| UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES |
| Investment Company Act file number 811-08797 811-09049 Name of Fund: BlackRock Small Cap Growth Fund II of BlackRock Series, Inc. BlackRock Master Small Cap Growth Portfolio of BlackRock Master LLC Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809 Name and address of agent for service: Donald C. Burke, Chief Executive Officer, BlackRock Small Cap Growth Fund II of BlackRock Series, Inc. and BlackRock Master Small Cap Growth Portfolio of BlackRock Master LLC, 800 Scudders Mill Road, Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton, NJ, 08543-9011 Registrant’s telephone number, including area code: (800) 441-7762 Date of fiscal year end: 05/31/2008 Date of reporting period: 06/01/2007 – 05/31/2008 Item 1 – Report to Stockholders |
| EQUITIES FIXED INCOME REAL ESTATE LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS BlackRock Small Cap Growth Fund II OF BLACKROCK SERIES, INC. ANNUAL REPORT | MAY 31, 2008 |
| NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE |
| Table of Contents | ||
| Page | ||
| A Letter to Shareholders | 3 | |
| Annual Report: | ||
| Fund Summary | 4 | |
| About Fund Performance | 6 | |
| Disclosure of Expenses | 6 | |
| Fund Financial Statements: | ||
| Statement of Assets and Liabilities | 7 | |
| Statement of Operations | 8 | |
| Statements of Changes in Net Assets | 9 | |
| Fund Financial Highlights | 10 | |
| Fund Notes to Financial Statements | 13 | |
| Fund Report of Independent Registered Public Accounting Firm | 16 | |
| Fund Important Tax Information | 17 | |
| Portfolio Summary | 17 | |
| Portfolio Financial Statements: | ||
| Schedule of Investments | 18 | |
| Statement of Assets and Liabilities | 20 | |
| Statement of Operations | 21 | |
| Statements of Changes in Net Assets | 22 | |
| Portfolio Financial Highlights | 22 | |
| Portfolio Notes to Financial Statements | 23 | |
| Portfolio Report of Independent Registered Public Accounting Firm | 25 | |
| Officers and Directors | 26 | |
| Additional Information | 29 | |
| Mutual Fund Family | 31 | |
2 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
| A Letter to Shareholders |
Dear Shareholder
For much of the reporting period, investors grappled with the repercussions of the credit crisis that surfaced last summer,
and with the effects of a weakening economy and surging energy and food prices. These factors were offset by the posi-
tive impact from robust export activity, strength in the non-financial corporate sector and monetary and fiscal stimuli.
Amid the market turbulence, the Federal Reserve Board (the “Fed”) initiated a series of moves to restore liquidity and
bolster financial market stability. Since September 2007, the central bank slashed the target federal funds rate 325
basis points (3.25%), bringing the rate to 2.0% as of period-end. Also of significance were its other policy decisions,
which included extending use of the discount window to broker-dealers and investment banks and backstopping the
rescue of ill-fated Bear Stearns. Notably, on April 30, the Fed dropped previous references to downside growth risks
and added more emphasis on inflationary pressures, indicating the central bankers have likely concluded the current
cycle of monetary easing.
Nevertheless, the Fed’s response to the financial crisis helped to ease credit turmoil and investor anxiety. Since hitting
a low point on March 17, following the collapse of Bear Stearns, stocks appreciated 10% (through May 30). Most
international markets, which had outperformed U.S. stocks for some time, saw a reversal in that trend, as the troubled
credit situation and downward pressures on growth fanned recession fears.
In fixed income markets, Treasury securities rallied (yields fell as prices correspondingly rose), as a broad “flight-to–
quality” theme persisted. The yield on 10-year Treasury issues, which touched 5.30% in June 2007 (its highest level in
five years), fell to a low of 3.34% in March 2008 before rising to 4.06% by May 31 as investors grew more risk tolerant
and shifted out of Treasury issues in favor of stocks and other high-quality fixed income sectors. Tax-exempt issues
underperformed throughout most of the reporting period, pressured by problems among municipal bond insurers and
the freeze in the market for auction rate securities. However, the final two months saw a firmer tone in the municipal
market, as investors took advantage of unusually high yields.
On the whole, results for the major benchmark indexes generally reflected heightened investor risk aversion:
| Total Returns as of May 31, 2008 | 6-month | 12-month | ||
| U.S. equities (S&P 500 Index) | (4.47%) | (6.70%) | ||
| Small cap U.S. equities (Russell 2000 Index) | (1.87) | (10.53) | ||
| International equities (MSCI Europe, Australasia, Far East Index) | (5.21) | (2.53) | ||
| Fixed income (Lehman Brothers U.S. Aggregate Index) | 1.49 | 6.89 | ||
| Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) | 1.44 | 3.87 | ||
| High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Capped Index) | 1.81 | (1.08) | ||
| Past performance is no guarantee of future results. Index performance shown for illustrative purposes only. You cannot invest directly in an index. As you navigate today’s volatile markets, we encourage you to review your investment goals with your financial profes- sional and to make portfolio changes, as needed. For more up-to-date commentary on the economy and financial markets, we invite you to visit www.blackrock.com/funds. As always, we thank you for entrusting BlackRock with your investment assets, and we look forward to continuing to serve you in the months and years ahead. |
THIS PAGE NOT PART OF YOUR FUND REPORT
| Fund Summary BlackRock Small Cap Growth Fund II |
Portfolio Management Commentary
How did the Fund perform?
•For the 12-month period ended May 31, 2008, the Fund generated
positive relative returns, through its investment in BlackRock Master
Small Cap Growth Portfolio, amid a challenging investment backdrop,
outpacing the benchmark Russell 2000 Growth Index.
What factors influenced performance?
•Broadly speaking, favorable stock selection was the main driver of the
Fund’s outperformance versus the benchmark. Relative returns were
strongest in the energy, materials and industrials sectors.
•Within the energy sector, equipment and services names had the great-
est positive impact on comparative results. On an individual basis, our
positions in IHS, Inc. and Atwood Oceanics, Inc. were the top individual
contributors in the sector, as shares of both companies were up close to
50% for the annual period. Coal company Massey Energy Co. further
aided performance, as shares soared more than 120% on increased
demand for coal.
•Fertilizer company Agrium Inc. was the Portfolio’s top-performing holding
in the materials sector. The stock climbed more than 125% for the 12
months, as the company continued to post strong financial results as
a result of increased fertilizer demand.
•Within industrials, hazardous waste disposal company Clean Harbors,
Inc. enhanced Fund results, as the firm benefited from strong market
positioning and pricing power. Equipment and mining company Bucyrus
International, Inc. also positively impacted the portfolio, as shares rose
nearly 100% on strong demand for its machinery.
•Conversely, stock selection within the consumer staples sector detracted
from comparative performance. In particular, shares of cosmetics com-
pany Bare Escentuals, Inc. lost nearly 10% during the annual period,
despite reporting good financial results. Elsewhere, Fund holding i2
Technologies, Inc. hurt results, as shares of the software company fell
35% on increased worries of slowing corporate software spending.
Describe recent portfolio activity.
•During the 12 months, we significantly reduced the Portfolio’s allocation
to the consumer discretionary sector, moving from a slight overweight
versus the benchmark a year ago to a period-end underweight of more
than 300 basis points (3.0%) . We also slightly reduced the Portfolio’s
overweight in energy.
•We modestly increased the Portfolio’s overweight in the information
technology sector.
Describe Portfolio positioning at period-end.
•As of May 31, 2008, the Portfolio maintained its largest overweight
position in information technology. The Portfolio’s most significant
underweights at period-end were in the consumer discretionary and
financials sectors. We continue to look for good growth prospects at
reasonable valuations.
| The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results. |
| Expense Example |
| Actual | Hypothetical2 | |||||||||||
| Beginning | Ending | Beginning | Ending | |||||||||
| Account Value | Account Value | Expenses Paid | Account Value | Account Value | Expenses Paid | |||||||
| December 1, 2007 | May 31, 2008 | During the Period1 | December 1, 2007 | May 31, 2008 | During the Period1 | |||||||
| Institutional | $1,000 | $987.10 | $ 6.32 | $1,000 | $1,018.53 | $6.42 | ||||||
| Investor A | $1,000 | $986.20 | $ 7.56 | $1,000 | $1,017.29 | $7.67 | ||||||
| Investor B | $1,000 | $981.30 | $12.76 | $1,000 | $1,012.09 | $12.96 | ||||||
| Investor C | $1,000 | $981.30 | $12.22 | $1,000 | $1,012.57 | $12.41 | ||||||
| Class R | $1,000 | $984.00 | $ 9.87 | $1,000 | $1,014.95 | $10.02 | ||||||
| 1 For each class of the Fund, expenses are equal to the annualized expense ratio for the class (1.28% for Institutional, 1.53% for Investor A, 2.59% for Investor B, 2.48% for Investor C and 2.00% for Class R), multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period shown). Because the Fund is a feeder fund, the expense table example reflects the expenses of both the feeder fund and the master portfolio in which it invests. 2 Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the most recent fiscal half year divided by 366. See “Disclosure of Expenses” on page 6 for further information on how expenses were calculated. |
| 4 BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2008 |
| Total Return Based on a $10,000 Investment |
1 Assuming maximum sales charge, if any, transaction costs and other operating expenses, including administration fees.
2 The Fund invests all of its assets in BlackRock Master Small Cap Growth Portfolio of BlackRock Master LLC. The Portfolio invests primarily
in a diversified portfolio of equity securities of small cap companies located in the United States that the Manager believes are undervalued
or have good prospects for earnings growth.
3 This unmanaged Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted
growth values. Russell 2000 is a registered trademark of the Frank Russell Company.
4 Commencement of operations.
| Performance Summary for the Period Ended May 31, 2008 |
| Average Annual Total Returns1 | ||||||||||||||
| 1 Year | 5 Years | Since Inception2 | ||||||||||||
| 6-Month | w/o sales | w/sales | w/o sales | w/sales | w/o sales | w/sales | ||||||||
| Total Returns | charge | charge | charge | charge | charge | charge | ||||||||
| Institutional | (1.29%) | 2.88% | — | 14.62% | — | 8.49% | — | |||||||
| Investor A | (1.38) | 2.57 | (2.82%) | 14.33 | 13.10% | 8.21 | 7.54% | |||||||
| Investor B | (1.87) | 1.61 | (2.30) | 13.38 | 13.14 | 7.42 | 7.42 | |||||||
| Investor C | (1.87) | 1.63 | 0.77 | 13.38 | 13.38 | 7.34 | 7.34 | |||||||
| Class R | (1.60) | 2.12 | — | 14.12 | — | 8.04 | — | |||||||
| Russell 2000 Growth Index | (2.55) | (5.72) | — | 12.16 | — | 3.35 | — | |||||||
| 1 Assuming maximum sales charges. See “About Fund Performance” on page 6 for a detailed description of share classes, including any related sales charges and fees. 2 The Fund commenced operations on 10/29/99. Past performance is not indicative of future results. |
| BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2008 5 |
About Fund Performance
•Institutional Sharesare not subject to any sales charge. Institutional
Shares bear no ongoing distribution or service fees and are available
only to eligible investors.
•Investor A Sharesincur a maximum initial sales charge (front-end load)
of 5.25% and a service fee of 0.25% per year (but no distribution fee).
•Investor B Sharesare subject to a maximum contingent deferred sales
charge of 4.50% declining to 0% after six years. In addition, Investor B
Shares are subject to a distribution fee of 0.75% per year and a service
fee of 0.25% per year. These shares automatically convert to Investor A
Shares after approximately eight years. (There is no initial sales charge
for automatic share conversions.) All returns for periods greater than
eight years reflect this conversion.
•Investor C Sharesare subject to a distribution fee of 0.75% and a service
fee of 0.25% per year. In addition, Investor C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
•Class R Sharesdo not incur a maximum initial sales charge (front-end
load) or deferred sales charge. These shares are subject to a distribution
fee of 0.25% per year and a service fee of 0.25% per year. Class R
Shares are available only to certain retirement plans. Prior to inception,
Class R Share performance results are those of Institutional Shares
(which have no distribution or service fees) restated to reflect Class R
Share fees.
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses
related to transactions, including sales charges, redemption fees and
exchange fees; and (b) operating expenses including advisory fees, distri-
bution fees including 12b-1 fees, and other Fund expenses. The expense
example on page 4 (which is based on a hypothetical investment of
$1,000 invested on December 1, 2007 and held through May 31, 2008)
is intended to assist shareholders both in calculating expenses based on
an investment in the Fund and in comparing these expenses with similar
costs of investing in other mutual funds.
The table provides information about actual account values and actual
expenses. In order to estimate the expenses a shareholder paid during the
period covered by this report, shareholders can divide their account value
by $1,000 and then multiply the result by the number corresponding
to their share class under the heading entitled “Expenses Paid During
the Period.”
| Performance information reflects past performance and does not guar- antee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Fund may charge a 2% redemption fee for sales or exchanges of shares within 30 days of purchase or exchange. Performance data does not reflect this potential fee. Figures shown in the performance tables on page 5 assume reinvestment of all dividends and capital gain distributions, if any, at net asset value on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of service, distri- bution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. |
The table also provides information about hypothetical account values
and hypothetical expenses based on the Fund’s actual expense ratio and
an assumed rate of return of 5% per year before expenses. In order to
assist shareholders in comparing the ongoing expenses of investing in this
Fund and other funds, compare the 5% hypothetical example with the 5%
hypothetical examples that appear in other funds’ shareholder reports.
The expenses shown in the table are intended to highlight shareholders’
ongoing costs only and do not reflect any transactional expenses, such as
sales charges, redemption fees or exchange fees. Therefore, the hypotheti-
cal table is useful in comparing ongoing expenses only, and will not help
shareholders determine the relative total expenses of owning different
funds. If these transactional expenses were included, shareholder expenses
would have been higher.
6 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
| Statement of Assets and Liabilities | BlackRock Small Cap Growth Fund II | |
| May 31, 2008 | ||
| Assets | ||
| Investment at value — BlackRock Master Small Cap Growth Portfolio (the “Portfolio”) (cost — $492,764,034) | $ 553,669,567 | |
| Capital shares sold receivable | 552,350 | |
| Portfolio receivable | 398,704 | |
| Other assets | 32,701 | |
| Total assets | 554,653,322 | |
| Liabilities | ||
| Capital shares redeemed payable | 951,054 | |
| Other affiliates payable | 251,087 | |
| Distribution fees payable | 161,985 | |
| Administration fees payable | 89,053 | |
| Officer’s and Directors’ fees payable | 172 | |
| Other accrued expenses payable | 55,505 | |
| Total liabilities | 1,508,856 | |
| Net Assets | ||
| Net assets | $ 553,144,466 | |
| Net Assets Consist of | ||
| Institutional Shares, $0.0001 par value | $ 1,111 | |
| Investor A Shares, $0.0001 par value | 1,673 | |
| Investor B Shares, $0.0001 par value | 222 | |
| Investor C Shares, $0.0001 par value | 744 | |
| Class R Shares, $0.0001 par value | 277 | |
| Paid-in capital in excess of par | 492,854,116 | |
| Net accumulated realized loss allocated from the Portfolio | (619,210) | |
| Net unrealized appreciation/depreciation allocated from the Portfolio | 60,905,533 | |
| Net assets | $ 553,144,466 | |
| Net Asset Value | ||
| Institutional — Based on net assets of $157,804,943 and 11,111,825 shares outstanding | $ 14.20 | |
| Investor A — Based on net assets of $232,600,128 and 16,732,013 shares outstanding | $ 13.90 | |
| Investor B — Based on net assets of $29,045,061 and 2,224,507 shares outstanding | $ 13.06 | |
| Investor C — Based on net assets of $96,449,071 and 7,440,187 shares outstanding | $ 12.96 | |
| Class R — Based on net assets of $37,245,263 and 2,766,944 shares outstanding | $ 13.46 | |
| See Notes to Financial Statements. |
| BLACKROCK SMALL CAP GROWTH FUND II |
| MAY 31, 2008 |
| 7 |
| Statement of Operations | BlackRock Small Cap Growth Fund II | |
| Year Ended May 31, 2008 | ||
| Investment Loss | ||
| Net investment income allocated from the Portfolio (net of $2,250 foreign tax expense): | ||
| Dividends | $ 2,544,214 | |
| Interest from affiliates | 582,532 | |
| Securities lending | 443,076 | |
| Expenses | (4,123,093) | |
| Total loss | (553,271) | |
| Expenses | ||
| Administration | 1,072,095 | |
| Service — Investor A | 525,100 | |
| Service and distribution — Investor B | 427,871 | |
| Service and distribution— Investor C | 970,346 | |
| Service and distribution — Class R | 143,004 | |
| Transfer agent — Institutional | 371,615 | |
| Transfer agent — Investor A | 518,455 | |
| Transfer agent — Investor B | 207,243 | |
| Transfer agent — Investor C | 412,639 | |
| Transfer agent — Class R | 126,454 | |
| Printing | 110,093 | |
| Registration | 64,484 | |
| Professional | 62,969 | |
| Officer and Directors | 371 | |
| Miscellaneous | 15,182 | |
| Total expenses | 5,027,921 | |
| Net investment loss | (5,581,192) | |
| Realized and Unrealized Gain (Loss) Allocated From the Portfolio | ||
| Net realized gain from investments | 30,599,653 | |
| Net change in unrealized appreciation/depreciation on investments | (12,304,369) | |
| Total realized and unrealized gain | 18,295,284 | |
| Net Increase in Net Assets Resulting from Operations | $ 12,714,092 | |
| See Notes to Financial Statements. |
8 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
| Statements of Changes in Net Assets | BlackRock Small Cap Growth Fund II | |||
| Year Ended May 31, | ||||
| Increase (Decrease) in Net Assets: | 2008 | 2007 | ||
| Operations | ||||
| Net investment loss | $ (5,581,192) | $ (6,610,899) | ||
| Net realized gain | 30,599,653 | 90,303,106 | ||
| Net change in unrealized appreciation/depreciation | (12,304,369) | (26,039,471) | ||
| Net increase in net assets resulting from operations | 12,714,092 | 57,652,736 | ||
| Distributions to Shareholders From | ||||
| Net realized gain: | ||||
| Institutional | (24,799,659) | (12,500,481) | ||
| Investor A | (31,351,738) | (13,721,588) | ||
| Investor B | (7,629,805) | (5,836,461) | ||
| Investor C | (15,093,297) | (7,391,661) | ||
| Class R | (3,909,293) | (1,321,136) | ||
| Tax return of capital: | ||||
| Institutional | (165,528) | — | ||
| Investor A | (232,733) | — | ||
| Investor B | (43,175) | — | ||
| Investor C | (110,892) | — | ||
| Class R | (32,423) | — | ||
| Decrease in net assets resulting from distributions to shareholders | (83,368,543) | (40,771,327) | ||
| Capital Share Transactions | ||||
| Net increase in net assets derived from capital share transactions | 85,217,124 | 40,153,088 | ||
| Redemption Fee | ||||
| Redemption fee | 5,519 | 4,171 | ||
| Net Assets | ||||
| Total increase in net assets | 14,568,192 | 57,038,668 | ||
| Beginning of year | 538,576,274 | 481,537,606 | ||
| End of year | $ 553,144,466 | $ 538,576,274 | ||
| See Notes to Financial Statements. |
| BLACKROCK SMALL CAP GROWTH FUND II |
| MAY 31, 2008 |
| 9 |
| Financial Highlights | BlackRock Small Cap Growth Fund II | |||||||||||||||||||||||
| Institutional | Investor A | |||||||||||||||||||||||
| Year Ended May 31, | Year Ended May 31, | |||||||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
| Per Share Operating Performance | ||||||||||||||||||||||||
| Net asset value, beginning of year | $ 16.26 | $ 15.74 | $ 12.50 | $ 11.23 | $ 9.21 | $ 15.96 | $ 15.51 | $ 12.34 | $ 11.12 | $ 9.14 | ||||||||||||||
| Net investment loss1 | (0.09) | (0.14) | (0.14) | (0.11) | (0.11) | (0.12) | (0.18) | (0.17) | (0.14) | (0.13) | ||||||||||||||
| Net realized and unrealized gain | 0.482 | 1.952 | 3.382 | 1.382 | 2.13 | 0.462 | 1.922 | 3.342 | 1.362 | 2.11 | ||||||||||||||
| Net increase from investment operations | 0.39 | 1.81 | 3.24 | 1.27 | 2.02 | 0.34 | 1.74 | 3.17 | 1.22 | 1.98 | ||||||||||||||
| Distributions from: | ||||||||||||||||||||||||
| Net realized gain | (2.43) | (1.29) | — | — | — | (2.38) | (1.29) | — | — | — | ||||||||||||||
| Tax return of capital | (0.02) | — | — | — | — | (0.02) | — | — | — | — | ||||||||||||||
| Total distributions | (2.45) | (1.29) | — | — | — | (2.40) | (1.29) | — | — | — | ||||||||||||||
| Net asset value, end of year | $ 14.20 | $ 16.26 | $ 15.74 | $ 12.50 | $ 11.23 | $ 13.90 | $ 15.96 | $ 15.51 | $ 12.34 | $ 11.12 | ||||||||||||||
| Total Investment Return3 | ||||||||||||||||||||||||
| Based on net asset value | 2.88% | 12.50% | 25.92% | 11.31% | 21.93% | 2.57% | 12.23% | 25.69% | 10.97% | 21.66% | ||||||||||||||
| Ratios to Average Net Assets4 | ||||||||||||||||||||||||
| Total expenses | 1.25% | 1.28% | 1.22% | 1.25% | 1.23% | 1.51% | 1.54% | 1.47% | 1.50% | 1.49% | ||||||||||||||
| Net investment loss | (0.59%) | (0.93%) | (0.93%) | (0.95%) | (0.99%) | (0.83%) | (1.18%) | (1.18%) | (1.20%) | (1.24%) | ||||||||||||||
| Supplemental Data | ||||||||||||||||||||||||
| Net assets, end of year (000) | $157,805 | $162,580 | $167,907 | $125,301 | $ 96,893 | $232,600 | $194,561 | $154,179 | $114,558 | $ 97,389 | ||||||||||||||
| Portfolio turnover of the Portfolio | 70% | 115% | 101% | 129% | 149% | 70% | 115% | 101% | 129% | 149% | ||||||||||||||
| 1 | Based on average shares outstanding. |
| 2 | Includes a redemption fee, which is less than $0.01 per share. |
| 3 | Total investment returns exclude the effects of any sales charges. |
| 4 | Includes the Fund’s share of the Portfolio’s allocated expenses and/or net investment loss. |
| See Notes to Financial Statements. |
10 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
| Financial Highlights (continued) | BlackRock Small Cap Growth Fund II | |||||||||||||||||||||||
| Investor B | Investor C | |||||||||||||||||||||||
| Year Ended May 31, | Year Ended May 31, | |||||||||||||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
| Per Share Operating Performance | ||||||||||||||||||||||||
| Net asset value, beginning of year | $ 15.01 | $ 14.78 | $ 11.85 | $ 10.77 | $ 8.92 | $ 14.99 | $ 14.76 | $ 11.84 | $ 10.75 | $ 8.91 | ||||||||||||||
| Net investment loss1 | (0.26) | (0.28) | (0.27) | (0.23) | (0.21) | (0.24) | (0.28) | (0.28) | (0.23) | (0.21) | ||||||||||||||
| Net realized and unrealized gain | 0.452 | 1.802 | 3.202 | 1.312 | 2.06 | 0.432 | 1.802 | 3.202 | 1.322 | 2.05 | ||||||||||||||
| Net increase from investment operations | 0.19 | 1.52 | 2.93 | 1.08 | 1.85 | 0.19 | 1.52 | 2.92 | 1.09 | 1.84 | ||||||||||||||
| Distributions from: | ||||||||||||||||||||||||
| Net realized gain | (2.12) | (1.29) | — | — | — | (2.20) | (1.29) | — | — | — | ||||||||||||||
| Tax return of capital | (0.02) | — | — | — | — | (0.02) | — | — | — | — | ||||||||||||||
| Total distributions | (2.14) | (1.29) | — | — | — | (2.22) | (1.29) | — | — | — | ||||||||||||||
| Net asset value, end of year | $ 13.06 | $ 15.01 | $ 14.78 | $ 11.85 | $ 10.77 | $ 12.96 | $ 14.99 | $ 14.76 | $ 11.84 | $ 10.75 | ||||||||||||||
| Total Investment Return3 | ||||||||||||||||||||||||
| Based on net asset value | 1.61% | 11.29% | 24.73% | 10.03% | 20.74% | 1.63% | 11.31% | 24.66% | 10.14% | 20.65% | ||||||||||||||
| Ratios to Average Net Assets4 | ||||||||||||||||||||||||
| Total expenses | 2.49% | 2.35% | 2.25% | 2.28% | 2.26% | 2.43% | 2.36% | 2.27% | 2.30% | 2.27% | ||||||||||||||
| Net investment loss | (1.89%) | (1.99%) | (1.96%) | (1.98%) | (2.01%) | (1.77%) | (2.01%) | (1.98%) | (1.99%) | (2.02%) | ||||||||||||||
| Supplemental Data | ||||||||||||||||||||||||
| Net assets, end of year (000) | $ 29,045 | $ 60,086 | $ 72,350 | $ 62,827 | $ 68,754 | $ 96,449 | $ 99,938 | $ 75,678 | $ 43,839 | $ 36,478 | ||||||||||||||
| Portfolio turnover of the Portfolio | 70% | 115% | 101% | 129% | 149% | 70% | 115% | 101% | 129% | 149% | ||||||||||||||
| 1 | Based on average shares outstanding. |
| 2 | Includes a redemption fee, which is less than $0.01 per share. |
| 3 | Total investment returns exclude the effects of sales charges. |
| 4 | Includes the Fund’s share of the Portfolio’s allocated expenses and/or net investment loss. |
| See Notes to Financial Statements. |
| BLACKROCK SMALL CAP GROWTH FUND II |
| MAY 31, 2008 |
| 11 |
| Financial Highlights (concluded) | BlackRock Small Cap Growth Fund II | |||||||||||
| Class R | ||||||||||||
| Year Ended May 31, | ||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||
| Per Share Operating Performance | ||||||||||||
| Net asset value, beginning of year | $ 15.54 | $ 15.18 | $ 12.11 | $ 10.94 | $ 8.96 | |||||||
| Net investment loss1 | (0.17) | (0.22) | (0.21) | (0.17) | (0.16) | |||||||
| Net realized and unrealized gain | 0.442 | 1.872 | 3.282 | 1.342 | 2.14 | |||||||
| Net increase from investment operations | 0.27 | 1.65 | 3.07 | 1.17 | 1.98 | |||||||
| Distributions from: | ||||||||||||
| Net realized gain | (2.33) | (1.29) | — | — | — | |||||||
| Total return of capital | (0.02) | — | — | — | — | |||||||
| Total distributions | (2.35) | (1.29) | — | — | — | |||||||
| Net asset value, end of year | $ 13.46 | $ 15.54 | $ 15.18 | $ 12.11 | $ 10.94 | |||||||
| Total Investment Return | ||||||||||||
| Based on net asset value | 2.12% | 11.88% | 25.35% | 10.69% | 22.10% | |||||||
| Ratios to Average Net Assets3 | ||||||||||||
| Total expenses | 1.95% | 1.86% | 1.72% | 1.76% | 1.74% | |||||||
| Net investment loss | (1.26%) | (1.50%) | (1.43%) | (1.44%) | (1.50%) | |||||||
| Supplemental Data | ||||||||||||
| Net assets, end of year (000) | $ 37,245 | $ 21,412 | $ 11,423 | $ 2,457 | $ 354 | |||||||
| Portfolio turnover of the Portfolio | 70% | 115% | 101% | 129% | 149% | |||||||
| 1 | Based on average shares outstanding. |
| 2 | Includes a redemption fee, which is less than $0.01 per share. |
| 3 | Includes the Fund’s share of the Portfolio’s allocated expenses and/or net investment loss. |
| See Notes to Financial Statements. |
12 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
| Notes to Financial Statements BlackRock Small Cap Growth Fund II |
| 1. Significant Accounting Policies: BlackRock Small Cap Growth Fund II (the “Fund”) of BlackRock Series, Inc. (the “Corporation”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Fund seeks to achieve its invest- ment objective by investing all of its assets in BlackRock Master Small Cap Growth Portfolio (the “Portfolio”) of BlackRock Master LLC (the “Master LLC”), which has the same investment objective and strategies as the Fund. The value of the Fund’s investment in the Portfolio reflects the Fund’s proportionate interest in the net assets of the Portfolio. The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund’s financial statements. The Fund’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. Actual results may differ from these estimates. The percentage of the Portfolio owned by the Fund at May 31, 2008 was 100%. The Fund offers multiple classes of shares. Institutional Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with a front-end sales charge. Investor B and Investor C Shares may be subject to a contingent deferred sales charge. Class R Shares are sold only to certain retirement plans. All classes of shares have identical vot- ing, dividend, liquidation and other rights and the same terms and con- ditions, except that Investor A, Investor B, Investor C and Class R Shares bear certain expenses related to the shareholder servicing of such shares, and Investor B, Investor C and Class R Shares also bear certain expenses related to the distribution of such shares. Each class has exclu- sive voting rights with respect to matters relating to its shareholder serv- icing and distribution expenditures (except that Investor B shareholders may vote on material changes to the Investor A distribution plan). The following is a summary of significant accounting policies followed by the Fund: Valuation of investments: The Fund records its investment in the Portfolio at fair value. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio’s Notes to Financial Statements, which are includ- ed elsewhere in this report. Investment Transactions and Net Investment Income: Investment trans- actions in the Portfolio are accounted for on a trade date basis. The Fund records daily its proportionate share of the Portfolio’s income, expenses and realized and unrealized gains and losses. In addition, the Fund accrues its own expenses. Income and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets. |
| Dividends and Distributions: Dividends and distributions paid by the Fund are recorded on the ex-dividend dates. Income Taxes: It is the Fund’s policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. Effective November 30, 2007, the Fund implemented Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes the minimum recognition thresh- old a tax position must meet in connection with accounting for uncer- tainties in income tax positions taken or expected to be taken by an entity, including investment companies, before being measured and rec- ognized in the financial statements. The administrator has evaluated the application of FIN 48 to the Fund, and has determined that the adoption of FIN 48 does not have a material impact on the Fund’s financial state- ments. The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns remains open for the years ended May 31, 2005 through May 31, 2007. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Recent Accounting Pronouncements: In September 2006, Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a frame- work for measuring fair value and expands disclosures about fair value measurements. The impact on the Fund’s financial statement disclo- sures, if any, is currently being assessed. In addition, in February 2007, Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS 159”), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. FAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The impact on the Fund’s financial statement disclosures, if any, is currently being assessed. In March 2008, Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133” (“FAS 161”), was issued and is effective for fiscal years beginning after November 15, 2008. FAS 161 is intended to improve financial reporting for derivative instruments by |
| BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2008 13 |
| Notes to Financial Statements (continued) BlackRock Small Cap Growth Fund II |
| requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of operations and financial position. The impact on the Fund’s financial statement disclosures, if any, is currently being assessed. Other: Expenses directly related to the Fund or its classes are charged to that Fund or class. Other operating expenses shared by several funds are pro-rated among those funds on the basis of relative net assets or other appropriate methods. Other expenses of the Fund are allocated daily to each class based on its relative net assets. 2. Transactions with Affiliates: The Corporation, on behalf of the Fund has entered into an Admini- stration Agreement with BlackRock Advisors, LLC (the “Administrator”), an indirect, wholly owned subsidiary of BlackRock, Inc., to provide administrative services (other than investment advice and related port- folio activities). For such services, the Fund pays a monthly fee at an annual rate of 0.20% of the Fund’s average daily net assets. Merrill Lynch & Co., Inc. (“Merrill Lynch”) and The PNC Financial Services Group, Inc. (“PNC”) are principal owners of BlackRock, Inc. The Corporation, on behalf of the Fund has also entered into separate Distribution Agreements and Distribution Plans with FAM Distributors, Inc. (“FAMD”) and BlackRock Distributors, Inc. and its affiliates (“BDI”) (collectively, the “Distributor”). FAMD is a wholly owned subsidiary of Merrill Lynch Group, Inc., and BDI is an affiliate of BlackRock, Inc. Pursuant to the Distribution Plans adopted by the Corporation in accor- dance with Rule 12b-1 under the 1940 Act, the Fund pays the Distributor ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the shares as follows: |
| Service | Distribution | |||
| Fee | Fee | |||
| Investor A | 0.25% | — | ||
| Investor B | 0.25% | 0.75% | ||
| Investor C | 0.25% | 0.75% | ||
| Class R | 0.25% | 0.25% | ||
| Pursuant to sub-agreements with each Distributor, broker-dealers, includ- ing Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly owned subsidiary of Merrill Lynch, and each Distributor provide shareholder servicing and distribution services to the Fund. The ongoing service fee and/or distribution fee compensates the Distributor and each broker-dealer for providing shareholder servicing and/or distribu- tion-related services to Investor A, Investor B, Investor C and Class R shareholders. |
| For the year ended May 31, 2008, the Distributor earned underwriting discounts and direct commissions and its affiliates earned dealer concessions on sales of the Fund’s Investor A Shares, which totaled $57,315. These amounts include payments to Hilliard Lyons, which was considered an affiliate for a portion of the year. For the year ended May 31, 2008, affiliates received contingent deferred sales charges of $13,903 and $16,462 relating to transactions in Investor B and Investor C Shares, respectively. Furthermore, affiliates received contingent deferred sales charges of $247, relating to transactions subject to front-end sales charge waivers on Investor A Shares. Pursuant to written agreements, certain affiliates provide the Fund with sub-accounting, record keeping, sub-transfer agency and other adminis- trative services with respect to sub-accounts they service. For these services, these affiliates receive an annual fee per shareholder account which will vary depending on share class. For the year ended May 31, 2008, the Fund paid $1,424,813 in return for these services. PNC Global Investment Servicing (U.S.) Inc., formerly PFPC Inc., an indirect, wholly owned subsidiary of PNC and an affiliate of the Administrator, is the Fund’s transfer agent. Each class of the Fund bears the costs of transfer agent fees associated with such respective classes. Transfer agency fees borne by each class of the Fund are comprised of those fees charged for all shareholder communications including the mailing of shareholder reports, dividend and distribution notices, and proxy materials for shareholders meetings, as well as per account and per transaction fees related to servicing and maintenance of shareholder accounts, including the issuing, redeeming and transferring of shares of each class of the Fund, 12b-1 fee calculation, check writing, anti–money laundering services, and customer identification services. The Administrator maintains a call center, which is responsible for pro- viding certain shareholder services to the Fund, such as responding to shareholder inquiries and processing transactions based upon instruc- tions from shareholders with respect to the subscription and redemp- tion of Fund shares. For the year ended May 31, 2008, the following amounts have been accrued by the Fund to reimburse the Administrator for costs incurred running the call center, which are a component of the transfer agent fees in the accompanying Statement of Operations. |
| Call Center | ||
| Fees | ||
| Institutional | $1,134 | |
| Investor A | $1,544 | |
| Investor B | $ 423 | |
| Investor C | $1,110 | |
| Class R | $ 343 | |
| Certain officers and/or directors of the Fund are officers and/or directors of BlackRock, Inc. or its affiliates. |
14 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
| Notes to Financial Statements (continued) BlackRock Small Cap Growth Fund II |
| 3. Capital Share Transactions: There are 100,000,000 shares authorized for each class. Transactions in capital shares for each class were as follows: |
| Year Ended | Year Ended | |||||||
| May 31, 2008 | May 31, 2007 | |||||||
| Shares | Amount | Shares | Amount | |||||
| Institutional Shares | ||||||||
| Shares sold | 2,111,452 | $ 30,348,284 | 3,259,102 | $ 49,487,906 | ||||
| Shares issued to shareholders in reinvestment of distributions | 1,661,011 | 23,665,501 | 806,674 | 11,932,076 | ||||
| Total issued | 3,772,463 | 54,013,785 | 4,065,776 | 61,419,982 | ||||
| Shares redeemed | (2,656,417) | (38,134,584) | (4,735,348) | (72,034,403) | ||||
| Net increase (decrease) | 1,116,046 | $ 15,879,201 | (669,572) | $(10,614,421) | ||||
| Investor A Shares | ||||||||
| Shares sold and automatic conversion of shares | 5,135,579 | $ 73,660,147 | 3,831,461 | $ 57,065,180 | ||||
| Shares issued to shareholders in reinvestment of distributions | 2,219,213 | 31,029,679 | 923,836 | 13,463,838 | ||||
| Total issued | 7,354,792 | 104,689,826 | 4,755,297 | 70,529,018 | ||||
| Shares redeemed | (2,815,945) | (39,881,982) | (2,504,543) | (37,550,517) | ||||
| Net increase | 4,538,847 | $ 64,807,844 | 2,250,754 | $ 32,978,501 | ||||
| Investor B Shares | ||||||||
| Shares sold | 794,904 | $ 10,794,113 | 1,064,811 | $ 14,966,520 | ||||
| Shares issued to shareholders in reinvestment of distributions | 540,676 | 7,094,229 | 386,611 | 5,324,597 | ||||
| Total issued | 1,335,580 | 17,888,342 | 1,451,422 | 20,291,117 | ||||
| Shares redeemed and automatic conversion of shares | (3,113,203) | (42,495,222) | (2,344,395) | (33,010,144) | ||||
| Net decrease | (1,777,623) | $ (24,606,880) | (892,973) | $(12,719,027) | ||||
| Investor C Shares | ||||||||
| Shares sold | 1,764,182 | $ 23,555,626 | 2,493,530 | $ 35,064,127 | ||||
| Shares issued to shareholders in reinvestment of distributions | 1,098,647 | 14,374,231 | 501,470 | 6,909,042 | ||||
| Total issued | 2,862,829 | 37,929,857 | 2,995,000 | 41,973,169 | ||||
| Shares redeemed | (2,089,120) | (27,643,349) | (1,455,462) | (20,522,034) | ||||
| Net increase | 773,709 | $ 10,286,508 | 1,539,538 | $ 21,451,135 | ||||
| Class R Shares | ||||||||
| Shares sold | 1,998,096 | $ 27,208,987 | 1,097,305 | $ 15,985,485 | ||||
| Shares issued to shareholders in reinvestment of distributions | 290,045 | 3,939,967 | 92,652 | 1,319,616 | ||||
| Total issued | 2,288,141 | 31,148,954 | 1,189,957 | 17,305,101 | ||||
| Shares redeemed | (899,419) | (12,298,503) | (564,507) | (8,248,201) | ||||
| Net increase | 1,388,722 | $ 18,850,451 | 625,450 | $ 9,056,900 | ||||
| There is a 2% redemption fee on shares redeemed (or exchanged) that have been held 30 days or less. The redemption fees are collected and retained by the Fund for the benefit of the remaining shareholders. The redemption fees are recorded as a credit to paid in capital. |
| BLACKROCK SMALL CAP GROWTH FUND II |
| MAY 31, 2008 |
| 15 |
| Notes to Financial Statements (concluded) BlackRock Small Cap Growth Fund II |
| 4. Income Tax Information: Reclassifications: Accounting principles generally accepted in the United States of America require that certain components of net assets be adjust- ed to reflect permanent differences between financial and tax reporting. Accordingly, during the current year, $5,581,192 has been reclassified between net accumulated realized loss allocated from the Fund and net accumulated investment loss as a result of permanent differences attribut- able to net operating losses. These reclassifications have no effect on net assets or net asset values per share. The tax character of distributions paid during the fiscal years ended May 31, 2008 and May 31, 2007 were as follows: |
| 5/31/2008 | 5/31/2007 | |||
| Distributions paid from: | ||||
| Ordinary income | $ 27,863,905 | — | ||
| Net long-term capital gains | 54,919,887 | $ 40,771,327 | ||
| Tax return of capital | 584,751 | — | ||
| Total distributions | $ 83,368,543 | $ 40,771,327 | ||
| As of May 31, 2008, the components of accumulated earnings on a tax basis were as follows: |
| Net unrealized gains | $ 60,286,323* | |
| Total accumulated earnings | $ 60,286,323 | |
| * The difference between book-basis and tax-basis net unrealized gains is attributable primarily to the tax deferral of losses on wash sales. |
| Report of Independent Registered Public Accounting Firm BlackRock Small Cap Growth Fund II |
| To the Shareholders and Board of Directors of BlackRock Series, Inc.: We have audited the accompanying statement of assets and liabilities of BlackRock Small Cap Growth Fund II, one of the portfolios constitut- ing BlackRock Series, Inc. (“BlackRock”), as of May 31, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of BlackRock’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assur- ance about whether the financial statements and financial highlights are free of material misstatement. BlackRock is not required to have, nor were we engaged to perform, an audit of its internal control over finan- cial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing |
| an opinion on the effectiveness of BlackRock’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by man- agement, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock Small Cap Growth Fund II of BlackRock Series, Inc. as of May 31, 2008, the results of the operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. |
| Deloitte & Touche LLP Princeton, New Jersey July 28, 2008 |
16 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
| Important Tax Information BlackRock Small Cap Growth Fund II The following information is provided with respect to the ordinary income distributions paid by BlackRock Small Cap Growth Fund II of BlackRock Series, Inc. during the fiscal year ended May 31, 2008: |
| Record Date | August 20, 2007 | December 5, 2007 | ||||
| Payable Date | August 22, 2007 | December 7, 2007 | ||||
| Qualified Dividend Income for Individuals | 4.85%* | 7.77%* | ||||
| Dividends Qualifying for the Dividends Received Deduction for Corporations | 4.73%* | 7.60%* | ||||
| Short-Term Capital Gains Dividends for Non-U.S. Residents | 100.00%** | 100.00%** | ||||
| * The fund hereby designates the percentage indicated above or the maximum amount allowable by law. ** Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations. Additionally, the Fund distributed long-term capital gains of $1.209211 per share to shareholders of record on August 20, 2007 and $0.350851 per share to shareholders of record on December 5, 2007. |
| Portfolio Summary BlackRock Master Small Cap Growth Portfolio As of May 31, 2008 |
| Ten Largest Holdings | Percent of | |
| (Equity Investments) | Net Assets | |
| SkillSoft Plc | 4% | |
| SYKES Enterprises, Inc. | 3 | |
| Forrester Research, Inc. | 2 | |
| Wright Medical Group, Inc. | 2 | |
| Zoll Medical Corp. | 2 | |
| IHS, Inc. Class A | 2 | |
| ExlService Holdings, Inc. | 2 | |
| Orient Express Hotels Ltd. Class A | 2 | |
| CKX, Inc. | 2 | |
| Pediatrix Medical Group, Inc. | 2 |
| Five Largest Industries | Percent of | |
| (Equity Investments) | Net Assets | |
| IT Services | 10% | |
| Health Care Equipment & Supplies | 9 | |
| Internet Software & Services | 8 | |
| Software | 7 | |
| Commercial Services & Supplies | 7 |
| Percent of | ||
| Long-Term | ||
| Sector Representation | Investments | |
| Information Technology | 32% | |
| Health Care | 19 | |
| Industrials | 16 | |
| Consumer Discretionary | 12 | |
| Energy | 10 | |
| Financials | 5 | |
| Materials | 3 | |
| Consumer Staples | 3 |
For Portfolio compliance purposes, the Portfolio's industry and sector classifications
refer to any one or more of the industry and sector sub-classifications used by one
or more widely recognized market indexes, and/or as defined by Portfolio manage-
ment. This definition may not apply for purposes of this report, which may combine
industry and sector sub-classifications for reporting ease. These industry classifica-
tions are unaudited.
| BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2008 17 |
| Schedule of Investments May 31, 2008 BlackRock Master Small Cap Growth Portfolio (Percentages shown are based on Net Assets) |
| Common Stocks | Shares | Value | ||
| Aerospace & Defense — 3.8% | ||||
| Argon ST, Inc. (a) | 328,200 | $ 7,922,748 | ||
| BE Aerospace, Inc. (a) | 259,800 | 9,080,010 | ||
| Ladish Co., Inc. (a) | 117,900 | 3,832,929 | ||
| 20,835,687 | ||||
| Biotechnology — 1.3% | ||||
| Martek Biosciences Corp. (a)(b) | 194,700 | 7,351,872 | ||
| Building Products — 0.6% | ||||
| Quanex Building Products Corp. | 190,100 | 3,345,760 | ||
| Capital Markets — 2.9% | ||||
| Affiliated Managers Group, Inc. (a) | 53,500 | 5,483,750 | ||
| Riskmetrics Group, Inc. (a) | 40,300 | 835,419 | ||
| Waddell & Reed Financial, Inc. Class A (b) | 278,600 | 9,851,296 | ||
| 16,170,465 | ||||
| Chemicals — 2.6% | ||||
| Agrium Inc. | 66,500 | 5,813,430 | ||
| Airgas, Inc. | 119,700 | 7,082,649 | ||
| Intrepid Potash, Inc. (a) | 30,200 | 1,484,632 | ||
| 14,380,711 | ||||
| Commercial Banks — 1.7% | ||||
| Signature Bank (a) | 129,900 | 3,707,346 | ||
| UMB Financial Corp. | 105,300 | 5,493,501 | ||
| 9,200,847 | ||||
| Commercial Services & Supplies — 7.1% | ||||
| The Advisory Board Co. (a)(b) | 149,600 | 6,907,032 | ||
| Clean Harbors, Inc. (a) | 137,800 | 9,787,934 | ||
| Diamond Management & Technology Consultants, Inc. | 877,641 | 4,651,497 | ||
| Healthcare Services Group, Inc. | 92,470 | 1,631,171 | ||
| IHS, Inc. Class A (a)(b) | 203,800 | 12,138,328 | ||
| Watson Wyatt Worldwide, Inc. (b) | 68,000 | 3,982,760 | ||
| 39,098,722 | ||||
| Communications Equipment — 2.6% | ||||
| EMS Technologies, Inc. (a) | 258,100 | 7,066,778 | ||
| Foundry Networks, Inc. (a)(b) | 261,400 | 3,555,040 | ||
| Neutral Tandem, Inc. (a) | 138,100 | 2,672,235 | ||
| Occam Networks, Inc. (a)(b) | 295,600 | 1,262,212 | ||
| 14,556,265 | ||||
| Diversified Consumer Services — 0.8% | ||||
| DeVry, Inc. (b) | 81,176 | 4,631,091 | ||
| Diversified Financial Services — 0.2% | ||||
| MSCI, Inc. (a) | 36,300 | 1,290,465 | ||
| Energy Equipment & Services — 5.2% | ||||
| Atwood Oceanics, Inc. (a)(b) | 100,300 | 10,221,573 | ||
| Dawson Geophysical Co. (a) | 66,400 | 4,534,456 | ||
| ION Geophysical Corp. (a) | 263,900 | 4,325,321 | ||
| Oceaneering International, Inc. (a) | 63,300 | 4,517,088 | ||
| Superior Energy Services, Inc. (a) | 93,600 | 5,025,384 | ||
| 28,623,822 | ||||
| Food Products — 1.1% | ||||
| Green Mountain Coffee Roasters, Inc. (a)(b) | 141,400 | 6,102,824 | ||
| Common Stocks | Shares | Value | ||
| Health Care Equipment & Supplies — 8.7% | ||||
| Align Technology, Inc. (a) | 53,236 | $701,118 | ||
| ArthroCare Corp. (a)(b) | 164,100 | 7,238,451 | ||
| Hologic, Inc. (a)(b) | 177,400 | 4,262,922 | ||
| Home Diagnostics, Inc. (a) | 140,800 | 1,117,952 | ||
| SonoSite, Inc. (a) | 259,500 | 7,971,840 | ||
| Wright Medical Group, Inc. (a) | 453,500 | 13,464,415 | ||
| Zoll Medical Corp. (a) | 362,200 | 13,129,750 | ||
| 47,886,448 | ||||
| Health Care Providers & Services — 4.3% | ||||
| Magellan Health Services, Inc. (a) | 190,900 | 7,683,725 | ||
| MedCath Corp. (a) | 248,300 | 5,388,110 | ||
| Pediatrix Medical Group, Inc. (a)(b) | 199,300 | 10,728,319 | ||
| 23,800,154 | ||||
| Hotels, Restaurants & Leisure — 4.2% | ||||
| Ameristar Casinos, Inc. (b) | 222,600 | 3,966,732 | ||
| Orient Express Hotels Ltd. Class A | 238,500 | 11,219,040 | ||
| Scientific Games Corp. Class A (a) | 255,100 | 8,247,383 | ||
| 23,433,155 | ||||
| Household Durables — 0.1% | ||||
| iRobot Corp. (a) | 54,881 | 769,432 | ||
| IT Services — 9.9% | ||||
| ExlService Holdings, Inc. (a)(b) | 567,505 | 11,316,050 | ||
| Forrester Research, Inc. (a) | 454,800 | 13,739,508 | ||
| Gartner, Inc. Class A (a) | 160,700 | 3,501,653 | ||
| SYKES Enterprises, Inc. (a) | 802,300 | 16,615,633 | ||
| Wright Express Corp. (a) | 304,600 | 9,741,108 | ||
| 54,913,952 | ||||
| Internet Software & Services — 7.9% | ||||
| ComScore, Inc. (a) | 275,300 | 6,744,850 | ||
| Greenfield Online, Inc. (a) | 359,728 | 4,582,935 | ||
| Move, Inc. (a) | 790,800 | 2,380,308 | ||
| SkillSoft Plc (a)(c) | 2,035,000 | 19,780,200 | ||
| SonicWALL, Inc. (a) | 1,297,800 | 10,382,400 | ||
| 43,870,693 | ||||
| Leisure Equipment & Products — 0.3% | ||||
| Smith & Wesson Holding Corp. (a)(b) | 256,828 | 1,481,897 | ||
| Life Sciences Tools & Services — 1.5% | ||||
| Bruker BioSciences Corp. (a) | 375,600 | 4,371,984 | ||
| Qiagen NV (a) | 193,623 | 3,855,034 | ||
| 8,227,018 | ||||
| Machinery — 3.8% | ||||
| Bucyrus International, Inc. (b) | 142,200 | 10,064,916 | ||
| Kaydon Corp. (b) | 106,600 | 6,514,326 | ||
| RBC Bearings, Inc. (a) | 121,600 | 4,581,888 | ||
| 21,161,130 | ||||
| Media — 4.3% | ||||
| CKX, Inc. (a) | 1,016,779 | 10,747,354 | ||
| Dolan Media Co. (a) | 372,321 | 6,925,170 | ||
| Outdoor Channel Holdings, Inc. (a) | 326,446 | 2,582,188 | ||
| World Wrestling Entertainment, Inc. | 205,000 | 3,413,250 | ||
| 23,667,962 | ||||
| See Notes to Financial Statements. |
18 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
| Schedule of Investments (concluded) BlackRock Master Small Cap Growth Portfolio (Percentages shown are based on Net Assets) |
| Common Stocks | Shares | Value | ||
| Oil, Gas & Consumable Fuels — 4.6% | ||||
| Comstock Resources, Inc. (a) | 184,400 | $ 10,575,340 | ||
| Delta Petroleum Corp. (a)(b) | 243,100 | 5,355,493 | ||
| Massey Energy Co. | 142,700 | 9,221,274 | ||
| 25,152,107 | ||||
| Personal Products — 1.7% | ||||
| Bare Escentuals, Inc. (a)(b) | 278,600 | 5,588,716 | ||
| Chattem, Inc. (a)(b) | 58,500 | 3,639,285 | ||
| 9,228,001 | ||||
| Pharmaceuticals — 3.0% | ||||
| Alpharma, Inc. Class A (a) | 205,700 | 5,181,583 | ||
| Medicis Pharmaceutical Corp. Class A | 371,700 | 8,839,026 | ||
| Santarus, Inc. (a)(b) | 1,016,600 | 2,470,338 | ||
| 16,490,947 | ||||
| Real Estate Management & Development — 0.1% | ||||
| FX Real Estate and Entertainment, Inc. (a)(b) | 203,355 | 795,119 | ||
| Semiconductors & Semiconductor | ||||
| Equipment — 3.7% | ||||
| Micro International Ltd. (a)(c) | 173,500 | 1,554,560 | ||
| Microsemi Corp. (a)(b) | 280,300 | 7,680,220 | ||
| Semtech Corp. (a) | 160,300 | 2,808,456 | ||
| Standard Microsystems Corp. (a) | 266,400 | 8,684,640 | ||
| 20,727,876 | ||||
| Software — 7.4% | ||||
| ACI Worldwide, Inc. (a) | 61,100 | 1,063,751 | ||
| Aladdin Knowledge Systems Ltd. (a) | 290,100 | 4,830,165 | ||
| Blackboard, Inc. (a) | 182,863 | 6,926,850 | ||
| CommVault Systems, Inc. (a) | 191,600 | 3,354,916 | ||
| DemandTec, Inc. (a)(b) | 389,800 | 3,422,444 | ||
| i2 Technologies, Inc. (a)(b) | 537,700 | 6,452,400 | ||
| Jack Henry & Associates, Inc. | 276,087 | 6,570,871 | ||
| TiVo, Inc. (a)(b) | 1,001,900 | 8,425,979 | ||
| 41,047,376 | ||||
| Textiles, Apparel & Luxury Goods — 1.9% | ||||
| Deckers Outdoor Corp. (a) | 43,700 | 5,974,664 | ||
| The Warnaco Group, Inc. (a) | 95,806 | 4,616,891 | ||
| 10,591,555 | ||||
| Total Common Stocks (Cost — $477,927,820) — 97.3% | 538,833,353 | |||
| Beneficial | ||||
| Interest | ||||
| Short-Term Securities | (000) | Value | ||
| Mutual Fund — 23.8% | ||||
| Merrill Lynch Premier Institutional Fund | ||||
| 2.84% (d)(e)(f) | 131,772 | $131,772,300 | ||
| Par | ||||
| (000) | ||||
| Time Deposit — 2.9% | ||||
| Wells Fargo, 1.46%, 6/02/2008 | $ 15,895 | 15,894,680 | ||
| Total Short-Term Securities | ||||
| (Cost — $147,666,980) — 26.7% | 147,666,980 | |||
| Total Investments (Cost — $625,594,800*) — 123.9% | 686,500,333 | |||
| Liabilities in Excess of Other Assets — (23.9%) | (132,830,766) | |||
| Net Assets — 100.0% | $553,669,567 | |||
| * The cost and unrealized appreciation (depreciation) of investments as of May 31, 2008, as computed for federal income tax purposes, were as follows: |
| Aggregate cost | $ 626,214,010 | |
| Gross unrealized appreciation | $ 100,597,939 | |
| Gross unrealized depreciation | (40,311,616) | |
| Net unrealized appreciation | $ 60,286,323 | |
| (a) Non-income producing security. (b) Security, or a portion of security, is on loan. (c) Depositary receipts. (d) Represents the current yield as of report date. (e) Security was purchased with cash proceeds from securities loans. (f) Investments in companies considered to be an affiliate of the Portfolio, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows: |
| Net | ||||
| Activity | Dividend | |||
| Affiliate | (000) | Income | ||
| BlackRock Liquidity Series, LLC | ||||
| Money Market Series | — | $434,726 | ||
| Merrill Lynch Premier Institutional Fund | $131,772 | $ 8,350 | ||
•For Portfolio compliance purposes,the Portfolio's industry classifications refer to any
one or more of the industry sub-classifications used by one or more widely recognized
market indexes or ratings group indexes, and/or as defined by Portfolio management.
This definition may not apply for purposes of this report, which may combine industry
sub-classifications for reporting ease. Industries are shown as a percent of net assets.
These industry classifications are unaudited.
| See Notes to Financial Statements. |
| BLACKROCK SMALL CAP GROWTH FUND II |
| MAY 31, 2008 |
| 19 |
| Statement of Assets and Liabilities | BlackRock Master Small Cap Growth Portfolio | |
| May 31, 2008 | ||
| Assets | ||
| Investments at value — unaffiliated (including securities loaned of $125,852,944) (cost — $493,822,500) | $ 554,728,033 | |
| Investments, at value — affiliated (cost — $131,772,300) | 131,772,300 | |
| Investments sold receivable | 639,244 | |
| Securities lending receivable | 145,756 | |
| Interest receivable | 1,772 | |
| Prepaid expenses | 4,930 | |
| Total assets | 687,292,035 | |
| Liabilities | ||
| Collateral at value — securities loaned | 131,772,300 | |
| Investments purchased payable | 1,026,866 | |
| Withdrawals payable | 398,704 | |
| Investment advisory fees payable | 311,891 | |
| Officer’s and Directors’ fees payable | 3,561 | |
| Other liabilities | 4,130 | |
| Other affiliates payable | 3,736 | |
| Other accrued expenses | 101,280 | |
| Total liabilities | 133,622,468 | |
| Net Assets | ||
| Net assets | 553,669,567 | |
| Net Assets Consist of | ||
| Investor’s capital | $ 492,764,034 | |
| Net unrealized appreciation/depreciation | 60,905,533 | |
| Net Assets | $ 553,669,567 | |
| See Notes to Financial Statements. |
20 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
| Statement of Operations | BlackRock Master Small Cap Growth Portfolio | |
| Year Ended May 31, 2008 | ||
| Investment Income | ||
| Dividends (net of $2,250 foreign withholding tax) | $ 2,544,214 | |
| Interest | 582,532 | |
| Securities lending | 443,076 | |
| Total income | 3,569,822 | |
| Expenses | ||
| Investment advisory | 3,756,562 | |
| Accounting services | 201,770 | |
| Custodian | 68,189 | |
| Professional | 41,551 | |
| Officer and Directors | 34,148 | |
| Printing | 2,533 | |
| Miscellaneous | 18,340 | |
| Total expenses | 4,123,093 | |
| Net investment loss | (553,271) | |
| Realized and Unrealized Gain (Loss) | ||
| Net realized gain from investments | 30,599,653 | |
| Net change in unrealized appreciation/depreciation on investments | (12,304,369) | |
| Total realized and unrealized gain | 18,295,284 | |
| Net Increase in Net Assets Resulting from Operations | $ 17,742,013 | |
| See Notes to Financial Statements. |
| BLACKROCK SMALL CAP GROWTH FUND II |
| MAY 31, 2008 |
| 21 |
| Statements of Changes in Net Assets | BlackRock Master Small Cap Growth Portfolio | |||||||||
| Year Ended May 31, | ||||||||||
| Increase (Decrease) in Net Assets: | 2008 | 2007 | ||||||||
| Operations | ||||||||||
| Net investment loss | $ (553,271) | $ (2,054,142) | ||||||||
| Net realized gain | 30,599,653 | 90,303,106 | ||||||||
| Net change in unrealized appreciation/depreciation | (12,304,369) | (26,039,471) | ||||||||
| Net increase in net assets resulting from operations | 17,742,013 | 62,209,493 | ||||||||
| Capital Share Transactions | ||||||||||
| Proceeds from contributions | 165,567,157 | 172,023,212 | ||||||||
| Fair value of withdrawals | (168,731,616) | (177,075,127) | ||||||||
| Net decrease in net assets derived from capital share transactions | (3,164,459) | (5,051,915) | ||||||||
| Net Assets | ||||||||||
| Total increase in net assets | 14,577,554 | 57,157,578 | ||||||||
| Beginning of year | 539,092,013 | 481,934,435 | ||||||||
| End of year | $ 553,669,567 | $ 539,092,013 | ||||||||
| Financial Highlights | BlackRock Master Small Cap Growth Portfolio | |||||||||
| Year Ended May 31, | ||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | ||||||
| Total Investment Return | ||||||||||
| Total investment return | 3.35% | 13.00% | 26.39% | 11.76% | 22.37% | |||||
| Ratios to Average Net Assets | ||||||||||
| Total expenses | 0.77% | 0.78% | 0.77% | 0.79% | 0.80% | |||||
| Net investment loss | (0.10%) | (0.42%) | (0.49%) | (0.48%) | (0.55%) | |||||
| Supplemental Data | ||||||||||
| Net assets, end of year (000) | $ 553,670 | $ 539,092 | $ 481,934 | $ 349,223 | $ 300,014 | |||||
| Portfolio turnover | 70% | 115% | 101% | 129% | 149% | |||||
| See Notes to Financial Statements. |
22 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
| Notes to Financial Statements BlackRock Master Small Cap Growth Portfolio |
| 1. Significant Accounting Policies: BlackRock Master Small Cap Growth Portfolio (the “Portfolio”) of BlackRock Master LLC (the “Master LLC”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and is organized as a Delaware limited liability company. The Limited Liability Company Agreement permits the Directors to issue non-transferable interests in the Master LLC, subject to certain limitations. The Portfolio’s financial statements are prepared in conformity with accounting princi- ples generally accepted in the United States of America, which may require the use of management accruals and estimates. Actual results may differ from these estimates. The following is a summary of significant accounting policies followed by the Portfolio: Valuation of Investments: Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid price. Short-term securities are valued at amortized cost. Investments in open-end investment companies are valued at net asset value each business day. In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the market value of such investment, the investment will be valued by a method approved by the Board of Directors (the “Board”) as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the investment advisor and/or sub-advisor seeks to determine the price that the Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value deter- minations shall be based upon all available factors that the investment advisor and/or sub-advisor deems relevant. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof. Investment Transactions and Investment Income: Investment trans- actions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Interest income is recognized on the accrual basis. |
| Securities Lending: The Portfolio may lend securities to financial institu- tions that provide cash or securities issued or guaranteed by the U.S. government as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Portfolio and any additional required collateral is delivered to the Portfolio on the next business day. The Portfolio typically receives the income on the loaned securities but does not receive the income on the collateral. Where the Portfolio receives cash collateral, it may invest such collateral and retain the amount earned on such investment, net of any amount rebated to the borrower. The Portfolio may receive a flat fee for its loans. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions. The Portfolio may pay reasonable lending agent, administra- tive and custodial fees in connection with its loans. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Portfolio could experience delays and costs in gaining access to the collateral. The Portfolio also could suffer a loss where the value of the collateral falls below the mar- ket value of the borrowed securities, in the event of borrower default or in the event of losses on investments made with cash collateral. Income Taxes: The Master LLC is classified as a “pass-through entity” for federal income tax purposes. As such, each investor in the Master LLC is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Master LLC. Therefore, no federal income tax provision is required. It is intended that the Master LLC’s assets will be managed so an investor in the Master LLC can satisfy the requirements of Subchapter M of the Internal Revenue Code. Effective November 30, 2007, the Portfolio implemented Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes the minimum recognition thresh- old a tax position must meet in connection with accounting for uncertain- ties in income tax positions taken or expected to be taken by an entity, including investment companies, before being measured and recognized in the financial statements. The investment advisor has evaluated the application of FIN 48 to the Portfolio and has determined that the adop- |
| BLACKROCK SMALL CAP GROWTH FUND II |
| MAY 31, 2008 |
| 23 |
| Notes to Financial Statements (continued) BlackRock Master Small Cap Growth Portfolio |
| tion of FIN 48 does not have a material impact on the Portfolio’s finan- cial statements. The Portfolio files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Portfolio’s U.S. federal tax returns remains open for the years ended May 31, 2005 through May 31, 2007. The statutes of limitations on the Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Recent Accounting Pronouncements: In September 2006, Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value meas- urements. The impact on the Portfolio’s financial statement disclosures, if any, is currently being assessed. In addition, in February 2007, Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS 159”), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. FAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The impact on the Portfolio’s financial statement disclosures, if any, is cur- rently being assessed. In March 2008, Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133” (“FAS 161”) was issued and is effective for fiscal years beginning after November 15, 2008. FAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of operations and financial position. The impact on the Portfolio’s financial statement disclosures, if any, is currently being assessed. Other: Expenses directly related to the Portfolio are charged to the Portfolio. Other operating expenses shared by several funds are pro-rated among those funds on the basis of relative net assets or other appropri- ate methods. |
| 2. Investment Advisory Agreement and Other Transactions with Affiliates: The Master LLC, on behalf of the Portfolio, has entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the “Advisor”), an indirect, wholly owned subsidiary of BlackRock, Inc., to provide investment advisory and administration services. Merrill Lynch & Co., Inc. (“Merrill Lynch”) and The PNC Financial Services Group, Inc. are principal owners of BlackRock, Inc. The Advisor is responsible for the management of the Portfolio’s invest- ments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Portfolio. For such services, the Portfolio pays the Advisor a monthly fee at an annual rate of 0.70% of the average daily value of the Portfolio’s net assets. For the year ended May 31, 2008, the Portfolio reimbursed the Advisor $9,799 for certain accounting services, which are included in accounting services in the Statement of Operations. The Advisor has entered into a separate sub-advisory agreement with BlackRock Capital Management, Inc., an affiliate of the Advisor, with respect to the Portfolio, under which the Advisor pays the sub-advisor, for services it provides, a monthly fee that is a percentage of the investment advisory fee paid by the Portfolio to the Advisor. The Master LLC has received an exemptive order from the Securities and Exchange Commission (“SEC”) permitting it to lend portfolio securities to Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly owned subsidiary of Merrill Lynch, or its affiliates. As of May 31, 2008, the Master LLC loaned securities with a value of $29,315,281. Pursuant to that order, the Portfolio has retained BlackRock Investment Management, LLC (“BIM”) as the securities lending agent for a fee based on a share of the returns on investment of cash collateral. BIM may, on behalf of the Portfolio, invest cash collateral received by the Portfolio for such loans, among other things, in a private investment company man- aged by the Advisor or in registered money market funds advised by the Advisor or its affiliates. For the year ended May 31, 2008, BIM received $114,580 in securities lending agent fees. Certain officers and/or directors of the Master LLC are officers and/or directors of BlackRock, Inc. or its affiliates. 3. Investments: Purchases and sales of investments, excluding short-term securities for the year ended May 31, 2008 were $372,229,028 and $369,592,005, respectively. |
24 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
| Notes to Financial Statements (concluded) BlackRock Master Small Cap Growth Portfolio |
| 4. Short-Term Borrowings: The Portfolio, along with certain other funds managed by the Advisor and its affiliates, is a party to a $500,000,000 credit agreement with a group of lenders. The Portfolio may borrow under the credit agreement to fund shareholder redemptions and for other lawful purposes other than for leverage. The Portfolio may borrow up to the maximum amount allow- able under the Portfolio’s current prospectus and statement of additional information, subject to various other legal, regulatory or contractual lim- its. On November 21, 2007, the credit agreement was renewed for one |
| year under substantially the same terms. The Portfolio pays a commit- ment fee of 0.06% per annum based on the Portfolio’s pro rata share of the unused portion of the credit agreement, which is included in mis- cellaneous in the Statement of Operations. Amounts borrowed under the credit agreement bear interest at a rate equal to, at each fund’s election, the federal funds rate plus 0.35% or a base rate as defined in the credit agreement. The Portfolio did not borrow under the credit agreement during the year ended May 31, 2008. |
| Report of Independent Registered Public Accounting Firm BlackRock Master Small Cap Growth Portfolio |
| To the Investor and Board of Directors of BlackRock Master LLC: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Master Small Cap Growth Portfolio, one of the portfolios constituting BlackRock Master LLC (formerly BlackRock Master Trust) (the “Master LLC”), as of May 31, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Master LLC’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assur- ance about whether the financial statements and financial highlights are free of material misstatement. The Master LLC is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of |
| expressing an opinion on the effectiveness of the Master LLC’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by manage- ment, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of May 31, 2008, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock Master Small Cap Growth Portfolio of BlackRock Master LLC as of May 31, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. |
| Deloitte & Touche LLP Princeton, New Jersey July 28, 2008 |
| BLACKROCK SMALL CAP GROWTH FUND II |
| MAY 31, 2008 |
| 25 |
| Officers and Directors | ||||||||||
| Number of | ||||||||||
| Position(s) | Length of | BlackRock- | ||||||||
| Held with | Time | Advised Funds | ||||||||
| Name, Address | Fund/ | Served as | and Portfolios | Public | ||||||
| and Year of Birth | Portfolio | a Director2 | Principal Occupation(s) During Past 5 Years | Overseen | Directorships | |||||
| Non-Interested Directors1 | ||||||||||
| David O. Beim | Director | Since | Professor of Finance and Economics at the Columbia University | 35 Funds | None | |||||
| 40 East 52nd Street | 1999 | Graduate School of Business since 1991; Trustee, Phillips Exeter | 81 Portfolios | |||||||
| New York, NY 10022 | Academy since 2002; Formerly Chairman, Wave Hill Inc. (public | |||||||||
| 1940 | garden and cultural center) from 1990 to 2006. | |||||||||
| Ronald W. Forbes | Co-Chairman | Since | Professor Emeritus of Finance, School of Business, State University | 35 Funds | None | |||||
| 40 East 52nd Street | of the Board | 2007 | of New York at Albany since 2000. | 81 Portfolios | ||||||
| New York, NY 10022 | and Director | |||||||||
| 1940 | ||||||||||
| Dr. Matina Horner | Director | Since | Formerly Executive Vice President of Teachers Insurance and Annuity | 35 Funds | NSTAR (electric | |||||
| 40 East 52nd Street | 2007 | Association and College Retirement Equities Fund from 1989 to 2003. | 81 Portfolios | and gas utility) | ||||||
| New York, NY 10022 | ||||||||||
| 1939 | ||||||||||
| Rodney D. Johnson | Co-Chairman | Since | President, Fairmount Capital Advisors, Inc. since 1987; Director, Fox | 35 Funds | None | |||||
| 40 East 52nd Street | of the Board | 2007 | Chase Cancer Center since 2002; Member of the Archdiocesan | 81 Portfolios | ||||||
| New York, NY 10022 | and Director | Investment Committee of the Archdiocese of Philadelphia since 2003; | ||||||||
| 1941 | Director, the Committee of Seventy (civic) since 2006. | |||||||||
| Herbert I. London | Director and | Since | Professor Emeritus, New York University since 2005; John M. Olin | 35 Funds | AIMS Worldwide, | |||||
| 40 East 52nd Street | Member of | 2007 | Professor of Humanities, New York University from 1993 to 2005 | 81 Portfolios | Inc. (marketing) | |||||
| New York, NY 10022 | the Audit | and Professor thereof from 1980 to 2005; President, Hudson Institute | ||||||||
| 1940 | Committee | (policy research organization) since 1997 and Trustee thereof since | ||||||||
| 1980; Chairman of the Board of Trustees for Grantham University since | ||||||||||
| 2006; Director, InnoCentive, Inc. (strategic solutions company) since | ||||||||||
| 2005; Director of Cerego, LLC (software development and design) | ||||||||||
| since 2005. | ||||||||||
| Cynthia A. Montgomery | Director | Since | Professor, Harvard Business School since 1989; Director, Harvard | 35 Funds | Newell Rubbermaid, | |||||
| 40 East 52nd Street | 2007 | Business School Publishing since 2005; Director, McLean Hospital | 81 Portfolios | Inc. (manufacturing) | ||||||
| New York, NY 10022 | since 2005. | |||||||||
| 1952 | ||||||||||
| Joseph P. Platt, Jr. | Director | Since | Director, The West Penn Allegheny Health System (a not-for-profit | 35 Funds | Greenlight Capital | |||||
| 40 East 52nd Street | 2007 | health system) since 2008; Partner, Amarna Corporation, LLC | 81 Portfolios | Re, Ltd (reinsurance | ||||||
| New York, NY 10022 | (private investment company) since 2002; Director, WQED Multimedia | company) | ||||||||
| 1947 | (PBS and Multimedia, a not-for-profit company) since 2002; Director, | |||||||||
| Jones and Brown (Canadian insurance broker) since 1998; General | ||||||||||
| Partner, Thorn Partner, LP (private investment) since 1998. | ||||||||||
| Robert C. Robb, Jr. | Director | Since | Partner, Lewis, Eckert, Robb and Company (management and | 35 Funds | None | |||||
| 40 East 52nd Street | 2007 | financial consulting firm) since 1981. | 81 Portfolios | |||||||
| New York, NY 10022 | ||||||||||
| 1945 | ||||||||||
| Toby Rosenblatt | Director | Since | President, Founders Investments Ltd. (private investments) since | 35 Funds | A Pharma, Inc. | |||||
| 40 East 52nd Street | 2007 | 1999; Director of Forward Management, LLC since 2007; Director, | 81 Portfolios | (specialty | ||||||
| New York, NY 10022 | The James Irvine Foundation (philanthropic foundation) since 1997; | pharmaceuticals) | ||||||||
| 1938 | Formerly Trustee, State Street Research Mutual Funds from 1990 | |||||||||
| to 2005; Formerly, Trustee, Metropolitan Series Funds, Inc. from | ||||||||||
| 2001 to 2005. | ||||||||||
26 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
| Officers and Directors (continued) | ||||||||||
| Number of | ||||||||||
| Position(s) | Length of | BlackRock- | ||||||||
| Held with | Time | Advised Funds | ||||||||
| Name, Address | Fund/ | Served as | and Portfolios | Public | ||||||
| and Year of Birth | Portfolio | a Director2 | Principal Occupation(s) During Past 5 Years | Overseen | Directorships | |||||
| Non-Interested Directors1 (concluded) | ||||||||||
| Kenneth L. Urish | Chairman of | Since | Managing Partner, Urish Popeck & Co., LLC (certified public | 35 Funds | None | |||||
| 40 East 52nd Street | the Audit | 2007 | accountants and consultants) since 1976; Member of External | 81 Portfolios | ||||||
| New York, NY 10022 | Committee | Advisory Board, The Pennsylvania State University Accounting | ||||||||
| 1951 | and Director | Department since 2001; Trustee, The Holy Family Foundation since | ||||||||
| 2001; Committee Member/Professional Ethics Committee of the | ||||||||||
| Pennsylvania Institute of Certified Public Accountants since 2007; | ||||||||||
| President and Trustee, Pittsburgh Catholic Publishing Associates | ||||||||||
| since 2003; Formerly Director, Inter-Tel from 2006 to 2007. | ||||||||||
| Frederick W. Winter | Director and | Since | Professor and Dean Emeritus of the Joseph M. Katz School of | 35 Funds | None | |||||
| 40 East 52nd Street | Member of | 2007 | Business, University of Pittsburgh since 2005 and Dean thereof | 81 Portfolios | ||||||
| New York, NY 10022 | the Audit | from 1997 to 2005. Director, Alkon Corporation (pneumatics) since | ||||||||
| 1945 | Committee | 1992; Director, Indotronix International (IT services) since 2004; | ||||||||
| Director, Tippman Sports (recreation) since 2005. | ||||||||||
| 1 Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. | ||||||||||
| 2 Following the combination of Merrill Lynch Investment Managers, L .P.(“MLIM”) and BlackRock, Inc. (“BlackRock”) in September 2006, the | ||||||||||
| various legacy MLIM and legacy BlackRock Fund boards were realigned and consolidated into three new Fund boards in 2007. As a result, | ||||||||||
| although the chart shows certain directors as joining the Fund’s/Portfolio’s board in 2007, each director first became a member of the | ||||||||||
| board of directors of other legacy MLIM or legacy BlackRock Funds as follows: David O. Beim since 1998; Ronald W. Forbes since 1977; | ||||||||||
| Matina Horner since 2004; Rodney D. Johnson since 1995; Herbert I. London since 1987; Cynthia A. Montgomery since 1994; Joseph P. Platt | ||||||||||
| since 1999; Robert C. Robb, Jr. since 1999; Toby Rosenblatt since 2005; Kenneth L. Urish since 1999 and Frederick W. Winter since 1999. | ||||||||||
| Interested Directors3 | ||||||||||
| Richard S. Davis | Director | Since | Managing Director, BlackRock, Inc. since 2005; Formerly Chief | 185 Funds | None | |||||
| 40 East 52nd Street | 2007 | Executive Officer, State Street Research & Management Company | 295 Portfolios | |||||||
| New York, NY 10022 | from 2000 to 2005; Formerly Chairman of the Board of Trustees, | |||||||||
| 1945 | State Street Research Mutual Funds from 2000 to 2005; Formerly | |||||||||
| Chairman, SSR Realty from 2000 to 2004. | ||||||||||
| Henry Gabbay | Director | Since | Consultant, BlackRock, Inc. since 2007; Formerly Managing Director, | 184 Funds | None | |||||
| 40 East 52nd Street | 2007 | BlackRock, Inc. from 1989 to 2007; Formerly Chief Administrative | 294 Portfolios | |||||||
| New York, NY 10022 | Officer, BlackRock Advisors, LLC from 1998 to 2007; Formerly President | |||||||||
| 1947 | of BlackRock Funds and BlackRock Bond Allocation Target Shares from | |||||||||
| 2005 to 2007 and Treasurer of certain closed-end funds in the | ||||||||||
| BlackRock fund complex from 1989 to 2006. | ||||||||||
3 Messrs. Davis and Gabbay are both “interested persons,” as defined in the Investment Company Act of 1940, of the Fund/Portfolio based on their positions with BlackRock, Inc. and its affiliates. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
| BLACKROCK SMALL CAP GROWTH FUND II |
| MAY 31, 2008 |
| 27 |
| Officers and Directors (concluded) | ||||||||||
| Position(s) | ||||||||||
| Held with | ||||||||||
| Name, Address | Fund/ | Length of | ||||||||
| and Year of Birth | Portfolio | Time Served | Principal Occupation(s) During Past 5 Years | |||||||
| Fund/Portfolio Officers1 | ||||||||||
| Donald C. Burke | Fund | Since | Managing Director of BlackRock, Inc. since 2006; Formerly Managing Director of Merrill Lynch Investment | |||||||
| 40 East 52nd Street | President | 2007 | Managers, L.P. ("MLIM") and Fund Asset Management, L .P.("FAM") in 2006; First Vice President thereof from | |||||||
| New York, NY 10022 | and Chief | 1997 to 2005; Treasurer thereof from 1999 to 2006 and Vice President thereof from 1990 to 1997. | ||||||||
| 1960 | Executive | |||||||||
| Officer | ||||||||||
| Anne F. Ackerley | Vice | Since | Managing Director of BlackRock, Inc. since 2000; Chief Operating Officer of BlackRock’s U.S. Retail Group since | |||||||
| 40 East 52nd Street | President | 2007 | 2006; Head of BlackRock’s Mutual Fund Group from 2000 to 2006; Merrill Lynch & Co., Inc. from 1984 to 1986 | |||||||
| New York, NY 10022 | and from 1988 to 2000, most recently as First Vice President and Operating Officer of the Mergers and | |||||||||
| 1962 | Acquisitions Group. | |||||||||
| Neal J. Andrews | Chief | Since | Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice President and Line of Business Head of | |||||||
| 40 East 52nd Street | Financial | 2007 | Fund Accounting and Administration at PFPC Inc. from 1992 to 2006. | |||||||
| New York, NY 10022 | Officer | |||||||||
| 1966 | ||||||||||
| Jay M. Fife | Treasurer | Since | Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Formerly Assistant Treasurer of the | |||||||
| 40 East 52nd Street | 2007 | MLIM/FAM advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006. | ||||||||
| New York, NY 10022 | ||||||||||
| 1970 | ||||||||||
| Brian P. Kindelan | Chief | Since | Chief Compliance Officer of the BlackRock-advised Funds since 2007; Anti-Money Laundering Officer of the | |||||||
| 40 East 52nd Street | Compliance | 2007 | BlackRock-advised Funds since 2007; Managing Director and Senior Counsel of BlackRock, Inc. since 2005; | |||||||
| New York, NY 10022 | Officer of | Director and Senior Counsel of BlackRock Advisors, Inc. from 2001 to 2004 and Vice President and Senior | ||||||||
| 1959 | the Fund | Counsel thereof from 1998 to 2000; Formerly Senior Counsel of The PNC Bank Corp. from 1995 to 1998. | ||||||||
| Howard Surloff | Secretary | Since | Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at BlackRock, Inc. since 2006; Formerly | |||||||
| 40 East 52nd Street | 2007 | General Counsel (U.S.) of Goldman Sachs Asset Management, L from 1993 to 2006. | ||||||||
| New York, NY 10022 | ||||||||||
| 1965 | ||||||||||
| 1 Officers of the Fund/Portfolio serve at the pleasure of the Board of Directors. | ||||||||||
| Further information about the Fund’s/Portfolio’s Officers and Directors is available in the Fund’s Statement of Additional Information, which can | ||||||||||
| be obtained without charge by calling (800) 441-7762. | ||||||||||
| Custodian | Transfer Agent | Accounting Agent | Independent Registered Public | Legal Counsel | ||||||
| Brown Brothers | PNC Global Investment | State Street Bank and | Accounting Firm | Sidley Austin LLP | ||||||
| Harriman & Co. | Servicing (U.S.) Inc. | Trust Company | Deloitte & Touche LLP | New York, NY 10019 | ||||||
| Boston, MA 02109 | Wilmington, DE 19809 | Princeton, NJ 08540 | Princeton, NJ 08540 | |||||||
28 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
| Additional Information 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 non-public personal information. The following infor- mation 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. BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on appli- cations, forms or other documents; (ii) information about your trans- actions 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 non-affiliated third parties any non- public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated 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 non-public 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 non-public personal information of its Clients, including proce- dures relating to the proper storage and disposal of such information. |
| Availability of Additional Information Electronic copies of most financial reports and prospectuses are available on the Fund’s Web site or 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 Advisors, Banks or Brokerages: Please contact your financial advisor. 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 Web site at http://www.blackrock.com/edelivery 2) Select “eDelivery” under the “More Information” section 3) Log into your account |
| Householding The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and it is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact the Fund at (800) 441-7762. Availability of Proxy Voting Policies and Procedures A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling toll-free (800) 441-7762; (2) at www.blackrock.com; and (3) on the Securities and Exchange Commission’s (the “SEC”) website at http://www.sec.gov. |
| BLACKROCK SMALL CAP GROWTH FUND II |
| MAY 31, 2008 |
| 29 |
| Additional Information (concluded) Availability of Additional Information (concluded) Availability of Proxy Voting Record Information about how the Fund votes proxies relating to securities held in the Fund’s portfolio during the most recent 12-month period ended June 30 is available upon request and without charge (1) at www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov. |
| Availability of Quarterly Portfolio Schedule The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. The Fund’s Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762. |
| Shareholder Privileges Account Information Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST to get infor- mation about your account balances, recent transactions and share prices. You can also reach us on the Web at www.blackrock.com/funds. Automatic Investment Plans Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds. |
| Systematic Withdrawal Plans Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account is at least $10,000. Retirement Plans Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans. |
30 BLACKROCK SMALL CAP GROWTH FUND II
| MAY 31, 2008 |
A World-Class Mutual Fund Family
BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.
| Equity Funds | ||||
| BlackRock All-Cap Global Resources Portfolio | BlackRock Global Opportunities Portfolio | BlackRock Mid-Cap Growth Equity Portfolio | ||
| BlackRock Asset Allocation Portfolio† | BlackRock Global Resources Portfolio | BlackRock Mid-Cap Value Equity Portfolio | ||
| BlackRock Aurora Portfolio | BlackRock Global Science & Technology | BlackRock Mid Cap Value Opportunities Fund | ||
| BlackRock Balanced Capital Fund† | Opportunities Portfolio | BlackRock Natural Resources Trust | ||
| BlackRock Basic Value Fund | BlackRock Global SmallCap Fund | BlackRock Pacific Fund | ||
| BlackRock Capital Appreciation Portfolio | BlackRock Health Sciences Opportunities Portfolio* | BlackRock Small Cap Core Equity Portfolio | ||
| BlackRock Equity Dividend Fund | BlackRock Healthcare Fund | BlackRock Small Cap Growth Equity Portfolio | ||
| BlackRock EuroFund | BlackRock Index Equity Portfolio* | BlackRock Small Cap Growth Fund II | ||
| BlackRock Focus Growth Fund | BlackRock International Fund | BlackRock Small Cap Index Fund | ||
| BlackRock Focus Value Fund | BlackRock International Index Fund | BlackRock Small Cap Value Equity Portfolio* | ||
| BlackRock Fundamental Growth Fund | BlackRock International Opportunities Portfolio | BlackRock Small/Mid-Cap Growth Portfolio | ||
| BlackRock Global Allocation Fund† | BlackRock International Value Fund | BlackRock S&P 500 Index Fund | ||
| BlackRock Global Dynamic Equity Fund | BlackRock Large Cap Core Fund | BlackRock Technology Fund | ||
| BlackRock Global Emerging Markets Fund | BlackRock Large Cap Growth Fund | BlackRock U.S. Opportunities Portfolio | ||
| BlackRock Global Financial Services Fund | BlackRock Large Cap Value Fund | BlackRock Utilities and Telecommunications Fund | ||
| BlackRock Global Growth Fund | BlackRock Latin America Fund | BlackRock Value Opportunities Fund | ||
| Fixed Income Funds | ||||
| BlackRock Commodity Strategies Fund | BlackRock Income Builder Portfolio | BlackRock Managed Income Portfolio | ||
| BlackRock Emerging Market Debt Portfolio | BlackRock Inflation Protected Bond Portfolio | BlackRock Short-Term Bond Fund | ||
| BlackRock Enhanced Income Portfolio | BlackRock Intermediate Bond Portfolio II | BlackRock Strategic Income Portfolio | ||
| BlackRock GNMA Portfolio | BlackRock Intermediate Government | BlackRock Total Return Fund | ||
| BlackRock Government Income Portfolio | Bond Portfolio | BlackRock Total Return Portfolio II | ||
| BlackRock High Income Fund | BlackRock International Bond Portfolio | BlackRock World Income Fund | ||
| BlackRock High Yield Bond Portfolio | BlackRock Long Duration Bond Portfolio | |||
| BlackRock Income Portfolio | BlackRock Low Duration Bond Portfolio | |||
| Municipal Bond Funds | ||||
| BlackRock AMT-Free Municipal Bond Portfolio | BlackRock Intermediate Municipal Fund | BlackRock New York Municipal Bond Fund | ||
| BlackRock California Insured Municipal Bond Fund | BlackRock Kentucky Municipal Bond Portfolio | BlackRock Ohio Municipal Bond Portfolio | ||
| BlackRock Delaware Municipal Bond Portfolio | BlackRock Municipal Insured Fund | BlackRock Pennsylvania Municipal Bond Fund | ||
| BlackRock Florida Municipal Bond Fund | BlackRock National Municipal Fund | BlackRock Short-Term Municipal Fund | ||
| BlackRock High Yield Municipal Fund | BlackRock New Jersey Municipal Bond Fund | |||
| Target Risk & Target Date Funds | ||||
| BlackRock Prepared Portfolios | BlackRock Lifecycle Prepared Portfolios | |||
| Conservative Prepared Portfolio | Prepared Portfolio 2010 | Prepared Portfolio 2030 | ||
| Moderate Prepared Portfolio | Prepared Portfolio 2015 | Prepared Portfolio 2035 | ||
| Growth Prepared Portfolio | Prepared Portfolio 2020 | Prepared Portfolio 2040 | ||
| Aggressive Growth Prepared Portfolio | Prepared Portfolio 2025 | Prepared Portfolio 2045 | ||
| Prepared Portfolio 2050 | ||||
| * See the prospectus for information on specific limitations on investments in the fund. | ||||
| † Mixed asset fund. | ||||
BlackRock mutual funds are distributed by BlackRock Distributors, Inc. and certain funds are also distributed by FAM Distributors, Inc. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund’s prospectus contains this and other information and is available at www.blackrock.com or by calling (800) 882-0052 or from your financial advisor. The prospectus should be read carefully before investing.
| BLACKROCK SMALL CAP GROWTH FUND II |
| MAY 31, 2008 |
| 31 |
| This report is not authorized for use as an offer of sale or a solicita- tion of an offer to buy shares of the Fund unless accompanied or preceded by the Fund’s current prospectus. Past performance results shown in this report should not be considered a representa- tion of future performance. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change. BlackRock Small Cap Growth Fund II Of BlackRock Series, Inc. 100 Bellevue Parkway Wilmington, DE 19809 |
| #SCGII-5/08 |
| Item 2 – Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant's principal executive officer, principal financial officer and principal accounting officer, or persons performing similar functions. During the period covered by this report, there have been no amendments to or waivers granted under the code of ethics. A copy of the code of ethics is available without charge at www.blackrock.com. Item 3 – Audit Committee Financial Expert – The registrant's board of directors or trustees, as applicable (the “board of directors”) has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent: David O. Beim (not reappointed to audit committee, effective November 1, 2007) James T. Flynn (term ended, effective November 1, 2007) W. Carl Kester (term ended, effective November 1, 2007) Karen P. Robards (term ended, effective November 1, 2007) Kenneth L. Urish (term began, effective November 1, 2007) The registrant's board of directors has determined that David O. Beim, W. Carl Kester and Karen P. Robards qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR. Mr. Beim has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. For 25 years, Mr. Beim was an investment banker actively engaged in financial analysis for securities transactions and mergers. These transactions presented a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements. Mr. Beim has also been a professor of finance and economics at the Columbia University Graduate School of Business since 1991. Prof. Kester has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Prof. Kester has been involved in providing valuation and other financial consulting services to corporate clients since 1978. Prof. Kester’s financial consulting services present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements. Ms. Robards has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Ms. Robards has been President of Robards & Company, a financial advisory firm, since 1987. Ms. Robards was formerly an investment banker for more than 10 years where she was responsible for evaluating and assessing the performance of companies based on their financial results. Ms. Robards has over 30 years of experience analyzing financial statements. She also is a member of the audit committee of one publicly held company and a non-profit organization. Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. Item 4 – Principal Accountant Fees and Services |
| (a) Audit Fees | (b) Audit-Related Fees1 | (c) Tax Fees2 | (d) All Other Fees3 | |||||||||||||
| Current | Previous | Current | Previous | Current | Previous | Current | Previous | |||||||||
| Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | |||||||||
| Entity Name | End | End | End | End | End | End | End | End | ||||||||
| BlackRock Small | $6,800 | $6,600 | $0 | $0 | $6,100 | $6,100 | $1,049 | $1,042 | ||||||||
| Cap Growth Fund II | ||||||||||||||||
| BlackRock Master | ||||||||||||||||
| Small Cap Growth | $30,300 | $32,500 | $0 | $0 | $0 | $0 | $0 | $0 | ||||||||
| Portfolio | ||||||||||||||||
| 1 The nature of the services include assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees. 2 The nature of the services include tax compliance, tax advice and tax planning. 3 The nature of the services include a review of compliance procedures and attestation thereto. |
| (e)(1) Audit Committee Pre-Approval Policies and Procedures: The registrant’s audit committee (the “Committee”) has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the registrant’s affiliated service providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are a) consistent with the SEC’s auditor independence rules and b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operation or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 for all of the registrants the Committee oversees. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels. Any proposed services exceeding the pre-approved cost levels will require specific pre- approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to one or more of its members the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels. (e)(2) None of the services described in each of Items 4(b) through (d) were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. |
| (f) Not Applicable (g) Affiliates’ Aggregate Non-Audit Fees: |
| Current Fiscal | Previous Fiscal | |||
| Entity Name | Year End | Year End | ||
| BlackRock Small Cap | $294,649 | $2,986,459 | ||
| Growth Fund II | ||||
| BlackRock Master Small | $287,500 | $2,979,317 | ||
| Cap Growth Portfolio | ||||
| (h) The registrant’s audit committee has considered and determined that the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any non-affiliated sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by the registrant’s investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre- approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. Regulation S-X Rule 2-01(c)(7)(ii) – $287,500, 0% |
| Item 5 – Audit Committee of Listed Registrants – Not Applicable Item 6 – Investments (a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form. (b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing. Item 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable Item 8 – Portfolio Managers of Closed-End Management Investment Companies – Not Applicable Item 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable Item 10 – Submission of Matters to a Vote of Security Holders – The registrant’s Nominating and Governance Committee will consider nominees to the board of directors recommended by shareholders when a vacancy becomes available. Shareholders who wish to recommend a nominee should send nominations which include biographical information and set forth the qualifications of the proposed nominee to the registrant’s Secretary. There have been no material changes to these procedures. Item 11 – Controls and Procedures 11(a) – The registrant’s principal executive and principal financial officers or persons performing similar functions have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended. 11(b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. Item 12 – Exhibits attached hereto 12(a)(1) – Code of Ethics – See Item 2 12(a)(2) – Certifications – Attached hereto 12(a)(3) – Not Applicable 12(b) – Certifications – Attached hereto |
| Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BlackRock Small Cap Growth Fund II of BlackRock Series, Inc. and BlackRock Master Small Cap Growth Portfolio of BlackRock Master LLC By: /s/ Donald C. Burke Donald C. Burke Chief Executive Officer of BlackRock Small Cap Growth Fund II of BlackRock Series, Inc. and BlackRock Master Small Cap Growth Portfolio of BlackRock Master LLC Date: July 18, 2008 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Donald C. Burke Donald C. Burke Chief Executive Officer (principal executive officer) of BlackRock Small Cap Growth Fund II of BlackRock Series, Inc. and BlackRock Master Small Cap Growth Portfolio of BlackRock Master LLC Date: July 18, 2008 By: /s/ Neal J. Andrews Neal J. Andrews Chief Financial Officer (principal financial officer) of BlackRock Small Cap Growth Fund II of BlackRock Series, Inc. and BlackRock Master Small Cap Growth Portfolio of BlackRock Master LLC Date: July 18, 2008 |