UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07885
Name of Fund: Master Core Bond Enhanced 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, Master Core Bond Enhanced 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: 12/31/2007
Date of reporting period: 01/01/2007 - 12/31/2007
Item 1 - Report to Stockholders
Master Core Bond Enhanced Index Series of Quantitative Master Series LLC
Annual Report, December 31, 2007
PORTFOLIO MANAGEMENT COMMENTARY
How did the Series perform?
o Master Core Bond Enhanced Index Series (the "Series) modestly
underperformed the benchmark Lehman Brothers U.S. Aggregate Bond
Index for the fiscal year as the Series had a total return of +6.83%
compared to +6.97% for the Index.
What factors influenced performance?
o One of the largest detractors from performance was our overweight to
high-quality spread assets, particularly AAA-rated commercial
mortgage-backed securities (CMBS), as well as agency mortgage
pass-throughs, asset-backed securities (ABS) and other
mortgage-related products. Despite their high quality, these assets
suffered amid fallout from the subprime mortgage scare. Generalized
concerns over the mortgage market, coupled with lack of liquidity
and the liquidation by investors of all mortgage-related assets,
caused the underperformance.
o On the positive side, an underweight exposure to corporate bonds,
and successful security selection within the corporate sector,
benefited the portfolio's relative performance. In addition, we had
positioned the portfolio for a steepening yield curve in the second
half of the year, a move that proved advantageous as short-term
interest rates fell more than long-term interest rates, causing the
curve to steepen. An underweight in agency debentures benefited
performance as well.
Describe recent portfolio activity.
o As spread sectors underperformed across the fixed income markets, we
used this as an opportunity to increase exposure to high-quality
mortgage products, moving from an underweight position in mortgages
at the start of 2007 to a significant overweight by year-end. In
addition, during late third quarter-early fourth quarter, we started
to decrease our underweight to investment-grade corporate bonds as
the valuations of lower-quality assets began to appear more
attractive.
o We maintained the yield curve steepening bias, but kept duration
relatively close to that of the index.
Describe portfolio positioning at period-end.
o At year-end, the portfolio was underweight in U.S. Treasury issues,
U.S. agency securities and corporate securities, although we closed
the gap in the corporate sector somewhat. The portfolio maintained
its notable overweights in high-quality, short-duration spread
product, including mortgage pass-through securities, CMBS and ABS.
In general, we find high-quality spread-related assets to be an
attractive investment, offering yields beyond those provided by
Treasury securities alone but without the risk associated with
corporate bonds. Although some areas of the corporate market are
attractive, lingering concerns about the economy cause us to be less
positive on corporate credit overall.
1
Master Core Bond Enhanced Index Series
Portfolio Information as of December 31, 2007
- --------------------------------------------------------------------------------
Percent of Long-Term
Quality Ratings* Investments
- --------------------------------------------------------------------------------
AAA/Aaa 78.7%
AA/Aa 8.7
A/A 6.2
BBB/Baa 3.1
BB/Ba 0.1
NR (Not Rated) 3.2
- --------------------------------------------------------------------------------
* Using the higher of Standard & Poor's or Moody's Investors Service ratings.
2
Master Core Bond Enhanced Index Series
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
- --------------------------------------------------------------------------------
Face
Amount Asset-Backed Securities* Value
- ------------------------------------------------------------------------------------------------------------------------------------
Asset-Backed $ 1,858,090 Capital Auto Receivables Asset Trust Series 2004-2 Class
Securities - 7.2% A3, 3.58% due 1/15/2009 $ 1,856,459
2,400,000 Chase Issuance Trust Series 2007-A17 Class A, 5.12% due
10/15/2014 2,458,046
2,306,162 Ford Credit Auto Owner Trust Series 2006-B Class A2A,
5.42% due 7/15/2009 2,309,000
5,751,000 Honda Auto Receivables Owner Trust Series 2006-3 Class
A3, 5.12% due 10/15/2010 5,774,304
3,605,696 Nissan Auto Receivables Owner Trust Series 2006-A Class
A3, 4.74% due 9/15/2009 3,602,232
2,489,235 Option One Mortgage Loan Trust Series 2007-5 Class 2A1,
4.879% due 5/25/2037 (a) 2,386,165
3,069,000 USAA Auto Owner Trust Series 2005-4 Class A4, 4.89% due
8/15/2012 3,082,327
2,903,000 Wachovia Auto Owner Trust Series 2005-B Class A5, 4.93%
due 11/20/2012 2,920,379
3,360,847 Whole Auto Loan Trust Series 2004-1 Class A4, 3.26% due
3/15/2011 3,335,864
- ------------------------------------------------------------------------------------------------------------------------------------
Total Asset-Backed Securities (Cost - $27,636,089) - 7.2% 27,724,776
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Government Agency 2,260,590 Fannie Mae Trust Series 2006-116 Class VC, 6%
Mortgage-Backed due 2/25/2016 2,328,137
Securities*- Collateralized 6,134,193 Fannie Mae Trust Series 2007-32 Class KP, 5.50%
Mortgage Obligations - 2.9% due 4/25/2037 6,242,416
2,598,431 Freddie Mac Multi-Class Certificates Series 3294 Class NA,
5.50% due 7/15/2027 2,635,651
- ------------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Mortgage-Backed Securities -
Collateralized Mortgage Obligations (Cost - $10,952,574) - 2.9% 11,206,204
- ------------------------------------------------------------------------------------------------------------------------------------
Face Interest Maturity
Issue Amount Rate Date
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Government & Fannie Mae $ 658,000 3.25% 1/15/2008 657,615
Agency Obligations - 6,200,000 4.375 3/15/2013 6,310,695
5.8% ---------------------------------------------------------------------------------------------------------
Freddie Mac 1,410,000 4.75 1/19/2016 1,454,595
1,400,000 5.00 12/14/2018 1,407,325
---------------------------------------------------------------------------------------------------------
Tennessee Valley 1,020,000 6.25 12/15/2017 1,155,368
Authority Series E
---------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds 665,016 2.375 1/15/2025 698,163
25,900 2.375 1/15/2027 27,389
---------------------------------------------------------------------------------------------------------
U.S. Treasury Notes 3,650,000 3.875 10/31/2012 3,721,573
1,595,000 4.25 11/15/2017 1,622,788
5,000,000 4.875 5/15/2037 5,449,610
- ------------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government & Agency Obligations
(Cost - $21,987,169) - 5.8% 22,505,121
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 3
Master Core Bond Enhanced Index Series
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
- --------------------------------------------------------------------------------
Face Interest Maturity
Issue Amount Rate Date(s) Value
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Government Fannie Mae $ 20,994,183 5.00% 1/15/2023 - 1/15/2038 (c) $ 20,689,045
Agency Mortgage- Guaranteed Pass 20,073,238 5.50 1/15/2023 - 1/01/2035 (c) 20,300,142
Backed Through 4,082,251 5.844 8/01/2036 4,133,503
Securities* - 43.1% Certificates 1,386,576 6.00 2/01/2013 - 1/15/2038 (c) 1,412,077
1,843,827 6.50 1/01/2013 - 10/01/2036 1,902,842
190,791 7.00 4/01/2027 - 3/01/2031 201,193
169,824 7.50 10/01/2027 - 5/01/2032 181,512
147,247 8.00 9/01/2015 - 9/01/2031 157,381
12,802 8.50 5/01/2030 - 1/01/2031 13,773
29,701 9.50 7/01/2017 32,473
15,371 10.00 10/01/2018 - 5/01/2022 17,539
5,135 10.50 12/01/2016 5,515
---------------------------------------------------------------------------------------------------------
Freddie Mac 21,715,243 4.50 2/01/2011 - 12/01/2035 21,174,258
Mortgage 34,680,279 5.00 11/01/2017 - 2/01/2036 34,200,837
Participation 21,730,961 5.50 12/01/2016 - 1/15/2038 (c) 21,741,261
Certificates 2,801,756 5.742 4/01/2037 2,844,230
3,213,905 5.879 4/01/2037 3,262,625
2,527,087 6.00 4/01/2016 - 10/01/2017 2,588,149
407,261 6.50 7/01/2015 - 8/01/2032 421,637
2,226,527 7.00 1/01/2011 - 11/01/2032 2,334,388
519,114 7.50 7/01/2010 - 9/01/2032 552,320
275,041 8.00 11/01/2024 - 3/01/2032 294,449
25,157 8.50 5/01/2028 - 8/01/2030 27,023
7,148 9.00 9/01/2014 7,630
98,424 9.50 2/01/2019 106,642
18,688 10.00 3/01/2010 - 9/01/2017 19,680
15,211 10.50 4/01/2016 15,948
8,222 11.00 9/01/2016 9,383
2,341 11.50 8/01/2015 2,654
13,635 12.50 2/01/2014 15,694
---------------------------------------------------------------------------------------------------------
Ginnie Mae MBS 2,416,837 4.50 9/15/2035 2,314,765
Certificates 6,981,037 5.00 4/15/2035 - 5/15/2036 6,880,892
8,565,331 5.50 1/15/2035 - 5/15/2036 8,630,136
6,639,399 6.00 4/20/2026 - 6/15/2035 6,805,596
1,516,080 6.50 2/15/2014 - 11/15/2034 1,570,872
863,275 7.00 4/15/2013 - 10/15/2031 915,337
301,194 7.50 3/15/2024 - 3/15/2032 321,459
172,739 8.00 12/15/2022 - 6/15/2031 186,728
68,039 8.50 11/15/2017 - 3/15/2031 73,909
55,506 9.00 4/15/2018 - 11/15/2024 60,088
1,541 9.50 9/15/2021 1,694
- ------------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Mortgage-Backed Securities
(Cost - $165,914,249) - 43.1% 166,427,279
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 4
Master Core Bond Enhanced Index Series
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
- --------------------------------------------------------------------------------
Face Non-U.S. Government Agency Mortgage-Backed
Amount Securities* Value
- ------------------------------------------------------------------------------------------------------------------------------------
Collateralized Mortgage Banc of America Commercial Mortgage Inc.:
Obligations - 17.2% $ 2,030,000 Series 2002-PB2 Class A3, 6.085% due 6/11/2035 $ 2,058,536
1,676,000 Series 2005-4 Class A5A, 4.933% due 7/10/2045 1,625,684
6,369,687 Bear Stearns Adjustable Rate Mortgage Trust Series 2007-4
Class 22A1, 6.065% due 6/25/2047 (a) 6,283,029
1,194,000 Bear Stearns Commercial Mortgage Securities Series 2005-
PWR8 Class AJ, 4.75% due 6/11/2041 1,082,551
1,323,000 CS First Boston Mortgage Securities Corp. Series 2001-CK1
Class C, 6.73% due 12/18/2035 1,397,531
1,350,000 CW Capital Cobalt Ltd. Series 2007-C3 Class A4, 6.015% due
6/15/2017 1,397,934
6,334,122 Citigroup Mortgage Loan Trust, Inc. Series 2005-4 Class A,
5.345% due 8/25/2035 (a) 6,149,010
1,461,589 Countrywide Home Loan Mortgage Pass-Through Trust
Series 2007-16 Class A1, 6.50% due 10/25/2037 1,481,573
2,375,000 Credit Suisse Mortgage Capital Certificates Series 2007-C3
Class A4, 5.773% due 6/15/2039 (a) 2,442,213
1,760,008 First Union NB-Bank of America Commercial Mortgage Trust
Series 2001-C1 Class A2, 6.136% due 3/15/2033 1,819,455
2,021,000 GE Capital Commercial Mortgage Corp. Series 2005-C1
Class A2, 4.353% due 6/10/2048 1,996,095
GS Mortgage Securities Corp. II:
1,433,000 2004-GG2 Class A5, 5.279% due 8/10/2038 (a) 1,454,811
1,622,000 2005-GG4 Class A4, 4.761% due 7/10/2039 1,554,657
1,670,000 2007-GG10 Class A4, 5.799% due 8/10/2045 (a) 1,727,232
JPMorgan Chase Commercial Mortgage Securities Corp.:
1,345,000 Series 2005-LDP4 Class AM, 4.999% due 10/15/2042 (a) 1,285,913
2,014,000 Series 2006-LDP7 Class A4, 6.066% due 4/15/2045 (a) 2,095,491
2,242,000 Series 2001-CIBC Class B, 6.446% due 3/15/2033 2,348,645
1,860,000 Series 2001-CIB3 Class A3, 6.465% due 11/15/2035 1,964,053
1,598,000 Series 2001-CIB3 Class B, 6.678% due 11/15/2035 1,705,688
1,433,000 LB-UBS Commercial Mortgage Trust Series 2003-C8 Class
A4, 5.124% due 11/15/2032 (a) 1,445,581
Morgan Stanley Capital I:
1,073,612 Series 1999-RM1 Class A2, 6.71% due 12/15/2031 (a) 1,081,860
3,907,000 Series 1999-WF1 Class B, 6.32% due 11/15/2031 (a) 3,934,692
1,856,000 Series 2005-T19 Class A2, 4.725% due 6/12/2047 1,843,591
2,725,000 Series 2007-IQ15 Class A4, 6.077% (a)(e) 2,821,220
1,275,000 Series 2007-IQ16 Class A4, 5.809% (e) 1,303,879
3,135,000 Series 2007-T27 Class A4, 5.803% due 6/11/2042 (a) 3,216,650
3,626,940 Residential Accredit Loans, Inc. Series 2006-QA9 Class A1,
5.045% due 11/25/2036 (a) 3,302,350
2,825,000 Wachovia Bank Commercial Mortgage Trust Series 2006-C29
Class A4, 5.308% due 11/15/2048 2,812,263
3,000,000 Wells Fargo Mortgage Backed Securities Trust, Series 2004-
S Class A6, 3.54% due 9/25/2034 (a) 2,971,962
- ------------------------------------------------------------------------------------------------------------------------------------
Total Non-U.S. Government Agency Mortgage-Backed Securities
(Cost - $65,966,532) - 17.2% 66,604,149
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 5
Master Core Bond Enhanced Index Series
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
- --------------------------------------------------------------------------------
Face
Industry Amount Corporate Bonds Value
- ------------------------------------------------------------------------------------------------------------------------------------
Aerospace & Defense - 0.1% $ 431,000 Northrop Grumman Corp., 7.125% due 2/15/2011 $ 459,337
- ------------------------------------------------------------------------------------------------------------------------------------
Automobiles - 0.2% DaimlerChrysler NA Holding Corp.:
206,000 7.30% due 1/15/2012 (h) 219,619
312,000 6.50% due 11/15/2013 326,042
257,000 8.50% due 1/18/2031 (h) 324,128
--------------
869,789
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 4.4% The Bear Stearns Cos., Inc.:
475,000 5.599% due 7/19/2010 (a) 446,401
1,300,000 6.95% due 8/10/2012 1,336,660
675,000 6.40% due 10/02/2017 652,158
1,367,000 Credit Suisse Guernsey Ltd., 5.86% (a)(e) 1,223,736
562,000 Goldman Sachs Capital II, 5.793% (a)(e) 500,363
The Goldman Sachs Group, Inc.:
456,000 5.25% due 10/15/2013 456,156
386,000 5.125% due 1/15/2015 379,187
625,000 5.35% due 1/15/2016 619,300
316,000 6.125% due 2/15/2033 310,558
Lehman Brothers Holdings, Inc.:
2,095,000 5.645% due 5/25/2010 (a) 2,013,873
180,000 7.875% due 8/15/2010 190,781
1,150,000 6.75% due 12/28/2017 1,185,304
575,000 6.691% due 9/15/2022 (a) 573,661
630,000 Series I, 5.25% due 2/06/2012 623,377
305,000 Series MTN, 7% due 9/27/2027 309,561
Morgan Stanley:
364,000 6.60% due 4/01/2012 382,463
200,000 5.375% due 10/15/2015 194,430
1,660,000 6.25% due 8/28/2017 1,687,561
1,910,000 Series F, 5.55% due 4/27/2017 1,862,571
1,865,000 UBS AG Series DPNT, 5.875% due 12/20/2017 1,878,139
--------------
16,826,240
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 5.7% 3,255,000 ANZ National International Ltd., 5.353%
due 4/14/2010 (a)(d)(h) 3,249,177
1,103,000 BSCH Issuance Ltd., 7.625% due 11/03/2009 1,161,377
217,000 Bank One Corp., 5.90% due 11/15/2011 225,317
700,000 Barclays Bank Plc, 7.434% (a)(d)(e) 727,406
393,000 Corporacion Andina de Fomento, 6.875%
due 3/15/2012 419,340
368,000 Eksportfinans A/S, 4.75% due 12/15/2008 369,366
5,513,000 European Investment Bank, 5% due 2/08/2010 5,657,766
515,000 HSBC Bank USA NA, 4.625% due 4/01/2014 493,520
1,000,000 KFW International Finance, 5.125% due 5/13/2009 1,017,863
KFW - Kreditanstalt fuer Wiederaufbau:
441,000 3.25% due 3/30/2009 436,997
441,000 4.125% due 10/15/2014 440,221
831,000 4.375% due 7/21/2015 830,507
735,000 Korea Development Bank, 4.75% due 7/20/2009 730,831
500,000 M&T Bank Corp., 3.85% due 4/01/2013 (a)(d) 498,754
See Notes to Financial Statements. 6
Master Core Bond Enhanced Index Series
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
- --------------------------------------------------------------------------------
Face
Industry Amount Corporate Bonds Value
- ------------------------------------------------------------------------------------------------------------------------------------
$ 368,000 The PNC Funding Corp., 4.20% due 3/10/2008 (b) $ 367,451
1,100,000 Royal Bank of Scotland Group Plc, 6.99% (a)(d)(e) 1,095,694
400,000 U.S. Bank, NA, 4.40% due 8/15/2008 398,379
1,500,000 Wachovia Bank NA, 6.60% due 1/15/2038 1,507,530
Wachovia Corp.:
658,000 5.625% due 12/15/2008 656,722
448,000 3.625% due 2/17/2009 438,729
1,227,000 Wells Fargo & Co., 3.125% due 4/01/2009 1,202,997
--------------
21,925,944
- ------------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 0.1% 257,000 Cisco Systems, Inc., 5.50% due 2/22/2016 261,361
- ------------------------------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 0.3% 246,000 Hewlett-Packard Co., 3.625% due 3/15/2008 245,428
755,000 International Business Machines Corp., 5.70%
due 9/14/2017 780,490
--------------
1,025,918
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.2% 110,000 CitiFinancial Credit Co., 10% due 5/15/2009 117,228
FIA Card Services NA:
400,000 4.625% due 8/03/2009 399,879
225,000 7.125% due 11/15/2012 244,452
--------------
761,559
- ------------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.0% 147,000 Sealed Air Corp., 5.375% due 4/15/2008 (d) 146,917
- ------------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - Bank of America Corp.:
6.3% 83,000 6.60% due 5/15/2010 86,857
551,000 4.875% due 1/15/2013 545,813
625,000 4.75% due 8/01/2015 601,521
400,000 7.80% due 9/15/2016 453,378
1,150,000 6% due 9/01/2017 1,174,923
2,130,000 5.75% due 12/01/2017 2,134,886
Citigroup, Inc.:
92,000 6.50% due 1/18/2011 96,068
147,000 6% due 2/21/2012 152,107
1,700,000 5.30% due 10/17/2012 1,722,220
397,000 6.625% due 6/15/2032 399,619
276,000 5.875% due 2/22/2033 251,899
257,000 5.85% due 12/11/2034 236,791
1,230,000 8.30% due 12/21/2077 (a) 1,284,355
General Electric Capital Corp.:
1,000,000 6.15% due 8/07/2037 1,062,429
925,000 6.375% due 11/15/2067 (a) 955,046
735,000 Series A, 4.125% due 3/04/2008 734,080
441,000 Series A, 4.875% due 10/21/2010 447,555
7,332,000 Series A, 5% due 12/01/2010 7,460,875
JPMorgan Chase & Co.:
294,000 3.50% due 3/15/2009 289,224
368,000 4.50% due 11/15/2010 368,742
474,000 6.625% due 3/15/2012 499,823
See Notes to Financial Statements. 7
Master Core Bond Enhanced Index Series
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
- --------------------------------------------------------------------------------
Face
Industry Amount Corporate Bonds Value
- ------------------------------------------------------------------------------------------------------------------------------------
$ 950,000 JPMorgan Chase Bank NA, 6% due 7/05/2017 $ 959,818
2,450,000 JPMorgan Chase Capital XXV, 6.80% due 10/01/2037 2,355,604
--------------
24,273,633
- ------------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 1,675,000 AT&T, Inc., 6.50% due 9/01/2037 1,751,511
Services - 0.8% 588,000 Deutsche Telekom International Finance BV, 3.875% due
7/22/2008 583,706
187,000 GTE Corp., 6.94% due 4/15/2028 200,305
Telecom Italia Capital SA:
349,000 5.25% due 10/01/2015 340,013
147,000 6% due 9/30/2034 142,944
--------------
3,018,479
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.2% 206,000 Commonwealth Edison Co., 6.95% due 7/15/2018 208,318
475,000 Pacificorp., 6.25% due 10/15/2037 490,528
--------------
698,846
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 110,000 Halliburton Co., 5.50% due 10/15/2010 113,075
0.1% 300,000 Transocean, Inc., 6.80% due 3/15/2038 306,104
--------------
419,179
- ------------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.3% 1,115,000 Kraft Foods, Inc., 6.50% due 8/11/2017 1,153,519
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care Providers 276,000 UnitedHealth Group, Inc., 3.30% due 1/30/2008 275,749
& Services - 0.1% 221,000 WellPoint, Inc., 5.95% due 12/15/2034 208,027
--------------
483,776
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.6% 331,000 Berkshire Hathaway Finance Corp., 4.125%
due 1/15/2010 332,195
386,000 Chubb Corp., 6.375% due 3/29/2067 (a) 376,509
MetLife, Inc.:
110,000 6.125% due 12/01/2011 114,066
331,000 5% due 11/24/2013 330,765
147,000 5.70% due 6/15/2035 134,233
368,000 Monumental Global Funding II, 4.375% due 7/30/2009 (d) 369,554
645,000 Progressive Corp., 6.70% due 6/15/2037 (a) 598,788
110,000 SunAmerica, Inc., 5.60% due 7/31/2097 96,113
--------------
2,352,223
- ------------------------------------------------------------------------------------------------------------------------------------
Media - 1.5% 750,000 Comcast Cable Communications Holdings, Inc., 8.375% due
3/15/2013 841,412
331,000 Comcast Cable Communications LLC, 8.875%
due 5/01/2017 394,658
Comcast Corp.:
342,000 5.85% due 1/15/2010 350,138
221,000 6.50% due 1/15/2017 230,426
327,000 7.05% due 3/15/2033 357,203
184,000 6.50% due 11/15/2035 187,761
925,000 6.95% due 8/15/2037 998,327
News America, Inc.:
489,000 7.25% due 5/18/2018 538,030
250,000 7.28% due 6/30/2028 268,665
259,000 Time Warner Cos., Inc., 6.875% due 6/15/2018 271,595
1,220,000 Time Warner, Inc., 6.875% due 5/01/2012 1,284,671
--------------
5,722,886
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 8
Master Core Bond Enhanced Index Series
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
- --------------------------------------------------------------------------------
Face
Industry Amount Corporate Bonds Value
- ------------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.2% $ 120,000 Corporacion Nacional del Cobre de Chile - CODELCO,
6.375% due 11/30/2012 (d) $ 128,443
221,000 Inco Ltd., 7.75% due 5/15/2012 241,110
110,000 Teck Cominco Ltd., 6.125% due 10/01/2035 101,648
294,000 Textron Financial Corp. Series E, 4.125% due 3/03/2008 293,715
--------------
764,916
- ------------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.1% 221,000 Dominion Resources, Inc., 5.70% due 9/17/2012 226,937
- ------------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.0% Federated Department Stores, Inc.:
18,000 6.625% due 9/01/2008 18,137
99,000 6.30% due 4/01/2009 99,760
--------------
117,897
- ------------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 287,000 Anadarko Finance Co. Series B, 6.75% due 5/01/2011 303,449
0.8% 221,000 Anadarko Petroleum Corp., 6.45% due 9/15/2036 225,052
349,000 Consolidated Natural Gas Co. Series C, 6.25%
due 11/01/2011 362,769
441,000 EnCana Corp., 4.75% due 10/15/2013 425,536
98,000 Kern River Funding Corp., 4.893% due 4/30/2018 (d)(f) 95,975
MidAmerican Energy Holdings Co.:
588,000 5.95% due 5/15/2037 570,347
400,000 6.50% due 9/15/2037 417,714
200,000 PTT PCL, 5.875% due 8/03/2035 (d) 186,419
68,000 Pemex Project Funding Master Trust, 9.125%
due 10/13/2010 75,140
575,000 XTO Energy, Inc., 6.75% due 8/01/2037 616,762
--------------
3,279,163
- ------------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.1% 221,000 Celulosa Arauco y Constitucion SA, 5.125%
due 7/09/2013 216,036
- ------------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.0% 118,000 Teva Pharmaceutical Finance LLC, 6.15%
due 2/01/2036 117,182
- ------------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - 169,000 Golden West Financial Corp., 4.75% due 10/01/2012 166,866
0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication 294,000 Sprint Capital Corp., 6.375% due 5/01/2009 295,483
Services - 0.2% Vodafone Group Plc:
390,000 7.75% due 2/15/2010 411,407
147,000 6.25% due 11/30/2032 147,693
--------------
854,583
- ------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (Cost - $85,315,641) - 22.3% 86,143,186
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign Government Obligations
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign Government 1,463,000 Canadian Government International Bond, 5.25%
Obligations - 2.0% due 11/05/2008 1,478,025
257,000 Chile Government International Bond, 5.50%
due 1/15/2013 268,082
368,000 China Government International Bond, 7.30%
due 12/15/2008 377,523
Italy Government International Bond:
496,000 4% due 6/16/2008 496,310
331,000 6% due 2/22/2011 354,476
309,000 4.50% due 1/21/2015 308,366
See Notes to Financial Statements. 9
Master Core Bond Enhanced Index Series
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
- --------------------------------------------------------------------------------
Face
Industry Amount Foreign Government Obligations Value
- ------------------------------------------------------------------------------------------------------------------------------------
Italy Government International Bond:
$ 772,000 6.875% due 9/27/2023 $ 921,538
386,000 5.375% due 6/15/2033 395,901
735,000 Inter-American Development Bank, 6.80%
due 10/15/2025 896,682
459,000 Korea Development Bank, 5.125% due 3/16/2015 445,553
294,000 Korea Export Import Bank, 5.125% due 2/14/2011 294,797
735,000 Landwirtschaftliche Rentenbank, 4.875%
due 2/14/2011 761,993
350,000 Mexico Government International Bond Series A, 6.75% due
9/27/2034 386,575
162,000 Poland Government International Bond, 5%
due 10/19/2015 163,801
- ------------------------------------------------------------------------------------------------------------------------------------
Total Foreign Government Obligations (Cost - $7,380,697) - 2.0% 7,549,622
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Trusts
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 0.2% 550,000 Mellon Capital IV Series 1, 6.244% (a)(e) 510,468
120,000 Lehman Brothers Holdings Capital Trust V, 5.857% (a)(e) 106,950
- ------------------------------------------------------------------------------------------------------------------------------------
Total Capital Trusts (Cost - $670,000) - 0.2% 617,418
- ------------------------------------------------------------------------------------------------------------------------------------
Municipal Bonds
- ------------------------------------------------------------------------------------------------------------------------------------
Illinois - 0.2% 662,000 Illinois State, GO, 5.10% due 6/01/2033 642,994
- ------------------------------------------------------------------------------------------------------------------------------------
Texas - 0.2% 764,000 Dallas, Texas, GO, Series C, 5.25% due 2/15/2024 759,347
- ------------------------------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost - $1,370,576) - 0.4% 1,402,341
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term Securities
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial Paper** - 1.0% 1,915,000 Chariot Funding LLC, 5.93% due 1/28/2008 1,906,978
1,915,000 Falcon Asset Securitization Corp., 6.01%
due 1/10/2008 1,912,532
--------------
3,819,510
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Government Agency 20,000,000 Federal Home Loan Bank, 3.01% due 1/02/2008 20,000,000
Obligations** - 5.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost - $23,819,510) - 6.2% 23,819,510
- ------------------------------------------------------------------------------------------------------------------------------------
Number of
Contracts++ Options Purchased
- ------------------------------------------------------------------------------------------------------------------------------------
Call Options Purchased 12 Receive a fixed rate of 5.78% and pay a floating rate based
on 3-month USD LIBOR, expiring August 2010, Broker
Deutsche Bank AG (g) 861,012
- ------------------------------------------------------------------------------------------------------------------------------------
Put Options Purchased 12 Pay a fixed rate of 5.78% and receive a floating rate based
3-month USD LIBOR, expiring August 2010, Broker Deutsche
Bank AG (g) 308,400
- ------------------------------------------------------------------------------------------------------------------------------------
Total Options Purchased (Premiums Paid - $919,200) - 0.3% 1,169,412
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments Before TBA Commitments and Options Written
(Cost - $411,935,957) - 107.6% 415,169,018
- ------------------------------------------------------------------------------------------------------------------------------------
Face
Amount TBA Sale Commitments
- ------------------------------------------------------------------------------------------------------------------------------------
Fannie Mae Guranteed Pass-Through Certificates:
$ 12,900,000 5% due 1/15/2023 - 1/15/2038 (12,586,362)
1,600,000 5.50% due 1/15/2023 - 1/01/2035 (1,598,059)
1,000,000 6% due 2/01/2013 - 1/15/2038 (1,015,467)
1,500,000 6.50% due 1/01/2013 - 10/01/2036 (1,541,391)
See Notes to Financial Statements. 10
Master Core Bond Enhanced Index Series
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
- --------------------------------------------------------------------------------
Face
Amount TBA Sale Commitments Value
- ------------------------------------------------------------------------------------------------------------------------------------
Freddie Mac Mortgage Participation Certificates:
$ (6,000,000) 4.50% due 2/01/2011 - 12/01/2035 $ (5,901,210)
(3,200,000) 5% due 11/01/2017 - 2/01/2036 (3,122,193)
(5,000,000) 5% due 11/01/2017 - 2/01/2036 (5,004,990)
(3,000,000) Ginnie Mae MBS Certificates 6% due 4/20/2026 - 6/15/2035 (3,071,784)
- ------------------------------------------------------------------------------------------------------------------------------------
Total TBA Sale Commitments
(Proceeds Received - $33,565,736) - (8.8%) (33,841,456)
- ------------------------------------------------------------------------------------------------------------------------------------
Number of
Contracts Options Written
- ------------------------------------------------------------------------------------------------------------------------------------
Call Options Written 37 U.S. Treasury Bonds, expiring February 2008 at $ 112 (16,187)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Options Written
(Premiums Received - $21,110) - (0.0%) (16,187)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments, Net of TBA Sale Commitments and Options Written
(Cost - $378,349,111) - 98.8% 381,311,375
Other Assets Less Liabilities - 1.2% 4,700,533
--------------
Net Assets - 100.0% $ 386,011,908
==============
* Asset-Backed and Mortgage-Backed Securities are subject to principal
paydowns. As a result of prepayments or refinancing of the underlying
instruments, the average life may be substantially less than the original
maturity.
** Commercial Paper and Short-Term U.S. Government Agency Obligations are
traded on a discount basis; the interest rate shown reflects the discount
rate paid at the time of purchase.
+ The cost and unrealized appreciation (depreciation) of investments, as of
December 31, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 412,633,820
==============
Gross unrealized appreciation $ 4,959,003
Gross unrealized depreciation (2,423,805)
--------------
Net unrealized appreciation $ 2,535,198
==============
++ One contract represents a notional amount of $1,000,000.
(a) Floating rate security.
(b) 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
Affiliate Cost Cost Loss Income
==========================================================================
The PNC Funding Corp., 4.20%
due 3/10/2008 -- $ 131,938 $ (1,253) $ 18,228
--------------------------------------------------------------------------
(c) Represents or includes a "to-be-announced" transaction. The Series has
committed to purchasing securities for which all specific information is
not available at this time.
(d) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(e) The security is a perpetual bond and has no stated maturity date.
(f) Subject to principal paydowns.
(g) This European style swaption, which can be exercised only on the
expiration date, represents a standby commitment whereby the Series is
obligated to enter into a predetermined interest rate swap contract upon
exercise of the swaption.
(h) All or a portion of security held as collateral in connection with open
financial futures contracts or swaps.
See Notes to Financial Statements. 11
Master Core Bond Enhanced Index Series
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
- --------------------------------------------------------------------------------
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. Industries are shown as a
percent of net assets. These industry classifications are unaudited.
o Financial futures contracts purchased as of December 31, 2007 were
as follows:
- ----------------------------------------------------------------------------------------
Unrealized
Number of Expiration Face Appreciation
Contracts Issue Date Value (Depreciation)
- ----------------------------------------------------------------------------------------
373 10-Year U.S. Treasury Bond March 2008 $ 42,304,978 $ (10,275)
84 30-Year U.S. Treasury Bond March 2008 $ 9,893,032 (117,532)
43 Euro Dollar Future September 2008 $ 10,373,720 1,105
- ----------------------------------------------------------------------------------------
Total Unrealized Depreciation - Net $ (126,702)
===============
o Financial futures contracts sold as of December 31, 2007 were as
follows:
- ----------------------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Value Appreciation
- ----------------------------------------------------------------------------------------
536 5-Year U.S. Treasury Bond March 2008 $ 59,187,195 $ 76,445
43 Euro Dollar Future September 2009 $ 10,359,752 2,127
- ----------------------------------------------------------------------------------------
Total Unrealized Appreciation $ 78,572
===============
o Swaps outstanding as of December 31, 2007 were as follows:
- -------------------------------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
- -------------------------------------------------------------------------------------------------
Receive (pay) a variable return based on the change in
the spread return of the Lehman Brothers CMBS Aaa 8.5+
Index and pay a floating rate based on 1.106%
Broker, Deutsche Bank AG
Expires January 2008 $ 4,455,000 --
Receive (pay) a variable return based on the change in
the spread return of the Lehman Brothers CMBS Investment
Grade Index and pay a floating rate based on 1.328%
Broker, Citibank N.A.
Expires January 2008 $ 4,435,000 --
Receive a fixed rate of 4.034% and pay a floating rate based
on 3-month USD LIBOR
Broker, Deutsche Bank AG
Expires December 2009 $ 15,300,000 $ 49,578
Receive a fixed rate of 4.1% and pay a floating rate based
on 3-month USD LIBOR
Broker, Lehman Brothers Special Financing
Expires December 2009 $ 11,900,000 52,840
Receive a fixed rate of 5.14050% and pay a floating rate based
on 3-month USD LIBOR
Broker, JPMorgan Chase
Expires August 2012 $ 21,700,000 893,254
See Notes to Financial Statements. 12
Master Core Bond Enhanced Index Series
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
- --------------------------------------------------------------------------------
o Swaps outstanding as of December 31, 2007 were as follows:
- -------------------------------------------------------------------------------------------------
Unrealized
Notional Appreciation
Amount (Depreciation)
- -------------------------------------------------------------------------------------------------
Receive a fixed rate of 4.87% and pay a floating rate based
on 3-month USD LIBOR
Broker, UBS Warburg
Expires September 2012 $ 43,000,000 $ 1,284,172
Sold credit default protection on Lehman Brothers
Holdings, Inc. and receive 0.95%
Broker, Deutsche Bank AG
Expires September 2012 $ 345,000 (3,487)
Receive a fixed rate of 4.9775% and pay a floating rate based
on 3-month USD LIBOR
Broker, Lehman Brothers Special Financing
Expires September 2012 $ 35,000,000 1,209,056
Pay a fixed rate of 5.6425% and receive a floating rate
based on 3-month USD LIBOR
Broker, Citibank N.A.
Expires July 2017 $ 6,500,000 (498,026)
Pay a fixed rate of 5.762% and receive a floating rate
based on 3-month USD LIBOR
Broker, Deutsche Bank AG
Expires July 2017 $ 25,200,000 (2,157,709)
Receive a fixed rate of 5.324% and pay a floating rate based
based on 3-month USD LIBOR
Broker, Citibank N.A.
Expires August 2017 $ 11,500,000 600,497
Pay a fixed rate of 5.16625% and receive a floating rate
based on 3-month USD LIBOR
Broker, Lehman Brothers Special Financing
Expires September 2017 $ 19,800,000 (788,810)
Pay a fixed rate of 4.54% and receive a floating rate
based on 3-month USD LIBOR
Broker, Morgan Stanley Capital Services, Inc.
Expires December 2017 $ 7,100,000 76,264
- -------------------------------------------------------------------------------------------------
Total $ 717,629
===============
See Notes to Financial Statements. 13
Master Core Bond Enhanced Index Series
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Assets: Investments in unaffiliated securities, at value (identified
cost - $410,648,930) ..................................................... $ 413,632,155
Investments in affiliated securities, at value (identified
cost - $367,827) ......................................................... 367,451
Options purchased, at value (premiums paid - $919,200) ...................... 1,169,412
Unrealized appreciation on swaps ............................................ 4,165,661
Cash ........................................................................ 1,629,429
Receivables:
Securities sold .......................................................... $ 33,543,820
Interest ................................................................. 2,666,091
Swaps .................................................................... 1,608,652
Variation margin ......................................................... 144,656
Contributions ............................................................ 135,959
Paydowns ................................................................. 9,996 38,109,174
-------------
Prepaid expenses and other assets ........................................... 103,601
--------------
Total assets ................................................................ 459,176,883
--------------
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities: Options written, at value (premiums received - $21,110) ..................... 16,187
Unrealized depreciation on swaps ............................................ 3,448,032
TBA sale commitments, at value (proceeds received - $33,565,736) ............ 33,841,456
Payables:
Securities purchased ..................................................... 34,560,353
Swaps .................................................................... 797,598
Withdrawals .............................................................. 369,334
Investment adviser ....................................................... 3,363
Other affiliates ......................................................... 3,219 35,733,867
-------------
Accrued expenses and other liabilities ...................................... 125,433
--------------
Total liabilities ........................................................... 73,164,975
--------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets .................................................................. $ 386,011,908
==============
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets Investors' capital .......................................................... $ 382,380,117
Consist of: Unrealized appreciation -net ................................................ 3,631,791
--------------
Net assets .................................................................. $ 386,011,908
==============
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 14
Master Core Bond Enhanced Index Series
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Interest (including $18,228 from affiliates) ................................ $ 25,882,765
--------------
Income:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses: Accounting services ......................................................... $ 160,128
Professional fees ........................................................... 138,450
Pricing fees ................................................................ 89,221
Custodian fees .............................................................. 83,734
Investment advisory fees .................................................... 49,527
Directors' fees and expenses ................................................ 10,087
Printing and shareholder reports ............................................ 2,642
Other ....................................................................... 16,557
-------------
Total expenses .............................................................. 550,346
--------------
Investment income-net ....................................................... 25,332,419
--------------
- ------------------------------------------------------------------------------------------------------------------------------------
Realized & Unrealized Realized gain (loss) on:
Gain (Loss) - Net: Investments-net (including $(1,253) from affiliates) ..................... 1,620,136
In-kind redemption-net ................................................... (1,427,696)
Financial futures contracts and swaps-net ................................ (1,319,408)
Options written-net ...................................................... 225,280 (901,688)
-------------
Change in unrealized appreciation/depreciation on:
Investments-net .......................................................... 5,350,579
Financial futures contracts and swaps-net ................................ 669,499
Options written-net ...................................................... (103,135) 5,916,943
------------- --------------
Total realized and unrealized gain-net ...................................... 5,015,255
--------------
Net Increase in Net Assets Resulting from Operations ........................ $ 30,347,674
==============
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 15
Master Core Bond Enhanced Index Series
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended
December 31
-------------------------------
Increase (Decrease) in Net Assets: 2007 2006
- ------------------------------------------------------------------------------------------------------------------------------------
Operations: Investment income-net ...................................................... $ 25,332,419 $ 47,275,839
Realized loss-net .......................................................... (901,688) (2,873,760)
Change in unrealized appreciation/depreciation-net ......................... 5,916,943 (3,744,891)
------------- --------------
Net increase in net assets resulting from operations ....................... 30,347,674 40,657,188
------------- --------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Proceeds from contributions ................................................ 38,101,851 267,930,355
Transactions: Fair value of withdrawals .................................................. (477,888,382) (517,719,844)
------------- --------------
Net decrease in net assets derived from capital transactions ............... (439,786,531) (249,789,489)
------------- --------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total decrease in net assets ............................................... (409,438,857) (209,132,301)
Beginning of year .......................................................... 795,450,765 1,004,583,066
------------- --------------
End of year ................................................................ $ 386,011,908 $ 795,450,765
============= ==============
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 16
Master Core Bond Enhanced Index Series
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
The following ratios have For the Year Ended December 31,
been derived from information ------------------------------------------------------------
provided in the financial statements. 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Total investment return ....................... 6.83% 4.48% 2.48% 4.58% 3.92%
========= ========= =========== ========= =========
Return:
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses, excluding
Average Net interest expense ........................... .11% .08% .06% .06% .06%
========= ========= =========== ========= =========
Assets: Expenses ...................................... .11% .08% .06% .06% .06%
========= ========= =========== ========= =========
Investment income - net ....................... 5.12% 4.94% 4.41% 4.13% 4.22%
========= ========= =========== ========= =========
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of
year (in thousands) ........................ $ 386,012 $ 795,451 $ 1,004,583 $ 840,221 $ 883,027
========= ========= =========== ========= =========
Data: Portfolio turnover ............................ 193% 155% 147% 159% 137%
========= ========= =========== ========= =========
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 17
Master Core Bond Enhanced Index Series
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Master Core Bond Enhanced Index Series (formerly Master Aggregate Bond Index
Series) (the "Series"), a non-diversified management 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, and is
organized as a Delaware limited liability company. Prior to June 15, 2007, the
Master LLC was organized as a Delaware statutory trust (the "Trust"). The
Limited Liability Company Agreement permits the Directors (and prior to June 15,
2007, the Declaration of Trust permitted the Trustees) to issue non-transferable
interests, subject to certain limitations. Throughout this report, the Trust and
the Master LLC are referred to as the Master LLC and the Board of Trustees of
the Trust and the Board of Directors of the Master LLC are referred to as the
Board of Directors. The financial statements of the Series are prepared in
conformity with U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. All such adjustments are of a normal, recurring nature. The
following is a summary of significant accounting policies followed by the
Series.
(a)Valuation of investments - Debt securities are traded primarily in the
over-the-counter ("OTC") markets and are valued at the last available bid price
in the OTC market or on the basis of values obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of the Master LLC under the general
direction of the Board of Directors. Such valuations and procedures will be
reviewed periodically by the Board of Directors. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their closing
prices as of the close of such exchanges. Options written or purchased are
valued at the last sale price in the case of exchange-traded options.
Effective September 4, 2007, exchange-traded options are valued at the mean
between the last bid and asked prices at the close of the options market in
which the options trade and previously were valued at the last sales price as of
the close of options trading on applicable exchanges. Options traded in the OTC
market are valued at the last asked price (options written) or the last bid
price (options purchased). Swap agreements are valued based upon quoted fair
valuations received daily by the Series from a pricing service or counterparty.
Effective April 2, 2007, short-term investments are valued at amortized cost,
which approximates market value. Prior to April 2, 2007, portfolio securities
with remaining maturities of greater than 60 days, for which market quotations
were readily available, were valued at market value. As securities transitioned
from 61 to 60 days to maturity, the difference between the valuation existing on
the sixty-first day before maturity and maturity value was amortized on a
straight-line basis to maturity. Repurchase agreements are valued at cost plus
accrued interest. Investments in open-end investment companies are valued at
their net asset value each business day. Securities and other assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Directors.
Equity securities held by the Series that are traded on stock exchanges or the
NASDAQ Global Market are valued at the last sale price or official close price
on the exchange, as of the close of business on the day the securities are being
valued or, lacking any sales, at the last available bid price for long
positions, and at the last available asked price for short positions. In cases
where equity securities are traded on more than one exchange, the securities are
valued on the exchange designated as the primary market by or under the
authority of the Board of Directors. Long positions traded in the OTC markets,
NASDAQ Capital Market or Bulletin Board are valued at the last available bid
price obtained from one or more dealers or pricing services approved by the
Board of Directors. Short positions traded in the OTC markets are valued at the
last available asked price. Portfolio securities that are traded both in the OTC
markets and on a stock exchange are valued according to the broadest and most
representative market.
Generally, trading in foreign securities, as well as U.S. government securities,
money market instruments and certain fixed income securities, is substantially
completed each day at various times prior to the close of business on the New
York Stock Exchange ("NYSE"). The value of such securities used in computing the
net assets of the Series are determined as of such times. Foreign currency
exchange rates will generally be determined as of the close of business on the
NYSE. Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of business on the NYSE that may not be reflected in the computation of
the Series' net assets. If events (for example, a company announcement, market
volatility or a natural disaster) occur during such periods that are expected to
materially affect the value of such securities, those securities will be valued
at their fair value as determined in good faith by the Board of Directors or by
BlackRock Advisors, LLC (the "Manager"), an indirect, wholly owned subsidiary of
BlackRock, Inc., using a pricing service and/or procedures approved by the Board
of Directors.
18
(b) Derivative financial instruments - The Series may engage in various
portfolio investment techniques to provide liquidity or as a proxy for a direct
investment in securities underlying the Series' index. Losses may arise due to
changes in the value of the contract due to an unfavorable change in the price
of the underlying security or index, or if the counterparty does not perform
under the contract. The counterparty, for certain instruments, may pledge cash
or securities as collateral.
o Financial futures contracts - The Series may purchase or sell
financial futures contracts and options on such financial futures
contracts. Financial futures contracts are contracts for delayed
delivery of securities at a specific future date and at a specific
price or yield. Upon entering into a contract, the 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 the value of the
contract. Such receipts or payments are known as variation margin
and are recorded 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.
o Options - The Series may purchase and write call and put options.
When the Series writes an option, an amount equal to the premium
received by the Series is reflected as an asset and an equivalent
liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option
written. When a security is purchased or sold through an exercise of
an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Series enters into a closing transaction), the
Series realizes a gain or loss on the option to the extent of the
premiums received or paid (or a gain or loss to the extent that the
cost of the closing transaction exceeds the premium paid or
received).
Written and purchased options are non-income producing investments.
o Swaps - The Series may enter into swap agreements, which are OTC
contracts in which the Series and a counterparty agree to make
periodic net payments on a specified notional amount. The net
payments can be made for a set period of time or may be triggered by
a predetermined credit event. The net periodic payments may be based
on a fixed or variable interest rate; the change in market value of
a specified security, basket of securities, or index; or the return
generated by a security. These periodic payments received or made by
the Series are recorded in the accompanying Statement of Operations
as realized gains or losses, respectively. Gains or losses are also
realized upon termination of the swap agreements. Swaps are
marked-to-market daily and changes in value are recorded as
unrealized appreciation (depreciation). Risks include changes in the
returns of the underlying instruments, failure of the counterparties
to perform under the contracts' terms and the possible lack of
liquidity with respect to the swap agreements.
(c) Reverse repurchase agreements - The Series may enter into reverse repurchase
agreements. Under reverse repurchase agreements, the Series sells securities to
the counterparty and agrees to repurchase them at a mutually agreed upon date
and price, and may exchange their respective commitments to pay or receive
interest. If the counterparty defaults on its obligation, the Series' ability to
receive interest will be delayed or limited. Furthermore, if the Series does not
have sufficient client income to pay its obligation under the reverse repurchase
agreement, the Series would be in default and the counterparty would be able to
terminate the repurchase agreement. At the time the Series enters into a reverse
repurchase agreement, it will establish a segregated account with the custodian
containing cash, or cash equivalents of liquid high grade debt securities having
a value at least equal to the repurchase price.
(d) Income taxes - The Series is classified as a partnership 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.
(e) Security transactions and investment income - Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Realized gains and losses on security transactions are determined on the
identified cost basis. Interest income is recognized on the accrual basis. The
Series amortizes all premiums and discounts on debt securities.
19
(f) Dollar rolls - The Series may sell securities for delivery in the current
month and simultaneously contract to repurchase substantially similar (same
type, coupon and maturity) securities on a specific future date. The Series
receives compensation as consideration for entering into the commitment to
repurchase. The Series must maintain liquid securities having a value not less
than the repurchase price (including accrued interest) for such dollar rolls.
The market value of the securities that the Series is required to purchase may
decline below the agreed upon repurchase price of those securities.
(g) 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. Where the Series receives securities as collateral for
the loaned securities, it collects a fee from the borrower. 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 investments, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within five
business days. The 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.
(h) TBA commitments - The Series may enter into to be announced ("TBA")
commitments to purchase or sell securities for a fixed price at a future date.
TBA commitments are considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased/sold declines/increases prior
to settlement date, which is in addition to the risk of decline in the value of
the Series' other assets. Unsettled TBA commitments are valued at the current
market value of the underlying securities, according to the procedures described
under "Valuation of investments."
(i) Asset-backed securities -- The Series invests a significant portion of its
assets in securities backed by commercial or residential mortgage loans or in
issuers that hold mortgage and other asset-backed securities. Please see the
Schedule of Investments for these securities. Changes in economic conditions,
including delinquencies and/or defaults or assets underlying these
securities, can affect the value, income and/or liquidity of such positions.
(j) Recent accounting pronouncements - Effective June 29, 2007, the Series
implemented Financial Accounting Standards Board ("FASB") Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
Statement No. 109" ("FIN 48"). FIN 48 prescribes the minimum recognition
threshold a tax position must meet in connection with accounting for
uncertainties in income tax positions taken or expected to be taken by an
entity, including investment companies, before being measured and recognized in
the financial statements. Management has evaluated the application of FIN 48 to
the Series, and has determined that the adoption of FIN 48 does not have a
material impact on the Series' financial statements. 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 statute of limitations on the Series' state and local tax
returns may remain open for an additional year depending upon the jurisdiction.
In September 2006, Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"), was issued and is effective for fiscal years
beginning after November 15, 2007. FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. The impact on the Series' financial statement disclosures, if any,
is currently being assessed.
In addition, in February 2007, Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for fiscal years beginning after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provisions of FAS 157. FAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. FAS 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. The impact on the Series' financial
statement disclosures, if any, is currently being assessed.
20
2. Investment Advisory Agreement and Transactions with Affiliates:
The Master LLC, on behalf of the Series, has entered into an Investment Advisory
Agreement with the Manager. Merrill Lynch & Co., Inc ("Merrill Lynch") and The
PNC Financial Services Group, Inc. are the principal owners of BlackRock, Inc.
The Manager is responsible for the management of the Series' portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Series. For such services, the
Series pays a monthly fee at an annual rate of .01% of the average daily value
of the Series' net assets. In addition, the Manager has entered into a
sub-advisory agreement with BlackRock Financial Management, Inc. ("BFM"), an
affiliate of the Manager, under which the Manager pays BFM for services it
provides a monthly fee at an annual rate that is a percentage of the management
fee paid by the Series to the Manager.
Prior to July 18, 2007, Merrill Lynch Trust Company, a wholly owned subsidiary
of Merrill Lynch, was the Series' custodian. Effective July 18, 2007, State
Street Bank & Trust Co. became the Series' custodian.
The Master LLC, on behalf of the Series, has received an exemptive order from
the Securities and Exchange Commission permitting it to lend portfolio
securities to Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly owned
subsidiary of Merrill Lynch, or its affiliates. Pursuant to that order, the
Master LLC has retained BlackRock Investment Management, LLC ("BIM"), an
affiliate of the Manager, as the securities lending agent for a fee based on a
share of the returns on investment of cash collateral. BIM may, on behalf of the
Master LLC and the Series, invest cash collateral received by the Series for
such loans, among other things, in a private investment fund managed by the
Manager or in registered money market funds advised by the Manager or its
affiliates. For the year ended December 31, 2007 there were no securities
lending agent fees paid to BIM.
For the year ended December 31, 2007, the Series reimbursed the Manager $8,004
for certain accounting services.
Certain officers and/or directors of the Master LLC are officers and/or
directors of BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales (including paydowns) of investments, excluding short-term
securities and dollar rolls, for the year ended December 31, 2007 were
$995,906,371 and $1,443,459,393, respectively.
Transactions in call options written for the year ended December 31, 2007 were
as follows:
- --------------------------------------------------------------------------------
Number of
Contracts+ Premiums Received
- --------------------------------------------------------------------------------
Outstanding call options written,
beginning of year 13 $ 85,760
Options written 37 21,110
Options expired (13) (85,760)
===== =========
Outstanding call options written, end
of year 37 $ 21,110
===== =========
+ One contract represents a notional amount of $1,000,000.
Transactions in put options written for the year ended December 31, 2007 were as
follows:
- --------------------------------------------------------------------------------
Number of
Contracts+ Premiums Received
- --------------------------------------------------------------------------------
Outstanding put options written,
beginning of year 13 $ 139,520
Options expired (13) (139,520)
----- ---------
Outstanding put options written, end
of year -- --
===== =========
+ One contract represents a notional amount of $1,000,000.
21
4. Short-Term Borrowings:
The Master LLC, on behalf of the Series, along with certain other funds managed
by the Manager and its affiliates, is party to a $500,000,000 credit agreement
with a group of lenders. The 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. The Series pays a
commitment fee of .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 .35% or a base rate as defined in the credit agreement. The
Series did not borrow under the credit agreement during the year ended December
31, 2007. On November 21, 2007, the credit agreement was renewed for one year
under substantially the same terms.
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Investors and Board of Directors of
Quantitative Master Series LLC:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Master Core Bond Enhanced Index Series (formerly
Master Aggregate Bond Index Series), one of the portfolios constituting
Quantitative Master Series LLC (formerly Quantitative Master Series Trust) (the
"Master LLC"), as of December 31, 2007, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Master LLC's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The
Master LLC is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Master LLC's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2007, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Master
Core Bond Enhanced Index Series of Quantitative Master Series LLC as of December
31, 2007, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Princeton, New Jersey
February 28, 2008
23
Officers and Directors
Number of
BlackRock-
Advised
Position(s) Principal Funds and
Name, Address and Held with Length of Occupation(s) During Portfolios Public
Year of Birth Master LLC Time Served Past Five Years Overseen Directorships
Non-Interested
Directors *
David O. Beim Director 2007 to Professor of Finance and 35 Funds None
40 East 52nd Street present Economics at the Columbia 81 Portfolios
New York, NY 10022 University Graduate School of
1940 Business since 1991; Chairman
of Outward Bound USA from 1997
to 2001; Chairman of Wave Hill
Inc. from 1990 to 2006;
Trustee of Phillips Exeter
Academy from 2002 to present.
Ronald W. Forbes Director 2007 to Professor Emeritus of Finance, 35 Funds None
40 East 52nd Street and Co-Chairman present School of Business, State 81 Portfolios
New York, NY 10022 of the Board of University of New York at
1940 Directors Albany since 2000 and
Professor thereof from 1989 to
2000; International
Consultant, Urban Institute,
Washington, D.C. from 1995 to
1999.
Dr. Matina Horner Director 2007 to Executive Vice President of 35 Funds NSTAR (electric
40 East 52nd Street present Teachers Insurance and Annuity 81 Portfolios and gas utility)
New York, NY 10022 Association and College
1939 Retirement Equities Fund from
1989 to 2003.
Rodney D. Johnson Director 2007 to President, Fairmount Capital 35 Funds None
40 East 52nd Street and Co-Chairman present Advisors, Inc. since 1987; 81 Portfolios
New York, NY 10022 of the Board of Director, Fox Chase Cancer
1941 Directors Center since 2002; Member of
the Archdiocesan Investment
Committee of the Archdioceses
of Philadelphia since 2003.
24
Herbert I. London Director 2007 to Professor Emeritus, New York 35 Funds AIMS Worldwide,
40 East 52nd Street and Member of present University since 2005; John M. 81 Portfolios Inc. (marketing)
New York, NY 10022 the Audit Olin Professor of Humanities,
1939 Committee New York University from 1993
to 2005 and Professor thereof
from 1980 to 2005; President,
Hudson Institute since 1997
and Trustee thereof since
1980; Dean, Gallatin Division
of New York University from
1976 to 1993; Distinguished
Fellow, Herman Kahn Chair,
Hudson Institute from 1984 to
1985; Chairman of the Board of
Directors of Vigilant
Research, Inc. since 2006;
Member of the Board of
Directors for Grantham
University since 2006;
Director of AIMS Worldwide,
Inc. since 2006; Director of
Reflex Security since 2006;
Director of InnoCentive, Inc.
since 2006; Director of
Cerego, LLC since 2005;
Director, Damon Corp. from
1991 to 1995; Overseer, Center
for Naval Analyses from 1983
to 1993.
25
Cynthia A. Director 2007 to Professor, Harvard Business 35 Funds Newell
Montgomery present School since 1989; Associate 81 Portfolios Rubbermaid, Inc.
40 East 52nd Street Professor, J.L. Kellogg (manufacturing)
New York, NY 10022 Graduate School of Management,
1952 Northwestern University from
1985 to 1989; Associate
Professor, Graduate School of
Business Administration,
University of Michigan from
1979 to 1985; Director,
Harvard Business School
Publishing since 2005;
Director, McLean Hospital
since 2005.
Joseph P. Platt, Jr. Director 2007 to Partner, Amarna Corporation, 35 Funds Greenlight
40 East 52nd Street present LLC (private investment 81 Portfolios Capital Re, Ltd.
New York, NY 10022 company) since 2002; Director, (reinsurance
1947 Jones and Brown (Canadian company)
insurance broker) since 1998;
Director, Greenlight Re Ltd.
(reinsurance company) since
2004; Partner, Amarna
Financial Company (private
investment company) since
2005; Director and Executive
Vice President, Johnson and
Higgins (insurance brokerage)
from 1990 to 1997.
26
Robert C. Robb, Jr. Director 2007 to Partner, Lewis, Eckert, Robb 35 Funds None
40 East 52nd Street present and Company (management and 81 Portfolios
New York, NY 10022 financial consulting firm)
1945 since 1981; Trustee, Medical
College of Pennsylvania/
Hahnemann University from 1998
to 2002; Trustee, EQK Realty
Investors from 1994 to 2000;
Director, Tamaqua Cable
Products Company from 1981 to
1998; Director, Brynwood
Partners from 1984 to 1998;
Director, The PNC Bank Corp.
from 1994 to 1998; Director,
Provident National Bank from
1983 to 1993; Director,
Brinks, Inc. from 1981 to
1986.
Toby Rosenblatt Director 2007 to President since 1999 and Vice 35 Funds A.P. Pharma,
40 East 52nd Street and Vice present President - General Partner 81 Portfolios Inc. (specialty
New York, NY 10022 Chairman of the since 1990, Founders pharmaceuticals)
1938 Performance Investments Ltd. (private
Oversight investments); Director,
Committee Forward Management, LLC since
2007; Trustee, SSR Funds from
1990 to 2005; Trustee,
Metropolitan Series Funds,
Inc. from 2001 to 2005.
Kenneth L. Urish Director and 2007 to Managing Partner, Urish Popeck 35 Funds None
40 East 52nd Street Chairman of the present & Co., LLC (certified public 81 Portfolios
New York, NY 10022 Audit Committee accountants and consultants)
1951 since 1976; External Advisory
Board, The Pennsylvania State
University Accounting
Department since 2001;
Trustee, The Holy Family
Foundation since 2001;
President and Trustee,
Pittsburgh Catholic Publishing
Associates since 2003;
Director, Inter-Tel from 2006
to 2007.
27
Frederick W. Winter Director 2007 to Professor and Dean Emeritus of 35 Funds None
40 East 52nd Street and Member of present the Joseph M. Katz School of 81 Portfolios
New York, NY 10022 the Audit Business - University of
1945 Committee Pittsburgh since 2005 and Dean
therof from 1997 to 2005;
Director, Alkon Corporation
(pneumatics) since 1992;
Director, Indotronix
International (IT service)
since 2004; Director, Tippman
Sports (recreation) since
2005.
* Directors serve until their resignation, removal or death, or until
December 31 of the year in which they turn 72.
Interested
Directors*
Richard S. Davis Director 2007 to Managing Director, BlackRock, 184 Funds None
40 East 52nd Street present Inc. since 2005; Chief 289 Portfolios
New York, NY 10022 Executive Officer, State
1945 Street Research & Management
Company from 2000 to 2005;
Chairman of the Board of
Trustees, State Street
Research mutual funds ("SSR
Funds") from 2000 to 2005;
Senior Vice President,
Metropolitan Life Insurance
Company from 1999 to 2000;
Chairman SSR Realty from 2000
to 2004.
28
Henry Gabbay Director 2007 to Consultant, BlackRock, Inc. 183 Funds None
40 East 52nd Street present since 2007; Managing Director, 288 Portfolios
New York, NY 10022 BlackRock, Inc. from 1989 to
1947 June 2007; Chief
Administrative Officer,
BlackRock Advisors, LLC from
1998 to 2007; President of
BlackRock Funds and BlackRock
Bond Allocation Target Shares
from 2005 to 2007; Treasurer
of certain closed-end funds in
the BlackRock Fund complex
from 1989 to 2006.
* Messrs. Davis and Gabbay are both "interested persons," as defined in the
Investment Company Act of 1940, of the Master LLC based on their positions
with BlackRock, Inc. and its affiliates. Directors serve until their
resignation, removal or death, or until December 31 of the year in which
they turn 72.
Advisory Board
Member
David R. Advisory 2007 Chairman, Wilmerding & 35 Funds Chestnut Street
Wilmerding, Jr. * Board Associates, Inc. (investment 81 Portfolios Exchange Fund (open-
40 East 52nd Street Member advisers) from 1989 to 2005; end investment
New York, NY 10022 Chairman, Coho Partners, Ltd. company)
1935 (investment advisers) from
2003 to 2005. Director, Beaver
Management Corporation.
* David R. Wilmerding, Jr. resigned from the Advisory Board of the Master
LLC, effective December 31, 2007.
Master LLC Officers *
Donald C. Burke Fund 2007 to Managing Director of
40 East 52nd Street President and present BlackRock, Inc. since 2006;
New York, NY 10022 Chief Formerly Managing Director of
1960 Executive Merrill Lynch Investment
Officer Managers, L.P. ("MLIM") and
Fund Asset Management, L.P.
("FAM") in 2006; First Vice
President thereof from 1997 to
2005; Treasurer thereof from
1999 to 2006 and Vice
President thereof from 1990 to
1997.
29
Anne F. Ackerley Vice President 2007 to Managing Director of
40 East 52nd Street present BlackRock, Inc. since 2000 and
New York, NY 10022 First Vice President and Chief
1962 Operating Officer of Mergers
and Acquisitions Group from
1997 to 2000; First Vice
President and Chief Operating
Officer of Public Finance
Group thereof from 1995 to
1997; First Vice President of
Emerging Markets Fixed Income
Research of Merrill Lynch &
Co., Inc. from 1994 to 1995.
Neal J. Andrews Chief 2007 to Managing Director of BlackRock
40 East 52nd Street Financial present Inc. since 2006; Formerly
New York, NY 10022 Officer Senior Vice President and Line
1966 of Business Head of Fund
Accounting and Administration
at PFPC Inc. from 1992 to
2006.
Jay M. Fife Treasurer 2007 to Managing Director of
40 East 52nd Street present BlackRock, Inc. since 2007 and
New York, NY 10022 Director in 2006; Formerly
1970 Assistant Treasurer of the
MLIM/FAM advised funds from
2005 to 2006; Director of MLIM
Fund Services Group from 2001
to 2006.
Brian P. Kindelan Chief 2007 to Chief Compliance Officer of
40 East 52nd Street Compliance present the Funds since 2007; Managing
New York, NY 10022 Officer Director and Senior Counsel
1959 thereof since 2005; Director
and Senior Counsel of
BlackRock Advisors, Inc. from
2001 to 2004 and Vice
President and Senior Counsel
thereof from 1998 to 2000;
Senior Counsel of The PNC Bank
Corp. from 1995 to 1998.
30
Howard Surloff Secretary 2007 to Managing Director of
40 East 52nd Street present BlackRock, Inc. and General
New York, NY 10022 Counsel of U.S. Funds at
1965 BlackRock, Inc. since 2006;
Formerly General Counsel
(U.S.) of Goldman Sachs Asset
Management, L.P. from 1993 to
2006.
* Officers of the Master LLC serve at the pleasure of the Board of
Directors.
- --------------------------------------------------------------------------------
Proxy Results
- --------------------------------------------------------------------------------
During the six-month period ended December 31, 2007, the holders of interests of
Master Core Bond Enhanced Index Series of Quantitative Master Series LLC voted
on the following proposal, which was approved at a special meeting on September
7, 2007. This proposal was a part of the reorganization of the Board of
Directors of Quantitative Master Series LLC that took effect on November 1,
2007. A description of the proposal and number of shares voted for each Director
are as follows:
==============================================================================================================
Units of Interest Units of Interest
Voted For Withheld From Voting
- --------------------------------------------------------------------------------------------------------------
To elect the Board of Directors of Quantitative Master Series LLC:
David O. Beim, Richard S. Davis, Ronald W. Forbes, Henry Gabbay,
Dr. Matina Horner, Rodney D. Johnson, Herbert I. London, Cynthia
A. Montgomery, Joseph P. Platt, Jr., Robert C. Robb, Jr., Toby
Rosenblatt, Kenneth L. Urish and Frederick W. Winter 956,472,383 0
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
31
Additional Information
Custodian
JPMorgan Chase Bank
Brooklyn, NY 11245
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
- --------------------------------------------------------------------------------
Availability of Quarterly Schedule of Investments
- --------------------------------------------------------------------------------
The Series files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Series' Forms N-Q are available on the SEC's website at
http://www.sec.gov. The Series' Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling (800) SEC-0330.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Availability of Proxy Voting
- --------------------------------------------------------------------------------
A description of the policies and procedures that the Series 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 website
at http://www.sec.gov. Information about how the Series voted proxies relating
to securities held in the Series' portfolio during the most recent 12-month
period ended June 30 is available (1) at www.blackrock.com; and (2) on the
Securities and Exchange Commission's website at http://www.sec.gov.
- --------------------------------------------------------------------------------
32
Item 2 - Code of Ethics - The registrant (or the "Fund") has adopted a code of
ethics, as of the end of the period covered by this report, applicable to
the registrant's principal executive officer, principal financial officer
and principal accounting officer, or persons performing similar functions.
During the period covered by this report, there have been no amendments to
or waivers granted under the code of ethics. A copy of the code of ethics
is available without charge at www.blackrock.com.
Item 3 - Audit Committee Financial Expert - The registrant's board of directors
or trustees, as applicable (the "board of directors") has determined that
(i) the registrant has the following audit committee financial experts
serving on its audit committee and (ii) each audit committee financial
expert is independent:
Donald W. Burton (term ended, effective November 1, 2007)
John F. O'Brien (term ended, effective November 1, 2007)
Kenneth L. Urish (term began, effective November 1, 2007)
David H. Walsh (term ended, effective November 1, 2007)
Fred G. Weiss (term ended, effective November 1, 2007)
Under applicable securities laws, a person determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the
Securities Act of 1933, as a result of being designated or identified as
an audit committee financial expert. The designation or identification as
an audit committee financial expert does not impose on such person any
duties, obligations, or liabilities greater than the duties, obligations,
and liabilities imposed on such person as a member of the audit committee
and board of directors in the absence of such designation or
identification.
Item 4 - Principal Accountant Fees and Services
- -----------------------------------------------------------------------------------------------------------------------------
(a) Audit Fees (b) Audit-Related Fees(1) (c) Tax Fees(2) (d) All Other Fees(3)
- -----------------------------------------------------------------------------------------------------------------------------
Current Previous Current Previous Current Previous Current Previous
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Entity Name End End End End End End End End
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Master Core Bond
Enhanced Index
Series of $42,900 $42,900 $0 $24,000 $22,700 $22,700 $0 $0
Quantitative Master
Series LLC
- -----------------------------------------------------------------------------------------------------------------------------
1 The nature of the services include assurance and related services reasonably
related to the performance of the audit of financial statements not included in
Audit Fees.
2 The nature of the services include tax compliance, tax advice and tax
planning.
3 The nature of the services include a review of compliance procedures and
attestation thereto.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of these
non-audit services that the Committee believes are a) consistent with the
SEC's auditor independence rules and b) routine and recurring services
that will not impair the independence of the independent accountants may
be approved by the
Committee without consideration on a specific case-by-case basis ("general
pre-approval"). However, such services will only be deemed pre-approved
provided that any individual project does not exceed $5,000 attributable
to the registrant or $50,000 for all of the registrants the Committee
oversees. Any proposed services exceeding the pre-approved cost levels
will require specific pre-approval by the Committee, as will any other
services not subject to general pre-approval (e.g., unanticipated but
permissible services). The Committee is informed of each service approved
subject to general pre-approval at the next regularly scheduled in-person
board meeting.
(e)(2) None of the services described in each of Items 4(b) through (d)
were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) Affiliates' Aggregate Non-Audit Fees:
----------------------------------------------------------------------
Current Fiscal Year Previous Fiscal
Entity Name End Year End
----------------------------------------------------------------------
----------------------------------------------------------------------
Master Core Bond Enhanced
Index Series of Quantitative $307,200 $3,118,150
Master Series LLC
----------------------------------------------------------------------
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the registrant's
investment adviser (not including any non-affiliated sub-adviser whose
role is primarily portfolio management and is subcontracted with or
overseen by the registrant's investment adviser), and any entity
controlling, controlled by, or under common control with the investment
adviser that provides ongoing services to the registrant that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation
S-X is compatible with maintaining the principal accountant's
independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $284,500, 0%
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - The registrant's Schedule of Investments is
included as part of the Report to Stockholders filed under Item 1 of this
form.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - The
registrant's Nominating and Governance Committee will consider nominees to
the Board recommended by shareholders when a vacancy becomes available.
Shareholders who wish to recommend a nominee should send nominations which
include biographical information and set forth the qualifications of the
proposed nominee to the registrant's Secretary. There have been no
material changes to these procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's principal executive and principal financial officers or
persons performing similar functions have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act")) are effective
as of a date within 90 days of the filing of this report based on the
evaluation of these controls and procedures required by Rule 30a-3(b)
under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of
1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that
occurred during the second fiscal quarter of the period covered by this
report that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Master Core Bond Enhanced Index Series of Quantitative Master Series LLC
By: /s/ Donald C. Burke
-------------------------------
Donald C. Burke
Chief Executive Officer (principal executive officer) of
Master Core Bond Enhanced Index Series of Quantitative Master Series LLC
Date: February 21, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Donald C. Burke
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Donald C. Burke
Chief Executive Officer (principal executive officer) of
Master Core Bond Enhanced Index Series of Quantitative Master Series LLC
Date: February 21, 2008
By: /s/ Neal J. Andrews
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Neal J. Andrews
Chief Financial Officer (principal financial officer) of
Master Core Bond Enhanced Index Series of Quantitative Master Series LLC
Date: February 21, 200