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: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., 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: 05/31/07
Date of reporting period: 06/01/06 - 05/31/07
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED INCOME LIQUIDITY
REAL ESTATE
BlackRock Small Cap
Growth Fund II
OF BLACKROCK SERIES, INC.
ANNUAL REPORT MAY 31, 2007
(BLACKROCK logo)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
This report is transmitted to shareholders only. It is not authorized for
use as an offer of sale or a solicitation 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
representation 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.
P.O. Box 9011
Princeton, NJ 08543-9011
(GO PAPERLESS... logo)
It's Fast, Convenient, & Timely!
To sign up today, go to www.blackrock.com/edelivery.
BlackRock Small Cap Growth Fund II
Important Tax Information
BlackRock Small Cap Growth Fund II of BlackRock Series, Inc. distributed
long-term capital gains of $.467448 and $.825416 per share to shareholders
of record on August 15, 2006 and December 4, 2006, respectively.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
A Letter to Shareholders
Dear Shareholder
The 12 months from May 2006 to May 2007 took global equities on an
extraordinary ride. A sharp correction at the start, the first in almost four
years, gave way to strength in the latter half of 2006 and early 2007. This
rally was interrupted by another set-back at the end of February, before
markets resumed their upward march through May 31. Ultimately, the tailwinds
of a generally favorable global economic backdrop, tame inflation, relatively
low interest rates, still positive earnings growth and attractive valuations
prevailed over the headwinds of a weakening U.S. economy, slowing housing
market, escalating geopolitical concerns and high energy prices. In fact, both
the Dow Jones Industrial Average and the Standard & Poor's 500 Index touched
new record highs following the most recent correction.
Mixed economic signals led to volatile behavior in fixed income markets as
well. However, from the beginning of 2007 through May 31, short-term bond
yields generally fell while longer-term yields increased. This resulted in
some re-steepening of the yield curve, which had been flat to inverted
throughout 2006. On a year-over-year basis, yields on 30-year Treasury bonds
fell 20 basis points (.20%) and 10-year yields fell 22 basis points, while
bond prices correspondingly rose. Meanwhile, the Federal Reserve Board (the
Fed) has left the federal funds rate at 5.25% since first pausing in August
2006. While first-quarter gross domestic product growth of 0.6% represented
the slowest rate of expansion since 2002, the Fed reiterated its view that
inflation, not a slowing economy, remains its primary concern. Many observers
interpreted the Fed's reaction to mean that the economy has hit its low and is
bound for renewed strength, therefore reducing the likelihood of an interest
rate cut in the near future.
Against this backdrop, most major market indexes posted positive returns for
the annual and semi-annual reporting periods ended May 31, 2007, with equities
exhibiting particular strength:
Total Returns as of May 31, 2007 6-month 12-month
U.S. equities (Standard & Poor's 500 Index) +10.29% +22.79%
Small cap U.S. equities (Russell 2000 Index) + 8.39 +18.92
International equities (MSCI Europe, Australasia, Far East Index) +14.08 +26.84
Fixed income (Lehman Brothers Aggregate Bond Index) + 0.69 + 6.66
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.30 + 4.84
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index) + 6.02 +12.64
We expect market volatility to linger throughout the remainder of 2007. As
you navigate the uncertainties, we encourage you to review your investment
goals with your financial professional and to make portfolio changes, as
needed. For more insight, we invite you to view "What's Ahead in 2007: An
Investment Perspective" and "Are You Prepared for Volatility?" at
www.blackrock.com/funds. 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.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
Fund/Trust President and Director
THIS PAGE NOT PART OF YOUR FUND REPORT
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
A Discussion With Your Fund's Portfolio Manager
We continued our search for the most attractive growth companies that we
believe can deliver strong returns regardless of the overall market
environment.
How did the Fund perform during the fiscal year in light of the existing
market conditions?
For the 12-month period ended May 31, 2007, BlackRock Small Cap Growth Fund
II's Institutional, Investor A, Investor B, Investor C and Class R Shares had
total returns of +12.50%, +12.23%, +11.29%, +11.31% and +11.88%, respectively.
(Fund results shown do not reflect sales charges and would be lower if sales
charges were included. Complete performance information can be found on pages
6 and 7 of this report to shareholders.) For the same period, the Fund's
benchmark, the Russell 2000 Growth Index, returned +17.56% and its comparable
Lipper category of Small-Cap Growth Funds posted an average return of +15.91%.
(Funds in this Lipper category normally invest in small-capitalization
companies with long-term earnings expected to grow significantly faster than
the earnings of the stocks represented in a major unmanaged stock index.)
Small cap stocks performed very well over the past 12 months, despite enduring
a difficult period in the summer of 2006 when fears of slowing economic
growth, a softening real estate market and rising interest rates combined to
exacerbate investor jitters. This led to a sharp decline from May into August
2006 as investors rotated away from smaller cap names and stocks in emerging
economies. After testing the low point of the year in early August, the small
cap market, as measured by the Russell 2000 Index, rebounded significantly
through the end of 2006 and into 2007. The Federal Reserve Board's (the Fed's)
long-anticipated break from interest rate increases, combined with falling
energy prices and a strengthening consumer, initiated this sustained rally.
Global liquidity and the insatiable appetite for emerging companies by larger
cap companies and private equity investors have helped to sustain this rally
deep into 2007.
Every sector within the Russell 2000 Growth Index generated double-digit
returns for the one-year period ended May 31, 2007. Though it accounts for
less than 4% of the index, the materials sector posted exceptional gains
during the year with the overall allocation within the benchmark rising 35%.
Continued demand for commodities by developing countries combined with a
growing world economy has raised prices, benefiting all of the metal
producers. While the consumer discretionary sector fell sharply with the
market downturn early in the period, stocks in this sector outperformed the
broader market as the U.S. consumer has proved very resilient in the face of
rising energy prices and a weakening housing market. Among the major sectors,
financials turned in the weakest return as the inverted yield curve and
deterioration in the subprime mortgage market presented headwinds for
financial stocks.
Company fundamentals and financial metrics continued to impress throughout the
period. Record profits at U.S. companies combined with historically low
interest rates have resulted in heightened merger-and-acquisition (M&A)
activity during this period. With these deals typically being executed at a
premium to pre-announcement stock prices, the frequent announcements have
provided consistent positive news flow and led investors to bid up stocks in
anticipation. While earnings growth has slowed to the single-digit range in
2007, reasonable valuations, unattractive bond yields and available liquidity
have enabled share prices to continue to climb.
What factors most influenced Fund performance during the fiscal year?
Stock selection in the information technology, consumer discretionary and
industrials sectors accounted for the Fund's underperformance relative to the
Russell 2000 Growth Index during the 12-month period.
While our positions in information technology included several of the
portfolio's top-performing stocks, such as SkillSoft Plc, Blackboard, Inc. and
eFunds Corp., our overall investment in the sector underperformed during the
year. The communications equipment industry featured two of the poorest
performers within technology: Redback Networks Inc. and Occam Networks, Inc.
In the software industry, the Fund's positions in i2 Technologies, Inc. and
Transaction Systems Architects, Inc. were unable to keep up with their peers.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
The Fund's investments in the consumer discretionary sector also detracted
from relative performance. Positions in the media and specialty retail
industries accounted for the majority of the underperformance. Our position in
CKX, Inc., an owner of entertainment media properties, closed lower during the
period as investors waited for a new acquisition to be announced. We
maintained our position and were rewarded shortly after period-end, in June
2007, when the company announced it was being bought out at a substantial
premium. In specialty retail, investments in Golfsmith International Holdings
and Coldwater Creek, Inc. proved detrimental during the year. We eliminated
Golfsmith from the portfolio.
Our health care allocation appreciated 23% and produced excellent relative
performance during the period, somewhat offsetting the negative results in
information technology and consumer discretionary. Many holdings across the
health care equipment & supplies and health care providers & services
industries contributed to the positive results. Align Technology, Inc., a
manufacturer of dental realignment systems, surged higher during the period
after its primary competitor, OrthoClear Inc., agreed to cease operations.
Align Technology reported two very successful quarters after that development
altered the competitive landscape. In addition, Adeza Biomedical Corp. and
Symbion, Inc. added significant value following their acquisitions by larger
companies.
What changes were made to the portfolio during the period?
A new management team assumed responsibility for the portfolio in May 2006.
During the course of this fiscal year, the management team made numerous
trades to align the portfolio with its best current investment ideas.
The most notable changes to sector weightings occurred in the information
technology and industrials sectors. In information technology, we added many
stocks to the portfolio, thereby raising the Fund's absolute and relative
exposure to the sector. We reduced the portfolio's investment in industrials
by removing some of the more cyclical holdings. Other changes included an
increase in health care and a reduction in energy.
How would you characterize the Fund's position at the close of the period?
At May 31, 2007, the Fund had a significant overweight in the information
technology sector, where we have identified a diverse group of what we believe
to be compelling investment opportunities. The largest underweights at period-
end were in industrials, where we do not own any transportation stocks, and
financials, where we simply do not find many stocks with promising long-term
growth prospects.
Now having managed the portfolio for a full year, the management team has
continued the basic fundamental investment process responsible for the Fund's
positive long-term performance record. That is, we employ fundamental bottom-
up research to identify stocks of companies with above-average sustainable
growth. We look to add value through stock selection, and do not rely on
macroeconomic themes in constructing the portfolio. In general, sector
positioning is a function of our bottom-up stock-selection process and is,
therefore, dependent on where we are finding individual opportunities within
the small-cap growth universe. This strategy has proved successful in varying
market environments, and we will continue to search for the most attractive
growth companies that we believe can deliver strong returns regardless of the
overall market environment.
Neil Wagner
Portfolio Manager
June 14, 2007
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Performance Data
About Fund Performance
Effective October 2, 2006, the Fund's Class A, Class B, Class C and Class I
Shares were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively. Class R Shares did not change their designation. As
previously communicated to shareholders, new sales charge schedules came into
effect at the same time for certain of these classes.
The Fund has multiple classes of shares.
* Institutional Shares are not subject to any sales charge. Institutional
Shares bear no ongoing distribution or service fees and are available only to
eligible investors.
* Investor A Shares incur 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 Shares are subject to a maximum contingent deferred sales charge
of 4.50% declining to 0% after the sixth year. 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 Shares are subject to a distribution fee of 0.75% per year and a
service fee of 0.25% per year. In addition, Investor C Shares may be subject
to a 1% contingent deferred sales charge if redeemed within one year of
purchase.
* Class R Shares do 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.
Performance information reflects past performance and does not guarantee
future results. Current performance may be lower or higher than the
performance data quoted. Refer to www.blackrock.com 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 each of the
following tables 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,
distribution and transfer agency fees applicable to each class, which are
deducted from the income available to be paid to shareholders.
Recent Performance Results
6-Month 12-Month Since Inception
As of May 31, 2007 Total Return Total Return Total Return
Institutional Shares* +9.37% +12.50% +95.65%
Investor A Shares* +9.33 +12.23 +92.06
Investor B Shares* +8.79 +11.29 +80.88
Investor C Shares* +8.80 +11.31 +80.76
Class R Shares* +9.15 +11.88 +90.22
Russell 2000r Growth Index** +9.69 +17.56 +40.76
* Investment results shown do not reflect sales charges; results shown would be lower if a sales
charge was included. Cumulative total investment returns are based on changes in the Fund's net
asset values for the periods shown, and assume reinvestment of all dividends and capital gains
at net asset value on the ex-dividend date. The Fund's since inception date is 10/29/99.
** This unmanaged Index measures the performance of those Russell 2000 companies with higher
price-to-book ratios and higher forecasted growth values. Since inception total returns are
from 10/29/99.
Russell 2000 is a registered trademark of the Frank Russell Company.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Performance Data (concluded)
Total Return Based on a $10,000 Investment
A line graph illustrating the growth of a $10,000 investment in Institutional
Shares*++, Investor A Shares*++, Investor B Shares*++, Investor C Shares*++
and Class R Shares*++ compared to a similar investment in Russell 2000 Growth
Index++++. Values illustrated are as follows:
Institutional Shares*++
Date Value
10/29/1999** $10,000.00
May 2000 $13,140.00
May 2001 $11,745.00
May 2002 $10,640.00
May 2003 $10,176.00
May 2004 $12,408.00
May 2005 $13,811.00
May 2006 $17,391.00
May 2007 $19,565.00
Investor A Shares*++
Date Value
10/29/1999** $ 9,475.00
May 2000 $12,431.00
May 2001 $11,082.00
May 2002 $10,015.00
May 2003 $ 9,555.00
May 2004 $11,625.00
May 2005 $12,901.00
May 2006 $16,215.00
May 2007 $18,198.00
Investor B Shares*++
Date Value
10/29/1999** $10,000.00
May 2000 $13,060.00
May 2001 $11,557.00
May 2002 $10,359.00
May 2003 $ 9,809.00
May 2004 $11,543.00
May 2005 $13,031.00
May 2006 $16,253.00
May 2007 $18,088.00
Investor C Shares*++
Date Value
10/29/1999** $10,000.00
May 2000 $13,060.00
May 2001 $11,552.00
May 2002 $10,353.00
May 2003 $ 9,803.00
May 2004 $11,827.00
May 2005 $13,027.00
May 2006 $16,239.00
May 2007 $18,076.00
Class R Shares*++
Date Value
10/29/1999** $10,000.00
May 2000 $13,102.00
May 2001 $11,652.00
May 2002 $10,503.00
May 2003 $10,036.00
May 2004 $12,254.00
May 2005 $13,564.00
May 2006 $17,003.00
May 2007 $19,022.00
Russell 2000 Growth Index++++
Date Value
10/29/1999** $10,000.00
May 2000 $11,660.00
May 2001 $ 9,825.00
May 2002 $ 8,271.00
May 2003 $ 7,477.00
May 2004 $ 9,703.00
May 2005 $10,128.00
May 2006 $11,973.00
May 2007 $14,076.00
* Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
** Commencement of operations.
++ The Fund invests all of its assets in BlackRock Master Small Cap Growth
Portfolio of BlackRock Master Trust. The Portfolio invests primarily in a
diversified portfolio of equity securities of small cap companies located
in the United States that Fund management believes are under-valued or
have good prospects for earnings growth.
++++ This unmanaged Index measures the performance of those Russell 2000
companies with higher price-to-book ratios and higher forecasted growth
values.
Past performance is not indicative of future results.
Average Annual Total Return
Return
Institutional Shares
One Year Ended 5/31/07 +12.50%
Five Years Ended 5/31/07 +12.96
Inception (10/29/99) through 5/31/07 + 9.25
Return Without Return With
Sales Charge Sales Charge*
Investor A Shares
One Year Ended 5/31/07 +12.23% + 6.34%
Five Years Ended 5/31/07 +12.69 +11.48
Inception (10/29/99)
through 5/31/07 + 8.98 + 8.21
Return Return
Without CDSC With CDSC++++++
Investor B Shares++
One Year Ended 5/31/07 +11.29% + 6.79%
Five Years Ended 5/31/07 +11.79 +11.54
Inception (10/29/99)
through 5/31/07 + 8.12 + 8.12
Return Return
Without CDSC With CDSC++++++
Investor C Shares++++
One Year Ended 5/31/07 +11.31% +10.31%
Five Years Ended 5/31/07 +11.79 +11.79
Inception (10/29/99)
through 5/31/07 + 8.11 + 8.11
Return
Class R Shares
One Year Ended 5/31/07 +11.88%
Five Years Ended 5/31/07 +12.61
Inception (10/29/99) through 5/31/07 + 8.84
* Assuming maximum sales charge of 5.25%.
++ Maximum contingent deferred sales charge is 4.50% and is
reduced to 0% after six years.
++++ Maximum contingent deferred sales charge is 1% and is reduced
to 0% after one year.
++++++ Assuming payment of applicable contingent deferred sales charge.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
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, distribution fees
including 12b-1 fees, and other Fund expenses. The following example (which is
based on a hypothetical investment of $1,000 invested on December 1, 2006 and
held through May 31, 2007) 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 first table below 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 in the first line under
the heading entitled "Expenses Paid During the Period."
The second table below 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 second 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.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value December 1, 2006
December 1, May 31, to May 31,
2006 2007 2007
Actual
Institutional $1,000 $ 1,093.70 $ 6.84
Investor A $1,000 $ 1,093.30 $ 8.19
Investor B $1,000 $ 1,087.90 $12.60
Investor C $1,000 $ 1,088.00 $12.55
Class R $1,000 $ 1,091.50 $10.06
Hypothetical (5% annual return before expenses)**
Institutional $1,000 $ 1,018.37 $ 6.59
Investor A $1,000 $ 1,017.07 $ 7.90
Investor B $1,000 $ 1,012.83 $12.14
Investor C $1,000 $ 1,012.88 $12.09
Class R $1,000 $ 1,015.28 $ 9.70
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class
(1.31% for Institutional, 1.57% for Investor A, 2.42% for Investor B, 2.41% for Investor C and
1.93% for Class R), multiplied by the average account value over the period, multiplied by 182/365
(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.
** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the
most recent fiscal half year divided by 365.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Statement of Assets and Liabilities BlackRock Small Cap Growth Fund II
As of May 31, 2007
Assets
Investment in BlackRock Master Small Cap Growth Portfolio (the "Portfolio"),
at value (identified cost--$465,882,111) $ 539,092,013
Prepaid expenses and other assets 29,893
---------------
Total assets 539,121,906
---------------
Liabilities
Payables:
Other affiliates $ 233,320
Distributor 182,989
Administrator 89,741 506,050
---------------
Accrued expenses 39,582
---------------
Total liabilities 545,632
---------------
Net Assets
Net assets $ 538,576,274
===============
Net Assets Consist of
Institutional Shares of Common Stock, $.0001 par value, 100,000,000 shares authorized $ 1,000
Investor A Shares of Common Stock, $.0001 par value, 100,000,000 shares authorized 1,219
Investor B Shares of Common Stock, $.0001 par value, 100,000,000 shares authorized 400
Investor C Shares of Common Stock, $.0001 par value, 100,000,000 shares authorized 667
Class R Shares of Common Stock, $.0001 par value, 100,000,000 shares authorized 138
Paid-in capital in excess of par 408,216,827
Undistributed realized capital gains allocated from the Portfolio--net $ 57,146,121
Unrealized appreciation allocated from the Portfolio--net 73,209,902
---------------
Total accumulated earnings--net 130,356,023
---------------
Net Assets $ 538,576,274
===============
Net Asset Value
Institutional--Based on net assets of $162,580,366 and 9,995,779 shares outstanding $ 16.26
===============
Investor A--Based on net assets of $194,560,778 and 12,193,166 shares outstanding $ 15.96
===============
Investor B--Based on net assets of $60,085,775 and 4,002,130 shares outstanding $ 15.01
===============
Investor C--Based on net assets of $99,937,677 and 6,666,478 shares outstanding $ 14.99
===============
Class R--Based on net assets of $21,411,678 and 1,378,222 shares outstanding $ 15.54
===============
See Notes to Financial Statements.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Statement of Operations BlackRock Small Cap Growth Fund II
For the Year Ended May 31, 2007
Investment Loss
Net investment loss allocated from the Portfolio:
Interest $ 917,735
Dividends 796,589
Securities lending--net 2,637
Expenses (3,771,103)
---------------
Total loss (2,054,142)
---------------
Expenses
Administration fees $ 968,673
Service and distribution fees--Investor C 846,975
Service and distribution fees--Investor B 636,963
Transfer agent fees--Investor A 447,054
Service fees--Investor A 414,474
Transfer agent fees--Institutional 400,361
Transfer agent fees--Investor C 264,261
Transfer agent fees--Investor B 192,391
Printing and shareholder reports 123,609
Service and distribution fees--Class R 81,721
Registration fees 78,661
Transfer agent fees--Class R 55,350
Professional fees 29,931
Other 16,333
---------------
Total expenses 4,556,757
---------------
Investment loss--net (6,610,899)
---------------
Realized & Unrealized Gain (Loss) Allocated from the Portfolio--Net
Realized gain on investments--net 90,303,106
Change in unrealized appreciation on investments--net (26,039,471)
---------------
Total realized and unrealized gain--net 64,263,635
---------------
Net Increase in Net Assets Resulting from Operations $ 57,652,736
===============
See Notes to Financial Statements.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Statements of Changes in Net Assets BlackRock Small Cap Growth Fund II
For the Year Ended May 31,
Increase (Decrease) in Net Assets: 2007 2006
Operations
Investment loss--net $ (6,610,899) $ (5,600,353)
Realized gain--net 90,303,106 61,110,407
Change in unrealized appreciation--net (26,039,471) 31,280,519
--------------- ---------------
Net increase in net assets resulting from operations 57,652,736 86,790,573
--------------- ---------------
Distributions to Shareholders
Realized gain--net
Institutional (12,500,481) --
Investor A (13,721,588) --
Investor B (5,836,461) --
Investor C (7,391,661) --
Class R (1,321,136) --
--------------- ---------------
Net decrease in net assets resulting from distributions to shareholders (40,771,327) --
--------------- ---------------
Capital Share Transactions
Net increase in net assets derived from capital share transactions 40,153,088 45,763,634
--------------- ---------------
Redemption Fees
Redemption fees 4,171 1,532
--------------- ---------------
Net Assets
Total increase in net assets 57,038,668 132,555,739
Beginning of year 481,537,606 348,981,867
--------------- ---------------
End of year $ 538,576,274 $ 481,537,606
=============== ===============
See Notes to Financial Statements.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Financial Highlights BlackRock Small Cap Growth Fund II
The following per share data Institutional Investor A
and ratios have been derived
from information provided in For the Year Ended May 31, For the Year Ended May 31,
the financial statements. 2007 2006 2005 2004 2003 2007 2006 2005 2004 2003
Per Share Operating Performance
Net asset value,
beginning of year $ 15.74 $ 12.50 $ 11.23 $ 9.21 $ 9.63 $ 15.51 $ 12.34 $ 11.12 $ 9.14 $ 9.58
------------------------------------------------- -------------------------------------------------
Investment loss--net* (.14) (.14) (.11) (.11) (.08) (.18) (.17) (.14) (.13) (.10)
Realized and unrealized
gain (loss)--net 1.95** 3.38** 1.38** 2.13 (.34) 1.92** 3.34** 1.36** 2.11 (.34)
------------------------------------------------- -------------------------------------------------
Total from investment
operations 1.81 3.24 1.27 2.02 (.42) 1.74 3.17 1.22 1.98 (.44)
------------------------------------------------- -------------------------------------------------
Less distributions from
realized gain--net (1.29) -- -- -- -- (1.29) -- -- -- --
------------------------------------------------- -------------------------------------------------
Net asset value,
end of year $ 16.26 $ 15.74 $ 12.50 $ 11.23 $ 9.21 $ 15.96 $ 15.51 $ 12.34 $ 11.12 $ 9.14
================================================= =================================================
Total Investment Return++++
Based on net asset
value per share 12.50% 25.92% 11.31% 21.93% (4.36%) 12.23% 25.69% 10.97% 21.66% (4.59%)
================================================= =================================================
Ratios to Average Net Assets++
Expenses 1.28% 1.22% 1.25% 1.23% 1.32% 1.54% 1.47% 1.50% 1.49% 1.57%
================================================= =================================================
Investment loss--net (.93%) (.93%) (.95%) (.99%) (1.03%) (1.18%) (1.18%) (1.20%) (1.24%) (1.28%)
================================================= =================================================
Supplemental Data
Net assets, end of year
(in thousands) $162,580 $167,907 $125,301 $ 96,893 $ 57,886 $194,561 $154,179 $114,558 $ 97,389 $ 70,577
================================================= =================================================
Portfolio turnover
of the Portfolio 114.53% 101.49% 129.38% 148.58% 76.45% 114.53% 101.49% 129.38% 148.58% 76.45%
================================================= =================================================
* Based on average shares outstanding.
** Includes a redemption fee, which is less than $.01 per share.
++ Includes the Fund's share of the Portfolio's allocated expenses and/or investment loss--net.
++++ Total investment returns exclude the effect of any sales charges.
See Notes to Financial Statements.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Financial Highlights (continued) BlackRock Small Cap Growth Fund II
The following per share data Investor B Investor C
and ratios have been derived
from information provided in For the Year Ended May 31, For the Year Ended May 31,
the financial statements. 2007 2006 2005 2004 2003 2007 2006 2005 2004 2003
Per Share Operating Performance
Net asset value,
beginning of year $ 14.78 $ 11.85 $ 10.77 $ 8.92 $ 9.42 $ 14.76 $ 11.84 $ 10.75 $ 8.91 $ 9.41
------------------------------------------------- -------------------------------------------------
Investment loss--net* (.28) (.27) (.23) (.21) (.16) (.28) (.28) (.23) (.21) (.16)
Realized and unrealized
gain (loss)--net 1.80** 3.20** 1.31** 2.06 (.34) 1.80** 3.20** 1.32** 2.05 (.34)
------------------------------------------------- -------------------------------------------------
Total from investment
operations 1.52 2.93 1.08 1.85 (.50) 1.52 2.92 1.09 1.84 (.50)
------------------------------------------------- -------------------------------------------------
Less distributions from
realized gain--net (1.29) -- -- -- -- (1.29) -- -- -- --
------------------------------------------------- -------------------------------------------------
Net asset value,
end of year $ 15.01 $ 14.78 $ 11.85 $ 10.77 $ 8.92 $ 14.99 $ 14.76 $ 11.84 $ 10.75 $ 8.91
================================================= =================================================
Total Investment Return++++
Based on net asset
value per share 11.29% 24.73% 10.03% 20.74% (5.31%) 11.31% 24.66% 10.14% 20.65% (5.31%)
================================================= =================================================
Ratios to Average Net Assets++
Expenses 2.35% 2.25% 2.28% 2.26% 2.35% 2.36% 2.27% 2.30% 2.27% 2.37%
================================================= =================================================
Investment loss--net (1.99%) (1.96%) (1.98%) (2.01%) (2.06%) (2.01%) (1.98%) (1.99%) (2.02%) (2.07%)
================================================= =================================================
Supplemental Data
Net assets, end of year
(in thousands) $ 60,086 $ 72,350 $ 62,827 $ 68,754 $ 60,835 $ 99,938 $ 75,678 $ 43,839 $ 36,478 $ 34,195
================================================= =================================================
Portfolio turnover of
the Portfolio 114.53% 101.49% 129.38% 148.58% 76.45% 114.53% 101.49% 129.38% 148.58% 76.45%
================================================= =================================================
* Based on average shares outstanding.
** Includes a redemption fee, which is less than $.01 per share.
++ Includes the Fund's share of the Portfolio's allocated expenses and/or investment loss--net.
++++ Total investment returns exclude the effect of sales charges.
See Notes to Financial Statements.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Financial Highlights (concluded) BlackRock Small Cap Growth Fund II
Class R
For the Period
Feb. 4, 2003++++++
The following per share data and ratios have been derived For the Year Ended May 31, to May 31,
from information provided in the financial statements. 2007 2006 2005 2004 2003
Per Share Operating Performance
Net asset value, beginning of period $ 15.18 $ 12.11 $ 10.94 $ 8.96 $ 7.54
----------- ----------- ----------- ----------- -----------
Investment loss--net* (.22) (.21) (.17) (.16) (.01)
Realized and unrealized gain--net 1.87** 3.28** 1.34** 2.14 1.43
----------- ----------- ----------- ----------- -----------
Total from investment operations 1.65 3.07 1.17 1.98 1.42
----------- ----------- ----------- ----------- -----------
Less distributions from realized gain--net (1.29) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 15.54 $ 15.18 $ 12.11 $ 10.94 $ 8.96
=========== =========== =========== =========== ===========
Total Investment Return
Based on net asset value per share 11.88% 25.35% 10.69% 22.10% 18.83%+++++
=========== =========== =========== =========== ===========
Ratios to Average Net Assets++
Expenses 1.86% 1.72% 1.76% 1.74% 1.81%+++
=========== =========== =========== =========== ===========
Investment loss--net (1.50%) (1.43%) (1.44%) (1.50%) (1.54%)+++
=========== =========== =========== =========== ===========
Supplemental Data
Net assets, end of period (in thousands) $ 21,412 $ 11,423 $ 2,457 $ 354 --++++
=========== =========== =========== =========== ===========
Portfolio turnover of the Portfolio 114.53% 101.49% 129.38% 148.58% 76.45%
=========== =========== =========== =========== ===========
* Based on average shares outstanding.
** Includes a redemption fee, which is less than $.01 per share.
++ Includes the Fund's share of the Portfolio's allocated expenses and/or investment loss--net.
++++ Amount is less than $1,000.
++++++ Commencement of operations.
+++ Annualized.
+++++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Notes to Financial Statements BlackRock Small Cap Growth Fund II
1. Significant Accounting Policies:
On September 29, 2006, Merrill Lynch Small Cap Growth Fund, a series of
Mercury Funds, Inc., was renamed BlackRock Small Cap Growth Fund II (the
"Fund") of BlackRock Series, Inc. (the "Corporation"). The Fund is registered
under the Investment Company Act of 1940, as amended, as a diversified, open-
end management investment company. The Fund seeks to achieve its investment
objective by investing all of its assets in Merrill Lynch Master Small Cap
Growth Portfolio of Mercury Master Trust, which were renamed on September 29,
2006 to BlackRock Master Small Cap Growth Portfolio (the "Portfolio") and
BlackRock Master Trust (the "Trust"), respectively, which has the same
investment objective and strategies as the Fund. Effective June 15, 2007, the
Trust was converted to a Delaware limited liability company and, in accordance
to the Limited Liability Company Agreement, was renamed BlackRock Master LLC
(the "Master LLC"). Throughout this report the Trust and the Master LLC are
referred to as the Master LLC. 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 U.S. generally accepted accounting
principles, 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, 2007 was 100%. The Fund offers multiple
classes of shares. Effective October 2, 2006, Class I, Class A, Class B and
Class C Shares were redesignated Institutional, Investor A, Investor B and
Investor C Shares, respectively. Class R Shares did not change their
designation. Institutional Shares are sold only to certain eligible investors.
Investor A Shares are sold with a front-end sales charge. Shares of Investor B
and Investor C may be subject to a contingent deferred sales charge. Class R
Shares are sold to certain retirement plans. All classes of shares have
identical voting, dividend, liquidation and other rights and the same terms
and conditions, 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 Shares and Class R also bear certain
expenses related to the distribution of such shares. Each class has exclusive
voting rights with respect to matters relating to its shareholder servicing
and distribution expenditures (except that Investor B shareholders may vote on
certain changes to the Investor A distribution plan).
Income, expenses (other than expenses attributable to a specific class) and
realized and unrealized gains and losses are allocated daily to each class
based on its relative net assets. The following is a summary of significant
accounting policies followed by the Fund.
(a) 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(a) of the Portfolio's Notes to Financial Statements, which are included
elsewhere in this report.
(b) Investment income and expenses--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.
(c) 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.
(d) Prepaid registration fees--Prepaid registration fees are charged to
expense as the related shares are issued.
(e) Dividends and distributions--Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(f) Investment transactions--Investment transactions in the Portfolio are
accounted for on a trade date basis.
(g) Reclassification--U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the
current year, $6,610,899 has been reclassified between undistributed net
realized capital gains allocated from the Portfolio and accumulated net
investment loss as a result of a permanent difference attributable to net
operating losses. This reclassification has no effect on net assets or net
asset values per share.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Notes to Financial Statements (continued) BlackRock Small Cap Growth Fund II
(h) Recent accounting pronouncements--In July 2006, the Financial Accounting
Standards Board released FASB Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes". FIN 48 provides guidance for how uncertain
tax positions should be recognized, measured, presented and disclosed in
financial statements. FIN 48 requires the evaluation of tax positions taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax benefits of positions not deemed to meet the more-likely-than-
not threshold would be booked as a tax expense in the current year and
recognized as: a liability for unrecognized tax benefits; a reduction of an
income tax refund receivable; a reduction of deferred tax asset; an increase
in deferred tax liability; or a combination thereof. Adoption of FIN 48 is
required for the last net asset value calculation in the first required
financial statement reporting period for fiscal years beginning after December
15, 2006. The impact on the Fund's financial statements, if any, is currently
being assessed.
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
measurements. At this time, management is evaluating the implications of FAS
157 and its impact on the Fund's financial statements, if any, has not been
determined.
In addition, in February 2007, FASB issued Statement of Financial Accounting
Standards No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("FAS 159"), which is effective for fiscal years beginning after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also
elecems 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. At this
time, management is evaluating the implications of FAS 159 and its impact on
the Fund's financial statements, if any, has not been determined.
2. Transactions with Affiliates:
On September 29, 2006, BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill
Lynch") combined Merrill Lynch's investment management business, Merrill Lynch
Investment Managers, L.P. ("MLIM"), and its affiliates, including Fund Asset
Management, L.P. ("FAM"), with BlackRock, Inc. to create a new independent
company. Merrill Lynch has a 49.8% economic interest and a 45% voting interest
in the combined company and The PNC Financial Services Group, Inc. ("PNC"),
has approximately a 34% economic and voting interest. The new company operates
under the BlackRock name and is governed by a board of directors with a
majority of independent members.
On August 15, 2006, shareholders of the Fund approved a new Investment
Advisory Agreement for the Master LLC with BlackRock Advisors, Inc., an
indirect, wholly owned subsidiary of BlackRock, Inc., which was reorganized
into a limited liability company and renamed BlackRock Advisors, LLC (the
"Manager"). The new Investment Advisory Agreement between the Master LLC and
the Manager became effective on September 29, 2006. Prior to September 29,
2006, FAM was the Master LLC's manager. The general partner of FAM is an
indirect, wholly owned subsidiary of Merrill Lynch, which is the limited
partner.
The Corporation, on behalf of the Fund, has entered into an Administration
Agreement with BlackRock Advisors, LLC. The Fund pays a monthly fee at an
annual rate of .20% of the Fund's average daily net assets for the performance
of administrative services (other than investment advice and related portfolio
activities) necessary for the operation of the Fund. Prior to September 29,
2006, FAM acted as the Fund's Administrator and was compensated at the same
fee rate. 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 accordance
with Rule 12b-1 under the Investment Company Act of 1940, 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 .25% --
Investor B .25% .75%
Investor C .25% .75%
Class R .25% .25%
Pursuant to sub-agreements with each Distributor, broker-dealers, including
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
compensates the Distributor and each broker-dealer (including MLPF&S) for
providing shareholder services to Investor A, Investor B, Investor C and Class
R shareholders. The ongoing distribution fee compensates each Distributor and
the broker-dealers for providing distribution-related services to Investor B,
Investor C and Class R shareholders.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Notes to Financial Statements (continued) BlackRock Small Cap Growth Fund II
For the year ended May 31, 2007, FAMD, the Fund's sole Distributor until
September 29, 2006, and BDI earned underwriting discounts and direct
commissions and MLPF&S earned dealer concessions on sales of the Fund's
Investor A Shares as follows:
FAMD MLPF&S BDI
Investor A $ 8,698 $ 112,964 $ 223
For the year ended May 31, 2007, MLPF&S received contingent deferred sales
charges of $14,522 and $13,820 relating to transactions in Investor B and
Investor C Shares, respectively. Furthermore, MLPF&S received contingent
deferred sales charges of $291, relating to transactions subject to front-end
sales charge waivers in Investor A Shares. In addition, BDI received contingent
deferred sales charges of $39 relating to transactions in Investor C Shares.
The Manager maintains a call center, which is responsible for providing
certain shareholder services to the Fund, such as responding to shareholder
inquiries and processing transactions based upon instructions from
shareholders with respect to the subscription and redemption of Fund shares.
For the year ended May 31, 2007, the following amounts have been accrued by
the Fund to reimburse BlackRock for costs incurred running the call center,
which are a component of the transfer agent fees in the accompanying Statement
of Operations.
Call Center
Fees
Institutional $1,453
Investor A $1,560
Investor B $1,057
Investor C $ 955
Class R $ 131
PFPC Inc., an indirect, wholly owned subsidiary of PNC and an affiliate of the
Manager, is the Fund's transfer agent. Prior to September 29, 2006, the Fund's
transfer agent was Financial Data Services, Inc. ("FDS"), a wholly owned
subsidiary of Merrill Lynch.
Prior to September 29, 2006, certain officers and/or directors of the
Corporation were officers and/or directors of FAM, FAMD, FDS, MLIM, and/or
Merrill Lynch.
Commencing September 29, 2006, certain officers and/or directors of the
Corporation are officers and/or directors of BlackRock, Inc. or its
affiliates.
3. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$40,153,088 and $45,763,634 for the years ended May 31, 2007 and May 31, 2006,
respectively.
Transactions in capital shares for each class were as follows:
Institutional Shares for the Year Dollar
Ended May 31, 2007 Shares Amount
Shares sold 3,259,102 $ 49,487,906
Shares issued to shareholders in
reinvestment of distributions 806,674 11,932,076
--------------- ---------------
Total issued 4,065,776 61,419,982
Shares redeemed (4,735,348) (72,034,403)
--------------- ---------------
Net decrease (669,572) $ (10,614,421)
=============== ===============
Institutional Shares for the Year Dollar
Ended May 31, 2006 Shares Amount
Shares sold 3,725,837 $ 58,400,821
Shares redeemed (3,086,978) (47,149,022)
--------------- ---------------
Net increase 638,859 $ 11,251,799
=============== ===============
Investor A Shares for the Year Dollar
Ended May 31, 2007 Shares Amount
Shares sold 3,793,806 $ 56,519,174
Automatic conversion of shares 37,655 546,006
Shares issued to shareholders in
reinvestment of distributions 923,836 13,463,838
--------------- ---------------
Total issued 4,755,297 70,529,018
Shares redeemed (2,504,543) (37,550,517)
--------------- ---------------
Net increase 2,250,754 $ 32,978,501
=============== ===============
Investor A Shares for the Year Dollar
Ended May 31, 2006 Shares Amount
Shares sold 2,770,780 $ 41,003,802
Automatic conversion of shares 137,178 2,055,621
--------------- ---------------
Total issued 2,907,958 43,059,423
Shares redeemed (2,248,778) (31,711,566)
--------------- ---------------
Net increase 659,180 $ 11,347,857
=============== ===============
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Notes to Financial Statements (concluded) BlackRock Small Cap Growth Fund II
Investor B Shares for the Year Dollar
Ended May 31, 2007 Shares Amount
Shares sold 1,064,811 $ 14,966,520
Shares issued to shareholders in
reinvestment of distributions 386,611 5,324,597
--------------- ---------------
Total issued 1,451,422 20,291,117
--------------- ---------------
Automatic conversion of shares (39,583) (546,006)
Shares redeemed (2,304,812) (32,464,138)
--------------- ---------------
Total redeemed (2,344,395) (33,010,144)
--------------- ---------------
Net decrease (892,973) $ (12,719,027)
=============== ===============
Investor B Shares for the Year Dollar
Ended May 31, 2006 Shares Amount
Shares sold 1,686,825 $ 24,034,908
--------------- ---------------
Shares redeemed (1,948,383) (27,303,552)
Automatic conversion of shares (143,492) (2,055,621)
--------------- ---------------
Total redeemed (2,091,875) (29,359,173)
--------------- ---------------
Net decrease (405,050) $ (5,324,265)
=============== ===============
Investor C Shares for the Year Dollar
Ended May 31, 2007 Shares Amount
Shares sold 2,493,530 $ 35,064,127
Shares issued to shareholders in
reinvestment of distributions 501,470 6,909,042
--------------- ---------------
Total issued 2,995,000 41,973,169
Shares redeemed (1,455,462) (20,522,034)
--------------- ---------------
Net increase 1,539,538 $ 21,451,135
=============== ===============
Investor C Shares for the Year Dollar
Ended May 31, 2006 Shares Amount
Shares sold 2,444,976 $ 34,720,133
Shares redeemed (1,020,681) (14,337,558)
--------------- ---------------
Net increase 1,424,295 $ 20,382,575
=============== ===============
Class R Shares for the Year Dollar
Ended May 31, 2007 Shares Amount
Shares sold 1,097,305 $ 15,985,485
Shares issued to shareholders in
reinvestment of distributions 92,652 1,319,616
--------------- ---------------
Total issued 1,189,957 17,305,101
Shares redeemed (564,507) (8,248,201)
--------------- ---------------
Net increase 625,450 $ 9,056,900
=============== ===============
Class R Shares for the Year Dollar
Ended May 31, 2006 Shares Amount
Shares sold 784,101 $ 11,588,662
Shares redeemed (234,308) (3,482,994)
--------------- ---------------
Net increase 549,793 $ 8,105,668
=============== ===============
The Fund charges a 2% redemption fee on the proceeds (calculated at market
value) of a redemption (either by sale or exchange) of Fund shares made within
30 days of purchase or exchange. The redemption fee is paid to the Fund and is
intended to offset the trading costs, market impact and other costs associated
with short-term trading into and out of the Fund.
4. Distributions to Shareholders:
The tax character of distributions paid during the year ended May 31, 2007
were as follows:
Distributions paid from:
Net long-term capital gains $ 40,771,327
---------------
Total taxable distributions $ 40,771,327
===============
As of May 31, 2007, the components of accumulated earnings on a tax
basis were as follows:
Undistributed ordinary income--net $ 16,281,094
Undistributed long-term capital gains--net 41,418,457
---------------
Total undistributed earnings--net 57,699,551
Capital loss carryforward --
Unrealized gains--net 72,656,472*
---------------
Total accumulated earnings--net $ 130,356,023
===============
* The difference between book-basis and tax-basis net unrealized
gain is attributable primarily to the tax deferral of losses on
wash sales.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
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, (formerly Merrill Lynch Small Cap Growth
Fund), one of the portfolios constituting BlackRock Series, Inc. ("BlackRock"),
as of May 31, 2007, 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 assurance 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 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
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 management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
BlackRock Small Cap Growth Fund II of BlackRock Series, Inc. as of May 31,
2007, 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 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 20, 2007
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Portfolio Information as of May 31, 2007
BlackRock Master Small Cap Growth Portfolio
Percent of
Ten Largest Holdings Net Assets
SkillSoft Plc 3.3%
BE Aerospace, Inc. 2.3
eFunds Corp. 2.2
Wright Medical Group, Inc. 2.1
SYKES Enterprises, Inc. 2.0
IHS, Inc. Class A 2.0
Pediatrix Medical Group, Inc. 2.0
Transaction Systems Architects, Inc. Class A 2.0
Digene Corp. 1.9
Kyphon, Inc. 1.9
Percent of
Ten Largest Industries Net Assets
IT Services 9.1%
Health Care Equipment & Supplies 9.0
Software 8.4
Commercial Services & Supplies 8.0
Hotels, Restaurants & Leisure 7.5
Internet Software & Services 5.1
Energy Equipment & Services 4.9
Semiconductors & Semiconductor Equipment 4.4
Pharmaceuticals 4.0
Aerospace & Defense 3.5
Percent of
Total
Sector Representation Investments
Information Technology 29.3%
Health Care 18.6
Consumer Discretionary 17.2
Industrials 13.7
Energy 6.6
Financials 5.5
Materials 4.6
Other* 4.5
* Includes portfolio holdings in short-term investments.
For Portfolio compliance purposes, the Portfolio's sector and
industry classifications refer to any one or more of the sector
and 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 sector and industry
sub-classifications for reporting ease. Industry classifications are
shown as a percent of net assets.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Schedule of Investments as of May 31, 2007
BlackRock Master Small Cap Growth Portfolio
Shares
Industry Common Stocks Held Value
Aerospace & Defense--3.5%
BE Aerospace, Inc. (a) 320,200 $ 12,260,458
Ladish Co., Inc. (a) 144,300 6,405,477
-------------
18,665,935
Biotechnology--2.1%
Digene Corp. (a) 232,200 10,332,900
Martek Biosciences Corp. (a) 58,200 1,218,126
-------------
11,551,026
Capital Markets--2.9%
Affiliated Managers Group, Inc. (a) 42,600 5,546,520
Cohen & Steers, Inc. 81,900 4,257,981
Waddell & Reed Financial, Inc. Class A 222,000 5,758,680
-------------
15,563,181
Chemicals--2.3%
Agrium Inc. 141,600 5,470,008
Airgas, Inc. 161,900 6,903,416
-------------
12,373,424
Commercial Banks--1.9%
Signature Bank (a) 150,700 5,010,775
UMB Financial Corp. 131,900 5,092,659
-------------
10,103,434
Commercial Services & Supplies--8.0%
The Advisory Board Co. (a) 128,900 6,711,823
Diamond Management &
Technology Consultants, Inc. 541,091 7,039,594
eTelecare Global Solutions, Inc. (b) 389,690 5,646,608
Healthcare Services Group, Inc. 219,800 6,125,826
IHS, Inc. Class A (a) 273,300 10,983,927
Watson Wyatt Worldwide, Inc. 135,100 6,967,107
-------------
43,474,885
Communications Equipment--2.4%
EMS Technologies, Inc. (a) 220,000 4,472,600
Foundry Networks, Inc. (a) 287,600 4,624,608
Occam Networks, Inc. (a) 298,700 2,930,247
Polycom, Inc. (a) 31,200 989,664
-------------
13,017,119
Diversified Consumer Services--1.5%
Laureate Education, Inc. (a) 138,900 8,321,499
Energy Equipment & Services--4.9%
Atwood Oceanics, Inc. (a) 131,400 8,625,096
Oceaneering International, Inc. (a) 165,100 8,261,604
Superior Energy Services, Inc. (a) 237,200 9,525,952
-------------
26,412,652
Health Care Equipment & Supplies--9.0%
Align Technology, Inc. (a) 262,000 5,970,980
Cutera, Inc. (a) 246,400 6,455,680
Hologic, Inc. (a) 53,500 2,893,815
Home Diagnostics, Inc. (a) 120,400 1,341,256
Kyphon, Inc. (a) 210,600 10,001,394
SonoSite, Inc. (a) 173,300 4,940,783
Tomotherapy, Inc. (a) 22,100 499,018
Wright Medical Group, Inc. (a) 470,100 11,451,636
Zoll Medical Corp. (a) 216,700 4,864,915
-------------
48,419,477
Shares
Industry Common Stocks Held Value
Health Care Providers & Services--3.1%
Animal Health International, Inc. (a) 94,500 $ 1,176,525
MedCath Corp. (a) 136,600 4,507,800
Pediatrix Medical Group, Inc. (a) 188,300 10,849,846
-------------
16,534,171
Hotels, Restaurants & Leisure--7.5%
Orient Express Hotels Ltd. Class A 183,800 9,846,166
Panera Bread Co. Class A (a) 101,200 5,704,644
Pinnacle Entertainment, Inc. (a) 164,700 5,039,820
Red Robin Gourmet Burgers, Inc. (a) 120,300 5,164,479
Scientific Games Corp. Class A (a) 220,500 8,233,470
Vail Resorts, Inc. (a) 105,600 6,330,720
-------------
40,319,299
Household Durables--0.6%
iRobot Corp. (a) 198,100 3,260,726
IT Services--9.1%
eFunds Corp. (a) 348,700 11,789,547
ExlService Holdings, Inc. (a) 413,821 7,775,697
Forrester Research, Inc. (a) 277,200 7,517,664
SYKES Enterprises, Inc. (a) 564,400 10,994,512
VeriFone Holdings, Inc. (a) 35,200 1,218,976
Wright Express Corp. (a) 282,800 9,917,796
-------------
49,214,192
Internet Software & Services--5.1%
SkillSoft Plc (a)(b) 1,928,800 17,687,096
SonicWALL, Inc. (a) 1,185,300 9,790,578
-------------
27,477,674
Leisure Equipment & Products--1.0%
Smith & Wesson Holding Corp. (a) 373,400 5,201,462
Life Sciences Tools & Services--0.6%
Bruker BioSciences Corp. (a) 349,500 2,984,730
Machinery--2.2%
Actuant Corp. Class A 82,000 4,561,660
Bucyrus International, Inc. 105,100 7,456,845
-------------
12,018,505
Media--3.0%
CKX, Inc. (a) 801,079 8,515,470
Outdoor Channel Holdings, Inc. (a) 323,746 3,240,697
World Wrestling Entertainment, Inc. 246,400 4,314,464
-------------
16,070,631
Metals & Mining--2.3%
Century Aluminum Co. (a) 125,000 7,042,500
Quanex Corp. 117,500 5,632,950
-------------
12,675,450
Oil, Gas & Consumable Fuels--1.8%
Comstock Resources, Inc. (a) 147,100 4,465,956
Massey Energy Co. 176,900 5,126,562
-------------
9,592,518
Pharmaceuticals--4.0%
Medicis Pharmaceutical Corp. Class A 275,300 9,084,900
Noven Pharmaceuticals, Inc. (a) 359,500 8,430,275
Santarus, Inc. (a) 666,900 3,921,372
-------------
21,436,547
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Schedule of Investments (concluded)
BlackRock Master Small Cap Growth Portfolio
Shares
Industry Common Stocks Held Value
Real Estate Management &
Development--0.8%
Move, Inc. (a) 969,100 $ 4,070,220
Semiconductors & Semiconductor
Equipment--4.4%
Micrel, Inc. 550,200 6,855,492
Microsemi Corp. (a) 331,900 7,650,295
Standard Microsystems Corp. (a) 294,800 9,144,696
-------------
23,650,483
Software--8.4%
Aladdin Knowledge Systems Ltd. (a) 286,600 6,379,716
Blackboard, Inc. (a) 238,700 9,822,505
Commvault Systems, Inc. (a) 339,300 5,686,668
i2 Technologies, Inc. (a) 492,700 9,243,052
Net 1 UEPS Technologies, Inc. (a) 141,600 3,792,048
Transaction Systems Architects, Inc.
Class A (a) 308,500 10,504,425
-------------
45,428,414
Shares
Industry Common Stocks Held Value
Specialty Retail--2.7%
Coldwater Creek, Inc. (a) 253,150 $ 6,290,777
Dick's Sporting Goods, Inc. (a) 151,000 8,391,070
-------------
14,681,847
Textiles, Apparel & Luxury Goods--1.0%
The Warnaco Group, Inc. (a) 156,900 5,395,791
Total Common Stocks
(Cost--$444,705,390)--96.1% 517,915,292
Face
Short-Term Securities Amount
Time Deposits--4.5%
Brown Brothers Harriman & Co.,
4.62% due 6/01/2007 $24,140,599 24,140,599
Total Short-Term Securities
(Cost--$24,140,599)--4.5% 24,140,599
Total Investments (Cost--$468,845,989*)--100.6% 542,055,891
Liabilities in Excess of Other Assets--(0.6%) (2,963,878)
-------------
Net Assets--100.0% $ 539,092,013
=============
* The cost and unrealized appreciation (depreciation) of investments
as of May 31, 2007, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 469,399,419
================
Gross unrealized appreciation $ 84,460,238
Gross unrealized depreciation (11,803,766)
----------------
Net unrealized appreciation $ 72,656,472
================
(a) Non-income producing security.
(b) Depositary receipts.
o 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, 2007
Statement of Assets and Liabilities BlackRock Master Small Cap Growth Portfolio
As of May 31, 2007
Assets
Investments in unaffiliated securities, at value (identified cost--$468,845,989) $ 542,055,891
Cash 95,139
Receivables:
Contributions $ 1,207,910
Dividends 16,380
Interest 3,098 1,227,388
---------------
Prepaid expenses and other assets 7,035
---------------
Total assets 543,385,453
---------------
Liabilities
Payables:
Securities purchased 2,069,732
Withdrawals 1,761,672
Investment adviser 314,287
Other affiliates 6,148 4,151,839
---------------
Accrued expenses 141,601
---------------
Total liabilities 4,293,440
---------------
Net Assets
Net assets $ 539,092,013
===============
Net Assets Consist of
Investor's capital $ 465,882,111
Unrealized appreciation--net 73,209,902
---------------
Net Assets $ 539,092,013
===============
See Notes to Financial Statements.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Statement of Operations BlackRock Master Small Cap Growth Portfolio
For the Year Ended May 31, 2007
Investment Income
Interest $ 917,735
Dividends 796,589
Securities lending--net 2,637
---------------
Total income 1,716,961
---------------
Expenses
Investment advisory fees $ 3,393,077
Accounting services 200,798
Custodian fees 74,951
Directors' fees and expenses 40,060
Professional fees 39,468
Printing and shareholder reports 3,432
Pricing fees 1,144
Other 18,173
---------------
Total expenses 3,771,103
---------------
Investment loss--net (2,054,142)
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain on investments--net 90,303,106
Change in unrealized appreciation on investments--net (26,039,471)
---------------
Total realized and unrealized gain--net 64,263,635
---------------
Net Increase in Net Assets Resulting from Operations $ 62,209,493
===============
See Notes to Financial Statements.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Statements of Changes in Net Assets BlackRock Master Small Cap Growth Portfolio
For the Year Ended May 31,
Increase (Decrease) in Net Assets: 2007 2006
Operations
Investment loss--net $ (2,054,142) $ (2,028,475)
Realized gain--net 90,303,106 61,110,407
Change in unrealized appreciation--net (26,039,471) 31,280,519
--------------- ---------------
Net increase in net assets resulting from operations 62,209,493 90,362,451
--------------- ---------------
Capital Share Transactions
Proceeds from contributions 172,023,212 169,748,327
Fair value of withdrawals (177,075,127) (127,399,595)
--------------- ---------------
Net increase (decrease) in net assets derived from capital share transactions (5,051,915) 42,348,732
--------------- ---------------
Net Assets
Total increase in net assets 57,157,578 132,711,183
Beginning of year 481,934,435 349,223,252
--------------- ---------------
End of year $ 539,092,013 $ 481,934,435
=============== ===============
See Notes to Financial Statements.
Financial Highlights BlackRock Master Small Cap Growth Portfolio
The following ratios have been derived from For the Year Ended May 31,
information provided in the financial statements. 2007 2006 2005 2004 2003
Total Investment Return
Total investment return 13.00% 26.39% 11.76% 22.37% (3.59%)
=========== =========== =========== =========== ===========
Ratios to Average Net Assets
Expenses .78% .77% .79% .80% .82%
=========== =========== =========== =========== ===========
Investment loss--net (.42%) (.49%) (.48%) (.55%) (.53%)
=========== =========== =========== =========== ===========
Supplemental Data
Net assets, end of year (in thousands) $ 539,092 $ 481,934 $ 349,223 $ 300,014 $ 223,626
=========== =========== =========== =========== ===========
Portfolio turnover 114.53% 101.49% 129.38% 148.58% 76.45%
=========== =========== =========== =========== ===========
See Notes to Financial Statements.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Notes to Financial Statements
BlackRock Master Small Cap Growth Portfolio
1. Significant Accounting Policies:
On September 29, 2006, Merrill Lynch Master Small Cap Growth Portfolio, a
series of Mercury Master Trust, was renamed BlackRock Master Small Cap Growth
Portfolio (the "Portfolio") of BlackRock Master Trust (the "Trust"). The Trust
is registered under the Investment Company Act of 1940, as amended, and is
organized as a Delaware statutory trust. Effective June 15, 2007, the Trust
was converted to a Delaware limited liability company and, in accordance to
the Limited Liability Company Agreement (the "LLC Agreement"), was renamed
BlackRock Master LLC (the "Master LLC"). The Declaration of Trust permits the
Trustees (and after June 15, 2007, the LLC Agreement permits the Directors) to
issue nontransferable interests in the Trust/Master LLC, subject to certain
limitations. Throughout this report the Trust and the Master LLC are referred
to as the Master LLC and the Board of Trustees is referred to as the Board of
Directors. The Portfolio's financial statements are prepared in conformity
with U.S. generally accepted accounting principles, 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.
(a) Valuation of investments--Equity securities held by the Portfolio that are
traded on stock exchanges or the NASDAQ Global Market are valued at the last
sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available
asked price for short positions. In cases where equity securities are traded
on more than one exchange, the securities are valued on the exchange
designated as the primary market by or under the authority of the Board of
Directors of the Master LLC. Long positions traded in the over-the-counter
("OTC") market, NASDAQ Capital Market or Bulletin Board are valued at the last
available bid price or yield equivalent obtained from one or more dealers or
pricing services approved by the Board of Directors of the Master LLC. Short
positions traded in the OTC market are valued at the last available asked
price. Portfolio securities that are traded both in the OTC market and on a
stock exchange are valued according to the broadest and most representative
market.
Options written are valued at the last sale price in the case of exchange-
traded options or, in the case of options traded in the OTC market, the last
asked price. Options purchased are valued at their last sale price in the case
of exchange-traded options or, in the case of options traded in the OTC
market, the last bid price. Swap agreements are valued based upon quoted fair
valuations by the Portfolio from a pricing service or counterparty. Financial
futures contracts and options thereon, which are traded on exchanges, are
valued at their last sale price as of the close of such exchanges. Valuation
of short-term investment vehicles is generally based on the net asset value of
the underlying investment vehicle or amortized cost.
Repurchase agreements are valued at cost plus accrued interest. The Master LLC
employs pricing services to provide certain securities prices for the
Portfolio. Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Master LLC, including valuations
furnished by the pricing services retained by the Master LLC, which may use a
matrix system for valuations. The procedures of a pricing service and its
valuations are reviewed by the officers of the Master LLC under the general
supervision of the Master LLC's Board of Directors. Such valuations and
procedures will be reviewed periodically by the Board of Directors of the
Master LLC.
Generally, trading in foreign securities, as well as U.S. government
securities, money market instruments and certain fixed income securities, is
substantially completed each day at various times prior to the close of
business on the New York Stock Exchange ("NYSE"). The values of such
securities used in computing the net assets of the Portfolio are determined as
of such times. Foreign currency exchange rates will generally be determined as
of the close of business on the NYSE. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times
at which they are determined and the close of business on the NYSE that may
not be reflected in the computation of the Portfolio's net assets. If events
(for example, a company announcement, market volatility or a natural disaster)
occur during such periods that are expected to materially affect the value of
such securities, those securities will be valued at their fair value as
determined in good faith by the Master LLC's Board of Directors or by
BlackRock Advisors, LLC. (the "Manager"), an indirect, wholly owned subsidiary
of BlackRock, Inc., using a pricing service and/or procedures approved by the
Master LLC's Board of Directors.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Notes to Financial Statements (continued)
BlackRock Master Small Cap Growth Portfolio
(b) Derivative financial instruments--The Portfolio may engage in various
portfolio investment strategies both to increase the return of the Portfolio
and to hedge, or protect, its exposure to interest rate movements and
movements in the securities markets. Losses may arise due to changes in the
value of the contract due to an unfavorable change in the price of the
underlying security or index, or if the counterparty does not perform under
the contract. The counterparty for certain instruments may pledge cash or
securities as collateral.
* Financial futures contracts--The Portfolio may purchase or sell financial
futures contracts and options on such financial futures contracts. Financial
futures contracts are contracts for delayed delivery of securities at a
specific future date and at a specific price or yield. Upon entering into a
contract, the Portfolio deposits, and maintains, as collateral, such initial
margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Portfolio agrees to receive from or pay to the
broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin and are
recorded by the Portfolio as unrealized gains or losses. When the contract is
closed, the Portfolio records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed.
* Options--The Portfolio may purchase and write call and put options. When the
Portfolio writes an option, an amount equal to the premium received by the
Portfolio is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked-to-market to reflect the current market
value of the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from (or added
to) the proceeds of the security sold. When an option expires (or the
Portfolio enters into a closing transaction), the Portfolio realizes a gain or
loss on the option to the extent of the premiums received or paid (or a gain
or loss to the extent that the cost of the closing transaction exceeds the
premium paid or received).
Written and purchased options are non-income producing investments.
* Forward foreign exchange contracts--The Portfolio may enter into forward
foreign exchange contracts as a hedge against either specific transactions or
portfolio positions. The contract is marked-to-market daily and the change in
market value is recorded by the Portfolio as an unrealized gain or loss. When
the contract is closed, the Portfolio records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at
the time it was closed.
(c) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized.
Assets and liabilities denominated in foreign currencies are valued at the
exchange rate at the end of the period. Foreign currency transactions are the
result of settling (realized) or valuing (unrealized) assets or liabilities
expressed in foreign currencies into U.S. dollars. Realized and unrealized
gains or losses from investments include the effects of foreign exchange rates
on investments. The Portfolio invests in foreign securities, which may involve
a number of risk factors and special considerations not present with
investments in securities of U.S. corporations.
(d) Income taxes--The Portfolio is considered as a "pass-through" entity for
federal income tax purposes. As such, each investor in the Portfolio is
treated as owner of its proportionate share of the net assets, income,
expenses and realized and unrealized gains and losses of the Portfolio.
Therefore, no federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates. It is intended that the Portfolio's assets
will be managed so an investor in the Portfolio can satisfy the requirements
of Subchapter M of the Internal Revenue Code.
(e) Security transactions and investment income--Security transactions are
accounted for on the date the securities are purchased or sold (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. Dividends from foreign securities where the ex-dividend date may have
passed are subsequently recorded when the Portfolio has determined the ex-
dividend date. Interest income is recognized on the accrual basis.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Notes to Financial Statements (continued)
BlackRock Master Small Cap Growth Portfolio
(f) Securities lending--The Portfolio may lend securities to financial
institutions 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. Where the Portfolio receives
securities as collateral for the loaned securities, it collects a fee from the
borrower. 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. Loans of
securities are terminable at any time and the borrower, after notice, is
required to return borrowed securities within five business days. The
Portfolio may pay reasonable finder's, lending agent, administrative 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 market value of the borrowed
securities, in the event of borrower default or in the event of losses on
investments made with cash collateral.
(g) Recent accounting pronouncements--In July 2006, the Financial Accounting
Standards Board released FASB Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes". FIN 48 provides guidance for how uncertain
tax positions should be recognized, measured, presented and disclosed in
financial statements. FIN 48 requires the evaluation of tax positions taken in
the course of preparing the Master LLC's tax returns to determine whether the
tax positions are "more-likely-than-not" of being sustained by the applicable
tax authority. Tax benefits of positions not deemed to meet the more-likely-
than-not threshold would be booked as a tax expense in the current year and
recognized as: a liability for unrecognized tax benefits; a reduction of an
income tax refund receivable; a reduction of deferred tax asset; an increase
in deferred tax liability; or a combination thereof. Adoption of FIN 48 is
required for the last net asset value calculation in the first required
financial statement reporting period for fiscal years beginning after December
15, 2006. The impact on the Master LLC's financial statements, if any, is
currently being assessed.
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
measurements. At this time, management is evaluating the implications of FAS
157 and its impact on the Portfolio's financial statements, if any, has not
been determined.
In addition, in February 2007, FASB issued Statement of Financial Accounting
Standard No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("FAS 159"), which is effective for fiscal years beginning after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also
elects to apply the provisions of FAS 157. 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. At this time, management is
evaluating the implications of FAS 159 and its impact on the Portfolio's
financial statements, if any, has not been determined.
2. Investment Advisory Agreement and Transactions with Affiliates:
On September 29, 2006, BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill
Lynch") combined Merrill Lynch's investment management business, Merrill Lynch
Investment Managers, L.P. ("MLIM"), and its affiliates, including Fund Asset
Management, L.P. ("FAM"), with BlackRock, Inc. to create a new independent
company. Merrill Lynch has a 49.8% economic interest and a 45% voting interest
in the combined company and The PNC Financial Services Group, Inc., has
approximately a 34% economic and voting interest. The new company operates
under the BlackRock name and is governed by a board of directors with a
majority of independent members.
On August 15, 2006, shareholders of the investor in the Portfolio approved a
new Investment Advisory Agreement with BlackRock Advisors, Inc., which was
reorganized into a limited liability company and renamed BlackRock Advisors,
LLC. The new Investment Advisory Agreement between the Master LLC and the
Manager became effective on September 29, 2006. Prior to September 29, 2006,
FAM was the manager. The general partner of FAM is an indirect, wholly owned
subsidiary of Merrill Lynch, which is the limited partner.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Notes to Financial Statements (concluded)
BlackRock Master Small Cap Growth Portfolio
The Manager is responsible for the management of the Portfolio's investments
and provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Portfolio. For such services, the
Portfolio pays a monthly fee at an annual rate of .70% of the average daily
value of the Portfolio's net assets. The Manager has entered into a Sub-
Advisory Agreement with BlackRock Capital Management, Inc., an affiliate of
the Manager, under which the Manager pays the sub-adviser for services it
provides a monthly fee at an annual rate that is a percentage of the
management fee paid by the Portfolio to the Manager. Prior to September 29,
2006, FAM had a Sub-Advisory Agreement with Merrill Lynch Investment Managers
International Limited ("MLIMIL"), an affiliate of FAM.
The Portfolio has received an exemptive order from the Securities and
Exchange Commission permitting it to lend portfolio securities to Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate of the
Manager, or its affiliates. Pursuant to that order, the Portfolio has
retained BlackRock Investment Management, LLC ("BIM"), an affiliate of the
Manager, as the securities lending agent for a fee based on a share of the
returns on investment of cash collateral. Prior to September 29, 2006, BIM
was organized as Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an
affiliate of FAM, and MLIM, LLC was the securities lending agent. 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 managed by
the Manager or in registered money market funds advised by the Manager or its
affiliates.
For the year ended May 31, 2007, the Portfolio reimbursed FAM and the
Manager $3,203 and $6,148, respectively, for certain accounting services.
In addition, MLPF&S received $16,601 in commissions on the execution of
portfolio security transactions for the Portfolio for the year ended
May 31, 2007.
Prior to September 29, 2006, certain officers and/or directors of the Master
LLC were officers and/or directors of MLIM, FAM, MLIMIL, Merrill Lynch, and/or
MLIM, LLC.
Commencing September 29, 2006, 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, 2007 were $537,989,052 and $546,232,613, respectively.
4. Short-Term Borrowings:
The Master LLC, on behalf of the Portfolio, along with certain other funds
managed by the Manager 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 allowable
under the Portfolio's current prospectus and statement of additional
information, subject to various other legal, regulatory or contractual limits.
On November 22, 2006 the credit agreement was renewed for one year under
substantially the same terms. The Portfolio pays a commitment fee of .06% per
annum based on the Portfolio's pro rata share of the unused portion of the
credit agreement. Amounts borrowed under the credit agreement bear interest at
a rate equal to, at each fund's election, the federal funds rate plus .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, 2007.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Report of Independent Registered Public Accounting Firm
BlackRock Master Small Cap Growth Portfolio
To the Investor and Board of Trustees of
BlackRock Master Trust:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of BlackRock Master Small Cap Growth
Portfolio, (formerly Merrill Lynch Master Small Cap Growth Portfolio) one of
the portfolios constituting BlackRock Master Trust (formerly Mercury Master
Trust) (the "Trust"), as of May 31, 2007, 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
Trust'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 assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Trust 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
Trust'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 management,
as well as evaluating the overall financial statement presentation. Our
procedures included confirmation of securities owned as of May 31, 2007, 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 Trust as of
May 31, 2007, 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 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 20, 2007
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Officers and Directors
Number of
Funds and
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
Interested Director
Robert C. Doll, Jr.* Fund 2005 to Vice Chairman and Director of BlackRock, Inc., 122 Funds None
P.O. Box 9011 President present Global Chief Investment Officer for Equities, 168 Portfolios
Princeton, and Chairman of the BlackRock Retail Operating
NJ 08543-9011 Director Committee, and member of the BlackRock Executive
Age: 52 Committee since 2006; President of the funds
advised by Merrill Lynch Investment Managers, L.P.
("MLIM") and its affiliates ("MLIM/FAM-advised
funds") from 2005 to 2006 and Chief Investment
Officer thereof from 2001 to 2006; President of
MLIM and Fund Asset Management, L.P. ("FAM")
from 2001 to 2006; Co-Head (Americas Region)
thereof from 2000 to 2001 and Senior Vice
President from 1999 to 2001; President and Director
of Princeton Services, Inc. ("Princeton Services")
and President of Princeton Administrators, L.P.
("Princeton Administrators") from 2001 to 2006;
Chief Investment Officer of OppenheimerFunds, Inc.
in 1999 and Executive Vice President thereof from
1991 to 1999.
* Mr. Doll is a director, trustee or member of an advisory board of certain
other investment companies for which BlackRock, LLC and its affiliates act
as investment adviser. Mr. Doll is an "interested person," as defined in the
Investment Company Act, of the Fund based on his positions with BlackRock, Inc.
and its affiliates. Directors/Trustees serve until their resignation, removal or
death, or until December 31 of the year in which they turn 72. As Fund/Trust
President, Mr. Doll serves at the pleasure of the Board of Directors.
Independent Directors*
David O. Beim** Director 1999 to Professor of Finance and Economics at the 17 Funds None
P.O. Box 9095 present Columbia University Graduate School of Business 24 Portfolios
Princeton, since 1991; Chairman of Outward Bound USA
NJ 08543-9095 from 1997 to 2001; Chairman of Wave Hill Inc.,
Age: 66 from 1990 to 2006; Trustee of Phillips Exeter
Academy from 2002 to present.
James T. Flynn Director 1999 to Chief Financial Officer of JP Morgan & Co., Inc. 17 Funds None
P.O. Box 9095 present from 1990 to 1995 and an employee of 24 Portfolios
Princeton, JP Morgan in various capacities from 1967
NJ 08543-9095 to 1995.
Age: 67
W. Carl Kester Director 1999 to Deputy Dean for Academic Affairs, Harvard 17 Funds None
P.O. Box 9095 present Business School since 2006; Mizuho Financial 24 Portfolios
Princeton, Group, Professor of Finance, Harvard Business
NJ 08543-9095 School; Unit Head, Finance in 2005 to 2006;
Age: 55 Senior Associate Dean and Chairman of the MBA
Program of Harvard Business School, 1999 to 2005,
Member of the faculty of Harvard Business School
since 1981. Independent Consultant since 1978.
Karen P. Robards*** Director 1999 to Partner of Robards & Company, LLC., a financial 17 Funds AtriCure, Inc.
P.O. Box 9095 present advisory firm since 1987; formerly an investment 24 Portfolios (medical devices)
Princeton, banker with Morgan Stanley for more than ten
NJ 08543-9095 years; Director of Enable Medical Corp. from 1996
Age: 57 to 2005; Director of AtriCure, Inc., since 2000;
Director of the Cooke Center for Learning and
Development, a not-for-profit organization,
since 1987.
* Directors serve until their resignation, removal or death, or until December 31
of the year in which they turn 72.
** Chairman of the Audit Committee.
*** Chair of the Board of Directors.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
Officers and Directors (concluded)
Position(s) Length of
Held with Time
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years
Fund Officers*
Donald C. Burke Vice 1999 to Managing Director of BlackRock, Inc. since 2006; Managing Director of Merrill
P.O. Box 9011 President present Lynch Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P.
Princeton, and ("FAM") in 2006; First Vice President of MLIM and FAM from 1997 to 2005 and
NJ 08543-9011 Treasurer Treasurer thereof from 1999 to 2006; Vice President of MLIM and FAM from 1990
Age: 46 to 1997.
Karen Clark Fund Chief 2007 to Managing Director of BlackRock, Inc. and Chief Compliance Officer of certain
P.O. Box 9011 Compliance present BlackRock-advised funds since 2007; Director of BlackRock, Inc. from 2005 to
Princeton, Officer 2007; Principal and Senior Compliance Officer, State Street Global Advisors,
NJ 08543-9011 from 2001 to 2005; Principal Consultant, PricewaterhouseCoopers, LLP from 1998
Age: 42 to 2001; and Branch Chief, Division of Investment Management and Office of
Compliance Inspections and Examinations, U.S. Securities and Exchange
Commission, from 1993 to 1998.
Alice A. Pellegrino Secretary 2004 to Director of BlackRock, Inc. since 2006; Director (Legal Advisory) of MLIM from
P.O. Box 9011 present 2002 to 2006; Vice President of MLIM from 1999 to 2002; Attorney associated
Princeton, with MLIM from 1997 to 1999; Secretary of MLIM, FAM, FAM Distributors, Inc.
NJ 08543-9011 and Princeton Services from 2004 to 2006.
Age: 47
* Officers of the Fund serve at the pleasure of the respective Board of Directors.
Further information about the Fund's Officers and Directors is available in
the Fund's Statement of Additional Information, which can be obtained without
charge by calling 1-800-441-7762.
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
Transfer Agent
PFPC Inc.
Wilmington, DE 19809
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
BlackRock Funds
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 information
is provided to help you understand what personal information BlackRock
collects, how we protect that information and why in certain cases we share
such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
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
applications, forms or other documents; (ii) information about your
transactions with us, our affiliates, or others; (iii) information we receive
from a consumer reporting agency; and (iv) from visits to our Web sites.
BlackRock does not sell or disclose to 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 procedures
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 Advisers, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment
advisors, 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
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.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
BlackRock Funds (concluded)
Availability of Additional Information (concluded)
Availability of Proxy Voting Policies and Procedures
The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Trustees.
A description of the policies and procedures that BlackRock and its affiliates
use to determine how to vote proxies relating to portfolio securities is
available without charge, upon request, on our Web site at www.blackrock.com,
by calling (800) 441-7762, or on the Web site of the Securities and Exchange
Commission (the "Commission") at http://www.sec.gov.
Availability of Proxy Voting Record
Information on how proxies relating to the Fund's voting securities
were voted (if any) by BlackRock during the most recent 12-month
period ended June 30 is available, upon request and without charge, on
our Web site at www.blackrock.com, by calling (800) 441-7762 or on the
Web site of the Commission at http://www.sec.gov.
Availability of Quarterly Portfolio Schedule
The Fund files its complete schedules of portfolio holdings for the first and
third quarters of its fiscal year with the Commission on Form N-Q. The Fund's
Forms N-Q are available on the Commission's Web site at http://www.sec.gov
and may be reviewed and copied at the Commission's Public Reference Room in
Washington, D.C. Information regarding the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330. The Fund's Forms N-Q may also
be obtained upon request, without charge, by calling (800) 441-7762.
Shareholder Privileges
Account Information
Call us at (800) 441-7762 8:00 AM - 6:00 PM EST to get information
about your account balances, recent transactions and share prices. You
can also reach us on the Web at www.blackrock.com.
Automatic Investment Plans
Investor Class shareholders who want to invest regularly can arrange
to have $50 or more automatically deducted from their checking or
savings account and invested in any of the BlackRock 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.
BLACKROCK SMALL CAP GROWTH FUND II MAY 31, 2007
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 Aurora Portfolio
BlackRock Asset Allocation Portfolio++
BlackRock Balanced Capital Fund++
BlackRock Basic Value Fund
BlackRock Capital Appreciation Portfolio
BlackRock Developing Capital Markets Fund
BlackRock Equity Dividend Fund
BlackRock EuroFund
BlackRock Focus Twenty Fund
BlackRock Focus Value Fund
BlackRock Fundamental Growth Fund
BlackRock Global Allocation Fund++
BlackRock Global Dynamic Equity Fund
BlackRock Global Financial Services Fund
BlackRock Global Growth Fund
BlackRock Global Opportunities Portfolio
BlackRock Global Resources Portfolio*
BlackRock Global Science & Technology
Opportunities Portfolio
BlackRock Global SmallCap Fund
BlackRock Healthcare Fund
BlackRock Health Sciences Opportunities Portfolio
BlackRock Index Equity Portfolio*
BlackRock International Fund
BlackRock International Index Fund
BlackRock International Opportunities Portfolio*
BlackRock International Value Fund
BlackRock Investment Trust
BlackRock Large Cap Core Fund
BlackRock Large Cap Growth Fund
BlackRock Large Cap Value Fund
BlackRock Latin America Fund
BlackRock Mid-Cap Growth Equity Portfolio
BlackRock Mid-Cap Value Equity Portfolio
BlackRock Mid Cap Value Opportunities Fund
BlackRock Natural Resources Trust
BlackRock Pacific Fund
BlackRock Small Cap Core Equity Portfolio
BlackRock Small Cap Growth Equity Portfolio
BlackRock Small Cap Growth Fund II
BlackRock Small Cap Index Fund
BlackRock Small Cap Value Equity Portfolio*
BlackRock Small/Mid-Cap Growth Portfolio
BlackRock S&P 500 Index Fund
BlackRock Technology Fund
BlackRock U.S. Opportunities Portfolio
BlackRock Utilities and Telecommunications Fund
BlackRock Value Opportunities Fund
Fixed Income Funds
BlackRock Bond Fund
BlackRock Commodity Strategies Fund
BlackRock Enhanced Income Portfolio
BlackRock GNMA Portfolio
BlackRock Government Income Portfolio
BlackRock High Income Fund
BlackRock High Yield Bond Portfolio
BlackRock Inflation Protected Bond Portfolio
BlackRock Intermediate Bond Portfolio II
BlackRock Intermediate Government
Bond Portfolio
BlackRock International Bond Portfolio
BlackRock Low Duration Bond Portfolio
BlackRock Managed Income Portfolio
BlackRock Short-Term Bond Fund
BlackRock Total Return Portfolio
BlackRock Total Return Portfolio II
BlackRock World Income Fund
Municipal Bond Funds
BlackRock AMT-Free Municipal Bond Portfolio
BlackRock California Insured Municipal Bond Fund
BlackRock Delaware Municipal Bond Portfolio
BlackRock Florida Municipal Bond Fund
BlackRock High Yield Municipal Fund
BlackRock Intermediate Municipal Fund
BlackRock Kentucky Municipal Bond Portfolio
BlackRock Municipal Insured Fund
BlackRock National Municipal Fund
BlackRock New Jersey Municipal Bond Fund
BlackRock New York Municipal Bond Fund
BlackRock Ohio Municipal Bond Portfolio
BlackRock Pennsylvania Municipal Bond Fund
BlackRock Short-Term Municipal Fund
Target Risk & Target Date Funds
BlackRock Prepared Portfolios
Conservative Prepared Portfolio
Moderate Prepared Portfolio
Growth Prepared Portfolio
Aggressive Growth Prepared Portfolio
BlackRock Lifecycle Prepared Portfolios
Prepared Portfolio 2010
Prepared Portfolio 2015
Prepared Portfolio 2020
Prepared Portfolio 2025
Prepared Portfolio 2030
Prepared Portfolio 2035
Prepared Portfolio 2040
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, 2007
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of
the end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial
officer and principal accounting officer, or persons performing
similar functions. 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 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: (1)
David O. Beim, (2) W. Carl Kester, (3) James T. Flynn and (4)
Karen P. Robards.
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 for the past 13 years.
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 the member of the Audit
Committees of one publicly held company and a non-profit
organization.
Item 4 - Principal Accountant Fees and Services
BlackRock Small Cap Growth Fund II
(a) Audit Fees - Fiscal Year Ended May 31, 2007 - $6,600
Fiscal Year Ended May 31, 2006 - $6,600
(b) Audit-Related Fees - Fiscal Year Ended May 31, 2007 - $0
Fiscal Year Ended May 31, 2006 - $0
(c) Tax Fees - Fiscal Year Ended May 31, 2007 - $6,100
Fiscal Year Ended May 31, 2006 - $6,000
The nature of the services include tax compliance, tax advice and
tax planning.
(d) All Other Fees - Fiscal Year Ended May 31, 2007 - $0
Fiscal Year Ended May 31, 2006 - $0
BlackRock Master Small Cap Growth Portfolio
(a) Audit Fees - Fiscal Year Ended May 31, 2007 - $32,500
Fiscal Year Ended May 31, 2006 - $32,500
(b) Audit-Related Fees - Fiscal Year Ended May 31, 2007 - $0
Fiscal Year Ended May 31, 2006 - $0
(c) Tax Fees - Fiscal Year Ended May 31, 2007 - $0
Fiscal Year Ended May 31, 2006 - $0
The nature of the services include tax compliance, tax advice and
tax planning.
(d) All Other Fees - Fiscal Year Ended May 31, 2007 - $0
Fiscal Year Ended May 31, 2006 - $0
(e)(1) 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"). However, such services will only be
deemed pre-approved provided that any individual project does not
exceed $5,000 attributable to the registrant or $50,000 for all of
the registrants the Committee oversees. 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.
(e)(2) 0%
(f) Not Applicable
(g) BlackRock Small Cap Growth Fund II
Fiscal Year Ended May 31, 2007 - $2,985,417
Fiscal Year Ended May 31, 2006 - $3,130,717
BlackRock Master Small Cap Growth Portfolio
Fiscal Year Ended May 31, 2007 - $2,979,317
Fiscal Year Ended May 31, 2006 - $3,124,717
(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 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) - $1,739,500, 0%
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - The registrant's Schedule of Investments
is included as part of the Report to Stockholders filed under Item 1
of this form.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
Not Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - The
registrant's Nominating Committee will consider nominees to the
Board 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 and 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
(17 CFR 270.30a-3(d)) 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/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
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 24, 2007
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/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
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 24, 2007
By: /s/ Donald C. Burke
-------------------
Donald C. Burke,
Chief 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 24, 2007