UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Donald C. Burke, Chief Executive Officer
(principal 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: 06/30/2008
Date of reporting period: 07/01/2007 - 12/31/2007
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.
SEMI-ANNUAL REPORT
DECEMBER 31, 2007 | (UNAUDITED)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Table of Contents
================================================================================
Page
- --------------------------------------------------------------------------------
A Letter to Shareholders ................................................. 3
Semi-Annual Report:
Fund Summary ............................................................. 4
About Fund Performance ................................................... 6
Disclosure of Expenses ................................................... 6
Fund Financial Statements:
Statement of Assets and Liabilities .................................... 7
Statement of Operations ................................................ 8
Statements of Changes in Net Assets .................................... 9
Fund Financial Highlights ................................................ 10
Fund Notes to Financial Statements ....................................... 15
Proxy Results ............................................................ 18
Master Portfolio Information ............................................. 18
Master Financial Statements:
Schedule of Investments ................................................ 19
Statement of Assets and Liabilities .................................... 25
Statement of Operations ................................................ 26
Statements of Changes in Net Assets .................................... 27
Master Financial Highlights .............................................. 27
Master Notes to Financial Statements ..................................... 28
Officers and Directors ................................................... 32
BlackRock Fund Information ............................................... 33
Mutual Fund Family ....................................................... 35
2 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
A Letter to Shareholders
Dear Shareholder
Financial markets endured heightened volatility during 2007, culminating in
mixed results for some of the major benchmark indexes:
Total Returns as of December 31, 2007 6-month 12-month
=====================================================================================================================
U.S. equities (S&P 500 Index) -1.37% + 5.49%
- ---------------------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) -7.53 - 1.57
- ---------------------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) +0.39 +11.17
- ---------------------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers U.S. Aggregate Bond Index) +5.93 + 6.97
- ---------------------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) +3.22 + 3.36
- ---------------------------------------------------------------------------------------------------------------------
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index) -0.67 + 2.27
- ---------------------------------------------------------------------------------------------------------------------
Past performance is no guarantee of future results. Index performance shown for
illustrative purposes only. You cannot invest directly in an index.
Subprime mortgage woes dominated headlines for much of 2007, spawning a
widespread liquidity and credit crisis with ramifications across global markets.
The Federal Reserve Board (the "Fed") stepped in to inject liquidity into the
markets and bolster investor confidence, cutting the federal funds rate by 0.50%
in September, 0.25% in October and 0.25% in December, which brought the target
short-term interest rate to 4.25%. In taking action, the central bankers, who
had long deemed themselves inflation fighters, were seeking to stem the fallout
from the credit crunch and forestall a wider economic unraveling.
Amid the volatility, equity markets displayed surprising resilience. Market
fundamentals generally held firm, dividend payouts and share buybacks continued,
and valuations remained attractive. To some extent, the credit turmoil dampened
corporate merger-and-acquisition (M&A) activity, a key source of strength for
equity markets, but 2007 remained a record year for global M&A nonetheless. As
the returns indicate, the most recent six months were more trying, reflecting
the slowing U.S. economy, a troubled housing market and a more difficult
corporate earnings backdrop. Overall, large cap stocks outperformed small caps
as investors grew increasingly risk averse. International markets fared better
than their U.S. counterparts, benefiting from generally stronger economies.
In fixed income markets, mixed economic signals and subprime fallout resulted in
a flight to quality. Investors shunned bonds associated with the housing and
credit markets in favor of higher-quality Treasury issues. The yield on 10-year
Treasury issues, which touched 5.30% in June (its highest level in five years),
fell to 4.04% by year-end, while prices correspondingly rose. The tax-exempt
bond market waffled amid the economic uncertainty and concerns around the credit
worthiness of bond insurers, but set a new-issuance record in 2007. A drop in
municipal bond prices created buying opportunities, and the heightened supply
was generally well absorbed.
As you navigate the uncertainties inherent in the financial markets, we
encourage you to start the year by reviewing your investment goals with your
financial professional and making portfolio changes, as needed. For more
reflection on 2007 and our 10 predictions for 2008, please ask your financial
professional for a copy of "What's Ahead in 2008: An Investment Perspective," or
view it online at www.blackrock.com/funds. As always, we thank you for
entrusting BlackRock with your investment assets, and we look forward to
continuing to serve you in the new year and beyond.
Sincerely,
/s/ Rob Kapito
Rob Kapito
President, BlackRock Advisors, LLC
3
THIS PAGE NOT PART OF YOUR FUND REPORT
Fund Summary
Portfolio Management Commentary
How did the Fund perform?
o The Fund underperformed the benchmark for the six-month period ended
December 31, 2007.
What factors influenced performance?
o Financial markets were highly volatile during the period as fears spread
about which investments might have exposure to the troubled subprime
mortgage market. The liquidity of mortgage-backed securities began drying
up, which led to a wider liquidity crisis as banks restricted their
short-term lending. Fundamentally, most spread product remained fairly
sound, but the lack of buyers caused spreads to widen as investors fled to
the safety of Treasury issues. The Fund concentrates its investment in
high-quality spread product (issues that generally have higher yield
potential and less correlation to Treasury issues), and this proved
detrimental against the underlying backdrop.
o In addition, the portfolio had long positions in Europe, Australia and
Sweden (including both government bonds and swap rates) against a short
position in the U.S. bond market. The theory was that the U.S. economic
slowdown and trouble in the subprime market would not be contained to the
United States, but would impact other markets as well, leading to a
slowdown across the globe. While the U.S. market was priced for a slowdown
(and for Federal Reserve Board interest rate cuts), the other economies
were not. As such, the U.S. continued to outperform and our positioning
detracted.
o Although it was nearly impossible to outperform Treasury issues during
this period, we were effective in avoiding problem securities, which
proved advantageous versus competitor funds. In particular, we avoided
collateralized debt obligations and structured investment vehicles within
the financial products markets. Our yield curve positioning also was a
benefit.
We had positioned the Fund for a steepening yield curve, a move that
proved advantageous as short-term interest rates fell more than long-term
interest rates and the curve steepened. We were short BBB-rated home
equities, which was a relative positive as well.
Describe recent portfolio activity.
o We established a short position in the home-equity sector, which we
removed in August to realize profits. Although the mortgage market was
battered, unduly in many cases, we continued to see good relative value
and selectively took advantage of this. We purchased some AAA-rated front
cash-flow one-year home equity floaters. These have an 18- to 24-month
payment window and are the first bonds in the payment structure to receive
principal. We also continued to add hybrid adjustable rate mortgage
product to the portfolio.
o Our aforementioned long position in Europe and Australia was put in place
early in this reporting period.
Describe Fund positioning at period-end.
o The Fund ended the period with a duration (a measure of interest rate
sensitivity) similar to that of its benchmark. We continue to overweight
high-quality spread product and remain long in Europe versus a short in
the United States.
Expense Example
Actual Hypothetical**
------------------------------------------------------- -------------------------------------------------------
Beginning Ending Beginning Ending
Account Value Account Value Expenses Paid Account Value Account Value Expenses Paid
July 1, 2007 December 31, 2007 During the Period* July 1, 2007 December 31, 2007 During the Period*
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional $1,000 $1,018.20 $ 3.56 $1,000 $1,021.67 $ 3.57
Investor A $1,000 $1,017.60 $ 5.29 $1,000 $1,019.96 $ 5.30
Investor B $1,000 $1,014.20 $ 8.63 $1,000 $1,016.63 $ 8.64
Investor C $1,000 $1,012.30 $10.50 $1,000 $1,014.76 $10.51
Investor C1 $1,000 $1,013.30 $ 8.42 $1,000 $1,016.83 $ 8.44
Class R $1,000 $1,015.70 $ 7.11 $1,000 $1,018.14 $ 7.12
- ------------------------------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (.70% for Institutional, 1.04% for Investor A, 1.70%
for Investor B, 2.07% for Investor C, 1.66% for Investor C1 and 1.40% for
Class R), multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period shown). Because
the Fund is a feeder fund, the expense table example reflects the expenses
of both the feeder fund and the master portfolio in which it invests.
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 365.
See "Disclosure of Expenses" on page 6 for further information on how
expenses were calculated.
4 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Institutional
Shares and Investor A Shares compared to growth of an investment in the Merrill
Lynch 1 - 3 Year Corporate & Government Index. Values are from December 1997 to
December 2007.
Merrill Lynch
1 - 3 Year
Corporate
Institutional Investor A & Government
Shares*+ Shares*+ Index++
12/97 $10,000 $9,700 $10,000
12/98 $10,565 $10,223 $10,701
12/99 $10,920 $10,540 $11,049
12/00 $11,677 $11,243 $11,940
12/01 $12,579 $12,073 $12,980
12/02 $13,147 $12,587 $13,771
12/03 $13,538 $12,930 $14,149
12/04 $13,760 $13,109 $14,321
12/05 $13,993 $13,296 $14,571
12/06 $14,593 $13,832 $15,191
12/07 $15,092 $14,273 $16,235
* 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
(the "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.
Performance Summary for the Period Ended December 31, 2007
Average Annual Total Returns*
--------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------- ------------------- --------------------
Standardized 6-Month w/o sales w/sales w/o sales w/sales w/o sales w/sales
30-Day Yields Total Returns charge charge charge charge charge charge
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional 4.46% +1.82% +3.42% -- +2.80% -- +4.20% --
Investor A 4.01 +1.76 +3.19 +0.10% +2.55 +1.92% +3.94 +3.62%
Investor B 3.46 +1.42 +2.51 -1.45 +1.87 +1.51 +3.26 +3.26
Investor C 3.15 +1.23 +2.14 +1.15 +1.73 +1.73 +3.14 +3.14
Investor C1 3.50 +1.33 +2.44 +1.45 +1.85 +1.85 +3.24 +3.24
Class R 3.71 +1.57 +2.74 -- +2.40 -- +3.74 --
Merrill Lynch 1 - 3 Corporate
and Government Index -- +4.59 +6.87 -- +3.35 -- +4.97 --
- ------------------------------------------------------------------------------------------------------------------------------------
* Assuming maximum sales charges. See "About Fund Performance" on page 6 for
a detailed description of share classes, including any related sales
charges and fees.
Past performance is not indicative of future results.
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 5
About Fund Performance
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 page 5 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/funds to obtain performance data current to
the most recent month-end. Performance results do not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of
fund shares. Figures shown in the performance tables on page 5 assume
reinvestment of all dividends and capital gain distributions, if any, at net
asset value on the 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. The Portfolio's Manager has voluntarily waived a portion
of its fee. Without such a waiver, the Fund's returns would have been lower.
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 expense example on page 4 (which is
based on a hypothetical investment of $1,000 invested on July 1, 2007 and held
through December 31, 2007) is intended to assist shareholders both in
calculating expenses based on an investment in the Fund and in comparing these
expenses with similar costs of investing in other mutual funds.
The table provides information about actual account values and actual expenses.
In order to estimate the expenses a shareholder paid during the period covered
by this report, shareholders can divide their account value by $1,000 and then
multiply the result by the number corresponding to their share class under the
heading entitled "Expenses Paid During the Period."
The table also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses. In order to assist shareholders
in comparing the ongoing expenses of investing in this Fund and other funds,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders' ongoing
costs only and do not reflect any transactional expenses, such as sales charges,
redemption fees or exchange fees. Therefore, the hypothetical table is useful in
comparing ongoing expenses only, and will not help shareholders determine the
relative total expenses of owning different funds. If these transactional
expenses were included, shareholder expenses would have been higher.
6 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Statement of Assets and Liabilities BlackRock Short-Term Bond Fund
As of December 31, 2007 (Unaudited)
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investment in Short-Term Bond Master Portfolio (the "Portfolio"), at value
(identified cost -- $694,665,326) ............................................................ $ 693,729,997
Prepaid expenses ............................................................................... 16,886
-------------
Total assets ................................................................................... 693,746,883
-------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Payables:
Dividends to shareholders .................................................................. $ 2,186,416
Other affiliates ........................................................................... 237,518
Distributor ................................................................................ 207,851
Administrator .............................................................................. 150,686 2,782,471
-------------
Accrued expenses ............................................................................... 16,992
-------------
Total liabilities .............................................................................. 2,799,463
-------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets ..................................................................................... $ 690,947,420
=============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Shares of Common Stock, $.01 par value, 100,000,000 shares authorized ............ $ 199,030
Investor A Shares of Common Stock, $.01 par value, 100,000,000 shares authorized ............... 313,677
Investor B Shares of Common Stock, $.01 par value, 200,000,000 shares authorized ............... 36,836
Investor C Shares of Common Stock, $.01 par value, 100,000,000 shares authorized ............... 37,235
Investor C1 Shares of Common Stock, $.01 par value, 100,000,000 shares authorized .............. 100,437
Class R Shares of Common Stock, $.01 par value, 200,000,000 shares authorized .................. 9,005
Paid-in capital in excess of par ............................................................... 725,822,811
Undistributed investment income -- net ......................................................... 298,943
Accumulated realized capital losses allocated from the Portfolio -- net ........................ (34,935,225)
Unrealized depreciation allocated from the Portfolio -- net .................................... (935,329)
-------------
Net assets ..................................................................................... $ 690,947,420
=============
===================================================================================================================================
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional -- Based on net assets of $197,718,257 and 19,903,049 shares outstanding ......... $ 9.93
=============
Investor A -- Based on net assets of $311,440,450 and 31,367,683 shares outstanding ............ $ 9.93
=============
Investor B -- Based on net assets of $36,492,249 and 3,683,629 shares outstanding .............. $ 9.91
=============
Investor C -- Based on net assets of $36,896,441 and 3,723,545 shares outstanding .............. $ 9.91
=============
Investor C1 -- Based on net assets of $99,474,261 and 10,043,725 shares outstanding ............ $ 9.90
=============
Class R -- Based on net assets of $8,925,762 and 900,507 shares outstanding .................... $ 9.91
=============
See Notes to Financial Statements.
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 7
Statement of Operations BlackRock Short-Term Bond Fund
For the Six Months Ended December 31, 2007 (Unaudited)
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Portfolio:
Interest ................................................................................... $ 18,045,155
Expenses ................................................................................... (968,344)
-------------
Total income ................................................................................... 17,076,811
-------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Administration fees ............................................................................ $ 864,285
Service and distribution fees -- Investor C1 ................................................... 475,453
Service fees -- Investor A ..................................................................... 382,896
Transfer agent fees -- Investor A .............................................................. 339,536
Service and distribution fees -- Investor B .................................................... 178,125
Service and distribution fees -- Investor C .................................................... 151,897
Transfer agent fees -- Institutional ........................................................... 135,024
Transfer agent fees -- Investor C1 ............................................................. 106,495
Transfer agent fees -- Investor C .............................................................. 76,823
Printing and shareholder reports ............................................................... 64,837
Transfer agent fees -- Investor B .............................................................. 46,394
Registration fees .............................................................................. 36,992
Service and distribution fees -- Class R ....................................................... 23,098
Professional fees .............................................................................. 19,696
Transfer agent fees -- Class R ................................................................. 15,662
Other .......................................................................................... 8,942
-------------
Total expenses ................................................................................. 2,926,155
-------------
Investment income -- net ....................................................................... 14,150,656
-------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) Allocated from the Portfolio -- Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments -- net ......................................................................... (1,513,761)
Financial futures contracts and swaps -- net ............................................... (5,185,062)
Foreign currency transactions -- net ....................................................... 329,844
Options written -- net ..................................................................... 388,121 (5,980,858)
-------------
Change in unrealized appreciation/depreciation on:
Investments -- net ......................................................................... 2,559,617
Financial futures contracts and swaps -- net ............................................... 922,382
Foreign currency transactions -- net ....................................................... (42,401)
Options written -- net ..................................................................... (35,253) 3,404,345
-------------------------------
Total realized and unrealized loss -- net ...................................................... (2,576,513)
-------------
Net Increase in Net Assets Resulting from Operations ........................................... $ 11,574,143
=============
See Notes to Financial Statements.
8 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Statements of Changes in Net Assets BlackRock Short-Term Bond Fund
For the Six
Months Ended For the
December 31, Year Ended
2007 June 30,
Increase (Decrease) in Net Assets: (Unaudited) 2007
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ....................................................................... $ 14,150,656 $ 25,375,834
Realized loss -- net ........................................................................... (5,980,858) (7,047,013)
Change in unrealized appreciation/depreciation -- net .......................................... 3,404,345 9,238,509
-------------------------------
Net increase in net assets resulting from operations ........................................... 11,574,143 27,567,330
-------------------------------
===================================================================================================================================
Dividends to Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net:
Institutional .............................................................................. (4,430,666) (8,402,051)
Investor A ................................................................................. (6,260,233) (10,962,922)
Investor B ................................................................................. (678,245) (1,626,913)
Investor C ................................................................................. (463,152) (278,138)
Investor C1 ................................................................................ (1,827,569) (4,176,074)
Class R .................................................................................... (171,908) (261,107)
-------------------------------
Net decrease in net assets resulting from dividends to shareholders ............................ (13,831,773) (25,707,205)
-------------------------------
===================================================================================================================================
Capital Share Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets derived from capital share transactions .................. 19,296,877 (5,691,836)
-------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ........................................................ 17,039,247 (3,831,711)
Beginning of period ............................................................................ 673,908,173 677,739,884
-------------------------------
End of period* ................................................................................. $ 690,947,420 $ 673,908,173
===============================
* Undistributed (accumulated distributions in excess of) investment income -- net .......... $ 298,943 $ (19,940)
===============================
See Notes to Financial Statements.
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 9
Financial Highlights BlackRock Short-Term Bond Fund
Institutional
---------------------------------------------------------------------
For the Six
Months Ended
December 31, For the Year Ended June 30,
The following per share data and ratios have been derived 2007 ------------------------------------------------------
from information provided in the financial statements. (Unaudited) 2007 2006 2005 2004 2003
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $ 9.97 $ 9.94 $ 10.10 $ 10.16 $ 10.39 $ 10.17
-------------------------------------------------------------------
Investment income -- net*** ........................... .23 .42 .36 .30 .31 .31
Realized and unrealized gain (loss) -- net ............ (.05) .03 (.15) (.06) (.23) .25
-------------------------------------------------------------------
Total from investment operations ...................... .18 .45 .21 .24 .08 .56
-------------------------------------------------------------------
Less dividends from investment income -- net .......... (.22) (.42) (.37) (.30) (.31) (.34)
-------------------------------------------------------------------
Net asset value, end of period ........................ $ 9.93 $ 9.97 $ 9.94 $ 10.10 $ 10.16 $ 10.39
===================================================================
===================================================================================================================================
Total Investment Return**
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 1.82%@ 4.59% 2.11% 2.39% .81% 5.61%
===================================================================
===================================================================================================================================
Ratios to Average Net Assets+
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and reimbursement and excluding
reorganization expenses ............................. .70%* .72% .67% .69% .65% .70%
===================================================================
Expenses .............................................. .70%* .72% .67% .69% .65% .75%
===================================================================
Investment income -- net .............................. 4.50%* 4.16% 3.61% 2.93% 3.00% 3.29%
===================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............. $197,718 $200,542 $203,377 $208,777 $240,749 $182,654
===================================================================
Portfolio turnover of the Portfolio ................... 36%++ 108%++ 80% 75% 107% 198%
===================================================================
* Annualized.
** 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.
@ Aggregate total investment return.
See Notes to Financial Statements.
10 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Financial Highlights (continued) BlackRock Short-Term Bond Fund
Investor A
---------------------------------------------------------------------
For the Six
Months Ended
December 31, For the Year Ended June 30,
The following per share data and ratios have been derived 2007 ------------------------------------------------------
from information provided in the financial statements. (Unaudited) 2007 2006 2005 2004 2003
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $ 9.96 $ 9.94 $ 10.10 $ 10.16 $ 10.38 $ 10.16
-------------------------------------------------------------------
Investment income -- net*** ........................... .21 .39 .34 .27 .29 .31
Realized and unrealized gain (loss) -- net ............ (.04) .02 (.16) (.05) (.22) .23
-------------------------------------------------------------------
Total from investment operations ...................... .17 .41 .18 .22 .07 .54
-------------------------------------------------------------------
Less dividends from investment income -- net .......... (.20) (.39) (.34) (.28) (.29) (.32)
-------------------------------------------------------------------
Net asset value, end of period ........................ $ 9.93 $ 9.96 $ 9.94 $ 10.10 $ 10.16 $ 10.38
===================================================================
===================================================================================================================================
Total Investment Return**
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 1.76%@ 4.20% 1.84% 2.14% .66% 5.36%
===================================================================
===================================================================================================================================
Ratios to Average Net Assets+
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and reimbursement and excluding
reorganization expenses ............................. 1.04%* 1.00% .91% .93% .89% .95%
===================================================================
Expenses .............................................. 1.04%* 1.00% .91% .93% .89% 1.00%
===================================================================
Investment income -- net .............................. 4.18%* 3.88% 3.37% 2.69% 2.78% 3.03%
===================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............. $311,440 $286,396 $267,411 $235,886 $125,950 $152,780
===================================================================
Portfolio turnover of the Portfolio ................... 36%++ 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.
++ Excludes dollar roll transactions.
@ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 11
Financial Highlights (continued) BlackRock Short-Term Bond Fund
Investor B
---------------------------------------------------------------------
For the Six
Months Ended
December 31, For the Year Ended June 30,
The following per share data and ratios have been derived 2007 ------------------------------------------------------
from information provided in the financial statements. (Unaudited) 2007 2006 2005 2004 2003
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $ 9.94 $ 9.91 $ 10.08 $ 10.14 $ 10.37 $ 10.14
-------------------------------------------------------------------
Investment income -- net*** ........................... .17 .32 .27 .20 .22 .24
Realized and unrealized gain (loss) -- net ............ (.03) .02 (.16) (.05) (.23) .24
-------------------------------------------------------------------
Total from investment operations ...................... .14 .34 .11 .15 (.01) .48
-------------------------------------------------------------------
Less dividends from investment income -- net .......... (.17) (.31) (.28) (.21) (.22) (.25)
-------------------------------------------------------------------
Net asset value, end of period ........................ $ 9.91 $ 9.94 $ 9.91 $ 10.08 $ 10.14 $ 10.37
===================================================================
===================================================================================================================================
Total Investment Return**
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 1.42%@ 3.61% 1.07% 1.46% (.11%) 4.77%
===================================================================
===================================================================================================================================
Ratios to Average Net Assets+
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and reimbursement and excluding
reorganization expenses ............................. 1.70%* 1.67% 1.59% 1.61% 1.56% 1.61%
===================================================================
Expenses .............................................. 1.70%* 1.67% 1.59% 1.61% 1.56% 1.66%
===================================================================
Investment income -- net .............................. 3.46%* 3.21% 2.67% 2.00% 2.12% 2.00%
===================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............. $ 36,492 $ 42,358 $ 60,519 $ 97,090 $130,802 $139,688
===================================================================
Portfolio turnover of the Portfolio ................... 36%++ 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.
++ Excludes dollar roll transactions.
@ Aggregate total investment return.
See Notes to Financial Statements.
12 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Financial Highlights (continued) BlackRock Short-Term Bond Fund
Investor C Investor C1
------------------------ ---------------------------------------------------------------
For the For the For the
Six Months Period Six Months
Ended October 2, Ended
The following per share data and ratios December 31, 2006+++ December 31, For the Year Ended June 30,
have been derived from information 2007 to June 30, 2007 --------------------------------------------------
provided in the financial statements. (Unaudited) 2007 (Unaudited) 2007 2006 2005 2004 2003
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 9.94 $ 10.01 $ 9.94 $ 9.91 $ 10.07 $ 10.13 $ 10.36 $ 10.14
-------------------- --------------------------------------------------------------
Investment income -- net*** ............ .16 .19 .18 .32 .27 .20 .22 .24
Realized and unrealized gain
(loss) -- net ........................ (.04) (.03) (.05) .04 (.15) (.05) (.23) .23
-------------------- --------------------------------------------------------------
Total from investment operations ....... .12 .16 .13 .36 .12 .15 (.01) .47
-------------------- --------------------------------------------------------------
Less dividends from investment
income -- net ........................ (.15) (.23) (.17) (.33) (.28) (.21) (.22) (.25)
-------------------- --------------------------------------------------------------
Net asset value, end of period ......... $ 9.91 $ 9.94 $ 9.90 $ 9.94 $ 9.91 $ 10.07 $ 10.13 $ 10.36
==================== ==============================================================
===================================================================================================================================
Total Investment Return**
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 1.23%@ 1.57%@ 1.33%@ 3.62% 1.17% 1.46% (.11%) 4.68%
==================== ==============================================================
===================================================================================================================================
Ratios to Average Net Assets+
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and reimbursement
and excluding reorganization expenses. 2.07%* 2.09%* 1.66%* 1.66% 1.59% 1.60% 1.56% 1.61%
==================== ==============================================================
Expenses ............................... 2.07%* 2.09%* 1.66%* 1.66% 1.59% 1.60% 1.56% 1.66%
==================== ==============================================================
Investment income -- net ............... 3.29%* 2.81%* 3.50%* 3.24% 2.68% 2.01% 2.12% 2.37%
==================== ==============================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 36,896 $ 23,886 $ 99,474 $111,844 $142,083 $179,290 $239,263 $263,066
==================== ==============================================================
Portfolio turnover of the Portfolio ... 36%++ 108%++ 36%++ 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.
++ Excludes dollar roll transactions.
+++ Commencement of operations.
@ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 13
Financial Highlights (concluded) BlackRock Short-Term Bond Fund
Class R
-----------------------------------------------------------------------
For the For the
Six Months Period
Ended For the Year Ended January 3,
December 31, June 30, 2003+++
The following per share data and ratios have been derived 2007 --------------------------------------- to June 30,
from information provided in the financial statements. (Unaudited) 2007 2006 2005 2004 2003
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............... $ 9.94 $ 9.92 $ 10.08 $ 10.14 $ 10.37 $ 10.29
---------------------------------------------------------------------
Investment income -- net** ......................... .19 .36 .32 .18 .17 .18
Realized and unrealized gain (loss) -- net ......... (.03) .02 (.16) .01 (.11) .08
---------------------------------------------------------------------
Total from investment operations ................... .16 .38 .16 .19 .06 .26
---------------------------------------------------------------------
Less dividends from investment income -- net ....... (.19) (.36) (.32) (.25) (.29) (.18)
---------------------------------------------------------------------
Net asset value, end of period ..................... $ 9.91 $ 9.94 $ 9.92 $ 10.08 $ 10.14 $ 10.37
=====================================================================
====================================================================================================================================
Total Investment Return
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ................. 1.57%@ 3.91% 1.58% 1.88% .56% 2.55%@
=====================================================================
====================================================================================================================================
Ratios to Average Net Assets+
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding reorganization expenses ........ 1.40%* 1.30% 1.17% 1.19% 1.16% 1.19%*
=====================================================================
Expenses ........................................... 1.40%* 1.30% 1.17% 1.19% 1.16% 1.28%*
=====================================================================
Investment income -- net ........................... 3.78%* 3.59% 3.15% 2.46% 2.42% 2.74%*
=====================================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ........... $ 8,926 $ 8,882 $ 4,350 $ 4,477 $ 2,387 --@@
=====================================================================
Portfolio turnover of the Portfolio ................ 36%++ 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.
++ Excludes dollar roll transactions.
+++ Commencement of operations.
@ Aggregate total investment return.
@@ Amount is less than $1,000.
See Notes to Financial Statements.
14 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Notes to Financial Statements (Unaudited) BlackRock Short-Term Bond Fund
1. Significant Accounting Policies:
BlackRock Short-Term Bond Fund (the "Fund"), a series of BlackRock Short-Term
Bond Series, Inc. (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. Prior
to June 15, 2007, the Master LLC was organized as a Delaware statutory trust.
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
December 31, 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. These unaudited financial statements reflect all adjustments,
which are, in the opinion of management, necessary to present a fair statement
of the results for the interim period. All such adjustments are of a normal,
recurring nature. The Fund offers multiple classes of shares. Institutional
Shares are sold only to certain eligible investors. Investor A Shares are
generally 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 require-ments 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 -- Effective June 29, 2007, the Fund
implemented Financial Accounting Standards Board ("FASB") Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
Statement No. 109" ("FIN 48"). FIN 48 prescribes the minimum recognition
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 investment companies, before being measured and recognized in
the financial statements. Management has evaluated the application of FIN 48 to
the Fund, and has determined that the adoption of FIN 48 does not have a
material impact on the Fund's financial statements. The Fund files U.S. federal
and various state and local tax returns. No income tax returns are currently
under examination. The statute of limitations on the Fund's U.S. federal tax
returns remains open for the years ended June 30, 2004 through June 30, 2007.
The statute of limitations on the Fund's state and local tax returns may remain
open for an additional year depending upon the jurisdiction.
In September 2006, Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"), was issued and is effective for fiscal years
beginning after November 15, 2007. FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. At this time, management is evaluating the implications of FAS 157
and its impact on the Fund's financial statements, if any, has not been
determined.
In addition, in February 2007, 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
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 15
Notes to Financial Statements (continued) BlackRock Short-Term Bond Fund
and liabilities. At this time, management is evaluating the implications of FAS
159 and its impact on the Fund's financial statements, if any, has not been
determined.
2. Transactions with Affiliates:
The Fund has entered into an Administration Agreement with BlackRock Advisors,
LLC (the "Administrator"), an indirect, wholly owned subsidiary of BlackRock
Inc. 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.
The Company has also entered into separate Distribution Agreements with FAM
Distributors, Inc. ("FAMD") and BlackRock Distributors, Inc. and its affiliates
("BDI") (collectively, the "Distributor") and has adopted separate Distribution
Plans with respect to its Investor A, Investor B, Investor C, Investor C1 and
Class R Shares. FAMD is a wholly owned subsidiary of Merrill Lynch Group, Inc.,
and BDI is an affiliate of BlackRock, Inc. Merrill Lynch & Co., Inc. ("Merrill
Lynch") and The PNC Financial Services Group, Inc. ("PNC") are the principal
owners 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 service and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Service Distribution
Fee Fee
- --------------------------------------------------------------------------------
Investor A ......................................... .25% --
Investor B ......................................... .25% .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 the 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 distribution-related services to Investor B,
Investor C, Investor C1 and Class R shareholders.
For the six months ended December 31, 2007, FAMD earned underwriting discounts
and direct commissions and MLPF&S earned dealer concessions on sales of the
Fund's Investor A Shares which totaled $76,943.
For the six months ended December 31, 2007, affiliates received contingent
deferred sales charges of $24,146, $7,557 and $2,646 relating to transactions in
Investor B, Investor C and Investor C1 Shares, respectively.
The Administrator 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 six
months ended December 31, 2007, the following amounts have been accrued by the
Fund to reimburse the Administrator for costs incurred running the call center,
which are a component of the transfer agent fees in the accompanying Statements
of Operations.
- --------------------------------------------------------------------------------
Call Center Fees
- --------------------------------------------------------------------------------
Institutional ................................................... $4,306
Investor A ...................................................... $7,517
Investor B ...................................................... $1,906
Investor C ...................................................... $ 665
Investor C1 ..................................................... $2,617
Class R ......................................................... $ 139
- --------------------------------------------------------------------------------
PFPC Inc., an indirect, wholly owned subsidiary of PNC and an affiliate of the
Administrator, is the Fund's transfer agent.
Certain officers and/or directors of the Fund are officers and/or directors of
BlackRock, Inc. or its affiliates.
3. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share transactions
was $19,296,877 and $(5,691,836) for the six months ended December 31, 2007 and
the year ended June 30, 2007, respectively.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Institutional Shares for the Six Months Dollar
Ended December 31, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 1,223,263 $ 12,181,178
Shares issued to shareholders in
reinvestment of dividends .................. 411,770 4,098,540
---------------------------
Total issued ................................. 1,635,033 16,279,718
Shares redeemed .............................. (1,853,744) (18,456,397)
---------------------------
Net decrease ................................. (218,711) $ (2,176,679)
===========================
- -------------------------------------------------------------------------------
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)
===========================
16 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Notes to Financial Statements (concluded) BlackRock Short-Term Bond Fund
- -------------------------------------------------------------------------------
Investor A Shares for the Six Months Dollar
Ended December 31, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold and automatic conversion of shares 4,571,228 $ 45,513,089
Shares issued to shareholders in
reinvestment of dividends .................. 588,751 5,857,070
---------------------------
Total issued ................................. 5,159,979 51,370,159
Shares redeemed .............................. (2,544,323) (25,311,676)
---------------------------
Net increase ................................. 2,615,656 $ 26,058,483
===========================
- -------------------------------------------------------------------------------
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
Shares 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 B Shares for the Six Months Dollar
Ended December 31, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 142,735 $ 1,417,364
Shares issued to shareholders in
reinvestment of dividends .................. 48,325 479,640
---------------------------
Total issued ................................. 191,060 1,897,004
Shares redeemed and automatic conversion
of shares .................................. (769,237) (7,637,814)
---------------------------
Net decrease ................................. (578,177) $ (5,740,810)
===========================
- -------------------------------------------------------------------------------
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)
===========================
- -------------------------------------------------------------------------------
Investor C Shares for the Six Months Dollar
Ended December 31, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 1,657,408 $ 16,458,416
Shares issued to shareholders in
reinvestment of dividends .................. 39,564 392,841
---------------------------
Total issued ................................. 1,696,972 16,851,257
Shares redeemed .............................. (376,167) (3,733,809)
---------------------------
Net increase ................................. 1,320,805 $ 13,117,448
===========================
- -------------------------------------------------------------------------------
Investor C Shares for the Period Dollar
October 2, 2006* to 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 Six Months Dollar
Ended December 31, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 63,894 $ 633,808
Shares issued to shareholders in
reinvestment of dividends .................. 139,838 1,387,711
---------------------------
Total issued ................................. 203,732 2,021,519
Shares redeemed .............................. (1,415,884) (14,056,780)
---------------------------
Net decrease ................................. (1,212,152) $(12,035,261)
===========================
- -------------------------------------------------------------------------------
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)
===========================
- -------------------------------------------------------------------------------
Class R Shares for the Six Months Dollar
Ended December 31, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 233,558 $ 2,320,103
Shares issued to shareholders in
reinvestment of dividends .................. 17,304 171,859
---------------------------
Total issued ................................. 250,862 2,491,962
Shares redeemed .............................. (243,515) (2,418,266)
---------------------------
Net increase ................................. 7,347 $ 73,696
===========================
- -------------------------------------------------------------------------------
Class R Shares for the Year Dollar
Ended June 30, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................................. 788,722 $ 7,885,609
Shares 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
===========================
4. Capital Loss Carryforward:
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.
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 17
Proxy Results
During the six-month period ended December 31, 2007, the shareholders* of
BlackRock Short-Term Bond Fund of BlackRock Short-Term Bond Series, Inc. voted
on the following proposal, which was approved at an annual shareholders' meeting
on September 7, 2007. This proposal was a part of the reorganization of the
Fund's Board of Directors that took effect on November 1, 2007. A description of
the proposal and number of shares voted are as follows:
- ------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- ------------------------------------------------------------------------------------------------------------
To elect the Fund's Board of Directors: James H. Bodurtha 62,651,823 2,597,228
Bruce R. Bond 62,651,823 2,597,228
Donald W. Burton 62,651,823 2,597,228
Richard S. Davis 62,650,224 2,598,827
Stuart E. Eizenstat 62,651,921 2,597,130
Laurence D. Fink 62,650,224 2,598,827
Kenneth A. Froot 62,651,823 2,597,228
Henry Gabbay 62,650,226 2,598,825
Robert M. Hernandez 62,651,823 2,597,228
John F. O'Brien 62,651,125 2,597,926
Roberta Cooper Ramo 62,652,725 2,596,326
Jean Margo Reid 62,652,725 2,596,326
David H. Walsh 62,652,525 2,596,526
Fred G. Weiss 62,652,525 2,596,526
Richard R. West 62,652,203 2,596,848
- ------------------------------------------------------------------------------------------------------------
* As a feeder fund of Short-Term Bond Master Portfolio of Short-Term Bond
Master LLC, the shareholders of BlackRock Short-Term Bond Fund of
BlackRock Short-Term Bond Series, Inc. also voted to elect the above-named
individuals as Directors of Short-Term Bond Master Portfolio of Short-Term
Bond Master LLC.
Portfolio Information as of December 31, 2007 Short-Term Bond Master Portfolio
Percent of
Asset Mix Long-Term Investments
- --------------------------------------------------------------------------------
Non-U.S. Government Agency Mortgage-Backed
Securities ...................................................... 36.9%
Asset-Backed Securities ........................................... 25.0
U.S. Government Agency Mortgage-Backed
Securities ...................................................... 17.5
Corporate Bonds ................................................... 16.1
U.S. Government Agency Mortgage-Backed
Obligations -- Collateralized Mortgage
Obligations ..................................................... 4.2
Foreign Government Obligations .................................... 0.2
Capital Trusts .................................................... 0.1
- --------------------------------------------------------------------------------
18 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Schedule of Investments as of December 31, 2007 (Unaudited)
Short-Term Bond Master Portfolio (in U.S. dollars)
Face
Amount Asset-Backed Securities+ Value
===============================================================================
USD 5,466,890 ACE Securities Corp. Series 2006-FM2
Class A2A, 4.915% due 8/25/2036 (a) $ 5,212,898
2,999,780 Aegis Asset Backed Securities Trust Series
2006-1 Class A1, 4.945%
due 1/25/2037 (a) 2,925,211
9,604,003 Ameriquest Mortgage Securities, Inc. Series
2004-FR1 Class A5, 4.455%
due 5/25/2034 (a) 9,404,864
3,168,544 Asset Backed Funding Certificates Series
2006-OPT2 Class A3A, 4.925%
due 10/25/2036 (a) 3,093,673
5,350,000 Bank of America Credit Card Trust Series
2007-A7 Class A7, 4.652%
due 8/15/2012 (a)(b) 5,318,123
Capital Auto Receivables Asset Trust (b):
1,250,000 Series 2004-2 Class D, 5.82%
due 5/15/2012 1,246,298
2,798,605 Series 2006-SN1A Class A2A, 5.40%
due 1/20/2009 2,801,106
2,139,345 Chase Manhattan Auto Owner Trust Series
2005-A Class A3, 3.87% due 6/15/2009 2,131,461
Countrywide Asset Backed Certificates (a):
804,123 Series 2004-13 Class AF3, 3.989%
due 12/25/2034 789,326
1,307,626 Series 2006-20 Class 2A1, 4.915%
due 4/25/2037 1,280,264
6,525,000 Daimler Chrysler Auto Trust Series 2006-C
Class A3, 5.02% due 7/08/2010 6,542,050
3,791,082 First Horizon Asset Backed Securities Trust
Series 2004-HE4 Class A2, 4.07%
due 7/25/2019 3,709,707
Ford Credit Auto Owner Trust:
5,035,928 Series 2005-A Class A4, 3.72%
due 10/15/2009 5,010,395
5,286,554 Series 2005-B Class A4, 4.38%
due 1/15/2010 5,278,539
2,557,375 Series 2005-C Class A3, 4.30%
due 8/15/2009 2,553,112
1,531,115 Fremont Home Loan Trust Series 2005-E Class
2A2, 5.035% due 1/25/2036 (a) 1,523,454
4,543,170 GCO Slims Trust Series 2006-1A Class NOTE,
5.72% due 3/01/2022 (b) 4,497,738
166,811 GSAA Home Equity Trust Series 2006-8N Class
N1, 6% due 10/26/2036 (b) 50,043
1,461,477 GSAA Trust Series 2004-10 Class AF2, 4.22%
due 8/25/2034 (a) 1,457,185
3,621,458 GSAMP Trust Series 2005-AHL Class A3,
5.205% due 4/25/2035 (a) 3,440,385
3,780,983 HSI Asset Securitization Corp. Trust Series
2006-HE1 Class 2A1, 4.915%
due 10/25/2036 (a) 3,709,432
Honda Auto Receivables Owner Trust Class A3:
2,128,420 Series 2006-1, 5.07% due 2/18/2010 2,131,700
5,425,000 Series 2006-3, 5.12% due 10/15/2010 5,446,983
7,533,155 JPMorgan Mortgage Acquisition Corp. Series
2007-CH5 Class A2, 4.915%
due 11/25/2029 (a) 7,323,269
Morgan Stanley ABS Capital I (a):
3,820,393 Series 2007-HE2 Class A2A, 4.905%
due 1/25/2037 3,728,228
6,198,123 Series 2007-HE6 Class A1, 4.925%
due 5/25/2037 6,045,578
National Collegiate Student Loan Trust
Class AIO (c):
16,400,000 Series 2005-2, 7.73% due 3/25/2012 2,639,252
33,292,725 Series 2005-GT1, 6.75% due 12/25/2009 4,177,197
1,181,755 Popular ABS Mortgage Pass-Through Trust
Series 2005-1 Class AF3, 4.142%
due 5/25/2035 (a) 1,168,656
9,272,853 Residential Asset Mortgage Products, Inc.
Series 2003-RZ3 Class A6, 3.40%
due 3/25/2033 8,232,530
SLM Student Loan Trust (a):
3,320,346 Series 2002-1 Class A2, 5.194%
due 4/25/2017 3,328,614
4,744,251 Series 2002-4 Class A4, 5.131%
due 3/15/2017 4,756,302
5,750,000 Series 2005-8 Class A2, 5.445%
due 7/25/2022 5,672,375
3,684,535 Securitized Asset Backed Receivables LLC Trust
Series 2007-NC2 Class A2A, 4.905%
due 1/25/2037 (a) 3,581,117
Soundview Home Equity Loan Trust (a):
5,706,718 Series 2003-2 Class A2, 5.515%
due 11/25/2033 5,453,735
4,035,225 Series 2007-OPT3 Class 2A1, 4.925%
due 8/25/2037 3,957,783
4,936,394 USAA Auto Owner Trust Series 2006-1 Class A3,
5.01% due 9/15/2010 4,944,694
9,987,869 WFS Financial Owner Trust Series 2004-4
Class A4, 3.44% due 5/17/2012 9,899,466
5,586,233 Wells Fargo Home Equity Trust Series 2007-2
Class A1, 4.955% due 4/25/2037 (a) 5,398,691
- -------------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost -- $161,998,973) -- 23.0% 159,861,434
===============================================================================
===============================================================================
U.S. Government Agency
Mortgage-Backed Securities+
===============================================================================
Fannie Mae Guaranteed Pass
Through Certificates:
1,911,853 4.226% due 3/01/2034 (a) 1,901,810
2,066,585 4.627% due 2/01/2035 (a) 2,076,606
4,848,815 5.407% due 5/01/2037 (a) 4,941,341
7,698,157 5.472% due 12/01/2036 (a) 7,802,262
12,095,223 5.50% due 11/01/2017 -- 12/01/2017 12,278,098
5,584,656 5.708% due 10/01/2036 (a) 5,654,715
32,591,101 6.50% due 8/01/2032 -- 3/01/2037 33,545,191
3,047,243 7.50% due 9/01/2035 3,252,563
2,870,451 8.00% due 7/01/2027 -- 11/01/2032 3,064,784
Freddie Mac Mortgage Participation
Certificates (a):
2,289,771 4.429% due 4/01/2035 2,274,607
4,787,031 4.635% due 4/01/2035 4,743,078
9,082,103 5.581% due 3/01/2037 9,214,292
4,761,840 5.807% due 11/01/2036 4,837,507
12,689,994 6.039% due 11/01/2036 12,897,589
3,394,273 Ginnie Mae MBS Certificates, 5%
due 11/20/2034 (a) 3,419,187
- -------------------------------------------------------------------------------
Total U.S. Government Agency Mortgage-Backed
Securities (Cost -- $110,795,524) -- 16.1% 111,903,630
===============================================================================
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 19
Schedule of Investments (continued)
Short-Term Bond Master Portfolio (in U.S. dollars)
U.S. Government Agency
Face Mortgage-Backed Obligations --
Amount Collateralized Mortgage Obligations Value
===============================================================================
Fannie Mae Trust:
due 8/01/2035 (c) $ 3,794,719
6,091,313 Series 377 Class 2, 5%
due 10/01/2036 (c) 1,525,045
3,588,874 Series 2003-17 Class QR, 4.50%
due 11/25/2025 3,576,844
1,820,561 Series 2003-67 Class GL, 3%
due 1/25/2025 1,798,978
3,514,397 Series 2006-M2 Class A1A, 4.855%
due 7/25/2016 (a) 3,583,686
Freddie Mac Multiclass Certificates:
6,114,651 Series 2485 Class AS, 5.50%
due 8/15/2017 6,225,752
3,179,652 Series 2673 Class ML, 4%
due 12/15/2022 3,170,161
47,458,581 Series 3309 Class SA, 0.77%
due 4/15/2037 (a)(c) 2,275,520
20,073,682 Series 3318 Class SK, 0.77%
due 5/15/2037 (a)(c) 933,460
- -------------------------------------------------------------------------------
Total U.S. Government Agency Mortgage-Backed
Obligations -- Collateralized Mortgage
Obligations (Cost -- $25,662,611) -- 3.9% 26,884,165
===============================================================================
===============================================================================
Non-U.S. Government Agency
Mortgage-Backed Securities+
===============================================================================
Collateralized Mortgage Obligations -- 21.6%
6,167,483 Banc of America Funding Corp. Series 2006-I
Class 1A1, 4.591% due 12/20/2036 (a) 6,138,746
Banc of America Mortgage Securities Inc. (a):
3,283,243 Series 2003-J Class 2A1, 4.086%
due 11/25/2033 3,297,654
5,838,821 Series 2006-B Class 3A1, 6.158%
due 11/20/2036 5,879,903
59,488 BlackRock Capital Finance LP Series 1997-R2
Class AP, 9.308% due 12/25/2035 (a)(b)(f) 59,488
4,163,875 Countrywide Home Loan Mortgage Pass-Through
Trust Series 2005-HYB8 Class 2A1, 5.209%
due 12/20/2035 (a) 4,116,962
1,654,644 Deutsche Alt-A Securities, Inc. Alternative Loan
Trust Series 2006-AF1 Class A1, 4.945%
due 4/25/2036 (a) 1,649,738
6,782,939 GMAC Mortgage Corp. Loan Trust Series
2003-J10 Class A1, 4.75% due 1/25/2019 6,662,232
GSR Mortgage Loan Trust Class 2A1 (a):
8,824,031 Series 2005-AR1, 4.919% due 1/25/2035 8,808,339
6,806,403 Series 2007-AR1, 6.006% due 3/25/2037 6,811,148
Harborview Mortgage Loan Trust (a):
4,101,733 Series 2006-11 Class A1A, 5.135%
due 12/19/2036 3,868,314
4,996,924 Series 2006-12 Class 2A2B, 5.215%
due 1/19/2038 4,568,349
7,974,273 Homebanc Mortgage Trust Series 2005-3
Class A1, 5.105% due 7/25/2035 (a) 7,514,436
3,498,921 Indymac Index Mortgage Loan Trust Series
2006-AR41 Class A3, 5.045%
due 2/25/2037 (a) 3,028,539
6,974,898 JPMorgan Mortgage Trust Series 2007-A1
Class 2A1, 4.768% due 7/25/2035 (a) 6,962,570
4,248,075 Luminent Mortgage Trust Series 2006-7
Class 1A1, 5.045% due 5/25/2036 (a) 4,010,465
145,330 Ocwen Residential MBS Corp. Series 1998-R2
Class AP, 10.006% due 11/25/2034 (a)(b) 94,464
4,144,673 Residential Accredit Loans, Inc. Series
2006-QA9 Class A1, 5.045%
due 11/25/2036 (a) 3,773,748
13,954 Salomon Brothers Mortgage Securities VI, Inc.
Series 1986-1 Class A, 6% due 12/25/2011 13,915
5,583 Structured Mortgage Asset Residential Trust
Series 1991-1 Class H, 8.25%
due 6/25/2022 5,559
6,379,205 SunTrust Adjustable Rate Mortgage Loan Trust
Series 2007-2 Class 3A3, 5.719%
due 4/25/2037 (a) 6,290,558
WaMu Mortgage Pass-Through Certificates (a):
3,666 Series 2000-1 Class B1, 5.708%
due 1/25/2040 (b) 3,373
14,117,699 Series 2004-AR3 Class A1, 3.918%
due 6/25/2034 14,024,199
7,175,000 Series 2005-AR12 Class 1A6, 4.835%
due 10/25/2035 7,107,661
6,792,122 Series 2006-AR12 Class 1A4, 6.073%
due 10/25/2036 6,881,758
7,592,238 Series 2007-HY3 Class 4A1, 5.35%
due 3/25/2037 7,557,239
42,872 Walsh Acceptance Series 1997-2 Class A,
6.813% due 3/01/2027 (a) 5,359
Wells Fargo Mortgage Backed Securities Trust:
8,261,950 Series 2004-3 Class A1, 4.75%
due 4/25/2019 8,132,857
8,105,651 Series 2006-AR8 Class 2A1, 5.24%
due 4/25/2036 (a) 8,107,188
6,084,201 Series 2006-AR10 Class 2A1, 5.646%
due 7/25/2036 (a) 6,126,620
8,192,692 Series 2007-8 Class 2A7, 6%
due 7/25/2037 8,282,840
------------
149,784,221
- -------------------------------------------------------------------------------
Commercial Mortgage-Backed Securities -- 12.4%
3,465,000 Banc of America Commercial Mortgage, Inc.
Series 2000-1 Class A2A, 7.333%
due 11/15/2031 (a) 3,581,658
CS First Boston Mortgage Securities Corp.:
4,209,991 Series 1999-C1 Class A2, 7.29%
due 9/15/2041 4,336,834
2,834,250 Series 2002-CKS4 Class A1, 4.485%
due 11/15/2036 2,821,246
65,866,385 Series 2003-CPN1 Class ASP, 1.584%
due 3/15/2035 (a)(c) 1,784,880
2,323,729 Series 2004-C3 Class A2, 3.913%
due 7/15/2036 2,301,411
3,702,086 Chase Commercial Mortgage Securities Corp.
Series 1999-2 Class A2, 7.198%
due 1/15/2032 3,847,500
4,157,673 Chase Manhattan Bank-First Union National
Bank Series 1999-1 Class A2, 7.439%
due 8/15/2031 (a) 4,300,285
20 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Schedule of Investments (continued)
Short-Term Bond Master Portfolio (in U.S. dollars)
Face Non-U.S. Government Agency
Amount Mortgage-Backed Securities+ Value
===============================================================================
Commercial Mortgage-Backed Securities (concluded)
USD 7,600,000 Citigroup Commercial Mortgage Trust Series
2007-C6 Class A4, 5.889%
due 12/10/2049 (a) $ 7,814,955
3,518,451 Commercial Mortgage Acceptance Corp. Series
1999-C1 Class A2, 7.03% due 6/15/2031 3,593,658
4,955,000 GE Capital Mall Finance Corp. Series 1998-1A
Class A2, 6.32% due 9/13/2028 4,988,379
GMAC Commercial Mortgage Securities, Inc.
Class A2:
4,017,223 Series 1998-C2, 6.42% due 5/15/2035 4,028,050
4,103,260 Series 1999-C1, 6.175%
due 5/15/2033 (a) 4,133,621
37,279,907 Greenwich Capital Commercial Funding Corp.
Series 2002-C1 Class XP, 2.059%
due 1/11/2035 (a) 1,353,138
JPMorgan Chase Commercial Mortgage
Securities Corp.:
12,435,721 Series 2001-CIBC Class A3, 6.26%
due 3/15/2033 12,899,812
4,030,000 Series 2007-CB20 Class A4, 5.794%
due 2/12/2051 (a) 4,151,343
4,530,683 LB Commercial Conduit Mortgage Trust Series
1999-C1 Class A2, 6.78% due 6/15/2031 4,607,965
LB-UBS Commercial Mortgage Trust:
65,291,737 Series 2002-C4 Class XCP, 1.475%
due 10/15/2035 (a)(c) 1,500,143
3,638,080 Series 2004-C7 Class A1, 3.625%
due 10/15/2029 3,595,836
6,575,186 TIAA Retail Commercial Trust Series 2007-C4
Class A1, 5.701% due 8/15/2039 (a) 6,676,100
3,625,000 Wachovia Bank Commercial Mortgage Trust
Series 2006-C25 Class A4, 5.954%
due 5/15/2043 (a) 3,742,766
------------
86,059,580
- -------------------------------------------------------------------------------
Total Non-U.S. Government Agency
Mortgage-Backed Securities
(Cost -- $236,738,930) -- 34.0% 235,843,801
===============================================================================
===============================================================================
Corporate Bonds
===============================================================================
Aerospace & Defense -- 0.2%
1,250,000 Goodrich Corp., 6.45% due 4/15/2008 1,253,836
- -------------------------------------------------------------------------------
Airlines -- 0.1%
556,806 American Airlines, Inc. Series 2003-1, 3.857%
due 1/09/2012 (e) 528,270
- -------------------------------------------------------------------------------
Automobiles -- 0.8%
DaimlerChrysler NA Holding Corp.:
3,400,000 4.75% due 1/15/2008 3,399,255
2,000,000 4.05% due 6/04/2008 1,992,300
------------
5,391,555
- -------------------------------------------------------------------------------
Capital Markets -- 2.2%
1,525,000 Credit Suisse Guernsey Ltd. Series 1,
5.559% (a)(h) 1,311,500
1,790,000 Deutsche Bank AG, 5.375% due 10/12/2012 1,834,138
3,180,000 Goldman Sachs Capital III Series F,
5.894% (a)(h) 2,575,800
1,330,000 Lehman Brothers Holdings Capital Trust V,
5.911% (a)(h) 1,064,411
3,340,000 Lehman Brothers Holdings, Inc., 5.645%
due 5/25/2010 (a) 3,210,662
5,043,000 Morgan Stanley, 5.625% due 1/09/2012 5,129,977
------------
15,126,488
- -------------------------------------------------------------------------------
Commercial Banks -- 1.0%
3,125,000 Glitnir Banki HF, 5.44% due 4/20/2010 (a)(b) 3,058,031
1,500,000 Wachovia Corp., 6.15% due 3/15/2009 1,509,114
2,240,000 Wells Fargo & Co., 5.445% due 1/24/2012 (a) 2,198,018
------------
6,765,163
- -------------------------------------------------------------------------------
Communications Equipment -- 0.1%
955,000 Cisco Systems, Inc., 5.095% due 2/20/2009 (a) 953,921
- -------------------------------------------------------------------------------
Computers & Peripherals -- 0.3%
1,700,000 International Business Machines Corp., 5.70%
due 9/14/2017 1,757,395
- -------------------------------------------------------------------------------
Consumer Finance -- 0.5%
3,500,000 HSBC Finance Corp., 4.125% due 12/15/2008 3,467,951
- -------------------------------------------------------------------------------
Diversified Financial Services --2.7%
5,850,000 Citigroup, Inc., 5.30% due 10/17/2012 5,926,463
General Electric Capital Corp.:
10,350,000 5.041% due 11/01/2012 (a) 10,198,797
2,700,000 Series A, 3.75% due 12/15/2009 (d) 2,677,712
------------
18,802,972
- -------------------------------------------------------------------------------
Diversified Telecommunication Services -- 1.2%
1,810,000 AT&T, Inc., 4.125% due 9/15/2009 1,798,490
2,500,000 Deutsche Telekom International Finance BV,
3.875% due 7/22/2008 2,481,745
250,000 Qwest Corp., 8.241% due 6/15/2013 (a) 255,000
2,250,000 Telecom Italia Capital SA, 4% due 11/15/2008 2,220,946
1,275,000 Telefonica Emisiones SAU, 5.984%
due 6/20/2011 1,311,577
------------
8,067,758
- -------------------------------------------------------------------------------
Electric Utilities -- 0.1%
685,000 Xcel Energy, Inc., 3.40% due 7/01/2008 678,873
- -------------------------------------------------------------------------------
Energy Equipment & Services -- 0.2%
1,280,000 Transocean, Inc., 5.25% due 3/15/2013 1,282,836
- -------------------------------------------------------------------------------
Food Products -- 0.2%
1,115,000 Kraft Foods, Inc., 5.625% due 8/11/2010 1,146,262
- -------------------------------------------------------------------------------
Gas Utilities -- 0.0%
180,000 Transcontinental Gas Pipe Line Corp. Series B,
8.875% due 7/15/2012 203,400
- -------------------------------------------------------------------------------
Insurance -- 0.9%
1,470,000 Protective Life Secured Trust, 5.436%
due 1/14/2008 (a) 1,470,323
1,500,000 Prudential Financial, Inc., 3.75% due 5/01/2008 1,491,639
ZFS Finance USA (a)(b):
1,735,000 Trust I, 6.15% due 12/15/2065 1,679,386
1,900,000 Trust IV, 5.875% due 5/09/2032 1,771,047
------------
6,412,395
- -------------------------------------------------------------------------------
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 21
Schedule of Investments (continued)
Short-Term Bond Master Portfolio (in U.S. dollars)
Face
Amount Corporate Bonds Value
===============================================================================
Media -- 1.2%
USD 2,825,000 British Sky Broadcasting Plc, 8.20%
due 7/15/2009 $ 2,955,481
1,655,000 COX Communications, Inc., 4.625%
due 1/15/2010 1,642,161
1,200,000 Comcast Cable Communications LLC, 6.20%
due 11/15/2008 1,209,764
1,470,000 Comcast Corp., 5.656% due 7/14/2009 (a) 1,464,649
1,220,000 News America, Inc., 6.75% due 1/09/2038 1,331,279
------------
8,603,334
- -------------------------------------------------------------------------------
Multi-Utilities -- 1.0%
Dominion Resources, Inc.:
2,395,000 5.688% due 5/15/2008 (g) 2,400,293
2,000,000 Series D, 5.125% due 12/15/2009 2,018,740
2,650,000 Energy East Corp., 6.75% due 6/15/2012 2,811,231
------------
7,230,264
- -------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels -- 1.2%
2,475,000 Anadarko Petroleum Corp., 5.755%
due 9/15/2009 (a) 2,436,698
3,775,000 Conoco Funding Co, 6.35% due 10/15/2011 4,009,545
1,910,000 Midamerican Energy Holdings Co., 3.50%
due 5/15/2008 1,897,451
------------
8,343,694
- -------------------------------------------------------------------------------
Real Estate Investment Trusts (REITs) -- 0.6%
Nationwide Health Properties, Inc.:
1,400,000 7.60% due 11/20/2028 1,582,841
1,400,000 6.59% due 7/07/2038 1,495,666
815,000 Rouse Co. LP, 3.625% due 3/15/2009 776,498
------------
3,855,005
- -------------------------------------------------------------------------------
Wireless Telecommunication Services -- 0.4%
400,000 Rogers Wireless, Inc., 7.50% due 3/15/2015 437,434
2,525,000 Vodafone Group Plc, 5.32% due 2/27/2012 (a) 2,469,208
------------
2,906,642
- -------------------------------------------------------------------------------
Total Corporate Bonds
(Cost -- $103,931,130) -- 14.9% 102,778,014
===============================================================================
===============================================================================
Foreign Government Obligations
===============================================================================
EUR 900,000 Bundesrepublik Deutschland Series 07, 4.25%
due 7/04/2039 1,241,233
- -------------------------------------------------------------------------------
Total Foreign Government Obligations
(Cost -- $1,235,151) -- 0.2% 1,241,233
===============================================================================
===============================================================================
Face
Amount Capital Trusts Value
===============================================================================
Capital Markets -- 0.1%
USD 1,210,000 State Street Capital Trust IV, 5.991%
due 6/01/2067 (a) 938,722
- -------------------------------------------------------------------------------
Total Capital Trusts
(Cost -- $1,210,000) -- 0.1% 938,722
===============================================================================
===============================================================================
Short-Term Securities
===============================================================================
Time Deposits -- 5.9%
41,124,134 Brown Brothers Harriman & Co., 2.53%
due 1/01/2008 41,124,134
- -------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $41,124,134) -- 5.9% 41,124,134
===============================================================================
===============================================================================
Number of
Contracts++ Options Purchased
===============================================================================
Call Currency Options Purchased
17 Deutsche Mark, expiring January 2008
at USD 935 108,034
- -------------------------------------------------------------------------------
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 2,105,444
- -------------------------------------------------------------------------------
Put Options Purchased
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 1,322,588
- -------------------------------------------------------------------------------
Total Options Purchased
(Premiums Paid -- $2,587,919) -- 0.5% 3,536,066
===============================================================================
Total Investments Before Options Written
(Cost -- $685,284,372*) -- 98.6% 684,111,199
===============================================================================
===============================================================================
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 (425,308)
- -------------------------------------------------------------------------------
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 (46,574)
- -------------------------------------------------------------------------------
Total Options Written
(Premiums Received -- $294,500) -- (0.1%) (471,882)
===============================================================================
Total Investments, Net of Options Written
(Cost -- $684,989,872) -- 98.5% 683,639,317
Other Assets Less Liabilities -- 1.5% 10,090,680
------------
Net Assets -- 100.0% $693,729,997
============
22 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Schedule of Investments (continued)
Short-Term Bond Master Portfolio (in U.S. dollars)
+ 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.
* The cost and unrealized appreciation (depreciation) of investments as of
December 31, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost ......................................... $ 685,961,809
=============
Gross unrealized appreciation .......................... $ 6,189,146
Gross unrealized depreciation .......................... (8,039,756)
-------------
Net unrealized depreciation ............................ $ (1,850,610)
=============
(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) Subject to principal paydowns.
(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 Interest
Affiliate Cost Cost Gain Income
--------------------------------------------------------------------------
BlackRock Capital Finance LP
Series 1997 -- R2 Class AP,
9.308% due 12/25/2035 -- $21,621 $133 $3,301
--------------------------------------------------------------------------
(g) Represents a step bond; the interest rate shown is the effective yield at
the time of purchase.
(h) The security is a perpetual bond and has no definite maturity date.
o For Portfolio compliance purposes, the Portfolio's industry
classifications refer to any one or more of the industry
sub-classifications used by one or more widely recognized market indexes
or ratings group indexes, and/or as defined by Portfolio management. This
definition may not apply for purposes of this report which may combine
industry sub-classifications for reporting ease. Industries are shown as a
percent of net assets.
o Financial futures contracts purchased as of December 31, 2007 were as
follows:
------------------------------------------------------------------------------------------
Unrealized
Number of Expiration Face Appreciation
Contracts Issue Exchange Date Value (Depreciation)
------------------------------------------------------------------------------------------
298 Euro BOBL
Future Eurex March 2008 $ 47,711,494 $(682,940)
97 Euro BUND
Future Frankfurt March 2008 $ 16,398,290 (357,133)
766 2-Year U.S.
Treasury Bond Chicago March 2008 $160,855,520 195,980
289 5-Year U.S.
Treasury Bond Chicago March 2008 $ 31,763,133 108,149
------------------------------------------------------------------------------------------
Total Unrealized Depreciation -- Net $(735,944)
=========
o Financial futures contracts sold as of December 31, 2007 were as follows:
------------------------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Exchange Date Value Depreciation
------------------------------------------------------------------------------------------
63 EuroDollar
Future Chicago March 2008 $14,957,312 $ (125,675)
52 EuroDollar
Future Chicago June 2008 $12,356,800 (156,351)
52 EuroDollar September
Future Chicago 2008 $12,361,935 (184,366)
52 EuroDollar December
Future Chicago 2008 $12,362,335 (199,565)
52 EuroDollar
Future Chicago March 2009 $12,360,885 (201,016)
40 EuroDollar
Future Chicago June 2009 $ 9,503,273 (147,727)
40 EuroDollar September
Future Chicago 2009 $ 9,499,435 (135,565)
40 EuroDollar December
Future Chicago 2009 $ 9,495,260 (122,740)
40 EuroDollar
Future Chicago March 2010 $ 9,492,585 (109,915)
727 10-Year U.S.
Treasury Bond Chicago March 2008 $82,361,989 (72,995)
10 30-Year U.S.
Treasury Bond Chicago March 2008 $ 1,148,197 (15,553)
------------------------------------------------------------------------------------------
Total Unrealized Depreciation -- Net $(1,471,468)
===========
o Forward foreign exchange contracts as of December 31, 2007 were as
follows:
--------------------------------------------------------------------------
Unrealized
Foreign Currency Foreign Currency Settlement Appreciation
Purchased Sold Date (Depreciation)
--------------------------------------------------------------------------
JPY 844,034,999 USD 7,315,390 1/15/08 $ 253,342
AUD 305,000 USD 270,907 1/23/08 (3,435)
EUR 1,030,375 USD 1,527,802 1/23/08 (20,681)
SEK 1,755,000 USD 280,201 1/23/08 (8,598)
USD 2,637,745 EUR 1,861,500 1/23/08 (85,054)
USD 6,879,886 JPY 800,000,000 1/23/08 (300,290)
--------------------------------------------------------------------------
Total Unrealized Depreciation on
Forward Foreign Exchange Contracts -- Net $ (164,716)
===========
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 23
Schedule of Investments (concluded)
Short-Term Bond Master Portfolio (in U.S. dollars)
o Swap contracts outstanding as of December 31, 2007 were as follows:
--------------------------------------------------------------------------
Unrealized
Notional Appreciation
Amount (Depreciation)
--------------------------------------------------------------------------
Receive a fixed rate of 5.366% and pay a
floating rate based on 3-month LIBOR
Broker, Credit Suisse First Boston
Expires July 2009 USD 95,500,000 $ 2,138,300
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 USD 43,095,000 945,634
Receive a fixed rate of 4.4325% and pay a
floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London
Expires August 2009 SEK 40,864,258 (170,337)
Receive a fixed rate of 4.256% and pay a
floating rate based on 3-month LIBOR
Broker, Credit Suisse First Boston
Expires November 2009 USD 43,360,000 327,418
Pay a fixed rate of 5.0125% and receive a
floating rate based on 3-month LIBOR
Broker, Union Bank of Switzerland AG
Expires October 2010 USD 37,000,000 1,083,103
Receive a fixed rate of 4.217% and pay a
floating rate based on 3-month LIBOR
Broker, Credit Suisse First Boston
Expires May 2012 USD 35,395,000 213,036
Receive a fixed rate of 7.1192% and pay a
floating rate based on 6-month LIBOR
Broker, Deutsche Bank AG London
Expires October 2012 AUD 19,754,025 (265,155)
Pay a fixed rate of 5.19375% and receive a
floating rate based on 3-month LIBOR
Broker, Citibank N.A.
Expires October 2017 USD 7,000,000 (296,575)
Pay a fixed rate of 5.025% and receive a
floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London
Expires November 2017 USD 41,000,000 (1,180,117)
--------------------------------------------------------------------------
Total $ 2,795,307
===========
o Currency Abbreviations:
AUD Australian Dollar
EUR Euro
JPY Japanese Yen
SEK Swedish Krona
USD U.S. Dollar
See Notes to Financial Statements.
24 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Statement of Assets and Liabilities Short-Term Bond Master Portfolio
As of December 31, 2007 (Unaudited)
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified cost -- $682,637,327) ............. $ 680,515,645
Investments in affiliated securities, at value (identified cost -- $59,126) .................... 59,488
Options purchased, at value (premiums paid -- $2,587,919) ...................................... 3,536,066
Unrealized appreciation on swaps ............................................................... 4,707,491
Unrealized appreciation on forward foreign exchange contracts .................................. 253,342
Cash ........................................................................................... 159,453
Foreign cash (identified cost -- $97,231) ...................................................... 97,095
Receivables:
Interest ................................................................................... $ 3,640,186
Contributions .............................................................................. 2,763,566
Swaps ...................................................................................... 2,353,048
Paydowns ................................................................................... 534,378 9,291,178
-------------
Prepaid expenses and other assets .............................................................. 15,057
-------------
Total assets ................................................................................... 698,634,815
-------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on swaps ............................................................... 1,912,184
Unrealized depreciation on forward foreign exchange contracts .................................. 418,058
Options written, at value (premiums received -- $294,500) ...................................... 471,882
Payables:
Withdrawals ................................................................................ 1,658,301
Investment adviser ......................................................................... 126,870
Swaps ...................................................................................... 126,034
Variation margin ........................................................................... 124,480
Other affiliates ........................................................................... 5,978 2,041,663
-------------
Accrued expenses and other liabilities ......................................................... 61,031
-------------
Total liabilities .............................................................................. 4,904,818
-------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets ..................................................................................... $ 693,729,997
=============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Investor's capital ............................................................................. $ 694,665,326
Unrealized depreciation -- net ................................................................. (935,329)
-------------
Net assets ..................................................................................... $ 693,729,997
=============
See Notes to Financial Statements.
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 25
Statement of Operations Short-Term Bond Master Portfolio
For the Six Months Ended December 31, 2007 (Unaudited)
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Interest (including $3,301 from affiliates) .................................................... $ 18,045,155
-------------
Total income ................................................................................... 18,045,155
-------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ....................................................................... $ 727,509
Accounting services ............................................................................ 126,557
Custodian fees ................................................................................. 44,459
Professional fees .............................................................................. 24,885
Directors' fees and expenses ................................................................... 20,374
Pricing fees ................................................................................... 12,425
Printing and shareholder reports ............................................................... 933
Other .......................................................................................... 11,202
-------------
Total expenses ................................................................................. 968,344
-------------
Investment income -- net ....................................................................... 17,076,811
-------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) -- Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments -- net ......................................................................... (1,513,761)
Financial futures contracts and swaps -- net ............................................... (5,185,062)
Foreign currency transactions -- net ....................................................... 329,844
Options written -- net ..................................................................... 388,121 (5,980,858)
-------------
Change in unrealized appreciation/depreciation on:
Investments -- net ......................................................................... 2,559,617
Financial futures contracts and swaps -- net ............................................... 922,382
Foreign currency transactions -- net ....................................................... (42,401)
Options written -- net ..................................................................... (35,253) 3,404,345
-------------------------------
Total realized and unrealized loss -- net ...................................................... (2,576,513)
-------------
Net Increase in Net Assets Resulting from Operations ........................................... $ 14,500,298
=============
See Notes to Financial Statements.
26 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Statements of Changes in Net Assets Short-Term Bond Master Portfolio
For the Six
Months Ended For the
December 31, Year Ended
2007 June 30,
Increase (Decrease) in Net Assets: (Unaudited) 2007
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ....................................................................... $ 17,076,811 $ 30,980,138
Realized loss -- net ........................................................................... (5,980,858) (7,047,013)
Change in unrealized appreciation/depreciation -- net .......................................... 3,404,345 9,238,509
-------------------------------
Net increase in net assets resulting from operations ........................................... 14,500,298 33,171,634
-------------------------------
===================================================================================================================================
Capital Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions .................................................................... 78,523,958 165,796,615
Fair value of withdrawals ...................................................................... (75,994,954) (201,097,486)
-------------------------------
Net increase (decrease) in net assets derived from capital transactions ........................ 2,529,004 (35,300,871)
-------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ........................................................ 17,029,302 (2,129,237)
Beginning of period ............................................................................ 676,700,695 678,829,932
-------------------------------
End of period .................................................................................. $ 693,729,997 $ 676,700,695
===============================
See Notes to Financial Statements.
Financial Highlights Short-Term Bond Master Portfolio
For the
Six Months
Ended
December 31, For the Year Ended June 30,
The following ratios have been derived from 2007 -------------------------------------------------------------
information provided in the financial statements. (Unaudited) 2007 2006 2005 2004 2003
===================================================================================================================================
Total Investment Return
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return ............................ 2.03%@ 5.03% 2.50% 2.80% 1.18% 6.05%
===========================================================================
===================================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses ........................................... .28%* .28% .28% .28% .28% .28%
===========================================================================
Investment income -- net ........................... 4.92%* 4.60% 4.00% 3.34% 3.39% 3.73%
===========================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ........... $693,730 $676,701 $678,830 $726,534 $740,024 $739,334
===========================================================================
Portfolio turnover ................................. 36%+ 108%+ 80% 75% 107% 198%
===========================================================================
* Annualized.
+ Excludes dollar roll transactions.
@ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 27
Notes to Financial Statements (Unaudited) Short-Term Bond Master Portfolio
1. Significant Accounting Policies:
Short-Term Bond Master Portfolio (the "Portfolio") of Short-Term Bond Master LLC
(the "Master LLC") is registered under the Investment Company Act of 1940, as
amended and is organized as a Delaware limited liability company. Prior to June
15, 2007, the Master LLC was organized as a Delaware statutory trust. The
Limited Liability Company Agreement permits the Directors to issue
nontransferable interests in the Master LLC, subject to certain limitations. 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. These unaudited
financial statements reflect all adjustments which are, in the opinion of
management, necessary to present a fair statement of the results for the interim
period. All such adjustments are of a normal, recurring nature. 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. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their closing
prices as of the close of such exchanges. Effective September 4, 2007,
exchange-traded options are valued at the mean between the last bid and ask
prices at the close of the options market in which the options trade and
previously were valued at the last sales price as of the close of options
trading on applicable exchanges. 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.
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. 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. 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
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 Board of Directors.
(b) Derivative financial instruments -- The Portfolio may engage in various
portfolio investment strategies both to increase the return of the Portfolio and
to hedge, or protect, its exposure to interest rate movements and movements in
the securities markets. Losses may arise due to changes in the value of the
contract due to an unfavorable change in the price of the underlying security or
if the counterparty does not perform under the contract. The counterparty, for
certain instruments, may pledge cash or securities as collateral.
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.
28 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Notes to Financial Statements (continued) Short-Term Bond Master Portfolio
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.
Swap options are similar to options on securities except that instead of
selling or purchasing the right to buy or sell a security, the writer or
purchaser of the swap option is granting or buying the right to enter into
a previously agreed upon interest rate swap agreement at any time before
the expiration of the option. Premiums received or paid from writing or
purchasing options are recorded as liabilities or assets and are
subsequently adjusted to the current market value of the option written or
purchased. Premiums received or paid from writing or purchasing options
which expire unexercised are treated by a Fund on the expiration date as
realized gains or losses. The difference between the premium and the
amount paid or received on effecting a closing purchase or sale
transaction, including brokerage commission, is also treated as a realized
gain or loss. If an option is exercised, the premium paid or received is
added to the cost of the purchase or the proceeds from the sale in
determining whether a Fund has realized a gain or loss on investment
transactions.
The main risk that is associated with purchasing swap options is that the swap
option expires without being exercised. In this case, the option expires
worthless and the premium paid for the swap option is considered the loss. The
main risk that is associated with the writing of a swap option is the market
risk of an unfavorable change in the value of the interest rate swap underlying
the written swap option. Swap options may be used by the Fund to manage the
duration of the Fund's portfolio in a manner similar to more generic options
described above.
(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 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
lending agent, administrative and custodial fees in connection with its loans.
In the event that the
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 29
Notes to Financial Statements (continued) Short-Term Bond Master Portfolio
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) Mortgage dollar rolls -- The Portfolio may sell mortgage-backed securities
for delivery in the current month and simultaneously contract to repurchase
substantially similar (same type, coupon and maturity) securities on a specific
future date. The Portfolio receives compensation as consideration for entering
into the commitment to repurchase. The Portfolio must maintain liquid securities
having a value not less than the repurchase price (including accrued interest)
for such dollar rolls. The market value of the securities that the Portfolio is
required to purchase may decline below the agreed upon repurchase price of those
securities.
(i) Recent accounting pronouncements -- Effective June 29, 2007, the Portfolio
implemented Financial Accounting Standards Board ("FASB") Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
Statement No. 109" ("FIN 48"). FIN 48 prescribes the minimum recognition
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 investment companies, before being measured and recognized in
the financial statements. Management has evaluated the application of FIN 48 to
the Portfolio, and has determined that the adoption of FIN 48 does not have a
material impact on the Portfolio's financial statements. The Portfolio files
U.S. federal and various state and local tax returns. No income tax returns are
currently under examination. The statute of limitations on the Portfolio's U.S.
federal tax returns remains open for the years ended June 2004 through June
2007. The statute of limitations on the Portfolio's state and local tax returns
may remain open for an additional year depending upon the jurisdiction.
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:
The Master LLC, on behalf of the Portfolio, has entered into an Investment
Advisory Agreement with the Manager. Merrill Lynch & Co., Inc. ("Merrill Lynch")
and The PNC Financial Services Group, Inc. are the principal owners of
BlackRock, Inc.
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 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 monthly fee at an
annual rate that is 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. 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 six months ended
December 31, 2007, there were no securities lending agent fees paid to BIM.
For the six months ended December 31, 2007, the Portfolio reimbursed the Manager
$5,924 for certain accounting services.
30 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
Notes to Financial Statements (concluded) Short-Term Bond Master Portfolio
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) of investments,
excluding short-term securities and mortgage dollar rolls, for the six months
ended December 31, 2007 were $571,119,039 and $238,720,247, respectively.
Transactions in call options written for the six months ended December 31, 2007
were as follows:
- --------------------------------------------------------------------------------
Number of Premiums
Contracts* Received
- --------------------------------------------------------------------------------
Outstanding call options written,
beginning of period .............................. 12 $ 147,250
-----------------------
Outstanding call options written, end of period .... 12 $ 147,250
=======================
* One contract represents a notional amount of $1,000,000.
Transactions in put options written for the six months ended December 31, 2007
were as follows:
- --------------------------------------------------------------------------------
Number of Premiums
Contracts* Received
- --------------------------------------------------------------------------------
Outstanding put options written,
beginning of period .............................. 12 $ 147,250
Options written .................................... 1,164 388,121
Options expired .................................... (1,164) (388,121)
-----------------------
Outstanding put options written, end of period ..... 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. 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 Portfolio did not borrow under the credit agreement during
the six months ended December 31, 2007. On November 21, 2007, the credit
agreement was renewed for one year under substantially the same terms.
BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007 31
Officers and Directors
James H. Bodurtha, Director
Bruce R. Bond, Director
Donald W. Burton, Director
Richard S. Davis, Director
Stuart E. Eizenstat, Director
Laurence D. Fink, Director
Kenneth A. Froot, Director
Henry Gabbay, Director
Robert M. Hernandez, Director
John F. O'Brien, Director
Roberta Cooper Ramo, Director
Jean Margo Reid, Director
David H. Walsh, Director
Fred G. Weiss, Director
Richard R. West, Director
Joe Grills, Advisory Board Member*
Anne F. Ackerley, Vice President
Neal J. Andrews, Chief Financial Officer
Donald C. Burke, Fund President and Chief Executive Officer
Jay M. Fife, Treasurer
Brian P. Kindelan, Chief Compliance Officer
Howard Surloff, Secretary
Custodian
Brown Brothers Harriman & Co.
Boston, MA 02109
Transfer Agent
PFPC Inc.
Wilmington, DE 19809
Accounting Agent
State Street Bank and Trust Company
Princeton, NJ 08540
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Princeton, NJ 08540
Legal Counsel
Willkie Farr & Gallagher LLP
New York, NY 10019
* Joe Grills resigned from the Advisory Board of the Fund and Master LLC,
effective December 31, 2007.
32 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
BlackRock Fund Information
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their non-public personal information. The following 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 websites.
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 website 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 website 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 DECEMBER 31, 2007 33
BlackRock Fund Information (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 website at www.blackrock.com, by calling
(800) 441-7762, or on the website of the Securities and Exchange Commission (the
"Commission") at http://www.sec.gov.
Information on how proxies relating to the Fund's voting securities were voted
(if any) by BlackRock during the most recent 12-month period ended June 30 is
available, upon request and without charge, on our website at www.blackrock.com,
by calling (800) 441-7762 or on the website 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 website 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/funds.
Automatic Investment Plans
Investor Class shareholders who want to invest regularly can arrange to have $50
or more automatically deducted from their checking or savings account and
invested in any of the BlackRock portfolios.
Systematic Withdrawal Plans
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments of $50 or more from their BlackRock portfolios, as
long as their account is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover,
Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
34 BLACKROCK SHORT-TERM BOND FUND DECEMBER 31, 2007
A World-Class Mutual Fund Family
BlackRock offers a diverse lineup of open-end mutual funds crossing all
investment styles and managed by experts in equity, fixed income and tax-exempt
investing.
Equity Funds
BlackRock All-Cap Global Resources Portfolio
BlackRock Aurora Portfolio
BlackRock Asset Allocation Portfolio+
BlackRock Balanced Capital Fund+
BlackRock Basic Value Fund
BlackRock Capital Appreciation Portfolio
BlackRock Developing Capital Markets Fund
BlackRock Equity Dividend Fund
BlackRock EuroFund
BlackRock Focus Growth 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 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 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 Fund
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 DECEMBER 31, 2007 35
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.
100 Bellevue Parkway
Wilmington, DE 19809
BLACKROCK
#BR-3070-12/07
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this
semi-annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
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 and Governance 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 Exchange Act of 1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
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/ Donald C. Burke
-------------------
Donald C. Burke
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: February 21, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Donald C. Burke
-------------------
Donald C. Burke
Chief Executive Officer (principal executive officer) of
BlackRock Short-Term Bond Fund of BlackRock Short-Term Bond Series, Inc. and
Short-Term Bond Master Portfolio of Short-Term Bond Master LLC
Date: February 21, 2008
By: /s/ Neal J. Andrews
-------------------
Neal J. Andrews
Chief Financial Officer (principal 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: February 21, 2008