackRock

Government Income Portfolio

IMPORTANT DEFINITIONS

Asset-Backed Securities: Bonds that are backed by a pool of assets, usually loans such as installment sale contracts or credit card receivables.

Collateralized Mortgage Obligations (CMO): Bonds that are backed by cash flows from pools of mortgages. CMOs may have multiple classes with different payment rights and protections.

Commercial Mortgage-Backed Securities (CMBS): Bonds that are backed by a mortgage loan or pools of loans secured by commercial property, not residential mortgages.

Investment Goal

The fund’s investment goal is to seek to maximize total return, consistent with income generation and prudent investment management.

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in the highest rated government and agency bonds in the ten to fifteen year maturity range and in mortgages guaranteed by the U.S. Government or its agencies. The fund normally invests at least 80% of its assets in bonds issued or guaranteed by the U.S. Government and its agencies. Securities purchased by the fund are rated in the highest rating category (AAA or Aaa) at the time of purchase by at least one major rating agency or are determined by the fund management team to be of similar quality. Split rated bonds will be considered to have the higher credit rating.

The management team will normally attempt to structure the fund’s portfolio to have comparable duration to its benchmark.

IMPORTANT DEFINITIONS

Lehman Brothers Mortgage-Backed Securities Index: An index that includes the mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC) that meet the maturity and liquidity criteria.

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Merrill Lynch 10-Year Treasury Index: A one-security index consisting of the current “on-the-run” 10-year issue.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

of securities at a specific price on a specific date. A swap is an agreement whereby one party exchanges its right to receive or its obligation to pay one type of interest with another party for that other party’s obligation to pay or its right to receive another type of interest in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate risk. The fund may also use derivatives for leverage, in which case their use would involve leveraging risk. The fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements or dollar rolls).

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

A main risk of investing in the fund is interest rate risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds such as those held by the fund. Market interest rates have in recent years declined significantly below recent historical average rates. This decline may have increased the risk that these rates will rise in the future.

interest rates, the rate of prepayments tends to increase (as does price fluctuation) as borrowers are motivated to pay off debt and refinance at new lower rates. During such periods, reinvestment of the prepayment proceeds by the management team will generally be at lower rates of return than the return on the assets which were prepaid.

Certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty).

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance has varied year by year and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of a customized weighted index comprised of the returns of the Lehman Brothers Mortgage-Backed Securities Index (50%) and the Merrill Lynch 10-Year Treasury Index (50%), recognized unmanaged indices of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

The performance for the period before Investor C Shares were launched is based upon performance for Investor B Shares of the

fund. Investor C Shares were launched in February 1997. Investor B Shares and Investor C Shares of the fund are expected to have expenses of 1.73% and 1.67%, respectively, of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year.

As of 12/31

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year		3 Years		5 Years		10 Years		Inception Date¹
Government Income; Inv A
Return Before Taxes	-2.60	%	1.41	%	5.26	%	5.87	%	10/03/94
Return After Taxes on Distributions	-4.01	%	-0.07	%	3.37	%	3.56	%
Return After Taxes on Distributions and Sale of Shares	-1.70	%	0.36	%	3.38	%	3.56	%
Government Income; Inv B
Return Before Taxes	-3.20	%	1.15	%	5.12	%	5.56	%	10/03/94
Government Income; Inv C
Return Before Taxes	0.22	%	2.20	%	5.41	%	5.54	%	10/03/94
Lehman Brothers Mtg./10-Yr. Tsy. (Reflects no deduction for fees, expenses or taxes)	2.31	%	3.12	%	5.41	%	5.88	%	N/A

Inception date of the fund’s oldest class(es).

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Expenses and Fees

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.0	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.50	%	.50	%	.50	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Other expenses	.73	%	.71	%	.65	%
Service fees	.25%		.25%		.25%
Other	.48%		.46%		.40%
Total annual fund operating expenses	1.23	%	1.96	%	1.90	%
Fee waivers and expense reimbursements¹	.16	%	.14	%	.08	%
Net expenses¹	1.07	%	1.82	%	1.82	%

Reduced front-end sales charges may be available (see the section “Can the Sales Charge be Reduced or Eliminated” for more information regarding the reduction of front-end sales charges). A CDSC of 0.50% is assessed on certain redemptions of Investor A Shares that are purchased with no initial sales charge as part of an investment of $1,000,000 or more.

***

There is no CDSC on C Shares after one year.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to 1.07% (for Investor A Shares) and 1.82% (for Investor B and C Shares) of average daily net assets until February 1, 2007. The fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. Including voluntary waivers, the net expenses for Investor A Shares of the fund are estimated to be 1.00%, for Investor B Shares of the fund are estimated to be 1.73%, and for C Shares of the fund are estimated to be 1.67%. These voluntary waivers may be terminated at any time. See the “Management” section for a discussion of these waivers and reimbursements. In addition, BlackRock has agreed to voluntarily waive or reimburse fees or expenses such that net expenses would not exceed 0.95% for Investor A Shares. This voluntary waiver or reimbursement may be reduced or discontinued at any time; however, BlackRock has agreed not to reduce or discontinue this waiver or reimbursement for a period of two years after the closing of the reorganization of the fund and a mutual fund formerly managed by Merrill Lynch Investment Managers unless approved by the Fund’s trustees, including a majority of the non-interested trustees.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time

period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year		3 Years		5 Years		10 Years
A Shares*	$	505	$	760	$	1,034	$	1,816
B Shares**
Redemption	$	635	$	952	$	1,244	$	1,996	***
B Shares
No Redemption	$	185	$	602	$	1,044	$	1,996	***
C Shares**
Redemption	$	285	$	589	$	1,019	$	2,216
C Shares
No Redemption	$	185	$	589	$	1,019	$	2,216

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

The fund management team is led by a team of investment professionals at BlackRock Financial Management, Inc. (BFM), including the following individuals who have day-to-day responsibility: Andrew J. Phillips, Managing Director of BFM since 1999, and Eric Pellicciaro, Managing Director of BFM since 2005.

Mr. Pellicciaro is a member of the Investment Strategy Group and the lead mortgage sector specialist. His primary responsibility is managing client portfolios, with a sector emphasis on fixed-rate mortgage securities, including pass-throughs and CMOs. Mr. Pellicciaro started his career in the Financial Modeling Group at BlackRock in 1996, and joined the Fixed Income Portfolio Management Group in 1999.

Mr. Phillips has been a member of the team managing the fund since 1995 and Mr. Pellicciaro since 1999. Mr. Phillips has been a portfolio co-manager of the fund since 1999 and Mr. Pellicciaro since April 2004.

Financial Highlights

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Government Income Portfolio


	INVESTOR A SHARES															INVESTOR B SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹			Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	11.18		$	11.33		$	11.40		$	10.99		$	10.03		$	11.18		$	11.33		$	11.40		$	10.98		$	10.03

Income from investment operations
Net investment income²		0.43	³		0.40	³		0.34	^3,4		0.45	^3,4		0.56	⁴		0.35	³		0.31	³		0.30	^3,4		0.39	³^,4		0.48	⁴
Net gain (loss) on investments (both realized and unrealized)²		(0.21	)		(0.03	)		0.14	⁴		0.74	⁴		0.94	⁴		(0.21	)		(0.03	)		0.10	⁴		0.73	⁴		0.93	⁴

Total from investment operations		0.22			0.37			0.48			1.19			1.50			0.14			0.28			0.40			1.12			1.41

Less distributions
Distributions from net investment income		(0.47	)		(0.36	)		(0.46	)		(0.51	)		(0.54	)		(0.39	)		(0.27	)		(0.38	)		(0.43	)		(0.46	)
Distributions from capital		(0.02	)		– –			– –			– –			– –			(0.02	)		– –			– –			– –			– –
Distributions from net realized gains		– –			(0.16	)		(0.09	)		(0.27	)		– –			– –			(0.16	)		(0.09	)		(0.27	)		– –

Total distributions		(0.49	)		(0.52	)		(0.55	)		(0.78	)		(0.54	)		(0.41	)		(0.43	)		(0.47	)		(0.70	)		(0.46	)

Net asset value at end of period	$	10.91		$	11.18		$	11.33		$	11.40		$	10.99		$	10.91		$	11.18		$	11.33		$	11.40		$	10.98

Total return⁵		2.01	%		3.34	%		4.34	%		11.47	%		15.36	%		1.25	%		2.57	%		3.56	%		10.74	%		14.41	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	247,380		$	126,332		$	86,559		$	42,845		$	12,040		$	42,479		$	44,786		$	53,89	7⁷	$	48,240		$	29,936
Ratios of expenses to average net assets
Net expenses		0.86	%		0.98	%		1.07	%		1.11	%		1.31	%		1.61	%		1.73	%		1.82	%		1.87	%		2.10	%
Net expenses (excluding interest expense)		0.86	%		0.98	%		1.07	%		1.07	%		1.06	%		1.61	%		1.73	%		1.82	%		1.82	%		1.82	%
Total expenses		1.26	%		1.38	%		1.34	%		1.41	%		1.60	%		1.90	%		2.03	%		2.09	%		2.17	%		2.39	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²		3.92	%		3.63	%		3.05	%⁴		4.26	%⁴		5.25	%⁴		3.20	%		2.81	%		2.62	%⁴		3.69	%⁴		4.62	%⁴
Before advisory/administration and other fee waivers²		3.52	%		3.23	%		2.78	%⁴		3.97	%⁴		4.96	%⁴		2.91	%		2.51	%		2.35	%⁴		3.40	%⁴		4.33	%⁴
Portfolio turnover rate		662	%		345	%		1,981	%⁶		615	%		849	%		662	%		345	%		1,981	%⁶		615	%		849	%

Continued

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Government Income Portfolio


	INVESTOR C SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	11.16		$	11.31		$	11.38		$	10.97		$	10.02

Income from investment operations
Net investment income²		0.35	³		0.31	³		0.30	³^,4		0.36	³^,4		0.47
Net gain (loss) on investments² (both realized and unrealized)		(0.21	)		(0.03	)		0.10	⁴		0.75	⁴		0.94

Total from investment operations		0.14			0.28			0.40			1.11			1.41

Less distributions
Distributions from net investment income		(0.39	)		(0.27	)		(0.38	)		(0.43	)		(0.46	)
Distributions from capital		(0.02	)		– –			– –			– –			– –
Distributions from net realized gains		– –			(0.16	)		(0.09	)		(0.27	)		– –

Total distributions		(0.41	)		(0.43	)		(0.47	)		(0.70	)		(0.46	)

Net asset value at end of period	$	10.89		$	11.16		$	11.31		$	11.38		$	10.97

Total return⁵		1.25	%		2.57	%		3.56	%		10.66	%		14.42	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	31,840		$	26,036		$	29,537		$	18,378		$	3,589
Ratios of expenses to average net assets
Net expenses		1.61	%		1.73	%		1.82	%		1.84	%		2.04	%
Net expenses (excluding interest expense)		1.61	%		1.73	%		1.82	%		1.81	%		1.80	%
Total expenses		1.90	%		2.03	%		2.09	%		2.13	%		2.33	%
Ratios of net investment income to average net assets
After advisory/administration fee waivers²		3.19	%		2.81	%		2.61	%⁴		3.42	%⁴		4.50	%⁴
Before advisory/administration fee waivers²		2.90	%		2.51	%		2.34	%⁴		3.13	%⁴		4.21	%⁴
Portfolio turnover rate		662	%		345	%		1,981	%⁶		615	%		849	%

Audited by other auditors.

Calculated using the average shares outstanding method.

⁴

Amounts reclassified and audited by Deloitte & Touche LLP as part of the audit for the fiscal year ended September 30, 2004. See Note C to the BlackRock Taxable Bond Portfolios Annual Report for the fiscal year ended September 30, 2005, for full explanations of such reclassifications.

⁵

Neither front-end sales load nor contingent deferred sales load is reflected.

⁶

Includes dollar roll transactions, excluding these transactions the portfolio turnover would have been 371%.

BlackRock

Inflation Protected Bond Portfolio

IMPORTANT DEFINITIONS

Asset-Backed Securities: Bonds that are backed by a pool of assets, usually loans such as installment sale contracts or credit card receivables.

Collateralized Mortgage Obligations (CMO): Bonds that are backed by cash flows from pools of mortgages. CMOs may have multiple classes with different payment rights and protections.

Commercial Mortgage-Backed Securities (CMBS): Bonds that are backed by a mortgage loan or pool of loans secured by commercial property, not residential mortgages.

Investment Goal

The fund seeks to maximize real return, consistent with preservation of real capital and prudent investment management.

Primary Investment Strategies

In pursuit of this goal, the fund normally invests at least 80% of its assets in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments, their agencies or instrumentalities, and U.S. and non-U.S. corporations. Inflation-indexed bonds are fixed income securities that are structured to provide protection against inflation. The value of the bond’s principal or the interest income paid on the bond is adjusted to track changes in an official inflation measure. The U.S. Treasury uses the Consumer Price Index for Urban Consumers as the inflation measure. Inflation-indexed bonds issued by a foreign government are generally adjusted to reflect a comparable inflation index, calculated by that government. “Real return” equals total return less the estimated cost of inflation, which is typically measured by the change in an official inflation measure. The fund maintains an average portfolio duration that is within ±20% of the duration of the Lehman Global Real: U.S. TIPS Index (the benchmark).

The fund may invest up to 20% of it assets in non-investment grade bonds (high yield or junk bonds) or securities of emerging market issuers. The fund may also invest up to 20% of its assets in non-dollar denominated securities of non-U.S. issuers, and may invest without limit in U.S. dollar denominated securities of non-U.S. issuers. The fund is non-diversifed, which means that it may concentrate its assets in a smaller number of issuers than a diversified fund.

The fund may also purchase: U.S. Treasuries and agency securities, commercial and residential mortgage-backed securities, CMOs, investment grade corporate bonds and asset-backed securities. Securities are purchased for the fund when the management team believes that they have the potential for above-average real return. The fund measures its performance against the benchmark.

IMPORTANT DEFINITIONS

Lehman Global Real: U.S. TIPS Index: An unmanaged market index made up of U.S. Treasury Inflation Linked Indexed securities.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

A security will be sold if, in the opinion of the management team, the risk of continuing to hold the security is unacceptable when compared to its real return potential.

The management team may, when consistent with the fund’s investment goal, buy or sell options or futures, or enter into credit default swaps and interest rate or foreign currency transactions, including swaps (collectively, commonly known as derivatives). An option is the right to buy or sell an instrument (which can be a security, an index of securities, a currency, or a basket of currencies) at a specific price on or before a specific date. A future is an agreement to buy or sell instruments of those types at a specific price on a specific date. A swap is an agreement whereby one party exchanges its right to receive or its obligation to pay one type of interest or currency with another party for that other party’s obligation to pay or its right to receive another type of interest or currency in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate or currency risk. The fund may also use derivatives for leverage, in which case their use would involve leveraging risk. The fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements or dollar rolls).

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies.

Key Risks

While the management team chooses bonds it believes can provide above-average real returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money. The principal value of your investment is not protected or otherwise guaranteed by virtue of the fund’s investments in 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.

The value of inflation-indexed bonds is expected to change in response to changes in real interest rates. Real interest rates are tied to the relationship between nominal interest rates and the rate of inflation. If nominal interest rates increase at a faster rate than inflation, real interest rates may rise, leading to a decrease in value of inflation-indexed bonds. Short-term increases in inflation may lead to a decline in value. Any increase in the principal amount of an inflation-indexed bond will be considered taxable ordinary income, even though investors do not receive their principal until maturity.

Periodic adjustments for inflation to the principal amount of an inflation-indexed bond may give rise to original issue discount, which will be includable in the fund’s gross income. Due to original issue discount, the fund may be required to make annual distributions to shareholders that exceed the cash received, which may cause the fund to liquidate certain investments when it is not advantageous to do so. Also, if the principal value of an inflation-indexed bond is adjusted downward due to deflation, amounts previously distributed in the taxable year may be characterized in some circumstances as a return of capital.

A main difference is that the principal on mortgage- or asset-backed securities may normally be prepaid at any time, which will reduce the yield and market value of these securities. Asset-backed securities and CMBS generally experience less prepayment than residential mortgage-backed securities. In periods of falling interest rates, the rate of prepayments tends to increase (as does price fluctuation) as borrowers are motivated to pay off debt and refinance at new lower rates. During such periods, reinvestment of the prepayment proceeds by the management team will generally be at lower rates of return than the return on the assets which were prepaid. Certain commercial mortgage-backed securities are issued in several classes with different levels of yield and credit protection. The fund’s investments in commercial mortgage- backed securities with several classes may be in the lower classes that have greater risks than the higher classes, including greater interest rate, credit and prepayment risks.

Certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults.

The fund may invest in non-investment grade bonds (high yield or junk bonds), non-dollar denominated bonds and bonds of emerging market issuers. Non-dollar and non-U.S. securities involve risks not typically associated with investing in U.S. securities. These risks include but are not limited to: currency risks (the risk that the value of interest paid on non-dollar and non-U.S. securities, or the value of the securities themselves, may fall if currency exchange rates change), the risk that a security’s value will be hurt by changes in non-U.S. political or social conditions, including changes in policies restricting non-U.S. investment, the possibility of heavy taxation, nationalization or expropriation of assets and more difficulty obtaining information on non-U.S. securities or companies. In addition, non-dollar and non-U.S. securities may be harder to sell and may be subject to wider price movements than comparable investments in U.S. companies. There is also less government regulation of non-U.S. securities markets.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

The fund is a non-diversified portfolio under the Investment Company Act, which means that fund performance is more dependent on the performance of a smaller number of securities and issuers than in a diversified portfolio. The change in value of any one security may affect the overall value of the fund more than it would a diversified fund’s.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance will vary and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Lehman Global Real: U.S. TIPS Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year	Since Inception	Inception Date¹
Inflation Protected Bond; Inv A
Return Before Taxes	0.55%	5.33%	06/28/04
Return After Taxes on Distributions	-1.99%	2.95%
Return After Taxes on Distributions and Sale of Shares	0.44%	3.21%
Inflation Protected Bond; Inv B
Return Before Taxes	-1.57%	4.23%	06/28/04
Inflation Protected Bond; Inv C
Return Before Taxes	1.86%	7.06%	06/28/04
Lehman Brothers Global Real: U.S. TIPS (Reflects no deduction for fees, expenses or taxes)	2.84%	7.02%	N/A

Inception date of the fund’s oldest class(es).

Expenses and Fees

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.0	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock, and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide shareholder liaison services to shareholders.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.40	%	.40	%	.40	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Other expenses	.98	%	1.05	%	.92	%
Service fees	.25%		.25%		.25%
Other	.73%		.80%		.67%
Total annual fund operating expenses	1.38	%	2.20	%	2.07	%
Fee waivers and expense reimbursements¹	.53	%	.60	%	.47	%
Net expenses¹	.85	%	1.60	%	1.60	%

Reduced front-end sales charges may be available (See the section “Can the Sales Charge be Reduced or Eliminated?” for more information regarding the reduction of front-end sales charges). A CDSC of .15% is assessed on certain redemptions of Investor A Shares that are purchased with no initial sales charge as part of an investment of $1,000,000 or more.

***

There is no CDSC on C Shares after one year.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to .85% (for Investor A Shares) and 1.60% (for Investor B and C Shares) of average daily net assets until February 1, 2007. The fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. Including voluntary waivers, the net expenses for Investor A Shares of the fund are estimated to be .75%, for Investor B Shares of the fund are estimated to be 1.58%, and for Investor and C Shares of the fund are estimated to be 1.44%. These voluntary waivers may be terminated at any time. See the “Management” section for a discussion of these waivers and reimbursements. In addition, BlackRock has agreed to voluntarily waive or reimburse fees or expenses such that net expenses would not exceed 0.66%, 1.42% and 1.41% for Investor A, Investor B and Investor C Shares, respectively. This voluntary waiver or reimbursement may be reduced or discontinued at any time; however, BlackRock has agreed not to reduce or discontinue this waiver or reimbursement for a period of two years after the closing of the reorganization of the fund and a mutual fund formerly managed by Merrill Lynch Investment Managers unless approved by the Fund’s trustees, including a majority of the non-interested trustees.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year	3 Years		5 Years		10 Years
A Shares*	$483	$	769	$	1,076	$	1,947

B Shares**
Redemption	$613		$981	$	1,325	$	2,180	***
B Shares
No Redemption	$163	$	631	$	1,125	$	2,180	***
C Shares**
Redemption	$263	$	603	$	1,070	$	2,363
C Shares
No Redemption	$163	$	603	$	1,070	$	2,363

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of Investor B Shares to Investor A Shares after seven years.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

Mr. Spodek is a member of the Investment Strategy Group and his primary responsibility is managing fixed income portfolios, with a sector emphasis on global government bonds, derivative instruments and implementing yield curve strategy across global portfolios. Mr. Spodek joined BlackRock in 1993.

Mr. Weinstein is a member of the Investment Strategy Group. His primary responsibility is the management of total return and real return products. Mr. Weinstein focuses on relative value opportunities across the yield curve in Government and Agency securities. Mr. Weinstein moved to his current role in the Portfolio Management Group in 2002. He began his career at BlackRock in the Portfolio Analytics Group in 2000.

Mr. Spodek has been a portfolio manager of the fund since inception. Mr. Weinstein has been a portfolio co-manager of the fund since 2005.

Financial Highlights

The financial information in the tables below shows the fund’s financial performance for the periods indicated. Certain information reflects results for a single fund share. The term “Total Return” indicates how much your investment would have increased or decreased during this period of time and assumes that you have reinvested all dividends and distributions. These figures have been audited by Deloitte & Touche LLP, the fund’s independent registered public accountant for the periods shown below. Deloitte & Touche LLP has been appointed as the Fund’s independent registered public accountant for the current fiscal year. Deloitte & Touche LLP’s report, and the Fund’s audited financial statements, are included in the Fund’s 2005 annual report as filed on Form N-CSR, as it may be amended from time to time, which is available upon request (see back cover for ordering instructions).

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Inflation Protected Bond Portfolio


	INVESTOR A SHARES						INVESTOR B SHARES						INVESTOR C SHARES
	Year Ended 9/30/05			For the Period 6/28/04¹ through 9/30/04			Year Ended 9/30/05			For the Period 6/28/04¹ through 9/30/04			Year Ended 9/30/05			For the Period 6/28/04¹ through 9/30/04
Net asset value at beginning of period	$	10.50		$	10.00		$	10.51		$	10.00		$	10.55		$	10.00

Income from investment operations
Net investment income (loss)		0.42	²		0.01	²		0.38	²		(0.01	)²		0.36	²		(0.01	)²
Net gain (loss) on investments (both realized and unrealized)		0.13			0.51			0.09			0.53			0.12			0.56

Total from investment operations		0.55			0.52			0.47			0.52			0.48			0.55

Less distributions
Distributions from net investment income		(0.48	)		(0.02	)		(0.40	)		(0.01	)		(0.40	)		– –
Distributions from net realized gains		(0.10	)		– –			(0.10	)		– –			(0.10	)		– –

Total distributions		(0.58	)		(0.02	)		(0.50	)		(0.01	)		(0.50	)		– –

Net asset value at end of period	$	10.47		$	10.50		$	10.48		$	10.51		$	10.53		$	10.55

Total return³		5.42	%		5.21	%		4.62	%		5.21	%		4.70	%		5.51	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	3,994		$	93		$	2,045		$	61		$	3,749		$	6
Ratios of expenses to average net assets
Net expenses		0.69	%		0.71	%⁴		1.44	%		1.44	%⁴		1.42	%		1.44	%⁴
Net expenses (excluding interest expenses)		0.69	%		0.71	%⁴		1.44	%		1.44	%⁴		1.42	%		1.44	%⁴
Total expenses		1.39	%		3.08	%⁴		2.07	%		3.73	%⁴		2.04	%		3.73	%⁴
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers		4.06	%		3.88	%⁴		3.65	%		3.15	%⁴		3.46	%		3.15	%⁴
Before advisory/administration and other fee waivers		3.36	%		1.51	%⁴		3.02	%		0.86	%⁴		2.84	%		0.86	%⁴
Portfolio turnover rate		419	%		96	%		419	%		96	%		419	%		96	%

Commencement of operations of share class.

Calculated using the average shares outstanding method.

Neither front-end sales load nor contingent deferred sales load is reflected.

⁴

Annualized.

BlackRock

GNMA Portfolio

IMPORTANT DEFINITIONS

Asset-Backed Securities: Bonds that are backed by a pool of assets, usually loans such as installment sale contracts or credit card receivables.

Commercial Mortgage-Backed Securities (CMBS): Bonds that are backed by a mortgage loan or pool of loans secured by commercial property, not residential mortgages.

Investment Goal

The fund’s investment goal is to seek to maximize total return, consistent with income generation and prudent investment management.

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in securities issued by the Government National Mortgage Association (GNMA) as well as other U.S. Government securities in the five to ten year maturity range. The fund normally invests at least 80% of its assets in GNMA securities. GNMA securities are backed by the full faith and credit of the United States and are supported by the right of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee.

Securities are purchased for the fund when the management team determines that they have the potential for above-average total return. The fund measures its performance against the Lehman Brothers GNMA MBS Index (the benchmark).

The management team will normally attempt to structure the fund’s portfolio to have comparable duration to its benchmark.

IMPORTANT DEFINITIONS

GNMA Securities: Securities issued and guaranteed by the Government National Mortgage Association (GNMA). These securities represent interests in pools of residential mortgage loans originated by private lenders and pass income from the initial debtors (homeowners) through intermediaries to investors.

Lehman Brothers GNMA MBS Index: An unmanaged index comprised of mortgage-backed pass through securities of the Government National Mortgage Association (GNMA).

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

of interest in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate risk. From time to time, the fund will use derivatives for leverage purposes, in which case their use would involve leveraging risk. The fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements or dollar rolls).

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

Two of the main risks of investing in the fund are interest rate risk and prepayment risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds such as those held by the fund. Market interest rates have in recent years declined significantly below historical average rates. This decline may have increased the risk that these rates will rise in the future.

In addition to GNMA securities, the fund also makes investments in other residential and commercial mortgage-backed securities and other asset-backed securities. The characteristics of mortgage-backed and asset-backed securities differ from traditional fixed income securities.

Certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty).

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance has varied year by year and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Lehman Brothers GNMA MBS Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year	3 Years	5 Years	Since Inception	Inception Date¹
GNMA; Inv A
Return Before Taxes	-1.91%	1.38%	4.33%	4.84%	05/18/98
Return After Taxes on Distributions	-3.47%	-0.32%	2.22%	2.61%
Return After Taxes on Distributions and Sale of Shares	-1.26%	0.19%	2.41%	2.74%
GNMA; Inv B
Return Before Taxes	-2.91%	0.95%	4.08%	4.60%	05/18/98
GNMA; Inv C
Return Before Taxes	0.41%	2.02%	4.40%	4.57%	05/18/98
Lehman Brothers GNMA MBS Index (Reflects no deduction for fees, expenses or taxes)	3.20%	3.47%	5.44%	5.82%	N/A

Inception date of the fund’s oldest class(es).

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Expenses and Fees

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.0	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.55	%	.55	%	.55	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Interest expense	.01	%	.01	%	.01	%
Other expenses	.60	%	.61	%	.59	%
Service fees	.25%		.25%		.25%
Other	.35%		.36%		.34%
Total annual fund operating expenses	1.16	%	1.92	%	1.90	%
Fee waivers and expense reimbursements¹	.08	%	.09	%	.07	%
Net expenses¹	1.08	%	1.83	%	1.83	%

***

There is no CDSC on C Shares after one year.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to 1.07% (excluding interest expense) (for Investor A Shares) and 1.82% (excluding interest expense) (for Investor B and C Shares) of average daily net assets until February 1, 2007. The fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. Including voluntary waivers, the net expenses for Investor A Shares of the fund are estimated to be .86% (excluding interest expense), for Investor B Shares of the fund are estimated to be 1.61% (excluding interest expense), and for Investor C Shares of the fund are estimated to be 1.60% (excluding interest expense). These voluntary waivers may be terminated at any time. See the “Management” section for a discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year		3 Years		5 Years		10 Years
A Shares*	$	506	$	746	$	1,005	$	1,746
B Shares**
Redemption	$	636	$	944	$	1,228	$	1,946	***
B Shares
No Redemption	$	186	$	594	$	1,028	$	1,946	***
C Shares**
Redemption	$	286	$	590	$	1,020	$	2,216
C Shares
No Redemption	$	186	$	590	$	1,020	$	2,216

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

The fund management team is led by a team of investment professionals at BlackRock Financial Management, Inc. (BFM), including the following individuals who have day-to-day responsibility: Andrew J. Phillips, Managing Director of BFM since 1999, and Eric Pellicciaro, Managing Director of BFM since 2005.

Mr. Pellicciaro is a member of the Investment Strategy Group and the lead mortgage sector specialist. Mr. Pellicciaro’s primary responsibility is managing client portfolios, with a sector emphasis on fixed-rate mortgage securities, including pass-throughs and CMOs. Mr. Pellicciaro started his career in the Financial Modeling Group at BlackRock in 1996, and joined the Fixed Income Portfolio Management Group in 1999.

Mr. Phillips has been a member of the team managing the fund since 1998 and Mr. Pellicciaro since 1999. Mr. Phillips has been a portfolio co-manager of the fund since 1999 and Mr. Pellicciaro since April 2004.

100

Financial Highlights

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

GNMA Portfolio


	INVESTOR A SHARES															INVESTOR B SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹			Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	9.92		$	10.06		$	10.27		$	10.32		$	9.71		$	9.89		$	10.03		$	10.24		$	10.29		$	9.71

Income from investment operations
Net investment income²		0.41	³		0.43	³		0.46	⁴		0.54	⁴		0.58	⁴		0.33	³		0.36	³		0.38	⁴		0.47	⁴		0.51
Net gain (loss) on investments (both realized and unrealized)²		(0.21	)		(0.09	)		(0.11	)⁴		0.20	⁴		0.61	⁴		(0.21	)		(0.09	)		(0.11	)⁴		0.19	⁴		0.58

Total from investment operations		0.20			0.34			0.35			0.74			1.19			0.12			0.27			0.27			0.66			1.09

Less distributions
Distributions from net investment income		(0.38	)		(0.48	)		(0.56	)		(0.58	)		(0.58	)		(0.30	)		(0.41	)		(0.48	)		(0.50	)		(0.51	)
Distributions from net realized gains		– –			– –			– –			(0.21	)		– –			– –			– –			– –			(0.21	)		– –

Total distributions		(0.38	)		(0.48	)		(0.56	)		(0.79	)		(0.58	)		(0.30	)		(0.41	)		(0.48	)		(0.71	)		(0.51	)

Net asset value at end of period	$	9.74		$	9.92		$	10.06		$	10.27		$	10.32		$	9.71		$	9.89		$	10.03		$	10.24		$	10.29

Total return⁵		2.01	%		3.50	%		3.50	%		7.50	%		12.74	%		1.25	%		2.74	%		2.74	%		6.72	%		11.48	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	15,288		$	18,080		$	18,978		$	13,620		$	3,672		$	19,792		$	25,439		$	32,486		$	23,928		$	4,936
Ratios of expenses to average net assets
Net expenses		0.86	%		1.05	%		1.11	%		1.36	%		1.81	%		1.62	%		1.80	%		1.85	%		2.07	%		2.53	%
Net expenses (excluding interest expense)		0.86	%		0.99	%		1.07	%		1.07	%		1.07	%		1.61	%		1.74	%		1.82	%		1.80	%		1.77	%
Total expenses		1.32	%		1.46	%		1.42	%		1.65	%		2.13	%		1.97	%		2.11	%		2.16	%		2.36	%		2.83	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²		4.13	%		4.34	%		4.27	%⁴		5.18	%⁴		5.77	%⁴		3.40	%		3.62	%		3.56	%⁴		4.44	%⁴		4.67	%⁴
Before advisory/administration and other fee waivers²		3.67	%		3.93	%		3.96	%⁴		4.89	%⁴		5.45	%⁴		3.05	%		3.31	%		3.25	%⁴		4.15	%⁴		4.36	%⁴
Portfolio turnover rate		521	%		228	%		1,365	%⁶		401	%		773	%		521	%		228	%		1,365	%⁶		401	%		773	%

101

Continued

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

GNMA Portfolio


	INVESTOR C SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	9.88		$	10.01		$	10.23		$	10.27		$	9.68

Income from investment operations
Net investment income²		0.34	³		0.36	³		0.38	⁴		0.45	⁴		0.51
Net gain (loss) on investments (both realized and unrealized)²		(0.22	)		(0.08	)		(0.12	)⁴		0.22	⁴		0.59

Total from investment operations		0.12			0.28			0.26			0.67			1.10

Less distributions
Distributions from net investment income		(0.30	)		(0.41	)		(0.48	)		(0.50	)		(0.51	)
Distributions from net realized gains		– –			– –			– –			(0.21	)		– –

Total distributions		(0.30	)		(0.41	)		(0.48	)		(0.71	)		(0.51	)

Net asset value at end of period	$	9.70		$	9.88		$	10.01		$	10.23		$	10.27

Total return⁵		1.26	%		2.85	%		2.64	%		6.84	%		11.62	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	26,691		$	39,542		$	51,109		$	36,220		$	1,225
Ratios of expenses to average net assets
Net expenses		1.62	%		1.80	%		1.85	%		1.94	%		2.48	%
Net expenses (excluding interest expense)		1.61	%		1.74	%		1.82	%		1.79	%		1.75	%
Total expenses		1.98	%		2.11	%		2.16	%		2.23	%		2.79	%
Ratios of net investment income to average net assets
After advisory/administration fee waivers²		3.44	%		3.62	%		3.55	%⁴		4.13	%⁴		4.54	%⁴
Before advisory/administration fee waivers²		3.08	%		3.31	%		3.24	%⁴		3.84	%⁴		4.23	%⁴
Portfolio turnover rate		521	%		228	%		1,365	%⁶		401	%		773	%

Audited by other Auditors.

Calculated using the average shares outstanding method.

⁴

Amounts reclassified and audited by Deloitte & Touche LLP as part of the audit for the fiscal year ended September 30, 2004. See Note C to the BlackRock Taxable Bond Portfolios Annual Report for the fiscal year ended September 30, 2005, for full explanations of such reclassifications.

⁵

Neither front-end sales load nor contingent deferred sales load is reflected.

⁶

Includes dollar roll transactions, excluding these transactions the portfolio turnover would have been 268%.

102

BlackRock

Managed Income Portfolio

IMPORTANT DEFINITIONS

Asset-Backed Securities: Bonds that are backed by a pool of assets, usually loans such as installment sale contracts or credit card receivables.

Collateralized Mortgage Obligations (CMO): Bonds that are backed by cash flows from pools of mortgages. CMOs may have multiple classes with different payment rights and protections.

Commercial Mortgage-Backed Securities (CMBS): Bonds that are backed by a mortgage loan or pools of loans secured by commercial property, not residential mortgages.

Investment Goal

The fund’s investment goal is to seek to maximize total return, consistent with income generation and prudent investment management.

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in investment grade bonds and maintains an average portfolio duration that is within ±20% of the Lehman Brothers U.S. Aggregate Index (the benchmark).

The management team evaluates sectors of the bond market and individual bonds within those sectors. The management team selects bonds from several sectors including: U.S. Treasuries and agency securities, commercial and residential mortgage-backed securities, CMOs, asset-backed securities and corporate bonds. Securities are purchased for the fund when the management team determines that they have the potential for above-average total return. The fund measures its performance against the benchmark.

If a security falls below investment grade, the management team will decide whether to continue to hold the security. Split rated bonds will be considered to have the higher credit rating. A security will be sold if, in the opinion of the management team, the risk of continuing to hold the security is unacceptable when compared to its total return potential.

The fund normally invests at least 80% of its assets in bonds and only buys securities rated investment grade at the time of purchase by at least one major rating agency or determined by the fund management team to be of similar quality. The fund may invest up to 10% of its assets in non-dollar denominated bonds of issuers located outside of the United States. The fund’s investment in non-dollar denominated bonds may be on a currency hedged or unhedged basis.

103

IMPORTANT DEFINITIONS

Lehman Brothers U.S. Aggregate Index: An unmanaged index comprised of more than 5,000 taxable bonds. This is an index of investment grade bonds; all securities included must be rated investment grade by Moody’s, Standard & Poor’s or Fitch.

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

specific date. A swap is an agreement whereby one party exchanges its right to receive or its obligation to pay one type of interest or currency with another party for that other party’s obligation to pay or its right to receive another type of interest or currency in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate or currency risk. From time to time, the fund will use derivatives for leverage purposes, in which case their use would involve leveraging risk. The fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements or dollar rolls).

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

A main difference is that the principal on mortgage- or asset-backed securities may normally be prepaid at any time, which will reduce the yield and market value of these securities. Asset-backed

104

securities and CMBS generally experience less prepayment than residential mortgage-backed securities. In periods of falling interest rates, the rate of prepayments tends to increase (as does price fluctuation) as borrowers are motivated to pay off debt and refinance at new lower rates. During such periods, reinvestment of the prepayment proceeds by the management team will generally be at lower rates of return than the return on the assets which were prepaid.

Certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

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management team will segregate liquid assets on the books of the fund or otherwise cover the transactions. The use of leverage may cause the fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Increases and decreases in the value of the fund’s portfolio will be magnified when the fund uses leverage. The fund will also have to pay interest on its borrowings, reducing the fund’s return. This interest expense may be greater than the fund’s return on the underlying investment.

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance has varied year by year and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Lehman Brothers U.S. Aggregate Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

106

Investor A Shares were launched in February 1992, Investor B Shares were launched in July 1997 and Investor C Shares were launched in November 1999. The performance for Investor B Shares for the period before they were launched is based upon performance for Investor A Shares and the performance for Investor C Shares for the period before they were launched is based upon performance for Investor A and Investor B Shares.

The actual return of Investor B and C Shares would have been lower compared to Investor A Shares because Investor B and C Shares have higher expenses than Investor A Shares. Investor A Shares of the fund are expected to have expenses of .98% of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year and Investor B Shares and Investor C Shares of the fund are expected to have expenses of 1.83% and 1.76%, respectively, of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year	3 Years	5 Years	10 Years	Inception Date¹
Managed Income; Inv A
Return Before Taxes	-2.79%	1.68%	4.38%	5.05%	11/01/89
Return After Taxes on Distributions	-4.42%	-0.09%	2.41%	2.77%
Return After Taxes on Distributions and Sale of Shares	-1.83%	0.46%	2.58%	2.89%
Managed Income; Inv B
Return Before Taxes	-3.33%	1.45%	4.25%	4.87%	11/01/89
Managed Income; Inv C
Return Before Taxes	0.16%	2.53%	4.57%	4.86%	11/01/89
Lehman Brothers U.S. Aggregate (Reflects no deduction for fees, expenses or taxes)	2.43%	3.62%	5.87%	6.16%	N/A

Inception date of the fund’s oldest class(es).

107

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Expenses and Fees

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.0	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.50	%	.50	%	.50	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Interest expense¹	– –		– –		– –
Other expenses	.48	%	.58	%	.51	%
Service fees	.25%		.25%		.25%
Other	.23%		.33%		.26%
Total annual fund operating expenses	.98	%	1.83	%	1.76	%
Fee waivers and expense reimbursements²	– –		– –		– –
Net expenses²	.98	%	1.83	%	1.76	%

The CDSC is 4.5% if shares are redeemed in less than one year. The CDSC for Investor B Shares decreases for redemptions made in subsequent years. After six years there is no CDSC on B Shares. (See the section “Purchases of Investor B Shares” for complete schedule of CDSCs.)

***

There is no CDSC on C Shares after one year.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to 1.12% (excluding interest expense) (for Investor A Shares) and 1.87% (excluding interest expense) (for Investor B and C Shares) of average daily net assets until February 1, 2007. The fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. See the “Management” section for a discussion of these waivers and reimbursements.

108

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year	3 Years	5 Years	10 Years
A Shares*	$496	$700	$ 920	$1,553

B Shares**
Redemption	$636	$926	$1,190	$1,820***
B Shares
No Redemption	$186	$576	$ 990	$1,820***
C Shares**
Redemption	$279	$554	$ 954	$2,073
C Shares
No Redemption	$179	$554	$ 954	$2,073

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

The fund management team is led by a team of investment professionals at BlackRock Financial Management, Inc. (BFM), including the following individuals who have day-to-day responsibility: Keith Anderson, Managing Director of BFM since 1988, Scott Amero, Managing Director of BFM since 1990, Matthew Marra, Managing Director of BlackRock since 2006, and Andrew J. Phillips, Managing Director of BFM since 1999.

109

Mr. Anderson and Mr. Amero have been members of the team managing the fund since 1995 and Mr. Marra and Mr. Phillips since 2006. Mr. Anderson has been a portfolio co-manager of the fund since 1997, Mr. Amero since 1999 and Mr. Marra and Mr. Phillips since 2006.

110

Financial Highlights

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Managed Income Portfolio


	INVESTOR A SHARES															INVESTOR B SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹			Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	10.41		$	10.80		$	10.71		$	10.60		$	9.92		$	10.41		$	10.80		$	10.71		$	10.60		$	9.92

Income from investment operations
Net investment income²		0.42	³		0.42	³		0.49	⁴		0.53	⁴		0.56			0.35	³		0.35	³		0.41			0.46	⁴		0.49
Net gain (loss) on investments (both realized and unrealized)²		(0.17	)		(0.10	)		0.18	⁴		0.12	⁴		0.68			(0.17	)		(0.11	)		0.18			0.11	⁴		0.68

Total from investment operations		0.25			0.32			0.67			0.65			1.24			0.18			0.24			0.59			0.57			1.17

Less distributions
Distributions from net investment income		(0.41	)		(0.43	)		(0.58	)		(0.54	)		(0.56	)		(0.34	)		(0.35	)		(0.50	)		(0.46	)		(0.49	)
Distributions from net realized gains		(0.04	)		(0.28	)		– –			– –			– –			(0.04	)		(0.28	)		– –			– –			– –

Total distributions		(0.45	)		(0.71	)		(0.58	)		(0.54	)		(0.56	)		(0.38	)		(0.63	)		(0.50	)		(0.46	)		(0.49	)

Net asset value at end of period	$	10.21		$	10.41		$	10.80		$	10.71		$	10.60		$	10.21		$	10.41		$	10.80		$	10.71		$	10.60

Total return⁵		2.45	%		3.13	%		6.41	%		6.32	%		12.86	%		1.69	%		2.36	%		5.61	%		5.53	%		12.03	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	29,462		$	35,462		$	49,870		$	52,794		$	20,196		$	6,625		$	9,136		$	10,425		$	9,582		$	7,981
Ratios of expenses to average net assets
Net expenses		1.05	%		1.10	%		1.13	%		1.23	%		1.50	%		1.80	%		1.85	%		1.87	%		1.99	%		2.21	%
Net expenses (excluding interest expense)		1.05	%		1.10	%		1.12	%		1.12	%		1.13	%		1.80	%		1.85	%		1.87	%		1.87	%		1.87	%
Total expenses		1.18	%		1.30	%		1.30	%		1.38	%		1.61	%		1.84	%		1.95	%		2.05	%		2.11	%		2.33	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²		4.06	%		4.06	%		4.57	%⁴		5.14	%⁴		5.47	%⁴		3.34	%		3.31	%		3.80	%⁴		4.43	%⁴		4.71	%⁴
Before advisory/administration and other fee waivers²		3.93	%		3.86	%		4.40	%⁴		5.00	%⁴		5.35	%⁴		3.30	%		3.21	%		3.63	%⁴		4.30	%⁴		4.60	%⁴
Portfolio turnover rate		252	%		284	%		613	%⁶		290	%		262	%		252	%		284	%		613	%⁶		290	%		262	%

111

Continued

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Managed Income Portfolio


	INVESTOR C SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	10.38		$	10.78		$	10.68		$	10.57		$	9.91

Income from investment operations
Net investment income²		0.34	³		0.35	³		0.41			0.46	⁴		0.49
Net gain (loss) on investments (both realized and unrealized)²		(0.16	)		(0.12	)		0.19			0.11	⁴		0.66

Total from investment operations		0.18			0.23			0.60			0.57			1.15

Less distributions
Distributions from net investment income		(0.34	)		(0.35	)		(0.50	)		(0.46	)		(0.49	)
Distributions from net realized gains		(0.04	)		(0.28	)		– –			– –			– –

Total distributions		(0.38	)		(0.63	)		(0.50	)		(0.46	)		(0.49	)

Net asset value at end of period	$	10.18		$	10.38		$	10.78		$	10.68		$	10.57

Total return⁵		1.69	%		2.26	%		5.73	%		5.54	%		11.84	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	1,187		$	870		$	763		$	554		$	345
Ratios of expenses to average net assets
Net expenses		1.79	%		1.84	%		1.87	%		2.00	%		2.03	%
Net expenses (excluding interest expense)		1.79	%		1.84	%		1.87	%		1.87	%		1.86	%
Total expenses		1.83	%		1.95	%		2.05	%		2.14	%		2.14	%
Ratios of net investment income to average net assets
After advisory/administration fee waivers²		3.27	%		3.34	%		3.77	%⁴		4.44	%⁴		4.60	%⁴
Before advisory/administration fee waivers²		3.23	%		3.24	%		3.60	%⁴		4.30	%⁴		4.49	%⁴
Portfolio turnover rate		252	%		284	%		613	%⁶		290	%		262	%

Audited by other Auditors.

Calculated using the average shares outstanding method.

⁴

Amounts reclassified and audited by Deloitte & Touche LLP as part of the audit for the fiscal year ended September 30, 2004. See Note C to the BlackRock Taxable Bond Portfolios Annual Report for the fiscal year ended September 30, 2005, for full explanations of such reclassifications.

⁵

Neither front-end sales load nor contingent deferred sales load is reflected.

⁶

Includes dollar roll transactions, excluding these transactions the portfolio turnover would have been 206%.

112

BlackRock

International Bond Portfolio

IMPORTANT DEFINITIONS

Citigroup Non-U.S. World Government Bond Index: An unmanaged index that tracks the performance of 21 government bond markets: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Norway, Poland, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.

Investment Goal

The fund seeks to realize a total return that exceeds that of the Citigroup Non-U.S. World Government Bond Index (the benchmark).

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in non-dollar denominated bonds of issuers located outside of the United States in the five to fifteen year maturity range. The fund normally invests at least 80% of its assets in bonds and at least 65% of its assets in bonds of a diversified group of non-U.S. issuers from at least three developed countries. The fund may invest more than 25% of its assets in the securities of issuers located in Canada, France, Germany, Japan and the United Kingdom. The fund may from time to time invest in investment grade bonds of issuers in emerging market countries. The fund will also invest in non-U.S. currencies; however, the fund may underweight or overweight a currency based on the fund management team’s outlook. The fund may only buy securities rated investment grade at the time of purchase by at least one major rating agency or determined by the management team to be of similar quality. Split rated bonds will be considered to have the higher credit rating.

The management team evaluates sectors of the bond markets of various world economies and individual securities within those sectors. Securities are purchased for the fund when the management team determines that they have the potential for above-average total return. The fund measures its performance against the benchmark.

The management team will normally attempt to structure the fund’s portfolio to have comparable duration to its benchmark.

113

IMPORTANT DEFINITIONS

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

is an agreement to buy or sell instruments of these types at a specific price on a specific date. A swap is an agreement whereby one party exchanges its right to receive or its obligation to pay one type of interest or currency with another party for that other party’s obligation to pay or its right to receive another type of interest or currency in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate or currency risk. The fund may also use derivatives for leverage, in which case their use would involve leveraging risk. The fund may seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as reverse repurchase agreements or dollar rolls).

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

Three of the main risks of investing in the fund are interest rate risk, credit risk and the risks associated with investing in non-dollar denominated bonds of issuers located outside of the United States. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds such as those held by the fund. Market interest rates have in recent years declined significantly below historical average rates. This decline may have increased the risk that these rates will rise in the future. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments when due.

Non-dollar and non-U.S. securities involve risks not typically associated with investing in U.S. securities. These risks include but are not limited to: currency risks (the risk that the value of interest

114

paid on non-dollar and non-U.S. securities, or the value of the securities themselves, may fall if currency exchange rates change), the risk that a security’s value will be hurt by changes in non-U.S. political or social conditions, including changes in policies restricting investment, the possibility of heavy taxation, nationalization or expropriation of assets and more difficulty obtaining information on non-U.S. securities or companies. In addition, non-dollar and non-U.S. securities may be harder to sell and may be subject to wider price movements than comparable investments in U.S. companies. There is also less government regulation of non-U.S. securities markets.

Investing a significant portion of assets in one country makes the fund more dependent upon the political and economic circumstances of a particular country than a mutual fund that is more widely diversified. For example, the Japanese economy (especially Japanese banks, securities firms and insurance companies) has experienced considerable difficulty in recent years. In addition, the Japanese Yen has gone up and down in value versus the U.S. dollar. Japan may also be affected by turmoil in other Asian countries. The ability to concentrate in Canada, France, Germany and the United Kingdom may make the fund’s performance more dependent on developments in those countries.

The fund’s expenses can be expected to be higher than those of funds investing primarily in domestic securities because the costs related to investing abroad are usually higher than domestic expenses.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

115

some derivatives are more sensitive to interest rate changes and market price fluctuations than other securities. The possible lack of a liquid secondary market for derivatives and the resulting inability of the fund to sell or otherwise close a derivatives position could expose the fund to losses. The fund could also suffer losses related to its derivatives positions as a result of unanticipated market movements, which losses are potentially unlimited. Finally, BlackRock may not be able to predict correctly the direction of securities prices, interest rates and other economic factors, which could cause the fund’s derivatives positions to lose value. Credit default swaps involve special risks in addition to those mentioned above because they are difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty).

Some transactions may give rise to a form of leverage. These transactions may include, among others, derivatives, reverse purchase agreements and dollar rolls and may expose the fund to greater risk and increase its costs. To mitigate leverage risk, the management team will segregate liquid assets on the books of the fund or otherwise cover the transactions. The use of leverage may cause the fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Increases and decreases in the value of the fund’s portfolio will be magnified when the fund uses leverage. The fund will also have to pay interest on its borrowings, reducing the fund’s return. This interest expense may be greater than the fund’s return on the underlying investment.

Forward foreign currency exchange contracts do not eliminate fluctuations in the value of non-U.S. securities but rather allow the fund to establish a fixed rate of exchange for a future point in time. This strategy can have the effect of reducing returns and minimizing opportunities for gain.

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

116

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance has varied year by year and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Citigroup Non-U.S. World Government Bond Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

The performance for the period before Investor A and B Shares were launched is based upon performance for Service Shares of the fund, which were first issued in July 1991. Investor A and B Shares were launched in April 1996 and Investor C Shares were launched in September 1996. The performance for Investor C Shares for the period before they were launched is based on performance for Service and Investor B Shares. The actual return of Investor A and B Shares would have been lower than shown for the period before they were launched because Investor A and B Shares have higher expenses than Service Shares. Also, the actual returns of Investor B and C Shares would have been lower compared to Investor A Shares because Investor B and C Shares have higher expenses than Investor A Shares. Investor A Shares of the fund are expected to have expenses of 1.19% of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year and Investor B Shares and Investor C Shares of the fund are expected to have expenses of 1.99% and 1.91%, respectively of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year. Service Shares of the fund are expected to have expenses of 1.12% of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year.

117

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year		3 Years		5 Years		10 Years		Inception Date¹
International Bond; Inv A
Return Before Taxes	-14.34	%	3.12	%	4.65	%	6.49	%	07/01/91
Return After Taxes on Distributions	-15.44	%	1.88	%	3.03	%	3.69	%
Return After Taxes on Distributions and Sale of Shares	-9.26	%	1.98	%	3.00	%	3.78	%
International Bond; Inv B
Return Before Taxes	-14.35	%	3.05	%	4.63	%	6.26	%	07/01/91
International Bond; Inv C
Return Before Taxes	-11.28	%	4.17	%	4.98	%	6.29	%	07/01/91
Citigroup Non-U.S. WGBI (Reflects no deduction for fees, expenses or taxes)	-9.21	%	6.46	%	7.26	%	4.42	%	N/A

The chart and the table both assume reinvestment of dividends and distributions. Source: BlackRock Advisors, LLC

Inception date of the fund’s oldest class(es).

Expenses and Fees

118

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.0	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)
Redemption Fee****	2.0	%	2.0	%	2.0	%
(as a percentage of amount redeemed)

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.55	%	.55	%	.55	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Other expenses	.71	%	.69	%	.61	%
Service fees	.25%		.25%		.25%
Other	.46%		.44%		.36%
Total annual fund operating expenses	1.26	%	1.99	%	1.91	%
Fee waivers and expense reimbursements¹	.07	%	– –		– –
Net expenses¹	1.19	%	1.99	%	1.91	%

Reduced front-end sales charges may be available (see the section “Can the Sales Charge be Reduced or Eliminated?” for more information regarding the reduction of front-end sales charges). A CDSC of 0.75% is assessed on certain redemptions of Investor A Shares that are purchased with no initial sales charge as part of an investment of $1,000,000 or more.

***

There is no CDSC on C Shares after one year.

****

Fee applies only to shares that are redeemed or exchanged within 30 days of purchase.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to 1.19% (for Investor A Shares) and 2.25% (for Investor B and C Shares) of average daily net assets until February 1, 2007. The fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. See the “Management” section for a discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year		3 Years		5 Years		10 Years
A Shares*	$	516	$	777	$	1,058	$	1,856

B Shares**
Redemption	$	652	$	974	$	1,273	$	2,040	***
B Shares
No Redemption	$	202	$	624	$	1,073	$	2,040	***
C Shares**
Redemption	$	294	$	600	$	1,032	$	2,233
C Shares
No Redemption	$	194	$	600	$	1,032	$	2,233

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

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As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

The fund management team is led by a team of investment professionals at BlackRock Financial Management, Inc. (BFM), including the following individuals who have day-to-day responsibility: Andrew Gordon, Managing Director of BFM since 1996, and Scott Thiel, Managing Director of BlackRock since 2002.

Mr. Gordon is the head of the global bond team and a member of the Investment Strategy Group. His primary responsibilities include developing and implementing strategies in the non-dollar and emerging markets sectors of the fixed income markets. Prior to joining BlackRock in 1996, Mr. Gordon, as principal, was responsible for developing strategies for a small relative value global fixed income hedge fund. Prior to that, he had an eight-year affiliation with CS First Boston, where he pioneered the firm’s international fixed income research effort.

Mr. Thiel is a member of the Investment Strategy Group and his primary responsibility is developing and implementing strategies in the non-dollar and emerging market sectors of the fixed income markets. Prior to joining BlackRock, he was a Vice President at Goldman Sachs & Co. since 1989, where he was responsible for developing strategies in both U.S. and international interest rate and derivative markets for institutional money managers.

Mr. Gordon has been a member of the team managing the fund since 1997 and Mr. Thiel since 2002. Mr. Gordon has been a portfolio co-manager of the fund since 1997 and Mr. Thiel since 2004.

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Financial Highlights

The financial information in the tables below show the fund’s financial performance for the periods indicated. Certain information reflects results for a single fund share. The term “Total Return” indicates how much your investment would have increased or decreased during this period of time and assumes that you have reinvested all dividends and distributions. These figures have been audited by Deloitte & Touche LLP (for the fiscal years ended September 30, 2004 and later) and PricewaterhouseCoopers LLP (for the other fiscal years shown). Deloitte & Touche LLP has been appointed as the Fund’s independent registered public accountant for the current fiscal year. Deloitte & Touche LLP’s report, and the Fund’s audited financial statements, are included in the Fund’s 2005 annual report as filed on Form N-CSR, as it may be amended from time to time, which is available upon request (see back cover for ordering instructions).

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

International Bond Portfolio


	INVESTOR A SHARES															INVESTOR B SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹			Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	11.42		$	11.07		$	10.54		$	10.53		$	10.69		$	11.42		$	11.07		$	10.54		$	10.53		$	10.69

Income from investment operations
Net investment income		0.25	²		0.23	²		0.24	²		0.35	²		0.47			0.17	²		0.15	²		0.16	²		0.27	²		0.39
Net gain (loss) on investments (both realized and unrealized)		0.03			0.52			0.81			0.19			0.71			0.02			0.51			0.81			0.19			0.71

Total from investment operations		0.28			0.75			1.05			0.54			1.18			0.19			0.66			0.97			0.46			1.10

Less distributions
Distributions from net investment income		(0.55	)		(0.40	)		(0.28	)		(0.53	)		(1.34	)		(0.46	)		(0.31	)		(0.20	)		(0.45	)		(1.26	)
Distributions from capital		– –			– –			(0.17	)		– –			– –			– –			– –			(0.17	)		– –			– –
Distributions from net realized gains		(0.01	)		– –			(0.07	)		– –			– –			(0.01	)		– –			(0.07	)		– –			– –

Total distributions		(0.56	)		(0.40	)		(0.52	)		(0.53	)		(1.34	)		(0.47	)		(0.31	)		(0.44	)		(0.45	)		(1.26	)

Net asset value at end of period	$	11.14		$	11.42		$	11.07		$	10.54		$	10.53		$	11.14		$	11.42		$	11.07		$	10.54		$	10.53

Total return³		2.21	%⁴		6.84	%⁴		10.27	%		5.29	%		11.79	%		1.45	%⁴		6.04	%⁴		9.45	%		4.51	%		10.96	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	182,321		$	123,145		$	74,821		$	39,727		$	16,827		$	19,705		$	16,780		$	13,087		$	11,470		$	7,393
Ratios of expenses to average net assets
Net expenses		1.18	%		1.31	%		1.41	%		1.47	%		2.88	%		1.93	%		2.06	%		2.16	%		2.25	%		3.63	%
Net expenses (excluding interest expense)		1.18	%		1.31	%		1.41	%		1.37	%		1.36	%		1.93	%		2.06	%		2.16	%		2.11	%		2.10	%
Total expenses		1.29	%		1.43	%		1.41	%		1.47	%		2.88	%		1.95	%		2.09	%		2.16	%		2.25	%		3.63	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers		2.17	%		2.06	%		2.21	%		3.36	%		4.85	%		1.43	%		1.32	%		1.51	%		2.64	%		4.17	%
Before advisory/administration and other fee waivers		2.06	%		1.93	%		2.21	%		3.36	%		4.85	%		1.41	%		1.29	%		1.51	%		2.64	%		4.17	%
Portfolio turnover rate		164	%		240	%		209	%		206	%		111	%		164	%		240	%		209	%		206	%		111	%

121

Continued

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

International Bond Portfolio


	INVESTOR C SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	11.45		$	11.10		$	10.56		$	10.55		$	10.69

Income from investment operations
Net investment income		0.17	²		0.15	²		0.15	²		0.27	²		0.39
Net gain (loss) on investments (both realized and unrealized)		0.02			0.51			0.83			0.19			0.73

Total from investment operations		0.19			0.66			0.98			0.46			1.12

Less distributions
Distributions from net investment income		(0.46	)		(0.31	)		(0.20	)		(0.45	)		(1.26	)
Distributions from capital		– –			– –			(0.17	)		– –			– –
Distributions from net realized gains		(0.01	)		– –			(0.07	)		– –			– –

Total distributions		(0.47	)		(0.31	)		(0.44	)		(0.45	)		(1.26	)

Net asset value at end of period	$	11.17		$	11.45		$	11.10		$	10.56		$	10.55

Total return³		1.45	%⁴		6.03	%⁴		9.53	%		4.50	%		11.15	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	65,555		$	36,947		$	17,777		$	8,427		$	4,182
Ratios of expenses to average net assets
Net expenses		1.93	%		2.04	%		2.15	%		2.23	%		3.64	%
Net expenses (excluding interest expense)		1.93	%		2.04	%		2.15	%		2.11	%		2.10	%
Total expenses		1.94	%		2.07	%		2.15	%		2.23	%		3.64	%
Ratios of net investment income to average net assets
After advisory/administration fee waivers		1.42	%		1.32	%		1.44	%		2.62	%		4.20	%
Before advisory/administration fee waivers		1.41	%		1.29	%		1.44	%		2.62	%		4.20	%
Portfolio turnover rate		164	%		240	%		209	%		206	%		111	%

Audited by other Auditors.

Calculated using the average shares outstanding method.

Neither front-end sales load nor contingent deferred sales load is reflected.

⁴

Redemption fee of 2.00% is reflected in total return calculations.

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BlackRock

High Yield Bond Portfolio

IMPORTANT DEFINITIONS

Asset-Backed Securities: Bonds that are backed by a pool of assets, usually loans such as installment sale contracts or credit card receivables.

Bank Loans: The fund may invest in fixed and floating rate loans arranged through private negotiations between a company or a non-U.S. government and one or more financial institutions. The fund considers such investments to be debt securities.

Collateralized Bond Obligations (CBO): The fund may invest in collateralized bond obligations which are securities backed by a diversified pool of high yield securities.

Commercial Mortgage-Backed Securities (CMBS): Bonds that are backed by a mortgage loan or pool of loans secured by commercial property, not residential mortgages.

Investment Goal

The fund’s investment goal is to seek to maximize total return, consistent with income generation and prudent investment management.

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in non-investment grade bonds with maturities of ten years or less. The fund normally invests at least 80% of its assets in high yield bonds, including convertible and preferred securities. The high yield securities (commonly called “junk bonds”) acquired by the fund will generally be in the lower rating categories of the major rating agencies (BB or lower by Standard & Poor’s or Ba or lower by Moody’s) or will be determined by the fund management team to be of similar quality. Split rated bonds will be considered to have the higher credit rating. The fund may invest up to 10% of its assets in non-dollar denominated bonds of issuers located outside of the United States. The fund’s investment in non-dollar denominated bonds may be on a currency hedged or unhedged basis.

The management team evaluates sectors of the high yield market and individual bonds within these sectors. Securities are purchased for the fund when the management team determines that they have the potential for above-average total return. Effective July 1, 2005, the fund has changed the benchmark against which it measures its performance from the Lehman Brothers U.S. Corporate High Yield Index to the Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index. The Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index more accurately reflects the universe of securities in which the fund will invest.

To add additional diversification, the management team can invest in a wide range of securities including corporate bonds, mezzanine investments, collateralized bond obligations, bank loans and mortgage-backed and asset-backed securities. The fund can also invest, to the extent consistent with its investment goal, in non-U.S. and emerging market securities and currencies. The fund may invest in securities of any rating, and may invest up to 10% of its assets (measured at the time of investment) in distressed securities that are in default or the issuers of which are in bankruptcy. These securities involve considerable risk and have significant uncertainties regarding the issuer’s current or future ability to make interest and principal payments. Typically the management team will invest in distressed securities when it believes they are undervalued.

123

IMPORTANT DEFINITIONS

Lehman Brothers U.S. Corporate High Yield Index: An unmanaged index that is comprised of issues that meet the following criteria: at least $150 million par value outstanding, maximum credit rating of Ba1 and at least one year to maturity.

Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index: An unmanaged index comprised of issues that meet the following criteria: at least $150 million par value outstanding, maximum credit rating of Ba1, at least one year to maturity, and no one issuer represents more than 2 percent of the index.

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Mezzanine Investments: These are subordinated debt securities which receive payments of interest and principal after other more senior security holders are paid. They are generally issued in private placements in connection with an equity security.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

If a security’s rating declines, the management team will decide whether to continue to hold the security. A security will be sold if, in the opinion of the management team, the risk of continuing to hold the security is unacceptable when compared to its total return potential.

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

Non-investment grade bonds carry greater risks than securities which have higher credit ratings, including a high risk of default.

124

The yields of non-investment grade securities will move up and down over time. The credit rating of a high yield security does not necessarily address its market value risk. Ratings and market value may change from time to time, positively or negatively, to reflect new developments regarding the issuer. These companies are often young and growing and have a lot of debt. High yield bonds are considered speculative, meaning there is a significant risk that companies issuing these securities may not be able to repay principal and pay interest or dividends on time. In addition, other creditors of a high yield issuer may have the right to be paid before the high yield bond holder.

The market for high yield bonds is not as liquid as the markets for higher-rated securities. This means that it may be harder to buy and sell high yield bonds, especially on short notice. The market could also be hurt by legal or tax changes.

If the fund invests in high yield securities that are rated C or below, the fund will incur significant risk in addition to the risks generally associated with investments in high yield securities. Distressed securities frequently do not produce income while they are outstanding. The fund may purchase distressed securities that are in default or the issuers of which are in bankruptcy. The fund may be required to bear certain extraordinary expenses in order to protect and recover its investment. The fund also will be subject to significant uncertainty as to when and in what manner and for what value the obligations evidenced by the distressed securities will eventually be satisfied.

Mezzanine securities carry the risk that the issuer will not be able to meet its obligations and that the equity securities purchased with the mezzanine investments may lose value.

The market for bank loans may not be highly liquid and the fund may have difficulty selling them. These investments expose the fund to the credit risk of both the financial institution and the underlying borrower.

The pool of high yield securities underlying CBOs is typically separated into groupings called tranches representing different degrees of credit quality. The higher quality tranches have greater degrees of protection and pay lower interest rates. The lower tranches, with greater risk, pay higher interest rates.

The expenses of the fund will be higher than those of mutual funds investing primarily in investment grade securities. The costs

125

of investing in the high yield market are usually higher for several reasons, such as the higher costs for investment research and higher commission costs.

A main difference is that the principal on mortgage- or asset-backed securities may normally be prepaid at any time, which will reduce the yield and market value of these securities. Asset-backed securities and CMBS generally experience less prepayment than residential mortgage-backed securities. In periods of falling interest rates, the rate of prepayments tends to increase (as does price fluctuation) as borrowers are motivated to pay off debt and refinance at new lower rates. During such periods, reinvestment of the prepayment proceeds by the management team will generally be at lower rates of return than the return on the assets which were prepaid. Certain commercial mortgage-backed securities are issued in several classes with different levels of yield and credit protection. The fund’s investments in commercial mortgage-backed securities with several classes will normally be in the lower classes that have greater risks than the higher classes, including greater interest rate, credit and prepayment risks.

Certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

126

default swaps involve special risks in addition to those mentioned above because they are difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty).

The fund may invest up to 10% of its assets in non-dollar denominated bonds of issuers located outside of the United States. Non-dollar and non-U.S. securities involve risks not typically associated with investing in U.S. securities. These risks include but are not limited to: currency risks (the risk that the value of interest paid on non-dollar and non- U.S. securities, or the value of the securities themselves, may fall if currency exchange rates change), the risk that a security’s value will be hurt by changes in non-U.S. political or social conditions, including changes in policies restricting investment, the possibility of heavy taxation, nationalization or expropriation of assets and more difficulty obtaining information on non-U.S. securities or companies. In addition, non-dollar and non U.S. securities may be harder to sell and may be subject to wider price movements than comparable investments in U.S. companies. There is also less government regulation of non U.S. securities markets.

In addition, political and economic structures in emerging market countries may be undergoing rapid change and these countries may lack the social, political and economic stability of more developed countries. As a result some of the risks described above, including the risks of nationalization or expropriation of assets and the existence of smaller, more volatile and less regulated markets, may be increased. The value of many investments in emerging market countries has declined significantly in the past, and may do so again in the future, as a result of economic and political turmoil in many of these countries.

High portfolio turnover (more than 100%) may result in increased transaction costs to the fund, including brokerage

127

commissions, dealer mark-ups and other transaction costs on the sale of the securities and on reinvestment in other securities. The sale of fund securities may result in the recognition of capital gain or loss. Given the frequency of sales, such gain or loss will likely be short-term capital gain or loss. These effects of higher than normal portfolio turnover may adversely affect fund performance.

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance has varied year by year and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Lehman Brothers U.S. Corporate High Yield Index and the Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index, each a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

128

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year	3 Years	5 Years	Since Inception		Inception Date¹
High Yield Bond; Inv A
Return Before Taxes	-1.68%	11.97%	8.52%	6.08%		11/19/98
Return After Taxes on Distributions	-4.48%	8.74%	4.80%	2.20%
Return After Taxes on Distributions and Sale of Shares	-0.88%	8.40%	4.97%	2.70%
High Yield Bond; Inv B
Return Before Taxes	-1.39%	12.13%	8.57%	6.05%		11/19/98
High Yield Bond; Inv C
Return Before Taxes	1.80%	12.99%	8.81%	6.03%		11/19/98
Lehman Brothers U.S. Corporate High Yield (Reflects no deduction for fees, expenses or taxes)	2.74%	13.77%	8.85%	5.83%		N/A
Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap (Reflects no deduction for fees, expenses or taxes)	2.76%	13.72%	9.12%	5.88%	**	N/A

The information for the fund in the chart and the table assumes reinvestment of dividends and distributions. The information for the benchmarks does not assume reinvestment of dividends and distributions. Source: BlackRock Advisors, LLC

Daily returns not available. Based on annualized data from November 30, 1998.

Inception date of the fund’s oldest class(es).

Expenses and Fees

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.0	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)
Redemption Fee****	2.0	%	2.0	%	2.0	%
(as a percentage of amount redeemed)

129

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.50	%	.50	%	.50	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Interest expense¹	– –		– –		– –
Other expenses	.71	%	.60	%	.56	%
Service fees	.25%		.25%		.25%
Other	.46%		.35%		.31%
Total annual fund operating expenses	1.21	%	1.85	%	1.81	%
Fee waivers and expense reimbursements²	.25	%	.14	%	.10	%
Net expenses²	.96	%	1.71	%	1.71	%

Reduced front-end sales charges may be available (see the section “Can the Sales Charge be Reduced or Eliminated?” for more information regarding the reduction of front-end sales charges). A CDSC of 0.75% is assessed on certain redemptions of Investor A Shares that are purchased with no initial sales charge as part of an investment of $1,000,000 or more.

***

There is no CDSC on C Shares after one year.

****

Fee applies only to shares that are redeemed or exchanged within 30 days of purchase.

The fund periodically engages in certain investment transactions which generate interest expense. For the year ended September 30, 2005 the interest expense of the fund for such transactions was less than .01%.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to .96% (excluding interest expense) (for Investor A Shares) and 1.71% (excluding interest expense) (for Investor B and C Shares) of average daily net assets until February 1, 2007. See the “Management” section for a discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year		3 Years		5 Years		10 Years
A Shares*	$	494	$	745	$	1,015	$	1,786
B Shares**
Redemption	$	624	$	918	$	1,188	$	1,912	***
B Shares
No Redemption	$	174	$	568	$	988	$	1,912	***
C Shares**
Redemption	$	274	$	560	$	971	$	2,118
C Shares
No Redemption	$	174	$	560	$	971	$	2,118

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

130

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

The fund management team is led by a team of investment professionals at BlackRock Financial Management, Inc. (BFM), including the following individuals who have day-to-day responsibility: Jeff Gary, Managing Director of BFM since 2003, and Scott Amero, Managing Director of BFM since 1990.

Mr. Gary is the head of the High Yield Team and is a member of the Investment Strategy Group. Prior to joining BFM in 2003, he was a Managing Director and portfolio manager with AIG (American General) Investment Group.

Mr. Gary and Mr. Amero have been portfolio managers of the fund since September 2003, and Mr. Amero has been part of the portfolio management team since its inception.

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Financial Highlights

The financial information in the tables below shows the fund’s financial performance for the periods indicated. Certain information reflects results for a single fund share. The term “Total Return” indicates how much your investment would have increased or decreased during this period of time and assumes that you have reinvested all dividends and distributions. These figures have been audited by Deloitte & Touche LLP (for the fiscal years ended September 30, 2004 and later) and PricewaterhouseCoopers LLP (for the other fiscal years shown). Deloitte & Touche LLP has been appointed as the Fund’s independent registered public accountant for the current fiscal year. Deloitte & Touche LLP’s report, and the Fund’s audited financial statements, are included in the Fund’s 2005 annual report as filed on Form N-CSR, as it may be amended from time to time, which is available upon request (see back cover for ordering instructions).

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

High Yield Bond Portfolio


	INVESTOR A SHARES															INVESTOR B SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹			Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	8.14		$	7.73		$	6.75		$	7.40		$	8.92		$	8.14		$	7.73		$	6.75		$	7.39		$	8.91

Income from investment operations
Net investment income		0.60	²		0.58	²		0.73			0.82			0.90			0.55	²		0.52	²		0.65			0.74			0.83
Net gain (loss) on investments (both realized and unrealized)		0.05			0.38			0.96			(0.69	)		(1.40	)		0.04			0.38			0.98			(0.66	)		(1.40	)

Total from investment operations		0.65			0.96			1.69			0.13			(0.50	)		0.59			0.90			1.63			0.08			(0.57	)

Less distributions
Distributions from net investment income		(0.56	)		(0.55	)		(0.71	)		(0.78	)		(1.02	)		(0.50	)		(0.49	)		(0.65	)		(0.72	)		(0.95	)
Distributions from net realized gains		(0.14	)		– –			– –			– –			– –			(0.14	)		– –			– –			– –			– –

Total distributions		(0.70	)		(0.55	)		(0.71	)		(0.78	)		(1.02	)		(0.64	)		(0.49	)		(0.65	)		(0.72	)		(0.95	)

Net asset value at end of period	$	8.09		$	8.14		$	7.73		$	6.75		$	7.40		$	8.09		$	8.14		$	7.73		$	6.75		$	7.39

Total return³		8.24	%⁴		12.70	%⁴		26.25	%		1.38	%		(5.98	)%		7.44	%⁴		11.87	%⁴		25.34	%		0.75	%		(6.71	)%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	262,920		$	72,806		$	82,391		$	18,932		$	8,980		$	110,420		$	92,243		$	107,078		$	57,612		$	49,786
Ratios of expenses to average net assets
Net expenses		0.96	%		1.10	%		1.22	%		1.33	%		1.52	%		1.71	%		1.85	%		1.98	%		2.09	%		2.27	%
Net expenses (excluding interest expense)		0.96	%		1.09	%		1.17	%		1.17	%		1.17	%		1.71	%		1.84	%		1.92	%		1.92	%		1.91	%
Total expenses		1.25	%		1.34	%		1.36	%		1.48	%		1.68	%		1.89	%		1.99	%		2.12	%		2.23	%		2.43	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers		7.41	%		7.29	%		8.81	%		10.42	%		10.55	%		6.74	%		6.49	%		8.39	%		9.81	%		10.01	%
Before advisory/administration and other fee waivers		7.12	%		7.05	%		8.68	%		10.28	%		10.39	%		6.56	%		6.35	%		8.25	%		9.66	%		9.85	%
Portfolio turnover rate		129	%		172	%		212	%		301	%		331	%		129	%		172	%		212	%		301	%		331	%

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Continued

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

High Yield Bond Portfolio


	INVESTOR C SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	8.15		$	7.74		$	6.75		$	7.40		$	8.92

Income from investment operations
Net investment income		0.55	²		0.52	²		0.67			0.76			0.83
Net gain (loss) on investments (both realized and unrealized)		0.04			0.38			0.97			(0.69	)		(1.40	)

Total from investment operations		0.59			0.90			1.64			0.07			(0.57	)

Less distributions
Distributions from net investment income		(0.50	)		(0.49	)		(0.65	)		(0.72	)		(0.95	)
Distributions from net realized gains		(0.14	)		– –			– –			– –			– –

Total distributions		(0.64	)		(0.49	)		(0.65	)		(0.72	)		(0.95	)

Net asset value at end of period	$	8.10		$	8.15		$	7.74		$	6.75		$	7.40

Total return³		7.44	%⁴		11.86	%⁴		25.48	%		0.61	%		(6.70	)%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	49,939		$	61,983		$	73,246		$	21,939		$	11,319
Ratios of expenses to average net assets
Net expenses		1.72	%		1.85	%		1.97	%		2.08	%		2.25	%
Net expenses (excluding interest expense)		1.72	%		1.85	%		1.92	%		1.91	%		1.91	%
Total expenses		1.89	%		1.99	%		2.11	%		2.23	%		2.41	%
Ratios of net investment income to average net assets
After advisory/administration fee waivers		6.77	%		6.50	%		8.14	%		9.73	%		9.63	%
Before advisory/administration fee waivers		6.60	%		6.35	%		8.00	%		9.59	%		9.47	%
Portfolio turnover rate		129	%		172	%		212	%		301	%		331	%

Audited by other Auditors.

Calculated using the average shares outstanding method.

Neither front-end sales load nor contingent deferred sales load is reflected.

⁴

Redemption fee of 2.00% is reflected in total return calculations.

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BlackRock

AMT-Free Municipal Bond Portfolio

IMPORTANT DEFINITIONS

General Obligation Bonds: Bonds which are secured by the issuer’s pledge of its full faith, credit and taxing power for the payment of principal and interest.

Lehman Brothers Municipal Bond Index: An unmanaged index of municipal bonds with the following characteristics: minimum credit rating of Baa, outstanding par value of at least $5 million and issued as part of a transaction of at least $50 million. In addition, the bonds must have a dated-date after December 31, 1990 and must be at least one year from their maturity date.

Investment Goal

The fund’s investment goal is to seek to maximize total return, consistent with income generation and prudent investment management.

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in bonds issued by or on behalf of states, possessions and territories of the United States, their political subdivisions and their agencies and authorities (and related tax-exempt derivative securities) the interest on which the fund manager believes is exempt from Federal income tax, including the Federal Alternative Minimum Tax (municipal securities). The fund normally invests at least 80% of its assets in municipal securities, including both general obligation and revenue bonds, from a diverse range of issuers. The other 20% of its assets can be invested in securities of non-municipal issuers the income from which is exempt from Federal income tax and securities which are subject to Federal income tax, including the Federal Alternative Minimum Tax. The fund emphasizes municipal securities in the ten to twenty year maturity range. The fund intends to invest so that no more than 25% of its assets are represented by the municipal securities of issuers located in the same state.

The fund manager evaluates sectors of the municipal market and individual bonds within those sectors.

The fund may invest up to 20% of its assets in non-investment grade bonds (high yield or junk bonds) or convertible securities with a minimum rating of B. Split rated bonds will be considered to have the higher credit rating. If a security’s rating falls below B, the management team will decide whether to continue to hold the security. A security will be sold if, in the opinion of the management team, the risk of continuing to hold the security is unacceptable when compared to its total return potential.

It is possible that in extreme market conditions the fund may invest more than 20% of its assets in securities that are not municipal securities (and therefore are subject to Federal income tax) and may hold an unlimited amount of uninvested cash reserves. Such a temporary defensive strategy would be inconsistent with the fund’s primary investment strategies. If market conditions improve, these strategies could result in reducing the potential gain from the market upswing, thus reducing the fund’s opportunity to achieve its investment goal.

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IMPORTANT DEFINITIONS

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Municipal Lease Obligations: These provide participation in municipal lease agreements and installment purchase contracts, but are not part of the general obligations of the municipality.

Revenue Bonds: Bonds which are secured only by the revenues from a particular facility or class of facilities, such as a water or sewer system, or from the proceeds of a special excise tax or other revenue source.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

Tender Option Bonds: Synthetic floating or variable rate securities issued when long term bonds are purchased in the primary or secondary market and then deposited into a trust. Custodial receipts are then issued to investors, such as the fund, evidencing ownership interests in the trust. The remarketing agent for the trust sets a floating or variable rate on typically a weekly basis. Tender option bonds may be considered derivatives.

derivatives). An option is the right to buy or sell a security or an index of securities at a specific price on or before a specific date. A future is an agreement to buy or sell a security or an index of securities at a specific price on a specific date. A swap is an agreement whereby one party exchanges its right to receive or its obligation to pay one type of interest with another party for that other party’s obligation to pay or its right to receive another type of interest in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate risk. The fund may also use derivatives for leverage, in which case their use would involve leveraging risk. These practices may reduce returns and/or increase volatility. Volatility is defined as the characteristic of a security or a market to fluctuate significantly in price within a short time period.

The fund may engage in active and frequent trading of portfolio securities to achieve its primary investment strategies. Any capital appreciation realized by the fund as a result of its normal investment activities will generally result in capital gain distributions subject to Federal capital gain taxation.

Should the Fund’s Board of Trustees determine that the investment goal of the fund should be changed, shareholders will be given at least 30 days notice before any such change is made. However, such change can be effected without shareholder approval. The fund may not change the requirement that it normally invest at least 80% of its assets in municipal securities without shareholder approval.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

Two of the main risks of investing in the fund are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of securities such as those held by the fund. Market interest rates have in recent years declined significantly below historical average rates. This decline may have increased the risk that these rates will rise in the future. Credit risk refers to the possibility that the issuer of the security will not be able to make principal and interest payments when due.

A B rating generally indicates that while the issuer can currently make its interest and principal payments, it probably will not be able to do so in times of financial difficulty. Non-investment grade securities carry greater risks than securities which have higher credit ratings, including a high risk of default. The yields of non-investment grade securities will move up and down over time. The credit rating of a high yield security does not necessarily address its market value risk. Ratings and market value may change from time to time, positively or negatively, to reflect new developments regarding the issuer. These issuers are often young and growing and have a lot of debt. High yield securities

135

are considered speculative, meaning there is a significant risk that issuers issuing these securities may not be able to repay principal and pay interest or dividends on time. In addition, other creditors of a high yield issuer may have the right to be paid before the high yield bond holder.

During an economic downturn, a period of rising interest rates or a recession, issuers of high yield securities who have a lot of debt may experience financial problems. They may not have enough cash to make their principal and interest payments. An economic downturn could also hurt the market for lower-rated securities and the fund. The market for high yield bonds is not as liquid as the markets for higher rated securities. This means that it may be harder to buy and sell high yield bonds, especially on short notice. The market could also be hurt by legal or tax changes.

Municipal securities include revenue bonds, general obligation bonds and municipal lease obligations. Revenue bonds include private activity bonds, which are not payable from the general revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved. To the extent that the fund’s assets are invested in private activity bonds, the fund will be subject to the particular risks presented by the laws and economic conditions relating to such projects and bonds to a greater extent than if its assets were not so invested. Municipal securities also include “moral obligation” bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to pay its debts from current revenues, it may draw on a reserve fund the restoration of which is a moral but not a legal obligation of the state or municipality which created the issuer. Municipal lease obligations are not guaranteed by the issuer and are generally less liquid than other securities. Municipal lease obligations also are subject to the risk that the municipality will not appropriate the funds for lease payments.

The fund may invest in bonds the interest on which may be subject to the Federal Alternative Minimum Tax. The fund may invest up to 20% of its assets in these bonds when added together with any of the fund’s other taxable investments. Interest on these bonds that is received by taxpayers subject to the Federal Alternative Minimum Tax is taxable.

The fund may, from time to time, invest up to 25% of its assets in securities whose issuers are located in a single state. These investments would make the fund more dependent upon the political and economic circumstances of that state than a mutual fund that invests more broadly.

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The fund may invest 25% or more of its assets in municipal securities whose interest is paid solely from revenues of similar projects. For example, the fund may invest more than 25% of its assets in municipal securities related to water or sewer systems. This type of concentration exposes the fund to the legal and economic risks relating to those projects.

There may be less information available on the financial condition of issuers of municipal securities than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. This means that it may be harder to buy and sell municipal securities, especially on short notice.

The fund will rely on legal opinions of counsel to issuers of municipal securities as to the tax-free status of investments and will not do its own analysis.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

The fund’s use of derivatives may reduce the fund’s returns and/or increase volatility. Volatility is defined as the characteristic of a security, an index or a market to fluctuate significantly in price within a short time period. A risk of the fund’s use of derivatives is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. In addition, some derivatives are more sensitive to interest rate changes and market price fluctuations than other securities. The possible lack of a liquid secondary market for derivatives and the resulting inability of the fund to sell or otherwise close a derivatives position could expose the fund to losses. The fund could also suffer losses related to its derivatives positions as a result of unanticipated market movements, which losses are potentially unlimited. Finally, BlackRock may not be able to predict correctly the direction of securities prices, interest rates and other economic factors, which could cause the fund’s derivatives positions to lose value. The income from certain derivatives may be subject to Federal income tax.

Some transactions may give rise to a form of leverage. These transactions may include, among others, derivatives, and may expose the fund to greater risk and increase its costs. To mitigate leverage risk, the fund manager will segregate liquid assets on the books of the fund or otherwise cover the transactions. The use of leverage may cause a fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Increases and decreases in the value of the fund’s portfolio will be magnified when the fund uses leverage.

137

or loss subject to Federal capital gain taxation. Given the frequency of sales, such gain or loss will likely be short-term capital gain or loss. These effects of higher than normal portfolio turnover may adversely affect fund performance.

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance has varied year by year and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Lehman Brothers Municipal Bond Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

The performance for the period before Investor B and C Shares were launched is based upon performance for Investor A Shares of the fund, which were first issued in May 1990. Investor B Shares were launched in July 1996 and Investor C Shares were launched in February 1997. The actual returns of Investor B and C Shares would have been lower than shown for the period before they were launched because Investor B and C Shares have higher expenses than Investor A Shares. Investor A Shares of the fund are expected to have expenses of .79% of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year and Investor B Shares and Investor C Shares of the fund are expected to have expenses of 1.57% and 1.54%, respectively, of average daily net assets (after waivers and reimbursements and excluding interest expense) for the current fiscal year.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

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As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charge.


	1 Year	3 Years	5 Years	10 Years	Inception Date¹
AMT-Free Municipal Bond; Inv A
Return Before Taxes	-2.38%	1.69%	2.96%	4.07%	05/14/90
Return After Taxes on Distributions	-2.38%	1.69%	2.95%	4.03%
Return After Taxes on Distributions and Sale of Shares	-0.23%	2.03%	3.14%	4.09%
AMT-Free Municipal Bond; Inv B
Return Before Taxes	-3.44%	1.23%	2.69%	3.76%	05/14/90
AMT-Free Municipal Bond; Inv C
Return Before Taxes	-0.02%	2.32%	3.03%	3.76%	05/14/90
Lehman Brothers Municipal Bond (Reflects no deduction for fees, expenses or taxes)	3.52%	4.43%	5.59%	5.72%	N/A

Inception date of the fund’s oldest class(es).

Expenses and Fees

The tables below explain your pricing options and describe the fees and expenses that you may pay if you buy and hold Investor A, B and C shares of the fund. The “Annual Fund Operating Expenses” table is based on expenses for the most recent fiscal year (restated to reflect current fees) and may not reflect expenses of the fund after February 1, 2007.

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.25	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)

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IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.50	%	.50	%	.50	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Other expenses	.49	%	.51	%	.49	%
Service fees	.25%		.25%		.25%
Other	.24%		.26%		.24%
Total annual fund operating expenses	.99	%	1.76	%	1.74	%
Fee waivers and expense reimbursements¹	– –		– –		– –
Net expenses¹	.99	%	1.76	%	1.74	%

***

There is no CDSC on C Shares after one year.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year	3 Years	5 Years	10 Years
A Shares*	$522	$727	$ 949	$1,586
B Shares**
Redemption	$629	$904	$1,154	$1,775***
B Shares
No Redemption	$179	$554	$ 954	$1,775***
C Shares**
Redemption	$277	$548	$ 944	$2,052
C Shares
No Redemption	$177	$548	$ 944	$2,052

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

140

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

The fund management team is led by Walter O’Connor, Managing Director of BlackRock since 2006. Mr. O’Connor was a Managing Director of Merrill Lynch Investment Managers (MLIM) from 2003 to 2006, a Director (Municipal Tax-Exempt Fund Management) of MLIM from 2000 to 2003, and a Vice President of MLIM from 1993 to 2000. Mr. O’Connor has been managing the fund since 2006.

The Statement of Additional Information (SAI) provides additional information about the fund manager’s compensation, other accounts managed by the fund manager, and the fund manager’s ownership of securities in the fund.

141

Financial Highlights

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

AMT-Free Municipal Bond Portfolio


	INVESTOR A SHARES											INVESTOR B SHARES
	Year Ended 9/30/05		Year Ended 9/30/04		Year Ended 9/30/03¹		Year Ended 9/30/02¹			Year Ended 9/30/01¹		Year Ended 9/30/05		Year Ended 9/30/04		Year Ended 9/30/03¹		Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$11.12		$11.22		$11.38		$	11.38		$10.92		$11.11		$11.22		$11.38		$	11.38		$10.92

Income from investment operations
Net investment income²	0.44	³	0.44	³	0.48			0.52		0.52		0.36	³	0.36	³	0.40			0.43		0.42
Net gain (loss) on investments (both realized and unrealized)²	(0.13	)	(0.10	)	(0.16	)		(0.01	)	0.48		(0.12	)	(0.11	)	(0.16	)		(0.01	)	0.49

Total from investment operations	0.31		0.34		0.32			0.51		1.00		0.24		0.25		0.24			0.42		0.91

Less distributions
Distributions from net investment income	(0.43	)	(0.44	)	(0.48	)		(0.51	)	(0.54	)	(0.35	)	(0.36	)	(0.40	)		(0.42	)	(0.45	)

Total distributions	(0.43	)	(0.44	)	(0.48	)		(0.51	)	(0.54	)	(0.35	)	(0.36	)	(0.40	)		(0.42	)	(0.45	)

Net asset value at end of period	$11.00		$11.12		$11.22		$	11.38		$11.38		$11.00		$11.11		$11.22		$	11.38		$11.38

Total return⁴	2.81	%	3.10	%	2.91	%		4.59	%	9.30	%	2.14	%	2.24	%	2.14	%		3.81	%	8.49	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$8,965		$7,711		$8,573		$	8,179		$7,309		$4,839		$5,869		$7,161		$	6,211		$4,884
Ratios of expenses to average net assets
Net expenses	0.86	%	1.00	%	1.07	%		1.07	%	1.07	%	1.61	%	1.75	%	1.82	%		1.82	%	1.81	%
Total expenses	1.18	%	1.31	%	1.30	%		1.29	%	1.28	%	1.84	%	1.97	%	2.05	%		2.03	%	2.02	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²	3.99	%	3.95	%	4.31	%		4.62	%⁵	4.61	%	3.24	%	3.21	%	3.57	%		3.87	%⁵	3.82	%
Before advisory/administration and other fee waivers²	3.67	%	3.64	%	4.08	%		4.41	%⁵	4.39	%	3.01	%	2.99	%	3.34	%		3.66	%⁵	3.60	%
Portfolio turnover rate	91	%	73	%	76	%		47	%	38	%	91	%	73	%	76	%		47	%	38	%

142

Continued

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

AMT-Free Municipal Bond Portfolio


	INVESTOR C SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	11.12		$	11.21		$	11.38		$	11.38		$	10.93

Income from investment operations
Net investment income²		0.36	³		0.35	³		0.41			0.43			0.41
Net gain (loss) on investments (both realized and unrealized)²		(0.13	)		(0.08	)		(0.18	)		(0.01	)		0.49

Total from investment operations		0.23			0.27			0.23			0.42			0.90

Less distributions
Distributions from net investment income		(0.35	)		(0.36	)		(0.40	)		(0.42	)		(0.45	)

Total distributions		(0.35	)		(0.36	)		(0.40	)		(0.42	)		(0.45	)

Net asset value at end of period	$	11.00		$	11.12		$	11.21		$	11.38		$	11.38

Total return⁴		2.05	%		2.33	%		2.05	%		3.81	%		8.39	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	2,303		$	2,918		$	2,559		$	2,857		$	2,604
Ratios of expenses to average net assets
Net expenses		1.62	%		1.73	%		1.82	%		1.82	%		1.81	%
Total expenses		1.85	%		1.95	%		2.05	%		2.03	%		2.02	%
Ratios of net investment income to average net assets
After advisory/administration fee waivers²		3.26	%		3.17	%		3.59	%		3.89	%⁵		3.80	%
Before advisory/administration fee waivers²		3.03	%		2.96	%		3.36	%		3.68	%⁵		3.59	%
Portfolio turnover rate		91	%		73	%		76	%		47	%		38	%

Audited by other auditors.

Calculated using the average shares outstanding method.

⁴

Neither front-end sales load nor contingent deferred sales load is reflected.

⁵

Amounts reclassified and audited by Deloitte & Touche LLP as part of the audit for the fiscal year ended September 30, 2004. See Note C to the BlackRock Tax-Free Bond Portfolios Annual Report for the fiscal year ended September 30, 2005, for full explanations of such reclassifications.

143

BlackRock

Delaware Municipal Bond Portfolio

IMPORTANT DEFINITIONS

General Obligation Bonds: Bonds which are secured by the issuer’s pledge of its full faith, credit and taxing power for the payment of principal and interest.

Investment Goal

The fund’s investment goal is to seek to maximize total return, consistent with income generation and prudent investment management.

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in bonds issued by or on behalf of states, possessions and territories of the United States, their political subdivisions and their agencies or authorities (and related tax-exempt derivative securities) the interest on which the fund manager believes is exempt from regular Federal income tax and Delaware state income tax (municipal securities). The interest on these securities may not be exempt from Federal Alternative Minimum Tax. The fund normally invests at least 80% of its assets in municipal securities, including both general obligation and revenue bonds, from a diverse range of issuers (including issuers located outside of Delaware). The other 20% of its assets can be invested in securities of non-municipal issuers the income from which is exempt from Federal income tax and/or Delaware state income tax and securities which are subject to Federal income tax and Delaware state income tax. The fund emphasizes municipal securities in the ten to twenty year maturity range.

The fund manager evaluates sectors of the municipal market and individual bonds within those sectors.

It is possible that in extreme market conditions the fund may invest more than 20% of its assets in securities that are not municipal securities (and therefore are subject to regular Federal income tax and Delaware state income tax) and may hold an unlimited amount of uninvested cash reserves. Such a temporary defensive strategy would be inconsistent with the fund’s primary investment strategies. If market conditions improve, these strategies could result in reducing the potential gain from the market upswing, thus reducing the fund’s opportunity to achieve its investment goal.

144

IMPORTANT DEFINITIONS

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Municipal Lease Obligations: These provide participation in municipal lease agreements and installment purchase contracts, but are not part of the general obligations of the municipality.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

The fund manager may, when consistent with the fund’s investment goal, buy or sell options or futures on a security or an index of securities, or tender option bonds, or enter into interest rate transactions, including swaps (collectively, commonly known as derivatives). An option is the right to buy or sell a security or an index of securities at a specific price on or before a specific date. A future is an agreement to buy or sell a security or an index of securities at a specific price on a specific date. A swap is an agreement whereby one party exchanges its right to receive or its obligation to pay one type of interest with another party for that other party’s obligation to pay or its right to receive another type of interest in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate risk. The fund may also use derivatives for leverage, in which case their use would involve leveraging risk. These practices may reduce returns and/or increase volatility. Volatility is defined as the characteristic of a security or a market to fluctuate significantly in price within a short time period.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

A B rating generally indicates that while the issuer can currently make its interest and principal payments, it probably will not be

145

able to do so in times of financial difficulty. Non-investment grade securities carry greater risks than securities which have higher credit ratings, including a high risk of default. The yields of non-investment grade securities will move up and down over time. The credit rating of a high yield security does not necessarily address its market value risk. Ratings and market value may change from time to time, positively or negatively, to reflect new developments regarding the issuer. These issuers are often young and growing and have a lot of debt. High yield securities are considered speculative, meaning there is a significant risk that issuers issuing these securities may not be able to repay principal and pay interest or dividends on time. In addition, other creditors of a high yield issuer may have the right to be paid before the high yield bond holder.

The fact that the fund concentrates its investments in securities of issuers located in Delaware raises special concerns. In particular, changes in the economic conditions and governmental policies of Delaware and its political subdivisions, including as a result of legislation or litigation changing the taxation of municipal securities or the rights of municipal security holders in the event of bankruptcy, could hurt the value of the fund’s shares.

146

securities also include “moral obligation” bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to pay its debts from current revenues, it may draw on a reserve fund the restoration of which is a moral but not a legal obligation of the state or municipality which created the issuer. Municipal lease obligations are not guaranteed by the issuer and are generally less liquid than other securities. Municipal lease obligations also are subject to the risk that the municipality will not appropriate the funds for lease payments.

The fund may invest without limit in bonds the interest on which may be subject to the Federal Alternative Minimum Tax. Interest on these bonds that is received by taxpayers subject to the Federal Alternative Minimum Tax is taxable.

The fund will rely on legal opinions of counsel to issuers of municipal securities as to the tax-free status of investments and will not do its own analysis.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

147

High portfolio turnover (more than 100%) may result in increased transaction costs to the fund, including brokerage commissions, dealer mark-ups and other transaction costs on the sale of the securities and on reinvestment in other securities. The sale of fund securities may result in the recognition of capital gain or loss subject to Federal capital gain taxation. Given the frequency of sales, such gain or loss will likely be short-term capital gain or loss. These effects of higher than normal portfolio turnover may adversely affect fund performance.

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance has varied year by year and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Lehman Brothers Municipal Bond Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

148

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year	3 Years	5 Years	Since Inception		Inception Date¹
Delaware Municipal Bond; Inv A
Return Before Taxes	-3.05%	1.32%	3.43%	3.80%		05/11/98
Return After Taxes on Distributions	-3.05%	1.32%	3.43%	3.75%
Return After Taxes on Distributions and Sale of Shares	-0.68%	1.76%	3.57%	3.85%
Delaware Municipal Bond; Inv B
Return Before Taxes	-4.16%	0.86%	3.14%	3.59%		05/11/98
Delaware Municipal Bond; Inv C
Return Before Taxes	-0.76%	1.94%	3.49%	3.59%		05/11/98
Lehman Brothers Municipal Bond (Reflects no deduction for fees, expenses or taxes)	3.52%	4.43%	5.59%	5.44%	**	N/A

Daily returns not available. Based upon annualized returns from May 31, 1998.

Inception date of the fund’s oldest class(es).

Expenses and Fees

149

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Shareholder Fees

(Fees paid directly from your investment)


	A Shares	B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.25%	0.0%		0.0%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0%	4.5%	**	1.00%	***
(as percentage of offering price)

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares	B Shares	C Shares
Advisory fees	.55%	.55%	.55%
Distribution (12b-1) fees	– –	.75%	.75%
Other expenses	.49%	.52%	.50%
Service fees	.25%	.25%	.25%
Other	.24%	.27%	.25%
Total annual fund operating expenses	1.04%	1.82%	1.80%
Fee waivers and expense reimbursements¹	.09%	.17%	.15%
Net expenses¹	.95%	1.65%	1.65%

Reduced front-end sales charges may be available (see the section “Can the Sales Charge be Reduced or Eliminated?” for more information regarding the reduction of front-end sales charges. A CDSC of 0.50% is assessed on certain redemptions of Investor A Shares that are purchased with no initial sales charge as part of an investment of $1,000,000 or more.

***

There is no CDSC on C Shares after one year.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to .95% (for Investor A Shares) and 1.65% (for Investor B and C Shares) of average daily net assets until February 1, 2007. The fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. See the “Management” section for a discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year	3 Years	5 Years	10 Years
A Shares*	$518	$733	$ 966	$	1,634

B Shares**
Redemption	$618	$906	$1,169	$	1,822	***
B Shares
No Redemption	$168	$556	$ 969	$	1,822	***
C Shares**
Redemption	$268	$552	$ 961	$	2,104
C Shares
No Redemption	$168	$552	$ 961	$	2,104

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

150

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one- time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

151

Financial Highlights

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Delaware Municipal Bond Portfolio


	INVESTOR A SHARES															INVESTOR B SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹			Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	10.13		$	10.24		$	10.54		$	10.20		$	9.68		$	10.14		$	10.24		$	10.54		$	10.20		$	9.68

Income from investment operations
Net investment income²		0.39	³		0.42	³		0.45			0.49	⁴		0.45			0.31	³		0.35	³		0.37			0.42	⁴		0.37
Net gain (loss) on investments (both realized and unrealized)²		(0.20	)		(0.09	)		(0.24	)		0.32	⁴		0.47			(0.21	)		(0.08	)		(0.23	)		0.32	⁴		0.47

Total from investment operations		0.19			0.33			0.21			0.81			0.92			0.10			0.27			0.14			0.74			0.84

Less distributions
Distributions from net investment income		(0.39	)		(0.44	)		(0.51	)		(0.47	)		(0.40	)		(0.31	)		(0.37	)		(0.44	)		(0.40	)		(0.32	)

Total distributions		(0.39	)		(0.44	)		(0.51	)		(0.47	)		(0.40	)		(0.31	)		(0.37	)		(0.44	)		(0.40	)		(0.32	)

Net asset value at end of period	$	9.93		$	10.13		$	10.24		$	10.54		$	10.20		$	9.93		$	10.14		$	10.24		$	10.54		$	10.20

Total return⁵		1.85	%		3.35	%		2.15	%		8.25	%		9.65	%		0.99	%		2.68	%		1.38	%		7.45	%		8.84	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	14,421		$	12,895		$	8,634		$	5,106		$	4,304		$	7,524		$	8,606		$	8,528		$	3,130		$	2,505
Ratios of expenses to average net assets
Net expenses		1.09	%		1.14	%		1.17	%		1.18	%		1.17	%		1.84	%		1.89	%		1.92	%		1.92	%		1.91	%
Total expenses		1.26	%		1.40	%		1.36	%		1.36	%		1.37	%		1.92	%		2.02	%		2.09	%		2.11	%		2.11	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²		3.86	%		4.16	%		4.48	%		4.90	%⁴		4.53	%		3.10	%		3.42	%		3.70	%		4.14	%⁴		3.79	%
Before advisory/administration and other fee waivers²		3.69	%		3.90	%		4.30	%		4.71	%⁴		4.34	%		3.02	%		3.29	%		3.52	%		3.96	%⁴		3.60	%
Portfolio turnover rate		10	%		3	%		34	%		17	%		14	%		10	%		3	%		34	%		17	%		14	%

152

Continued

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Delaware Municipal Bond Portfolio


	INVESTOR C SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	10.13		$	10.24		$	10.54		$	10.20		$	9.68

Income from investment operations
Net investment income²		0.31	³		0.35	³		0.37			0.38			0.36
Net gain (loss) on investments (both realized and unrealized)²		(0.20	)		(0.09	)		(0.23	)		0.36			0.48

Total from investment operations		0.11			0.26			0.14			0.74			0.84

Less distributions
Distributions from net investment income		(0.31	)		(0.37	)		(0.44	)		(0.40	)		(0.32	)

Total distributions		(0.31	)		(0.37	)		(0.44	)		(0.40	)		(0.32	)

Net asset value at end of period	$	9.93		$	10.13		$	10.24		$	10.54		$	10.20

Total return⁵		1.10	%		2.58	%		1.38	%		7.45	%		8.84	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	13,293		$	14,500		$	14,529		$	3,149		$	638
Ratios of expenses to average net assets
Net expenses		1.85	%		1.89	%		1.91	%		1.90	%		1.92	%
Total expenses		1.92	%		2.02	%		2.08	%		2.09	%		2.12	%
Ratios of net investment income to average net assets
After advisory/administration fee waivers²		3.11	%		3.43	%		3.56	%		3.96	%⁴		3.78	%
Before advisory/administration fee waivers²		3.04	%		3.30	%		3.40	%		3.77	%⁴		3.59	%
Portfolio turnover rate		10	%		3	%		34	%		17	%		14	%

Audited by other auditors.

Calculated using the average shares outstanding method.

⁴

⁵

Neither front-end sales load nor contingent deferred sales load is reflected.

153

BlackRock

Ohio Municipal Bond Portfolio

IMPORTANT DEFINITIONS

General Obligation Bonds: Bonds which are secured by the issuer’s pledge of its full faith, credit and taxing power for the payment of principal and interest.

Lehman Brothers Municipal Bond Index: An unmanaged index of municipal bonds with the following characteristics; minimum credit rating of Baa, outstanding par value of at least $5 million and issued as part of a transaction of at least $50 million. In addition, the bonds must have a dated-date after December 31, 1990 and must be at least one year from their maturity date.

Investment Goal

The fund’s investment goal is to seek to maximize total return, consistent with income generation and prudent investment management.

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in bonds issued by or on behalf of states, possessions and territories of the United States, their political subdivisions and their agencies or authorities (and related tax-exempt derivative securities) the interest on which the fund manager believes is exempt from regular Federal income tax and Ohio state income tax (municipal securities). The interest on these securities may not be exempt from Federal Alternative Minimum Tax. The fund normally invests at least 80% of its assets in municipal securities, including both general obligation and revenue bonds, from a diverse range of issuers (including issuers located outside of Ohio). The other 20% of its assets can be invested in securities of non-municipal issuers the income from which is exempt from Federal income tax and/or Ohio state income tax and securities which are subject to Federal income tax and Ohio state income tax. The fund emphasizes municipal securities in the ten to twenty year maturity range.

The fund manager evaluates sectors of the municipal market and individual bonds within those sectors.

It is possible that in extreme market conditions the fund may invest more than 20% of its assets in securities that are not municipal securities (and therefore are subject to regular Federal income tax and Ohio state income tax) and may hold an unlimited amount of uninvested cash reserves. Such a temporary defensive strategy would be inconsistent with the fund’s primary investment strategies. If market conditions improve, these strategies could result in reducing the potential gain from the market upswing, thus reducing the fund’s opportunity to achieve its investment goal.

154

IMPORTANT DEFINITIONS

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Municipal Lease Obligations: These provide participation in municipal lease agreements and installment purchase contracts, but are not part of the general obligations of the municipality.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

The fund manager may, when consistent with the fund’s investment goal, buy or sell options or futures on a security or an index of securities or tender option bonds, or enter into interest rate transactions, including swaps, (collectively, commonly known as derivatives). An option is the right to buy or sell a security or an index of securities at a specific price on or before a specific date. A future is an agreement to buy or sell a security or an index of Securities at a specific price on a specific date. A swap is an agreement whereby one party exchanges its right to receive or its obligation to pay one type of interest with another party for that other party’s obligation to pay or its right to receive another type of interest in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate risk. The fund may also use derivatives for leverage, in which case their use would involve leveraging risk. These practices may reduce returns and/or increase volatility. Volatility is defined as the characteristic of a security or a market to fluctuate significantly in price within a short time period.

Key Risks

While the management team chooses bonds it believes can provide above average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

A B rating generally indicates that while the issuer can currently make its interest and principal payments, it probably will not be

155

The fact that the fund concentrates its investments in securities of issuers located in Ohio raises special concerns. In particular, changes in the economic conditions and governmental policies of Ohio and its political subdivisions, including as a result of legislation or litigation changing the taxation of municipal securities or the rights of municipal security holders in the event of bankruptcy, could hurt the value of the fund’s shares.

156

of moral obligation bonds is unable to pay its debts from current revenues, it may draw on a reserve fund the restoration of which is a moral but not a legal obligation of the state or municipality which created the issuer. Municipal lease obligations are not guaranteed by the issuer and are generally less liquid than other securities. Municipal lease obligations also are subject to the risk that the municipality will not appropriate the funds for lease payments.

The fund will rely on legal opinions of counsel to issuers of municipal securities as to the tax-free status of investments and will not do its own analysis.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

157

factors, which could cause the fund’s derivatives positions to lose value. The income from certain derivatives may be subject to Federal income tax.

High portfolio turnover (more than 100%) may result in increased transaction costs to the fund, including brokerage commissions, dealer mark-ups and other transaction costs on the sale of the securities and on reinvestment in other securities. The sale of fund securities may result in the recognition of capital gain or loss subject to Federal capital gain taxation. Given the frequency of sales, such gain or loss will likely be short-term capital gain or loss. These effects of higher than normal portfolio turnover may adversely affect fund performance.

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance has varied year by year and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Lehman Brothers Municipal Bond Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

158

The performance for the period before Investor C Shares were launched is based upon performance for Investor B Shares of the fund, which were first issued in October 1994. Investor C Shares were launched in August 1998. Investor B Shares of the fund are expected to have expenses of 1.69% of average daily net assets (after waivers and reimbursements) for the current fiscal year and Investor C Shares of the fund are expected to have expenses of 1.68% of average daily net assets (after waivers and reimbursements) for the current fiscal year.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year	3 Years	5 Years	10 Years	Inception Date¹
Ohio Municipal Bond; Inv A
Return Before Taxes	-2.35%	1.78%	3.86%	4.37%	12/01/92
Return After Taxes on Distributions	-2.35%	1.78%	3.86%	4.36%
Return After Taxes on Distributions and Sale of Shares	-0.04%	2.14%	3.96%	4.38%
Ohio Municipal Bond; Inv B
Return Before Taxes	-3.45%	1.30%	3.59%	4.01%	12/01/92
Ohio Municipal Bond; Inv C
Return Before Taxes	-0.04%	2.42%	3.96%	4.02%	12/01/92
Lehman Brothers Municipal Bond (Reflects no deduction for fees, expenses or taxes)	3.52%	4.43%	5.59%	5.72%	N/A

Inception date of the fund’s oldest class(es).

159

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

shown for Investor A Shares only, and the after-tax returns for Investor B and C Shares will vary.

Expenses and Fees

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.25	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.50	%	.50	%	.50	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Other expenses	.52	%	.50	%	.49	%
Service fees	.25%		.25%		.25%
Other	.27%		.25%		.24%
Total annual fund operating expenses	1.02	%	1.75	%	1.74	%
Fee waivers and expense reimbursements¹	.17	%	– –		– –
Net expenses¹	.85	%	1.75	%	1.74	%

***

There is no CDSC on C Shares after one year.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to .85% (for Investor A Shares) and 1.82% (for Investor B and C Shares) of average daily net assets until February 1, 2007. The fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. Including voluntary waivers, the net expenses for Investor B Shares of the fund are estimated to be 1.69% and for Investor C Shares of the fund are estimated to be 1.68%. These voluntary waivers may be terminated at any time. See the “Management” section for a discussion of these waivers and reimbursements.

160

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year		3 Years		5 Years		10 Years
A Shares*	$	508	$	720	$	948	$	1,605

B Shares**
Redemption	$	628	$	901	$	1,149	$	1,779	***
B Shares
No Redemption	$	178	$	551	$	949	$	1,779	***
C Shares**
Redemption	$	277	$	548	$	944	$	2,052
C Shares
No Redemption	$	177	$	548	$	944	$	2,052

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

161

Fund Management

162

Financial Highlights

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Ohio Municipal Bond Portfolio


	INVESTOR A SHARES															INVESTOR B SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹			Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	10.88		$	10.87		$	11.09		$	10.80		$	10.22		$	10.88		$	10.87		$	11.09		$	10.80		$	10.22

Income from investment operations
Net investment income²		0.44	³		0.49	³		0.46			0.46			0.52			0.36	³		0.41	³		0.39			0.39	⁴		0.42
Net gain (loss) on investments (both realized and unrealized)²		(0.21	)		(0.03	)		(0.21	)		0.36			0.57			(0.21	)		(0.03	)		(0.23	)		0.35	⁴		0.59

Total from investment operations		0.23			0.46			0.25			0.82			1.09			0.15			0.38			0.16			0.74			1.01

Less distributions
Distributions from net investment income		(0.47	)		(0.45	)		(0.47	)		(0.53	)		(0.51	)		(0.39	)		(0.37	)		(0.38	)		(0.45	)		(0.43	)

Total distributions		(0.47	)		(0.45	)		(0.47	)		(0.53	)		(0.51	)		(0.39	)		(0.37	)		(0.38	)		(0.45	)		(0.43	)

Net asset value at end of period	$	10.64		$	10.88		$	10.87		$	11.09		$	10.80		$	10.64		$	10.88		$	10.87		$	11.09		$	10.80

Total return⁵		2.14	%		4.34	%		2.31	%		7.90	%		10.89	%		1.38	%		3.57	%		1.54	%		7.10	%		10.08	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	8,873		$	5,043		$	7,494		$	15,587		$	3,674		$	9,424		$	10,280		$	10,453		$	8,740		$	4,277
Ratios of expenses to average net assets
Net expenses		0.99	%		1.07	%		1.08	%		1.06	%		1.07	%		1.75	%		1.79	%		1.82	%		1.81	%		1.80	%
Total expenses		1.20	%		1.34	%		1.31	%		1.28	%		1.31	%		1.85	%		1.97	%		2.05	%		2.03	%		2.04	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²		4.05	%		4.56	%		4.32	%		4.37	%⁵		4.97	%		3.32	%		3.78	%		3.55	%		3.65	%⁴		4.20	%
Before advisory/administration and other fee waivers²		3.84	%		4.29	%		4.09	%		4.16	%⁵		4.73	%		3.22	%		3.60	%		3.32	%		3.44	%⁴		3.97	%
Portfolio turnover rate		10	%		6	%		18	%		28	%		19	%		10	%		6	%		18	%		28	%		19	%

163

Continued

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Ohio Municipal Bond Portfolio


	INVESTOR C SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹
Net asset value at beginning of period	$	10.89		$	10.87		$	11.09		$	10.80		$	10.22

Income from investment operations
Net investment income²		0.36³			0.41	³		0.40			0.39⁴			0.41
Net gain (loss) on investments (both realized and unrealized)²		(0.21	)		(0.02	)		(0.24	)		0.35⁴			0.60

Total from investment operations		0.15			0.39			0.16			0.74			1.01

Less distributions
Distributions from net investment income		(0.39	)		(0.37	)		(0.38	)		(0.45	)		(0.43	)

Total distributions		(0.39	)		(0.37	)		(0.38	)		(0.45	)		(0.43	)

Net asset value at the end of the period	$	10.65		$	10.89		$	10.87		$	11.09		$	10.80

Total return⁵		1.38	%		3.66	%		1.54	%		7.09	%		10.08	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	7,063		$	5,411		$	5,740		$	3,632		$	1,496
Ratios of expenses to average net assets
Net expenses		1.74	%		1.77	%		1.82	%		1.80	%		1.80	%
Total expenses		1.84	%		1.95	%		2.05	%		2.01	%		2.04	%
Ratios of net investment income to average net assets
After advisory/administration fee waivers²		3.30	%		3.80	%		3.55	%		3.60	%⁴		4.05	%
Before advisory/administration fee waivers²		3.20	%		3.62	%		3.32	%		3.39	%⁴		3.82	%
Portfolio turnover rate		10	%		6	%		18	%		28	%		19	%

Audited by other auditors.

Calculated using the average shares outstanding method.

⁴

⁵

Neither front-end sales load nor contingent deferred sales load is reflected.

164

BlackRock

Kentucky Municipal Bond Portfolio

IMPORTANT DEFINITIONS

General Obligation Bonds: Bonds which are secured by the issuer’s pledge of its full faith, credit and taxing power for the payment of principal and interest.

Investment Goal

The fund’s investment goal is to seek to maximize total return, consistent with income generation and prudent investment management.

Primary Investment Strategies

In pursuit of this goal, the fund invests primarily in bonds issued by or on behalf of states, possessions and territories of the United States, their political subdivisions and their agencies or authorities (and related tax-exempt derivative securities) the interest on which the fund manager believes is exempt from regular Federal income tax and Kentucky state income tax (municipal securities). The interest on these securities may not be exempt from Federal Alternative Minimum Tax. The fund normally invests at least 80% of its assets in municipal securities, including both general obligation and revenue bonds, from a diverse range of issuers (including issuers located outside of Kentucky). The other 20% of its assets can be invested in securities of non-municipal issuers the income from which is exempt from Federal income tax and/or Kentucky state income tax and securities which are subject to Federal income tax and Kentucky state income tax. The fund emphasizes municipal securities in the ten to twenty year maturity range.

The management team evaluates sectors of the municipal market and individual bonds within those sectors.

It is possible that in extreme market conditions the fund may invest more than 20% of its assets in securities that are not municipal securities (and therefore are subject to regular Federal income tax and Kentucky state income tax) and may hold an unlimited amount of uninvested cash reserves. Such a temporary defensive strategy would be inconsistent with the fund’s primary investment strategies. If market conditions improve, these strategies could result in reducing the potential gain from the market upswing, thus reducing the fund’s opportunity to achieve its investment goal.

The fund manager may, when consistent with the fund’s investment goal, buy or sell options or futures on a security or an

165

IMPORTANT DEFINITIONS

Maturity: The date upon which debt securities are due to be repaid, that is, the date when the issuer generally must pay back the face amount of the security.

Municipal Lease Obligations: These provide participation in municipal lease agreements and installment purchase contracts, but are not part of the general obligations of the municipality.

Split Rated Bond: A bond that receives different ratings from two or more rating agencies.

index of securities or tender option bonds, or enter into interest rate transactions, including swaps (collectively, commonly known as derivatives). An option is the right to buy or sell a security or an index of securities at a specific price on or before a specific date. A future is an agreement to buy or sell a security or an index of securities at a specific price on a specific date. A swap is an agreement whereby one party exchanges its right to receive or its obligation to pay one type of interest with another party for that other party’s obligation to pay or its right to receive another type of interest in the future or for a period of time. The fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate risk. The fund may also use derivatives for leverage, in which case their use would involve leveraging risk. These practices may reduce returns and/or increase volatility. Volatility is defined as the characteristic of a security or a market to fluctuate significantly in price within a short time period.

Key Risks

While the management team chooses bonds it believes can provide above-average total returns, there is no guarantee that shares of the fund will not lose value. This means you could lose money.

166

developments regarding the issuer. These issuers are often young and growing and have a lot of debt. High yield securities are considered speculative, meaning there is a significant risk that issuers issuing these securities may not be able to repay principal and pay interest or dividends on time. In addition, other creditors of a high yield issuer may have the right to be paid before the high yield bond holder.

The fact that the fund concentrates its investments in securities of issuers located in Kentucky raises special concerns. In particular, changes in the economic conditions and governmental policies of Kentucky and its political subdivisions, including as a result of legislation or litigation changing the taxation of municipal securities or the rights of municipal security holders in the event of bankruptcy, could hurt the value of the fund’s shares.

The fund may invest without limit in bonds the interest on which may be subject to the Federal Alternative Minimum Tax. Interest

167

on these bonds that is received by taxpayers subject to the Federal Alternative Minimum Tax is taxable.

The fund will rely on legal opinions of counsel to issuers of municipal securities as to the tax-free status of investments and will not do its own analysis.

The fund may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year.

The fund’s use of derivatives may reduce the fund’s returns and/or increase volatility. Volatility is defined as the characteristic of a security, an index or a market to fluctuate significantly in price within a short time period. A risk of the fund’s use of derivatives is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. In addition, some derivatives are more sensitive to interest rate changes and market price fluctuations than other securities. The possible lack of a liquid secondary market for derivatives and the resulting inability of the fund to sell or otherwise close a derivatives position could expose the fund to losses. The fund could also suffer losses related to its derivatives positions as a result of unanticipated market movements, which losses are potentially unlimited. Finally, BlackRock may not be able to predict correctly the direction of securities prices, interest rates and other economic factors, which could cause the fund’s derivatives positions to lose value. The income from certain derivatives may be subject to Federal income tax.

168

High portfolio turnover (more than 100%) may result in increased transaction costs to the fund, including brokerage commissions, dealer mark-ups and other transaction costs on the sale of the securities and on reinvestment in other securities. The sale of fund securities may result in the recognition of capital gain or loss subject to Federal capital gain taxation. Given the frequency of sales, such gain or loss will likely be short-term capital gain or loss. These effects of higher than normal portfolio turnover may adversely affect fund performance.

When you invest in this fund you are not making a bank deposit. Your investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund’s long-term performance for Investor A Shares (in the chart) and for Investor A, B and C Shares (in the table). The information shows you how the fund’s performance has varied year by year and provides some indication of the risks of investing in the fund. The table compares the fund’s performance to that of the Lehman Brothers Municipal Bond Index, a recognized unmanaged index of bond market performance. As with all such investments, past performance (before and after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those shown. If BlackRock and its affiliates had not waived or reimbursed certain fund expenses during these periods, the fund’s returns would have been lower.

As of 12/31

Investor A Shares

ANNUAL TOTAL RETURNS*

LOGO

169

As of 12/31/05

AVERAGE ANNUAL TOTAL RETURNS*

These returns assume payment of applicable sales charges.


	1 Year		3 Years		5 Years		Since Inception		Inception Date¹
Kentucky Municipal Bond; Inv A
Return Before Taxes	-2.38	%	1.78	%	3.09	%	3.37	%	05/11/98
Return After Taxes on Distributions	-2.38	%	1.77	%	3.09	%	3.31	%
Return After Taxes on Distributions and Sale of Shares	-0.42	%	2.07	%	3.24	%	3.44	%
Kentucky Municipal Bond; Inv B
Return Before Taxes	-3.49	%	1.30	%	2.82	%	3.15	%	05/11/98
Kentucky Municipal Bond; Inv C
Return Before Taxes	0.05	%	2.40	%	3.16	%	3.19	%	05/11/98
Lehman Brothers Municipal Bond (Reflects no deduction for fees, expenses or taxes)	3.52	%	4.43	%	5.59	%	5.44	%**	N/A

Daily returns not available. Based upon annualized returns from May 31, 1998.

Inception date of the fund’s oldest class(es).

Expenses and Fees

Shareholder Fees

(Fees paid directly from your investment)


	A Shares		B Shares		C Shares
Maximum Sales Charge (Load) Imposed on Purchases*	4.25	%	0.0	%	0.0	%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load)	0.0	%	4.5	%**	1.00	%***
(as percentage of offering price)

170

IMPORTANT DEFINITIONS

Advisory Fees: Fees paid to the investment adviser for portfolio management services.

Distribution Fees: Fees paid to the fund’s distributor, BlackRock and service organizations for distribution of fund shares and related sales support services.

Other Expenses: Include administration, transfer agency, custody, professional fees and registration fees.

Service Fees: Fees that are paid to service organizations that provide services to shareholders.

Service Organizations: Brokers, dealers, financial institutions and industry professionals that provide support services to their customers who own shares of the Fund.

Annual Fund Operating Expenses

(Expenses that are deducted from fund assets)


	A Shares		B Shares		C Shares
Advisory fees	.55	%	.55	%	.55	%
Distribution (12b-1) fees	– –		.75	%	.75	%
Other expenses	.48	%	.52	%	.49	%
Service fees	.25%		.25%		.25%
Other	.23%		.27%		.24%
Total annual fund operating expenses	1.03	%	1.82	%	1.79	%
Fee waivers and expense reimbursements¹	.08	%	.22	%	.19	%
Net expenses¹	.95	%	1.60	%	1.60	%

***

There is no CDSC on C Shares after one year.

BlackRock has contractually agreed to waive or reimburse fees or expenses in order to limit expenses to .95% (for Investor A Shares) and 1.60% (for Investor B and C Shares) of average daily net assets until February 1, 2007. The fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. Including voluntary waivers, the net expenses for Investor A Shares of the fund are estimated to be .91%. These voluntary waivers may be terminated at any time. See the “Management” section for a discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. We are assuming an initial investment of $10,000, 5% total return each year with no changes in operating expenses, redemption at the end of each time period and, with respect to B Shares and C Shares only, no redemption at the end of each time period. Although your actual cost may be higher or lower, based on these assumptions your costs would be:


	1 Year		3 Years		5 Years		10 Years
A Shares*	$	518	$	731	$	962	$	1,624
B Shares**
Redemption	$	613	$	901	$	1,165	$	1,814	***
B Shares
No Redemption	$	163	$	551	$	965	$	1,814	***
C Shares**
Redemption	$	263	$	545	$	952	$	2,090
C Shares
No Redemption	$	163	$	545	$	952	$	2,090

Reflects imposition of sales charge.

Reflects deduction of CDSC.

***

Based on the conversion of the Investor B Shares to Investor A Shares after seven years.

As a shareholder you pay certain fees and expenses. Shareholder transaction fees are paid out of your investment and annual fund operating expenses are paid out of fund assets.

171

This prospectus offers shareholders different ways to invest with three separate pricing options. You need to understand your choices so that you can choose the pricing option that is most suitable for you. As shown above, with one option (Investor A Shares) you pay a one-time front-end transaction fee each time you buy shares. The other options (Investor B and Investor C Shares) have no front-end charges but have higher on-going fees, which are paid over the life of the investment, and have a contingent deferred sales charge (CDSC) that you may pay when you redeem your shares. Which option should you choose? It depends on your individual circumstances. You should know that the lowest sales charge won’t necessarily be the least expensive option over time. For example, if you intend to hold your shares long term it may cost less to buy A Shares than B or C Shares.

Fund Management

172

Financial Highlights

The financial information in the tables below shows the fund’s financial performance for the periods indicated. Certain information reflects results for a single fund share. The term “Total Return” indicates how much your investment would have increased or decreased during this period of time and assumes that you have reinvested all dividends and distributions. These figures have been audited by Deloitte & Touche LLP (for the fiscal years ended September 30, 2004 and later, and for the reclassifications noted in the tables below) and PricewaterhouseCoopers LLP (for the other fiscal years shown except for the reclassifications noted in the tables below). Deloitte & Touche LLP has been appointed as the Fund’s independent registered public accountant for the current fiscal year. Deloitte & Touche LLP’s report, and the Fund’s audited financial statements, are included in the Fund’s 2005 annual report as filed on Form N-CSR, as it may be amended from time to time, which is available upon request (see back cover for ordering instructions).

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Kentucky Municipal Bond Portfolio


	INVESTOR A SHARES															INVESTOR B SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹			Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹

Net asset value at beginning of period	$	9.73		$	9.77		$	9.99		$	9.94		$	9.60		$	9.73		$	9.77		$	9.99		$	9.94		$	9.60

Income from investment operations
Net investment income²		0.42	³		0.41	³		0.44			0.44			0.45			0.35	³		0.33	³		0.36			0.37	⁴		0.37
Net gain (loss) on investments (both realized and unrealized)²		(0.14	)		(0.07	)		(0.20	)		0.07			0.34			(0.14	)		(0.07	)		(0.20	)		0.07	⁴		0.35

Total from investment operations		0.28			0.34			0.24			0.51			0.79			0.21			0.26			0.16			0.44			0.72

Less distributions
Distributions from net investment income		(0.32	)		(0.38	)		(0.46	)		(0.46	)		(0.45	)		(0.25	)		(0.30	)		(0.38	)		(0.39	)		(0.38	)

Total distributions		(0.32	)		(0.38	)		(0.46	)		(0.46	)		(0.45	)		(0.25	)		(0.30	)		(0.38	)		(0.39	)		(0.38	)

Net asset value at end of period	$	9.69		$	9.73		$	9.77		$	9.99		$	9.94		$	9.69		$	9.73		$	9.77		$	9.99		$	9.94

Total return⁵		2.95	%		3.53	%		2.46	%		5.33	%		8.40	%		2.18	%		2.76	%		1.70	%		4.55	%		7.60	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	6,377		$	5,482		$	4,701		$	3,612		$	3,214		$	3,578		$	3,897		$	3,795		$	2,311		$	978
Ratios of expenses to average net assets
Net expenses		1.09	%		1.15	%		1.17	%		1.18	%		1.17	%		1.85	%		1.89	%		1.92	%		1.91	%		1.89	%
Total expenses		1.26	%		1.36	%		1.35	%		1.35	%		1.33	%		1.92	%		2.02	%		2.09	%		2.08	%		2.05	%
Ratios of net investment income to average net assets
After advisory/administration and other fee waivers²		4.28	%		4.19	%		4.42	%		4.52	%⁴		4.64	%		3.55	%		3.44	%		3.64	%		3.71	%⁴		3.79	%
Before advisory/administration and other fee waivers²		4.11	%		3.97	%		4.24	%		4.35	%⁴		4.47	%		3.48	%		3.31	%		3.46	%		3.54	%⁴		3.62	%
Portfolio turnover rate		4	%		8	%		37	%		12	%		32	%		4	%		8	%		37	%		12	%		32	%

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Continued

FINANCIAL HIGHLIGHTS

(For an Investor A, B or C Share Outstanding Throughout Each Period)

Kentucky Municipal Bond Portfolio


	INVESTOR C SHARES
	Year Ended 9/30/05			Year Ended 9/30/04			Year Ended 9/30/03¹			Year Ended 9/30/02¹			Year Ended 9/30/01¹

Net asset value at beginning of period	$	9.76		$	9.79		$	10.02		$	9.97		$	9.62

Income from investment operations
Net investment income²		0.35	³		0.33	³		0.36			0.37⁴			0.37
Net gain (loss) on investments (both realized and unrealized)²		(0.15	)		(0.06	)		(0.21	)		0.07⁴			0.36

Total from investment operations		0.20			0.27			0.15			0.44			0.73

Less distributions
Distributions from net investment income		(0.25	)		(0.30	)		(0.38	)		(0.39	)		(0.38	)

Total distributions		(0.25	)		(0.30	)		(0.38	)		(0.39	)		(0.38	)

Net asset value at end of period	$	9.71		$	9.76		$	9.79		$	10.02		$	9.97

Total return⁵		2.07	%		2.86	%		1.59	%		4.53	%		7.69	%
Ratios/Supplemental data
Net assets at end of period (in thousands)	$	938		$	1,399		$	1,179		$	1,036		$	236
Ratios of expenses to average net assets
Net expenses		1.86	%		1.88	%		1.92	%		1.90	%		1.91	%
Total expenses		1.92	%		2.00	%		2.10	%		2.08	%		2.07	%
Ratios of net investment income to average net assets
After advisory/administration fee waivers²		3.55	%		3.43	%		3.69	%		3.61	%⁴		3.75	%
Before advisory/administration fee waivers²		3.49	%		3.31	%		3.50	%		3.44	%⁴		3.57	%
Portfolio turnover rate		4	%		8	%		37	%		12	%		32	%

Audited by other auditors.

Calculated using the average shares outstanding method.

⁴

⁵	Neither front-end sales load nor contingent deferred sales load is reflected.

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About Your Investment

Buying Shares from a Registered Investment Professional

BlackRock Funds believes that investors can benefit from the advice and ongoing assistance of a registered investment professional. Accordingly, when you buy or sell BlackRock Funds Investor Shares, you may pay a sales charge, which is used to compensate your investment professional for services provided to you. An investment professional who is compensated for selling shares may receive a different amount for each class.

As a shareholder you pay certain fees and expenses. Shareholder fees are paid directly from your investment and annual fund operating expenses are paid out of fund assets and are reflected in the fund’s net asset value.

Your registered representative can help you to buy shares by telephone. Before you place your order make sure that you have read the Prospectus and have a discussion with your registered representative about the details of your investment.

What Price Per Share Will You Pay?

The price of mutual fund shares generally changes every day the New York Stock Exchange (NYSE) is open (business day). A mutual fund is a pool of investors’ money that is used to purchase a portfolio of securities, which in turn is owned in common by the investors. Investors put money into a mutual fund by buying shares. If a mutual fund has a portfolio worth $50 million and has 5 million shares outstanding, the net asset value (NAV) per share is $10. When you buy Investor Shares you pay the NAV per share plus the applicable front-end sales charge if you are purchasing Investor A Shares.

PFPC Inc. (PFPC), the Fund’s transfer agent, will probably receive your order from your registered representative, who takes your order. However, you can also fill out a purchase application and mail it to the transfer agent with your check. Please call (800) 441-7762 for a purchase application. Purchase orders received by the transfer agent before the close of regular trading on the NYSE (currently 4 p.m. (Eastern time)) on each day the NYSE is open will be priced based on the NAV calculated at the close of trading on that day plus any applicable sales charge. NAV is calculated separately for each class of shares of each fund as of the close of business on the NYSE, generally 4 p.m. (Eastern time), each day the NYSE is open. Shares will not be priced on days the NYSE is closed. Purchase orders received after the close of trading will be priced based on the next calculation of NAV. Non-U.S. securities

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and certain other securities held by a fund may trade on days when the NYSE is closed. In these cases, net asset value of shares may change when fund shares cannot be bought or sold.

Since the NAV changes daily, the price of your shares depends on the time that your order is received by the Fund’s transfer agent, whose job it is to keep track of shareholder records.

Each fund’s assets are valued primarily on the basis of market quotations. Certain short-term debt securities are valued on the basis of amortized cost. When a determination is made that market quotations are not readily available, including, but not limited to, when (i) the exchange or market on which a security is traded does not open for trading for an entire trading day and no other market prices are available, (ii) a particular security does not trade regularly or has had its trading halted, (iii) a security does not have a price source due to its lack of liquidity, (iv) BlackRock believes a market quotation from a broker-dealer is unreliable (e.g., where it varies significantly from a recent trade), (v) the security is thinly traded or (vi) there has been a significant subsequent event, each fund values the affected securities at fair value as determined by BlackRock pursuant to procedures adopted by the Fund’s Board of Trustees. For example, the fund will value a security that trades principally on a foreign market using the most recent closing market price from the market on which the security principally trades, unless, in BlackRock’s judgment, a significant event subsequent to the market close has rendered such market closing price unreliable. Because significant events could affect the value of a foreign security between the close of the foreign market where the security is principally traded and the time the fund calculates its NAV, such closing price may not be reflective of current market conditions. In this case, the fund will use what it believes to be the fair value of the security as of the time the fund calculates its NAV.

Fair value represents a good faith approximation of the value of a security. A security’s valuation may differ depending on the method used for determining value. Valuing securities at fair value involves greater reliance on judgment than valuation of securities based on readily available market quotations. The fair value of one or more securities may not, in retrospect, be the prices at which those assets could have been sold during the period in which the particular fair values were used in determining a fund’s NAV. As a result, a fund’s sale or redemption of its shares at

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NAV, at a time when a holding or holdings are valued at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.

When you place a purchase order, you need to specify whether you want Investor A, B or C Shares. If you do not specify a class, you will receive Investor A Shares.

When Must You Pay?

Payment for an order must be made in Federal funds or other immediately available funds by the time specified by your registered representative or other financial intermediary, but in no event later than 4 p.m. (Eastern time) on the third business day following PFPC’s receipt of the order. If payment is not received by this time, the order will be cancelled and you and your registered representative or other financial intermediary will be responsible for any loss to the Fund. For shares purchased directly from the transfer agent, a check payable to BlackRock Funds which bears the name of the fund you are purchasing must accompany a completed purchase application. There is a $20 fee for each purchase check that is returned due to insufficient funds. The Fund does not accept third-party checks. You may also wire Federal funds to the transfer agent to purchase shares, but you must call the Fund at (800) 441-7762 before doing so to confirm the wiring instructions.

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions, including the Fund, to obtain, verify and record information that identifies each person who opens an account. When opening an account, you will be asked for your name, address, date of birth and other information that will allow the Fund to identify you. The Fund may also ask to see other identifying documents such as a driver’s license (for individuals) or Articles of Incorporation or other formation documents (for institutions). The Fund may use a third party to obtain and verify this information. The Fund may not be able to establish an account, or it may close your existing account and/or redeem your shares involuntarily, if you do not provide sufficient information within the relevant time periods.

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How Much is the Minimum Investment?

The minimum investment for the initial purchase of Investor Shares is $1,000. The Fund permits a lower initial investment if you are an employee of the Fund or one of its service providers and through certain fee-based programs, retirement plans and the Automatic Investment Plan (AIP) in which you make regular, periodic investments through a savings or checking account. See “Automatic Investment Plan” below. There is a $50 minimum for all subsequent investments, subject to certain exclusions. The Fund will not accept a purchase order of $50,000 or more for Investor B Shares or $500,000 or more for Investor C Shares. Your registered representative may set a lower maximum for Investor B Shares purchasers. The Fund may reject any purchase order, modify or waive the minimum initial or subsequent investment requirements for any shareholder and suspend and resume the sale of any share class of any fund at any time for any reason.

Which Pricing Option Should You Choose?

BlackRock Funds offers different pricing options to investors in the form of different share classes. Your registered representative can help you decide which option works best for you. Through this Prospectus, you can choose from Investor A, B, or C Shares. Investor B Shares automatically convert to A Shares seven years from purchase. Purchases of Investor B and C Shares can only be made through a registered representative.

A Shares (Front-End Load)

One time sales charge paid at time of purchase

No distribution fees

Free exchange with other A Shares in BlackRock Funds family

Advantage: Makes sense for investors who are eligible to have the sales charge reduced or eliminated or who have a long-term investment horizon because there are no ongoing distribution fees.

Disadvantage: You pay a sales charge up-front, and therefore you start off owning fewer shares.

B Shares (Back-End Load)

No front-end sales charge when you buy shares

You pay a sales charge when you redeem shares. It is called a contingent deferred sales charge (CDSC) and it declines over 6 years to zero from a high of 4.5%.

Ongoing distribution fees

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Free exchange with other B Shares in BlackRock Funds family

Automatically convert to A Shares seven years from purchase and therefore will have lower ongoing distribution fees than C Shares held for longer than 7 years.

Advantage: No up-front sales charge so you start off owning more shares.

Disadvantage: You pay ongoing distribution fees each year you own shares, which means that you can expect lower total performance per share than A Shares.

C Shares (Level Load)

No front-end sales charge when you buy shares

Contingent deferred sales charge (CDSC) of 1.00% if shares are redeemed within 12 months of purchase

Ongoing distribution fees

Free exchange with other C Shares in BlackRock Funds family

Advantage: No up-front sales charge so you start off owning more shares. These shares may make sense for investors who have a shorter investment horizon relative to A or B Shares.

Disadvantage: You pay ongoing distribution fees each year you own shares, which means that you can expect lower total performance per share than A Shares. Unlike B Shares, C Shares do not convert to A Shares, so you will continue paying the ongoing distribution fees as long as you hold the C Shares. Over the long term, this can add up to higher total fees than either A Shares or B Shares.

Investor B Shares received through the reinvestment of dividends and capital gains convert to A Shares proportionately with the conversion of B Shares that were not received through reinvestment.

If you are choosing between Investor A or Investor B Shares of the Bond Portfolios, it generally will be more economical for you to purchase A Shares because the relatively low front-end sales charge on A Shares as compared to the CDSC and higher ongoing distribution fees on B Shares generally will result in higher returns for A Shares.

Your registered representative may receive different compensation depending upon which share class you choose. A portion of the front-end sales charge on Investor A Shares is reallowed to your registered representative, as described in the SAI. Your registered

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representative will generally receive commissions equal to 4.00% of Investor B Shares and 1.00% of Investor C Shares sold by him or her, plus ongoing fees under the Fund’s distribution and service plan. It is important to remember that Investor B and Investor C Share contingent deferred sales charges and ongoing distribution fees have the same purpose as the front-end sales charge on sales of Investor A Shares: to compensate your registered representative for selling you shares. In some circumstances, these differences in compensation may create an incentive for your registered representative to recommend one fund or share class to you over another. Please contact your registered representative for details about compensation he or she receives for selling you shares of the Fund. To receive information about sales charges and payments to registered representatives free of charge, please see the SAI or go to www.blackrock.com/funds.

How Much is the Sales Charge?

The tables below show the schedules of sales charges that you may pay if you buy and sell Investor A, B and C Shares of a fund.

Purchase of Investor A Shares

The following tables show the front-end sales charges that you may pay if you buy Investor A Shares. The offering price for Investor A Shares includes any front-end sales charge. The front-end sales charge expressed as a percentage of the offering price may be higher or lower than the charge described below due to rounding. Similarly, any contingent deferred sales charge paid upon certain redemptions of Investor A Shares expressed as a percentage of the applicable redemption amount may be higher or lower than the charge described below due to rounding. You may qualify for a reduced front-end sales charge. Purchases of Investor A Shares at certain fixed dollar levels, known as “breakpoints,” cause a reduction in the front-end sales charge. Once you achieve a breakpoint, you pay that sales charge on your entire purchase amount (and not just the portion above the breakpoint). Additionally, the front-end sales charge can be reduced or eliminated through one or a combination of the following: the right of accumulation, a Letter of Intent, the reinstatement privilege, quantity discounts or a waiver of the sales charge (described below).

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The following schedule of front-end sales charges and quantity discounts applies to the Enhanced Income and Low Duration Bond Portfolios.


AMOUNT OF TRANSACTION AT OFFERING PRICE	SALES CHARGE AS % OF OFFERING PRICE*	SALES CHARGE AS % OF NET ASSET VALUE*
Less than $50,000	3.00%	3.09%
$50,000 but less than $100,000	2.75%	2.83%
$100,000 but less than $250,000	2.50%	2.56%
$250,000 but less than $500,000	1.75%	1.78%
$500,000 but less than $1,000,000	1.25%	1.26%
$1 million or more	0.00%	0.00%

There is no initial sales charge on purchases of $1,000,000 or more of Investor A Shares; however, you will pay a contingent deferred sales charge of (i) 0.50% for Low Duration Bond and (ii) 0.15% for Enhanced Income Portfolios, of the price of the shares when purchased or the net asset value of the shares on the redemption date (whichever is less) for shares redeemed within 18 months after purchase.

The following schedule of front-end sales charges and quantity discounts applies to the Intermediate Government Bond, Intermediate Bond, Intermediate Bond II, Total Return, Total Return II, Inflation Protected Bond, Government Income, Managed Income, International Bond, High Yield Bond and GNMA Portfolios.


AMOUNT OF TRANSACTION AT OFFERING PRICE	SALES CHARGE AS % OF OFFERING PRICE*	SALES CHARGE AS % OF NET ASSET VALUE*
Less than $25,000	4.00%	4.17%
$25,000 but less than $100,000	3.75%	3.90%
$100,000 but less than $250,000	3.50%	3.63%
$250,000 but less than $500,000	2.50%	2.56%
$500,000 but less than $750,000	2.00%	2.04%
$750,000 but less than $1,000,000	1.50%	1.52%
$1,000,000 or more	0.00%	0.00%

There is no initial sales charge on purchases of $1,000,000 or more of Investor A Shares; however, you will pay a contingent deferred sales charge of (i) .50% for the Intermediate Government Bond, Intermediate Bond, Intermediate Bond II, Total Return, Total Return II, Government Income, GNMA and Managed Income Portfolios, (ii) .15% for the Inflation Protected Bond Portfolio and (iii) .75% for the International Bond and High Yield Bond Portfolios, of the price of the shares when purchased or the net asset value of the shares on the redemption date (whichever is less) for shares redeemed within 18 months after purchase.

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The following schedule of front-end sales charges and quantity discounts applies to the AMT-Free Municipal Bond, Delaware Municipal Bond, Ohio Municipal Bond and Kentucky Municipal Bond Portfolios.


AMOUNT OF TRANSACTION AT OFFERING PRICE	SALES CHARGE AS % OF OFFERING PRICE*	SALES CHARGE AS % OF NET ASSET VALUE*
Less than $100,000	4.25%	4.44%
$100,000 but less than $250,000	3.25%	3.36%
$250,000 but less than $500,000	2.50%	2.56%
$500,000 but less than $1,000,000	2.25%	2.30%
$1,000,000 or more	0.00%	0.00%

There is no initial sales charge on purchases of $1,000,000 or more of Investor A Shares; however, you will pay a contingent deferred sales charge of 0.50% of the price of the shares when purchased or the net asset value of the shares on the redemption date (whichever is less) for shares redeemed within 18 months after purchase.

The Fund’s distributor retains .25% of the sales charge on all purchases of Investor A Shares. When an investor purchases Investor A Shares directly from the Fund (and not through a broker), the distributor retains the entire front-end sales charge.

Purchase of Investor B Shares

Except for purchase orders from certain authorized qualified employee benefit plans, no new purchase orders for Investor B Shares of the Bond Portfolios will be accepted. Existing holders of Investor B Shares may continue to (i) have their dividends and distributions reinvested in Investor B Shares and (ii) exchange their Investor B Shares for Investor B Shares of other BlackRock funds, subject to applicable restrictions.

Purchases of Investor B Shares can only be made through a registered representative. Investor B Shares are subject to a CDSC at the rates shown in the chart below if they are redeemed within six years of purchase. The CDSC is based on the price of the Investor B Shares when purchased or the net asset value of the Investor B Shares on the redemption date (whichever is less) and is calculated without regard to any redemption fee. The amount of any CDSC an investor must pay depends on the number of years that elapse between the date of purchase and the date of redemption. The CDSC may be waived under certain circumstances, as described below. Any CDSC paid on redemptions of Investor B Shares expressed as a percentage of the

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applicable redemption amount may be higher or lower than the charge described below due to rounding.


NUMBER OF YEARS ELAPSED SINCE PURCHASE		CONTINGENT DEFERRED SALES CHARGE (AS % OF DOLLAR AMOUNT SUBJECT TO THE CHARGE)
Up to one year		4.50%
More than one but less than two years		4.00%
More than two, but less than three years		3.50%
More than three but less than four years		3.00%
More than four but less than five years		2.00%
More than five but less than six years		1.00%
More than six years		0.00%

Class B(1) shares of an SSR Fund purchased prior to its reorganization with a BlackRock fund remain subject to the CDSC applicable to such Class B(1) shares. All Investor B shares of a BlackRock fund purchased following the reorganizations will be subject to the CDSC of the BlackRock fund. Class B(1) shares of an SSR Fund are subject to a CDSC at the rates shown in the chart below if they are redeemed within six years of purchase.


NUMBER OF YEARS ELAPSED SINCE PURCHASE		CONTINGENT DEFERRED SALES CHARGE AS % OF NET ASSET VALUE AT THE TIME OF PURCHASE (OR REDEMPTION, IF LOWER)
First year		5.00%
Second year		4.00%
Third year		3.00%
Fourth year		3.00%
Fifth year		2.00%
Sixth year		1.00%
Seventh or Eighth year		0.00%

Purchase of Investor C Shares

Purchases of Investor C Shares can only be made through a registered representative. Investor C Shares are subject to a CDSC of 1.00% if they are redeemed within 12 months after purchase. The CDSC is based on the price of the Investor C Shares when purchased or the net asset value of the Investor C Shares on the redemption date (whichever is less) and is calculated without

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regard to any redemption fee. The CDSC may be waived under certain circumstances, as described below. There is no CDSC on redemptions of Investor C Shares after 12 months. Any CDSC paid on redemptions of Investor C Shares expressed as a percentage of the applicable redemption amount may be higher or lower than the charge described above due to rounding.

When an investor redeems Investor B Shares or Investor C Shares, the redemption order is processed so that the lowest CDSC is charged. Investor B Shares and Investor C Shares that are not subject to the CDSC are redeemed first. After that, the Fund redeems the Shares that have been held the longest.

Can the Sales Charge be Reduced or Eliminated?

There are several ways in which the sales charge can be reduced or eliminated. Purchases of Investor A Shares at certain fixed dollar levels, known as “breakpoints,” cause a reduction in the front-end sales charge (as described above in the “Purchase of Investor A Shares” section). Additionally, the front-end sales charge can be reduced or eliminated through one or a combination of the following: the right of accumulation, a Letter of Intent, the reinstatement privilege, quantity discounts or a waiver of the sales charge (described below). The CDSC on Investor B Shares can be reduced depending on how long you own the shares (a schedule of these reductions is listed above in the “Purchase of Investor B Shares” section). The CDSC on Investor B and C Shares also may be eliminated through waivers (described below). You may be required to provide PFPC and/or your registered representative with certain records and information in connection with the exercise of these rights, including information or records regarding shares of the funds held (i) in other accounts at your registered representative, (ii) at any other financial intermediary and (iii) at any financial intermediary by your related parties, such as members of your family or household. For more information, see the SAI or contact your investment professional.

Right of Accumulation (Investor A Shares)

Investors have a “right of accumulation” under which the current value of an investor’s existing Investor A, A1, B, B1, B2, C, C1, C2 and Institutional Shares in most BlackRock funds may be combined with the amount of the current purchase in determining whether an investor qualifies for a breakpoint and a reduced front-end sales charge. Service Organizations may value

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current holdings of their customers differently for purposes of determining whether an investor qualifies for a breakpoint and a reduced front-end sales charge, although customers of the same Service Organization will be treated similarly. In order to use this right, the investor must alert PFPC to the existence of any previously purchased shares.

Letter of Intent (Investor A Shares)

An investor may qualify for a reduced front-end sales charge immediately by signing a “Letter of Intent” stating the investor’s intention to buy a specified amount of Investor A, B, C or Institutional Shares in one or more funds within the next 13 months that would, if bought all at once, qualify the investor for a reduced sales charge. The initial investment must meet the minimum initial purchase requirement. The 13-month Letter of Intent period commences on the day that the Letter of Intent is received by PFPC, and the investor must tell PFPC that later purchases are subject to the Letter of Intent. During the term of the Letter of Intent, PFPC will hold Investor A Shares representing up to 5% of the indicated amount in an escrow account for payment of a higher sales load if the full amount indicated in the Letter of Intent is not purchased. If the full amount indicated is not purchased within the 13-month period, and the investor does not pay the higher sales load within 20 days, PFPC will redeem enough of the Investor A Shares held in escrow to pay the difference.

Reinstatement Privilege (Investor A, Investor B and Investor C Shares)

Upon redemption of Institutional and Investor A, A1, B, B1, B2, C, C1, and C2 Shares, shareholders may reinvest their redemption proceeds (after paying any applicable CDSC or redemption fee) in Investor A Shares of the SAME fund without paying a front-end sales charge. This right may be exercised once a year and within 60 days of the redemption, provided that the Investor A Share class of that fund is currently open to new investors or the shareholder has a current account in that closed fund. Shares will be purchased at the NAV calculated at the close of trading on the day the request is received. To exercise this privilege, PFPC must receive written notification from the shareholder of record or the registered representative of record, at the time of purchase. Investors should consult a tax adviser concerning the tax consequences of exercising this reinstatement privilege.

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Quantity Discounts (Investor A Shares)

In addition to quantity discounts for individuals which we discussed above, there are ways for you to qualify for breakpoints and therefore reduce the front-end sales charge by combining your order with the orders of (a) your spouse and any of your children under the age of 21, or (b) a trustee or fiduciary of a single trust estate or single fiduciary account. All orders must be placed at one time and certain restrictions apply. Investors must tell PFPC or their broker, at the time of purchase, that they are aggregating their purchases. For more information, please contact the Fund at (800) 441-7762 or see the SAI.

Waiving the Sales Charge (Investor A Shares)

The following investors may buy Investor A Shares without paying a front-end sales charge: (a) authorized qualified employee benefit plans or savings plans and rollovers of current investments in the Fund through such plans; (b) persons investing through an authorized payroll deduction plan; (c) persons investing through an authorized investment plan for organizations which operate under Section 501(c)(3) of the Internal Revenue Code; (d) registered investment advisers, trust companies and bank trust departments exercising discretionary investment authority with respect to amounts to be invested in a fund; (e) persons participating in selected fee-based programs under which they (i) pay advisory fees to a broker-dealer or other financial institution or (ii) pay fees to a broker-dealer or other financial institution for providing transaction processing and other administrative services, but not investment advisory services; and (f) employees of MetLife. Investors who qualify for any of these exemptions from the sales charge must purchase Investor A Shares. Additionally, some people associated with the Fund and its service providers may buy Investor A Shares without paying a sales charge. The front-end sales charge is not applied on Investor A Shares acquired through the reinvestment of dividends or distributions. There is no initial sales charge on purchases of $1,000,000 or more of Investor A Shares; however, you may pay a CDSC as described in “Purchase of Investor A Shares.” The applicable CDSC on Investor A Shares is not charged in connection with: (a) redemptions of Investor A Shares purchased through authorized qualified employee benefit plans or savings plans and rollovers of current investments in the Fund through such plans; (b) exchanges described in “Exchange Privilege” below; (c) redemptions made in connection with minimum required distributions due to the shareholder reaching age 70¹/2

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from IRA and 403(b)(7) accounts; (d) redemptions made with respect to certain retirement plans sponsored by the Fund, BlackRock or its affiliates; (e) redemptions (i) within one year of a shareholder’s death or, if later, the receipt of a certified probate settlement (including in connection with the distribution of account assets to a beneficiary of the decedent) or (ii) in connection with a shareholder’s disability (as defined in the Internal Revenue Code) subsequent to the purchase of Investor A Shares; (f) involuntary redemptions of Investor A Shares in accounts with low balances; (g) certain redemptions made pursuant to the Systematic Withdrawal Plan (described below); (h) redemptions related to the payment of PFPC custodial IRA fees; and (i) redemptions when a shareholder can demonstrate hardship, in the absolute discretion of the Fund. For more information on the waivers, please contact the Fund at (800) 441-7762 or see the SAI.

Waiving the Contingent Deferred Sales Charge (Investor B and Investor C Shares)

The CDSC on Investor B and Investor C Shares is not charged in connection with: (a) redemptions of Investor B and Investor C Shares purchased through authorized qualified employee benefit plans or savings plans and rollovers of current investments in the Fund through such plans; (b) exchanges described in “Exchange Privilege” below; (c) redemptions made in connection with minimum required distributions due to the shareholder reaching age 70½ from IRA and 403(b)(7) accounts; (d) redemptions made with respect to certain retirement plans sponsored by the Fund, BlackRock or its affiliates; (e) redemptions (i) within one year of a shareholder’s death or, if later, the receipt of a certified probate settlement (including in connection with the distribution of account assets to a beneficiary of the decedent) or (ii) in connection with a shareholder’s disability (as defined in the Internal Revenue Code) subsequent to the purchase of Investor B or C Shares; (f) involuntary redemptions of Investor B or Investor C Shares in accounts with low balances; (g) certain redemptions made pursuant to the Systematic Withdrawal Plan (described below); (h) redemptions related to the payment of PFPC custodial IRA fees; and (i) redemptions when a shareholder can demonstrate hardship, in the absolute discretion of the Fund. In addition, no CDSC is charged on Investor B or Investor C Shares acquired through the reinvestment of dividends or distributions. For more information on these waivers, please contact the Fund at (800) 441-7762 or see the SAI.

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Distribution and Service Plan

The Fund has adopted a plan (the Plan) that allows the Fund to pay distribution fees for the sale of its shares under Rule 12b-1 of the Investment Company Act and shareholder servicing fees for certain services provided to its shareholders.

Under the Plan, Investor B and C Shares pay a fee (distribution fees) to BlackRock Distributors, Inc. (the Distributor) and/or affiliates of PNC Bank or Merrill Lynch & Co., Inc. (Merrill Lynch) (including BlackRock) for distribution and sales support services. The distribution fees may be used to pay the Distributor for distribution services and to pay the Distributor and affiliates of PNC Bank or Merrill Lynch (including BlackRock) for sales support services provided in connection with the sale of Investor B and C Shares. The distribution fees may also be used to pay brokers, dealers, financial institutions and industry professionals (including BlackRock, PNC Bank, Merrill Lynch and their affiliates) (Service Organizations) for sales support services and related expenses. All Investor B and C Shares pay a maximum distribution fee of .75% per year of the average daily net asset value of each fund attributable to Investor B and C Shares. Investor A Shares do not pay a distribution fee.

Under the Plan, the Fund also pays shareholder servicing fees to Service Organizations whereby the Service Organizations provide support services to their customers who own Investor Shares in return for these fees. The Fund may pay a shareholder servicing fee of up to .25% per year of the average daily net asset value of Investor Shares of a fund. All Investor Shares pay this shareholder servicing fee.

In return for the shareholder servicing fee, Service Organizations (including BlackRock) may provide one or more of the following services to their customers who own Investor Shares:

(1)

Responding to customer questions on the services performed by the Service Organization and investments in Investor Shares;

(2)

Assisting customers in choosing and changing dividend options, account designations and addresses; and

(3)

Providing other similar shareholder liaison services.

The shareholder servicing fees payable pursuant to the Plan are fees payable for the administration and servicing of shareholder accounts and not costs which are primarily intended to result in the sale of a fund’s shares.

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Because the fees paid by the Fund under the Plan are paid out of Fund assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. In addition, the distribution fees paid by Investor B and C Shares may over time cost investors more than the front-end sales charge on Investor A Shares.

For more information on the Plan including a complete list of services provided thereunder, see the SAI.

In addition to, rather than in lieu of, distribution and shareholder servicing fees that the Fund may pay to a Service Organization pursuant to the Plan and fees the Fund pays to its transfer agent, the Fund may enter into non-Plan agreements with Service Organizations pursuant to which the Fund will pay a Service Organization for administrative, networking, recordkeeping, sub-transfer agency and shareholder services. These non-Plan payments are generally based on either (1) a percentage of the average daily net assets of Fund shareholders serviced by a Service Organization or (2) a fixed dollar amount for each account serviced by a Service Organization. The aggregate amount of these payments may be substantial.

The Plan permits BlackRock, the Distributor and their affiliates to make payments relating to distribution and sales support activities out of their past profits or other sources available to them (and not as an additional charge to the Fund). From time to time, BlackRock, the Distributor or their affiliates also may pay a portion of the fees for administrative, networking, recordkeeping, sub-transfer agency and shareholder services described above at its or their own expense and out of its or their legitimate profits. BlackRock, the Distributor and their affiliates may compensate affiliated and unaffiliated Service Organizations for the sale and distribution of shares of the Fund or for these other services to the Fund and shareholders. These payments would be in addition to the Fund payments described in this Prospectus and may be a fixed dollar amount, may be based on the number of customer accounts maintained by the Service Organization, or may be based on a percentage of the value of shares sold to, or held by, customers of the Service Organization. The aggregate amount of these payments by BlackRock, the Distributor and their affiliates may be substantial. Payments by BlackRock may include amounts that are sometimes referred to as “revenue sharing” payments. In some circumstances, these revenue sharing payments may create an incentive for a Service Organization, its employees or

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associated persons to recommend or sell shares of the Fund to you. Please contact your Service Organization for details about payments it may receive from the Fund or from BlackRock, the Distributor or their affiliates. For more information, see the SAI.

Selling Shares

You can redeem shares at any time. The Fund will redeem your shares at the next NAV calculated after your order is received by the fund’s transfer agent minus any applicable CDSC and/or redemption fee. Each of the CDSC and redemption fee is assessed without regard to the other. See “Market Timing and Redemption Fees” below. Shares may be redeemed by sending a written redemption request to BlackRock Funds, c/o PFPC Inc., P.O. Box 9819, Providence, RI 02940-8019. Shares may also be redeemed by telephone request by calling (800) 441-7762. Redemption proceeds may be paid by check or, if the Fund has verified banking information on file, through the Automated Clearing House Network (ACH) or by wire transfer. Redemption requests in excess of $100,000 (for checks) and $250,000 (for ACH and wire transfers) must be in writing with a medallion signature guarantee. Shares may also be redeemed by use of the Fund’s automated voice response unit service (VRU). Payment for shares redeemed by VRU or Internet may be made for non-retirement accounts in amounts up to $25,000, either through check, ACH or wire. You will be charged a fee of $7.50 for each redemption payment made by wire transfer and $15 for redemptions by check sent via overnight mail.

You can also make redemption requests through your registered investment professional, who may charge for this service. Shareholders should indicate whether they are redeeming Investor A, Investor B or Investor C Shares.

Unless another option is requested, payment for redeemed shares is normally made by check mailed within seven days after PFPC receives the redemption request. If the shares to be redeemed have been recently purchased by check, PFPC may delay the payment of redemption proceeds for up to 10 business days after the purchase date until the check has cleared.

Market Timing and Redemption/Exchange Fees

The Board of Trustees of the Fund has determined that the interests of long-term shareholders and the Fund’s ability to manage its investments may be adversely affected when shares are repeatedly bought, sold or exchanged in response to short-term

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market fluctuations—also known as “market timing.” The funds are not designed for market timing organizations or other entities using programmed or frequent purchases and sales or exchanges. The exchange privilege for Investor, Institutional and R Shares is not intended as a vehicle for short-term trading. Excessive purchase and sale or exchange activity may interfere with portfolio management, increase expenses and taxes and may have an adverse effect on the performance of a fund and its shareholders. For example, large flows of cash into and out of a fund may require the management team to allocate a significant amount of assets to cash or other short-term investments or sell securities, rather than maintaining such assets in securities selected to achieve the fund’s investment goal. Frequent trading may cause a fund to sell securities at less favorable prices, and transaction costs, such as brokerage commissions, can reduce a fund’s performance.

A fund that invests in non-U.S. securities is subject to the risk that an investor may seek to take advantage of a delay between the change in value of the fund’s portfolio securities and the determination of the fund’s NAV as a result of different closing times of U.S. and non-U.S. markets by buying or selling fund shares at a price that does not reflect their true value. A similar risk exists for funds that invest in securities of small capitalization companies, securities of issuers located in emerging markets or high yield securities (junk bonds) that are thinly traded and therefore may have actual values that differ from their market prices. This short-term arbitrage activity can reduce the return received by long-term shareholders. The Fund will seek to eliminate these opportunities by using fair value pricing, as described in “What Price Per Share Will You Pay?” above.

The Fund discourages market timing and seeks to prevent frequent purchases and sales or exchanges of fund shares that it determines may be detrimental to a fund or long-term shareholders. The Board of Trustees has approved the policies discussed below to seek to deter market timing activity. The Board has not adopted any specific numerical restrictions on purchases, sales and exchanges of fund shares because legitimate strategies, such as asset allocation, dollar cost averaging or similar activities, may result in frequent trading of fund shares. It is not expected that shareholders would be harmed by such legitimate activities.

If, as a result of its own investigation, information provided by a financial intermediary or other third party, or otherwise, the Fund believes, in its sole discretion, that your short-term trading is

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excessive or that you are engaging in market timing activity, it reserves the right to reject any specific purchase or exchange order. If the Fund rejects your purchase or exchange order, you will not be able to execute that transaction, and the Fund will not be responsible for any losses you therefore may suffer. In addition, any redemptions or exchanges that you make (as a result of the activity described above or otherwise) will be subject to any and all redemption fees, as described below. For transactions placed directly with the Fund, the Fund may consider the trading history of accounts under common ownership or control for the purpose of enforcing these policies. Transactions placed through the same financial intermediary on an omnibus basis may be deemed part of a group for the purpose of this policy and may be rejected in whole or in part by the Fund. Certain accounts, such as omnibus accounts and accounts at financial intermediaries, however, include multiple investors and such accounts typically provide the Fund with net purchase or redemption and exchange requests on any given day where purchases, redemptions and exchanges of shares are netted against one another and the identity of individual purchasers, redeemers and exchangers whose orders are aggregated are not known by the Fund. While the Fund monitors for market timing activity, the Fund may be unable to identify such activities because the netting effect in omnibus accounts often makes it more difficult to locate and eliminate market timers from the funds. Identification of market timers may also be limited by operational systems and technical limitations. In the event that a financial intermediary is determined by the Fund to be engaged in market timing or other improper trading activity, the Fund’s distributor may terminate such financial intermediary’s agreement with the distributor, suspend such financial intermediary’s trading privileges or take other appropriate actions.

Each of the Fund’s High Yield Bond, International Bond, Aurora, Small/Mid-Cap Growth, Small Cap Value Equity, Small Cap Core Equity, Small Cap Growth Equity, Health Sciences Opportunities, Global Science & Technology Opportunities, Global Resources, All-Cap Global Resources, U.S. Opportunities, Global Opportunities and International Opportunities Portfolios will automatically assess and retain a fee of 2% of the current NAV, after excluding the effect of any contingent deferred sales charges, of shares being redeemed or exchanged within 30 days of acquisition (other than those acquired through reinvestment of dividends or other distributions). A new 30-day period begins with each acquisition of shares through a purchase or exchange.

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For example, a series of transactions in which shares of Portfolio A are exchanged for shares of Portfolio B 20 days after the purchase of the Portfolio A shares, followed in 20 days by an exchange of the Portfolio B shares for shares of Portfolio C, will be subject to two redemption fees (one on each exchange).

The redemption fee is for the benefit of the remaining shareholders of a fund and is intended to encourage long-term investment, to compensate for transaction and other expenses caused by early redemptions and exchanges, and to facilitate portfolio management. The “first-in, first-out” method is used to determine the holding period. Under this method, the date of redemption or exchange will be compared with the earliest purchase date of shares held in the account. The Fund sells shares to some 401(k) plans, 403(b) plans, bank or trust company accounts, and accounts of certain financial institutions or intermediaries that do not apply the redemption fee to underlying shareholders, often because of administrative or systems limitations. From time to time, with the approval of the Fund, the redemption fee will not be assessed on redemptions or exchanges by: (i) accounts of asset allocation programs or wrap programs whose trading practices are determined by the Fund not to be detrimental to a fund or long-term shareholders (e.g., model driven programs with periodic automatic portfolio rebalancing that prohibit participant-directed trading and other programs with similar characteristics); (ii) accounts of shareholders who have died or become disabled; (iii) shareholders redeeming or exchanging shares through the Fund’s Systematic Withdrawal Plan, Systematic Exchange Plan or in connection with required distributions from an IRA, 401(k) plan, 403(b) plan or any other Internal Revenue Code Section 401 qualified retirement plan or account, or distribution from a 529 plan; (iv) shareholders executing rollovers of current investments in the Fund through qualified employee benefit plans; and (v) certain other accounts in the absolute discretion of the Fund when a shareholder can demonstrate hardship. The Fund reserves the right to modify or eliminate these waivers at any time.

There is no assurance that the methods described above will prevent market timing or other trading that may be deemed abusive.

The Fund may from time to time use other methods that it believes are appropriate to deter market timing or other trading activity that may be detrimental to a fund or long-term shareholders.

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Expedited Redemptions

If a shareholder has given authorization for expedited redemption, shares can be redeemed by telephone and the proceeds sent by check to the shareholder or by Federal wire transfer to a single previously designated bank account. Shareholders will pay $15 for redemption proceeds sent by check via overnight mail and $7.50 for redemption proceeds sent by Federal wire transfer. You are responsible for any additional charges imposed by your bank for this service. Once authorization for expedited redemptions is on file, the Fund will honor requests by telephone at (800) 441-7762. The Fund is not responsible for the efficiency of the Federal wire system or the shareholder’s firm or bank. The Fund may refuse a telephone redemption request if it believes it is advisable to do so and may use reasonable procedures to make sure telephone instructions are genuine. The Fund and its service providers will not be liable for any loss that results from acting upon telephone instructions that they reasonably believed to be genuine in accordance with those procedures. The Fund may alter the terms of or terminate this expedited redemption privilege at any time for any reason.

The Fund's Rights

The Fund may:

Suspend the right of redemption if trading is halted or restricted on the NYSE or under other emergency conditions described in the Investment Company Act,

Postpone date of payment upon redemption if trading is halted or restricted on the NYSE or under other emergency conditions described in the Investment Company Act or as described in the third paragraph in the section “Selling Shares” above,

Redeem shares involuntarily in certain cases, such as when the value of a shareholder account falls below a specified level, as described below, and

Redeem shares for property other than cash if conditions exist which make cash payments undesirable in accordance with its rights under the Investment Company Act.

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IMPORTANT DEFINITIONS

Adviser: The adviser of a mutual fund is responsible for the overall investment management of the fund. The adviser for BlackRock Funds is BlackRock.

Sub-Adviser: The sub-adviser of a fund is responsible for its day-to-day management and will generally make all buy and sell decisions. Sub-advisers also provide research and credit analysis. The sub-adviser for all the funds is BlackRock Financial Management, Inc.

Accounts with Low Balances

The Fund may redeem a shareholder’s account in any fund at any time if the net asset value of the account in such fund falls below $500 as the result of a redemption or an exchange request. This minimum does not apply to accounts of authorized qualified employee benefit plans, selected fee-based programs or accounts established under the Uniform Gifts to Minors or Uniform Transfers to Minors Acts. The shareholder will be notified in writing that the value of the account is less than the required amount and the shareholder will be allowed 60 days to make additional investments before the redemption is processed.

Management

BlackRock Funds’ adviser is BlackRock Advisors, LLC (BlackRock). BlackRock was organized in 1994 to perform advisory services for investment companies and is located at 100 Bellevue Parkway, Wilmington, DE 19809. BlackRock is a wholly-owned subsidiary of BlackRock, Inc., one of the largest publicly traded investment management firms in the United States with approximately $464 billion of assets under management as of June 30, 2006. BlackRock, Inc. is an affiliate of The PNC Financial Services Group, Inc., one of the largest diversified financial services companies in the United States, and Merrill Lynch & Co., Inc. BlackRock Financial Management, Inc. (BFM), an affiliate of BlackRock located at 40 E. 52nd Street, New York, NY 10022, acts as sub-adviser to the funds.

For their investment advisory and sub-advisory services, BlackRock and BFM, as applicable, are entitled to fees computed daily on a fund-by-fund basis and payable monthly. For the fiscal year ended September 30, 2005, the aggregate advisory fees paid by the funds to BlackRock as a percentage of average daily net assets were:


Enhanced Income	.03	%
Low Duration Bond	.24	%
Intermediate Government Bond	.36	%
Intermediate Bond II	.28	%
Intermediate Bond	.00	%
Total Return II	.25	%
Total Return	.22	%
Government Income	.21	%
Inflation Protected Bond	.00	%
GNMA	.20	%
Managed Income	.46	%
International Bond	.54	%
High Yield Bond	.32	%
AMT-Free Municipal Bond	.28	%
Delaware Municipal Bond	.48	%
Ohio Municipal Bond	.40	%
Kentucky Municipal Bond	.48	%

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The maximum annual advisory fees that can be paid to BlackRock (as a percentage of average daily net assets) are as follows:

Total Annual Advisory Fee (Before Waivers)


	Each Fund Except Enhanced Income, Int’l Bond, Inflation Protected Bond, GNMA, KY Municipal Bond, DE Municipal Bond	Int’l Bond, GNMA, KY Municipal Bond, DE Municipal Bond	Inflation Protected Bond

AVG DAILY NET ASSETS	INVESTMENT ADVISORY FEE	INVESTMENT ADVISORY FEE	INVESTMENT ADVISORY FEE
first $1 billion	.500%	.550%	.400%
$1 billion— $2 billion	.450%	.500%	.375%
$2 billion— $3 billion	.425%	.475%	.350%
greater than $3 billion	.400%	.450%	.325%

The maximum annual advisory fees that can be paid to BlackRock for the Enhanced Income Portfolio (as a percentage of average daily net assets) is .40%.

A discussion regarding the basis for the Board of Trustees of the Fund approving the Fund’s investment advisory contracts is available in the Fund’s semi-annual report to shareholders.

Information about the portfolio manager for each of the funds is presented in the appropriate fund section.

As discussed above, BlackRock has agreed contractually to cap net expenses (excluding interest expense, taxes, brokerage commissions and extraordinary expenses, if any) of each share class of each fund at the levels shown in each fund’s expense table.

To achieve this cap, BlackRock and the Fund have entered into an expense limitation agreement. The agreement sets a limit on certain of the operating expenses of each class of shares and requires BlackRock to waive or reimburse fees or expenses if these operating expenses exceed that limit.

With respect to all funds except the Intermediate Government Bond and High Yield Bond Portfolios, within two years following a waiver or reimbursement, the operating expenses of a share class that previously received a waiver or reimbursement from BlackRock are less than the expense limit for that share class, the

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share class is required to repay BlackRock up to the amount of fees waived or expenses reimbursed under the agreement if: (1) the fund of which the share class is a part has more than $50 million in assets, (2) BlackRock or an affiliate serves as the fund’s investment adviser or administrator and (3) the Board of Trustees of the Fund has approved in advance the payments to BlackRock at the previous quarterly meeting of the Board.

Dividends and Distributions

BlackRock Funds makes two kinds of distributions to shareholders: net investment income and net realized capital gains.

Distributions of net investment income derived by a fund are paid within ten days after the end of each month. The Fund’s Board of Trustees may change the timing of such dividend payments.

Net realized capital gains (including net short-term capital gains), if any, will be distributed by a fund at least annually at a date determined by the Fund’s Board of Trustees.

Your distributions will be reinvested at net asset value in new shares of the same class of the fund unless you instruct PFPC in writing to pay them in cash. There are no sales charges on these reinvestments.

If you invest in a fund shortly before it makes a capital gain distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as “buying a dividend.” Distributions that are declared in December, but paid in January are taxable as if they were paid in December.

Taxation of Distributions

Distributions paid out of a fund’s “net capital gain” will be taxed to shareholders as long-term capital gain, regardless of how long a shareholder has owned shares. Distributions of net investment income, other than exempt-interest dividends, and net short-term capital gains will generally be taxed to shareholders as ordinary income. However, individual shareholders who satisfy certain holding period requirements and other requirements are taxed on such dividends at long-term capital gain rates to the extent the dividends are attributable to “qualified dividend income” received by the fund. “Qualified dividend income” generally consists of dividends received from U.S. corporations (other than dividends from tax exempt organizations and certain dividends from real estate investment trusts and regulated investment companies) and certain foreign corporations.

Each of the AMT-Free Municipal Bond, Delaware Municipal Bond, Ohio Municipal Bond and Kentucky Municipal Bond

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Portfolios intends to pay most of its dividends as exempt-interest dividends, which means such dividends are exempt from regular Federal income tax. However, each of these funds may generally invest up to 20% of its assets in non-municipal securities, the interest on which will be subject to Federal income tax. In addition, a certain portion of the dividends distributed by a fund may be subject to the Federal Alternative Minimum Tax. The state or municipality where you live may not charge you state and local taxes on dividends paid with respect to interest on obligations of such state or municipality. Otherwise, these dividends will generally be subject to state and local taxes.

Dividends paid with respect to interest on securities issued by the U.S. Government and its agencies may also be exempt from some types of state and local taxes.

Your annual tax statement from the Fund will present in detail the tax status of your distributions for each year.

When you sell your shares of a fund, you may realize a capital gain or loss. Use of the exchange privilege also will be treated as a taxable event because it will be deemed a redemption and subsequent purchase of the shares involved. Therefore, use of the exchange privilege may be subject to federal, state and local income tax.

If more than half of the total asset value of a fund is invested in non-U.S. securities, the fund may elect to “pass through” to its shareholders the amount of non-U.S. income taxes paid by it. In such case, you would be required to include your proportionate share of such taxes in your income and may be entitled to deduct or credit such taxes when computing your taxable income.

If you do not provide a fund with your proper taxpayer identification number and certain required certifications, you may be subject to backup withholding on any distributions of income, capital gains or proceeds from the sale of your shares. When withholding is required, the amount will be 28% of any distributions or proceeds paid. Backup withholding is not an additional tax. Any amounts withheld may be credited against your U.S. federal income tax liability.

Non-U.S. investors may be subject to U.S. withholding and/or estate tax, and will be subject to special U.S. tax certification requirements. Because every investor has an individual tax situation, and also because the tax laws are subject to periodic changes, you should always consult your tax adviser about federal, state and local tax consequences of owning shares of the Fund.

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Services for Shareholders

BlackRock Funds offers shareholders many special features which can enable investors to have greater investment flexibility as well as more access to information about the Fund.

Additional information about these features is available by calling the Fund at (800) 441-7762.

Exchange Privilege

Once you are a shareholder, you have the right to exchange Investor A, B, or C Shares from one fund to Investor A, B, or C Shares, respectively, of another to meet your changing financial needs. Please note that you can exchange only into a share class and fund that are open to new investors, unless you have a current account in a fund that is closed to new investors.

You can exchange $1,000 or more of Investor A, Investor B or Investor C Shares from one fund into another. (You can exchange less than $1,000 of Investor A, Investor B or Investor C Shares if you already have an account in the fund into which you are exchanging.) Investor A, Investor B and Investor C Shares of each fund may be exchanged for shares of the same class of other funds which offer that class of shares, based on their respective net asset values. For Federal income tax purposes a share exchange is a taxable event and a capital gain or loss may be realized. Please consult your tax or other financial adviser before making an exchange request.

The exchange of Investor B and Investor C Shares will not be subject to a CDSC although exchanges may be subject to the 2% redemption fee. See “Market Timing and Redemption Fees” above. The CDSC will continue to be measured from the date of the original purchase and will not be affected by the exchange.

There are several ways to make an exchange: you may call the Fund at (800) 441-7762 and speak with one of our representatives, make the exchange via the Internet by accessing your account online, or you may send a written request to us at BlackRock Funds c/o PFPC Inc., P.O. Box 9819, Providence, RI 02940-8019. Please note, if you indicated on your New Account Application that you did not want the Telephone Exchange Privilege, you will not be able to place exchanges via the telephone until you update this option either in writing or by calling our Service Center. The Fund has the right to reject any telephone request for any reason.

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The Fund may suspend or terminate your exchange privilege at any time for any reason, including if the Fund believes, in its sole discretion, that you are engaging in market timing activities. See “Market Timing and Redemption Fees” above.

The Fund reserves the right to modify, limit the use of, or terminate the exchange privilege at any time for any reason.

Automatic Investment Plan (AIP)

If you would like to establish a regular, affordable investment program, BlackRock Funds makes it easy to set up. As an investor in any fund, you can arrange for periodic investments in that fund through automatic deductions from a checking or non-passbook savings account by completing the AIP Application Form. You determine the frequency and amount of your investment. The minimum investment amount for an automatic investment plan is $50 per portfolio. AIP Application Forms are available from BlackRock Funds.

Retirement Plans

Shares may be purchased in conjunction with individual retirement accounts (IRAs), rollover IRAs and 403(b) plans where PNC Bank or any of its affiliates acts as custodian. For more information about applications or annual fees, please contact BlackRock Funds, c/o PFPC Inc., P.O. Box 9819, Providence, RI 02940-8019, or call (800) 441-7762. Investors will be charged an annual fee of $15 for all of the IRA and 403(b) accounts they have under their Social Security number (therefore if you own a 403(b) account, a Roth IRA, a Traditional IRA and a Rollover IRA, you would only be charged one $15 fee). In addition, 403(b) accounts will be charged a separate loan application/processing fee of $25. To determine if you are eligible for an IRA or 403(b) plan and whether an IRA or 403(b) plan is appropriate for you, you should consult with a tax adviser.

Statements

Every shareholder automatically receives quarterly account statements. In addition, for tax purposes, shareholders also receive a yearly statement describing the characteristics of any dividends or other distributions received.

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Systematic Withdrawal Plan (SWP)

This feature can be used by investors who want to receive regular distributions from their accounts. To start a Systematic Withdrawal Plan (SWP) a shareholder must have a current investment of $10,000 or more in a fund. Shareholders can elect to receive cash payments of $50 or more at any interval they choose. Shareholders may sign up by completing the SWP Application Form which may be obtained from PFPC. Shareholders should realize that if withdrawals exceed income the invested principal in their account will be depleted.

To participate in the SWP, shareholders must have their dividends automatically reinvested. Shareholders may change or cancel the SWP at any time, upon written notice to PFPC. If a shareholder purchases additional Investor A Shares of a fund at the same time he or she redeems shares through the SWP, that investor may lose money because of the sales charge involved. No CDSC will be assessed on redemptions of Investor B or Investor C Shares made through the SWP that do not exceed 12% of the account’s net asset value on an annualized basis. For example, monthly, quarterly and semi-annual SWP redemptions of Investor B or Investor C Shares will not be subject to the CDSC if they do not exceed 1%, 3% and 6%, respectively, of an account’s net asset value on the redemption date. SWP redemptions of Investor B or Investor C Shares in excess of this limit will still pay any applicable CDSC.

Systematic Exchange

This feature can be used by investors to systematically exchange money from one fund to up to four other funds. A minimum of $10,000 in the initial fund is required and investments in any additional funds must meet minimum initial investment requirements. For more information, please contact the Fund at (800) 441-7762.

EZ Trader

This service allows an investor to purchase or sell Fund shares by telephone or over the Internet through ACH. Prior to establishing an EZ Trader account, please contact your bank to confirm that they are a member of the ACH system. Once confirmed, complete an application, making sure to include the appropriate bank information, and return the application to BlackRock Funds, c/o PFPC. Prior to placing a telephone or internet purchase or sale order, please contact the Fund at (800) 441-7762 to confirm that your bank information has been

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updated on your account. Once this is established, you may place your request to sell shares with the Fund by telephone or Internet. Proceeds will be sent to your pre-designated bank account.

Dividend Allocation Plan

This plan automatically invests your distributions from one fund into another fund of your choice pursuant to your instructions, without any fees or sales charges. Please call the Fund at (800) 441-7762 for details. The fund into which you request your distributions be invested must be open to new purchases.

Important Notice Regarding Delivery of Shareholder Documents

The funds deliver only one copy of shareholder documents, including prospectuses, shareholder reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is known as “householding” and is intended to eliminate duplicate mailings and reduce expenses. Mailings of your 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.

Internet Transactions

Investors in the funds may make on-line transactions, view their account balance and activity by logging into their account through the BlackRock website at www.blackrock.com/funds. To use this service, you will need a browser that supports Microsoft Internet Explorer 5.5 or higher, Netscape 7.1 or higher, FIREFOX 1.0 or higher, and AOL 8.0 (for Windows operating systems from Windows 2000 and above). In addition, MacIntosh operating system 9 with Netscape 6.2 and MacIntosh operating system 10x with Safari 1.2.3, Netscape 6.2, and FIREFOX 1.0 are also supported. Purchases made on the Internet using ACH will have a trade date that is the day after the purchase is made. Proceeds from Internet redemptions may be sent via check, ACH or wire to the bank account of record. The Fund will limit Internet purchases and redemptions in Investor Class shares to $25,000.00 per trade. Please read the On-Line Services Disclosure Statement and User Agreement, the Terms and Conditions page and the Consent to Election Delivery Agreement (if you consent to Electronic Delivery), before attempting to transact online.

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The Fund employs reasonable procedures to confirm that transactions entered over the Internet are genuine. The procedures include the use of a protected password, Secure Socket Layering (SSL), 128-bit encryption and other precautions designed to protect the integrity, confidentiality and security of shareholder information. By entering into the User Agreement with the Fund in order to open an account through the website, the shareholder waives any right to reclaim any losses from the Fund or any of its affiliates, incurred through fraudulent activity.

Electronic Access to Annual Reports, Semi-Annual Reports and Prospectuses

Electronic copies of most financial reports and prospectuses are available on the Fund’s website. Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Fund’s electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:

Please contact your financial adviser. Please note that not all investment advisers, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly With BlackRock

1)	Access the BlackRock website at http://www.blackrock.com/edelivery

2)	Log into your account

Blackrock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their nonpublic personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

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BlackRock obtains or verifies personal nonpublic information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our Web sites.

BlackRock does not sell or disclose to nonaffiliated third parties any nonpublic personal information about its Clients, except as permitted by law or as is necessary to service Client accounts. These nonaffiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to nonpublic personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the nonpublic personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

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For more information:

This Prospectus contains important information you should know before you invest. Read it carefully and keep it for future reference. More information about the Fund is available at no charge upon request. This information includes:

Annual/Semi-Annual Reports

These reports contain additional information about each of the funds’ investments. The annual report describes the funds’ performance, lists portfolio holdings, and discusses recent market conditions, economic trends and fund investment strategies that significantly affected the funds’ performance for the last fiscal year.

Statement of Additional Information (SAI)

A Statement of Additional Information, dated October 2, 2006, has been filed with the Securities and Exchange Commission (SEC). The SAI, which includes additional information about the Fund, may be obtained free of charge, along with the Fund’s annual and semi-annual reports, by calling (800) 441-7762. The SAI, as supplemented from time to time, is incorporated by reference into this Prospectus.

BlackRock Investments Services

Representatives are available to discuss account balance information, mutual fund prospectuses, literature, programs and services available. Hours: 8:00 a.m. to 6:00 p.m. (Eastern time), Monday-Friday. Call: (800) 441-7762.

An investor in any fund can call the National TTY Relay Number at (800) 688-4889 with his or her TTY machine. A Relay agent will assist the investor with all inquiries made to a Shareholder Account Service Representative.

Purchases and Redemptions

Call your registered representative or (800) 441-7762.

World Wide Web

Access general fund information and specific fund

performance, including SAI and annual/semi-annual reports, free of charge. Request mutual fund prospectuses and literature. Forward mutual fund inquiries. www.blackrock.com/funds

Written Correspondence

BlackRock Funds

c/o PFPC Inc.

PO Box 9819

Providence, RI 02940-8019

Overnight Mail

BlackRock Funds

c/o PFPC Inc.

101 Sabin Street

Pawtucket, RI 02860

Internal Wholesalers/Broker Dealer Support

Available to support investment professionals

8:30 a.m. to 6:00 p.m. (Eastern time), Monday-Friday.

Call: (800) 882-0052

Portfolio Characteristics and Holdings

A description of the Fund’s policies and procedures related to disclosure of portfolio characteristics and holdings is available in the SAI.

For information about portfolio holdings and characteristics, BlackRock fund shareholders and prospective investors may call (800) 882-0052.

Securities and Exchange Commission

You may also view and copy public information about the Fund, including the SAI, by visiting the EDGAR database on the SEC Web site (http://www.sec.gov) or the SEC’s Public Reference Room in Washington, D.C. Information about the operation of the public reference room can be obtained by calling the SEC directly at (202) 551-8090. Copies of this information can be obtained, for a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the SEC, Washington, D.C. 20549.

INVESTMENT COMPANY ACT FILE NO. 811-05742

PRO-BD-INV 1006

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