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 811-10053
811-10089
Name of Fund: BlackRock Short-Term Bond Fund of
BlackRock Short-Term Bond Series, Inc.
Short-Term Bond Master Portfolio of Short-Term Bond 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 Short-Term Bond Fund of BlackRock Short-Term Bond
Series, Inc. and Short-Term Bond Master Portfolio of Short-Term Bond
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: 06/30/07
Date of reporting period: 07/01/06 - 06/30/07
Item 1 - Report to Stockholders
EQUITIES FIXED INCOME REAL ESTATE
LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
BlackRock Short-Term BLACKROCK
Bond Fund
OF BLACKROCK SHORT-TERM BOND SERIES, INC.
ANNUAL REPORT | JUNE 30, 2007
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BlackRock Short-Term Bond Fund
Important Tax Information
Of the ordinary income distributions paid by BlackRock Short-Term Bond Fund
during the year ended June 30, 2007, 2.92% was attributable to federal
obligations. In calculating the foregoing percentage, Fund expenses have been
allocated on a pro rata basis.
The law varies in each state as to whether and what percentage of dividend
income attributable to federal obligations is exempt from state income tax. We
recommend that you consult your tax adviser to determine if any portion of the
dividends you received is exempt from state income taxes.
The following information is provided with respect to the ordinary income
distributions paid monthly by BlackRock Short-Term Bond Fund for the fiscal year
ended June 30, 2007:
- --------------------------------------------------------------------------------
Interest-Related Dividends for Non-U.S. Residents
- --------------------------------------------------------------------------------
Month Paid: July 2006 ......................................... 92.20%*
August 2006 - December 2006 ....................... 95.66%*
January 2007 - June 2007 .......................... 92.79%*
- --------------------------------------------------------------------------------
* Represents the portion of the taxable ordinary income dividends eligible
for exemption from U.S. withholding tax for nonresident aliens and foreign
corporations.
Change in Portfolio's Independent Registered Public Accounting Firm
On August 28, 2006, Ernst & Young llp ("E&Y") resigned as the Independent
Registered Public Accounting Firm of BlackRock Short-Term Bond Fund (the
"Fund").
E&Y's report on the financial statements of the Fund for the past two fiscal
years did not contain an adverse opinion or a disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
In connection with its audits for the two most recent fiscal years through
August 28, 2006 (1) there were no disagreements with E&Y on any matter of
accounting principle or practice, financial statement disclosure or auditing
scope or procedure, whereby such disagreements, if not resolved to the
satisfaction of E&Y, would have caused them to make reference to the subject
matter of the disagreements in connection with their report on the financial
statements for such years; and (2) there have been no reportable events (as
defined in Item 304(a)(1)(v) of Regulation S-K).
The Audit Committee of the Fund's Board of Directors approved the engagement of
Deloitte & Touche llp as the Fund's Independent Registered Public Accounting
Firm for the fiscal year ending June 30, 2007.
2 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
A Letter to Shareholders
Dear Shareholder
At the mid-point of 2007, investor sentiment appeared quite buoyant,
notwithstanding some undertones of caution. For equity markets, positive
momentum as the year began was interrupted by a notable but transitory set-back
at the end of February. Markets resumed their ascent through May, but entered a
trading range in June as investors began to question the sustainability of the
rally. For the most part, equities found support in robust
merger-and-acquisition activity, healthy global economies, tame inflation,
relatively low interest rates, still-positive earnings growth and attractive
valuations. These tailwinds prevailed over such headwinds as a weakening U.S.
economy, slowing housing market, credit-related lending problems, escalating
geopolitical concerns and high energy prices, leading the Standard & Poor's
(S&P) 500 Index to a new record high in May.
Meanwhile, turmoil in the subprime mortgage market and generally mixed economic
signals weighed on bonds. In June, bond prices dropped precipitously as
long-term yields rose to their highest levels in five years. The 10-year
Treasury yield, which began 2007 at 4.68%, reached nearly 5.30% in mid-June
before retracing to 5.03% by month's end. Notably, this year has brought some
re-steepening of the yield curve, which had been flat to inverted throughout
2006. Still, at the end of June, yields along the curve remained below the
federal funds rate of 5.25%, the level at which the Federal Reserve Board (the
Fed) has left it since first pausing in August 2006. While first-quarter gross
domestic product growth of 0.7% represented the slowest rate of expansion since
2002, the Fed reiterated 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, thereby reducing the
likelihood of an interest rate cut in the near future.
Against this backdrop, the major equity market indexes posted strong returns for
the annual and semi-annual periods ended June 30, 2007, while fixed income
assets were more mixed:
Total Returns as of June 30, 2007 6-month 12-month
==============================================================================================================
U.S. equities (S&P 500 Index) + 6.96% +20.59%
- --------------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) + 6.45 +16.43
- --------------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) +10.74 +27.00
- --------------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers U.S. Aggregate Bond Index) + 0.98 + 6.12
- --------------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.14 + 4.69
- --------------------------------------------------------------------------------------------------------------
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index) + 2.96 +11.22
- --------------------------------------------------------------------------------------------------------------
We expect market volatility to linger throughout the second half 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 market insight, we invite you to view "What's Ahead in 2007: The
Second-Quarter Update" 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,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
Fund President and Director
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 3
A Discussion With Your Fund's Portfolio Managers
We maintained our focus on mortgage-related securities and believe the
Fund is positioned to perform well upon a return to strength in that market.
How did the Fund perform during the fiscal year in light of the existing market
conditions?
For the 12-month period ended June 30, 2007, BlackRock Short Term Bond Fund's
Institutional, Investor A, Investor B, Investor C, Investor C1 and Class R
Shares had total returns of +4.59%, +4.20%, +3.61%, +3.39%, +3.62% and +3.91%,
respectively. For the same period, the Fund's unmanaged benchmark, the Merrill
Lynch 1 - 3 Year Corporate and Government Index, returned +5.32%. (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 - 8 of this
report to shareholders.)
Amid ample volatility, bond yields generally moved lower over the past 12 months
as their prices, which move opposite of yields, increased. As the 12-month
period began, bond prices were improving (and yields falling) against a backdrop
of weakening economic growth. The bond price improvement accelerated in response
to the Federal Reserve Board's (the Fed) decision in August 2006 to keep its
target interest rate on hold at 5.25% after 17 consecutive interest rate hikes
since mid-2004. The rally continued in the fall as oil prices moderated and
gross domestic product growth slowed. By the end of December 2006, 10-year U.S.
Treasury bond yields had fallen to 4.71%, a decline of 44 basis points (.44%)
from June 30.
The latter six months of the period were more challenging for fixed income
markets in general. Strong U.S. equity markets, continued moderate employment
growth, higher bond yields overseas and growing investor conviction that the Fed
would keep interest rates steady for the remainder of 2007 combined to push bond
prices lower, erasing much of the market's earlier gains. The 10-year Treasury
yield increased more than 30 basis points during the first six months of 2007,
as bond prices correspondingly fell. June was particularly volatile, with the
10-year Treasury yield reaching 5.30%, its highest level in more than five
years, before retracing to 5.03% by period-end.
During this time, a crisis in the subprime mortgage market rekindled fears of a
housing-induced slowdown in the United States and led to increased financial
market volatility and expanded risk premiums. With the jump in volatility came a
decline in investor risk appetite. Although the subprime fears had eased
somewhat by second quarter 2007, credit spreads had widened from their
historically tight levels. Mortgage securities, even the high-quality,
securitized product in which we invest, were among the most punished.
At the end of June 2007, 30-year Treasury bond yields stood at 5.12%, a decline
of 7 basis points year-over-year, while 10-year Treasury yields fell 12 basis
points to 5.03% during the same period. Shorter-term securities outperformed
longer-dated bonds on a year-over-year basis, with two-year Treasury yields
falling nearly 30 basis points to 4.87%. The market's movement over the course
of the 12 months resulted in some renormalization (that is, resteepening) of the
yield curve, which had been flat to inverted for much of 2006.
What factors most influenced Fund performance?
The Fund's underperformance of the benchmark for the 12-month period is
attributed to a few factors. The first was our duration positioning. While we
adjusted the Fund's duration (a measure of interest rate sensitivity) throughout
the period based on our assessment of interest rate direction, the volatile
nature of the market meant that at times we found ourselves with inopportune
duration biases.
Also detracting from performance relative to the benchmark was an opportunistic
position we had established in the Japanese yen. Given the yen's decline versus
the U.S. dollar during the period, this currency position failed to perform as
anticipated. Finally, in recent months, the aforementioned widening in credit
spreads was most evident in higher-quality assets, such as mortgage securities,
and our exposure to this asset class detracted from performance. The spread
widening later crept into the credit markets (that is, investment-grade and
non-investment-grade corporate bonds), causing our exposures there to detract
marginally from performance in the final month of the period as well. Prior to
this, spreads had remained at historically tight levels and the Fund benefited
from its ample positions in adjustable-rate mortgages (ARMs) and commercial
mortgage-backed securities (CMBS). We would expect a return to strength among
mortgage securities once the market reaffirms their value as a high-quality
asset with the potential to offer yields beyond those available in the Treasury
market alone.
4 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
On the positive side of the ledger, Fund performance benefited from some
investments we had made based on our expectation for a resteepening yield curve.
In addition, we had reduced exposure to the subprime segment of the mortgage
market dramatically in the fall of 2006, and this proved quite advantageous as
that market collapsed in early 2007.
What changes were made to the portfolio during the period?
Upon assuming management of the Fund in October, we established a short duration
bias in the portfolio. We have since moved to a neutral to slightly long
duration relative to our benchmark, reflecting our expectation for a more
range-bound interest rate environment, but also our relatively balanced
assessment of the market. Essentially, we believe that rising financing costs
could lead to problems in the credit market, which saw aggressive leveraged
buyout and recapitalization activity when interest rates were low. There are
fears that a deterioration in the credit market could impact the macro-economic
statistics. At the same time, the global economy remains strong, inflation is
trending slowly downward, manufacturing activity is picking up thanks to the
solid global growth, and corporate earnings are positive. All of this points
toward a rebound in the U.S. economy in the second half of the year. So, we have
these countertrends in the fixed income market, where there is a deleveraging
effect that could ultimately bleed into the economy and, at the same time, there
is strong global growth. We do not want to be short duration in an environment
where credit could underperform, but at the same time we have already priced in
the likelihood of the Fed cutting interest rates in the future. At 4.87% on June
30, 2007, the two-year Treasury rate was well below the federal funds rate of
5.25%. Under these circumstances, we believe a neutral to slightly long duration
posture is most prudent and could be a relative advantage compared to funds with
a more extreme duration bias.
In terms of specific fixed income sectors, we viewed the recent spread widening
in the mortgage market as an opportunity to increase our position in what we
consider to be a very high-quality fixed income asset with yield-enhancement
potential. Over the course of the full year, the Fund's exposure to ARMs, CMBS
and mortgage passthrough securities was increased considerably. Conversely, as
mentioned earlier, we sold a number of subprime-related mortgage securities in
October 2006, a move that ultimately proved beneficial. We decreased exposure to
U.S. agency securities dramatically, as we did not find a lot of relative value
in these assets compared to other opportunities in the fixed income markets. We
also trimmed exposure to credit product, both investment-grade and
non-investment-grade. With these changes, we have essentially structured a more
conservative portfolio, but also enhanced the Fund's credit quality and
liquidity.
How would you characterize the Fund's position at the close of the period?
Compared to its benchmark, the Fund ended the period with underweight positions
in U.S. Treasury and agency securities, reflecting our preference for
mortgage-related product, including ARMs, CMBS and other asset-backed securities
(ABS). Our negligible exposure to agency securities compared to 26% in the
benchmark, while our 20% allocation to ABS compared to 0% in the benchmark. In
terms of credit exposure, the Fund's 22.5% allocation at period-end compared to
19% in the benchmark, although our credit exposure is much shorter in duration
than that of the benchmark. As such, should credit spreads widen further, our
bonds should outperform from a price perspective. Finally, the Fund ended the
period with a 1% weighting in high yield bonds, compared to 0% in the index. Our
duration remains relatively neutral, reflecting the fairly balanced outlook
described above.
Keith Anderson
Portfolio Manager
Scott Amero
Portfolio Manager
Todd Kopstein
Portfolio Manager
July 18, 2007
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 5
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 C1, and Institutional
Shares, respectively. Class R Shares did not change their designation. Also,
effective October 2, 2006, the Fund's Investor C Shares commenced operations. 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:
o 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.
o Investor A Shares incur a maximum initial sales charge (front-end load) of
3% and a service fee of 0.25% per year (but no distribution fee).
o Investor B Shares are subject to a maximum contingent deferred sales
charge of 4%, declining to 0% after six years. In addition, Investor B
Shares are subject to a distribution fee of 0.65% per year and a service
fee of 0.25% per year. These shares automatically convert to Investor A
Shares after approximately 10 years. (There is no initial sales charge for
automatic share conversions.)
o 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 are
subject to a 1% contingent deferred sales charge if redeemed within one
year of purchase. Prior to October 2, 2006, Investor C Share performance
results were those of Institutional Shares (which have no distribution or
service fees) restated to reflect the Investor C Share fees.
o Investor C1 Shares are subject to a distribution fee of 0.65% per year and
a service fee of 0.25% per year. In addition, Investor C1 Shares are
subject to a 1% contingent deferred sales charge if redeemed within one
year of purchase.
o 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 the Class R Share
fees.
The performance results for Investor A, Investor B, Investor C, Investor C1 and
Institutional Shares depicted on pages 7 and 8 are those of BlackRock Short-Term
Bond Fund and, prior to October 6, 2000 (commencement of operations), share
performance results were those of Institutional Shares of a predecessor Fund
(which have no distribution or service fees) restated to reflect each share
class' 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. 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
payable 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.
6 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Performance Data (continued)
Recent Performance Results*
6-Month 12-Month 10-Year Standardized
As of June 30, 2007 Total Return Total Return Total Return 30-Day Yield
============================================================================================================================
Institutional Shares* +1.54% +4.59% +53.44% 4.53%
- ----------------------------------------------------------------------------------------------------------------------------
Investor A Shares* +1.39 +4.20 +49.52 4.00
- ----------------------------------------------------------------------------------------------------------------------------
Investor B Shares* +1.06 +3.61 +40.00 3.49
- ----------------------------------------------------------------------------------------------------------------------------
Investor C Shares* +0.89 +3.39 +38.67 2.89
- ----------------------------------------------------------------------------------------------------------------------------
Investor C1 Shares* +1.07 +3.62 +39.95 3.53
- ----------------------------------------------------------------------------------------------------------------------------
Class R Shares* +1.13 +3.91 +46.78 3.73
- ----------------------------------------------------------------------------------------------------------------------------
Merrill Lynch 1 - 3 Year Corporate & GovernmentIndex** +2.18 +5.32 +60.90 --
- ----------------------------------------------------------------------------------------------------------------------------
* 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 net asset values for the periods shown,
and assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable date.
** This unmanaged Index is comprised of investment grade corporate bonds and
U.S. Treasury and agency securities with a maturity ranging from one year
to three years.
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 7
Performance Data (concluded)
Short-Term Bond Fund
BlackRock Short-Term Bond Fund--Edgar
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Institutional
Shares, Investor A Shares, Investor B Shares, Investor C Shares, Investor C1
Shares and Class R Shares compared to growth of an investment in the Merrill
Lynch 1 - 3 Year Corporate & Government Index. Values are from June 1997 to June
2007.
Merrill Lynch
1 - 3 Year
Corporate
Institutional Investor A Investor B Investor C Investor C1 Class R & Government
Shares*+ Shares*+ Shares*+ Shares*+ Shares*+ Shares*+ Index++
6/97 $10,000 $ 9,700 $10,000 $10,000 $10,000 $10,000 $10,000
6/98 $10,695 $10,348 $10,599 $10,589 $10,599 $10,642 $10,685
6/99 $11,052 $10,667 $10,856 $10,834 $10,856 $10,943 $11,239
6/00 $11,647 $11,214 $11,339 $11,305 $11,339 $11,475 $11,791
6/01 $12,591 $12,072 $12,136 $12,099 $12,129 $12,343 $12,902
6/02 $13,180 $12,618 $12,591 $12,540 $12,584 $12,856 $13,782
6/03 $13,919 $13,294 $13,192 $13,112 $13,172 $13,572 $14,558
6/04 $14,032 $13,382 $13,178 $13,087 $13,158 $13,649 $14,664
6/05 $14,368 $13,668 $13,369 $13,267 $13,349 $13,906 $14,986
6/06 $14,671 $13,919 $13,512 $13,412 $13,506 $14,126 $15,277
6/07 $15,344 $14,504 $14,000 $13,867 $13,995 $14,678 $16,090
* Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
+ The Fund invests all of its assets in Short-Term Bond Master Portfolio of
Short-Term Bond Master LLC. The Portfolio invests in bonds of varying
maturities with a portfolio duration of one to three years.
++ This unmanaged Index is comprised of investment grade corporate bonds and
U.S. Treasury and agency securities with a maturity ranging from one year
to three years.
Past performance is not indicative of future results.
Average Annual Total Return
Return
================================================================================
Institutional Shares
================================================================================
One Year Ended 6/30/07 +4.59%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/07 +3.09
- --------------------------------------------------------------------------------
Ten Years Ended 6/30/07 +4.37
- --------------------------------------------------------------------------------
Return Without Return With
Sales Charge Sales Charge*
================================================================================
Investor A Shares
================================================================================
One Year Ended 6/30/07 +4.20% +1.07%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/07 +2.82 +2.20
- --------------------------------------------------------------------------------
Ten Years Ended 6/30/07 +4.10 +3.79
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC+++
================================================================================
Investor B Shares+
================================================================================
One Year Ended 6/30/07 +3.61% -0.39%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/07 +2.14 +1.78
- --------------------------------------------------------------------------------
Ten Years Ended 6/30/07 +3.42 +3.42
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC+++
================================================================================
Investor C Shares++
================================================================================
One Year Ended 6/30/07 +3.39% +2.39%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/07 +2.03 +2.03
- --------------------------------------------------------------------------------
Ten Years Ended 6/30/07 +3.32 +3.32
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC+++
================================================================================
Investor C1 Shares++
================================================================================
One Year Ended 6/30/07 +3.62% +2.62%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/07 +2.15 +2.15
- --------------------------------------------------------------------------------
Ten Years Ended 6/30/07 +3.42 +3.42
- --------------------------------------------------------------------------------
* Assuming maximum sales charge of 3%.
+ Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
Return
================================================================================
Class R Shares
================================================================================
One Year Ended 6/30/07 +3.91%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/07 +2.69
- --------------------------------------------------------------------------------
Ten Years Ended 6/30/07 +3.91
- --------------------------------------------------------------------------------
++ Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
+++ Assuming payment of applicable contingent deferred sales charge.
8 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 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 January 1, 2007 and held through
June 30, 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 January 1, 2007
January 1, 2007 June 30, 2007 to June 30, 2007
==================================================================================================================
Actual
==================================================================================================================
Institutional $1,000 $1,015.40 $ 3.80
- ------------------------------------------------------------------------------------------------------------------
Investor A $1,000 $1,013.90 $ 5.34
- ------------------------------------------------------------------------------------------------------------------
Investor B $1,000 $1,010.60 $ 8.62
- ------------------------------------------------------------------------------------------------------------------
Investor C $1,000 $1,008.90 $10.71
- ------------------------------------------------------------------------------------------------------------------
Investor C1 $1,000 $1,010.70 $ 8.57
- ------------------------------------------------------------------------------------------------------------------
Class R $1,000 $1,011.30 $ 6.93
==================================================================================================================
Hypothetical (5% annual return before expenses)**
==================================================================================================================
Institutional $1,000 $1,021.03 $ 3.81
- ------------------------------------------------------------------------------------------------------------------
Investor A $1,000 $1,019.49 $ 5.36
- ------------------------------------------------------------------------------------------------------------------
Investor B $1,000 $1,016.22 $ 8.65
- ------------------------------------------------------------------------------------------------------------------
Investor C $1,000 $1,014.14 $10.74
- ------------------------------------------------------------------------------------------------------------------
Investor C1 $1,000 $1,016.27 $ 8.60
- ------------------------------------------------------------------------------------------------------------------
Class R $1,000 $1,017.91 $ 6.95
- ------------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the expense ratio for
the class (.76% for Institutional, 1.07% for Investor A, 1.73% for
Investor B, 2.15% for Investor C, 1.72% for Investor C1 and 1.39% 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 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 SHORT-TERM BOND FUND JUNE 30, 2007 9
Statement of Assets and Liabilities BlackRock Short-Term Bond Fund
As of June 30, 2007
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investment in Short-Term Bond Master Portfolio (the "Portfolio"), at value
(identified cost -- $681,040,369) ................................................ $ 676,700,695
Prepaid expenses ................................................................... 16,888
-------------
Total assets ....................................................................... 676,717,583
-------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Payables:
Dividends to shareholders ...................................................... $ 2,199,452
Distributor .................................................................... 202,423
Administrator .................................................................. 142,797
Other affiliates ............................................................... 220,741 2,765,413
-------------
Accrued expenses ................................................................... 43,997
-------------
Total liabilities .................................................................. 2,809,410
-------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ......................................................................... $ 673,908,173
=============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Shares of Common Stock, $.01 par value, 100,000,000
shares authorized ................................................................ $ 201,218
Investor A Shares of Common Stock, $.01 par value, 100,000,000
shares authorized ................................................................ 287,520
Investor B Shares of Common Stock, $.01 par value, 200,000,000
shares authorized ................................................................ 42,618
Investor C Shares of Common Stock, $.01 par value, 100,000,000
shares authorized ................................................................ 24,027
Investor C1 Shares of Common Stock, $.01 par value, 100,000,000
shares authorized ................................................................ 112,559
Class R Shares of Common Stock, $.01 par value, 200,000,000
shares authorized ................................................................ 8,932
Paid-in capital in excess of par ................................................... 706,545,280
Accumulated distributions in excess of investment income -- net .................... $ (19,940)
Accumulated realized capital losses allocated from the Portfolio -- net ............ (28,954,367)
Unrealized depreciation allocated from the Portfolio -- net ........................ (4,339,674)
-------------
Total accumulated losses -- net .................................................... (33,313,981)
-------------
Net Assets ......................................................................... $ 673,908,173
=============
===================================================================================================================================
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional -- Based on net assets of $200,542,398 and 20,121,760
shares outstanding ............................................................... $ 9.97
=============
Investor A -- Based on net assets of $286,395,554 and 28,752,027
shares outstanding ............................................................... $ 9.96
=============
Investor B -- Based on net assets of $42,358,095 and 4,261,806
shares outstanding ............................................................... $ 9.94
=============
Investor C -- Based on net assets of $23,886,081 and 2,402,740
shares outstanding ............................................................... $ 9.94
=============
Investor C1 -- Based on net assets of $111,843,961 and 11,255,877
shares outstanding ............................................................... $ 9.94
=============
Class R -- Based on net assets of $8,882,084 and 893,160
shares outstanding ............................................................... $ 9.94
=============
See Notes to Financial Statements.
10 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Statement of Operations BlackRock Short-Term Bond Fund
For the Year Ended June 30, 2007
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Portfolio:
Interest ....................................................................... $ 32,812,868
Dividends ...................................................................... 22,961
Securities lending -- net ...................................................... 17,698
Expenses ....................................................................... (1,873,389)
-------------
Total income ....................................................................... 30,980,138
-------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Administration fees ................................................................ $ 1,681,744
Service and distribution fees -- Investor C1 ....................................... 1,150,701
Service fees -- Investor A ......................................................... 697,008
Transfer agent fees -- Investor A .................................................. 533,785
Service and distribution fees -- Investor B ........................................ 450,583
Transfer agent fees -- Institutional ............................................... 256,389
Transfer agent fees -- Investor C1 ................................................. 229,127
Printing and shareholder reports ................................................... 148,115
Transfer agent fees -- Investor B .................................................. 100,008
Service and distribution fees -- Investor C ........................................ 93,465
Registration fees .................................................................. 85,741
Transfer agent fees -- Investor C .................................................. 82,646
Service and distribution fees -- Class R ........................................... 35,659
Professional fees .................................................................. 22,362
Transfer agent fees -- Class R ..................................................... 20,210
Other .............................................................................. 16,761
-------------
Total expenses ..................................................................... 5,604,304
-------------
Investment income -- net ........................................................... 25,375,834
-------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) Allocated from the Portfolio -- Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments -- net ............................................................. (5,704,143)
Financial futures contracts and swaps -- net ................................... (1,836,808)
Foreign currency transactions -- net ........................................... 203,618
Options written -- net ......................................................... 290,320 (7,047,013)
-------------
Change in unrealized appreciation/depreciation on:
Investments -- net ............................................................. 9,731,460
Financial futures contracts and swaps -- net ................................... (220,553)
Foreign currency transactions -- net ........................................... (130,269)
Options written -- net ......................................................... (142,129) 9,238,509
-------------------------------
Total realized and unrealized gain -- net .......................................... 2,191,496
-------------
Net Increase in Net Assets Resulting from Operations ............................... $ 27,567,330
=============
See Notes to Financial Statements.
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 11
Statements of Changes in Net Assets BlackRock Short-Term Bond Fund
For the Year Ended
June 30,
-------------------------------
Increase (Decrease) in Net Assets: 2007 2006
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ........................................................... $ 25,375,834 $ 22,254,247
Realized loss -- net ............................................................... (7,047,013) (2,431,805)
Change in unrealized appreciation/depreciation -- net .............................. 9,238,509 (8,404,614)
-------------------------------
Net increase in net assets resulting from operations ............................... 27,567,330 11,417,828
-------------------------------
===================================================================================================================================
Dividends to Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net:
Institutional .................................................................. (8,402,051) (7,412,136)
Investor A ..................................................................... (10,962,922) (8,619,359)
Investor B ..................................................................... (1,626,913) (2,128,686)
Investor C ..................................................................... (278,138) --
Investor C1 .................................................................... (4,176,074) (4,405,599)
Class R ........................................................................ (261,107) (146,884)
-------------------------------
Net decrease in net assets resulting from dividends to shareholders ................ (25,707,205) (22,712,664)
-------------------------------
===================================================================================================================================
Capital Share Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets derived from capital share transactions ................. (5,691,836) (36,485,602)
-------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets ....................................................... (3,831,711) (47,780,438)
Beginning of year .................................................................. 677,739,884 725,520,322
-------------------------------
End of year* ....................................................................... $ 673,908,173 $ 677,739,884
===============================
* Accumulated distributions in excess of investment income -- net .............. $ (19,940) $ (165,146)
===============================
See Notes to Financial Statements.
12 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Financial Highlights BlackRock Short-Term Bond Fund
Institutional
---------------------------------------------------------------------------------
The following per share data For the Year Ended
and ratios have been derived June 30,
from information provided in ---------------------------------------------------------------------------------
the financial statements. 2007 2006 2005 2004 2003
===============================================================================================================================
Per Share Operating Performance
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ....... $ 9.94 $ 10.10 $ 10.16 $ 10.39 $ 10.17
---------------------------------------------------------------------------------
Investment income -- net** ............... .42 .36 .30 .31 .31
Realized and unrealized gain (loss) -- net .03 (.15) (.06) (.23) .25
---------------------------------------------------------------------------------
Total from investment operations ......... .45 .21 .24 .08 .56
---------------------------------------------------------------------------------
Less dividends and distributions:
Investment income -- net ............. (.42) (.37) (.30) (.31) (.34)
Realized gain -- net ................. -- -- -- -- --
---------------------------------------------------------------------------------
Total dividends and distributions ........ (.42) (.37) (.30) (.31) (.34)
---------------------------------------------------------------------------------
Net asset value, end of year ............. $ 9.97 $ 9.94 $ 10.10 $ 10.16 $ 10.39
=================================================================================
===============================================================================================================================
Total Investment Return*
- -------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ....... 4.59% 2.11% 2.39% .81% 5.61%
=================================================================================
===============================================================================================================================
Ratios to Average Net Assets+
- -------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and reimbursement
and excluding reorganization expenses .. .72% .67% .69% .65% .70%
=================================================================================
Expenses ................................. .72% .67% .69% .65% .75%
=================================================================================
Investment income -- net ................. 4.16% 3.61% 2.93% 3.00% 3.29%
=================================================================================
===============================================================================================================================
Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) ... $ 200,542 $ 203,377 $ 208,777 $ 240,749 $ 182,654
=================================================================================
Portfolio turnover of the Portfolio ...... 108%++ 80% 75% 107% 198%
=================================================================================
Investor A
---------------------------------------------------------------------------------
The following per share data For the Year Ended
and ratios have been derived June 30,
from information provided in ---------------------------------------------------------------------------------
the financial statements. 2007 2006 2005 2004 2003
===============================================================================================================================
Per Share Operating Performance
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ....... $ 9.94 $ 10.10 $ 10.16 $ 10.38 $ 10.16
---------------------------------------------------------------------------------
Investment income -- net** ............... .39 .34 .27 .29 .31
Realized and unrealized gain (loss) -- net .02 (.16) (.05) (.22) .23
---------------------------------------------------------------------------------
Total from investment operations ......... .41 .18 .22 .07 .54
---------------------------------------------------------------------------------
Less dividends and distributions:
Investment income -- net ............. (.39) (.34) (.28) (.29) (.32)
Realized gain -- net ................. -- -- -- -- --
---------------------------------------------------------------------------------
Total dividends and distributions ........ (.39) (.34) (.28) (.29) (.32)
---------------------------------------------------------------------------------
Net asset value, end of year ............. $ 9.96 $ 9.94 $ 10.10 $ 10.16 $ 10.38
=================================================================================
===============================================================================================================================
Total Investment Return*
- -------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ....... 4.20% 1.84% 2.14% .66% 5.36%
=================================================================================
===============================================================================================================================
Ratios to Average Net Assets+
- -------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and reimbursement
and excluding reorganization expenses .. 1.00% .91% .93% .89% .95%
=================================================================================
Expenses ................................. 1.00% .91% .93% .89% 1.00%
=================================================================================
Investment income -- net ................. 3.88% 3.37% 2.69% 2.78% 3.03%
=================================================================================
===============================================================================================================================
Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) ... $ 286,396 $ 267,411 $ 235,886 $ 125,950 $ 152,780
=================================================================================
Portfolio turnover of the Portfolio ...... 108%++ 80% 75% 107% 198%
=================================================================================
* Total investment returns exclude the effects of any sales charges.
** Based on average shares outstanding.
+ Includes the Fund's share of the Portfolio's allocated expenses and/or
investment income -- net.
++ Excludes dollar roll transactions.
See Notes to Financial Statements.
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 13
Financial Highlights (continued) BlackRock Short-Term Bond Fund
Investor B
------------------------------------------------------------
For the Year Ended June 30,
The following per share data and ratios have been derived ------------------------------------------------------------
from information provided in the financial statements. 2007 2006 2005 2004 2003
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .................... $ 9.91 $ 10.08 $ 10.14 $ 10.37 $ 10.14
------------------------------------------------------------
Investment income -- net** ............................ .32 .27 .20 .22 .24
Realized and unrealized gain (loss) -- net ............ .02 (.16) (.05) (.23) .24
------------------------------------------------------------
Total from investment operations ...................... .34 .11 .15 (.01) .48
------------------------------------------------------------
Less dividends from investment income -- net .......... (.31) (.28) (.21) (.22) (.25)
------------------------------------------------------------
Net asset value, end of year .......................... $ 9.94 $ 9.91 $ 10.08 $ 10.14 $ 10.37
============================================================
===================================================================================================================================
Total Investment Return*
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 3.61% 1.07% 1.46% (.11%) 4.77%
============================================================
===================================================================================================================================
Ratios to Average Net Assets+
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and reimbursement and excluding
reorganization expenses ............................. 1.67% 1.59% 1.61% 1.56% 1.61%
============================================================
Expenses .............................................. 1.67% 1.59% 1.61% 1.56% 1.66%
============================================================
Investment income -- net .............................. 3.21% 2.67% 2.00% 2.12% 2.00%
============================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) ................ $ 42,358 $ 60,519 $ 97,090 $130,802 $139,688
============================================================
Portfolio turnover of the Portfolio ................... 108%++ 80% 75% 107% 198%
============================================================
* Total investment returns exclude the effects of sales charges.
** Based on average shares outstanding.
+ Includes the Fund's share of the Portfolio's allocated expenses and/or
investment income -- net.
++ Excludes dollar roll transactions.
See Notes to Financial Statements.
14 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Financial Highlights (continued) BlackRock Short-Term Bond Fund
Investor C Investor C1
---------- -----------------------------------------------------------
For the
Period
October 2,
2006++ to For the Year Ended June 30,
The following per share data and ratios have been derived June 30, -----------------------------------------------------------
from information provided in the financial statements. 2007 2007 2006 2005 2004 2003
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $ 10.01 $ 9.91 $ 10.07 $ 10.13 $ 10.36 $ 10.14
-------- ----------------------------------------------------------
Investment income -- net*** ........................... .19 .32 .27 .20 .22 .24
Realized and unrealized gain (loss) -- net ............ (.03) .04 (.15) (.05) (.23) .23
-------- ----------------------------------------------------------
Total from investment operations ...................... .16 .36 .12 .15 (.01) .47
-------- ----------------------------------------------------------
Less dividends from investment income -- net .......... (.23) (.33) (.28) (.21) (.22) (.25)
-------- ----------------------------------------------------------
Net asset value, end of period ........................ $ 9.94 $ 9.94 $ 9.91 $ 10.07 $ 10.13 $ 10.36
======== ==========================================================
===================================================================================================================================
Total Investment Return**
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 1.57%@ 3.62% 1.17% 1.46% (.11%) 4.68%
======== ==========================================================
===================================================================================================================================
Ratios to Average Net Assets+
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and reimbursement and excluding
reorganization expenses ............................. 2.09%* 1.66% 1.59% 1.60% 1.56% 1.61%
======== ==========================================================
Expenses .............................................. 2.09%* 1.66% 1.59% 1.60% 1.56% 1.66%
======== ==========================================================
Investment income -- net .............................. 2.81%* 3.24% 2.68% 2.01% 2.12% 2.37%
======== ==========================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............. $ 23,886 $111,844 $142,083 $179,290 $239,263 $263,066
======== ==========================================================
Portfolio turnover of the Portfolio ................... 108%+++ 108%+++ 80% 75% 107% 198%
======== ==========================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
+ Includes the Fund's share of the Portfolio's allocated expenses and/or
investment income -- net.
++ Commencement of operations.
+++ Excludes dollar roll transactions.
@ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 15
Financial Highlights (concluded) BlackRock Short-Term Bond Fund
Class R
-------------------------------------------------------------
For the
For the Year Ended Period
June 30, Jan. 3, 2003++
The following per share data and ratios have been derived -------------------------------------------- to June 30,
from information provided in the financial statements. 2007 2006 2005 2004 2003
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $ 9.92 $10.08 $10.14 $10.37 $ 10.29
-------------------------------------------------------------
Investment income -- net** ............................ .36 .32 .18 .17 .18
Realized and unrealized gain (loss) -- net ............ .02 (.16) .01 (.11) .08
-------------------------------------------------------------
Total from investment operations ...................... .38 .16 .19 .06 .26
-------------------------------------------------------------
Less dividends from investment income -- net .......... (.36) (.32) (.25) (.29) (.18)
-------------------------------------------------------------
Net asset value, end of period ........................ $ 9.94 $ 9.92 $10.08 $10.14 $ 10.37
-------------------------------------------------------------
====================================================================================================================================
Total Investment Return
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 3.91% 1.58% 1.88% .56% 2.55%@
-------------------------------------------------------------
====================================================================================================================================
Ratios to Average Net Assets+
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding reorganization expenses ........... 1.30% 1.17% 1.19% 1.16% 1.19%*
-------------------------------------------------------------
Expenses .............................................. 1.30% 1.17% 1.19% 1.16% 1.28%*
-------------------------------------------------------------
Investment income -- net .............................. 3.59% 3.15% 2.46% 2.42% 2.74%*
-------------------------------------------------------------
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............. $8,882 $4,350 $4,477 $2,387 --@@
=============================================================
Portfolio turnover of the Portfolio ................... 108%+++ 80% 75% 107% 198%
=============================================================
* Annualized.
** Based on average shares outstanding.
+ Includes the Fund's share of the Portfolio's allocated expenses and/or
investment income -- net.
++ Commencement of operations.
+++ Excludes dollar roll transactions.
@ Aggregate total investment return.
@@ Amount is less than $1,000.
See Notes to Financial Statements.
16 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Notes to Financial Statements BlackRock Short-Term Bond Fund
1. Significant Accounting Policies:
On September 29, 2006, Merrill Lynch Low Duration Fund and Merrill Lynch
Investment Managers Funds, Inc., of which the ML Fund is a series, were renamed
BlackRock Short-Term Bond Fund (the "Fund") and BlackRock Short-Term Bond
Series, Inc. (the "Company"), respectively. The Company is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company, which is organized as a Maryland Corporation. The
Fund seeks to achieve its investment objective by investing all of its assets in
Short-Term Bond Master Portfolio (the "Portfolio") of Short-Term Bond Master LLC
(the "Master LLC"), which has the same investment objective and strategies as
the Fund. Effective June 15, 2007, the Master LLC was converted from a Delaware
statutory trust to a Delaware limited liability company. 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
percentage of the Portfolio owned by the Fund at June 30, 2007 was 100%. 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 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 C1 Shares, respectively. Class R Shares did not change their
designation. Investor C Shares commenced operations on October 2, 2006.
Institutional Shares are sold only to certain eligible investors. Investor A
Shares are sold with a front-end sales charge. Shares of Investor B, Investor C
and Investor C1 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, Investor C1 and
Class R Shares bear certain expenses related to the shareholder servicing of
such shares, and Investor B, Investor C, Investor C1 and Class R Shares 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 from net investment income are
declared daily and paid monthly. Distributions of capital gains are recorded on
the ex-dividend dates.
(f) Investment transactions -- Investment transactions in the Portfolio are
accounted for on a trade-date basis.
(g) Recent accounting pronouncements -- In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109."
FIN 48 prescribes the minimum recognition threshold a tax position must meet in
connection with accounting for uncertainties in income tax positions taken or
expected to be taken by an entity, including mutual funds, before being measured
and recognized in the financial statements. 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
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 17
Notes to Financial Statements (continued) BlackRock Short-Term Bond Fund
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, Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for fiscal years beginning after
November 15, 2007. 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 Fund's financial statements,
if any, has not been determined.
(h) Reclassifications -- 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, $2,721,252 has been reclassified between paid-in capital in excess of par
and accumulated net realized capital losses on investments, and $476,577 has
been reclassified between accumulated net realized capital losses on investments
and accumulated distributions in excess of net investment income as a result of
permanent differences attributable to the expiration of capital loss
carryforwards, accounting for paydowns, foreign currency transactions, and swap
agreements. These reclassifications have no effect on net assets or net asset
values per share.
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. 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 respect to the Portfolio, with BlackRock
Advisors, Inc., an indirect, wholly owned subsidiary of BlackRock, Inc.
BlackRock Advisors, Inc. 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 Portfolio's manager.
The Fund has entered into an Administration Agreement with BlackRock Advisors,
LLC. The Fund pays a monthly fee at an annual rate of .25% 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 Company has also entered into
separate Distribution Agreements and Distribution Plans, with respect to the
Fund, 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 Company in accordance with
Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the
Distributor ongoing shareholder servicing 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% .65%
Investor C ........................................ .25% .75%
Investor C1 ....................................... .25% .65%
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
servicing to Investor A, Investor B, Investor C, Investor C1 and Class R
shareholders. The ongoing distribution fee compensates the Distributor and the
broker-dealers for providing shareholder and distribution-related services to
Investor B, Investor C, Investor C1 and Class R shareholders.
18 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Notes to Financial Statements (continued) BlackRock Short-Term Bond Fund
For the year ended June 30, 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
- --------------------------------------------------------------------------------
Investor A ............................... $16,979 $118,291
- --------------------------------------------------------------------------------
For the year ended June 30, 2007, MLPF&S received contingent deferred sales
charges of $73,866, $5,788 and $11,811 relating to transactions in Investor B,
Investor C and Investor C1 Shares, respectively. Furthermore, FAMD paid MLPF&S
sales charges of $9 relating to transactions subject to front-end sales charge
waivers in Investor A 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. During the period
September 29, 2006 to June 30, 2007, the following amounts have been accrued by
the Fund to reimburse the Manager for costs incurred running the call center,
which are a component of the transfer agent fees in the accompanying Statements
of Operations.
- --------------------------------------------------------------------------------
Call Center Fees
- --------------------------------------------------------------------------------
Institutional ......................................... $2,599
Investor A ............................................ $4,485
Investor B ............................................ $1,177
Investor C ............................................ --
Investor C1 ........................................... $1,952
Class R ............................................... $ 74
- --------------------------------------------------------------------------------
Prior to September 29, 2006, certain officers and/or directors of the Fund were
officers and/or directors of FAM, FAMD, Financial Data Services, and/or Merrill
Lynch.
Commencing September 29, 2006, certain officers and/or directors of the Fund are
officers and/or directors of BlackRock, Inc. or its affiliates.
3. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$5,691,836 and $36,485,602 for the years ended June 30, 2007 and June 30, 2006,
respectively.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Institutional Shares for the Year Dollar
Ended June 30, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 3,882,332 $ 38,889,841
Shares issued to shareholders in
reinvestment of dividends .................. 778,991 7,804,278
---------------------------
Total issued ................................. 4,661,323 46,694,119
Shares redeemed .............................. (4,998,426) (50,085,942)
---------------------------
Net decrease ................................. (337,103) $ (3,391,823)
===========================
- -------------------------------------------------------------------------------
Institutional Shares for the Year Dollar
Ended June 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 4,589,347 $ 45,878,308
Shares issued to shareholders in
reinvestment of dividends .................. 629,194 6,294,006
---------------------------
Total issued ................................. 5,218,541 52,172,314
Shares redeemed .............................. (5,423,759) (54,309,989)
---------------------------
Net decrease ................................. (205,218) $ (2,137,675)
===========================
- -------------------------------------------------------------------------------
Investor A Shares for the Year Dollar
Ended June 30, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 7,835,850 $ 78,389,432
Automatic conversion of shares ............... 35,889 357,567
Share issued to shareholders in
reinvestment of dividends .................. 1,017,022 10,181,373
---------------------------
Total issued ................................. 8,888,761 88,928,372
Shares redeemed .............................. (7,051,933) (70,623,994)
---------------------------
Net increase ................................. 1,836,828 $ 18,304,378
===========================
- -------------------------------------------------------------------------------
Investor A Shares for the Year Dollar
Ended June 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 7,868,571 $ 78,742,195
Automatic conversion of shares ............... 165,449 1,653,466
Shares issued to shareholders in
reinvestment of dividends .................. 720,378 7,200,366
---------------------------
Total issued ................................. 8,754,398 87,596,027
Shares redeemed .............................. (5,202,244) (52,071,208)
---------------------------
Net increase ................................. 3,552,154 $ 35,524,819
===========================
- -------------------------------------------------------------------------------
Investor B Shares for the Year Dollar
Ended June 30, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 382,971 $ 3,826,348
Shares issued to shareholders in
reinvestment of dividends .................. 115,734 1,156,044
---------------------------
Total issued ................................. 498,705 4,982,392
---------------------------
Automatic conversion of shares ............... (35,961) (357,567)
Shares redeemed .............................. (2,305,722) (23,035,689)
---------------------------
Total redeemed ............................... (2,341,683) (23,393,256)
---------------------------
Net decrease ................................. (1,842,978) $(18,410,864)
===========================
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 19
Notes to Financial Statements (concluded) BlackRock Short-Term Bond Fund
- -------------------------------------------------------------------------------
Investor B Shares for the Year Dollar
Ended June 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 764,008 $ 7,626,851
Shares issued to shareholders in
reinvestment of dividends .................. 138,454 1,381,959
---------------------------
Total issued ................................. 902,462 9,008,810
---------------------------
Automatic conversion of shares ............... (165,800) (1,653,466)
Shares redeemed .............................. (4,267,131) (42,618,020)
---------------------------
Total redeemed ............................... (4,432,931) (44,271,486)
---------------------------
Net decrease ................................. (3,530,469) $(35,262,676)
===========================
- -------------------------------------------------------------------------------
Investor C Shares for the Period
October 2, 2006* to Dollar
June 30, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 2,588,797 $ 25,893,412
Shares issued to shareholders in
reinvestment of dividends .................. 22,869 228,442
---------------------------
Total issued ................................. 2,611,666 26,121,854
Shares redeemed .............................. (208,926) (2,088,810)
---------------------------
Net increase ................................. 2,402,740 $ 24,033,044
===========================
* Commencement of operations.
- -------------------------------------------------------------------------------
Investor C1 Shares for the Year Dollar
Ended June 30, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 1,095,000 $ 10,911,973
Shares issued to shareholders in
reinvestment of dividends .................. 322,310 3,219,362
---------------------------
Total issued ................................. 1,417,310 14,131,335
Shares redeemed .............................. (4,497,738) (44,899,591)
---------------------------
Net decrease ................................. (3,080,428) $(30,768,256)
===========================
- -------------------------------------------------------------------------------
Investor C1 Shares for the Year Dollar
Ended June 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 4,003,186 $ 39,947,150
Shares issued to shareholders in
reinvestment of dividends .................. 318,879 3,180,745
---------------------------
Total issued ................................. 4,322,065 43,127,895
Shares redeemed .............................. (7,784,003) (77,684,767)
---------------------------
Net decrease ................................. (3,461,938) $(34,556,872)
===========================
- -------------------------------------------------------------------------------
Class R Shares for the Year Dollar
Ended June 30, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 788,722 $ 7,885,609
Share issued to shareholders in
reinvestment of dividends .................. 26,378 263,698
---------------------------
Total issued ................................. 815,100 8,149,307
Shares redeemed .............................. (360,498) (3,607,622)
---------------------------
Net increase ................................. 454,602 $ 4,541,685
===========================
- -------------------------------------------------------------------------------
Class R Shares for the Year Dollar
Ended June 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 340,042 $ 3,397,077
Shares issued to shareholders in
reinvestment of dividends .................. 14,555 145,278
---------------------------
Total issued ................................. 354,597 3,542,355
Shares redeemed .............................. (360,251) (3,595,553)
---------------------------
Net decrease ................................. (5,654) $ (53,198)
===========================
4. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended June 30,
2007 and June 30, 2006 was as follows:
- --------------------------------------------------------------------------------
6/30/2007 6/30/2006
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income .............................. $ 25,707,205 $ 22,712,664
----------------------------
Total taxable distributions .................... $ 25,707,205 $ 22,712,664
============================
As of June 30, 2007, the components of accumulated losses on a tax basis were as
follows:
- -----------------------------------------------------------------------------
Ordinary income -- net ...................................... $ 47,644
Undistributed long-term capital gains -- net ................ --
------------
Total undistributed earnings -- net ......................... 47,644
Capital loss carryforward ................................... (23,900,904)*
Unrealized losses -- net .................................... (9,460,721)**
------------
Total accumulated losses -- net ............................. $(33,313,981)
============
* On June 30, 2007, the Fund had a net capital loss carryforward of
$23,900,904, of which $6,549,324 expires in 2008, $1,140,537 expires in
2009, $971,617 expires in 2011, $1,630,307 expires in 2012, $6,250,370
expires in 2013, $2,851,962 expires in 2014 and $4,506,787 expires in
2015. This amount will be available to offset like amounts of any future
taxable gains.
** The difference between book-basis and tax-basis net unrealized losses is
attributable primarily to the tax deferral of losses on wash sales,
accounting for swap agreements, the realization for tax purposes of
unrealized gains (losses) on certain futures contracts and the deferral of
post-October capital losses for tax purposes.
20 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Report of Independent Registered Public Accounting Firm
BlackRock Short-Term Bond Fund
To the Board of Directors and Shareholders of BlackRock Short-Term Bond Series,
Inc.:
We have audited the accompanying statement of assets and liabilities of
BlackRock Short-Term Bond Fund (formerly Merrill Lynch Low Duration Fund) (the
"Fund") of BlackRock Short-Term Bond Series, Inc. (formerly Merrill Lynch
Investment Managers Funds, Inc.) as of June 30, 2007, and the related statement
of operations, the statement of changes in net assets, and the financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit. The financial statements of the Fund for the year ended June
30, 2006 and the financial highlights for each of the four years in the period
ended June 30, 2006 were audited by other auditors whose report, dated August 9,
2006, expressed an unqualified opinion on those financial statements and
financial highlights.
We conducted our audit 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 Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit 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 Fund'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 audit provides 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 Short-Term Bond Fund of BlackRock Short-Term Bond Series, Inc. as of
June 30, 2007, the results of its operations, the changes in its net assets, and
its financial highlights for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
August 27, 2007
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 21
Portfolio Information as of June 30, 2007 Short-Term Bond Master Portfolio
Percent of
Asset Mix Long-Term Investments
- --------------------------------------------------------------------------------
Government Agency Mortgage-Backed
Securities ..................................................... 30.8%
Asset-Backed Securities .......................................... 22.9
Corporate Bonds .................................................. 19.3
Non-Government Agency Mortgage-Backed
Securities ..................................................... 18.4
Government Agency Mortgage-Backed
Obligations -- Collateralized Mortgage
Obligations .................................................... 7.4
Capital Trusts ................................................... 1.2
- --------------------------------------------------------------------------------
22 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Schedule of Investments as of June 30, 2007 Short-Term Bond Master Portfolio
(in U.S. dollars)
Face
Amount Asset-Backed Securities+ Value
==============================================================================================
$ 5,347,883 ACE Securities Corp. Series 2006-FM2 Class A2A,
5.37% due 8/25/2036 (a) $ 5,347,868
3,754,781 Aegis Asset Backed Securities Trust Series 2006-1
Class A1, 5.40% due 1/25/2037 (a) 3,754,771
11,000,000 Ameriquest Mortgage Securities, Inc. Series
2004-FR1 Class A5, 4.455% due 5/25/2034 10,827,719
4,319,474 Asset Backed Funding Certificates Series
2006-OPT2 Class A3A, 5.38%
due 10/25/2036 (a) 4,319,463
Bank of America Credit Card Trust:
5,650,000 Series 2006-A16 Class A16, 4.72%
due 5/15/2013 5,537,447
5,350,000 Series 2007-A7 Class A7, 5.32%
due 8/15/2012 (a) 5,348,534
Capital Auto Receivables Asset Trust:
1,250,000 Series 2004-2 Class D, 5.82%
due 5/15/2012 (b) 1,234,194
7,090,195 Series 2006-SN1A Class A2A, 5.40%
due 1/20/2009 (b) 7,090,671
1,550,000 Chase Issuance Trust Series 2007-A1 Class A1,
5.34% due 3/15/2013 (a) 1,549,984
4,171,689 Chase Manhattan Auto Owner Trust Series
2005-A Class A3, 3.87% due 6/15/2009 4,139,115
2,764,733 Countrywide Asset Backed Certificates Series
2004-13 Class AF3, 3.989% due 12/25/2034 (a) 2,746,849
6,525,000 DaimlerChrysler Auto Trust Series 2006-C
Class A3, 5.02% due 7/08/2010 6,503,759
5,241,781 First Horizon Asset Backed Securities Trust
Series 2004-HE4 Class A2, 4.07% due 7/25/2019 5,155,931
Ford Credit Auto Owner Trust:
6,300,000 Series 2005-A Class A4, 3.72%
due 10/15/2009 (b) 6,221,299
5,625,000 Series 2005-B Class A4, 4.38% due 1/15/2010 5,576,449
5,418,937 Series 2005-C Class A3, 4.30% due 8/15/2009 5,392,673
3,182,664 Fremont Home Loan Trust Series 2005-E Class 2A2,
5.49% due 1/25/2036 (a) 3,183,286
4,942,563 GCO Slims Trust Series 2006-1A Class NOTE,
5.72% due 3/01/2022 (b) 4,874,603
650,690 GSAA Home Equity Trust Series 2006-8N Class N1,
6% due 10/26/2036 (b) 642,556
2,508,537 GSAA Trust Series 2004-10 Class AF2, 4.22%
due 8/25/2034 (a) 2,488,904
6,777,339 GSAMP Trust Series 2005-AHL Class A3, 5.66%
due 4/25/2035 (a) 6,785,001
4,310,216 HSI Asset Securitization Corp. Trust Series
2006-HE1 Class 2A1, 5.37% due 10/25/2036 (a) 4,305,219
Honda Auto Receivables Owner Trust:
2,890,333 Series 2004-1 Class A4, 3.06%
due 10/21/2009 2,873,205
2,850,000 Series 2006-1 Class A3, 5.07%
due 2/18/2010 2,844,624
5,425,000 Series 2006-3 Class A3, 5.12%
due 10/15/2010 5,406,884
National Collegiate Student Loan Trust (c):
16,400,000 Series 2005-2 Class AIO, 7.73%
due 3/25/2012 3,172,744
33,292,725 Series 2005-GT1 Class AIO, 6.75%
due 12/25/2009 5,170,776
2,548,933 Popular ABS Mortgage Pass-Through Trust
Series 2005-1 Class AF3, 4.142%
due 5/25/2035 (a) 2,522,825
9,708,580 Residential Asset Mortgage Products, Inc.
Series 2003-RZ3 Class A6, 3.40% due 3/25/2033 9,292,952
SLM Student Loan Trust (a):
4,228,851 Series 2002-1 Class A2, 5.47% due 4/25/2017 4,238,831
5,949,066 Series 2002-4 Class A4, 5.50% due 3/15/2017 5,966,174
5,750,000 Series 2005-8 Class A2, 5.445%
due 7/25/2022 5,723,723
5,706,718 Soundview Home Equity Loan Trust Series 2003-2
Class A2, 5.797% due 11/25/2033 (a) 5,779,901
7,000,000 USAA Auto Owner Trust Series 2006-1
Class A3, 5.01% due 9/15/2010 6,984,732
WFS Financial Owner Trust:
1,239,681 Series 2003-4 Class B, 2.73% due 5/20/2011 1,230,103
10,800,000 Series 2004-4 Class A4, 3.44% due 5/17/2012 10,602,870
- ----------------------------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost -- $175,681,991) -- 25.8% 174,836,639
==============================================================================================
Government Agency
Mortgage-Backed Securities+
==============================================================================================
Fannie Mae Guaranteed Pass Through Certificates:
5,063,394 5.41% due 5/01/2037 (a) 5,018,177
8,202,455 5.48% due 12/01/2036 (a) 8,152,908
67,309,024 5.50% due 11/01/2017 - 7/15/2037 (e) 65,236,944
5,531,651 5.70% due 10/01/2036 (a) 5,542,432
2,252,990 5.91% due 9/01/2036 (a) 2,264,242
102,500,000 6.00% due 7/15/2037 (e) 101,378,855
3,913,097 6.50% due 8/01/2032 - 8/01/2034 3,992,915
3,430,434 7.50% due 9/01/2035 3,582,928
3,175,851 8.00% due 7/01/2027 - 11/01/2032 3,346,531
Freddie Mac Mortgage Participation Certificates (a):
4,965,501 4.64% due 4/01/2035 4,863,187
9,611,283 5.61% due 3/01/2037 9,571,885
4,901,713 5.82% due 11/01/2036 4,915,142
13,039,914 6.04% due 11/01/2036 13,127,660
4,340,618 Ginnie Mae MBS Certificates, 5%
due 11/20/2034 (a) 4,355,630
- ----------------------------------------------------------------------------------------------
Total Government Agency
Mortgage-Backed Securities
(Cost -- $236,204,051) -- 34.8% 235,349,436
==============================================================================================
Government Agency
Mortgage-Backed Obligations --
Collateralized Mortgage Obligations
==============================================================================================
Fannie Mae Trust:
16,258,055 Series 360 Class 2, 5% due 8/01/2035 (c) 4,225,129
6,343,935 Series 377 Class 2, 5% due 10/01/2036 (c) 1,690,968
5,320,168 Series 2003-17 Class QR, 4.50%
due 11/25/2025 5,277,418
2,517,975 Series 2003-67 Class GL, 3% due 1/25/2025 2,464,241
3,868,236 Series 2005-70 Class GA, 5.50%
due 12/25/2034 3,837,135
8,415,457 Series 2006-53 Class BA, 6% due 2/25/2027 8,459,021
9,745,996 Series 2006-106 Class PA, 5.50%
due 6/25/2030 9,706,672
4,068,853 Series 2006-M2 Class A1A, 4.855%
due 7/25/2016 (a) 4,034,359
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 23
Schedule of Investments (continued) Short-Term Bond Master Portfolio
(in U.S. dollars)
Government Agency
Face Mortgage-Backed Obligations --
Amount Collateralized Mortgage Obligations Value
==============================================================================================
Freddie Mac Multiclass Certificates:
$ 6,818,842 Series 2485 Class AS, 5.50%
due 8/15/2017 $ 6,793,186
5,969,886 Series 2673 Class ML, 4% due 12/15/2022 5,918,441
1,896,160 Series 2996 Class PB, 5.50% due 5/15/2035 1,885,158
49,648,641 Series 3309 Class SA, 0.77%
due 4/15/2037 (a)(c) 1,401,705
20,749,005 Series 3318 Class SK, 0.77%
due 5/15/2037 (a)(c) 499,209
56,577,972 Ginnie Mae Trust Series 2002-94 Class XB,
2.349% due 11/16/2007 (a)(c) 96,607
- ----------------------------------------------------------------------------------------------
Total Government Agency
Mortgage-Backed Obligations --
Collateralized Mortgage Obligations
(Cost -- $57,347,901) -- 8.3% 56,289,249
==============================================================================================
Non-Government Agency
Mortgage-Backed Securities+
==============================================================================================
Collateralized Mortgage Obligations -- 11.2%
6,616,945 Banc of America Funding Corp. Series 2006-I
Class 1A1, 4.576% due 12/20/2036 (a) 6,511,196
3,562,084 Banc of America Mortgage Securities Inc.
Series 2003-J Class 2A1, 4.081%
due 11/25/2033 (a) 3,522,938
81,242 BlackRock Capital Finance LP Series 1997-R2
Class AP, 1.268% due 12/25/2035 (a)(b)(f) 80,960
4,414,900 Countrywide Home Loan Mortgage Pass-Through
Trust Series 2005-HYB8 Class 2A1, 5.255%
due 12/20/2035 (a) 4,385,655
2,453,654 Deutsche Alt-A Securities, Inc. Mortgage Loan
Series 2006-AF1 Class A1, 5.40%
due 4/25/2036 (a) 2,453,900
4,441,137 Harborview Mortgage Loan Trust Series 2006-11
Class A1A, 5.49% due 12/19/2036 (a) 4,446,866
3,693,452 Indymac Index Mortgage Loan Trust Series
2006-AR41 Class A3, 5.50% due 2/25/2037 (a) 3,701,501
7,653,956 JPMorgan Mortgage Trust Series 2007-A1
Class 2A1, 4.763% due 7/25/2035 (a) 7,550,711
4,576,862 Luminent Mortgage Trust Series 2006-7 Class 1A1,
5.50% due 5/25/2036 (a) 4,574,858
162,916 Ocwen Residential MBS Corp. Series 1998-R2
Class AP, 9.111% due 11/25/2034 (a)(b) 130,332
Residential Accredit Loans, Inc. (a):
4,078,214 Series 2005-QS12 Class A8, 5.646%
due 8/25/2035 4,074,995
4,755,552 Series 2006-QA9 Class A1, 5.50%
due 11/25/2036 4,749,018
19,230 Salomon Brothers Mortgage Securities Series
1986-1 Class A, 6% due 12/25/2011 19,169
5,857 Structured Mortgage Asset Residential Trust
Series 1991-1 Class H, 8.25% due 6/25/2022 5,830
6,715,476 Suntrust Adjustable Rate Mortgage Loan Trust
Series 2007-2 Class 3A3, 5.731%
due 4/25/2037 (a) 6,700,420
46,557 Walsh Acceptance Series 1997-2 Class A,
7.32% due 3/01/2027 (a) 18,623
Washington Mutual (a):
3,666 Series 2000-1 Class B1, 9.32%
due 1/25/2040 (b) 2,933
14,778,057 Series 2004-AR3 Class A1, 3.918%
due 6/25/2034 14,507,082
8,903,426 Wells Fargo Mortgage Backed Securities Trust
Series 2004-3 Class A1, 4.75% due 4/25/2019 8,455,468
--------------
75,892,455
- ----------------------------------------------------------------------------------------------
Commercial Mortgage-Backed Securities -- 9.6%
3,465,000 Banc of America Commercial Mortgage, Inc.
Series 2000-1 Class A2A, 7.333% due 11/15/2031 3,574,670
CS First Boston Mortgage Securities Corp.:
4,824,811 Series 1999-C1 Class A2, 7.29%
due 9/15/2041 4,957,224
3,358,229 Series 2002-CKS4 Class A1, 4.485%
due 11/15/2036 3,277,485
65,866,385 Series 2003-CPN1 Class ASP, 1.584%
due 3/15/2035 (a)(c) 2,216,885
2,946,054 Series 2004-C3 Class A2, 3.913%
due 7/15/2036 2,894,891
3,862,838 Chase Commercial Mortgage Securities Corp.
Series 1999-2 Class A2, 7.198% due 1/15/2032 3,984,689
4,332,045 Chase Manhattan Bank-First Union National
Series 1999-1 Class A2, 7.439% due 8/15/2031 4,471,844
3,827,080 Commercial Mortgage Acceptance Corp. Series
1999-C1 Class A2, 7.03% due 6/15/2031 3,906,593
707,320 Commercial Mortgage Pass-Through Certificates
Series 2004-LB4A Class A1, 3.566%
due 10/15/2037 703,797
4,955,000 GE Capital Mall Finance Corp. Series 1998-1A
Class A2, 6.32% due 9/13/2028 4,994,663
GMAC Commercial Mortgage Securities, Inc.:
Series 1998-C2 Class A2, 6.42%
due 5/15/2035 4,571,934
4,265,131 Series 1999-C1 Class A2, 6.175%
due 5/15/2033 4,293,729
Greenwich Capital Commercial Funding Corp.:
20,524,183 Series 2002-C1 Class XP, 2.059%
due 1/11/2035 (a)(c) 1,542,659
656,082 Series 2004-GG1 Class A2, 3.835%
due 6/10/2036 654,003
4,008,772 JPMorgan Chase Commercial Mortgage Securities
Corp. Series 2001-CIBC Class A3, 6.26% due
3/15/20334,085,181
4,683,042 LB Commercial Conduit Mortgage Trust Series
1999-C1 Class A2, 6.78% due 6/15/2031 4,758,922
LB-UBS Commercial Mortgage Trust:
70,606,349 Series 2002-C4 Class XCP, 1.475%
due 10/15/2035 (a)(c) 1,968,837
4,538,427 Series 2004-C7 Class A1, 3.625%
due 10/15/2029 4,443,424
3,625,000 Wachovia Bank Commercial Mortgage Trust
Series 2006-C25 Class A4, 5.764%
due 5/15/2043 (a) 3,612,417
--------------
64,913,847
- ----------------------------------------------------------------------------------------------
Total Non-Government Agency
Mortgage-Backed Securities
(Cost -- $142,299,040) -- 20.8% 140,806,302
==============================================================================================
24 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Schedule of Investments (continued) Short-Term Bond Master Portfolio
(in U.S. dollars)
Face
Amount Corporate Bonds Value
==============================================================================================
Aerospace & Defense -- 0.5%
$ 1,250,000 Goodrich Corp., 6.45% due 4/15/2008 $ 1,257,272
L-3 Communications Corp.:
80,000 5.875% due 1/15/2015 74,200
360,000 Series B, 6.375% due 10/15/2015 340,200
1,700,000 Raytheon Co., 6.75% due 8/15/2007 1,702,208
--------------
3,373,880
- ----------------------------------------------------------------------------------------------
Airlines -- 0.1%
618,550 American Airlines, Inc. Series 2003-1, 3.857%
due 1/09/2012 (d) 593,035
- ----------------------------------------------------------------------------------------------
Automobiles -- 0.8%
DaimlerChrysler NA Holding Corp.:
3,400,000 4.75% due 1/15/2008 3,388,246
2,000,000 4.05% due 6/04/2008 1,971,942
--------------
5,360,188
- ----------------------------------------------------------------------------------------------
Capital Markets -- 2.4%
1,070,000 The Bank of New York Co., Inc., 3.80%
due 2/01/2008 1,060,371
3,180,000 Goldman Sachs Capital III Series F, 6.13%
due (a)(h) 3,178,442
2,225,000 Lehman Brothers Holdings Capital Trust V,
6.19% due (a)(h) 2,224,223
3,340,000 Lehman Brothers Holdings, Inc., 5.50%
due 5/25/2010 (a) 3,337,051
Morgan Stanley:
1,000,000 5.61% due 1/09/2012 (a) 998,172
5,043,000 5.625% due 1/09/2012 5,032,117
610,000 UBS Preferred Funding Trust I, 8.622%
due (a)(h) 662,513
--------------
16,492,889
- ----------------------------------------------------------------------------------------------
Chemicals -- 0.1%
146,000 Equistar Chemicals LP, 10.125% due 9/01/2008 151,840
525,000 Lyondell Chemical Co., 8.25% due 9/15/2016 (d) 548,625
--------------
700,465
- ----------------------------------------------------------------------------------------------
Commercial Banks -- 2.6%
3,125,000 Glitnir Banki HF, 5.618% due 4/20/2010 (a)(b) 3,119,759
2,425,000 HBOS Treasury Services Plc, 3.50%
due 11/30/2007 (b) 2,409,148
2,500,000 U.S. Bank, NA, 4.125% due 3/17/2008 2,476,775
Wachovia Corp.:
1,500,000 6.15% due 3/15/2009 1,519,050
1,570,000 5.75% due 6/15/2017 1,548,975
Wells Fargo & Co.:
2,200,000 4% due 8/15/2008 2,164,287
4,100,000 5.445% due 1/24/2012 (a) 4,098,745
--------------
17,336,739
- ----------------------------------------------------------------------------------------------
Communications Equipment -- 0.2%
955,000 Cisco Systems, Inc., 5.44% due 2/20/2009 (a) 956,639
300,000 Wind Acquisition Finance SA, 10.75%
due 12/01/2015 (b) 344,250
--------------
1,300,889
- ----------------------------------------------------------------------------------------------
Computers & Peripherals -- 0.0%
135,000 Seagate Technology HDD Holdings, 6.80%
due 10/01/2016 129,600
- ----------------------------------------------------------------------------------------------
Consumer Finance -- 0.5%
3,500,000 HSBC Finance Corp., 4.125% due 12/15/2008 3,437,035
- ----------------------------------------------------------------------------------------------
Diversified Financial Services -- 4.0%
3,800,000 Citigroup, Inc., 3.50% due 2/01/2008 3,761,571
4,300,000 Credit Suisse Guernsey Ltd. Series 1, 6.05%
due (a)(h) 4,302,752
1,030,000 Ford Motor Credit Co. LLC, 7.80% due 6/01/2012 1,004,793
General Electric Capital Corp.:
10,350,000 5.486% due 11/01/2012 (a) 10,344,856
2,700,000 Series A, 3.75% due 12/15/2009 (d) 2,601,399
4,800,000 JPMorgan Chase & Co., 3.625% due 5/01/2008 4,729,056
--------------
26,744,427
- ----------------------------------------------------------------------------------------------
Diversified Telecommunication Services -- 2.0%
1,810,000 AT&T, Inc., 4.125% due 9/15/2009 1,760,067
1,960,000 BellSouth Corp., 5.485% due 11/15/2007 (a) 1,960,900
260,000 Cincinnati Bell, Inc., 7.25% due 7/15/2013 266,500
2,500,000 Deutsche Telekom International Finance BV,
3.875% due 7/22/2008 2,458,400
250,000 Qwest Corp., 8.61% due 6/15/2013 (a) 271,250
2,250,000 Telecom Italia Capital SA, 4% due 11/15/2008 2,202,174
1,275,000 Telefonica Emisiones SAU, 5.984% due 6/20/2011 1,286,733
3,225,000 Verizon Global Funding Corp., 4% due 1/15/2008 3,201,112
--------------
13,407,136
- ----------------------------------------------------------------------------------------------
Electric Utilities -- 1.5%
1,485,000 American Electric Power Co., Inc., 4.709%
due 8/16/2007 (g) 1,483,459
210,000 Reliant Energy, Inc., 6.75% due 12/15/2014 214,200
7,730,000 TXU Energy Co. LLC, 5.85% due 9/16/2008 (a)(b) 7,732,991
685,000 Xcel Energy, Inc., 3.40% due 7/01/2008 670,565
--------------
10,101,215
- ----------------------------------------------------------------------------------------------
Gas Utilities -- 0.1%
670,000 Targa Resources, Inc., 8.50% due 11/01/2013 (b) 680,050
180,000 Transcontinental Gas Pipe Line Corp. Series B,
8.875% due 7/15/2012 201,600
--------------
881,650
- ----------------------------------------------------------------------------------------------
Health Care Providers & Services -- 0.3%
1,940,000 WellPoint, Inc., 3.75% due 12/14/2007 1,924,802
- ----------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure -- 0.1%
195,000 American Real Estate Partners LP, 8.125%
due 6/01/2012 195,731
335,000 Seneca Gaming Corp., 7.25% due 5/01/2012 339,606
--------------
535,337
- ----------------------------------------------------------------------------------------------
Household Durables -- 0.2%
1,095,000 Centex Corp., 5.606% due 8/01/2007 (a) 1,095,113
- ----------------------------------------------------------------------------------------------
Insurance -- 1.2%
385,000 Monumental Global Funding II, 3.85%
due 3/03/2008 (b) 380,831
1,470,000 Protective Life Secured Trust, 5.436%
due 1/14/2008 (a) 1,470,878
1,500,000 Prudential Financial, Inc., 3.75% due 5/01/2008 1,479,381
1,250,000 The St. Paul Travelers Cos., Inc., 5.01%
due 8/16/2007 1,249,461
ZFS Finance USA Trust I (a)(b):
1,900,000 5.875% due 5/09/2032 1,871,977
1,735,000 6.15% due 12/15/2065 1,737,580
--------------
8,190,108
- ----------------------------------------------------------------------------------------------
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 25
Schedule of Investments (continued) Short-Term Bond Master Portfolio
(in U.S. dollars)
Face
Amount Corporate Bonds Value
==============================================================================================
Media -- 1.3%
$ 1,655,000 COX Communications, Inc., 4.625%
due 1/15/2010 $ 1,616,510
1,200,000 Comcast Cable Communications, 6.20%
due 11/15/2008 1,209,521
1,470,000 Comcast Corp., 5.656% due 7/14/2009 (a) 1,470,120
315,000 Intelsat Bermuda Ltd., 9.25% due 6/15/2016 334,687
650,000 Intelsat Corp., 9% due 6/15/2016 680,875
1,220,000 News America, Inc., 6.75% due 1/09/2038 1,276,907
2,000,000 Time Warner Companies, Inc., 8.18%
due 8/15/2007 2,006,814
--------------
8,595,434
- ----------------------------------------------------------------------------------------------
Metals & Mining -- 0.1%
725,000 Freeport-McMoRan Copper & Gold, Inc., 8.375%
due 4/01/2017 773,937
- ----------------------------------------------------------------------------------------------
Multi-Utilities -- 0.6%
Dominion Resources, Inc.:
2,395,000 5.688% due 5/15/2009 (g) 2,397,884
2,000,000 Series D, 5.125% due 12/15/2009 1,985,692
--------------
4,383,576
- ----------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels -- 2.2%
2,475,000 Anadarko Petroleum Corp., 5.755%
due 9/15/2009 (a) 2,477,203
350,000 Chesapeake Energy Corp., 6.375% due 6/15/2015 333,812
350,000 Compton Petroleum Finance Corp., 7.625%
due 12/01/2013 345,625
3,775,000 Conoco Funding Co, 6.35% due 10/15/2011 3,892,542
Midamerican Energy Holdings Co.:
2,250,000 4.625% due 10/01/2007 2,244,523
1,910,000 3.50% due 5/15/2008 1,877,580
3,430,000 Pemex Project Funding Master Trust, 6.66%
due 6/15/2010 (a)(b) 3,519,180
190,000 Williams Cos Inc, 7.625% due 7/15/2019 200,450
--------------
14,890,915
- ----------------------------------------------------------------------------------------------
Real Estate Investment Trusts (REITs) -- 0.6%
Nationwide Health Properties, Inc.:
1,400,000 6.59% due 7/07/2038 1,399,020
1,400,000 7.60% due 11/20/2028 1,472,170
815,000 The Rouse Co., 3.625% due 3/15/2009 781,137
325,000 Ventas Realty LP, 6.625% due 10/15/2014 320,531
--------------
3,972,858
- ----------------------------------------------------------------------------------------------
Wireless Telecommunication Services -- 0.4%
400,000 Rogers Wireless, Inc., 7.50% due 3/15/2015 428,484
2,525,000 Vodafone Group Plc, 5.64% due 2/27/2012 (a) 2,528,707
--------------
2,957,191
- ----------------------------------------------------------------------------------------------
Total Corporate Bonds
(Cost -- $147,813,370) -- 21.8% 147,178,419
==============================================================================================
Face
Amount Capital Trusts (a) Value
==============================================================================================
Capital Markets -- 0.4%
$ 2,690,000 State Street Capital Trust IV, 6.355%
due 6/01/2067 (a) $ 2,697,941
- ----------------------------------------------------------------------------------------------
Commercial Banks -- 0.6%
2,725,000 BAC Capital Trust XV, 6.16% due 6/01/2056 (a) 2,721,218
1,450,000 USB Capital IX, 6.189% due (a)(h) 1,460,707
--------------
4,181,925
- ----------------------------------------------------------------------------------------------
Diversified Financial Services -- 0.4%
2,785,000 JPM Chase Capital XXI, 6.36% due 5/15/2077 (a) 2,752,995
- ----------------------------------------------------------------------------------------------
Total Capital Trusts
(Cost -- $9,674,860) -- 1.4% 9,632,861
==============================================================================================
Short-Term Investments
==============================================================================================
Time Deposits -- 7.8%
52,988,815 Brown Brothers Harriman & Co., 4.63%
due 7/2/2007 52,988,815
- ----------------------------------------------------------------------------------------------
Total Short-Term Investments
(Cost -- $52,988,815) -- 7.8% 52,988,815
==============================================================================================
Number of
Contracts++ Options Purchased
==============================================================================================
Call Options Purchased
33 Receive a fixed rate of 5.705% and pay a
floating rate based on 3-month LIBOR,
expiring May 2012, broker Deutsche Bank AG 1,590,114
- ----------------------------------------------------------------------------------------------
Put Currency Options Purchased
18 Japanese Yen, expiring September 2007 at USD 120 123,714
- ----------------------------------------------------------------------------------------------
Put Options Purchased
23 Pay a fixed rate of 5.95% and receive a floating
rate based on 3-month LIBOR, expiring
August 2007, broker Deutsche Bank AG 64,145
33 Pay a fixed rate of 5.705% and receive a
floating rate based on 3-month LIBOR,
expiring May 2012, broker Deutsche Bank AG 921,964
--------------
986,109
- ----------------------------------------------------------------------------------------------
Total Investments in Options Purchased
(Premiums Paid -- $2,760,522) -- 0.4% 2,699,937
==============================================================================================
Total Investments
(Cost -- $824,770,550) -- 121.1% 819,781,658
==============================================================================================
26 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Schedule of Investments (continued) Short-Term Bond Master Portfolio
(in U.S. dollars)
Face
Amount TBA Sale Commitments Value
==============================================================================================
$ 54,000,000 Fannie Mae Guaranteed Pass Through
Certificates, 5.50% due 7/12/2007 $ (52,083,432)
- ----------------------------------------------------------------------------------------------
Total TBA Sale Commitments
(Premiums Received -- $53,339,534) -- (7.7%) (52,083,432)
==============================================================================================
Number of
Contracts++ Options Written
==============================================================================================
Call Options Written
12 Pay a fixed rate of 4.96% and receive a
floating rate based on 3-month LIBOR,
expiring May 2008, broker Deutsche Bank AG (48,224)
- ----------------------------------------------------------------------------------------------
Put Options Written
12 Receive a fixed rate of 5.46% and pay a
floating rate based on 3-month LIBOR,
expiring May 2008, broker Deutsche Bank AG (388,405)
- ----------------------------------------------------------------------------------------------
Total Options Written
(Premiums Received -- $294,500) -- (0.0%) (436,629)
==============================================================================================
Total Investments
(Cost -- $771,136,516*) -- 113.4% 767,261,597
Liabilities in Excess of Other Assets -- (13.4%) (90,560,902)
--------------
Net Assets -- 100.0% $ 676,700,695
==============
+ Asset-Backed and Mortgage-Backed Obligations are subject to principal
paydowns. As a result of prepayments or refinancings of the underlying
instruments, the average life may be substantially less than the original
maturity.
++ One contract represents a notional amount of $1,000,000.
(a) Floating rate security.
(b) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(c) Represents the interest only portion of a mortgage-backed security and has
either a nominal or a notional amount of principal.
(d) All or a portion of security held as collateral in connection with open
financial futures contracts.
(e) Represents or includes a "to-be-announced" transaction. The Portfolio has
committed to purchasing securities for which all specific information is
not available at this time.
(f) Investments in companies considered to be an affiliate of the Portfolio,
for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
were as follows:
----------------------------------------------------------------------------------------------
Purchase Sale Realized Dividend
Affiliate Cost Cost Gain Income
----------------------------------------------------------------------------------------------
BlackRock Capital Finance
LP Series 1997-R2 Class AP,
1.268% due 12/25/2035 -- $ 28,504 $175 $ 6,933
BlackRock Liquidity Series LLC
Money Market Series -- $(51,000,000)* -- $17,698
----------------------------------------------------------------------------------------------
* Represents net sale cost.
(g) Represents a step bond; the interest rate shown reflects the effective
yield at the time of purchase.
(h) The security is a perpetual bond and has no definite maturity date.
* The cost and unrealized appreciation (depreciation) of investments, net of
TBA sales commitments and options written as of June 30, 2007, as computed
for federal income tax purposes, were as follows:
Aggregate cost ..................................... $ 771,813,953
=============
Gross unrealized appreciation ...................... $ 2,646,118
Gross unrealized depreciation ...................... (7,198,474)
-------------
Net unrealized depreciation ........................ $ (4,552,356)
=============
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
percent of net assets.
o Financial futures contracts purchased as of June 30, 2007 were as follows:
------------------------------------------------------------------------------------
Unrealized
Number of Expiration Face Appreciation
Contracts Issue Exchange Date Value (Depreciation)
------------------------------------------------------------------------------------
83 Euro-Bund Frankfurt September $12,583,410 $(142,116)
Future 2007
414 2-Year U.S. Chicago September 84,257,904 107,534
Treasury Bond 2007
49 5-Year U.S. Chicago September 5,100,477 (649)
Treasury Bond 2007
------------------------------------------------------------------------------------
Total $ (35,231)
==========
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 27
Schedule of Investments (concluded) Short-Term Bond Master Portfolio
(in U.S. dollars)
o Financial futures contracts sold as of June 30, 2007 were as follows:
------------------------------------------------------------------------------------
Unrealized
Number of Expiration Face Appreciation
Contracts Issue Date Value (Depreciation)
------------------------------------------------------------------------------------
63 Eurodollar Futures September 2007 $14,917,937 $ 7,412
63 Eurodollar Futures December 2007 14,936,874 19,262
63 Eurodollar Futures March 2008 14,957,312 27,887
52 Eurodollar Futures June 2008 12,356,800 29,549
52 Eurodollar Futures September 2008 12,361,935 35,985
52 Eurodollar Futures December 2008 12,362,335 40,935
52 Eurodollar Futures March 2009 12,360,885 44,685
40 Eurodollar Futures June 2009 9,503,272 34,272
40 Eurodollar Futures September 2009 9,499,435 34,935
40 Eurodollar Futures December 2009 9,495,260 35,760
40 Eurodollar Futures March 2010 9,492,585 36,085
728 10-Year U.S. September 2007 76,454,395 (497,480)
Treasury Bond
10 30-Year U.S. September 2007 1,059,272 (18,228)
Treasury Bond
------------------------------------------------------------------------------------
Total $(168,941)
==========
o Forward foreign exchange contracts purchased as of June 30, 2007 were as
follows:
------------------------------------------------------------------------------------
Unrealized
Foreign currency Settlement Appreciation
Purchased Date (Depreciation)
------------------------------------------------------------------------------------
JPY 62,605,000 July 2007 $(16,439)
NOK 31,014,683 July 2007 73,235
SEK 35,351,341 July 2007 (47,393)
------------------------------------------------------------------------------------
Total Unrealized Appreciation on Forward Foreign Exchange
Contracts -- Net (USD Commitment -- $10,937,918) $ 9,403
========
o Forward foreign exchange contracts sold as of June 30, 2007 were as
follows:
-----------------------------------------------------------------------------------
Foreign Currency Settlement Unrealized
Sold Date Appreciation
-----------------------------------------------------------------------------------
EUR 7,665,000 July 2007 $28,285
JPY 832,530,000 July 2007 29,896
-----------------------------------------------------------------------------------
Total Unrealized Appreciation on Forward Foreign Exchange
Contracts -- Net (USD Commitment -- $17,224,910) $58,181
=======
o Swap contracts outstanding as of June 30, 2007 were as follows:
------------------------------------------------------------------------------------
Unrealized
Notional Appreciation
Amount (Depreciation)
------------------------------------------------------------------------------------
Receive (pay) a variable return based on the
change in the spread return of the Lehman
Brothers CMBS AAA 8.5+ Index and receive
a floating rate based on the spread
Broker, Credit Suisse First Boston
Expires September 2007 $33,000,000 --
Receive a fixed rate of 5.42% and pay a
floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London
Expires June 2009 $65,600,000 $ 64,047
Receive a fixed rate of 5.39% and pay a
floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London
Expires July 2009 $43,095,000 18,660
Receive a fixed rate of 5.0125% and pay a
floating rate based on 3-month LIBOR
Broker, Union Bank of Switzerland AG
Expires October 2010 $37,000,000 (444,061)
Pay a fixed rate of 4.9335% and receive a
floating rate based on 3-month LIBOR
Broker, JPMorgan Chase
Expires March 2012 $31,200,000 703,420
Receive a fixed rate of 5.406% and pay a
floating rate based on 3-month LIBOR
Broker, JPMorgan Chase
Expires June 2012 $62,900,000 (229,061)
Pay a fixed rate of 5.57225% and receive a
floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London
Expires June 2012 $28,400,000 (98,114)
Pay a fixed rate of 5.225% and receive a
floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London
Expires January 2017 $ 1,500,000 47,326
Pay a fixed rate of 5.725% and receive a
floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London
Expires June 2017 $11,800,000 (50,626)
Sold credit default protection on Morgan
Stanley Capital I and receive 1.10%
Broker, Lehman Brothers Special Finance
Expires November 2042 $ 5,000,000 (44,795)
Sold credit default protection on Wachovia
Bank Commercial Mortgage Trust and
receive 1.10%
Broker, Lehman Brothers Special Finance
Expires October 2044 $ 1,700,000 (15,097)
Sold credit default protection on Wachovia
Bank Commercial Mortgage Trust and
receive 1.05%
Broker, Lehman Brothers Special Finance
Expires December 2044 $ 6,700,000 (82,014)
------------------------------------------------------------------------------------
Total $(130,315)
=========
o Currency Abbreviations:
EUR Euro
JPY Japanese Yen
NOK Norwegian Krone
SEK Swedish Krona
USD U.S. Dollar
See Notes to Financial Statements.
28 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Statement of Assets and Liabilities Short-Term Bond Master Portfolio
As of June 30, 2007
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified cost -- $821,929,281) .. $ 817,000,761
Investments in affiliated securities, at value (identified cost -- $80,747) ......... 80,960
Options purchased, at value (premiums paid -- $2,760,522) ........................... 2,699,937
Unrealized appreciation on swaps .................................................... 833,453
Unrealized appreciation on forward foreign contracts ................................ 131,416
Cash ................................................................................ 164,064
Foreign cash (identified cost -- $6,712,275) ........................................ 6,514,487
Receivables:
Securities sold ................................................................. $ 132,404,232
Interest ........................................................................ 4,072,090
Contributions ................................................................... 3,035,790
Paydowns ........................................................................ 302,039
Swaps ........................................................................... 17,533 139,831,684
-------------
Prepaid expenses and other assets ................................................... 2,883
-------------
Total assets ........................................................................ 967,259,645
-------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on swaps .................................................... 963,768
Unrealized depreciation on forward foreign contracts ................................ 63,832
Options written, at value (premiums received -- $294,500) ........................... 436,629
TBA sale commitments, at value (premiums received -- $53,339,534) ................... 52,083,432
Payables:
Securities purchased ............................................................ 234,685,168
Withdrawals ..................................................................... 1,019,036
Variation margin ................................................................ 263,178
Swaps ........................................................................... 748,597
Investment adviser .............................................................. 120,187
Other affiliates ................................................................ 3,192 236,839,358
-------------
Accrued expenses and other liabilities .............................................. 171,931
-------------
Total liabilities ................................................................... 290,558,950
-------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets .......................................................................... $ 676,700,695
=============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Investor's capital .................................................................. $ 681,040,369
Unrealized depreciation -- net ...................................................... (4,339,674)
-------------
Net assets .......................................................................... $ 676,700,695
=============
See Notes to Financial Statements.
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 29
Statement of Operations Short-Term Bond Master Portfolio
For the Year Ended June 30, 2007
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Interest (income from affiliates -- $6,933) ......................................... $ 32,812,868
Dividends ........................................................................... 22,961
Securities lending -- net ........................................................... 17,698
-------------
Total income ........................................................................ 32,853,527
-------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ............................................................ $ 1,414,905
Accounting services ................................................................. 249,940
Custodian fees ...................................................................... 78,180
Professional fees ................................................................... 54,499
Trustees' fees and expenses ......................................................... 28,918
Pricing fees ........................................................................ 22,739
Printing and shareholder reports .................................................... 3,126
Other ............................................................................... 21,082
-------------
Total expenses ...................................................................... 1,873,389
-------------
Investment income -- net ............................................................ 30,980,138
-------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) -- Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments (includes $175 gain from affiliates) -- net ......................... (5,704,143)
Financial futures contracts and swaps -- net .................................... (1,836,808)
Foreign currency transactions -- net ............................................ 203,618
Options written -- net .......................................................... 290,320 (7,047,013)
-------------
Change in unrealized appreciation/depreciation on:
Investments -- net .............................................................. 9,731,460
Financial futures contracts and swaps -- net .................................... (220,553)
Foreign currency transactions -- net ............................................ (130,269)
Options written ................................................................. (142,129) 9,238,509
------------------------------
Total realized and unrealized gain -- net ........................................... 2,191,496
-------------
Net Increase in Net Assets Resulting from Operations ................................ $ 33,171,634
=============
See Notes to Financial Statements.
30 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Statements of Changes in Net Assets Short-Term Bond Master Portfolio
For the Year Ended
June 30,
------------------------------
Increase (Decrease) in Net Assets: 2007 2006
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ............................................................ $ 30,980,138 $ 27,804,920
Realized loss -- net ................................................................ (7,047,013) (2,431,805)
Change in unrealized appreciation/depreciation -- net ............................... 9,238,509 (8,404,614)
------------------------------
Net increase in net assets resulting from operations ................................ 33,171,634 16,968,501
------------------------------
===================================================================================================================================
Capital Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ......................................................... 165,796,615 175,591,581
Fair value of withdrawals ........................................................... (201,097,486) (240,264,379)
------------------------------
Net decrease in net assets derived from capital transactions ........................ (35,300,871) (64,672,798)
------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets ........................................................ (2,129,237) (47,704,297)
Beginning of year ................................................................... 678,829,932 726,534,229
------------------------------
End of year ......................................................................... $ 676,700,695 $ 678,829,932
==============================
See Notes to Financial Statements.
Financial Highlights Short-Term Bond Master Portfolio
For the Year Ended June 30,
The following ratios have been derived from ----------------------------------------------------------------------------
information provided in the financial statements. 2007 2006 2005 2004 2003
===================================================================================================================================
Total Investment Return
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return ................ 5.03% 2.50% 2.80% 1.18% 6.05%
============================================================================
===================================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... .28% .28% .28% .28% .28%
============================================================================
Investment income -- net ............... 4.60% 4.00% 3.34% 3.39% 3.73%
============================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) . $ 676,701 $ 678,830 $ 726,534 $ 740,024 $ 739,334
============================================================================
Portfolio turnover ..................... 108%+ 80% 75% 107% 198%
============================================================================
+ Excludes dollar roll transactions.
See Notes to Financial Statements.
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 31
Notes to Financial Statements Short-Term Bond Master Portfolio
1. Significant Accounting Policies:
On September 29, 2006, Low Duration Master Portfolio and Fund Asset Management
Master Trust, of which Low Duration Master Portfolio is a series, were renamed
Short-Term Bond Master Portfolio (the "Portfolio") and Short-Term Bond Master
Trust (the "Trust"), respectively. Effective June 15, 2007, the Trust was
converted from a Delaware statutory trust to a Delaware limited liability
company and, in accordance with the Limited Liability Company Agreement (the
"LLC Agreement"), was renamed Short-Term Bond Master LLC (the "Master LLC"). The
Master LLC is registered under the Investment Company Act of 1940, as amended.
The LLC Agreement permits the Directors (and prior to June 15, 2007, the
Declaration of Trust permitted the Trustees) to issue non-transferable interests
in the Portfolio 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 -- Debt securities are traded primarily in the
over-the-counter ("OTC") markets and are valued at the last available bid price
in the OTC market or on the basis of values obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer-supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of the Master LLC under the general
direction of the Board of Directors. Such valuations and procedures will be
reviewed periodically by the Board of Directors of the Master LLC. Financial
futures contracts and options thereon, which are traded on exchanges, are valued
at their closing prices as of the close of such exchanges. Options written or
purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the OTC market, valuation is the last
asked price (options written) or the last bid price (options purchased). Swap
agreements are valued based upon quoted fair valuations received daily by the
Master LLC from a pricing service or counterparty. Valuation of short-term
investment vehicles is generally based on the net asset value of the underlying
investment vehicle or amortized cost. Securities and other 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.
Equity securities that are held by the Portfolio, which 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 OTC market, NASDAQ Capital Market or Bulletin Board
are valued at the last available bid price 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.
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 also are generally 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.
(b) Derivative financial instruments -- The Portfolio may engage in various
portfolio investment strategies both to
32 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Notes to Financial Statements (continued) Short-Term Bond Master Portfolio
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 if the counterparty does not perform
under the contract.
o 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 the 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.
o 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.
o Swaps -- The Portfolio may enter into swap agreements, which are OTC
contracts in which the Portfolio and a counterparty agree to make periodic
net payments on a specified notional amount. The net payments can be made
for a set period of time or may be triggered by a predetermined credit
event. The net periodic payments may be based on a fixed or variable
interest rate; the change in market value of a specified security, basket
of securities, or index; or the return generated by a security. These
periodic payments received or made by the Portfolio are recorded in the
accompanying Statement of Operations as realized gains or losses,
respectively. Gains or losses are realized upon termination of the swap
agreements. Swaps are marked-to-market daily and changes in value are
recorded as unrealized appreciation (depreciation). Risks include changes
in the returns of the underlying instruments, failure of the
counterparties to perform under the contracts' terms and the possible lack
of liquidity with respect to the swap agreements.
(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 a "pass-through" entity for
federal income tax purposes. As such, each investor in the Portfolio is treated
as an 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. 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. Interest income is recognized on the accrual basis.
(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
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 33
Notes to Financial Statements (continued) Short-Term Bond Master Portfolio
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) TBA Commitments -- The Portfolio may enter into to be announced (TBA)
commitments to purchase or sell securities for a fixed price at a future date.
TBA commitments are considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased/sold declines/increases prior
to settlement date, which is in addition to the risk of decline in the value of
a Portfolio's other assets. Unsettled TBA commitments are valued at the current
market value of the underlying securities, according to the procedures described
under "Valuation of investments."
(h) Recent accounting pronouncements -- In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109."
FIN 48 prescribes the minimum recognition threshold a tax position must meet in
connection with accounting for uncertainties in income tax positions taken or
expected to be taken by an entity, including mutual funds, before being measured
and recognized in the financial statements. 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 Portfolio'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, Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for fiscal years beginning after
November 15, 2007. 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 of the Master LLC approved a
new Investment Advisory Agreement with BlackRock Advisors, Inc. BlackRock
Advisors, Inc. was reorganized into a limited liability company and renamed
BlackRock Advisors, LLC. The new Investment Advisory Agreement between the
Master LLC and the Manager, with respect to the Portfolio, 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 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 the annual rate of .21% based upon
34 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Notes to Financial Statements (concluded) Short-Term Bond Master Portfolio
the average daily value of the Portfolio's net assets. In addition, the Manager
has entered into a Sub-Advisory Agreement with BlackRock Financial Management,
Inc., an affiliate of the Manager, under which the Manager pays the sub-adviser
for services it provides a fee equal to a percentage of the management fee paid
by the Portfolio to the Manager.
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"), a wholly owned subsidiary of Merrill
Lynch, 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
June 30, 2007, BIM received $6,592 in securities lending agent fees.
For the year ended June 30, 2007, the Portfolio reimbursed FAM and the Manager
$4,052 and $860, respectively, for certain accounting services.
Prior to September 29, 2006, certain officers and/or directors of the Master LLC
were officers and/or directors of MLIM, FAM, 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 (including paydowns and maturities and excluding dollar roll
transactions) of investments, excluding short-term securities, for the year
ended June 30, 2007 were $726,773,098 and $712,296,303, respectively.
Transactions in call options written for the year ended June 30, 2007 were as
follows:
- --------------------------------------------------------------------------------
Number of Premiums
Contracts* Received
- --------------------------------------------------------------------------------
Outstanding call options written,
beginning of year .................. -- --
Options written ............................ 31 $ 567,450
Options closed ............................. (19) (420,200)
Outstanding call options written,
end of year ........................ 12 $ 147,250
* One contract represents a notional amount of $1,000,000.
Transactions in put options written for the year ended June 30, 2007 were as
follows:
- --------------------------------------------------------------------------------
Number of Premiums
Contracts* Received
- --------------------------------------------------------------------------------
Outstanding put options written,
beginning of year .................. -- --
Options written ............................ 31 $ 567,450
Options closed ............................. (19) (420,200)
Outstanding put options written,
end of year ........................ 12 $ 147,250
* One contract represents a notional amount of $1,000,000.
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 party to a $500,000,000 credit
agreement with a group of lenders, which expires November 2007. The Master LLC
may borrow under the credit agreement to fund shareholder redemptions and for
other lawful purposes other than for leverage. The Master LLC may borrow up to
the maximum amount allowable under the Master LLC's current prospectus and
statement of additional information, subject to various other legal, regulatory
or contractual limits. The Master LLC pays a commitment fee of .06% per annum
based on the Master LLC'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 Master LLC did not borrow under the
credit agreement during the year ended June 30, 2007.
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 35
Report of Independent Registered Public Accounting Firm
Short-Term Bond Master Portfolio
To the Board of Directors and Investors of Short-Term Bond Master LLC:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Short-Term Bond Master Portfolio (the
"Portfolio") (formerly Low Duration Master Portfolio) of Short-Term Bond Master
LLC (formerly Fund Asset Management Master Trust) as of June 30, 2007, and the
related statement of operations, the statement of changes in net assets, and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The financial statements of the
Portfolio for the year ended June 30, 2006 and the financial highlights for each
of the four years in the period ended June 30, 2006 were audited by other
auditors whose report, dated August 9, 2006, expressed an unqualified opinion on
those financial statements and financial highlights.
We conducted our audit 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
Portfolio is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit 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 Portfolio'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 June 30, 2007, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audit provides 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
Short-Term Bond Master Portfolio of Short-Term Bond Master LLC as of June 30,
2007, the results of its operations, the changes in its net assets, and its
financial highlights for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
August 27, 2007
Change in Portfolio's Independent Registered Public Accounting Firm
On August 28, 2006, Ernst & Young llp ("E&Y") resigned as the Independent
Registered Public Accounting Firm of Short-Term Bond Master Portfolio (the
"Portfolio").
E&Y's report on the financial statements of the Portfolio for the past two
fiscal years did not contain an adverse opinion or a disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
In connection with its audits for the two most recent fiscal years through
August 28, 2006 (1) there were no disagreements with E&Y on any matter of
accounting principle or practice, financial statement disclosure or auditing
scope or procedure, whereby such disagreements, if not resolved to the
satisfaction of E&Y, would have caused them to make reference to the subject
matter of the disagreements in connection with their report on the financial
statements for such years; and (2) there have been no reportable events (as
defined in Item 304(a)(1)(v) of Regulation S-K).
The Audit Committee of the Portfolio's Board of Directors approved the
engagement of Deloitte & Touche llp as the Portfolio's Independent Registered
Public Accounting Firm for the fiscal year ending June 30, 2007.
36 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 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. P.O. Box 9011 Fund 2005 to Vice Chairman and Director of BlackRock, Inc., 121 Funds None
Doll, Jr.* Princeton, NJ President present Global Chief Investment Officer for Equities, 161 Portfolios
08543-9011 and Chairman of the BlackRock Retail Operating
Age: 52 Director Committee, and member of the BlackRock Executive
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 Advisors, 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 serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
As Fund President, Mr. Doll serves at the pleasure of the Board of Directors.
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 37
Officers and Directors (continued)
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
====================================================================================================================================
Independent Directors*
- ------------------------------------------------------------------------------------------------------------------------------------
James H. P.O. Box 9095 Director 2002 to Director, The China Business Group, Inc. since 37 Funds None
Bodurtha** Princeton, NJ present 1996 and Executive Vice President thereof from 57 Portfolios
08543-9095 1996 to 2003; Chairman of the Board, Berkshire
Age: 63 Holding Corporation since 1980; Partner, Squire,
Sanders & Dempsey from 1980 to 1993.
- ------------------------------------------------------------------------------------------------------------------------------------
Kenneth A. P.O. Box 9095 Director 2005 to Professor, Harvard University since 1992; 37 Funds None
Froot Princeton, NJ present Professor, Massachusetts Institute of Technology 57 Portfolios
08543-9095 from 1986 to 1992.
Age: 49
- ------------------------------------------------------------------------------------------------------------------------------------
Joe P.O. Box 9095 Director 2000 to Member of the Committee of Investment of Employee 37 Funds Kimco
Grills** Princeton, NJ present Benefit Assets of the Association of Financial 57 Portfolios Realty
08543-9095 Professionals ("CIEBA") since 1986; Member of Corporation
Age: 72 CIEBA's Executive Committee since 1988 and its
Chairman from 1991 to 1992; Assistant Treasurer of
International Business Machines Corporation
("IBM") and Chief Investment Officer of IBM
Retirement Funds from 1986 to 1993; Member of the
Investment Advisory Committee of the State of New
York Common Retirement Fund from 1989 to 2006;
Member of the Investment Advisory Committee of the
Howard Hughes Medical Institute from 1997 to 2000;
Director, Duke University Management Company from
1992 to 2004, Vice Chairman thereof from 1998 to
2004, and Director Emeritus thereof since 2004;
Director, LaSalle Street Fund from 1995 to 2001;
Director, Kimco Realty Corporation since 1997;
Member of the Investment Advisory Committee of the
Virginia Retirement System since 1998, Vice
Chairman thereof from 2002 to 2005, and Chairman
thereof since 2005; Director, Montpelier
Foundation since 1998, its Vice Chairman from 2000
to 2006, and Chairman, thereof, since 2006; Member
of the Investment Committee of the Woodberry
Forest School since 2000; Member of the Investment
Committee of the National Trust for Historic
Preservation since 2000.
38 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007
Officers and Directors (continued)
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
====================================================================================================================================
Independent Directors* (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Herbert I. P.O. Box 9095 Director 2002 to Professor Emeritus, New York University since 37 Funds None
London Princeton, NJ present 2005; John M. Olin Professor of Humanities, New 57 Portfolios
08543-9095 York University from 1993 to 2005 and Professor
Age: 68 thereof from 1980 to 2005; President, Hudson
Institute since 1997 and Trustee thereof since
1980; Dean, Gallatin Division of New York
University from 1976 to 1993; Distinguished
Fellow, Herman Kahn Chair, Hudson Institute from
1984 to 1985; Chairman of the Board of Directors
of Vigilant Research, Inc. since 2006; Member of
the Board of Directors for Grantham University
since 2006; Director of AIMS since 2006; Director
of Reflex Security since 2006; Director of
InnoCentive, Inc. since 2006; Director of Cerego,
LLC since 2005; Director, Damon Corp. from 1991 to
1995; Overseer, Center for Naval Analyses from
1983 to 1993.
- ------------------------------------------------------------------------------------------------------------------------------------
Roberta P.O. Box 9095 Director 2002 to Shareholder, Modrall, Sperling, Roehl, Harris & 37 Funds None
Cooper Princeton, NJ present Sisk, P.A. since 1993; President, American Bar 57 Portfolios
Ramo 08543-9095 Association from 1995 to 1996 and Member of the
Age: 64 Board of Governors thereof from 1994 to 1997;
Shareholder, Poole, Kelly & Ramo, Attorneys at
Law, P.C. from 1977 to 1993; Director of ECMC
Group (service provider to students, schools and
lenders) since 2001; Director, United New Mexico
Bank (now Wells Fargo) from 1983 to 1988;
Director, First National Bank of New Mexico (now
Wells Fargo) from 1975 to 1976; Vice President,
American Law Institute since 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert S. P.O. Box 9095 Director 2002 to Principal of STI Management (investment adviser) 37 Funds None
Salomon, Princeton, NJ present from 1994 to 2005; Chairman and CEO of Salomon 57 Portfolios
Jr. 08543-9095 Brothers Asset Management Inc. from 1992 to 1995;
Age: 70 Chairman of Salomon Brothers Equity Mutual Funds
from 1992 to 1995; regular columnist with Forbes
Magazine from 1992 to 2002; Director of Stock
Research and U.S. Equity Strategist at Salomon
Brothers Inc. from 1975 to 1991; Trustee,
Commonfund from 1980 to 2001.
------------------------------------------------------------------------------------------------------------------------
* Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
** Co-Chairman of the Board of Directors and the Audit Committee.
BLACKROCK SHORT-TERM BOND FUND JUNE 30, 2007 39
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. P.O. Box 9011 Vice 2002 to Managing Director of BlackRock, Inc. since 2006; Managing Director of Merrill
Burke Princeton, NJ President present Lynch Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P. ("FAM")
08543-9011 and in 2006; First Vice President of MLIM and FAM from 1997 to 2005 and Treasurer
Age: 47 Treasurer thereof from 1999 to 2006; Vice President of MLIM and FAM from 1990 to 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
Karen P.O. Box 9011 Fund Chief 2007 to Managing Director of BlackRock, Inc. and Chief Compliance Officer of certain
Clark Princeton, NJ Compliance present BlackRock-advised funds since 2007; Director of BlackRock, Inc. from 2005 to
08543-9011 Officer 2007; Principal and Senior Compliance Officer, State Street Global Advisors,
Age: 42 from 2001 to 2005; Principal Consultant, PricewaterhouseCoopers, LLP from 1998
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. P.O. Box 9011 Secretary 2004 to Director of BlackRock, Inc. since 2006; Director (Legal Advisory) of MLIM from
Pellegrino Princeton, NJ present 2002 to 2006; Vice President of MLIM from 1999 to 2002; Attorney associated with
08543-9011 MLIM from 1997 to 1999; Secretary of MLIM, FAM, FAM Distributors, Inc. and
Age: 47 Princeton Services from 2004 to 2006.
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the 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
40 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 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
advisers, banks or brokerages may offer this service.
Shareholders Who Hold Accounts Directly with BlackRock:
1) Access the BlackRock Web site at http://www.blackrock.com/edelivery
2) Select eDelivery under the More Information section
3) Log into your account
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 SHORT-TERM BOND FUND JUNE 30, 2007 41
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 Directors. 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 schedule 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.
42 BLACKROCK SHORT-TERM BOND FUND JUNE 30, 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 SHORT-TERM BOND FUND JUNE 30, 2007 43
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 returns 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 Short-Term Bond Fund of
BlackRock Short-Term Bond Series, Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
BLACKROCK
#BR-3070-6/07
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) Joe
Grills and (2) Robert S. Salomon, Jr.
Item 4 - Principal Accountant Fees and Services
Note: The Fund changed auditors effective August, 28, 2006. Prior to
that date, Ernst & Young LLP provided services as the Fund's
independent registered public accountant.
BlackRock Short-Term Bond Fund of BlackRock Short-Term Bond Series,
Inc.
(a) Audit Fees - Fiscal Year Ended June 30, 2007 - $6,600
Fiscal Year Ended June 30, 2006 - $0
(b) Audit-Related Fees - Fiscal Year Ended June 30, 2007 - $0
Fiscal Year Ended June 30, 2006 - $0
(c) Tax Fees - Fiscal Year Ended June 30, 2007 - $6,100
Fiscal Year Ended June 30, 2006 - $0
The nature of the services include tax compliance, tax advice and
tax planning.
(d) All Other Fees - Fiscal Year Ended June 30, 2007 - $0
Fiscal Year Ended June 30, 2006 - $0
Short-Term Bond Master Portfolio of Short-Term Bond Master LLC
(a) Audit Fees - Fiscal Year Ended June 30, 2007 - $32,700
Fiscal Year Ended June 30, 2006 - $41,000
(b) Audit-Related Fees - Fiscal Year Ended June 30, 2007 - $0
Fiscal Year Ended June 30, 2006 - $0
(c) Tax Fees - Fiscal Year Ended June 30, 2007 - $9,200
Fiscal Year Ended June 30, 2006 - $5,700
The nature of the services include tax compliance, tax advice and
tax planning.
(d) All Other Fees - Fiscal Year Ended June 30, 2007 - $0
Fiscal Year Ended June 30, 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 Short-Term Bond Fund of BlackRock Short-Term Bond
Series, Inc.
Fiscal Year Ended June 30, 2007 - $2,967,000
Fiscal Year Ended June 30, 2006 - $0
Short-Term Bond Master Portfolio of Short-Term Bond Master LLC
Fiscal Year Ended June 30, 2007 - $2,970,100
Fiscal Year Ended June 30, 2006 - $0
(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) - $1,735,000, 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 Short-Term Bond Fund of BlackRock Short-Term Bond Series, Inc. and
Short-Term Bond Master Portfolio of Short-Term Bond Master LLC
By: /s/ Robert C. Doll, Jr.
-----------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Short-Term Bond Fund of
BlackRock Short-Term Bond Series, Inc. and
Short-Term Bond Master Portfolio of Short-Term Bond Master LLC
Date: August 20, 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 Short-Term Bond Fund of
BlackRock Short-Term Bond Series, Inc. and
Short-Term Bond Master Portfolio of Short-Term Bond Master LLC
Date: August 20, 2007
By: /s/ Donald C. Burke
-----------------------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock Short-Term Bond Fund of
BlackRock Short-Term Bond Series, Inc. and
Short-Term Bond Master Portfolio of Short-Term Bond Master LLC
Date: August 20, 2007