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 811-05742
811-07885
Name of Fund: Index Equity Portfolio of BlackRock Funds
Master S&P 500 Index Series of Quantitative Master Series LLC
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Donald C. Burke, Chief Executive Officer,
Index Equity Portfolio of BlackRock Funds and Master S&P 500 Index Series
of Quantitative Master Series 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: 12/31/2008
Date of reporting period: 01/01/2008 - 06/30/2008
Item 1 - Report to Stockholders
EQUITIES FIXED INCOME REAL ESTATE
LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
BlackRock Index BLACKROCK
Equity Portfolio
OF BLACKROCK FUNDS
SEMI-ANNUAL REPORT
JUNE 30, 2008 | (UNAUDITED)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Table of Contents
================================================================================
Page
- --------------------------------------------------------------------------------
A Letter to Shareholders ................................................... 3
Semi-Annual Report:
Portfolio Summary .......................................................... 4
About Portfolio Performance ................................................ 6
Disclosure of Expenses ..................................................... 6
Portfolio Financial Statements:
Statement of Assets and Liabilities ...................................... 7
Statement of Operations .................................................. 8
Statements of Changes in Net Assets ...................................... 9
Portfolio Financial Highlights ............................................. 10
Portfolio Notes to Financial Statements .................................... 15
Series Portfolio Information ............................................... 19
Series Financial Statements:
Summary Schedule of Investments .......................................... 20
Statement of Assets and Liabilities ...................................... 24
Statement of Operations .................................................. 25
Statements of Changes in Net Assets ...................................... 26
Series Financial Highlights ................................................ 26
Series Notes to Financial Statements ....................................... 27
Disclosure of Investment Advisory Agreement and Subadvisory Agreement ...... 29
Officers and Directors ..................................................... 33
Additional Information ..................................................... 33
Mutual Fund Family ......................................................... 35
2 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
A Letter to Shareholders
Dear Shareholder
Throughout the past year, investors were overwhelmed by lingering credit and
financial market troubles, surging oil prices and more recently, renewed
inflation concerns. Healthy nonfinancial corporate profits and robust exporting
activity remained among the few bright spots, helping the economy to grow at a
modest, but still positive, pace.
The Federal Reserve Board (the "Fed") has been aggressive in its attempts to
stoke economic growth and ease financial market instability. In addition to
slashing the target federal funds rate 325 basis points (3.25%) between
September 2007 and April 2008, the central bank introduced the new Term
Securities Lending Facility, granted broker-dealers access to the discount
window and used its own balance sheet to help negotiate the sale of Bear
Stearns. As widely anticipated, the end of the period saw a pause in Fed action,
as the central bank held the target rate steady at 2.0% amid rising inflationary
pressures.
As the Fed's bold response to the financial crisis helped ease credit turmoil
and investor anxiety, U.S. equity markets sank sharply over the last six months,
notwithstanding a brief rally in the spring. International markets were not
immune to the tumult, with most regions also registering declines.
Treasury securities also traded in a volatile fashion, but generally rallied
(yields fell as prices correspondingly rose), with investors continuing to seek
safety as part of a broader flight to quality. The yield on 10-year Treasury
issues, which fell to 3.34% in March 2008, climbed up to the 4.20% range in
mid-June as investors temporarily shifted out of Treasury issues in favor of
riskier assets (such as stocks and other high-quality fixed income sectors),
then reversed course and declined to 3.99% by period-end when credit fears
re-emerged.
Tax-exempt issues eked out gains for the reporting period, but underperformed
their taxable counterparts, as the group continued to be pressured by problems
among municipal bond insurers and the breakdown in the market for auction rate
securities.
The major benchmark indexes generated results that largely reflected heightened
investor risk aversion:
Total Returns as of June 30, 2008 6-month 12-month
===============================================================================================================
U.S. equities (S&P 500 Index) (11.91)% (13.12)%
- ---------------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) (9.37)% (16.19)%
- ---------------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) (10.96)% (10.61)%
- ---------------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers U.S. Aggregate Index) 1.13% 7.12%
- ---------------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) 0.02% 3.23%
- ---------------------------------------------------------------------------------------------------------------
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Capped Index) (1.08)% (1.74)%
- ---------------------------------------------------------------------------------------------------------------
Past performance is no guarantee of future results. Index performance shown for
illustrative purposes only. You cannot invest directly in an index.
As you navigate today's volatile markets, we encourage you to review your
investment goals with your financial professional and to make portfolio changes,
as needed. For more up-to-date commentary on the economy and financial markets,
we invite you to visit www.blackrock.com/funds. As always, we thank you for
entrusting BlackRock with your investment assets, and we look forward to
continuing to serve you in the months and years ahead.
Sincerely,
/s/ Rob Kapito
Rob Kapito
President, BlackRock Advisors, LLC
3
THIS PAGE NOT PART OF YOUR FUND REPORT
Portfolio Summary
Portfolio Management Commentary
How did the Portfolio perform?
o During the six months ended June 30, 2008, the Portfolio, through its
investment in Master S&P 500 Index Series, generated returns that were
comparable, before fees and expenses, to that of the benchmark Standard &
Poor's ("S&P") 500 Index. Returns, after fees and expenses, for the
Portfolio's respective share classes trailed the benchmark approximately
by the amount of such classes' respective share-class fees and expenses.
Describe the market environment.
o U.S. equity markets endured a remarkably difficult first six months of
2008, with most indexes finishing in negative territory against a backdrop
of slowing economic growth, continued credit market strains and rising
food and energy prices.
o The predominant issues dominating financial headlines throughout most of
2007 -- problems with subprime mortgages and the resulting credit crunch
-- intensified during the first quarter of 2008. Credit availability
continued to contract, culminating in the dramatic collapse of Bear
Stearns in mid-March. Fears of economic recession, combined with a rapidly
sinking dollar and surging commodities prices, caused investors to grow
increasingly risk-averse as they dumped stocks in favor of safer
alternatives, such as U.S. Treasury issues. In the end, U.S. stocks posted
their worst quarterly return since 2002.
o After a grueling first quarter, the second quarter brought some reprieve,
as U.S. equities rallied in April and May on expectations that
accommodative Fed action, fiscal stimulus and the bailout of Bear Stearns
signified that the worst had passed. Unfortunately, these gains quickly
evaporated, as crude oil topped $140 per barrel, consumer confidence
plummeted, inflation concerns resurfaced and news of additional
write-downs and capital raising in the financials sector tempered investor
optimism.
o For the six months, large-cap stocks trailed their small-cap counterparts,
as the S&P 500 Index returned (11.91)%, while the small cap S&P 600 Index
returned (7.09)%. Within the S&P 500 Index, the growth style of investing
significantly outperformed the value style for the period.
o Turning to sector performance, energy (+8.88%) and materials (+1.26%) were
the only sectors to post positive returns, while financials (-29.73%),
telecommunication services (-17.30%) and industrials (-13.65%) were the
weakest performers.
Describe recent portfolio activity.
o Throughout the semi-annual period, as changes were made to the composition
of the S&P 500 Index, the Series purchased and sold securities to maintain
its objective of replicating the risks and return of the benchmark.
Describe portfolio positioning at period-end.
o In keeping with its investment objective, the Series remains positioned to
match the risk characteristics of its benchmark, irrespective of the
market's future direction.
The views expressed reflect the opinions of BlackRock as of the date of this
report and are subject to change based on changes in market, economic or other
conditions. These views are not intended to be a forecast of future events and
are no guarantee of future results.
Expense Example
Actual Hypothetical 2
----------------------------------------------------- -----------------------------------------------------
Beginning Ending Beginning Ending
Account Value Account Value Expenses Paid Account Value Account Value Expenses Paid
January 1, 2008 June 30, 2008 During the Period 1 January 1, 2008 June 30, 2008 During the Period 1
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional .... $ 1,000 $ 880.10 $ 0.79 $ 1,000 $1,024.05 $ 0.86
Service .......... $ 1,000 $ 879.00 $ 1.64 $ 1,000 $1,023.16 $ 1.76
Investor A ....... $ 1,000 $ 879.10 $ 1.73 $ 1,000 $1,023.06 $ 1.86
Investor B ....... $ 1,000 $ 875.30 $ 5.74 $ 1,000 $1,018.78 $ 6.17
Investor C ....... $ 1,000 $ 875.50 $ 5.50 $ 1,000 $1,019.03 $ 5.92
- ------------------------------------------------------------------------------------------------------------------------------------
1 For each class of the Portfolio, expenses are equal to the annualized
expense ratio for the class (0.17% for Institutional, 0.35% for Service,
0.37% for Investor A, 1.23% for Investor B and 1.18% for Investor C),
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the period shown). Because the Portfolio is a feeder
fund, the expense table example reflects the expense of both the feeder
fund and the master fund in which it invests.
2 Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal period divided by 366.
See "Disclosure of Expenses" on page 6 for further information on how
expenses were calculated.
4 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Institutional
and Investor A Shares compared to growth of an investment in the S&P 500(R)
Index. Values are from June 1998 to June 2008.
Institutional Investor A S&P 500(R)
Shares(1,2) Shares(1,2) Index(3)
6/98 $10,000 $ 9,700 $10,000
6/99 $12,244 $11,816 $12,276
6/00 $13,095 $12,563 $13,165
6/01 $11,152 $10,632 $11,213
6/02 $ 9,124 $ 8,647 $ 9,196
6/03 $ 9,131 $ 8,604 $ 9,219
6/04 $10,860 $10,173 $10,981
6/05 $11,533 $10,761 $11,675
6/06 $12,520 $11,648 $12,683
6/07 $15,091 $14,011 $15,294
6/07 $13,099 $12,137 $13,287
1 Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
2 The Portfolio currently invests all of its assets in Master S&P 500 Index
Series (the "Series") of Quantitative Master Series LLC. The Series'
investments are allocated among common stocks in approximately the same
weightings as the S&P 500 Index.
3 This unmanaged Index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues) representing
about 75% of NYSE market capitalization and 30% of NYSE issues. S&P 500 is
a registered trademark of the McGraw-Hill Companies.
Performance Summary for the Period Ended June 30, 2008
Average Annual Total Returns1
-------------------------------------------------------------------------
1 Year 5 Years 10 Years
-------------------- -------------------- --------------------
6-Month w/o sales w/sales w/o sales w/sales w/o sales w/sales
Total Returns charge charge charge charge charge charge
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional ................... (11.99)% (13.20)% -- 7.48% -- 2.74% --
Service ......................... (12.10) (13.32) -- 7.17 -- 2.38 --
Investor A ...................... (12.09) (13.37) (15.97)% 7.12 6.47% 2.27 1.96%
Investor B ...................... (12.47) (14.12) (17.95) 6.27 5.96 1.66 1.66
Investor C ...................... (12.45) (14.10) (14.95) 6.28 6.28 1.49 1.49
S&P 500 Index ................... (11.91) (13.12) -- 7.58 -- 2.88 --
- ------------------------------------------------------------------------------------------------------------------------------------
1 Assuming maximum sales charges. See "About Portfolio 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 INDEX EQUITY PORTFOLIO JUNE 30, 2008 5
About Portfolio 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 Service Shares are not subject to any sales charge. Service Shares are
subject to a service fee of 0.15% per year (but no distribution fee) 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 0.15% per year (but no distribution fee).
o Investor B Shares are subject to a maximum contingent deferred sales
charge of 4.50%, declining to 0% after six years. In addition, Investor B
Shares are subject to a distribution fee of 0.75% per year and a service
fee of 0.15% per year. These shares automatically convert to Investor A
Shares after approximately eight years. (There is no initial sales charge
for automatic share conversions.) All returns for periods greater than
eight years reflect this conversion.
o Investor C Shares are subject to a distribution fee of 0.75% per year and
a service fee of 0.15% per year. In addition, Investor C Shares are
subject to a 1% contingent deferred sales charge if redeemed within one
year of purchase.
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. The Portfolio may charge a 2% redemption fee for
sales or exchanges of shares within 30 days of purchase or exchange. Performance
results do not reflect the deduction of taxes that a shareholder would pay on
fund distributions or the redemption of fund shares. Performance data does not
reflect this potential fee. Figures shown in each of the performance tables on
page 5 assume reinvestment of all dividends and capital gain distributions, if
any, at net asset value on the ex-dividend date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost. Dividends paid to each class of shares will
vary because of the different levels of service, distribution and transfer
agency fees applicable to each class, which are deducted from the income
available to be paid to shareholders. The Portfolio's administrator waived a
portion of its fee. Without such waiver, the Portfolio's returns would have been
lower.
Disclosure of Expenses
Shareholders of this Portfolio may incur the following charges: (a) expenses
related to transactions, including sales charges, redemption fees and exchange
fees; and (b) operating expenses, including administration fees, distribution
fees including 12b-1 fees, and other Portfolio expenses. The expense example on
page 4 (which is based on a hypothetical investment of $1,000 invested on
January 1, 2008 and held through June 30, 2008) is intended to assist
shareholders both in calculating expenses based on an investment in the
Portfolio 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 Portfolio'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 Portfolio
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 information 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 INDEX EQUITY PORTFOLIO JUNE 30, 2008
Statement of Assets and Liabilities BlackRock Index Equity Portfolio
June 30, 2008 (Unaudited)
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investment at value -- Master S&P 500 Index Series (the "Series") (cost -- $968,874,842) ........................... $ 812,386,463
Series interest sold receivable .................................................................................... 1,408,154
Capital shares sold receivable ..................................................................................... 399,934
Prepaid expenses ................................................................................................... 55,139
-------------
Total assets ....................................................................................................... 814,249,690
-------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Capital shares redeemed payable .................................................................................... $ 1,808,088
Distribution fees payable .......................................................................................... 149,107
Administration fees payable ........................................................................................ 73,280
Other affiliates payable ........................................................................................... 56,914
Income dividends payable ........................................................................................... 614
Officer's and Directors' fees payable .............................................................................. 178
Other accrued expenses payable ..................................................................................... 188,130
-------------
Total liabilities .................................................................................................. 2,276,311
-------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ......................................................................................................... $ 811,973,379
=============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Shares, $0.001 par value, unlimited number of shares authorized ...................................... $ 16,718
Service Shares, $0.001 par value, unlimited number of shares authorized ............................................ 896
Investor A Shares, $0.001 par value, unlimited number of shares authorized ......................................... 9,102
Investor B Shares, $0.001 par value, unlimited number of shares authorized ......................................... 1,313
Investor C Shares, $0.001 par value, unlimited number of shares authorized ......................................... 5,112
Paid-in capital in excess of par ................................................................................... 550,286,587
Undistributed net investment income ................................................................................ 3,869,411
Accumulated net realized gain allocated from the Series ............................................................ 414,272,619
Net unrealized appreciation/depreciation allocated from the Series ................................................. (156,488,379)
-------------
Net assets ......................................................................................................... $ 811,973,379
=============
===================================================================================================================================
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional -- Based on net assets of $412,700,569 and 16,717,932 shares outstanding ............................. $ 24.69
=============
Service -- Based on net assets of $21,956,856 and 895,686 shares outstanding ....................................... $ 24.51
=============
Investor A -- Based on net assets of $222,939,327 and 9,102,239 shares outstanding ................................. $ 24.49
=============
Investor B -- Based on net assets of $31,618,922 and 1,313,014 shares outstanding .................................. $ 24.08
=============
Investor C -- Based on net assets of $122,757,705 and 5,111,778 shares outstanding ................................. $ 24.01
=============
See Notes to Financial Statements.
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 7
Statement of Operations BlackRock Index Equity Portfolio
Six Months Ended June 30, 2008 (Unaudited)
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Series:
Dividends ...................................................................................................... $ 8,963,508
Securities lending ............................................................................................. 299,354
Interest from affiliates ....................................................................................... 41,657
Expenses ....................................................................................................... (165,209)
-------------
Total income ....................................................................................................... 9,139,310
-------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Administration ..................................................................................................... 418,736
Service -- Service ................................................................................................. 17,474
Service -- Investor A .............................................................................................. 183,443
Service and distribution -- Investor B ............................................................................. 170,893
Service and distribution -- Investor C ............................................................................. 605,150
Transfer agent -- Institutional .................................................................................... 12,154
Transfer agent -- Service .......................................................................................... 5,165
Transfer agent -- Investor A ....................................................................................... 71,692
Transfer agent -- Investor B ....................................................................................... 48,933
Transfer agent -- Investor C ....................................................................................... 90,681
Printing ........................................................................................................... 79,164
Professional ....................................................................................................... 40,778
Registration ....................................................................................................... 21,338
Officer and Directors .............................................................................................. 178
Miscellaneous ...................................................................................................... 2,935
-------------
Total expenses ..................................................................................................... 1,768,714
Less fees waived by administrator .................................................................................. (36,614)
-------------
Total expenses after waiver ........................................................................................ 1,732,100
-------------
Net investment income .............................................................................................. 7,407,210
-------------
===================================================================================================================================
Realized and Unrealized Gain (Loss) Allocated from the Series
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................................................................... 8,447,782
Futures ........................................................................................................ (96,135)
-------------
8,351,647
-------------
Net change in unrealized appreciation/depreciation on investments and futures ...................................... (131,042,077)
-------------
Total realized and unrealized loss ................................................................................. (122,690,430)
-------------
Net Decrease in Net Assets Resulting from Operations ............................................................... $(115,283,220)
=============
See Notes to Financial Statements.
8 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Statements of Changes in Net Assets BlackRock Index Equity Portfolio
Six Months
Ended Period
June 30, October 1, 2007 Year Ended
2008 to December 31, September 30,
Increase (Decrease) in Net Assets: (Unaudited) 2007 2007
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income ........................................................ $ 7,407,210 $ 4,147,964 $ 17,143,544
Net realized gain (loss) ..................................................... 8,351,647 (25,510,279) 735,306,429
Net change in unrealized appreciation/depreciation ........................... (131,042,077) (12,772,754) (592,655,572)
---------------------------------------------------
Net increase (decrease) in net assets resulting from operations .............. (115,283,220) (34,135,069) 159,794,401
---------------------------------------------------
===================================================================================================================================
Dividends to Shareholders From
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income:
Institutional ............................................................ (2,579,252) (6,325,075) (5,030,661)
Service .................................................................. (128,924) (388,257) (346,097)
Investor A ............................................................... (1,344,881) (3,330,287) (2,790,854)
Investor B ............................................................... (117,796) (223,933) (341,372)
Investor C ............................................................... (472,238) (932,479) (916,013)
---------------------------------------------------
Decrease in net assets resulting from dividends to shareholders .............. (4,643,091) (11,200,031) (9,424,997)
---------------------------------------------------
===================================================================================================================================
Capital Share Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets derived from capital share transactions ........... (33,547,113) (22,476,080) (194,817,053)
---------------------------------------------------
===================================================================================================================================
Redemption Fee
- -----------------------------------------------------------------------------------------------------------------------------------
Redemption fee ............................................................... -- -- 35,030
---------------------------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets ................................................. (153,473,424) (67,811,180) (44,412,619)
Beginning of period .......................................................... 965,446,803 1,033,257,983 1,077,670,602
---------------------------------------------------
End of period ................................................................ $ 811,973,379 $ 965,446,803 $ 1,033,257,983
===================================================
End of period undistributed net investment income ............................ $ 3,869,411 $ 1,105,292 $ 8,157,359
===================================================
See Notes to Financial Statements.
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 9
Financial Highlights BlackRock Index Equity Portfolio
Institutional
--------------------------------------------------------------------------------------
Six Months
Ended Period
June 30, Oct. 1, 2007 Year Ended September 30,
2008 to Dec. 31, ------------------------------------------------------------
(Unaudited) 2007 2007 2006 2005 2004 2003
=================================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..... $ 28.22 $ 29.58 $ 25.70 $ 23.63 $ 21.49 $ 19.19 $ 15.69
--------------------------------------------------------------------------------------
Net investment income .................... 0.26 1 0.14 1 0.52 1 0.44 1 0.45 1 0.34 1 0.30
Net realized and unrealized gain (loss) .. (3.63) (1.11) 3.64 2 2.08 2 2.15 2 2.29 2 3.48
--------------------------------------------------------------------------------------
Net increase (decrease) from investment
operations ............................. (3.37) (0.97) 4.16 2.52 2.60 2.63 3.78
--------------------------------------------------------------------------------------
Dividends from net investment income ..... (0.16) (0.39) (0.28) (0.45) (0.46) (0.33) (0.28)
--------------------------------------------------------------------------------------
Net asset value, end of period ........... $ 24.69 $ 28.22 $ 29.58 $ 25.70 $ 23.63 $ 21.49 $ 19.19
======================================================================================
=================================================================================================================================
Total Investment Return 8
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value ................. (11.99)% 3 (3.28)% 3 16.27% 10.75% 12.17% 13.71% 24.20%
======================================================================================
=================================================================================================================================
Ratios to Average Net Assets 4
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses after waiver .............. 0.17% 5 0.15% 5 0.17% 0.18% 0.18% 0.18% 0.18%
======================================================================================
Total expenses ........................... 0.17% 5 0.16% 5 0.18% 0.26% 0.37% 0.36% 0.37%
======================================================================================
Net investment income .................... 1.96% 5 1.89% 5 1.89% 1.81% 1.95% 1.56% 1.63%
======================================================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) .......... $412,701 $464,166 $491,201 $474,801 $595,050 $546,947 $618,249
======================================================================================
Portfolio turnover from the Series ....... 4% 4% 1% 6 4% 7 7% 7 2% 7 10% 7
======================================================================================
1 Based on average shares outstanding.
2 Includes a redemption fee, which is less than $0.01 per share.
3 Aggregate total investment return.
4 Includes the Portfolio's share of the Series' (for the period June 4, 2007
to September 30, 2007) and The U.S. Large Company Series (the "Master")
(for the years ended 2003 - 2006 and the period October 1, 2006 to June 3,
2007) allocated expenses and/or net investment income.
5 Annualized.
6 Represents the portfolio turnover of the Series for the period June 4,
2007 to September 30, 2007.
7 Represents the portfolio turnover of the Master for the periods December
1, 2005 to September 30, 2006, December 1, 2004 to September 30, 2005,
December 1, 2003 to September 30, 2004 and December 1, 2002 to September
30, 2003, respectively.
8 Total investment returns exclude the effects of any sales charges.
See Notes to Financial Statements.
10 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Financial Highlights (continued) BlackRock Index Equity Portfolio
Service
--------------------------------------------------------------------------------------
Six Months
Ended Period
June 30, Oct. 1, 2007 Year Ended September 30,
2008 to Dec. 31, ------------------------------------------------------------
(Unaudited) 2007 2007 2006 2005 2004 2003
=================================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..... $ 28.04 $ 29.37 $ 25.53 $ 23.48 $ 21.35 $ 19.08 $ 15.62
--------------------------------------------------------------------------------------
Net investment income .................... 0.23 1 0.14 1 0.46 1 0.37 1 0.37 1 0.25 1 0.21
Net realized and unrealized gain (loss) .. (3.62) (1.11) 3.64 2 2.06 2 2.13 2 2.27 2 3.47
--------------------------------------------------------------------------------------
Net increase (decrease) from investment
operations ............................. (3.39) (0.97) 4.10 2.43 2.50 2.52 3.68
--------------------------------------------------------------------------------------
Dividends from net investment income ..... (0.14) (0.36) (0.26) (0.38) (0.37) (0.25) (0.22)
--------------------------------------------------------------------------------------
Net asset value, end of period ........... $ 24.51 $ 28.04 $ 29.37 $ 25.53 $ 23.48 $ 21.35 $ 19.08
======================================================================================
=================================================================================================================================
Total Investment Return
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value ................. (12.10)% 3 (3.28)% 3 16.12% 10.42% 11.78% 13.20% 23.68%
======================================================================================
=================================================================================================================================
Ratios to Average Net Assets 4
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses after waiver .............. 0.35% 5 0.16% 5 0.33% 0.46% 0.55% 0.56% 0.61%
======================================================================================
Total expenses ........................... 0.36% 5 0.17% 5 0.34% 0.49% 0.60% 0.67% 0.67%
======================================================================================
Net investment income .................... 1.77% 5 1.84% 5 1.70% 1.53% 1.62% 1.17% 1.19%
======================================================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) .......... $ 21,957 $ 26,177 $ 35,719 $ 44,765 $ 68,637 $ 74,641 $ 72,505
======================================================================================
Portfolio turnover from the Series ....... 4% 4% 1% 6 4% 7 7% 7 2% 7 10% 7
======================================================================================
1 Based on average shares outstanding.
2 Includes a redemption fee, which is less than $0.01 per share.
3 Aggregate total investment return.
4 Includes the Portfolio's share of the Series' (for the period June 4, 2007
to September 30, 2007) and The U.S. Large Company Series (the "Master")
(for the years ended 2003 - 2006 and the period October 1, 2006 to June 3,
2007) allocated expenses and/or net investment income.
5 Annualized.
6 Represents the portfolio turnover of the Series for the period June 4,
2007 to September 30, 2007.
7 Represents the portfolio turnover of the Master for the periods December
1, 2005 to September 30, 2006, December 1, 2004 to September 30, 2005,
December 1, 2003 to September 30, 2004 and December 1, 2002 to September
30, 2003, respectively.
See Notes to Financial Statements.
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 11
Financial Highlights (continued) BlackRock Index Equity Portfolio
Investor A
--------------------------------------------------------------------------------------
Six Months
Ended Period
June 30, Oct. 1, 2007 Year Ended September 30,
2008 to Dec. 31, ------------------------------------------------------------
(Unaudited) 2007 2007 2006 2005 2004 2003
=================================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..... $ 28.01 $ 29.34 $ 25.52 $ 23.46 $ 21.34 $ 19.07 $ 15.62
--------------------------------------------------------------------------------------
Net investment income .................... 0.23 1 0.12 1 0.47 1 0.38 1 0.36 1 0.22 1 0.18
Net realized and unrealized gain (loss) .. (3.61) (1.10) 3.60 2 2.07 2 2.13 2 2.28 2 3.46
--------------------------------------------------------------------------------------
Net increase (decrease) from investment
operations ............................. (3.38) (0.98) 4.07 2.45 2.49 2.50 3.64
--------------------------------------------------------------------------------------
Dividends from net investment income ..... (0.14) (0.35) (0.25) (0.39) (0.37) (0.23) (0.19)
--------------------------------------------------------------------------------------
Net asset value, end of period ........... $ 24.49 $ 28.01 $ 29.34 $ 25.52 $ 23.46 $ 21.34 $ 19.07
======================================================================================
=================================================================================================================================
Total Investment Return 3
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value ................. (12.09)% 4 (3.34)% 4 16.01% 10.52% 11.75% 13.10% 23.41%
======================================================================================
=================================================================================================================================
Ratios to Average Net Assets 5
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses after waiver .............. 0.37% 6 0.36% 6 0.37% 0.42% 0.55% 0.70% 0.79%
======================================================================================
Total expenses ........................... 0.37% 6 0.37% 6 0.37% 0.54% 0.70% 0.84% 0.85%
======================================================================================
Net investment income .................... 1.75% 6 1.68% 6 1.69% 1.57% 1.59% 1.04% 1.01%
======================================================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) .......... $222,939 $272,771 $284,761 $287,288 $296,266 $312,606 $281,505
======================================================================================
Portfolio turnover from the Series ....... 4% 4% 1% 7 4% 8 7% 8 2% 8 10% 8
======================================================================================
1 Based on average shares outstanding.
2 Includes a redemption fee, which is less than $0.01 per share.
3 Total investment returns exclude the effects of any sales charges.
4 Aggregate total investment return.
5 Includes the Portfolio's share of the Series' (for the period June 4, 2007
to September 30, 2007) and The U.S. Large Company Series (the "Master")
(for the years ended 2003 - 2006 and the period October 1, 2006 to June 3,
2007) allocated expenses and/or net investment income.
6 Annualized.
7 Represents the portfolio turnover of the Series for the period June 4,
2007 to September 30, 2007.
8 Represents the portfolio turnover of the Master for the periods December
1, 2005 to September 30, 2006, December 1, 2004 to September 30, 2005,
December 1, 2003 to September 30, 2004 and December 1, 2002 to September
30, 2003, respectively.
See Notes to Financial Statements.
12 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Financial Highlights (continued) BlackRock Index Equity Portfolio
Investor B
--------------------------------------------------------------------------------------
Six Months
Ended Period
June 30, Oct. 1, 2007 Year Ended September 30,
2008 to Dec. 31, ------------------------------------------------------------
(Unaudited) 2007 2007 2006 2005 2004 2003
=================================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..... $ 27.60 $ 28.75 $ 25.09 $ 23.06 $ 20.98 $ 18.75 $ 15.35
--------------------------------------------------------------------------------------
Net investment income .................... 0.11 1 0.06 1 0.24 1 0.18 1 0.19 1 0.06 1 0.04
Net realized and unrealized gain (loss) .. (3.55) (1.08) 3.55 2 2.03 2 2.09 2 2.24 2 3.42
--------------------------------------------------------------------------------------
Net increase (decrease) from investment
operations ............................. (3.44) (1.02) 3.79 2.21 2.28 2.30 3.46
--------------------------------------------------------------------------------------
Dividends from net investment income ..... (0.08) (0.13) (0.13) (0.18) (0.20) (0.07) (0.06)
--------------------------------------------------------------------------------------
Net asset value, end of period ........... $ 24.08 $ 27.60 $ 28.75 $ 25.09 $ 23.06 $ 20.98 $ 18.75
======================================================================================
=================================================================================================================================
Total Investment Return 3
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value ................. (12.47)% 4 (3.55)% 4 15.13% 9.62% 10.89% 12.25% 22.59%
======================================================================================
=================================================================================================================================
Ratios to Average Net Assets 5
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses after waiver .............. 1.23% 6 1.17% 6 1.19% 1.23% 1.31% 1.46% 1.54%
======================================================================================
Total expenses ........................... 1.24% 6 1.24% 6 1.21% 1.34% 1.35% 1.50% 1.59%
======================================================================================
Net investment income .................... 0.89% 6 0.86% 6 0.88% 0.76% 0.86% 0.28% 0.27%
======================================================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) .......... $ 31,619 $ 48,002 $ 56,503 $ 91,683 $136,878 $177,754 $192,614
======================================================================================
Portfolio turnover from the Series ....... 4% 4% 1% 7 4% 8 7% 8 2% 8 10% 8
======================================================================================
1 Based on average shares outstanding.
2 Includes a redemption fee, which is less than $0.01 per share.
3 Total investment returns exclude the effects of any sales charges.
4 Aggregate total investment return.
5 Includes the Portfolio's share of the Series' (for the period June 4, 2007
to September 30, 2007) and The U.S. Large Company Series (the "Master")
(for the years ended 2003 - 2006 and the period October 1, 2006 to June 3,
2007) allocated expenses and/or net investment income.
6 Annualized.
7 Represents the portfolio turnover of the Series for the period June 4,
2007 to September 30, 2007.
8 Represents the portfolio turnover of the Master for the periods December
1, 2005 to September 30, 2006, December 1, 2004 to September 30, 2005,
December 1, 2003 to September 30, 2004 and December 1, 2002 to September
30, 2003, respectively.
See Notes to Financial Statements.
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 13
Financial Highlights (concluded) BlackRock Index Equity Portfolio
Investor C
--------------------------------------------------------------------------------------
Six Months
Ended Period
June 30, Oct. 1, 2007 Year Ended September 30,
2008 to Dec. 31, ------------------------------------------------------------
(Unaudited) 2007 2007 2006 2005 2004 2003
=================================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..... $ 27.52 $ 28.71 $ 25.07 $ 23.05 $ 20.97 $ 18.74 $ 15.35
--------------------------------------------------------------------------------------
Net investment income .................... 0.12 1 0.06 1 0.24 1 0.18 1 0.19 1 0.06 1 0.04
Net realized and unrealized gain (loss) .. (3.54) (1.08) 3.55 2 2.03 2 2.09 2 2.24 2 3.41
--------------------------------------------------------------------------------------
Net increase (decrease) from investment
operations ............................. (3.42) (1.02) 3.79 2.21 2.28 2.30 3.45
--------------------------------------------------------------------------------------
Dividends from net investment income ..... (0.09) (0.17) (0.15) (0.19) (0.20) (0.07) (0.06)
--------------------------------------------------------------------------------------
Net asset value, end of period ........... $ 24.01 $ 27.52 $ 28.71 $ 25.07 $ 23.05 $ 20.97 $ 18.74
======================================================================================
=================================================================================================================================
Total Investment Return 3
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value ................. (12.45)% 4 (3.56)% 4 15.13% 9.61% 10.90% 12.26% 22.52%
======================================================================================
=================================================================================================================================
Ratios to Average Net Assets 5
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses after waiver .............. 1.18% 6 1.17% 6 1.17% 1.23% 1.31% 1.46% 1.54%
======================================================================================
Total expenses ........................... 1.19% 6 1.17% 6 1.17% 1.27% 1.35% 1.50% 1.59%
======================================================================================
Net investment income .................... 0.93% 6 0.87% 6 0.89% 0.76% 0.86% 0.28% 0.27%
======================================================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) .......... $122,758 $154,330 $165,075 $179,134 $228,276 $279,130 $297,835
======================================================================================
Portfolio turnover from the Series ....... 4% 4% 1% 7 4% 8 7% 8 2% 8 10% 8
======================================================================================
1 Based on average shares outstanding.
2 Includes a redemption fee, which is less than $0.01 per share.
3 Total investment returns exclude the effects of any sales charges.
4 Aggregate total investment return.
5 Includes the Portfolio's share of the Series' (for the period June 4, 2007
to September 30, 2007) and The U.S. Large Company Series (the "Master")
(for the years ended 2003 - 2006 and the period October 1, 2006 to June 3,
2007) allocated expenses and/or net investment income.
6 Annualized.
7 Represents the portfolio turnover of the Series for the period June 4,
2007 to September 30, 2007.
8 Represents the portfolio turnover of the Master for the periods December
1, 2005 to September 30, 2006, December 1, 2004 to September 30, 2005,
December 1, 2003 to September 30, 2004 and December 1, 2002 to September
30, 2003, respectively.
See Notes to Financial Statements.
14 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Notes to Financial Statements (Unaudited) BlackRock Index Equity Portfolio
1. Significant Accounting Policies:
BlackRock Index Equity Portfolio (the "Portfolio"), a part of BlackRock FundsSM
(the "Fund"), is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end management investment company. The Portfolio
seeks to achieve its investment objective by investing all of its assets in
Master S&P 500 Index Series (the "Series") of Quantitative Master Series LLC.
The value of the Portfolio's investment in the Series reflects the Portfolio's
proportionate interest in the net assets of the Series. The performance of the
Portfolio is directly affected by the performance of the Series. The financial
statements of the Series, including the Summary Schedule of Investments, are
included elsewhere in this report and should be read in conjunction with the
Portfolio's financial statements. The Portfolio's financial statements are
prepared in conformity with accounting principles generally accepted in the
United States of America, which may require the use of management accruals and
estimates. Actual results may differ from these estimates. The percentage of the
Series owned by the Portfolio at June 30, 2008 was 25.7%. The Portfolio offers
multiple classes of shares. Institutional and Service shares are sold without a
sales charge and only to certain eligible investors. Investor A Shares are
generally sold with a front-end sales charge. Investor B and Investor C Shares
may be subject to a contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the same terms and
conditions, except that Investor A, Investor B and Investor C Shares bear
certain expenses related to the shareholder servicing of such shares, and
Investor B and Investor C 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 material changes to the
Investor A distribution plan).
The following is a summary of significant accounting policies followed by the
Portfolio:
Valuation of Investments: The Portfolio records its investment in the Series at
fair value. Valuation of securities held by the Series is discussed in Note 1 of
the Series' Notes to Financial Statements, which are included elsewhere in this
report.
Effective January 1, 2008, the Portfolio adopted Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 157, "Fair Value
Measurements" ("FAS 157"). FAS 157 clarifies the definition of fair value,
establishes a framework for measuring fair values and requires additional
disclosures about the use of fair value measurements. Various inputs are used in
determining the fair value of investments, which are as follows:
o Level 1 -- price quotations in active markets/exchanges for identical
securities
o Level 2 -- other observable inputs (including, but not limited to: quoted
prices for similar assets or liabilities in markets that are not active,
inputs other than quoted prices that are observable for the assets or
liabilities (such as interest rates, yield curves, volatilities,
prepayment speeds, loss severities, credit risks, and default rates) or
other market-corroborated inputs)
o Level 3 -- unobservable inputs based on the best information available in
the circumstance, to the extent observable inputs are not available
(including the Portfolio's own assumption used in determining the fair
value of investments).
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. The
following table summarizes the inputs used as of June 30, 2008 in determining
the fair valuation of the Portfolio's investments:
- --------------------------------------------------------------------------------
Investments in
Valuation Inputs Securities
- --------------------------------------------------------------------------------
Level 1 .......................................................... --
Level 2 .......................................................... $812,386,463
Level 3 .......................................................... --
- --------------------------------------------------------------------------------
Total $812,386,463
============
Investment Transactions and Net Investment Income: Investment transactions in
the Series are accounted for on a trade date basis. The Portfolio records daily
its proportionate share of the Series' income, expenses and realized and
unrealized gains and losses. In addition, the Portfolio accrues its own
expenses. Income and realized and unrealized gains and losses are allocated
daily to each class based on its relative net assets.
Dividends and Distributions to Shareholders: Dividends and distributions paid by
the Portfolio are recorded on the ex-dividend dates.
Income Taxes: It is the Portfolio's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
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
December 31, 2004 through December 31, 2006. The statutes of limitations on the
Portfolio's state and local tax returns may remain open for an additional year
depending upon the jurisdiction.
Recent Accounting Pronouncement: In March 2008, Statement of Financial
Accounting Standards No. 161, "Disclosures about Derivative Instruments and
Hedging Activities -- an amendment of FASB Statement No. 133" ("FAS 161") was
issued and is effective for fiscal years beginning after November 15, 2008. FAS
161 is intended to improve financial reporting for derivative instruments by
requiring enhanced disclosure that enables investors to understand how and why
an entity uses derivatives, how derivatives are accounted for, and how
derivative instruments
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 15
Notes to Financial Statements (continued) BlackRock Index Equity Portfolio
affect an entity's results of operations and financial position. The impact on
the Portfolio's financial statement disclosures, if any, is currently being
assessed.
Other: Expenses directly related to the Portfolio or its classes are charged to
that Portfolio or class. Other operating expenses shared by several funds are
pro-rated among those funds on the basis of relative net assets or other
appropriate methods. Other expenses of the Portfolio are allocated daily to each
class based on its relative net assets.
2. Transactions with Affiliates:
The Fund, on behalf of the Portfolio, has entered into an Administration
Agreement with BlackRock Advisors, LLC and State Street Bank and Trust Company
(collectively, the "Administrator"). Merrill Lynch & Co., Inc. ("Merrill Lynch")
and The PNC Financial Services Group, Inc. ("PNC") are principal owners of
BlackRock, Inc.
The Portfolio pays the Administrator a monthly fee based upon the average daily
value of the Portfolio's net assets at the following annual rates for the
performance of administrative services other than investment advice and related
portfolio activities necessary to the operation of the Portfolio: 0.075% of the
Portfolio's average daily net assets not exceeding $500 million; 0.065% of
average daily net assets in excess of $500 million but not exceeding $1 billion;
and 0.055% of average daily net assets in excess of $1 billion. In addition,
each of the share classes is charged an administration fee based upon the
average daily net assets of each respective class at the following rates for the
performance of administrative services other than investment advice and related
portfolio activities necessary to the operation of the portfolio: 0.025% of the
first $500 million, 0.015% of the next $500 million and 0.005% of assets in
excess of $1 billion.
BlackRock contractually agreed to waive or reimburse fees or expenses until
February 1, 2009 in order to limit expenses. This agreement is reviewed annually
by the Fund's Board of Trustees. The current expense limitation as a percentage
of net assets are as follows: 0.18% for Institutional; 0.615% for Service;
0.785% for Investor A, and 1.24% for Investor B and Investor C. These amounts
are shown as fees waived by the Administrator on the Statement of Operations.
If after two years following a waiver or reimbursement of the operating expenses
of a share class that previously received a waiver or reimbursement from
BlackRock are less than the expense limit for that share class, BlackRock is
entitled to reimbursement by such share class up to the amount of fees waived or
expenses reimbursed under the agreement if: (1) the Portfolio of which the share
class is a part has more than $50 million in assets, (2) BlackRock continues to
be the Portfolio's investment advisor and (3) the Board of the Fund approved the
payments to BlackRock at the previous quarterly meeting. At June 30, 2008, the
amounts subject to possible future reimbursement under the expense limitation
agreement are as follows:
- --------------------------------------------------------------------------------
Expiring Expiring Expiring Expiring Total Waivers
January 31, January 31, January 31, January 31, Subject to
2009 2010 2011 2012 Reimbursement
- --------------------------------------------------------------------------------
$131,162 $87,300 $20,683 $36,614 $275,759
- --------------------------------------------------------------------------------
Waivers of $1,120,125 previously recognized by the Portfolio, which may have
been subject to recoupment, expired on January 31, 2008.
The Portfolio has also entered into separate Distribution Agreements and
Distribution Plans with FAM Distributors, Inc. ("FAMD") and BlackRock
Distributors, Inc. and its affiliates ("BDI") (collectively the "Distributor").
FAMD is a wholly owned subsidiary of Merrill Lynch Group, Inc., and BDI is an
affiliate of BlackRock, Inc.
Pursuant to the Distribution Plans adopted by the Portfolio in accordance with
Rule 12b-1 under the 1940 Act, the Portfolio 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
- --------------------------------------------------------------------------------
Service ............................................. 0.15% --
Investor A .......................................... 0.15% --
Investor B .......................................... 0.15% 0.75%
Investor C .......................................... 0.15% 0.75%
- --------------------------------------------------------------------------------
Pursuant to sub-agreements with each Distributor, broker-dealers, including
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned
subsidiary of Merrill Lynch, and each Distributor provide shareholder servicing
and/or distribution services to the Portfolio. The ongoing service fee and/or
distribution fee compensates the Distributor and each broker-dealer for
providing shareholder servicing and/or distribution related services to Service,
Investor A, Investor B and Investor C shareholders.
For the six months ended June 30, 2008, the Distributor earned underwriting
discounts and direct commissions and its affiliates earned dealer concessions on
sales of the Portfolio's Investor A Shares, which totaled $1,371 and affiliates
received contingent deferred sales charges of $14,895 and $439 relating to
transactions in Investor B and Investor C Shares, respectively. These amounts
include payments to Hilliard Lyons, which was considered an affiliate for a
portion of the period.
Pursuant to written agreements, certain affiliates provide the Portfolio with
sub-accounting, record keeping, sub-transfer agency and other administrative
services with respect to sub-accounts they service. For these services, these
affiliates receive an annual fee per shareholder account, which will vary
depending on share class. For the six months ended June 30, 2008, the Portfolio
paid $55,363 in return for these services.
16 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Notes to Financial Statements (continued) BlackRock Index Equity Portfolio
PNC Global Investment Servicing (U.S.) Inc., formerly PFPC Inc., an indirect,
wholly owned subsidiary of PNC and an affiliate of the Administrator, is the
Portfolio's transfer agent. Each class of the Portfolio bears the costs of
transfer agent fees associated with such respective classes. Transfer agency
fees borne by each class of the Portfolio are comprised of those fees charged
for all shareholder communications including mailing of shareholder reports,
dividend and distribution notices, and proxy materials for shareholders
meetings, as well as per account and per transaction fees related to servicing
and maintenance of shareholder accounts, including the issuing, redeeming and
transferring of shares of each class of the Portfolio, 12b-1 fee calculation,
check writing, anti-money laundering services, and customer identification
services.
The Administrator maintains a call center, which is responsible for providing
certain shareholder services to the Portfolio, such as responding to shareholder
inquiries and processing transactions based upon instructions from shareholders
with respect to the subscription and redemption of Portfolio shares. During the
six months ended June 30, 2008, the following amounts have been accrued by the
Portfolio to reimburse the Administrator for costs incurred running the call
center, which are a component of the transfer agent fees in the accompanying
Statement of Operations.
- --------------------------------------------------------------------------------
Call Center
Fees
- --------------------------------------------------------------------------------
Institutional ........................................................ $1,707
Service .............................................................. $ 249
Investor A ........................................................... $6,730
Investor B ........................................................... $3,009
Investor C ........................................................... $5,082
- --------------------------------------------------------------------------------
Certain officers and/or directors of the Fund are officers and/or directors of
BlackRock, Inc. or its affiliates.
3. Capital Loss Carryforward:
As of December 31, 2007, the Portfolio had a capital loss carryforward of
$190,053,588, of which $72,454,352 expires in 2009, $117,169,455 expires in 2010
and $429,781 expires in 2012. This amount will be available to offset future
realized capital gains.
4. Short-Term Borrowings:
The Portfolio, along with certain other funds managed by the Administrator and
its affiliates, is a party to a $500,000,000 credit agreement with a group of
lenders. The Portfolio may borrow under the credit agreement to fund shareholder
redemptions and for other lawful purposes other than for leverage. The Portfolio
may borrow up to the maximum amount allowable under the Portfolio's current
Prospectus and Statement of Additional Information, subject to various other
legal, regulatory or contractual limits. On November 21, 2007, the credit
agreement was renewed for one year under substantially the same terms. The
Portfolio pays a commitment fee of 0.06% per annum based on the Portfolio's pro
rata share of the unused portion of the credit agreement, which is included in
miscellaneous in the Statement of Operations. Amounts borrowed under the credit
agreement bear interest at a rate equal to, at each fund's election, the federal
funds rate plus 0.35% or a base rate as defined in the credit agreement. The
Portfolio did not borrow under the credit agreement during the six months ended
June 30, 2008.
5. Subsequent Event:
The Portfolio paid an ordinary income dividend in the amount of $0.132783 per
Institutional Share, $0.118035 per Service Share, $0.119268 per Investor A
Share, $0.056807 per Investor B Share and $0.065268 per Investor C Share on July
18, 2008 to shareholders of record on July 16, 2008.
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 17
Notes to Financial Statements (concluded) BlackRock Index Equity Portfolio
6. Capital Share Transactions:
Transactions in capital shares for each class were as follows:
Six Months Ended Period October 1, 2007 Year Ended
June 30, 2008 to December 31, 2007 September 30, 2007
-------------------------- ------------------------ ---------------------------
Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ........................ 1,127,687 $ 29,672,923 133,762 $ 3,866,196 15,182,132 $ 434,758,246
Shares issued to shareholders in
reinvestment of dividends ........ 14,065 368,933 39,636 1,107,420 56,212 1,568,893
-------------------------- ------------------------ ---------------------------
Total issued ....................... 1,141,752 30,041,856 173,398 4,973,616 15,238,344 436,327,139
Shares redeemed .................... (872,309) (22,930,893) (330,077) (9,604,299) (17,107,084) (488,875,217)
-------------------------- ------------------------ ---------------------------
Net increase (decrease) ............ 269,443 $ 7,110,963 (156,679) $ (4,630,683) (1,868,740) $ (52,548,078)
========================== ======================== ===========================
- -----------------------------------------------------------------------------------------------------------------------------------
Service
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ........................ 78,568 $ 2,065,987 33,332 $ 968,514 689,177 $ 19,281,423
Shares issued to shareholders in
reinvestment of dividends ........ 4,748 123,732 13,469 373,897 12,156 337,537
-------------------------- ------------------------ ---------------------------
Total issued ....................... 83,316 2,189,719 46,801 1,342,411 701,333 19,618,960
Shares redeemed .................... (121,190) (3,154,294) (329,281) (9,581,149) (1,238,485) (34,417,910)
-------------------------- ------------------------ ---------------------------
Net decrease ....................... (37,874) $ (964,575) (282,480) $ (8,238,738) (537,152) $ (14,798,950)
========================== ======================== ===========================
- -----------------------------------------------------------------------------------------------------------------------------------
Investor A
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ........................ 937,795 $ 24,618,919 439,162 $ 12,581,287 2,241,287 $ 62,047,128
Shares issued to shareholders in
reinvestment of dividends ........ 46,557 1,211,879 117,548 3,260,755 93,212 2,586,033
-------------------------- ------------------------ ---------------------------
Total issued ....................... 984,352 25,830,798 556,710 15,842,042 2,334,499 64,633,161
Shares redeemed .................... (1,619,260) (42,034,500) (524,488) (15,056,914) (3,888,674) (108,477,810)
-------------------------- ------------------------ ---------------------------
Net increase (decrease) ............ (634,908) $ (16,203,702) 32,222 $ 785,128 (1,554,175) $ (43,844,649)
========================== ======================== ===========================
- -----------------------------------------------------------------------------------------------------------------------------------
Investor B
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ........................ 1,422 $ 36,470 3,318 $ 91,883 28,652 $ 761,184
Shares issued to shareholders in
reinvestment of dividends ........ 2,680 68,715 4,794 131,056 7,531 206,387
-------------------------- ------------------------ ---------------------------
Total issued ....................... 4,102 105,185 8,112 222,939 36,183 967,571
Shares redeemed .................... (430,340) (10,991,846) (234,402) (6,570,338) (1,724,332) (46,833,109)
-------------------------- ------------------------ ---------------------------
Net decrease ....................... (426,238) $ (10,886,661) (226,290) $ (6,347,399) (1,688,149) $ (45,865,538)
========================== ======================== ===========================
- -----------------------------------------------------------------------------------------------------------------------------------
Investor C
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ........................ 8,164 $ 209,267 14,928 $ 407,697 15,122 $ 414,223
Shares issued to shareholders in
reinvestment of dividends ........ 8,701 222,482 16,173 440,843 15,356 420,558
-------------------------- ------------------------ ---------------------------
Total issued ....................... 16,865 431,749 31,101 848,540 30,478 834,781
Shares redeemed .................... (512,122) (13,034,887) (174,122) (4,892,928) (1,425,591) (38,594,619)
-------------------------- ------------------------ ---------------------------
Net decrease ....................... (495,257) $ (12,603,138) (143,021) $ (4,044,388) (1,395,113) $ (37,759,838)
========================== ======================== ===========================
There is a 2% redemption fee on shares redeemed or exchanged that have been held
for 30 days or less. The redemption fees are collected and retained by the
Portfolio for the benefit of the remaining shareholders. The redemption fees are
recorded as a credit to paid-in capital.
18 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Portfolio Information Master S&P 500 Index Series
As of June 30, 2008
Percent of
Top Ten Holdings Net Assets
- --------------------------------------------------------------------------------
Exxon Mobil Corp. ..................................................... 4%
General Electric Co. .................................................. 2
Microsoft Corp. ....................................................... 2
Chevron Corp. ......................................................... 2
AT&T Inc. ............................................................. 2
The Procter & Gamble Co. .............................................. 2
Johnson & Johnson ..................................................... 2
International Business Machines Corp. ................................. 2
Apple, Inc. ........................................................... 1
ConocoPhillips ........................................................ 1
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries Net Assets
- --------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels ........................................... 13%
Pharmaceuticals ....................................................... 6
Computers & Peripherals ............................................... 5
Energy Equipment & Services ........................................... 4
Software .............................................................. 4
- --------------------------------------------------------------------------------
Percent of
Sector Representation Long-Term Investments
- --------------------------------------------------------------------------------
Information Technology ................................................ 17%
Energy ................................................................ 16
Financials ............................................................ 14
Health Care ........................................................... 12
Industrials ........................................................... 11
Consumer Staples ...................................................... 11
Consumer Discretionary ................................................ 8
Utilities ............................................................. 4
Materials ............................................................. 4
Telecommunication Services ............................................ 3
- --------------------------------------------------------------------------------
For Series compliance purposes, the Series' industry and sector
classifications refer to any one or more of the industry and sector
sub-classifications used by one or more widely recognized market indexes
or ratings group indexes, and/or as defined by Series management. This
definition may not apply for purposes of this report, which may combine
industry and sector sub-classifications for reporting ease.
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 19
Summary Schedule of Investments June 30, 2008 (Unaudited)
Master S&P 500 Index Series
(Percentages shown are based on Net Assets)
This summary schedule of investments is presented to help investors focus on the
Series' principal holdings. It includes the Series' 50 largest holdings and each
investment of any issuer that exceeds 1% of the Series' net assets, and
affiliated investments. "Other Securities" represent all issues not required to
be disclosed under the rules adopted by the Securities and Exchange Commission
("SEC"). A complete schedule of investments is available without charge, upon
request, by calling 800-441-7762 or on the SEC's website at http://www.sec.gov.
====================================================================================================================================
Industry Common Stocks Shares Value Percent
====================================================================================================================================
Aerospace & Defense Boeing Co. 211,161 $ 13,877,501 0.5%
United Technologies Corp. 273,511 16,875,629 0.5
Other Securities 53,049,884 1.7
---------------------------
83,803,014 2.7
- ------------------------------------------------------------------------------------------------------------------------------------
Air Freight & Logistics United Parcel Service, Inc. Class B (a) 286,887 17,634,944 0.6
Other Securities 12,044,502 0.4
---------------------------
29,679,446 1.0
- ------------------------------------------------------------------------------------------------------------------------------------
Airlines Other Securities 2,658,465 0.1
- ------------------------------------------------------------------------------------------------------------------------------------
Auto Components Other Securities 5,915,799 0.2
- ------------------------------------------------------------------------------------------------------------------------------------
Automobiles Other Securities 7,258,013 0.2
- ------------------------------------------------------------------------------------------------------------------------------------
Beverages The Coca-Cola Co. 561,383 29,180,688 0.9
PepsiCo, Inc. 445,724 28,343,589 0.9
Other Securities 20,286,520 0.7
---------------------------
77,810,797 2.5
- ------------------------------------------------------------------------------------------------------------------------------------
Biotechnology Amgen, Inc. (b) 305,940 14,428,130 0.5
Gilead Sciences, Inc. (b) 259,282 13,728,982 0.4
Other Securities 17,837,709 0.6
---------------------------
45,994,821 1.5
- ------------------------------------------------------------------------------------------------------------------------------------
Building Products Other Securities 1,599,851 0.1
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Markets The Goldman Sachs Group, Inc. (a) 110,783 19,375,947 0.6
Merrill Lynch & Co., Inc. (a)(c) 276,938 8,781,704 0.3
Other Securities 60,048,406 1.9
---------------------------
88,206,057 2.8
- ------------------------------------------------------------------------------------------------------------------------------------
Chemicals Monsanto Co. 154,172 19,493,508 0.6
Other Securities 46,442,393 1.5
---------------------------
65,935,901 2.1
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial Banks The PNC Financial Services Group, Inc. (c) 97,149 5,547,208 0.2
U.S. Bancorp (a) 489,111 13,641,306 0.4
Wells Fargo & Co. (a) 928,090 22,042,138 0.7
Other Securities 28,247,863 0.9
---------------------------
69,478,515 2.2
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies Other Securities 15,559,956 0.5
- ------------------------------------------------------------------------------------------------------------------------------------
Communications Equipment Cisco Systems, Inc. (b) 1,660,104 38,614,019 1.2
QUALCOMM, Inc. 454,901 20,183,957 0.7
Other Securities 19,923,498 0.6
---------------------------
78,721,474 2.5
- ------------------------------------------------------------------------------------------------------------------------------------
Computers & Peripherals Apple, Inc. (b) 247,803 41,492,134 1.3
Hewlett-Packard Co. 693,111 30,642,437 1.0
International Business Machines Corp. 385,991 45,751,513 1.5
Other Securities 29,295,344 0.9
---------------------------
147,181,428 4.7
- ------------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering Other Securities 7,396,681 0.2
- ------------------------------------------------------------------------------------------------------------------------------------
Construction Materials Other Securities 1,839,550 0.1
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Finance Other Securities 20,584,415 0.7
- ------------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging Other Securities 3,760,424 0.1
- ------------------------------------------------------------------------------------------------------------------------------------
Distributors Other Securities 1,892,617 0.1
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
20 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Summary Schedule of Investments (continued) Master S&P 500 Index Series
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value Percent
====================================================================================================================================
Diversified Consumer Services Other Securities $ 3,784,384 0.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services Bank of America Corp. 1,258,053 30,029,725 0.9
Citigroup, Inc. 1,529,979 25,642,448 0.8
JPMorgan Chase & Co. 970,448 33,296,078 1.1
Other Securities 16,667,684 0.5
---------------------------
105,635,935 3.3
- ------------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services AT&T Inc. 1,669,591 56,248,521 1.8
Verizon Communications, Inc. 801,157 28,360,958 0.9
Other Securities 7,328,810 0.2
---------------------------
91,938,289 2.9
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Utilities Exelon Corp. 184,311 16,580,618 0.5
Other Securities 57,071,448 1.8
---------------------------
73,652,066 2.3
- ------------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment Other Securities 14,641,796 0.5
- ------------------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments Other Securities 10,284,419 0.3
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services Schlumberger Ltd. 335,290 36,020,205 1.1
Transocean, Inc. 89,575 13,650,334 0.4
Other Securities 64,733,240 2.1
---------------------------
114,403,779 3.6
- ------------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing CVS Caremark Corp. 401,652 15,893,370 0.5
Wal-Mart Stores, Inc. 653,909 36,749,686 1.1
Other Securities 33,803,541 1.1
---------------------------
86,446,597 2.7
- ------------------------------------------------------------------------------------------------------------------------------------
Food Products Other Securities 48,221,841 1.5
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Utilities Other Securities 3,958,706 0.1
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies Medtronic, Inc. 315,557 16,330,075 0.5
Other Securities 49,678,578 1.6
---------------------------
66,008,653 2.1
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care Providers & Services Other Securities 56,448,916 1.8
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care Technology Other Securities 1,246,573 0.0
- ------------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure McDonald's Corp. (a) 318,601 17,911,748 0.5
Other Securities 21,410,945 0.7
---------------------------
39,322,693 1.2
- ------------------------------------------------------------------------------------------------------------------------------------
Household Durables Other Securities 12,298,736 0.4
- ------------------------------------------------------------------------------------------------------------------------------------
Household Products The Procter & Gamble Co. 857,994 52,174,615 1.7
Other Securities 18,908,973 0.6
---------------------------
71,083,588 2.3
- ------------------------------------------------------------------------------------------------------------------------------------
IT Services Other Securities 29,651,995 0.9
- ------------------------------------------------------------------------------------------------------------------------------------
Independent Power Producers & Other Securities 8,853,596 0.3
Energy Traders
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates 3M Co. 197,885 13,770,817 0.4
General Electric Co. 2,801,137 74,762,347 2.4
Other Securities 8,729,658 0.3
---------------------------
97,262,822 3.1
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance American International Group, Inc. (a)(b) 755,593 19,992,991 0.6
Other Securities 90,430,632 2.9
---------------------------
110,423,623 3.5
- ------------------------------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail Other Securities 8,419,465 0.3
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 21
Summary Schedule of Investments (continued) Master S&P 500 Index Series
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value Percent
====================================================================================================================================
Internet Software & Services Google, Inc. Class A (b) 65,319 $ 34,385,228 1.1%
Other Securities 20,191,291 0.6
---------------------------
54,576,519 1.7
- ------------------------------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products Other Securities 4,302,706 0.1
- ------------------------------------------------------------------------------------------------------------------------------------
Life Sciences Tools & Services Other Securities 11,828,342 0.4
- ------------------------------------------------------------------------------------------------------------------------------------
Machinery Other Securities 60,607,814 1.9
- ------------------------------------------------------------------------------------------------------------------------------------
Media Comcast Corp. Class A 831,509 15,773,726 0.5
Time Warner, Inc. 1,005,697 14,884,316 0.5
Walt Disney Co. 535,440 16,705,728 0.5
Other Securities 42,061,668 1.3
---------------------------
89,425,438 2.8
- ------------------------------------------------------------------------------------------------------------------------------------
Metals & Mining Other Securities 44,297,006 1.4
- ------------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities Other Securities 37,679,508 1.2
- ------------------------------------------------------------------------------------------------------------------------------------
Multiline Retail Other Securities 22,867,012 0.7
- ------------------------------------------------------------------------------------------------------------------------------------
Office Electronics Other Securities 3,427,439 0.1
- ------------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels Chevron Corp. 581,229 57,617,231 1.8
ConocoPhillips 433,505 40,918,537 1.3
Devon Energy Corp. 125,364 15,063,738 0.5
Exxon Mobil Corp. (d) 1,484,827 130,857,804 4.1
Occidental Petroleum Corp. 230,619 20,723,423 0.7
Other Securities 129,266,000 4.1
---------------------------
394,446,733 12.5
- ------------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products Other Securities 7,128,719 0.2
- ------------------------------------------------------------------------------------------------------------------------------------
Personal Products Other Securities 5,790,193 0.2
- ------------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals Abbott Laboratories 433,754 22,975,949 0.7
Johnson & Johnson 792,037 50,959,661 1.6
Merck & Co., Inc. 603,225 22,735,550 0.7
Pfizer, Inc. 1,901,230 33,214,488 1.1
Wyeth 374,734 17,972,243 0.6
Other Securities 44,495,563 1.4
---------------------------
192,353,454 6.1
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts (REITs) Other Securities 36,906,256 1.2
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate Management & Development Other Securities 1,005,907 0.0
- ------------------------------------------------------------------------------------------------------------------------------------
Road & Rail Other Securities 34,073,179 1.1
- ------------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Intel Corp. 1,609,753 34,577,494 1.1
Semiconductor Equipment Other Securities 45,700,995 1.4
---------------------------
80,278,489 2.5
- ------------------------------------------------------------------------------------------------------------------------------------
Software Microsoft Corp. (d) 2,250,887 61,921,901 2.0
Oracle Corp. (b) 1,114,719 23,409,099 0.7
Other Securities 26,382,543 0.8
---------------------------
111,713,543 3.5
- ------------------------------------------------------------------------------------------------------------------------------------
Specialty Retail Other Securities 46,811,557 1.5
- ------------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods Other Securities 12,704,987 0.4
- ------------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance Other Securities 14,560,522 0.5
- ------------------------------------------------------------------------------------------------------------------------------------
Tobacco Philip Morris International, Inc. 592,737 29,275,280 0.9
Other Securities 19,964,985 0.7
---------------------------
49,240,265 1.6
- ------------------------------------------------------------------------------------------------------------------------------------
Trading Companies & Distributors Other Securities 1,496,286 0.0
- ------------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services Other Securities 12,319,494 0.4
- ------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost -- $2,686,753,272) 3,139,107,064 99.5
====================================================================================================================================
See Notes to Financial Statements.
22 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Summary Schedule of Investments (concluded) Master S&P 500 Index Series
(Percentages shown are based on Net Assets)
Beneficial
Interest
Short-Term Securities (000) Value Percent
====================================================================================================================================
BlackRock Liquidity Series, LLC Cash
Sweep Series, 2.56% (c)(e) $ 19,004 $ 19,003,784 0.6%
BlackRock Liquidity Series, LLC Money
Market Series, 2.70% (c)(e)(f) 258,804 258,804,027 8.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $277,807,811) 277,807,811 8.8
====================================================================================================================================
Total Investments (Cost -- $2,964,561,083*) 3,416,914,875 108.3
Liabilities in Excess of Other Assets (261,237,310) (8.3)
---------------------------
Net Assets $3,155,677,565 100.0%
===========================
* The cost and unrealized appreciation (depreciation) of investments, as of
June 30, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost ......................................... $ 2,436,265,656
===============
Gross unrealized appreciation .......................... $ 1,218,348,868
Gross unrealized depreciation .......................... (237,699,649)
---------------
Net unrealized appreciation ............................ $ 980,649,219
===============
(a) Security, or a portion of security, is on loan.
(b) Non-income producing security.
(c) Investments in companies considered to be an affiliate of the Series, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
-------------------------------------------------------------------------------------
Interest/
Purchase Sale Realized Dividend
Affiliate Cost Cost Loss Income
-------------------------------------------------------------------------------------
Blackrock Liquidity
Series, LLC
Cash Sweep Series $15,346,892* -- -- $ 163,729
BlackRock Liquidity
Series, LLC
Money Market Series -- $93,760,873** -- $ 1,177,687
Merrill Lynch & Co., Inc. $ 2,132,408 $ 923,119 $ (265,882) $ 185,527
The PNC Financial
Services Group, Inc. $ 262,005 $ 560,987 $ (85,126) $ 129,834
-------------------------------------------------------------------------------------
* Represents net purchase cost.
** Represents net sale cost.
(d) All, or a portion of security, pledged as collateral in connection with
open financial futures contracts.
(e) Represents the current yield as of report date.
(f) Security was purchased with the cash proceeds from securities loans.
o For Series compliance purposes, the Series 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 Series management. This definition may not apply for purposes
of this report, which may combine industry sub-classifications for
reporting ease.
o Financial futures contracts purchased as of June 30, 2008 were as follows:
--------------------------------------------------------------------------
Expiration Face Unrealized
Contracts Issue Date Value Depreciation
--------------------------------------------------------------------------
66 S&P 500
Index September 2008 $22,318,867 $(1,180,717)
--------------------------------------------------------------------------
o Effective January 1, 2008, the Series adopted Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"). FAS 157 clarifies the definition of fair
value, establishes a framework for measuring fair values and requires
additional disclosures about the use of fair value measurements. Various
inputs are used in determining the fair value of investments, which are as
follows:
o Level 1 -- price quotations in active markets/exchanges for
identical securities
o Level 2 -- other observable inputs (including, but not limited to:
quoted prices for similar assets or liabilities in markets that are
not active, inputs other than quoted prices that are observable for
the assets or liabilities (such as interest rates, yield curves,
volatilities, prepayment speeds, loss severities, credit risks, and
default rates) or other market-corroborated inputs)
o Level 3 -- unobservable inputs based on the best information
available in the circumstance, to the extent observable inputs are
not available (including the Series' own assumption used in
determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities.
For information about the Series' policy regarding valuation of
investments and other significant accounting policies, please refer to
Note 1 of the Notes to Financial Statements.
The following table summarizes the inputs used as of June 30, 2008 in
determining the fair valuation of the Fund's investments:
--------------------------------------------------------------------------
Investments in Other Financial
Valuation Inputs Securities Instruments*
--------------------------------------------------------------------------
Level 1 ........................... $3,139,107,064 $(1,180,717)
Level 2 ........................... 277,807,811 --
Level 3 ........................... -- --
--------------------------------------------------------------------------
Total ............................. $3,416,914,875 $(1,180,717)
===================================
* Other financial instruments are futures.
See Notes to Financial Statements.
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 23
Statement of Assets and Liabilities Master S&P 500 Index Series
June 30, 2008 (Unaudited)
====================================================================================================================================
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Investments at value -- unaffiliated (including securities loaned of $246,394,158)
(cost -- $2,671,226,119) ......................................................................................... $3,124,778,152
Investments at value -- affiliated (cost -- $293,334,964) .......................................................... 292,136,723
Cash ............................................................................................................... 14,482
Investments sold receivable ........................................................................................ 64,025,313
Dividends receivable ............................................................................................... 4,336,623
Securities lending income receivable ............................................................................... 153,346
Margin variation payable ........................................................................................... 18,123
Prepaid expenses ................................................................................................... 97,897
Other assets ....................................................................................................... 34,437
--------------
Total assets ....................................................................................................... 3,485,595,096
--------------
====================================================================================================================================
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Collateral at value -- securities loaned ........................................................................... 258,804,027
Withdrawals payable to Investors ................................................................................... 67,673,879
Investments purchased payable ...................................................................................... 3,160,756
Other affiliates payable ........................................................................................... 29,868
Investment advisory fees payable ................................................................................... 14,025
Officer's and Directors' fees payable .............................................................................. 690
Other liabilities .................................................................................................. 25,741
Other accrued expenses payable ..................................................................................... 208,545
--------------
Total liabilities .................................................................................................. 329,917,531
--------------
====================================================================================================================================
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets ......................................................................................................... $3,155,677,565
==============
====================================================================================================================================
Net Assets Consist of
- ------------------------------------------------------------------------------------------------------------------------------------
Investors' capital ................................................................................................. $2,704,504,490
Net unrealized appreciation/depreciation ........................................................................... 451,173,075
--------------
Net assets ......................................................................................................... $3,155,677,565
==============
See Notes to Financial Statements.
24 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Statement of Operations Master S&P 500 Index Series
Six Months Ended June 30, 2008 (Unaudited)
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends (including $315,361 from affiliates) ..................................................................... $ 35,245,185
Securities lending ................................................................................................. 1,177,687
Interest from affiliates ........................................................................................... 163,729
-------------
Total income ....................................................................................................... 36,586,601
=============
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Accounting services ................................................................................................ 278,288
Investment advisory ................................................................................................ 172,114
Custodian .......................................................................................................... 71,423
Professional ....................................................................................................... 62,237
Officer and Directors .............................................................................................. 27,996
Registration ....................................................................................................... 9,427
Printing ........................................................................................................... 929
Miscellaneous ...................................................................................................... 26,867
-------------
Total expenses before waiver ....................................................................................... 649,281
Less fees waived by the advisor .................................................................................... (86,057)
-------------
Total expenses ..................................................................................................... 563,224
-------------
Net investment income .............................................................................................. 36,023,377
-------------
===================================================================================================================================
Realized and Unrealized Loss
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized loss from:
Investments (including $351,008 loss from affiliates) .......................................................... (13,489,343)
Futures ........................................................................................................ (356,390)
-------------
(13,845,733)
-------------
Net change in unrealized appreciation/depreciation on:
Investments .................................................................................................... (460,342,241)
Futures ........................................................................................................ (1,275,548)
-------------
(461,617,789)
-------------
Total realized and unrealized loss ................................................................................. (475,463,522)
-------------
Net Decrease in Net Assets Resulting from Operations ............................................................... $(439,440,145)
=============
See Notes to Financial Statements.
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 25
Statements of Changes in Net Assets Master S&P 500 Index Series
Six Months
Ended
June 30, Year Ended
2007 December 31,
Increase (Decrease) in Net Assets: (Unaudited) 2007
==================================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income ......................................................................... $ 36,023,377 $ 68,144,242
Net realized gain (loss) ...................................................................... (13,845,733) 72,971,959
Net change in unrealized appreciation/depreciation ............................................ (461,617,789) (17,251,673)
---------------------------------
Net increase (decrease) in net assets resulting from operations ............................... (439,440,145) 123,864,528
---------------------------------
==================================================================================================================================
Capital Transactions
- ----------------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ................................................................... 440,677,937 1,916,951,681*
Fair value of withdrawals ..................................................................... (566,731,063) (1,130,278,630)
---------------------------------
Net increase (decrease) in net assets derived from capital transactions ....................... (126,053,126) 786,673,051
---------------------------------
==================================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ....................................................... (565,493,271) 910,537,579
Beginning of period ........................................................................... 3,721,170,836 2,810,633,257
---------------------------------
End of period ................................................................................. $ 3,155,677,565 $ 3,721,170,836
=================================
* Amount includes an in-kind contribution of $1,099,448,117 from an
affiliated fund.
Financial Highlights Master S&P 500 Index Series
Six Months
Ended
June 30, Year Ended December 31,
2008 ----------------------------------------------------------
(Unaudited) 2007 2006 2005 2004 2003
===================================================================================================================================
Total Investment Return
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return ................................. (11.93)% 1 5.56% 15.85% 4.96% 10.90% 28.70%
========================================================================
===================================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses after waiver ............................. 0.03% 2 0.03% 0.04% 0.03% 0.03% 0.04%
========================================================================
Total expenses .......................................... 0.04% 2 0.04% 0.04% 0.03% 0.03% 0.04%
========================================================================
Net investment income ................................... 2.07% 2 1.95% 1.92% 1.84% 1.99% 1.76%
========================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) ......................... $3,155,678 $3,721,171 $2,810,633 $2,945,782 $2,938,391 $2,474,596
========================================================================
Portfolio turnover ...................................... 4% 4% 4% 11% 6% 4%
========================================================================
1 Aggregate total investment return.
2 Annualized.
See Notes to Financial Statements.
26 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Notes to Financial Statements (Unaudited) Master S&P 500 Index Series
1. Significant Accounting Policies:
Master S&P 500 Index Series (the "Series"), a non-diversified investment
company, is part of Quantitative Master Series LLC (the "Master LLC"). The
Master LLC is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), and is organized as a Delaware limited liability company. The
Limited Liability Company Agreement permits the Board of Directors (the "Board")
to issue non-transferable interests in the Master LLC, subject to certain
limitations. The Series' financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. Actual results may
differ from these estimates.
The following is a summary of significant accounting policies followed by the
Series:
Valuation of Investments: Equity investments traded on a recognized securities
exchange or the NASDAQ Global Market System are valued at the last reported sale
price that day or the NASDAQ official closing price, if applicable. For equity
investments traded on more than one exchange, the last reported sale price on
the exchange where the stock is primarily traded is used. Equity investments
traded on a recognized exchange for which there were no sales on that day are
valued at the last available bid price. If no bid or ask price is available, the
prior day's price will be used, unless it is determined that such prior day's
price no longer reflects the fair value of the security. Financial futures
contracts are traded on exchanges and are valued at their last sale price.
Short-term securities are valued at amortized cost. Investments in open-end
investment companies are valued at net asset value each business day.
In the event that application of these methods of valuation results in a price
for an investment which is deemed not to be representative of the market value
of such investment, the investment will be valued by a method approved by the
Board as reflecting fair value ("Fair Value Assets"). When determining the price
for Fair Value Assets, the investment advisor and/or sub-advisor seeks to
determine the price that the Portfolio might reasonably expect to receive from
the current sale of that asset in an arm's-length transaction. Fair value
determinations shall be based upon all available factors that the investment
advisor and/or sub-advisor deems relevant. The pricing of all Fair Value Assets
is subsequently reported to the Board or a committee thereof.
Derivative Financial Instruments: The Series may engage in various portfolio
investment strategies to increase the return of the Series and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise if the value of the contract decreases due to an
unfavorable change in the price of the underlying security, or if the
counterparty does not perform under the contract.
o Financial futures contracts -- The Series may purchase or sell financial
futures contracts and options on such financial futures contracts. 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 Series deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Series agrees to receive from, or pay to,
the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as margin variation and
are recognized by the Series as unrealized gains or losses. When the
contract is closed, the Series 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.
Segregation: In cases in which the 1940 Act and the interpretive positions of
the Securities and Exchange Commission ("SEC") require that the Series
segregates assets in connection with certain investments (e.g., futures) or
certain borrowings, the Series will, consistent with certain interpretive
letters issued by the SEC, designate on its books and records cash or other
liquid debt securities having a market value at least equal to the amount that
would otherwise be required to be physically segregated.
Investment Transactions and Investment Income: Investment transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis.
Securities Lending: The Series 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 Series and
any additional required collateral is delivered to the Series on the next
business day. The Series typically receives the income on the loaned securities
but does not receive the income on the collateral. Where the Series 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 the standard time period for settlement of securities
transactions. The Series may pay reasonable lending agent, administrative and
custodial fees in connection with its loans. In the event that the borrower
defaults on its obligation to return borrowed securities because of insolvency
or for any other reason, the Series could experience delays and costs in gaining
access to the collateral. The Series 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.
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 27
Notes to Financial Statements (concluded) Master S&P 500 Index Series
Income Taxes: The Series is classified as a "pass-through entity" for federal
income tax purposes. As such, each investor in the Series is treated as owner of
its proportionate share of the net assets, income, expenses and realized and
unrealized gains and losses of the Series. Therefore, no federal income tax
provision is required. It is intended that the Series' assets will be managed so
an investor in the Series can satisfy the requirements of Subchapter M of the
Internal Revenue Code.
The Series 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
Series' U.S. federal tax returns remains open for the years ended December 31,
2004 through December 31, 2006. The statutes of limitations on the Series' state
and local tax returns may remain open for an additional year depending upon the
jurisdiction.
Recent Accounting Pronouncement: In March 2008, Statement of Financial
Accounting Standards No. 161, "Disclosures about Derivative Instruments and
Hedging Activities -- an amendment of FASB Statement No. 133" ("FAS 161"), was
issued and is effective for fiscal years beginning after November 15, 2008. FAS
161 is intended to improve financial reporting for derivative instruments by
requiring enhanced disclosure that enables investors to understand how and why
an entity uses derivatives, how derivatives are accounted for, and how
derivative instruments affect an entity's results of operations and financial
position. The impact on the Series' financial statement disclosures, if any, is
currently being assessed.
Other: Expenses directly related to the Series are charged to that Series. Other
operating expenses shared by several funds are pro-rated among those funds on
the basis of relative net assets or other appropriate methods.
2. Investment Advisory Agreement and Other Transactions with Affiliates:
The Master LLC, on behalf of the Series, has entered into an Investment Advisory
Agreement with BlackRock Advisors, LLC (the "Advisor"), an indirect, wholly
owned subsidiary of BlackRock, Inc., to provide investment advisory and
administration services. Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC
Financial Services Group, Inc. are principal owners of BlackRock, Inc.
The Advisor is responsible for the management of the Series' investments and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Series. For such services, the
Portfolio pays the Advisor a monthly fee at an annual rate of 0.01% of the
average daily value of the Series' net assets. However, the Advisor has entered
into a contract with the Master LLC, on behalf of the Series, that provides that
the investment advisory fee for the Series, when combined with the
administrative fee of a certain feeder fund, will not exceed a specified amount.
As a result, the Series pays a monthly fee at an annual rate of 0.005% of the
average daily value of the Series' net assets. The waiver is shown as fees
waived by the Advisor on the Statement of Operations.
The Advisor has entered into a separate sub-advisory agreement with BlackRock
Investment Management, LLC ("BIM"), an affiliate of the Advisor, under which the
Advisor pays BIM, for services it provides, a monthly fee that is a percentage
of the investment advisory fee paid by the Series to the Advisor.
For the six months ended June 30, 2008, the Series reimbursed the Advisor
$28,322 for certain accounting services, which are included in accounting
services in the Statement of Operations.
The Master LLC, on behalf of the Series, has received an exemptive order from
the SEC permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of Merrill
Lynch, or its affiliates. As of June 30, 2008, the Series lent securities with a
value of $73,856,236 to MLPF&S or its affiliates. Pursuant to that order, the
Series has retained BIM as the securities lending agent for a fee based on a
share of the returns on investment of cash collateral. BIM may, on behalf of the
Series, invest cash collateral received by the Series for such loans, among
other things, in a private investment company managed by the Advisor or in
registered money market funds advised by the Advisor or its affiliates. For the
six months ended June 30, 2008, BIM received $293,072 in securities lending
agent fees.
Certain officers and/or directors of the Master LLC are officers and/or
directors of BlackRock, Inc. or its affiliates.
3.Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 2008 were $145,634,350 and $238,335,482, respectively.
4. Short-Term Borrowings:
The Master LLC, on behalf of the Series, along with certain other funds managed
by the Advisor and its affiliates, is party to a $500,000,000 credit agreement
with a group of lenders. The Series may borrow under the credit agreement to
fund shareholder redemptions and for other lawful purposes other than for
leverage. The Series may borrow up to the maximum amount allowable under the
Series' current prospectus and statement of additional information, subject to
various other legal, regulatory or contractual limits. On November 21, 2007, the
credit agreement was renewed for one year under substantially the same terms.
The Series pays a commitment fee of 0.06% per annum based on the Series' 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 0.35% or a base rate as defined in the credit
agreement. The Series did not borrow under the credit agreement during the six
months ended June 30, 2008.
28 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
BlackRock Index Equity Portfolio (the "Portfolio") of BlackRock Funds (the
"Fund") currently invests all of its investable assets in the Master S&P 500
Index Series (the "Series") of Quantitative Master Series LLC (the "Master
LLC"). Accordingly, the Portfolio does not require investment advisory services,
since all investments are made at the Series level. Prior to June 1, 2007, the
Portfolio invested all of its investable assets in The U.S. Large Company Series
of The DFA Investment Trust Company.
The Board of Directors of the Master LLC met in person in April and June 2008 to
consider the approval of the Master LLC's investment advisory agreement entered
into on behalf of the Series with the Master LLC's investment adviser, BlackRock
Advisors, LLC (the "Adviser") (the "Advisory Agreement"). The Board of the
Master LLC also considered the approval of the subadvisory agreement with
respect to the Series between the Adviser and BlackRock Investment Management,
LLC (the "Subadviser") (the "Subadvisory Agreement"). The Adviser and the
Subadviser are referred to herein as "BlackRock." The Advisory Agreement and the
Subadvisory Agreement are referred to herein as the "Agreements." Since the
Portfolio invests all of its investable assets in the Series, the Board of
Directors of the Fund also considered the approval of the Agreements. For ease
and clarity of presentation, the Board of Directors of the Master LLC and the
Board of Directors of the Fund, which are comprised of the same thirteen
individuals, are herein referred to collectively as the "Boards," the members of
which are referred to as "Directors."
Activities and Composition of the Board
The Boards each consist of thirteen individuals, eleven of whom are not
"interested persons" of either the Fund or the Master LLC as defined in the
Investment Company Act of 1940, as amended (the "1940 Act") (the "Independent
Directors"). The Boards are responsible for the oversight of the operations of
the Portfolio and the Series, as pertinent, and perform the various duties
imposed on the directors of investment companies by the 1940 Act. The
Independent Directors have retained independent legal counsel to assist them in
connection with their duties. The Co-Chairs of each Board are both Independent
Directors. The Boards established four standing committees: an Audit Committee,
a Governance and Nominating Committee, a Compliance Committee and a Performance
Oversight Committee, each of which is composed of, and chaired by, Independent
Directors.
The Agreements
Upon the consummation of the combination of BlackRock's investment management
business with Merrill Lynch & Co., Inc.'s investment management business,
including Merrill Lynch Investment Managers, L.P. and certain affiliates (the
"Transaction"), the Master LLC entered into an Advisory Agreement with the
Adviser with respect to the Series with an initial two-year term and the Adviser
entered into a Subadvisory Agreement with the Subadviser with respect to the
Series with an initial two-year term. Consistent with the 1940 Act, prior to the
expiration of each Agreement's initial two-year term, the Boards are required to
consider the continuation of the Agreements on an annual basis. In connection
with this process, the Boards assessed, among other things, the nature, scope
and quality of the services provided to the Portfolio and/or the Series by the
personnel of BlackRock and its affiliates, including investment management,
administrative services, shareholder services, oversight of fund accounting and
custody, marketing services and assistance in meeting legal and regulatory
requirements. The Boards also received and assessed information regarding the
services provided to the Portfolio and/or the Series by certain unaffiliated
service providers.
Throughout the year, the Boards, acting directly and through its committees,
considers at each of its meetings factors that are relevant to its annual
consideration of the renewal of the Fund's Agreements, including the services
and support provided to the Fund and its shareholders. Among the matters the
Boards considered, as pertinent, were: (a) investment performance for one, three
and five years, as applicable, against peer funds, as well as senior
management's and portfolio managers' analysis of the reasons for
underperformance, if applicable; (b) fees, including advisory, administration,
if applicable, and other fees paid to BlackRock and its affiliates by the
Portfolio and/or the Series, such as transfer agency fees and fees for marketing
and distribution; (c) Portfolio and Series operating expenses; (d) the resources
devoted to and compliance reports relating to the Portfolio's and the Series'
investment objective, policies and restrictions; (e) the Fund's and the Master
LLC's compliance with its respective Code of Ethics and compliance policies and
procedures; (f) the nature, cost and character of non-investment management
services provided by BlackRock and its affiliates; (g) BlackRock's and other
service providers' internal controls; (h) BlackRock's implementation of the
proxy voting guidelines approved by the Boards; (i) the use of brokerage
commissions and spread and execution quality; (j) valuation and liquidity
procedures; and (k) periodic overview of BlackRock's business, including
BlackRock's response to the increasing scale of its business.
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 29
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
(continued)
Board Considerations in Approving the Advisory Agreement and Subadvisory
Agreement
The Approval Process: Prior to the April 16, 2008 meeting, at which approval of
the Agreements was to be considered, the Boards requested and received materials
specifically relating to the Agreements. The Board is engaged in an ongoing
process with BlackRock to continuously review the nature and scope of the
information provided to better assist its deliberations. These materials
included (a) information independently compiled and prepared by Lipper, Inc.
("Lipper") on the Portfolio's fees and expenses and the investment performance
of the Portfolio as compared with a peer group of funds as determined by Lipper
("Peers"); (b) information on the profitability of the Agreements to BlackRock
and certain affiliates, including their other relationships with the Portfolio
and/or the Series, and a discussion of fall-out benefits; (c) a general analysis
provided by BlackRock concerning investment advisory fees charged to other
clients, such as institutional and closed-end funds under similar investment
mandates, as well as the performance of such other clients; (d) a report on
economies of scale; (e) sales and redemption data regarding the Portfolio's
shares and the Series' interests, and (f) an internal comparison of management
fees classified by Lipper, if applicable. At the April 16, 2008 meeting, the
Boards requested and subsequently received from BlackRock (i) comprehensive
analysis of total expenses on a fund-by-fund basis; (ii) further analysis of
investment performance; (iii) further data regarding Portfolio and Series
profitability, Portfolio and Series size and Portfolio and Series fee levels;
and (iv) additional information on sales and redemptions.
The Boards also considered other matters they deemed important to the approval
process, such as payments made to BlackRock or its affiliates relating to the
distribution of Portfolio shares, services related to the valuation and pricing
of portfolio holdings of the Series, allocation of Series brokerage fees
(including the benefits of "soft dollars"), and direct and indirect benefits to
BlackRock and its affiliates from their relationship with the Portfolio and the
Series. The Boards did not identify any particular information as controlling,
and each Director may have attributed different weights to the various items
considered.
At an in-person meeting held on April 16, 2008, the Boards discussed and
considered materials provided. As a result of the discussions, the Boards
requested and BlackRock provided additional information, as detailed above, in
advance of the June 3 - 4, 2008 Board meeting. At an in-person meeting held on
June 3 - 4, 2008, the Boards, including the Independent Directors, unanimously
approved the continuation of (a) the Advisory Agreement between the Adviser and
the Master LLC with respect to the Series for a one-year term ending June 30,
2009 and (b) the Subadvisory Agreement between the Adviser and the Subadviser
with respect to the Series for a one-year term ending June 30, 2009. The Boards
considered all factors they believed relevant with respect to the Portfolio and
the Series, as relevant, including, among other factors: (i) the nature, extent
and quality of the services provided by BlackRock; (ii) the investment
performance of the Portfolio and BlackRock portfolio management; (iii) the
advisory fee and the cost of the services and profits to be realized by
BlackRock and certain affiliates from the relationships with the Portfolio and
the Series; and (iv) economies of scale.
A. Nature, Extent and Quality of the Services: The Boards, including the
Independent Directors, reviewed the nature, extent and quality of services
provided by BlackRock, including the investment advisory services and the
resulting performance of the Portfolio. Throughout the year, the Boards compared
the Portfolio's performance -- both including and excluding the effects of the
Portfolio's fees and expenses -- to the performance of a comparable group of
mutual funds as classified by Lipper and the performance of at least one
relevant index or combination of indices. The Boards met with BlackRock's senior
management personnel responsible for investment operations, including the senior
investment officers. The Boards also reviewed the materials provided by the
Series' portfolio management team discussing performance and the Series'
investment objective, strategies and outlook.
The Boards considered, among other factors, the number, education and experience
of BlackRock's investment personnel generally, and of the Series' portfolio
management team; BlackRock's portfolio trading capabilities; BlackRock's use of
technology; BlackRock's commitment to compliance; and BlackRock's approach to
training and retaining portfolio managers and other research, advisory and
management personnel. The Boards also reviewed BlackRock's compensation
structure with respect to the portfolio management team of the Series and
BlackRock's ability to attract and retain high-quality talent.
30 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
(continued)
In addition to advisory services, the Boards considered the quality of the
administrative and non-investment advisory services provided to the Portfolio
and the Series. BlackRock and its affiliates provide the Portfolio and the
Series, as pertinent, with certain administrative, transfer agency, shareholder
and other services (in addition to any such services provided to the Portfolio
and the Series by third parties) and officers and other personnel as are
necessary for the operations of the Portfolio and the Series. In addition to
investment advisory services, BlackRock and its affiliates provide the Portfolio
and the Series with other services, including, as pertinent, (a) preparing
disclosure documents, such as the prospectus, the statement of additional
information and shareholder reports; (b) assisting with daily accounting and
pricing; (c) overseeing and coordinating the activities of other service
providers; (d) organizing Board meetings and preparing the materials for such
Board meetings; (e) providing legal and compliance support; and (f) performing
other administrative functions necessary for the operation of the Portfolio and
the Series, such as tax reporting and fulfilling regulatory filing requirements.
The Boards reviewed the structure and duties of BlackRock's fund administration,
accounting, legal and compliance departments.
B. The Investment Performance of the Portfolio, the Series and BlackRock: The
Boards, including the Independent Directors, also reviewed and considered the
performance history of the Portfolio. In preparation for the April 16, 2008
meeting, the Boards were provided with reports, independently prepared by
Lipper, which included a comprehensive analysis of the Portfolio's performance.
The Boards also reviewed a narrative and statistical analysis of the Lipper data
that was prepared by BlackRock, which analyzed various factors that affect
Lipper's rankings. In connection with their review, the Boards received and
reviewed information regarding the investment performance of the Portfolio as
compared to a representative group of similar funds as determined by Lipper and
to all funds in the Portfolio's applicable Lipper category. The Boards were
provided with a description of the methodology used by Lipper to select peer
funds. The Boards regularly review the performance of the Portfolio throughout
the year. The Boards attach more importance to performance over relatively long
periods of time, typically three to five years.
The Boards noted that the Portfolio's performance was above the median for the
Portfolio's Peers in the one- and three-year periods but was slightly below the
median for the five-year period reported.
C. Consideration of the Advisory Fees and the Cost of the Services and Profits
to be Realized by BlackRock and its Affiliates from the Relationship with the
Portfolio and the Series: The Boards, including the Independent Directors,
reviewed the Series' contractual advisory fee rates compared with the other
funds in the Portfolio's Lipper category. They also compared the Portfolio's
total expenses to those of other comparable funds. The Boards considered the
services provided and the fees charged by BlackRock to other types of clients
with similar investment mandates, including separately managed institutional
accounts.
The Boards received and reviewed statements relating to BlackRock's financial
condition and profitability with respect to the services it provided the Series.
The Boards were also provided with a profitability analysis that detailed the
revenues earned and the expenses incurred by BlackRock and certain affiliates
that provide services to the Series. The Boards reviewed BlackRock's
profitability with respect to the Series and each fund the Boards currently
oversee for the year ended December 31, 2007 compared to aggregated
profitability data provided for the year ended December 31, 2005.
In addition, the Boards considered the cost of the services provided to the
Portfolio and the Series by BlackRock, and BlackRock's and its affiliates'
profits relating to the management and distribution, as pertinent, of the
Portfolio and the Series and the other funds advised by BlackRock and its
affiliates. As part of their analysis, the Boards reviewed BlackRock's
methodology in allocating its costs to the management of the Portfolio and the
Series and concluded that there was a reasonable basis for the allocation. The
Boards also considered whether BlackRock has the financial resources necessary
to attract and retain high-quality investment management personnel to perform
its obligations under the Agreements and to continue to provide the high quality
of services that are expected by the Board.
The Board noted that the Series paid contractual advisory fees, prior to any
expense reimbursements, that were lower than or equal to the median of its
Peers. The Board also noted that the actual advisory fees paid were less than
the contractual advisory fees, as a result of a contractual arrangement with the
Adviser that limits the combined administrative and advisory fees of the
Portfolio/Series.
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 31
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
(concluded)
D. Economies of Scale: The Boards, including the Independent Directors,
considered the extent to which economies of scale might be realized as the
assets of the Portfolio and the Series increase and whether there should be
changes in the advisory fee rate or structure in order to enable the Portfolio
and the Series to participate in these economies of scale. The Boards, including
the Independent Directors, considered whether the shareholders would benefit
from economies of scale and whether there was potential for future realization
of economies with respect to the Portfolio and the Series. The Boards considered
that the funds in the BlackRock fund complex share common resources and, as a
result, an increase in the overall size of the complex could permit each fund to
incur lower expenses than it would otherwise as a stand-alone entity. The Boards
also considered the anticipated efficiencies in the processes of BlackRock's
overall operations as it continues to add personnel and commit capital to expand
the scale of operations. The Boards found, based on their review of comparable
funds, that the Series' management fee is appropriate in light of the scale of
the Series.
E. Other Factors: The Board also took into account other ancillary or "fall-out"
benefits that BlackRock may derive from its relationship with the Portfolio and
the Series, both tangible and intangible, such as BlackRock's ability to
leverage its investment professionals who manage other portfolios, an increase
in BlackRock's profile in the investment advisory community, and the engagement
of BlackRock's affiliates as service providers to the Portfolio and the Series,
including for administrative, transfer agency and distribution services. The
Boards also noted that BlackRock may use third-party research, obtained by soft
dollars generated by transactions in the Series, to assist itself in managing
all or a number of its other client accounts.
In connection with its consideration of the Agreements, the Boards also received
information regarding BlackRock's brokerage and soft dollar practices. The
Boards received reports from BlackRock which included information on brokerage
commissions and trade execution throughout the year.
Conclusion
The Boards approved the continuation of (a) the Advisory Agreement between the
Adviser and the Master LLC with respect to the Series for a one-year term ending
June 30, 2009 and (b) the Subadvisory Agreement between the Adviser and the
Subadviser with respect to the Series for a one-year term ending June 30, 2009.
Based upon their evaluation of all these factors in their totality, the Boards,
including the Independent Directors, were satisfied that the terms of the
Agreements were fair and reasonable and in the best interest of the Portfolio
and the Series and the Portfolio's shareholders. In arriving at a decision to
approve the Agreements, the Boards did not identify any single factor or group
of factors as all-important or controlling, but considered all factors together.
The Independent Directors were also assisted by the advice of independent legal
counsel in making this determination. The contractual fee arrangements for the
Portfolio and the Series reflect the results of several years of review by the
Directors and predecessor Directors, and discussions between the Directors (and
predecessor Directors) and BlackRock (and predecessor advisers). Certain aspects
of the arrangements may be the subject of more attention in some years than in
others, and the Directors' conclusions may be based in part on their
consideration of these arrangements in prior years.
32 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
Officers and Directors
David O. Beim, Director
Richard S. Davis, Director
Ronald W. Forbes, Co-Chairman of the Board and Director
Henry Gabbay, Director
Dr. Matina Horner, Director
Rodney D. Johnson, Co-Chairman of the Board and Director
Herbert I. London, Director
Cynthia A. Montgomery, Director
Joseph P. Platt, Jr., Director
Robert C. Robb, Jr., Director
Toby Rosenblatt, Director
Kenneth L. Urish, Chairman of the Audit Committee and Director
Frederick W. Winter, Director
Donald C. Burke, Fund/Master LLC President and Chief Executive Officer
Anne F. Ackerley, Vice President
Neal J. Andrews, Chief Financial Officer
Jay M. Fife, Treasurer
Brian P. Kindelan, Chief Compliance Officer of the Fund/Master LLC
Howard Surloff, Secretary
Custodian
State Street Bank and Trust Company
North Quincy, MA 02171
Transfer Agent
PNC Global Investment Servicing (U.S.) 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
Sidley Austin LLP
New York, NY 10019
Additional Information
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their non-public personal information. The following 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.
BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008 33
Additional Information (concluded)
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 Advisors, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment
advisors, banks or brokerages may offer this service.
Shareholders Who Hold Accounts Directly with BlackRock:
1) Access the BlackRock website at http://www.blackrock.com/edelivery
2) Click on the applicable link and follow the steps to sign up
3) Log into your account
Householding
The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it is intended to reduce expenses and
eliminate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be combined with
those for other members of your household, please contact the Fund at (800)
441-7762.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free (800) 441-7762; (2) at
www.blackrock.com; and (3) on the Securities and Exchange Commission's (the
"SEC") website at http://www.sec.gov.
Availability of Proxy Voting Record
Information on how the Fund votes proxies relating to securities held in the
portfolio during the most recent 12-month period ended June 30 is available upon
request and without charge (1) at www.blackrock.com or by calling (800) 441-7762
and (2) on the SEC's website at http://www.sec.gov.
Availability of Quarterly Portfolio Schedule
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of its fiscal year on Form N-Q. The Fund's Forms N-Q
are available on the Commission's website at http://www.sec.gov and may also be
reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) SEC-0330. The Fund's Forms N-Q may also be obtained upon request
and without charge by calling (800) 441-7762.
Shareholder Privileges
Account Information
Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST to get 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 funds.
Systematic Withdrawal Plans
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments of $50 or more from their BlackRock funds, as long as
their account is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover,
Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
34 BLACKROCK INDEX EQUITY PORTFOLIO JUNE 30, 2008
A World-Class Mutual Fund Family
BlackRock offers a diverse lineup of open-end mutual funds crossing all
investment styles and managed by experts in equity, fixed income and tax-exempt
investing.
Equity Funds
BlackRock All-Cap Global Resources Portfolio
BlackRock Asset Allocation Portfolio+
BlackRock Aurora Portfolio
BlackRock Balanced Capital Fund+
BlackRock Basic Value Fund
BlackRock Capital Appreciation Portfolio
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 Emerging Markets 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 Health Sciences Opportunities Portfolio*
BlackRock Healthcare Fund
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 Emerging Market Debt Portfolio
BlackRock Enhanced Income Portfolio
BlackRock GNMA Portfolio
BlackRock Government Income Portfolio
BlackRock High Income Fund
BlackRock High Yield Bond Portfolio
BlackRock Income Portfolio
BlackRock Income Builder Portfolio
BlackRock Inflation Protected Bond Portfolio
BlackRock Intermediate Bond Portfolio II
BlackRock Intermediate Government Bond Portfolio
BlackRock International Bond Portfolio
BlackRock Long Duration Bond Portfolio
BlackRock Low Duration Bond Portfolio
BlackRock Managed Income Portfolio
BlackRock Short-Term Bond Fund
BlackRock Strategic Income Portfolio
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 INDEX EQUITY PORTFOLIO JUNE 30, 2008 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 Portfolio
unless accompanied or preceded by the Portfolio's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. Statements and other information herein are as dated
and are subject to change.
BlackRock Index Equity Portfolio
Of BlackRock Funds
100 Bellevue Parkway
Wilmington, DE 19809
BLACKROCK
#IE-6/08
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 - Investments
(a) Schedule of Investments - Master S&P 500 Index Series
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Aerospace & Defense - 2.7% Boeing Co. 211,161 $ 13,877,501
General Dynamics Corp. 111,957 9,426,779
Goodrich Corp. 34,749 1,649,188
Honeywell International, Inc. 208,374 10,477,045
L-3 Communications Holdings, Inc. 33,767 3,068,407
Lockheed Martin Corp. 94,951 9,367,866
Northrop Grumman Corp. 96,162 6,433,238
Precision Castparts Corp. 39,100 3,768,067
Raytheon Co. 118,883 6,690,735
Rockwell Collins, Inc. 45,216 2,168,559
United Technologies Corp. 273,511 16,875,629
---------------
83,803,014
- -----------------------------------------------------------------------------------------------------------------------------------
Air Freight & Logistics - 1.0% C.H. Robinson Worldwide, Inc. 47,992 2,631,881
Expeditors International Washington, Inc. 59,200 2,545,600
FedEx Corp. 87,156 6,867,021
United Parcel Service, Inc. Class B (a) 286,887 17,634,944
---------------
29,679,446
- -----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.1% Southwest Airlines Co. 203,870 2,658,465
- -----------------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.2% The Goodyear Tire & Rubber Co. (b) 64,983 1,158,647
Johnson Controls, Inc. (a) 165,870 4,757,152
---------------
5,915,799
- -----------------------------------------------------------------------------------------------------------------------------------
Automobiles - 0.2% Ford Motor Co. (a)(b) 626,797 3,014,894
General Motors Corp. (a) 159,198 1,830,777
Harley-Davidson, Inc. (a) 66,529 2,412,342
---------------
7,258,013
- -----------------------------------------------------------------------------------------------------------------------------------
Beverages - 2.5% Anheuser-Busch Cos., Inc. 203,009 12,610,919
Brown-Forman Corp. Class B 25,613 1,935,574
The Coca-Cola Co. 561,383 29,180,688
Coca-Cola Enterprises, Inc. 84,223 1,457,058
Constellation Brands, Inc. Class A (b) 58,156 1,154,978
Molson Coors Brewing Co. Class B 37,700 2,048,241
Pepsi Bottling Group, Inc. 38,673 1,079,750
PepsiCo, Inc. 445,724 28,343,589
---------------
77,810,797
- -----------------------------------------------------------------------------------------------------------------------------------
Biotechnology - 1.5% Amgen, Inc. (b) 305,940 14,428,130
Biogen Idec, Inc. (b) 82,322 4,600,977
Celgene Corp. (b) 122,536 7,826,374
Genzyme Corp. (b) 75,123 5,410,358
Gilead Sciences, Inc. (b) 259,282 13,728,982
---------------
45,994,821
- -----------------------------------------------------------------------------------------------------------------------------------
Building Products - 0.1% Masco Corp. (a) 101,707 1,599,851
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 2.8% American Capital Strategies Ltd. (a) 57,000 1,354,890
Ameriprise Financial, Inc. 62,473 2,540,777
The Bank of New York Mellon Corp. 321,477 12,161,475
The Charles Schwab Corp. 1,963,246 5,360,817
E*Trade Financial Corp. (a)(b) 139,082 436,717
See Notes to Financial Statements.
1
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Federated Investors, Inc. Class B 24,148 $ 831,174
Franklin Resources, Inc. (a) 43,822 4,016,286
The Goldman Sachs Group, Inc. (a) 110,783 19,375,947
Janus Capital Group, Inc. 41,132 1,088,764
Legg Mason, Inc. 38,354 1,671,084
Lehman Brothers Holdings, Inc. (a) 195,776 3,878,323
Merrill Lynch & Co., Inc. (a)(c) 276,938 8,781,704
Morgan Stanley 311,133 11,222,567
Northern Trust Corp. 53,861 3,693,249
State Street Corp. 119,915 7,673,361
T. Rowe Price Group, Inc. 72,940 4,118,922
---------------
88,206,057
- -----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 2.1% Air Products & Chemicals, Inc. 59,218 5,854,291
Ashland, Inc. 18,332 883,602
The Dow Chemical Co. 261,453 9,127,324
E.I. du Pont de Nemours & Co. 253,137 10,857,046
Eastman Chemical Co. 22,362 1,539,847
Ecolab, Inc. 52,195 2,243,863
Hercules, Inc. 29,202 494,390
International Flavors & Fragrances, Inc. 23,964 936,034
Monsanto Co. 154,172 19,493,508
PPG Industries, Inc. 46,147 2,647,453
Praxair, Inc. 87,957 8,289,068
Rohm & Haas Co. 34,826 1,617,319
Sigma-Aldrich Corp. 36,245 1,952,156
---------------
65,935,901
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 2.2% BB&T Corp. (a) 153,696 3,499,658
Comerica, Inc. 42,243 1,082,688
Fifth Third Bancorp (a) 160,897 1,637,931
First Horizon National Corp. 58,198 432,411
Huntington Bancshares, Inc. (a) 103,029 594,477
KeyCorp (a) 133,182 1,462,338
M&T Bank Corp. (a) 20,766 1,464,834
Marshall & Ilsley Corp. 68,921 1,056,559
National City Corp. (a) 213,805 1,019,850
The PNC Financial Services Group, Inc. (c) 97,149 5,547,208
Regions Financial Corp. (a) 195,348 2,131,247
SunTrust Banks, Inc. 98,911 3,582,556
U.S. Bancorp (a) 489,111 13,641,306
Wachovia Corp. (a) 600,861 9,331,371
Wells Fargo & Co. (a) 928,090 22,042,138
Zions Bancorporation (a) 30,230 951,943
---------------
69,478,515
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.5% Allied Waste Industries, Inc. (b) 88,342 1,114,876
Avery Dennison Corp. 28,312 1,243,746
Cintas Corp. 40,797 1,081,528
Equifax, Inc. 38,854 1,306,271
See Notes to Financial Statements.
2
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Monster Worldwide, Inc. (b) 33,751 $ 695,608
Pitney Bowes, Inc. 60,462 2,061,754
R.R. Donnelley & Sons Co. 58,422 1,734,549
Robert Half International, Inc. 46,792 1,121,604
Waste Management, Inc. 137,895 5,200,020
---------------
15,559,956
- -----------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 2.5% Ciena Corp. (b) 25,301 586,224
Cisco Systems, Inc. (b) 1,660,104 38,614,019
Corning, Inc. 442,549 10,200,754
JDS Uniphase Corp. (b) 57,372 651,746
Juniper Networks, Inc. (b) 147,483 3,271,173
Motorola, Inc. (a) 633,908 4,652,885
QUALCOMM, Inc. 454,901 20,183,957
Tellabs, Inc. (b) 120,584 560,716
---------------
78,721,474
- -----------------------------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 4.7% Apple, Inc. (b) 247,803 41,492,134
Dell, Inc. (a)(b) 567,921 12,426,111
EMC Corp. (b) 581,038 8,535,448
Hewlett-Packard Co. 693,111 30,642,437
International Business Machines Corp. 385,991 45,751,513
Lexmark International, Inc. Class A (b) 26,644 890,709
NetApp, Inc. (b) 96,500 2,090,190
QLogic Corp. (b) 40,181 586,241
SanDisk Corp. (b) 63,147 1,180,849
Sun Microsystems, Inc. (b) 219,832 2,391,772
Teradata Corp. (b) 51,600 1,194,024
---------------
147,181,428
- -----------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.2% Fluor Corp. 24,918 4,636,741
Jacobs Engineering Group, Inc. (b) 34,200 2,759,940
---------------
7,396,681
- -----------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.1% Vulcan Materials Co. (a) 30,772 1,839,550
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.7% American Express Co. 325,574 12,264,373
Capital One Financial Corp. (a) 105,419 4,006,976
Discover Financial Services, Inc. 134,766 1,774,868
SLM Corp. (b) 131,173 2,538,198
---------------
20,584,415
- -----------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.1% Ball Corp. 30,433 1,452,871
Bemis Co. 29,030 650,853
Pactiv Corp. (b) 36,589 776,784
Sealed Air Corp. 46,287 879,916
---------------
3,760,424
- -----------------------------------------------------------------------------------------------------------------------------------
Distributors - 0.1% Genuine Parts Co. 47,697 1,892,617
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Consumer Services - 0.1% Apollo Group, Inc. Class A (b) 38,731 1,714,234
H&R Block, Inc. 96,736 2,070,150
---------------
3,784,384
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 3.3% Bank of America Corp. 1,258,053 30,029,725
See Notes to Financial Statements.
3
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
CIT Group, Inc. 79,489 $ 541,320
CME Group, Inc. (a) 15,350 5,881,966
Citigroup, Inc. 1,529,979 25,642,448
IntercontinentalExchange, Inc. (b) 19,800 2,257,200
JPMorgan Chase & Co. 970,448 33,296,078
Leucadia National Corp. 48,000 2,253,120
Moody's Corp. (a) 57,055 1,964,974
NYSE Euronext (a) 74,400 3,769,104
---------------
105,635,935
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication AT&T Inc. 1,669,591 56,248,521
Services - 2.9% CenturyTel, Inc. 31,315 1,114,501
Citizens Communications Co. (a) 96,004 1,088,685
Embarq Corp. 40,256 1,902,901
Qwest Communications International Inc. (a) 427,726 1,680,963
Verizon Communications, Inc. 801,157 28,360,958
Windstream Corp. 124,940 1,541,760
---------------
91,938,289
- -----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 2.3% Allegheny Energy, Inc. 47,218 2,366,094
American Electric Power Co., Inc. 112,855 4,540,157
Duke Energy Corp. 355,434 6,177,443
Edison International 90,547 4,652,305
Entergy Corp. 53,770 6,478,210
Exelon Corp. 184,311 16,580,618
FPL Group, Inc. 114,664 7,519,665
FirstEnergy Corp. 85,634 7,050,247
PPL Corp. 104,869 5,481,503
Pepco Holdings, Inc. 55,384 1,420,600
Pinnacle West Capital Corp. 25,458 783,343
Progress Energy, Inc. 73,460 3,072,832
Progress Energy, Inc. (b) 900 297
The Southern Co. 215,600 7,528,752
---------------
73,652,066
- -----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.5% Cooper Industries Ltd. Class A 50,350 1,988,825
Emerson Electric Co. 219,430 10,850,814
Rockwell Automation, Inc. 41,211 1,802,157
---------------
14,641,796
- -----------------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Agilent Technologies, Inc. (b) 101,249 3,598,389
Instruments - 0.3% Jabil Circuit, Inc. 53,086 871,141
Molex, Inc. 41,140 1,004,227
Tyco Electronics Ltd. 134,301 4,810,662
---------------
10,284,419
- -----------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 3.6% BJ Services Co. 82,633 2,639,298
Baker Hughes, Inc. 86,545 7,558,840
Cameron International Corp. (b) 60,900 3,370,815
ENSCO International, Inc. 40,609 3,278,771
Halliburton Co. 245,151 13,010,164
See Notes to Financial Statements.
4
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Nabors Industries Ltd. (a)(b) 79,079 $ 3,893,059
National Oilwell Varco, Inc. (b) 116,690 10,352,737
Noble Corp. 75,546 4,907,468
Rowan Cos., Inc. 31,640 1,479,170
Schlumberger Ltd. 335,290 36,020,205
Smith International, Inc. 57,401 4,772,319
Transocean, Inc. 89,575 13,650,334
Weatherford International Ltd. (b) 190,978 9,470,599
---------------
114,403,779
- -----------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 2.7% CVS Caremark Corp. 401,652 15,893,370
Costco Wholesale Corp. 121,724 8,537,721
The Kroger Co. 185,941 5,368,117
SUPERVALU, Inc. 57,410 1,773,395
SYSCO Corp. (a) 168,215 4,627,595
Safeway, Inc. 123,110 3,514,790
Wal-Mart Stores, Inc. 653,909 36,749,686
Walgreen Co. 278,344 9,048,963
Whole Foods Market, Inc. (a) 39,382 932,960
---------------
86,446,597
- -----------------------------------------------------------------------------------------------------------------------------------
Food Products - 1.5% Archer Daniels Midland Co. 180,918 6,105,983
Campbell Soup Co. 60,562 2,026,405
ConAgra Foods, Inc. 133,420 2,572,338
Dean Foods Co. (a)(b) 39,049 766,141
General Mills, Inc. 94,160 5,722,103
H.J. Heinz Co. 88,607 4,239,845
The Hershey Co. (a) 47,246 1,548,724
Kellogg Co. 71,286 3,423,154
Kraft Foods, Inc. 426,051 12,121,151
McCormick & Co., Inc. 37,348 1,331,830
Sara Lee Corp. 198,605 2,432,911
Tyson Foods, Inc. Class A 74,645 1,115,196
Wm. Wrigley Jr. Co. 61,919 4,816,060
---------------
48,221,841
- -----------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% Nicor, Inc. 12,058 513,550
Questar Corp. 48,496 3,445,156
---------------
3,958,706
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 2.1% Baxter International, Inc. 176,277 11,271,151
Becton Dickinson & Co. 68,624 5,579,131
Boston Scientific Corp. (b) 377,713 4,642,093
C.R. Bard, Inc. 27,906 2,454,333
Covidien Ltd. 139,901 6,699,859
Hospira, Inc. (b) 42,827 1,717,791
Intuitive Surgical, Inc. (b) 10,878 2,930,533
Medtronic, Inc. 315,557 16,330,075
St. Jude Medical, Inc. (b) 95,215 3,892,389
Stryker Corp. 66,139 4,158,820
Varian Medical Systems, Inc. (b) 36,809 1,908,547
See Notes to Financial Statements.
5
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Zimmer Holdings, Inc. (b) 65,010 $ 4,423,931
---------------
66,008,653
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 1.8% Aetna, Inc. 136,211 5,520,632
AmerisourceBergen Corp. 46,991 1,879,170
Cardinal Health, Inc. 100,316 5,174,299
Cigna Corp. 77,557 2,744,742
Coventry Health Care, Inc. (a)(b) 44,599 1,356,702
Express Scripts, Inc. (a)(b) 70,570 4,426,150
Humana, Inc. (b) 47,584 1,892,416
Laboratory Corp. of America Holdings (b) 31,323 2,181,020
McKesson Corp. 77,891 4,354,886
Medco Health Solutions, Inc. (b) 142,336 6,718,259
Patterson Cos., Inc. (b) 39,766 1,168,723
Quest Diagnostics, Inc. (a) 45,442 2,202,574
Tenet Healthcare Corp. (b) 129,185 718,269
UnitedHealth Group, Inc. 345,345 9,065,306
WellPoint, Inc. (b) 147,834 7,045,768
---------------
56,448,916
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care Technology - 0.0% IMS Health, Inc. 53,501 1,246,573
- -----------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 1.2% Carnival Corp. (a) 122,785 4,046,994
Darden Restaurants, Inc. 39,359 1,257,126
International Game Technology 86,968 2,172,461
Marriott International, Inc. Class A 84,419 2,215,155
McDonald's Corp. (a) 318,601 17,911,748
Starbucks Corp. (b) 204,691 3,221,836
Starwood Hotels & Resorts Worldwide, Inc. (a) 52,511 2,104,116
Wendy's International, Inc. 27,533 749,448
Wyndham Worldwide Corp. 54,185 970,453
Yum! Brands, Inc. (a) 133,182 4,673,356
---------------
39,322,693
- -----------------------------------------------------------------------------------------------------------------------------------
Household Durables - 0.4% Black & Decker Corp. 17,407 1,001,077
Centex Corp. 34,754 464,661
D.R. Horton, Inc. 77,311 838,824
Fortune Brands, Inc. 41,751 2,605,680
Harman International Industries, Inc. 17,457 722,545
KB Home (a) 21,691 367,229
Leggett & Platt, Inc. 49,552 830,987
Lennar Corp. Class A 39,391 486,085
Newell Rubbermaid, Inc. 75,333 1,264,841
Pulte Homes, Inc. (a) 60,125 579,004
Snap-On, Inc. 16,079 836,269
The Stanley Works 22,289 999,216
Whirlpool Corp. (a) 21,097 1,302,318
---------------
12,298,736
- -----------------------------------------------------------------------------------------------------------------------------------
Household Products - 2.3% Clorox Co. 38,737 2,022,071
Colgate-Palmolive Co. (a) 142,684 9,859,464
See Notes to Financial Statements.
6
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Kimberly-Clark Corp. 117,555 $ 7,027,438
The Procter & Gamble Co. 857,994 52,174,615
---------------
71,083,588
- -----------------------------------------------------------------------------------------------------------------------------------
IT Services - 0.9% Affiliated Computer Services, Inc. Class A (b) 29,138 1,558,592
Automatic Data Processing, Inc. 145,643 6,102,442
Cognizant Technology Solutions Corp. (b) 80,002 2,600,865
Computer Sciences Corp. (b) 42,451 1,988,405
Convergys Corp. (b) 37,581 558,454
Electronic Data Systems Corp. 144,972 3,572,110
Fidelity National Information Services, Inc. 46,064 1,700,222
Fiserv, Inc. (b) 44,082 2,000,000
Paychex, Inc. 90,179 2,820,799
Total System Services, Inc. (a) 56,100 1,246,542
Unisys Corp. (b) 91,890 362,966
The Western Union Co. 207,953 5,140,598
---------------
29,651,995
- -----------------------------------------------------------------------------------------------------------------------------------
Independent Power Producers & Energy Traders - 0.3% The AES Corp. (b) 188,763 3,626,137
Constellation Energy Group, Inc. 50,149 4,117,233
Dynegy, Inc. Class A (b) 129,851 1,110,226
---------------
8,853,596
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 3.1% 3M Co. 197,885 13,770,817
General Electric Co. 2,801,137 74,762,347
Textron, Inc. 68,938 3,304,198
Tyco International Ltd. 135,501 5,425,460
---------------
97,262,822
- -----------------------------------------------------------------------------------------------------------------------------------
Insurance - 3.5% ACE Ltd. 93,531 5,152,623
AON Corp. 83,931 3,855,790
Aflac, Inc. 133,574 8,388,447
The Allstate Corp. 154,800 7,057,332
American International Group, Inc. (a) 755,593 19,992,991
Assurant, Inc. 26,452 1,744,774
Chubb Corp. 102,697 5,033,180
Cincinnati Financial Corp. 47,962 1,218,235
Genworth Financial, Inc. Class A 120,475 2,145,660
Hartford Financial Services Group, Inc. 88,424 5,709,538
Lincoln National Corp. 72,831 3,300,701
Loews Corp. 101,770 4,773,013
MBIA, Inc. (a) 62,159 272,878
Marsh & McLennan Cos., Inc. 143,760 3,816,828
MetLife, Inc. 199,646 10,535,319
Principal Financial Group, Inc. 72,798 3,055,332
The Progressive Corp. 190,447 3,565,168
Prudential Financial, Inc. 122,539 7,320,480
Safeco Corp. 23,994 1,611,437
Torchmark Corp. 26,220 1,537,803
The Travelers Cos., Inc. 169,946 7,375,656
See Notes to Financial Statements.
7
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
UnumProvident Corp. 95,667 $ 1,956,390
XL Capital Ltd. Class A 48,835 1,004,048
---------------
110,423,623
- -----------------------------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail - 0.3% Amazon.com, Inc. (b) 86,860 6,369,444
Expedia, Inc. (b) 57,800 1,062,364
IAC/InterActiveCorp (b) 51,227 987,657
---------------
8,419,465
- -----------------------------------------------------------------------------------------------------------------------------------
Internet Software & Services - 1.7% Akamai Technologies, Inc. (b) 47,300 1,645,567
eBay, Inc. (b) 310,688 8,491,103
Google, Inc. Class A (b) 65,319 34,385,228
VeriSign, Inc. (b) 54,673 2,066,639
Yahoo! Inc. (b) 386,640 7,987,982
---------------
54,576,519
- -----------------------------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products - 0.1% Eastman Kodak Co. (a) 80,627 1,163,448
Hasbro, Inc. 39,004 1,393,223
Mattel, Inc. 101,988 1,746,035
---------------
4,302,706
- -----------------------------------------------------------------------------------------------------------------------------------
Life Sciences Tools & Services - 0.4% Applera Corp. - Applied Biosystems Group (b) 46,686 1,563,047
Millipore Corp. (b) 13,583 921,742
PerkinElmer, Inc. 31,061 865,049
Thermo Fisher Scientific, Inc. (b) 117,566 6,551,953
Waters Corp. (b) 29,869 1,926,551
---------------
11,828,342
- -----------------------------------------------------------------------------------------------------------------------------------
Machinery - 1.9% Caterpillar, Inc. 172,816 12,757,277
Cummins, Inc. 56,762 3,719,046
Danaher Corp. (a) 71,551 5,530,892
Deere & Co. 121,108 8,735,520
Dover Corp. 53,187 2,572,655
Eaton Corp. 46,223 3,927,568
ITT Corp. 50,282 3,184,359
Illinois Tool Works, Inc. 111,529 5,298,743
Ingersoll-Rand Co. Class A 87,855 3,288,413
Manitowoc Co. 35,800 1,164,574
PACCAR, Inc. 102,577 4,290,796
Pall Corp. 34,075 1,352,096
Parker Hannifin Corp. 46,768 3,335,494
Terex Corp. (b) 28,234 1,450,381
---------------
60,607,814
- -----------------------------------------------------------------------------------------------------------------------------------
Media - 2.8% CBS Corp. Class B 190,512 3,713,079
Clear Channel Communications, Inc. 143,275 5,043,280
Comcast Corp. Class A 831,509 15,773,726
Comcast Corp. Special Class A 557 10,449
The DIRECTV Group, Inc. (b) 199,668 5,173,398
Gannett Co., Inc. (a) 62,025 1,344,082
Interpublic Group of Cos., Inc. (a)(b) 122,946 1,057,336
The McGraw-Hill Cos., Inc. (a) 90,101 3,614,852
See Notes to Financial Statements.
8
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Meredith Corp. 11,745 $ 332,266
The New York Times Co. Class A (a) 40,498 623,264
News Corp. Class A 647,293 9,735,287
Omnicom Group Inc. 90,014 4,039,828
Scripps Networks Interactive (b) 25,400 974,090
Time Warner, Inc. 1,005,697 14,884,316
Viacom, Inc. Class B (b) 177,829 5,430,898
Walt Disney Co. 535,440 16,705,728
The Washington Post Co. Class B 1,652 969,559
---------------
89,425,438
- -----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 1.4% AK Steel Holding Corp. 31,700 2,187,300
Alcoa, Inc. 229,028 8,157,977
Allegheny Technologies, Inc. 27,413 1,625,043
Freeport-McMoRan Copper & Gold, Inc. Class B (a) 107,675 12,618,433
Newmont Mining Corp. 127,577 6,654,416
Nucor Corp. 88,131 6,580,742
Titanium Metals Corp. (a) 25,100 351,149
United States Steel Corp. 33,131 6,121,946
---------------
44,297,006
- -----------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 1.2% Ameren Corp. 55,962 2,363,275
CMS Energy Corp. 71,731 1,068,792
CenterPoint Energy, Inc. 87,258 1,400,491
Consolidated Edison, Inc. 76,602 2,994,372
DTE Energy Co. 45,453 1,929,025
Dominion Resources, Inc. 161,918 7,689,486
Integrys Energy Group, Inc. 20,770 1,055,739
NiSource, Inc. 69,915 1,252,877
PG&E Corp. 98,331 3,902,757
Public Service Enterprise Group, Inc. 142,900 6,563,397
Sempra Energy 70,338 3,970,580
TECO Energy, Inc. 54,916 1,180,145
Xcel Energy, Inc. 115,026 2,308,572
---------------
37,679,508
- -----------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.7% Big Lots, Inc. (b) 22,982 717,958
Dillard's, Inc. Class A (a) 21,350 247,019
Family Dollar Stores, Inc. 39,133 780,312
J.C. Penney Co., Inc. 62,354 2,262,827
Kohl's Corp. (b) 86,154 3,449,606
Macy's, Inc. 118,166 2,294,784
Nordstrom, Inc. 49,332 1,494,760
Sears Holdings Corp. (a)(b) 19,677 1,449,408
Target Corp. 218,764 10,170,338
---------------
22,867,012
- -----------------------------------------------------------------------------------------------------------------------------------
Office Electronics - 0.1% Xerox Corp. 252,761 3,427,439
- -----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 12.5% Anadarko Petroleum Corp. 131,587 9,847,971
Apache Corp. 93,703 13,024,717
See Notes to Financial Statements.
9
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Cabot Oil & Gas Corp. Class A 27,500 $ 1,862,575
Chesapeake Energy Corp. 135,161 8,915,220
Chevron Corp. 581,229 57,617,231
ConocoPhillips 433,505 40,918,537
Consol Energy, Inc. 51,348 5,769,975
Devon Energy Corp. 125,364 15,063,738
EOG Resources, Inc. 69,822 9,160,646
El Paso Corp. 197,359 4,290,585
Exxon Mobil Corp. (d) 1,484,827 130,857,804
Hess Corp. 78,984 9,966,991
Marathon Oil Corp. 198,958 10,319,951
Massey Energy Co. 22,600 2,118,750
Murphy Oil Corp. 53,359 5,231,850
Noble Energy, Inc. 48,200 4,846,992
Occidental Petroleum Corp. 230,619 20,723,423
Peabody Energy Corp. 76,342 6,721,913
Range Resources Corp. 43,400 2,844,436
Southwestern Energy Co. (b) 96,100 4,575,321
Spectra Energy Corp. 177,361 5,097,355
Sunoco, Inc. 32,808 1,334,958
Tesoro Corp. 38,700 765,099
Valero Energy Corp. 148,560 6,117,701
Williams Cos., Inc. 164,267 6,621,603
XTO Energy, Inc. 143,503 9,831,391
---------------
394,446,733
- -----------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.2% International Paper Co. 120,184 2,800,287
MeadWestvaco Corp. 54,115 1,290,102
Weyerhaeuser Co. (a) 59,412 3,038,330
---------------
7,128,719
- -----------------------------------------------------------------------------------------------------------------------------------
Personal Products - 0.2% Avon Products, Inc. 119,958 4,320,887
The Estee Lauder Cos., Inc. Class A (a) 31,632 1,469,306
---------------
5,790,193
- -----------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 6.1% Abbott Laboratories 433,754 22,975,949
Allergan, Inc. 85,908 4,471,511
Barr Pharmaceuticals, Inc. (b) 29,059 1,309,980
Bristol-Myers Squibb Co. 556,331 11,421,475
Eli Lilly & Co. 277,956 12,830,449
Forest Laboratories, Inc. (b) 85,674 2,976,315
Johnson & Johnson 792,037 50,959,661
King Pharmaceuticals, Inc. (b) 64,873 679,220
Merck & Co., Inc. 603,225 22,735,550
Mylan, Inc. (a) 85,643 1,033,711
Pfizer, Inc. 1,901,230 33,214,488
Schering-Plough Corp. 455,622 8,971,197
Watson Pharmaceuticals, Inc. (b) 29,507 801,705
Wyeth 374,734 17,972,243
---------------
192,353,454
- -----------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
10
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts Apartment Investment & Management Co. Class A 26,066 $ 887,808
(REITs) - 1.2% AvalonBay Communities, Inc. 21,668 1,931,919
Boston Properties, Inc. (a) 33,646 3,035,542
Developers Diversified Realty Corp. (a) 36,075 1,252,163
Equity Residential 76,036 2,909,898
General Growth Properties, Inc. (a) 75,200 2,634,256
HCP, Inc. 63,100 2,007,211
Host Marriott Corp. 146,895 2,005,117
Kimco Realty Corp. (a) 68,241 2,355,679
Plum Creek Timber Co., Inc. (a) 48,130 2,055,632
ProLogis (a) 73,664 4,003,638
Public Storage 34,746 2,807,129
Simon Property Group, Inc. (a) 63,183 5,679,520
Vornado Realty Trust 37,963 3,340,744
---------------
36,906,256
- -----------------------------------------------------------------------------------------------------------------------------------
Real Estate Management CB Richard Ellis Group, Inc. (b) 52,391 1,005,907
& Development - 0.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 1.1% Burlington Northern Santa Fe Corp. 82,402 8,231,136
CSX Corp. 113,810 7,148,406
Norfolk Southern Corp. 105,602 6,618,077
Ryder System, Inc. 16,147 1,112,205
Union Pacific Corp. 145,210 10,963,355
---------------
34,073,179
- -----------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor Equipment - 2.5% Advanced Micro Devices, Inc. (a)(b) 170,582 994,493
Altera Corp. 84,204 1,743,023
Analog Devices, Inc. 81,498 2,589,191
Applied Materials, Inc. (a) 380,880 7,270,999
Broadcom Corp. Class A (b) 125,664 3,429,371
Intel Corp. 1,609,753 34,577,494
KLA-Tencor Corp. 47,766 1,944,554
LSI Corp. (b) 179,275 1,100,749
Linear Technology Corp. 62,369 2,031,358
MEMC Electronic Materials, Inc. (b) 64,000 3,938,560
Microchip Technology, Inc. 52,000 1,588,080
Micron Technology, Inc. (b) 213,943 1,283,658
National Semiconductor Corp. 60,634 1,245,422
Novellus Systems, Inc. (b) 28,092 595,269
Nvidia Corp. (b) 155,911 2,918,654
Teradyne, Inc. (b) 52,161 577,422
Texas Instruments, Inc. (a) 371,712 10,467,410
Xilinx, Inc. 78,526 1,982,782
---------------
80,278,489
- -----------------------------------------------------------------------------------------------------------------------------------
Software - 3.5% Adobe Systems, Inc. (b) 149,476 5,887,860
Autodesk, Inc. (b) 62,923 2,127,427
BMC Software, Inc. (b) 53,689 1,932,804
CA, Inc. 109,724 2,533,527
See Notes to Financial Statements.
11
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Citrix Systems, Inc. (b) 51,598 $ 1,517,497
Compuware Corp. (b) 78,371 747,659
Electronic Arts, Inc. (b) 89,482 3,975,685
Intuit, Inc. (b) 90,196 2,486,704
Microsoft Corp. 2,250,887 61,921,901
Novell, Inc. (b) 102,631 604,497
Oracle Corp. (b) 1,114,719 23,409,099
Symantec Corp. (b) 236,118 4,568,883
---------------
111,713,543
- -----------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 1.5% Abercrombie & Fitch Co. Class A 24,382 1,528,264
AutoNation, Inc. (b) 41,013 410,950
AutoZone, Inc. (b) 12,064 1,459,865
Bed Bath & Beyond, Inc. (a)(b) 72,766 2,044,725
Best Buy Co., Inc. 97,257 3,851,377
GameStop Corp. Class A (b) 45,400 1,834,160
The Gap, Inc. 126,199 2,103,737
Home Depot, Inc. 476,873 11,168,366
Limited Brands, Inc. 84,243 1,419,495
Lowe's Cos., Inc. 411,389 8,536,322
Office Depot, Inc. (b) 77,647 849,458
RadioShack Corp. 36,429 446,984
The Sherwin-Williams Co. 27,748 1,274,466
Staples, Inc. 197,293 4,685,709
TJX Cos., Inc. 119,372 3,756,637
Tiffany & Co. 35,363 1,441,042
---------------
46,811,557
- -----------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 0.4% Coach, Inc. (b) 95,908 2,769,823
Jones Apparel Group, Inc. 30,267 416,171
Liz Claiborne, Inc. 27,740 392,521
Nike, Inc. Class B 106,655 6,357,705
Polo Ralph Lauren Corp. 16,218 1,018,166
VF Corp. 24,594 1,750,601
---------------
12,704,987
- -----------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - 0.5% Countrywide Financial Corp. (a) 161,845 687,841
Fannie Mae (a) 299,151 5,836,436
Freddie Mac 181,719 2,980,192
Hudson City Bancorp, Inc. 145,919 2,433,929
MGIC Investment Corp. (a) 26,644 162,795
Sovereign Bancorp, Inc. (a) 134,765 991,870
Washington Mutual, Inc. (a) 297,659 1,467,459
---------------
14,560,522
- -----------------------------------------------------------------------------------------------------------------------------------
Tobacco - 1.6% Altria Group, Inc. 588,537 12,100,321
Lorillard, Inc. (b) 48,900 3,381,924
Philip Morris International, Inc. 592,737 29,275,280
Reynolds American, Inc. 47,461 2,215,005
UST, Inc. 41,526 2,267,735
---------------
49,240,265
- -----------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
12
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Trading Companies & Distributors - 0.0% W.W. Grainger, Inc. 18,292 $ 1,496,286
- -----------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication American Tower Corp. Class A (b) 111,400 4,706,650
Services - 0.4% Sprint Nextel Corp. 801,352 7,612,844
---------------
12,319,494
- -----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks 3,139,107,064
(Cost - $2,686,753,272) - 99.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Beneficial
Interest
Short-Term Securities (000)
- -----------------------------------------------------------------------------------------------------------------------------------
BlackRock Liquidity Series, LLC Cash Sweep
Series, 2.56% (c)(e) $ 19,004 19,003,784
BlackRock Liquidity Series, LLC Money
Market Series, 2.70% (c)(e)(f) 258,804 258,804,027
- -----------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities 277,807,811
(Cost - $277,807,811) - 8.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments
(Cost - $2,964,561,083*) - 108.3% 3,416,914,875
Liabilities in Excess of Other Assets - (8.3%) (261,237,310)
---------------
Net Assets - 100.0% $ 3,155,677,565
===============
* The cost and unrealized appreciation (depreciation) of investments, as of
June 30, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 2,436,265,656
===============
Gross unrealized appreciation $ 1,218,348,868
Gross unrealized depreciation (237,699,649)
---------------
Net unrealized appreciation $ 980,649,219
===============
(a) Security, or a portion of security, is on loan.
(b) Non-income producing security.
(c) Investments in companies considered to be an affiliate of the Series, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
-----------------------------------------------------------------------------------------------------------------------
Purchase Sale Realized Interest/Dividend
Affiliate Cost Cost Loss Income
-----------------------------------------------------------------------------------------------------------------------
BlackRock Liquidity Series, LLC Cash Sweep Series $15,346,892* -- -- $ 163,729
BlackRock Liquidity Series, LLC Money Market Series -- $93,760,873** -- $ 1,177,687
Merrill Lynch & Co., Inc. $ 2,132,408 $ 923,119 $ (265,882) $ 185,527
The PNC Financial Services Group, Inc. $ 262,005 $ 560,987 $ (85,126) $ 129,834
-----------------------------------------------------------------------------------------------------------------------
* Represents net purchase cost.
** Represents net sale cost.
See Notes to Financial Statements.
13
Master S&P 500 Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(d) All, or a portion of security pledged as collateral in connection with
open financial futures contracts.
(e) Represents the current yield as of report date.
(f) Security was purchased with the cash proceeds from securities loans.
o For Series compliance purposes, the Series 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 Series management. This definition may not apply for purposes
of this report, which may combine industry sub-classifications for
reporting ease.
o Financial futures contracts purchased as of June 30, 2008 were as follows:
-------------------------------------------------------------------------------------
Expiration Face Unrealized
Contracts Issue Date Value Depreciation
-------------------------------------------------------------------------------------
66 S&P 500 Index September 2008 $ 22,318,867 $ (1,180,717)
-------------------------------------------------------------------------------------
o Effective January 1, 2008, the Fund adopted Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 157, "Fair Value
Measurements" ("FAS 157"). FAS 157 clarifies the definition of fair value,
establishes a framework for measuring fair values and requires additional
disclosures about the use of fair value measurements. Various inputs are
used in determining the fair value of investments, which are as follows:
o Level 1 - price quotations in active markets/exchanges for
identical securities
o Level 2 - other observable inputs (including, but not limited
to: quoted prices for similar assets or liabilities in markets
that are not active, inputs other than quoted prices that are
observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss
severities, credit risks, and default rates) or other
market-corroborated inputs)
o Level 3 - unobservable inputs based on the best information
available in the circumstance, to the extent observable inputs
are not available (including the Series own assumption used in
determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities.
For information about the Series' policy regarding valuation of
investments and other significant accounting policies, please refer to
Note 1 of the Notes to Financial Statements.
The following table summarizes the inputs used as of June 30, 2008 in
determining the fair valuation of the Fund's investments:
--------------------------------------------------------------------------
Valuation Investments in Other Financial
Inputs Securities Instruments*
--------------------------------------------------------------------------
Level 1 $ 3,139,107,064 $ (1,180,717)
Level 2 277,807,811 --
Level 3 -- --
--------------------------------------------------------------------------
Total $ 3,416,914,875 $ (1,180,717)
========================================
* Other financial instruments are futures.
See Notes to Financial Statements.
14
(b) Not Applicable due to no such divestments during the semi-annual
period covered since the previous Form N-CSR filing.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
Not Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - The
registrant's Nominating and Governance Committee will consider
nominees to the board of directors recommended by shareholders when
a vacancy becomes available. Shareholders who wish to recommend a
nominee should send nominations which include biographical
information and set forth the qualifications of the proposed nominee
to the registrant's Secretary. There have been no material changes
to these procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's principal executive and principal financial
officers or persons performing similar functions have concluded that
the registrant's disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended
(the "1940 Act")) are effective as of a date within 90 days of the
filing of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
15d-15(b) under the Securities Exchange Act of 1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - 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.
Index Equity Portfolio of BlackRock Funds and Master S&P 500 Index Series of
Quantitative Master Series LLC
By: /s/ Donald C. Burke
-------------------
Donald C. Burke
Chief Executive Officer of
Index Equity Portfolio of BlackRock Funds and
Master S&P 500 Index Series of Quantitative Master Series LLC
Date: August 22, 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
Index Equity Portfolio of BlackRock Funds and
Master S&P 500 Index Series of Quantitative Master Series LLC
Date: August 22, 2008
By: /s/ Neal J. Andrews
-------------------
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
Index Equity Portfolio of BlackRock Funds and
Master S&P 500 Index Series of Quantitative Master Series LLC
Date: August 22, 2008