American Beacon Balanced Fund NCSRS Certified semi-annual shareholder report (management investment company)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-04984

AMERICAN BEACON FUNDS

(Exact name of registrant as specified in charter)

4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Address of principal executive offices)-(Zip code)

Gene L. Needles, Jr., PRESIDENT
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Name and address of agent for service)

Registrant’s telephone number, including area code: (817) 391-6100

Date of fiscal year end: December 31, 2010

Date of reporting period: June 30, 2010

ITEM 1. REPORTS TO STOCKHOLDERS.

About American Beacon Advisors

Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.

Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.

Contents


Message from American Beacon		1

Market and Performance Overview		2

Schedule of Investments		6

Additional Information	Back Cover

Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and the Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.

Investing in debt securities entails interest rate risk which is the risk that debt securities will decrease in value with increases in market interest rates.



American Beacon Funds		June 30, 2010

Fellow Shareholders,

Over the past six months, one universal investing theme seems to have emerged: while significant shifts may characterize recent market activity, it doesn’t mean investors can’t benefit. Opportunity abounds for those know how to capitalize on it...and for those who want to defend against such market shifts by investing in the American Beacon Treasury Inflation Protected Securities (TIPS) Fund.

Like so many of our funds, our TIPS Fund is conservatively managed for the longer term—helping to keep its investors in a position to ride out the inevitable economic storms, whenever and wherever they occur.

For the six-month period ended June 30, 2010, the American Beacon TIPS Fund (Institutional Class) generated 3.15%. This return came at a time when inflation has become less of an immediate concern and the federal funds rate finished the reporting period below zero in real terms.

Given that shifting global markets often give rise to new opportunities, American Beacon continuously looks for new and innovative strategies for capitalizing on them. This year, that led to the addition of three new actively managed funds to our lineup: the American Beacon Global Real Estate, American Beacon Zebra Small Cap Equity and American Beacon Zebra Large Cap Equity Funds.*

Our fund selection is also a reflection of our commitment to you, a commitment we summarize as: Oversight 360. Ours is a continuous commitment to cast a watchful and analytical eye over all the factors that influence our fellow shareholders’ investments.

Best Regards,

Gene L. Needles, Jr.
President
American Beacon Funds


*		Securities of these Funds may only be sold by offering each Funds’ Prospectus and Summary Prospectus. You should consider the investment objectives, risks, fees and expenses of any mutual fund carefully before investing. This and other information is available in each Funds’ Prospectus and Summary Prospectus which you may obtain at www.americanbeaconfunds.com or by calling 1-800-967-9009. Please read the Prospectus and Summary Prospectus carefully before investing.

There is no guarantee that the investment objective will be met of the American Beacon Zebra Large Cap Equity Fund. At times, certain securities may have limited marketability and may be difficult to sell.

There is no guarantee that the investment objectives will be met of the American Beacon Zebra Small Cap Equity Fund. Investing in the securities of small capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies. At times, certain securities may have limited marketability and may be difficult to sell.

There is no guarantee that the investment objectives will be met of the American Beacon Global Real Estate Fund. Investing in a global fund concentrating in real estate securities involves special risks, such as declines in the value of real estate as well as increased susceptibility to adverse economic, political, or regulatory developments affecting the industry. Investing in one economic sector, such as real estate, may result in greater price fluctuations than owning a portfolio of diversified investments. Changes in interest rates may also affect the value of the Fund’s investments in real estate securities. The real estate industry tends to be cyclical and therefore such cycles may adversely affect the value of the Fund’s portfolio. The Fund may invest in smaller and mid-size companies. Certain real estate securities have a relatively small market capitalization, which may tend to increase the volatility of the market price of their securities. Investing in the securities of small and mid-capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies. Investing in foreign equities entails additional risk not associated with domestic equities, such as currency fluctuations, economic and political instability, and differences in accounting standards. The risks of investing in foreign equities are heightened when investing in emerging markets. By itself, the Fund does not constitute a complete investment plan and should be considered a long term investment for investors who can afford to weather changes in the value of their investments. Some of the Fund’s investments may be considered speculative and are not appropriate for individuals who require safety of principal or stable income from their investments.

Market Overview

June 30, 2010 (Unaudited)

Though the U.S. economy continues to recover, its strength and the sustainability of the recovery remain a matter of concern. The cyclical tailwinds-low inflation, inventory rebuilding and massive government support-have provided a needed boost to growth, but their positive effects may be waning in the face of even stronger structural headwinds. High unemployment, fiscal imbalances among national, state, and local governments, and still-tight credit conditions all remain in place and are not expected to subside any time soon. The estimates for Gross Domestic Product during the second quarter of 2010 reflect this. It’s expected that while the economy was still expanding, it was doing so at a lower rate, which is estimated to be 2.4%. That is far more modest than the 3.7% real rate of growth experienced in the first quarter of 2010.

Concern for the slowing rate of growth led the Federal Open Market Committee (FOMC) to leave the overnight fed funds rate unchanged at each of its four meetings over the first half of the year. Given the low level of inflation, and persistently high unemployment, it is expected that the FOMC will maintain its overnight rate near the current range of 0.00% to 0.25% for quite some time.

For its part, inflation, as measured by the Consumer Price Index (CPI), has been extremely tame. In fact, one commonly watched CPI statistic declined in the second quarter of 2010 to its lowest level in over 40 years. This was the year-over-year change in the CPI, excluding food and energy. It rose 0.9% in each month in the second quarter, and these 0.9% increases were the smallest increases since 1966. Inflation expectations as evidenced by market-based breakeven inflation rates (the spread between similar maturity nominal and inflation-protected securities) declined over the first half of the year. For example, according to Bloomberg, the breakeven inflation rate in five years for the 5-Year Treasury Note fell from 2.91% in early February to 2.20% in late June. Significant slack in the U. S. economy, given a high unemployment rate and low capacity utilization rate, suggests that inflation likely will not be a major concern in the near future.

Market Performance

As a result of moderating growth and low inflation, Treasury Inflation Protected Securities (TIPS) posted solid returns for the first half of 2010 as heightened risk premiums throughout the global financial markets led to lower real yields for these securities. The 30 to 35 basis point (0.30% — 0.35%) decline in real yields began early in the reporting period in response to the increased sovereign debt risk associated with the deteriorating fiscal outlooks for the peripheral European economies.

However, the early-year rally unwound in late March when concerns over the supply of nominal Treasuries combined with a short-term absence of buyers. That absence was associated with quarter-end reporting requirements for securities dealers. By April, the rally was back in full force as real yields fell almost 60 basis points (0.60%) from early April until the end of June. The increased uncertainty around the European financial markets, including the impact of potential sovereign defaults on the health of European banking system, led to a more widespread downgrading of global growth expectations including the U.S. where market participants began assessing the likelihood of a double dip recession.

Despite good total returns, TIPS underperformed nominal Treasury securities during the quarter as forces that led to lower yields were also consistent with lower inflation expectations. In addition to lower inflation expectations, the actual inflation reported during the period generally came in below consensus expectations.

This led to further pressure on TIPS valuations relative to nominal Treasury securities. Standing out among the components leading inflation downward was housing—specifically, the owner’s equivalent rent that carries a weight of about 25% of the total CPI.

The inflation accrual for the period was a modest 84 basis points (0.84%) as the year-over-year headline CPI fell from 2.7% in December to 1.1% in June. The gross supply in TIPS for the first half was a healthy $37 billion. However, due to maturities, the net supply was minus $9 billion, which helped support values. The material inflows into TIPS funds that characterized much of the second half of 2009—and supported pricing—declined significantly during the reporting period as expectations for rising inflation waned.

Performance Overview

American Beacon Treasury Inflation Protected Securities Fund^SM

June 30, 2010 (Unaudited)

The Institutional Class of the Fund returned 3.15% for the six months ended June 30, 2010, trailing the Barclays Capital 1-10 Year U.S. TIPS Index (the “Index”) return of 3.17% and the Lipper TIPS Index return of 4.60%.


	Annualized Total Returns
	Periods Ended 6/30/10									Since
	6									Inception
	Months*			1 Year			5 Years			6/30/04
Institutional Class(1,6,7)		3.15	%		8.59	%		4.77	%		4.92	%
Y Class (1,3,6,7)		3.05	%		8.49	%		4.75	%		4.90	%
Investor Class(1,2,6,7)		2.86	%		8.17	%		4.65	%		4.81	%
A Class without sales load (1,4,6,7)		2.76	%		8.07	%		4.63	%		4.80	%
A Class with load (1,4,6,7)		-2.16	%		2.96	%		3.62	%		3.95	%
Barclays Capital 1-10 Yr. U.S. TIPS Index(5)		3.17	%		8.52	%		5.07	%		5.32	%
Barclays Capital U.S. TIPS Index(5)		4.41	%		9.52	%		4.98	%		5.69	%
Lipper TIPS Index(5)		4.60	%		10.79	%		4.36	%		5.25	%


*		Not annualized

1.		Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares.

2.		Fund performance for the five-year and since inception periods represents the total returns achieved by the Institutional Class up to 3/2/09, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Investor Class been in existence since 6/30/04.

3.		Fund performance represents the total returns achieved by the Institutional Class up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 6/30/04.

4.		Fund performance represents the total returns achieved by the Institutional Class from 6/30/04 up to 3/1/09, and the Investor Class from 3/2/09 up to 3/1/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 6/30/04. Maximum sales charge is the maximum front-end sales charge (load) imposed on purchases (as a % of offering price). A Class has a maximum sales charge of 4.75%.

5.		The Barclays Capital 1-10 Yr. U.S. TIPS Index is an unmanaged market index comprising U.S. Treasury inflation-indexed securities with maturities between one and ten years while the Barclays Capital U.S. TIPS Index includes all maturities. The Lipper TIPS Index tracks the results of the 30 largest mutual funds in the Lipper TIPS category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index.

6.		A portion of the fees charged to the Investor Class of the Fund was waived from its inception. A portion of the fees charged to the Institutional Class of the Fund has been waived since 2005. Performance prior to waiving fees was lower than the actual returns shown.

7.		The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, and A Class shares was 0.36%, 0.46%, 0.68%, and 0.86%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund produced strong absolute returns for the six-month time period. TIPS rallied during the first half of 2010, amid downgraded global growth expectations and the increased risk aversion and uncertainty surrounding the European financial environment.

From a yield curve positioning standpoint during the period, the Fund’s underweight position in 1-3 year maturity TIPS benefited performance relative to the Index, but not enough to compensate for value lost due to Fund expenses. The Fund’s average modified duration was in-line with the Index for the six-month period.

The Fund remains focused on investing in TIPS to provide inflation protection and income to its shareholders.

Market Overview

June 30, 2010 (Unaudited)

Top Ten Holdings


	% of
	Net Assets
U.S. Treasury Note, 1.875%, Due 7/15/2015		13.1	%
U.S. Treasury Note, 3.000%, Due 7/15/2012		11.7	%
U.S. Treasury Note, 1.250%, Due 4/15/2014		10.2	%
U.S. Treasury Note, 1.625%, Due 1/15/2015		9.4	%
U.S. Treasury Note, 2.375%, Due 1/15/2017		7.1	%
U.S. Treasury Note, 2.125%, Due 1/15/2019		6.3	%
U.S. Treasury Note, 1.875%, Due 7/15/2019		6.2	%
U.S. Treasury Note, 2.000%, Due 1/15/2014		6.1	%
U.S. Treasury Note, 2.625%, Due 7/15/2017		4.7	%
U.S. Treasury Note, 2.500%, Due 7/15/2016		4.5	%

Sector Allocation


	% of
	Fixed Income
U.S. Treasury Obligations		100.0	%

See accompanying notes

Fund Expenses

American Beacon Treasury Inflation Protected Securities Fund^SM

June 30, 2010 (Unaudited)

Fund Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2010 through June 30, 2010.

Actual Expenses

The “Actual” line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The “Hypothetical” line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.


	Beginning		Ending
	Account		Account		Expenses Paid
	Value		Value		During Period
	1/1/10		6/30/10		1/1/10-6/30/10
Institutional Class*
Actual	$	1,000.00	$	1,031.49	$	1.26
Hypothetical (5% return before expenses)	$	1,000.00	$	1,023.55	$	1.25
Y Class**
Actual	$	1,000.00	$	1,021.46	$	1.91
Hypothetical (5% return before expenses)	$	1,000.00	$	1,014.80	$	1.93
Investor Class*
Actual	$	1,000.00	$	1,028.63	$	3.17
Hypothetical (5% return before expenses)	$	1,000.00	$	1,021.67	$	3.16
A Class***
Actual	$	1,000.00	$	1,005.79	$	1.18
Hypothetical (5% return before expenses)	$	1,000.00	$	1,004.95	$	1.18


*		Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.25% and 0.63% for the Institutional and Investor Classes, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half year period.

**		Beginning account value for A Class is the inception date of 3/1/10. Expenses are equal to the Class annualized expense ratio for the period of 0.57% multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the period (122) by days in the year (365).

***		Beginning account value for A Class is the inception date of 5/17/10. Expenses are equal to the Class annualized expense ratio for the period of 0.98% multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the period (45) by days in the year (365).

American Beacon Treasury Inflation Protected Securities Fund

Schedule of Investments

June 30, 2010 (unaudited)


	Par Amount		Value
	(dollars in thousands)
U.S. TREASURY OBLIGATIONS — 98.58%
2.00%, Due 4/15/2012*	$	4,029	$	4,173
3.00%, Due 7/15/2012*		22,448		23,881
0.63%, Due 4/15/2013*		6,523		6,657
1.88%, Due 7/15/2013*		4,878		5,160
2.00%, Due 1/15/2014*		11,796		12,566
1.25%, Due 4/15/2014*		20,061		20,943
2.00%, Due 7/15/2014*		2,743		2,943
1.63%, Due 1/15/2015*		18,272		19,289
0.50%, Due 4/15/2015*		1,152		1,167
1.88%, Due 7/15/2015*		25,082		26,876
2.00%, Due 1/15/2016*		6,310		6,807
2.50%, Due 7/15/2016*		8,368		9,312
2.38%, Due 1/15/2017*		13,269		14,649
2.63%, Due 7/15/2017*		8,514		9,605
1.63%, Due 1/15/2018*		1,738		1,832
1.38%, Due 7/15/2018*		6,788		7,036
2.13%, Due 1/15/2019*		11,910		12,997
1.88%, Due 7/15/2019*		11,940		12,800
1.38%, Due 1/15/2020*		3,730		3,819

Total U.S. Treasury Obligations				202,512


	Shares
SHORT-TERM INVESTMENTS — 0.24%
JPMorgan U.S. Government Money Market Fund		487,576		488


TOTAL INVESTMENTS — 98.82% (Cost $199,670)				203,000
OTHER ASSETS, NET OF LIABILITIES — 1.18%				2,416
TOTAL NET ASSETS — 100.00%			$	205,416


Percentages are stated as a percent of net assets.


*		Inflation-Indexed Note.

See accompanying notes

American Beacon Treasury Inflation Protected Securities Fund

Statement of Assets and Liabilities

June 30, 2010 (Unaudited) (in thousands, except share and per share amounts)


Assets:
Investments in securities, at value ^A	$	203,000
Dividends and interest receivable		1,623
Receivable for fund shares sold		1,221
Receivable for expense reimbursement		16
Prepaid expenses		24

Total assets		205,884

Liabilities:
Payable for fund shares redeemed		375
Management and investment advisory fees payable (Note 2)		39
Administrative service and service fees payable		27
Professional fees payable		11
Other liabilities		16

Total liabilities		468

Net assets	$	205,416


Analysis of Net Assets:
Paid-in-capital		218,419
Undistributed net investment income		2,172
Accumulated net realized loss		(18,505	)
Unrealized appreciation of investments, futures contracts, and foreign currency		3,330

Net assets	$	205,416


Shares outstanding (no par value):
Institutional Class		18,184,627

Y Class		19,095

Investor Class		1,411,341

A Class		97


Net asset value, offering and redemption price per share:
Institutional Class	$	10.48

Y Class	$	10.47

Investor Class	$	10.42

Net asset value and redemption price per share:
A Class	$	10.41

Maximum offering price per share:
A Class	$	10.93



^A Cost of investments in securities	$	199,670

See accompanying notes

American Beacon Treasury Inflation Protected Securities Fund

Statement of Operations

Six Months ended June 30, 2010 (Unaudited) (in thousands)


Investment Income:
Dividend income from unaffiliated securities	$	1
Interest income		2,243

Total investment income		2,244

Expenses:
Management and investment advisory fees (Note 2)		109
Administrative service fees (Note 2):
Institutional Class		124
Investor Class		20
Transfer agent fees:
Institutional Class		8
Custody and fund accounting fees		18
Professional fees		17
Registration fees and expenses		14
Service fees:
Investor Class (Note 2)		17
Prospectus and shareholder reports		5
Trustee fees		6
Other expenses		5

Total expenses		343

Net fees waived and expenses reimbursed by Manager (Note 2)		(90	)

Net expenses		253

Net investment income		1,991


Realized and unrealized gain (loss) on investments:
Net realized gain (loss) from:
Investments		2,395
Change in net unrealized appreciation or depreciation of:
Investments		1,243

Net gain on investments		3,638

Net increase in net assets resulting from operations	$	5,629

See accompanying notes

American Beacon Treasury Inflation Protected Securities Fund

Statement of Changes of Net Assets (in thousands)


	Six Months
	Ended			Year Ended
	June 30,			December
	2010			31, 2009
	(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	1,991		$	953
Net realized gain on investments, futures contracts, and foreign currency transactions		2,395			2,897
Change in net unrealized appreciation of investments, futures contracts, and foreign currency translations		1,243			9,275

Net increase in net assets resulting from operations		5,629			13,124


Distributions to Shareholders:
Net investment income:
Institutional Class		—			(789	)
Investor Class		—			(28	)

Net distributions to shareholders		—			(817	)


Capital Share Transactions:
Proceeds from sales of shares		67,122			82,724
Reinvestment of dividends and distributions		—			615
Cost of shares redeemed		(29,036	)		(74,134	)

Net increase in net assets from capital share transactions		38,086			9,205

Net increase in net assets		43,715			21,512

Net Assets:
Beginning of period		161,701			140,189

End of Period *	$	205,416		$	161,701

* Includes undistributed net investment income of	$	2,172		$	181

See accompanying notes

American Beacon Treasury Inflation Protected Securities Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)

1. Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”) is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the “Act”), as amended, as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Treasury Inflation Protected Securities Fund (the “Fund”), a series of the Trust.

American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors.

Class Disclosure

March 1 and May 17, 2010 are the inception dates of the Y and A Classes, respectively.

The Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:


Class:		Offered to:
Institutional Class		Investors making an initial investment of $250,000
Y Class		Investors making an initial investment of $100,000
Investor Class		General public and investors investing through an intermediary
A Class		General public and investors investing through an intermediary with applicable sales charges

Administrative service fees, service fees and distribution fees vary amongst the classes as described more fully in footnote 2.

Investment income, net capital gains (losses) and all expenses incurred by the Fund are allocated based on the relative net assets of each class, except for service fees and certain other fees and expenses related solely to one class of shares.

Security Valuation

Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business.

Debt securities (other than short-term securities) normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data. The prices of debt securities may be determined using quotes obtained from brokers.

Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates market value.

Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Board of Trustees (the “Board”).

American Beacon Treasury Inflation Protected Securities Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)

Valuation Inputs

Various inputs may be used to determine the value of the Fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

Level 1 — Quoted prices in active markets for identical securities.

Level 2 — Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.

Level 3 — Prices determined using significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.

The Fund’s investments are summarized by level based on the inputs used to determine their values. As of June 30, 2010 the Fund’s investments were classified as follows (in thousands):


Description	Level 1		Level 2		Level 3		Total
U.S. Treasury Obligations	$	—	$	202,512	$	—	$	202,512
Short-Term Investments		488		—		—		488

Total Investments		488		202,512		—		203,000

Security Transactions and Investment Income

Security transactions are recorded on the trade date of the security purchase or sale. The Fund may purchase securities with delivery or payment to occur at a later date. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the net asset value. The value of the security may vary with market fluctuations.

Dividend income is recorded on the ex-dividend date. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.

Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though principal is not received until maturity.

Dividends to Shareholders

Dividends from net investment income of the Fund normally will be declared and paid at least semi-annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.

American Beacon Treasury Inflation Protected Securities Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)

Other

Under the Trust’s organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.

2. Transactions with Affiliates

Management Agreement

The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory and portfolio management services. Investment assets of the Fund may be managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Fund an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to the investment advisors hired by the Manager to direct investment activities of the Fund. Management fees paid during the six months ended June 30, 2010 were as follows:


		Amounts paid to	Net Amounts Retained
Management Fee Rate	Management Fee	Investment Advisors	by Manager
0.15% — 0.19%	$109,194	$64,480	$44,714

Administrative Services Agreement

The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.15% of the average daily net assets of the Institutional Class, 0.30% of the average daily net assets of the Y and Investor Classes and 0.40% of the average daily net assets of the A Class of the Fund.

Distribution Plans

The Trust, except for the A Class of the Fund, has adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Fund for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Trust does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Trust shares.

A separate Distribution Plan (the “Distribution Plan”) has been adopted pursuant to rule 12b-1 under the Act for the A Class of the Fund. Under the Distribution Plan, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the A Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.

Services Plan

American Beacon Treasury Inflation Protected Securities Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)

daily net assets of the Y Class, 0.15% of the average daily net assets of the A Class, and up to 0.375% of the average daily net assets of the Investor Class of the Fund.

Investment in Affiliated Funds

The Fund may invest in the American Beacon Money Market Select Fund and the American Beacon US Government Money Market Select Fund (collectively the “Select Funds”). The Fund and the Select Funds have the same investment advisor and, therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives from the Select Funds an annualized fee equal to 0.09% of the Select Funds’ average daily net assets. During the six months ended June 30, 2010, the Fund did not invest in the Select Funds.

Interfund Lending Program

Pursuant to an exemptive order by the Securities Exchange Commission (the “SEC”), the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. For the six months ended June 30, 2010, the Fund did not utilize the credit facility.

Reimbursement of Expenses

The Manager voluntarily agreed to reimburse a portion of its Administrative Service fee for the Institutional Class and other expenses of the Investor Class. For the six months ended June 30, 2010, the Manager reimbursed expenses of $82,708 and $7,212 for the Institutional and Investor Classes, respectively.

The Fund has adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’s average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The Fund has not recorded a liability for potential reimbursement, due to the current assessment that a reimbursement is unlikely.

Sales Commissions

The Fund’s distributor, Foreside Fund Services, LLC (“Foreside”) may receive a portion of A Class sales charges from broker dealers and it may be used to offset expenses that the Manager pays to Foreside. Since May 17^th (the inception date of the A Class) there has been $0 in sales commissions from the sale of Class A shares that were received by Foreside.

3. Federal Income and Excise Taxes

It is the policy of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income or excise tax provision is required.

The Fund does not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended December 31, 2009, remains subject to examination by the Internal Revenue Service. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statement of Operations.

Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of

American Beacon Treasury Inflation Protected Securities Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)

distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.

The tax character of distributions paid during the period ended June 30, 2010 and the fiscal year ended December 31, 2009 were as follows (in thousands):

Institutional

Six Months

Ended

Year Ended

Period Ended

Year Ended

June 30, 2010

December 31,

June 30, 2010

December 31,

Distributions paid from:

(unaudited)

2009

(unaudited)

2009

Ordinary income*

—

789

—

N/A

Investor

Six Months

Ended

Year Ended

Period Ended

Year Ended

June 30, 2010

December 31,

June 30, 2010

December 31,

Distributions paid from:

(unaudited)

2009

(unaudited)

2009

Ordinary income*

—

N/A


*		For tax purposes, short-term capital gains distributions are considered ordinary income distributions.

As of June 30, 2010, the components of distributable earnings on a tax basis were as follows (in thousands):


Cost basis of investments for federal income tax purposes	$	199,842
Unrealized appreciation		3,159
Unrealized depreciation		(1	)

Net unrealized appreciation/(depreciation)		3,158
Undistributed ordinary income		(1,461	)
Undistributed long-term gain/(loss)		(2,172	)

Distributable earnings	$	13,003

Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses from wash.

Due to inherent differences in the recognition of income, expenses and realized gains/(losses) under U.S. generally accepted accounting principles and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities.

Accordingly, the following amounts represent current year permanent differences that have been reclassified as of June 30, 2010 (in thousands):


Paid in capital	$	0
Undistributed net investment income		0
Accumulated net realized gain (loss)		(1	)
Unrealized appreciation (depreciation) of investments and foreign currency		1

At June 30, 2010, the capital loss carry forward positions for federal income tax purposes were $12,965 and $5,368 expiring in 2016 and 2017, respectively (in thousands).

The Fund utilized $2,275 (in thousands) of net capital loss carryovers for the six months ended June 30, 2010.

American Beacon Treasury Inflation Protected Securities Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)

4. Investment Transactions

Purchases and proceeds from sales of investments for the six months ended June 30, 2010, excluding short-term investments, were $197,635,867 and $158,026,026, respectively. These amounts also represent purchases and sales of U.S. Government securities.

5. Capital Share Transactions

The tables below summarize the activity in capital shares (dollars and shares in thousands):

Six Months Ended June 30, 2010


	Institutional Class						Y Class				Investor Class						A Class
	Shares			Amount			Shares		Amount		Shares			Amount			Shares		Amount
Shares sold		5,412		$	55,905			19	$	198		1,079		$	11,018			—	$	1
Reinvestment of dividends		–			–			–		–		–			–			–		–
Shares redeemed		(2,569	)		(26,496	)		–		–		(247	)		(2,540	)		–		–

Net increase in shares outstanding		2,843		$	29,409			19	$	198		832		$	8,478			—	$	1

Year Ended December 31, 2009


	Institutional Class						Investor Class
	Shares			Amount			Shares			Amount
Shares sold		7,637		$	75,743			709		$	6,981
Reinvestment of dividends		58			587			3			28
Shares redeemed		(7,594	)		(72,804	)		(132	)		(1,330	)

Net increase in shares outstanding		101		$	3,526			580		$	5,679

6. Subsequent Events

Management has evaluated the possibility of subsequent events existing in the Fund’s financial statements and determined that there are no material events that would require disclosure in the Fund’s financial statements.

American Beacon Treasury Inflation Protected Securities Fund
Financial Highlights
(For a share outstanding throughout the period)


	Institutional Class																		Y Class			Investor Class						A Class
	Six
	Months																								March			May
	Ended																		March			Six Months			2 to			17 to
	June 30,			Year Ended December 31,															1 to June			Ended June			December			June 30,
	2010			2009^A			2008			2007^B			2006			2005			30, 2010			30, 2010			31, 2009^A			2010
	(unaudited)																		(unaudited)			(unaudited)						(unaudited)
Net asset value, beginning of period	$	10.16		$	9.20		$	10.18		$	9.53		$	9.75		$	10.16		$	10.25		$	10.13		$	9.25		$	10.35

Income from investment operations:
Net investment income		0.10			0.06			0.80			0.45			0.29			0.56	^C		0.03			0.10	^C		0.14			0.03
Net gains (losses) on securities (both realized and unrealized)		0.22			0.95			(0.98	)		0.59			(0.19	)		(0.37	)		0.19			0.19	^C		0.79			0.03

Total income (loss) from investment operations		0.32			1.01			(0.18	)		1.04			0.10			0.19			0.22			0.29			0.93			0.06

Less distributions:
Dividends from net investment income		–			(0.05	)		(0.80	)		(0.39	)		(0.29	)		(0.55	)		–			–			(0.05	)		—
Distributions from net realized gains on securities		–			–			–			–			–			(0.05	)		–			–			—			—
Tax return of capital		–			–			–			0.00	^D,E		(0.03	)^D		–			–			–			—			—

Total distributions		–			(0.05	)		(0.80	)		(0.39	)		(0.32	)		(0.60	)		–			–			(0.05	)		—

Net asset value, end of period	$	10.48		$	10.16		$	9.20		$	10.18		$	9.53		$	9.75		$	10.47		$	10.42		$	10.13		$	10.41

Total return		3.15	%^F		11.00	%		(2.09	)%		11.22	%		1.05	%		1.86	%		2.15	%^F		2.86	%^F		10.05	%^F		0.58	%^F

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	190,508		$	155,833		$	140,189		$	223,697		$	33,792		$	30,584		$	200		$	14,707		$	5,868		$	1
Ratios to average net assets (annualized):

Expenses, after expense reimbursements (recoupments)		0.25	%		0.26	%		0.25	%		0.43	%		0.49	%		0.44	%		0.57	%^G		0.63	%		0.65	%^G		0.98	%^G

Expenses, before expense reimbursements (recoupments)		0.35	%		0.36	%		0.29	%		0.43	%		0.49	%		0.39	%		0.57	%^G		0.74	%		0.81	%^G		0.98	%^G

Net investment income, after expense reimbursements (recoupements)		2.25	%		0.69	%		5.19	%		4.74	%		2.94	%		5.45	%		2.83	%^G		1.88	%		3.20	%^G		2.58	%^G

Net investment income, before expense reimbursements (recoupments)		2.15	%		0.59	%		5.15	%		4.74	%		2.94	%		5.50	%		2.83	%^G		1.78	%		3.04	%^G		2.58	%^G
Portfolio turnover rate		88	%^F		180	%		128	%		139	%		259	%		355	%		88	%^F,I		88	%^F		180	%^H		88	%^F,I


^A		Standish Mellon Asset Management Company, LLC was added as an investment advisor on December 11, 2009.

^B		Brown Brothers Harriman & Co. was removed as an investment advisor to the Treasury Inflation Protected Securities Fund on November 30, 2007.

^C		Based on average shares outstanding.

^D		The tax return of capital is calculated based on outstanding shares at the time of distribution.

^E		Amount represents less than $0.01 per share.

^F		Not annualized.

^G		Annualized.

^H		Portfolio turnover rate is for the period from January 1 through December 31, 2009.

^I		Portfolio turnover rate is for the period from January 1 through June 30, 2010.

Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)

At its May 25, 2010 meeting, the Board of Trustees (“Board”) considered the renewal of each existing Management Agreement between the Manager and the American Beacon Funds (the “Funds”) and each Investment Advisory Agreement between the Manager and a subadvisor (“Investment Advisory Agreements”) In preparation for the Board’s consideration to renew the Management Agreement and each Investment Advisory Agreement, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors and Lipper, Inc. (“Lipper”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.

In addition, the Board’s Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee held a separate meeting on May 10, 2010 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process.

In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, the Trustees considered, among other materials, responses by the Manager and the subadvisors to inquiries requesting:

	•		a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds;

	•		a copy of the firm’s most recent audited or unaudited financial statements, as well as Parts 1 and II of its Form ADV registration statement with the SEC;

	•		a summary of any material pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit;

	•		a comparison of the performance of that portion of Fund assets managed by each firm with performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any remedial measures if the firm’s performance was materially below that of the peer group;

	•		a profit/loss analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to each Fund;

	•		an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers;

	•		a description of any payments by the subadvisers to the manager to support the Funds’ marketing efforts;

	•		an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any;

	•		confirmation that the firm’s financial condition would not impair its ability to provide high-quality advisory services to the Funds;

	•		a description of any internal actions the firm has taken or anticipates taking in light of the current and projected decrease in revenues from prior years as a result of the current economic environment that may affect or are expected to affect the services performed for the Funds;

Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)

	•		a description of the scope of portfolio management services provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities;

	•		a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds;

	•		a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks;

	•		a discussion regarding the firm’s participation in “soft dollar” arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the firm’s methodology for obtaining best execution and the use of any affiliated broker-dealers;

	•		a description of any actual or potential conflicts of interest anticipated in managing Fund assets;

	•		a discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets;

	•		a description of trade allocation procedures among accounts managed by the firm;

	•		a discussion of whether the firm receives, with respect to the Funds, other compensation, including any payment for order flow or ECN liquidity rebates

	•		a certification by the firm regarding the reasonable design of its compliance program;

	•		information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm;

	•		a description of the firm’s affiliation with any broker-dealer;

	•		a discussion of any anticipated change in the firm’s controlling persons; and

	•		verification of the firm’s insurance coverage with regards to the services provided to the Funds.

In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement:

	•		a comparison of the performance of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average;

	•		a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take;

	•		a comparison of advisory fees and expense ratios for comparable mutual funds;

	•		an analysis of any material complaints received from Fund shareholders;

Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)

	•		a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds;

	•		a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices;

	•		a description of the Manager’s securities lending practices and the fees received from such practices;

	•		a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider;

	•		a description of the portfolio turnover rate and average execution costs for each Fund and, as applicable, each subadvisor to a Fund; and

	•		a description of how expenses that are not readily identifiable to a particular Fund are allocated.

In connection with the Management Agreement and each Investment Advisory Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds; and (iii) each Fund’s investment advisory fees versus comparable mutual funds. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. References below to each Fund’s Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper.

Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2010 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 25, 2010 meeting at which the Board considered the renewal of the Agreements. The Board did not identify any particular information that was most relevant to its consideration to renew the Management Agreement and each Investment Advisory Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal of the Agreements. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal of each Agreement was in the best interests of the Funds and their shareholders.

Considerations With Respect to All Funds

In determining whether to renew the Management Agreement and each Investment Advisory Agreement, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 25, 2010 meeting, the Board considered each Fund’s investment management and subadvisory relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager and (to the extent provided) the subadvisors in rendering their services and their resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fees with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other

Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)

benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.

Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s generally favorable long-term performance and the background and experience of key investment personnel at the Manager; the low cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the manager’s commitment to increase assets in the Funds as demonstrated, for example, by the recent substantial increase in sales personnel; the Manager’s continuing efforts to add new series and share classes to enhance the Funds’ product line; the Manager’s high quality of services; the Manager’s active role in monitoring and, as appropriate recommending additional or replacement subadvisors; and efforts made by the Manager to retain key employees and maintain staff levels.

With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and their ability to continue to attract and retain qualified investment personnel. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.

Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund’s investment performance relative to its benchmark index(es) and peer group. The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Manager also noted that it generally was satisfied with the performance of the subadvisors. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”

The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year and to put in place new expense waivers and reimbursements for certain classes of the Funds. The Board further considered that each subadvised Fund pays the Manager the amounts due to its subadvisors, and the Manager remits these amounts directly to the applicable subadvisors. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.

In analyzing the cost of services and profitability for each subadvisor in connection with its investment advisory services to the Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee a subadvisor charges for any comparable client accounts. The Board gave less weight to profitability considerations or did not view this data as imperative to its deliberations given the arm’s length

Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)

nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fees.

Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services performed by the Manager and the subadvisors. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Economies of Scale. In considering the reasonableness of the management and investment advisory fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates. The Board also noted the Manager’s representation that assets in the Funds’ complex increased during 2009, primarily due to market appreciation.

In addition, the Board noted the Manager’s representation that, due to the existing low cost structure of the Funds, further breakpoints in the management fee would not be appropriate at this time. The Board also considered that the management fee for the Money Market Funds is amongst the lowest in the industry. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee schedules for each Fund provides for a reasonable sharing of benefits from any economies of scale with the Fund.

Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors. The Board also considered that the Manager’s relationship with the Funds and the money market portfolios continues to be a significant factor in attracting separate account assets for the Manager and the Manager’s use of the Large Cap Value Fund model for an actively managed exchange traded fund, managed by the Manager.

In addition, the Manager noted that the Funds also derive benefits from their association with the Manager. Specifically, the Board noted that the benefit plans of AMR Corporation, which are managed by the Manager, remain the largest or one of the largest shareholders in most of the Funds and the Manager’s representation that it provides services to the Funds at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that, with the exception of the Emerging Markets Fund, the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal year ended December 31, 2009.

Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable.

Additional Considerations and Conclusions with Respect to the Treasury Inflation Protected Securities Fund

The performance comparisons below were made versus each Fund’s Lipper peer universe median. References to the Lipper expense universe below are to the universe of comparable mutual funds included in the analysis provided to the Trustees by Lipper.

In considering the renewal of the Management Agreement for the Treasury Inflation Protected Securities Fund, the Trustees considered the following additional factors: (1) the Treasury Inflation Protected Securities Fund outperformed the peer universe median for the one-, three- and five-year periods ended March 31, 2010;

Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)

and (2) the expense ratio of the Institutional Class of Fund shares was the lowest of its Lipper expense universe.

In considering the renewal of the Investment Advisory Agreement with NISA Investment Advisors LLC (“NISA”), the Trustees considered the following additional factors: (1) NISA outperformed the peer universe median for the one-, three- and five-year periods ended March 31, 2010; (2) representations by NISA regarding fee rates charged it charges to other comparable clients; (3) whether NISA uses Fund commissions to obtain proprietary or third-party research; and (4) the Manager’s recommendation to continue to retain NISA.

Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager and the subadvisor under the Agreements are fair and reasonable, (2) determined that the Treasury Inflation Protected Securities Fund and its shareholders would benefit from the Manager’s and subadvisor’s continued management of the Fund and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the Treasury Inflation Protected Securities Fund.

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Delivery of Documents

To reduce expenses, your financial institution may mail only one copy of the Summary Prospectus, Annual Report and Semi-Annual Report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please contact your financial institution. Delivery of individual copies will commence thirty days after receiving your request.

If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Summary Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.

To obtain more information about the Fund:




By E-mail:		On the Internet:
american_beacon.funds@ambeacon.com		Visit our website at www.americanbeaconfunds.com



By Telephone:		By Mail:
Call (800) 658-5811		American Beacon Funds
		P.O. Box 219643
		Kansas City, MO 64121-9643

Availability of Quarterly Portfolio Schedules		Availability of Proxy Voting Policy and Records

In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available on the Funds’ website (www.americanbeaconfunds.com) approximately twenty days after the end of each month.		A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:


Custodian	Transfer Agent	Independent Registered	Distributor
State Street Bank and	Boston Financial Data	Public Accounting	Foreside Fund Services,
Trust	Services	Firm	LLC
Boston, Massachusetts	Kansas City, Missouri	Ernst & Young LLP	Portland, Maine
		Dallas, Texas

This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus or summary prospectus.

American Beacon Funds and American Beacon Treasury Inflation Protected Securities Fund are service marks of American Beacon Advisors, Inc

SAR 6/10

About American Beacon Advisors

Contents


Message from American Beacon		1
Performance Overviews		2

American Beacon Funds
Statements of Assets and Liabilities		9
Statements of Operations		10
Statements of Changes in Net Assets		11
Notes to Financial Statements		12
Financial Highlights		17

State Street Equity 500 Index Portfolio
Portfolio of Investments		26
Statement of Assets and Liabilities		32
Statement of Operations		33
Statement of Changes in Net Assets		34
Financial Highlights		35
Notes to Financial Statements		36

Master Small Cap Index Series
Schedule of Investments		42
Statement of Assets and Liabilities		62
Statement of Operations		63
Statement of Changes in Net Assets		64
Financial Highlights		64
Notes to Financial Statements		65

Master International Index Series
Schedule of Investments		73
Statement of Assets and Liabilities		84
Statement of Operations		85
Statement of Changes in Net Assets		86
Financial Highlights		86
Notes to Financial Statements		87

Additional Information		Back Cover

Investing in foreign equities entails additional risk not associated with domestic equities, such as currency fluctuations, economic and political instability and differences in accounting standards. Investing in the securities of small capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies.

Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and each Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.


American Beacon Funds		June 30, 2010

Fellow Shareholders,

Each Fund seeks to match the performance of its underlying index as closely as possible before the deduction of fund expenses. This means that while investors may ride the index down, they will capture the entirety of the move back up during a recovery.

During the six-month period ended June 30, 2010, index investors experienced the downside market turn as the American Beacon S&P Index Fund (Institutional Class) declined 6.67%; the American Beacon Small Cap Index Fund (Institutional Class) experienced a downturn of 1.89% and the American Beacon International Equity Index Fund (Institutional Class) finished the reporting period down 14.07%.

As you review the enclosed market overview, portfolio listings, and detailed financial data, please know that we welcome the opportunity to serve your financial needs. To obtain further details about the American Beacon Funds family or to access your account information, please visit our website at americanbeaconfunds.com.

Thank you for your continued investment in the American Beacon Funds, and know that we remain dedicated to offering you and your advisor the level of service and broad range of well-managed investment products you’ve come to expect from us.


				Sincerely,



				Gene L. Needles, Jr.
				President
				American Beacon Funds

Securities of these Funds may only be sold by offering each Funds’ Prospectus and Summary Prospectus. You should consider the investment objectives, risks, fees and expenses of any mutual fund carefully before investing. This and other information is available in each Funds’ Prospectus and Summary Prospectus which you may obtain at www.americanbeaconfunds.com or by calling 1-800-967-9009. Please read the Prospectus and Summary Prospectus carefully before investing.

Performance Overview

American Beacon S&P 500^® Index Fund
June 30, 2010 (Unaudited)

For the six months ended June 30, 2010, the total return of the Institutional Class of the American Beacon S&P 500 Index Fund was -6.67%, slightly behind the S&P 500 Index (the “Index”) return of -6.65% but ahead of the Lipper S&P 500 Objective Funds Index return of -6.77%.


	Annualized Total Returns
	Periods Ended 6/30/10
	6 Months*			1 Year			5 Years			10 Years
Institutional Class(1,4)		-6.67	%		14.57	%		-0.83	%		-1.70	%
Investor Class(1,2,4)		-6.91	%		14.18	%		-1.28	%		-2.13	%
Lipper S&P 500 Objective Funds Index (3)		-6.77	%		14.18	%		-0.99	%		-1.82	%
S&P 500 Index (3)		-6.65	%		14.43	%		-0.79	%		-1.59	%


*		Not annualized

1.		Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares.

2.		A portion of the fees charged to the Investor Class of the Fund was waived through 2002. Performance prior to waiving fees was lower than the actual returns shown for periods prior to 2002.

3.		The Lipper S&P 500 Objective Funds Index tracks the results of the 30 largest mutual funds in the Lipper S&P 500 Objective Funds category. Lipper is an independent mutual fund research and ranking service. The S&P 500 Index is a market capitalization weighted index of common stocks publicly traded in the U.S. One cannot invest directly in an index.

4.		The total annual Fund operating expense ratios set forth in the most recent prospectus for the Institutional and Investor Class shares were 0.15% and 0.60%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report which are based on expenses incurred during the period covered by this report.

Performance Summary

All ten sectors within the Index lost value during the first six months of 2010. The Materials, Energy and Information Technology sectors were particularly hard hit, down 12.4%, 12.2% and 10.6%, respectively, as fears of a double-dip recession weighed heavily on the minds of investors. For the Energy sector, the Gulf of Mexico situation further exacerbated the decline in share prices. The Industrial sector was the best performing in the Index, down only 0.7% for the period. A fall of nearly 10% in June erased gains earlier in the year leaving the Consumer Discretionary sector down 1.7% for the semi-annual period. The Financials sector likewise posted gains during the first quarter that were erased in the second quarter, resulting in a decline of 3.6% for the six-month period.

Notable individual performers were Apple, Inc. (up 19.4%), Citigroup, Inc. (up 13.6%) and Berkshire Hathaway, Inc. (up 3.6%). Apple launched its “iPad” and early sales results were impressive. Citigroup also performed well due to its turnaround and continued recovery from a near collapse. Berkshire Hathaway was a new entrant to the Fund and the Index during the period. The stock was added with a weight of roughly 1% making it the largest addition to the Index in years.

Exxon Mobil Corporation (down 15.2%), Microsoft Corporation (down 23.8%), and Google, Inc. (down 28.2%), three large and well known firms, were notable laggards during the period. Exxon Mobil appeared hurt by the disaster in the Gulf of Mexico, Microsoft suffered from investor fears of a slowing recovery, and Google sank as fallout from its battle with the Chinese government over censorship weighed on the stock price.

Portfolio Strategy

The investment manager continues to utilize a replication strategy, owning all 500 names in the S&P 500 Index in approximately the same weightings as the Index. Therefore, the Fund is expected to continue to meet its objective of closely tracking, before expenses, the return of its benchmark, the S&P 500 Index.


†		The S&P 500 Index Fund is not sponsored, sold or promoted by Standard & Poor’s, and Standard & Poor’s makes no representation regarding the advisability of investing in this fund.

S&P is a trademark of the McGraw-Hill Companies, Inc. and has been licensed for use, “Standard and Poor’s®”, “S&P”, “Standard & Poor’s 500”, “S&P 500” are all trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by State Street Bank and Trust Company.

Performance Overview
American Beacon S&P 500^® Index Fund
June 30, 2010 (Unaudited)

Top Ten Holdings


	% of
	Equities*
Exxon Mobil Corp.		3.1	%
Apple, Inc.		2.5	%
Microsoft Corp.		1.9	%
Procter & Gamble Co.		1.9	%
Johnson & Johnson		1.8	%
International Business Machines Corp.		1.7	%
General Electric Co.		1.7	%
JPMorgan Chase & Co.		1.6	%
Bank of America Corp.		1.5	%
AT&T, Inc.		1.5	%


*		Percent of the equities of State Street Equity 500 Index Portfolio

Equity Sector Allocation


	% of
	Equities*
Information Technology		18.7	%
Financials		16.3	%
Health Care		12.1	%
Consumer Staples		11.6	%
Energy		10.7	%
Industrials		10.3	%
Consumer Discretionary		10.2	%
Utilities		3.7	%
Materials		3.4	%
Telecommunication Services		3.0	%


*		Percent of the equities of State Street Equity 500 Index Portfolio

†		The S&P 500 Index Fund is not sponsored, sold or promoted by Standard & Poor’s, and Standard & Poor’s makes no representation regarding the advisability of investing in this fund.

Performance Overview
American Beacon Small Cap Index Fund^SM
June 30, 2010 (Unaudited)

For the six months ended June 30, 2010, the total return of the Institutional Class of the American Beacon Small Cap Index Fund was -1.89%. The Fund’s performance was slightly ahead of the Russell 2000â Index (the “Index”) return of -1.95% and also ahead of the Lipper Small-Cap Core Funds Index return of -2.09% which consists primarily of actively managed funds.


	Annualized Total Returns
	Periods Ended 6/30/10
										Since
	6									Inception
	Months*			1 Year			5 Years			(7/31/00)
Institutional Class(1,3)		-1.89	%		21.62	%		0.35	%		3.28	%
Lipper Small-Cap Core Funds Index(2)		-2.09	%		21.67	%		1.15	%		4.52	%
Russell 2000 Index(2)		-1.95	%		21.48	%		0.37	%		3.37	%


*		Not annualized

1.		Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Please note that the recent growth rate in the stock market helped to produce short-term returns that are not typical and may not continue in the future.

2.		The Lipper Small-Cap Core Funds Index tracks the results of the 30 largest mutual funds in the Lipper Small-Cap Core Funds category. Lipper is an independent mutual fund research and ranking service. The Russell 2000 Index is an unmanaged index comprising approximately 2,000 smaller-capitalization stocks from various industrial sectors. One cannot invest directly in an index.

3.		The total annual Fund operating expense ratio set forth in the most recent prospectus for the Fund was 0.23%. The expense ratio above may vary from the expense ratio presented in other sections of this report which is based on expenses incurred during the period covered by this report.

Performance Summary provided by Blackrock Advisors, LLC

At the beginning of 2010, we expected to see a modest cyclical recovery that was countered by the structural problems facing most of the developed world. For the first four months of the year, the cyclical recovery did dominate, but over the past two months, structural problems (especially those in Europe) began to win out, and risk assets (including US equities) have been struggling.

Financial markets took a dramatic turn in late April, as investor sentiment became dominated by concerns over the European sovereign debt crisis, some less-positive economic data and uncertainty over financial regulatory reform in the United States. Volatility levels moved noticeably higher over the past several months, and investors embarked on a renewed “flight to quality,” abandoning risk assets such as stocks in favor of safer alternatives, most notably US Treasury bonds and gold.

In the United States, the Dow Jones Industrial Average fell 5.0% to 9,774, the S&P 500 Index declined 6.7% to 1,030 and the Nasdaq Composite lost 7.1% to end the period at 2,109.

Portfolio Strategy

The Fund will continue to strive to meet its objective of closely replicating, before expenses, the return of its benchmark, the Russell 2000 Index. It does so by investing in a subset of the securities in the Index such that the characteristics of the portfolio closely track the characteristics of the Index.

Performance Overview
American Beacon Small Cap Index Fund^SM
June 30, 2010 (Unaudited)

Top Ten Holdings


	% of
	Equities*
Salix Pharmaceuticals Ltd.		0.2	%
Jack Henry & Associates, Inc.		0.2	%
MFA Financial, Inc.		0.2	%
TIBCO Software, Inc.		0.2	%
Rock-Tenn Co.		0.2	%
Nordson Corp.		0.2	%
Highwoods Properties, Inc.		0.2	%
Psychiatric Solutions, Inc.		0.2	%
ev3, Inc.		0.2	%
Deckers Outdoor Corp.		0.2	%


*		Percent of equity portion of Master Small Cap Index Series

Equity Sector Allocation


	% of
	Equities
Financials		22	%
Information Technology		16	%
Consumer Discretionary		15	%
Health Care		14	%
Producer Durables		14	%
Materials		7	%
Energy		5	%
Utilities		4	%
Consumer Staples		3	%


*		Percent of equity portion of Master Small Cap Index Series

Performance Overview
American Beacon International Equity Index Fund^SM
June 30, 2010 (Unaudited)

For the six months ended June 30, 2010, the Institutional Class of the American Beacon International Equity Index Fund posted a total return of -14.07%, underperforming the MSCI EAFE Index (the “Index”) return of -13.23% and the Lipper International Funds Index return of -10.89%. Other than deduction of Fund expenses, the investment manager’s application of its fair valuation policy during the period was a significant driver of the Fund’s underperformance.


	Annualized Total Returns
	Periods Ended 6/30/10
										Since
										Inception
	6 Months*			1 Year			5 Years			(7/31/00)
Institutional Class(1,3)		-14.07	%		4.44	%		0.67	%		0.42	%
Lipper International Funds Index(2)		-10.89	%		9.50	%		2.62	%		1.55	%
MSCI EAFE Index(2)		-13.23	%		5.92	%		0.88	%		0.60	%


*		Not annualized

1.		Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares.

2.		The Lipper International Funds Index tracks the results of the 30 largest mutual funds in the Lipper International Funds category. Lipper is an independent mutual fund research and ranking service. The MSCI EAFE Index is a market capitalization weighted index of international stock performance composed of equities from developed markets excluding the U.S. and Canada. One cannot invest directly in an index.

3.		The total annual Fund operating expense ratio set forth in the most recent prospectus for the Fund was 0.23%. The expense ratio above may vary from the expense ratio presented in other sections of this report, which is based on expenses incurred during the period covered by this report.

Performance Summary provided by Blackrock Advisors, LLC

At the beginning of 2010, we expected to see a modest cyclical recovery that was countered by the structural problems facing most of the developed world. For the first four months of the year, the cyclical recovery did dominate, but over the last two months of the period, structural problems (especially those in Europe) began to win out, and risk assets (including global equities) struggled.

Financial markets took a dramatic turn in late April, as investor sentiment became dominated by concerns over the European sovereign debt crisis and some less-positive economic data. Volatility levels moved noticeably higher over the past several months, and investors embarked on a renewed “flight to quality,” abandoning risk assets such as stocks in favor of safer alternatives, most notably US Treasury bonds and gold.

International equities, as represented by the MSCI EAFE Index, declined 13.2% over the first six months of the year. Within international developed markets, Denmark (+3.8%) was the lone country to experience positive returns over the six month period, with Sweden (-0.2%) and Singapore (-1.3%) also outperforming on a relative basis.

From a global sector perspective, all sectors experienced declines for the first six months of 2010, but on a relative basis the Industrials (-3.7%), Consumer Discretionary (-4.2%) and Consumer Staples (-4.5%) sectors were the best performers, while Energy (-17.2%), Materials (-13.8%) and Utilities (-12.8%) were the worst.

Portfolio Strategy

The Fund continues to pursue its objective of closely replicating, before expenses, the return of its benchmark, the MSCI EAFE Index. It does so by investing in a subset of the securities in the Index such that the characteristics of the portfolio closely track the characteristics of the Index.

Performance Overview
American Beacon International Equity Index Fund^SM
June 30, 2010 (Unaudited)

Top Ten Holdings


	% of
	Equities*
Nestle S.A.		1.9	%
HSBC Holdings plc.		1.8	%
Vodafone Group plc.		1.2	%
BHP Billiton Ltd.		1.2	%
Novartis AG.		1.1	%
Roche Holding Ltd.		1.1	%
Toyota Motor Corp.		1.1	%
Total S.A.		1.1	%
Royal Dutch Shell plc.		1.0	%
BP plc.		1.0	%

Equity Sector Allocation


	% of
	Equities*
Financials		21.2	%
Industrials		17.6	%
Consumer Discretionary		15.2	%
Health Care		9.6	%
Materials		8.4	%
Energy		7.8	%
Telecommunication Services		6.8	%
Consumer Staples		5.3	%
Information Technology		5.2	%
Utilities		2.9	%


*		Percent of equity portion of Master Small Cap Index Series

Country Allocation


	% of
	Equities*
Japan		23.3	%
United Kingdom		21.2	%
France		9.9	%
Australia		8.2	%
Switzerland		8.0	%
Germany		7.9	%
Spain		3.5	%
Sweden		2.9	%
Italy		2.9	%
Netherlands		2.7	%
Hong Kong		2.5	%
Singapore		1.7	%
Belgium		1.0	%
Denmark		1.0	%
Finland		1.0	%
Israel		0.9	%
Norway		0.7	%
Other		0.8	%


*		Percent of equity portion of Master Small Cap Index Series

Fund Expenses
June 30, 2010 (Unaudited)

Fund Expense Example

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in a particular Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2010 through June 30, 2010.

Actual Expenses

The following table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid During Period” row to estimate the expenses you paid on your account during this period. Shareholders of the Institutional and Investor Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

Actual


	S&P 500			Small Cap			International				S&P 500
Institutional Class	Index			Index			Equity Index			Investor Class	Index
Beginning Account Value 1/1/10	$	1,000.00		$	1,000.00		$	1,000.00		Beginning Account Value 1/1/10	$	1,000.00
Ending Account Value 6/30/10	$	933.26		$	981.12		$	859.28		Ending Account Value 6/30/10	$	930.94
Expenses Paid During Period* 1/1/10 — 6/30/10	$	0.67		$	0.93		$	1.15		Expenses Paid During Period* 1/1/10 — 6/30/10	$	2.87
Annualized Expense Ratio		0.14	%		0.19	%		0.25	%	Annualized Expense Ratio		0.60	%

Hypothetical Example for Comparison Purposes

The following table provides information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in a particular Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Institutional and Investor Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by a Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Expenses Paid During Period” line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.

Hypothetical


	S&P 500			Small Cap			International				S&P 500
Institutional Class	Index			Index			Equity Index			Investor Class	Index
Beginning Account Value 1/1/10	$	1,000.00		$	1,000.00		$	1,000.00		Beginning Account Value 1/1/10	$	1,000.00
Ending Account Value 6/30/10	$	1,024.10		$	1,023.85		$	1,023.55		Ending Account Value 6/30/10	$	1,021.82
Expenses Paid During Period* 1/1/10 — 6/30/10	$	0.70		$	0.95		$	1.25		Expenses Paid During Period* 1/1/10 — 6/30/10	$	3.01
Annualized Expense Ratio		0.14	%		0.19	%		0.25	%	Annualized Expense Ratio		0.60	%


*		Expenses are equal to each Fund’s annualized expense ratio for the six-month period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period.

American Beacon Funds

Statements of Assets and Liabilities
June 30, 2010 (Unaudited) (in thousands, except share and per share amounts)


							International
	S&P 500 Index			Small Cap Index			Equity Index
	Fund			Fund			Fund
Assets:
Investment in Portfolio, at value	$	313,605		$	107,203		$	231,401
Receivable for fund shares sold		881			1			745
Prepaid expenses		19			—			1

Total assets		314,505			107,204			232,147


Liabilities:
Payable for fund shares redeemed		10			220			1
Administrative service and service fees payable (Note 2)		20			4			9
Printing fees payable		27			8			34
Professional fees payable		4			7			2
Fund accounting fees payable		—			1			4
Sub-administration fees payable		—			3			4
Transfer agent fees payable		6			—			4
Trustee fees payable		3			—			2
Insurance fees payable		2			—			—
Registration fees payable		—			1			—
Other liabilities		5			1			2

Total liabilities		77			245			62

Net Assets	$	314,428		$	106,959		$	232,085


Analysis of Net Assets:
Paid-in-capital		370,397			135,679			333,926
Undistributed net investment income (expense)		2,404			315			4,271
Accumulated net realized gain (loss)		(83,776	)		(11,040	)		(37,575	)
Unrealized net appreciation (depreciation) of investments and futures contracts		25,403			(17,995	)		(68,537	)

Net assets	$	314,428		$	106,959		$	232,085


Shares outstanding (no par value):
Institutional Class		21,143,768			10,841,557			28,776,677

Investor Class		1,199,584			—			—


Net asset value, offering and redemption price per share:
Institutional Class	$	14.08		$	9.87		$	8.07

Investor Class	$	13.92		$	—		$	—

See accompanying notes
See accompanying Financial Statements of the respective Master Portfolios

American Beacon Funds

Statements of Operations
Six Months ended June 30, 2010 (Unaudited) (in thousands)


							International
	S&P 500 Index			Small Cap Index			Equity Index
	Fund			Fund			Fund
Investment Income Allocated From Portfolio:
Dividend income	$	3,295		$	348		$	4,626
Interest income		6			2			1
Securities lending income		—			25			—
Portfolio expenses		(77	)		(24	)		(146	)

Net investment income allocated from Portfolio		3,224			351			4,481

Fund Expenses:
Administrative service fees (Note 2):
Institutional Class		80			16			64
Investor Class		28			—			—
Sub-administrative service fees:
Institutional Class		—			2			6
Transfer agent fees:
Institutional Class		9			2			10
Investor Class		2			—			—
Custody and accounting fees		5			4			6
Professional fees		13			8			10
Registration fees		15			—			1
Service fees — Investor Class (Note 2)		28			—			—
Printing		10			—			11
Trustee fees		11			1			12
Insurance		5			1			3
Other expenses		4			2			3

Total fund expenses		210			36			126

Net investment income		3,014			315			4,355


Realized and Unrealized Gain (Loss) Allocated From Master Portfolio
Net realized gain (loss) from:
Investments		2,998			27			(3,967	)
Foreign currency transactions		—			—			(406	)
Futures contracts		(50	)		—			(785	)
Change in net unrealized appreciation or depreciation of:
Investments		(27,998	)		(14,318	)		(38,803	)
Foreign currency transactions		—			—			(1,070	)
Futures contracts		(550	)		331			3,438

Net loss on investments		(25,600	)		(13,960	)		(41,593	)

Net decrease in net assets resulting from operations	$	(22,586	)	$	(13,645	)	$	(37,238	)

See accompanying notes
See accompanying Financial Statements of the respective Master Portfolios

American Beacon Funds

Statements of Changes in Net Assets (in thousands)


													International Equity Index
	S&P 500 Index Fund						Small Cap Index Fund						Fund
	Six Months			Year ended			Six Months			Year ended			Six Months			Year ended
	ended June 30,			December 31,			ended June 30,			December 31,			ended June 30,			December 31,
	2010			2009			2010			2009			2010			2009
	(unaudited)						(unaudited)						(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	3,014		$	6,450		$	315		$	396		$	4,355		$	6,171
Net realized gain (loss) on investments, foreign currency, and futures contracts		2,948			(14,452	)		27			(1,771	)		(5,158	)		6,591
Change in net unrealized appreciation or depreciation of investments and futures contracts		(28,548	)		78,871			(13,987	)		9,739			(36,435	)		45,505

Net increase (decrease) in net assets resulting from operations		(22,586	)		70,869			(13,645	)		8,364			(37,238	)		58,267

Distributions to Shareholders:
Net investment income:
Institutional Class		(1,422	)		(5,395	)		—			(451	)		—			(6,410	)
Investor Class		(76	)		(325	)		—			—			—			—

Total distributions to shareholders		(1,498	)		(5,720	)		—			(451	)		—			(6,410	)

Capital Share Transactions:
Proceeds from sales of shares		23,911			71,955			88,303			10,774			30,150			180,859
Reinvestment of dividends and distributions		1,497			5,714			—			451			—			6,409
Cost of shares redeemed		(26,132	)		(41,080	)		(7,657	)		(10,732	)		(40,937	)		(144,875	)

Net increase (decrease) in net assets from capital share transactions		(724	)		36,589			80,646			493			(10,787	)		42,393

Net increase (decrease) in net assets		(24,808	)		101,738			67,001			8,406			(48,025	)		94,250

Net Assets:
Beginning of period		339,236			237,498			39,958			31,552			280,110			185,860

End of Period *	$	314,428		$	339,236		$	106,959		$	39,958		$	232,085		$	280,110

*Includes undistributed net investment income (loss) of	$	2,404		$	888		$	315		$	—		$	4,271		$	(84	)

See accompanying notes
See accompanying Financial Statements of the respective Master Portfolios

American Beacon Funds

Notes to Financial Statements
June 30, 2010 (Unaudited)

1. Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”) is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the “Act”), as amended, as a no load, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon S&P 500 Index Fund, the American Beacon Small Cap Index Fund and the American Beacon International Equity Index Fund (each a “Fund” and collectively, the “Funds”), each a series of the Trust.

Each Fund invests all of its investable assets in a corresponding portfolio. The State Street Equity 500 Index Portfolio, Master Small Cap Index Series and the Master International Index Series (each a “Portfolio” and collectively the “Portfolios”) are open-ended management investment companies registered under the Act. The value of such investment reflects each Fund’s proportionate interest in the net assets of the corresponding Portfolio.


		% of Portfolio
		Held by Fund at
American Beacon:	Portfolios:	June 30, 2010
S&P 500 Index Fund	State Street Equity 500 Index Portfolio		18.1	%
Small Cap Index Fund	Master Small Cap Index Series		36.9	%
International Equity Index Fund	Master International Index Series		31.3	%

The financial statements of the Portfolios are included elsewhere in this report and should be read in conjunction with the Funds’ financial statements.

The following is a summary of the significant accounting policies followed by the Funds.

Class Disclosure

The S&P 500 Index Fund has two classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:


Class:	Offered to:	Service Fees:
Institutional Class	Investors making an initial investment of $2 million	Administrative Service Fee - 0.05%
Investor Class	General public and investors investing through an intermediary	Administrative Service Fee - 0.25% Service Fee - 0.25%

Administrative service fees and service fees vary amongst the classes as described more fully in footnote 2.

Investment income, net capital gains (losses) and all expenses incurred by the S&P 500 Index Fund are allocated based on the relative net assets of each class, except for service fees and certain other fees and expenses related solely to one class of shares.

Security Valuation and Valuation Inputs

Valuation of securities by each Portfolio as well as the inputs used to value the Portfolios’ net assets is discussed in the Portfolios’ Notes to Financial Statements, which are included elsewhere in this report.

American Beacon Funds
Notes to Financial Statements
June 30, 2010 (Unaudited)

Investment Income

Each Fund records its share of net investment income and realized and unrealized gains and losses from the security transactions of its corresponding Portfolio each day. All net investment income and realized and unrealized gains (losses) of each Portfolio are allocated pro rata among the investors in that Portfolio at the time of such determination.

Dividends to Shareholders

Dividends from net investment income of the Small Cap Index and International Equity Index Funds normally will be declared and paid annually. The S&P 500 Index Fund normally will declare and pay dividends quarterly. Distributions, if any, of net realized capital gains are generally paid annually and recorded on the ex-dividend date. Dividends are determined in accordance with income tax principles that may treat certain transactions differently than generally accepted accounting principles.

Allocation of Income, Expenses, Gains and Losses

Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Valuation of Shares

The price per share is calculated on each day on which shares are offered for sale. Net asset value per share is computed by dividing the value of each Fund’s total assets (which includes the value of the Fund’s investments in its Portfolio) less liabilities, by the number of Fund shares outstanding.

Use of Estimates

Other

2. Fees and Transactions with Affiliates

Administrative Services Agreement

The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to each Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.05% of the average daily net assets of the Institutional Class of the S&P 500 Index Fund, International Equity Index Fund and the Small Cap Index Fund and an annualized fee of 0.25% of the average daily net assets of the Investor Class of the S&P 500 Index Fund.

American Beacon Funds
Notes to Financial Statements
June 30, 2010 (Unaudited)

Service Plans

The Manager and the Trust entered into a Service Plan that obligates the Manager to oversee additional shareholder servicing of the Investor Class of S&P 500 Index Fund. As compensation for performing the duties required under the Service Plan, the Manager receives 0.25% of the average daily net assets of the Investor Class of the S&P 500 Index Fund.

Subadministration Agreement

The Trust, the Manager and BlackRock Advisors, LLC (“BlackRock”) entered into a Subadministration Agreement that obligates BlackRock to provide certain other administrative services to the Small Cap Index Fund and the International Equity Index Fund. As compensation for performing these services, BlackRock receives an annualized fee of 0.08% of the average daily net assets of the Small Cap Index Fund and 0.12% of the average daily net assets of the International Equity Index Fund; however, the fee of each is reduced by the total expense ratio of its corresponding Portfolio, net of any fee waivers.

3. Federal Income and Excise Taxes

It is the policy of each of the Funds to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income or excise tax provision is required.

The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended December 31, 2009, remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statement of Operations.

Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.

The International Equity Index Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation, as applicable, as the income is earned or capital gains are recorded.

The tax character of distributions paid during the six months ended June 30, 2010 and fiscal year ended December 31, 2009 were as follows (in thousands):


	S&P 500 Index				Small Cap Index				International Equity Index
	Six Months		Year		Six Months		Year		Six Months		Year
	Ended		Ended		Ended		Ended		Ended		Ended
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2010		2009		2010		2009		2010		2009
	(Unaudited)				(Unaudited)				(Unaudited)
Distributions paid from:
Ordinary income:*
Institutional Class	$	1,422	$	5,395	$	—	$	397	$	—	$	6,410
Investor Class		76		325		—		—		—		—
Return of Capital:
Institutional Class		—		—		—		54		—		—

Total taxable distributions	$	1,498	$	5,720	$	—	$	451	$	—	$	6,410


*		For tax purposes, short-term capital gains are considered ordinary income distributions.

American Beacon Funds
Notes to Financial Statements
June 30, 2010 (Unaudited)

At June 30, 2010 capital loss carry forward positions for federal income tax purposes were as follows (in thousands):


Fund	2010		2011		2012		2013		2014		2015		2016		2017		Total
S&P 500 Index Fund	$	7,852	$	635	$	1,060	$	2,311	$	286	$	—	$	11,180	$	28,055	$	51,379
Small Cap Index Fund		—		—		—		—		—		—		—	$	9,383	$	9,383
International Equity Index Fund		—		—		—		—		—		—	$	9,746	$	13,890	$	23,636

4. Capital Share Transactions

The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands):

Six Months ended June 30, 2010


	Institutional Class						Investor Class
S&P 500 Index Fund	Shares			Amount			Shares			Amount
Shares sold		1,334		$	20,315			236		$	3,596
Reinvestment of dividends		89			1,422			5			76
Shares redeemed		(1,202	)		(18,421	)		(526	)		(7,711	)

Net increase (decrease) in shares outstanding		221		$	3,316			(285	)	$	(4,039	)


	Institutional Class
Small Cap Index Fund	Shares			Amount
Shares sold		7,626		$	88,302
Reinvestment of dividends		—			—
Shares redeemed		(758	)		(7,657	)

Net increase in shares outstanding		6,868		$	80,645


	Institutional Class
International Equity Index Fund	Shares			Amount
Shares sold		3,349		$	30,150
Reinvestment of dividends		—			—
Shares redeemed		(4,441	)		(40,938	)

Net (decrease) in shares outstanding		(1,092	)	$	(10,788	)

Year ended December 31, 2009


	Institutional Class						Investor Class
S&P 500 Index Fund	Shares			Amount			Shares			Amount
Shares sold		4,250		$	54,132			1,580		$	17,823
Reinvestment of dividends		416			5,395			26			319
Shares redeemed		(2,132	)		(26,685	)		(1,193	)		(14,395	)

Net increase in shares outstanding		2,534		$	32,842			413		$	3,747


	Institutional Class
Small Cap Index Fund	Shares			Amount
Shares sold		1,305		$	10,774
Reinvestment of dividends		45			451
Shares redeemed		(1,321	)		(10,732	)

Net increase in shares outstanding		29		$	493


	Institutional Class
International Equity Index Fund	Shares			Amount
Shares sold		20,666		$	180,859
Reinvestment of dividends		691			6,409
Shares redeemed		(16,414	)		(144,875	)

Net increase in shares outstanding		4,943		$	42,393

American Beacon Funds
Notes to Financial Statements
June 30, 2010 (Unaudited)

5. Subsequent Events

Management has evaluated the possibility of subsequent events existing in the Funds’ financial statements. Management has determined that there are no material events that would require disclosure in the Funds’ financial statements through this date.

American Beacon S&P 500 Index Fund^SM
Financial Highlights
(For a share outstanding throughout each period)


	Institutional Class
	Six Months
	ended June			Year Ended December 31,
	30, 2010			2009			2008			2007			2006			2005
	(unaudited)
Net asset value, beginning of period	$	15.15		$	12.21		$	19.85		$	19.19		$	16.90		$	16.43

Income from investment operations:
Net investment income:^A		0.13			0.30			0.35			0.39			0.34	^B,E		0.29
Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized)		(1.13	)		2.91			(7.64	)		0.65			2.29	^E		0.47

Total income (loss) from investment operations		(1.00	)		3.21			(7.29	)		1.04			2.63			0.76

Less distributions:
Dividends from net investment income		(0.07	)		(0.27	)		(0.35	)		(0.38	)		(0.34	)		(0.29	)
Tax return of capital		—			—			—			—			—			0.00	^C

Total distributions		(0.07	)		(0.27	)		(0.35	)		(0.38	)		(0.34	)		(0.29	)

Net asset value, end of period	$	14.08		$	15.15		$	12.21		$	19.85		$	19.19		$	16.90

Total return		(6.67	)%^D		26.70	%		(37.08	)%		5.39	%		15.69	%		4.74	%

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	297,725		$	316,975		$	224,583		$	271,746		$	223,008		$	225,857

Ratios to average net assets (annualized):^A
Net investment income		1.78	%		2.39	%		2.23	%		1.89	%		1.85	%		1.75	%
Expenses, including expenses of the master portfolio		0.14	%		0.15	%		0.13	%		0.13	%		0.14	%		0.13	%


^A		The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund’s proportionate share of the income and expenses of the State Street Equity 500 Index Portfolio.

^B		Based on average shares outstanding.

^C		The tax return of capital is calculated based upon outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

^D		Not annualized.

^E		For the year ended December 31, 2006, the net investment income and net gains on securities (both realized and unrealized) have been restated from $0.33 and $2.30, respectively.

American Beacon S&P 500 Index Fund^SM
Financial Highlights
(For a share outstanding throughout each period)


	Investor Class
	Six Months
	ended June			Year Ended December 31,
	30, 2010			2009			2008			2007				2006			2005
	(unaudited)
Net asset value, beginning of period	$	15.00		$	12.06		$	19.60		$	18.97			$	16.69		$	16.23

Income from investment operations:
Net investment income:^A		0.11			0.33			0.33			0.31	^C			0.23	^B,C		0.21
Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized)		(1.14	)		2.80			(7.60	)		0.62	^C			2.27	^C		0.48

Total income (loss) from investment operations		(1.03	)		3.13			(7.27	)		0.93				2.50			0.69

Less distributions:
Dividends from net investment income		(0.05	)		(0.19	)		(0.27	)		(0.30	)			(0.22	)		(0.23	)
Tax return of capital		—			—			—			—				—			0.00	^D

Total distributions		(0.05	)		(0.19	)		(0.27	)		(0.30	)			(0.22	)		(0.23	)

Net asset value, end of period	$	13.92		$	15.00		$	12.06		$	19.60			$	18.97		$	16.69

Total return		(6.91	)%^E		26.26	%		(37.35	)%		4.88	%			15.09	%		4.32	%

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	16,703		$	22,261		$	12,915		$	18,430		��	$	16,056		$	48,985

Ratios to average net assets (annualized):^A
Net investment income		1.31	%		2.01	%		1.73	%		1.38	%			1.37	%		1.28	%
Expenses, including expenses of the master portfolio		0.60	%		0.60	%		0.62	%		0.63	%			0.61	%		0.61	%


^A		The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund’s proportionate share of the income and expenses of the State Street Equity 500 Index Portfolio.

^B		Based on average shares outstanding.

^C		For the years ended December 31, 2006 and 2007, the net investment income and net gains on securities (both realized and unrealized) have been restated from 0.27 and 2.23 and 0.28 and 0.65, respectively.

^D		The tax return of capital is calculated based upon outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

^E		Not annualized.

American Beacon Small Cap Index Fund
Financial Highlights
(For a share outstanding throughout each period)


	Institutional Class
	Six Months
	ended June			Year Ended December 31,
	30, 2010			2009			2008			2007			2006			2005
	(unaudited)
Net asset value, beginning of period	$	10.06		$	8.00		$	13.51		$	14.89		$	12.78		$	12.57

Income from investment operations:
Net investment income^A		0.03			0.10			0.18			0.32			0.17			0.16
Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized)		(0.22	)		2.08			(4.78	)		(0.53	)		2.11			0.42

Total income (loss) from investment operations		(0.19	)		2.18			(4.60	)		(0.21	)		2.28			0.58

Less distributions:
Dividends from net investment income		—			(0.11	)		(0.17	)		(0.31	)		(0.17	)		(0.17	)
Distributions from net realized gains on investments		—			—			(0.61	)		(0.80	)		—			(0.15	)
Tax return of capital		—			(0.01	)^B		(0.13	)^B		(0.06	)^B		—			(0.05	)^B

Total distributions		—			(0.12	)		(0.91	)		(1.17	)		(0.17	)		(0.37	)

Net asset value, end of period	$	9.87		$	10.06		$	8.00		$	13.51		$	14.89		$	12.78

Total return		(1.89	)%^C		27.21	%		(33.58	)%		(1.63	)%		17.85	%		4.51	%

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	106,959		$	39,958		$	31,552		$	52,325		$	151,878		$	46,113

Ratios to average net assets (annualized):^A
Net investment income		0.95	%		1.18	%		1.54	%		1.49	%		1.49	%		1.12	%
Expenses, including expenses of the master portfolio		0.18	%		0.23	%		0.20	%		0.20	%		0.18	%		0.18	%


^A		The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund’s proportionate share of the income and expenses of the Master Small Cap Index Series.

^B		The tax return of capital is calculated based upon outstanding shares at the time of distribution.

^C		Not annualized.

American Beacon International Equity Index Fund
Financial Highlights
(For a share outstanding throughout each period)


	Institutional Class
	Six Months
	ended June			Year Ended December 31,
	30, 2010			2009			2008			2007			2006			2005
	(unaudited)
Net asset value, beginning of period	$	9.38		$	7.46		$	13.37		$	12.76		$	10.33		$	9.39

Income from investment operations:
Net investment income^A		0.08			0.21			0.39			0.51	^B		0.23			0.22	^B
Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized)		(1.39	)		1.93			(6.00	)		0.86	^B		2.50			1.05	^B

Total income (loss) from investment operations		(1.31	)		2.14			(5.61	)		1.37			2.73			1.27

Less distributions:
Dividends from net investment income		—			(0.22	)		(0.30	)		(0.53	)		(0.23	)		(0.24	)
Distributions from net realized gains on investments		—			—			—			(0.22	)		(0.07	)		—
Tax return of capital		—			—			—			(0.01	)^C		—			(0.09	)^C

Total distributions		—			(0.22	)		(0.30	)		(0.76	)		(0.30	)		(0.33	)

Net asset value, end of period	$	8.07		$	9.38		$	7.46		$	13.37		$	12.76		$	10.33

Total return		(13.97	)%^D		28.72	%		(41.85	)%		10.68	%		26.52	%		13.58	%

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	232,084		$	280,110		$	185,860		$	267,293		$	162,113		$	90,200

Ratios to average net assets (annualized):^A
Net investment income		3.42	%		2.66	%		3.58	%		2.96	%		2.44	%		2.49	%
Expenses, including expenses of the master portfolio		0.21	%		0.23	%		0.19	%		0.19	%		0.22	%		0.23	%


^A		The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund’s proportionate share of the income and expenses of the Master International Index Series.

^B		For the years ended December 31, 2005 and 2007, the net investment income and net gains on securities (both realized and unrealized) have been restated from $0.21 and $1.06 and $0.52 and $0.85, respectively.

^C		The tax return of capital is calculated based upon outstanding shares at the time of distribution.

^D		Not annualized.

American Beacon Funds
Disclosure Regarding the Board of Trustees’ Approval of the
Management Agreement of the Funds (Unaudited)

At its May 25, 2010 meeting, the Board of Trustees (“Board”) considered the renewal of the existing Management Agreement between the Manager and the American Beacon Funds (collectively, the “Funds”). In preparation for the Board’s consideration to renew the Agreement, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager and Lipper, Inc. (“Lipper”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager.

In connection with the Board’s consideration of the Management Agreement, the Trustees considered, among other materials, responses by the Manager to inquiries requesting:

	•		a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds;

	•		a copy of the firm’s most recent audited or unaudited financial statements, as well as Parts 1 and II of its Form ADV registration statement with the SEC;

	•		a summary of any material pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit;

	•		a comparison of the performance of that portion of Fund assets managed by each firm with performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any remedial measures if the firm’s performance was materially below that of the peer group;

	•		a profit/loss analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to each Fund;

	•		an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers;

	•		a description of any payments by the subadvisors to the manager to support the Funds’ marketing efforts;

	•		an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any;

	•		confirmation that the firm’s financial condition would not impair its ability to provide high-quality advisory services to the Funds;

	•		a description of any internal actions the firm has taken or anticipates taking in light of the current and projected decrease in revenues from prior years as a result of the current economic environment that may affect or are expected to affect the services performed for the Funds;

	•		a description of the scope of portfolio management services provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities;

	•		a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds;

	•		a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks;

	•		a discussion regarding the firm’s participation in “soft dollar” arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the firm’s methodology for obtaining best execution and the use of any affiliated broker-dealers;

American Beacon Funds
Disclosure Regarding the Board of Trustees’ Approval of the
Management Agreement of the Funds (Unaudited)

	•		a description of any actual or potential conflicts of interest anticipated in managing Fund assets;

	•		a discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets;

	•		a description of trade allocation procedures among accounts managed by the firm;

	•		a discussion of whether the firm receives, with respect to the Funds, other compensation, including any payment for order flow or ECN liquidity rebates

	•		a certification by the firm regarding the reasonable design of its compliance program;

	•		information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm;

	•		a description of the firm’s affiliation with any broker-dealer;

	•		a discussion of any anticipated change in the firm’s controlling persons; and

	•		verification of the firm’s insurance coverage with regards to the services provided to the Funds.

In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement:

	•		a comparison of the performance of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average;

	•		a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take;

	•		a comparison of advisory fees and expense ratios for comparable mutual funds;

	•		an analysis of any material complaints received from Fund shareholders;

	•		a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds;

	•		a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices;

	•		a description of the Manager’s securities lending practices and the fees received from such practices;

	•		a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider;

	•		a description of the portfolio turnover rate and average execution costs for each Fund and, as applicable, each subadvisor to a Fund; and

	•		a description of how expenses that are not readily identifiable to a particular Fund are allocated.

In connection with the Management Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds; and (iii) each Fund’s investment advisory fees versus comparable mutual funds. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. References below to each Fund’s Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper.

Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2010 at which the Trustees reviewed the investment performance of the Manager and the primary factors considered by the Board at its May 25, 2010 meeting at which the Board considered the renewal of the Agreements. The Board did not identify any particular information that was most relevant to its consideration to renew the Management Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal of the Management Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded

American Beacon Funds
Disclosure Regarding the Board of Trustees’ Approval of the
Management Agreement of the Funds (Unaudited)

that the terms of the Management Agreement were reasonable and fair and that the renewal of the Management Agreement was in the best interests of the Funds and their shareholders.

Considerations With Respect to All Funds

In determining whether to renew the Management Agreement, the Trustees considered the best interests of each Fund separately. While the Management Agreement for all of the Funds were considered at the May 25, 2010 meeting, the Board considered each Fund’s investment management and subadvisory relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager and (to the extent provided) the subadvisors in rendering their services and their resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fees with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.

Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s generally favorable long-term performance and the background and experience of key investment personnel at the Manager; the low cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the manager’s commitment to increase assets in the Funds as demonstrated, for example, by the recent substantial increase in sales personnel; the Manager’s continuing efforts to add new series and share classes to enhance the Funds’ product line; the Manager’s high quality of services; and efforts made by the Manager to retain key employees and maintain staff levels.

Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund’s investment performance relative to its benchmark index(es) and peer group. The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an individual Fund level and at an aggregate level for all Funds. The Board also considered that the Management Agreement for the Funds stipulate that, to the extent that a Fund invests all of its investable assets in another registered investment company (i.e., is a “Feeder Fund”), the Fund will not pay the Manager a management fee. The index series of the Funds also operate under a master-feeder structure, but each of these series invests in a master portfolio that is not managed by the Manager. As such, the Board considered that the Manager does not receive a management fee with respect to the International Equity Index, S&P 500 Index, or Small Cap Index Funds. Although the Board noted that, in certain cases, the fee rates paid by other clients is lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.

American Beacon Funds
Disclosure Regarding the Board of Trustees’ Approval of the
Management Agreement of the Funds (Unaudited)

management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.

Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Economies of Scale. In considering the reasonableness of the management fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. The Board also noted the Manager’s representation that assets in the Funds’ complex increased during 2009, primarily due to market appreciation.

In addition, the Board noted the Manager’s representation that, due to the existing low cost structure of the Funds, further breakpoints in the management fee would not be appropriate at this time. Based on the foregoing information, the Board concluded that the Manager fee schedules for each Fund provides for a reasonable sharing of benefits from any economies of scale with the Fund.

Additional Considerations and Conclusions with Respect to the International Equity Index Fund

In considering the renewal of the Management Agreement for the International Equity Index Fund, the Trustees considered the following additional factors: (1) the performance of the Fund’s master portfolio outperformed the peer universe median for the one- and five-year periods ended March 31, 2010, but underperformed for the three-year period; (2) the Fund’s master portfolio underperformed the MSCI EAFE

American Beacon Funds
Disclosure Regarding the Board of Trustees’ Approval of the
Management Agreement of the Funds (Unaudited)

Index, the Fund’s benchmark index, for the one- and three-year periods; (3) management’s explanation that the International Equity Index Fund’s underperformance was due, in part, to the impact of fair valuation; and (3) the Fund’s expense ratio ranked better than the median of its Lipper expense universe.

Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the International Equity Index Fund and its shareholders would benefit from the Manager’s continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the International Equity Index Fund.

Additional Considerations and Conclusions with Respect to the S&P 500 Index Fund

In considering the renewal of the Management Agreement for the S&P 500 Index Fund, the Trustees considered the following additional factors: (1) the Fund’s master portfolio outperformed the peer universe median for the one-, three- and five-year periods ended March 31, 2010 and (2) the Fund’s expense ratio ranked better than the median of its Lipper expense universe.

Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the S&P 500 Index Fund and its shareholders would benefit from the Manager’s continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the S&P 500 Index Fund.

Additional Considerations and Conclusions with Respect to the Small Cap Index Fund

In considering the renewal of the Management Agreement for the Small Cap Index Fund, the Trustees considered the following additional factors: (1) The Fund’s master portfolio underperformed the Russell 2000 Index, the Fund’s benchmark index, for the three- and five-year periods; (2) the Fund’s master portfolio outperformed the peer universe median for the one-, three- and five-year periods ended March 31, 2010; (3) management’s analysis regarding the rationale for the underperformance of the Fund’s master portfolio compared to the performance of the Russell 2000 Index; and (4) the Fund’s expense ratio was the lowest of its Lipper expense universe.

Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the Small Cap Index Fund and its shareholders would benefit from the Manager’s continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the Small Cap Index Fund.

State Street Equity 500 Index Portfolio

Portfolio of Investments

June 30, 2010 (Unaudited)


			Market
			Value
	Shares		(000)
COMMON STOCKS — 97.4%
Consumer Discretionary — 10.2%
Abercrombie & Fitch Co. Class A		15,846	$	486
Amazon.Com, Inc.^(a)		61,992		6,773
Apollo Group, Inc. Class A^(a)		23,129		982
AutoNation, Inc.^(a)		16,963		331
AutoZone, Inc.^(a)		5,464		1,056
Bed Bath & Beyond, Inc.^(a)		45,645		1,693
Best Buy Co., Inc.		64,019		2,168
Big Lots, Inc.^(a)		12,727		408
CarMax, Inc.^(a)		40,300		802
Carnival Corp.		79,250		2,397
CBS Corp. Class B		126,503		1,636
Coach, Inc.		57,528		2,103
Comcast Corp. Class A		513,748		8,924
D.R. Horton, Inc.		52,876		520
Darden Restaurants, Inc.		24,588		955
DeVry, Inc.		10,400		546
Direct TV. Class A^(a)		165,777		5,623
Discovery Communications, Inc. Class A^(a)		50,000		1,786
Eastman Kodak Co.^(a)		54,482		236
eBay, Inc.^(a)		205,503		4,030
Expedia, Inc.		38,815		729
Family Dollar Stores, Inc.		25,558		963
Ford Motor Co.^(a)		610,598		6,155
Fortune Brands, Inc.		27,245		1,067
GameStop Corp. Class A^(a)		26,800		504
Gannett Co., Inc.		42,074		566
Gap, Inc.		87,498		1,703
Genuine Parts Co.		29,509		1,164
Goodyear Tire & Rubber Co.^(a)		42,357		421
H&R Block, Inc.		60,415		948
Harley-Davidson, Inc.		42,501		945
Harman International Industries, Inc.^(a)		12,621		377
Hasbro, Inc.		24,525		1,008
Home Depot, Inc.		307,812		8,640
Host Hotels & Resorts, Inc.		122,521		1,652
International Game Technology		53,619		842
Interpublic Group of Cos., Inc.^(a)		83,894		598
JC Penney Co., Inc.		40,010		859
Johnson Controls, Inc.		122,386		3,289
Kohl’s Corp.^(a)		55,933		2,657
Lennar Corp. Class A		25,931		361
Limited Brands		45,467		1,003
Lowe’s Cos., Inc.		260,762		5,325
Macy’s, Inc.		72,423		1,296
Marriot International, Inc. Class A		45,350		1,358
Mattel, Inc.		67,276		1,424
McDonald’s Corp.		194,625		12,820
McGraw-Hill, Inc.		55,266		1,555
Meredith Corp.		7,889		246
New York Times Co. Class A^(a)		22,922		198
Newell Rubbermaid, Inc.		50,693		742
News Corp. Class A		409,009		4,892
NIKE, Inc. Class B		70,852		4,786
Nordstrom, Inc.		29,533		951
O’Reilly Automotive, Inc.^(a)		24,600		1,170
Office Depot, Inc.^(a)		51,256		207
Omnicom Group, Inc.		54,641		1,874
Polo Ralph Lauren Corp.		10,615		775
Priceline.com, Inc.^(a)		8,890		1,569
Pulte Homes, Inc.^(a)		54,705		453
Radioshack Corp.		20,103		392
Ross Stores, Inc.		22,300		1,188
Scripps Networks Interactive, Inc. Class A		17,135		691
Sears Holdings Corp.^(a)		8,174		528
Snap-On, Inc.		9,212		377
Stanley Black & Decker, Inc.		30,007		1,516
Staples, Inc.		133,133		2,536
Starbucks Corp.		135,361		3,289
Starwood Hotels & Resorts Worldwide, Inc.		34,447		1,427
Target Corp.		136,316		6,703
Tiffany & Co.		22,880		867
Time Warner Cable, Inc.		64,271		3,347
Time Warner, Inc.		208,591		6,030
TJX Cos., Inc.		76,506		3,209
Urban Outfitters, Inc.^(a)		23,900		822
V.F. Corp.		16,393		1,167
Viacom, Inc. Class B		110,622		3,470
Walt Disney Co.		355,645		11,203
Washington Post Co. Class B		960		394
Whirlpool Corp.		13,661		1,200
Wyndham Worldwide Corp.		29,699		598
Wynn Resorts, Ltd.		12,300		938
Yum! Brands, Inc.		85,492		3,338

				176,777

Consumer Staples — 11.2%
Altria Group, Inc.		377,099		7,557
Archer-Daniels-Midland Co.		117,224		3,027
Avon Products, Inc.		78,360		2,077
Brown-Forman Corp. Class B		18,655		1,068
Campbell Soup Co.		34,065		1,221
Clorox Co.		24,143		1,501
Coca-Cola Co.		416,411		20,870
Coca-Cola Enterprises, Inc.		56,701		1,466
Colgate-Palmolive Co.		89,501		7,049
ConAgra Foods, Inc.		82,675		1,928
Constellation Brands, Inc. Class A^(a)		37,426		585
Costco Wholesale Corp.		79,889		4,380
CVS Caremark Corp.		251,932		7,387
Dean Foods Co.^(a)		33,458		337
Dr Pepper Snapple Group, Inc.		46,800		1,750
Estee Lauder Cos., Inc. Class A		20,952		1,168
General Mills, Inc.		119,864		4,258
H.J. Heinz Co.		55,669		2,406
Hormel Foods Corp.		13,400		542
Kellogg Co.		44,835		2,255
Kimberly-Clark Corp.		75,700		4,590
Kraft Foods, Inc. Class A		314,409		8,803
Kroger Co.		118,976		2,343
Lorillard, Inc.		28,361		2,041
McCormick & Co., Inc.		23,953		909
Molson Coors Brewing Co., Class B		28,262		1,197
PepsiCo, Inc.		292,454		17,825
Philip Morris International, Inc.		335,999		15,402
Procter & Gamble Co.		521,519		31,281
Reynolds American, Inc.		31,187		1,625
Safeway, Inc.		71,864		1,413
Sara Lee Corp.		116,034		1,636

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio
Portfolio of Investments — (continued)
June 30, 2010 (Unaudited)


			Market
			Value
	Shares		(000)
COMMON STOCKS — (continued)
Consumer Staples — (continued)
SuperValu, Inc.		34,848	$	378
Sysco Corp.		108,009		3,086
The Hershey Company		30,782		1,475
The J.M. Smucker Co.		20,260		1,220
Tyson Foods, Inc., Class A		51,235		840
Wal-Mart Stores, Inc.		376,602		18,103
Walgreen Co.		178,918		4,777
Whole Foods Market, Inc.^(a)		31,633		1,139

				192,915

Energy — 10.5%
Anadarko Petroleum Corp.		89,626		3,235
Apache Corp.		61,025		5,138
Baker Hughes, Inc.		78,273		3,254
Cabot Oil & Gas Corp.		17,300		542
Cameron International Corp.^(a)		45,100		1,467
Chesapeake Energy Corp.		114,482		2,398
Chevron Corp.^(b)		362,746		24,616
ConocoPhillips		268,830		13,197
Consol Energy, Inc.		38,973		1,316
Denbury Resources, Inc.^(a)		69,800		1,022
Devon Energy Corp.		81,151		4,944
Diamond Offshore Drilling, Inc.		11,300		703
El Paso Corp.		131,592		1,462
EOG Resources, Inc.		45,917		4,517
EQT Corp.		26,800		968
ExxonMobil Corp.^(b)		927,447		52,929
FMC Technologies, Inc.^(a)		20,800		1,095
Halliburton Co.		164,634		4,042
Helmerich & Payne, Inc.		18,600		679
Hess Corp.		53,201		2,678
Marathon Oil Corp.		128,777		4,004
Massey Energy Co.		20,400		558
Murphy Oil Corp.		33,441		1,657
Nabors Industries, Ltd.^(a)		48,204		849
National Oilwell Varco, Inc.		76,457		2,528
Noble Energy, Inc.		30,510		1,841
Occidental Petroleum Corp.		146,844		11,329
Peabody Energy Corp.		47,024		1,840
Pioneer Natural Resources Co.		21,400		1,272
Questar Corp.		32,768		1,491
Range Resources Corp.		28,700		1,152
Rowan Cos., Inc.^(a)		19,620		430
Schlumberger, Ltd.		216,375		11,974
Smith International, Inc.		44,334		1,669
Southwestern Energy Co.^(a)		63,200		2,442
Spectra Energy Corp.		113,998		2,288
Sunoco, Inc.		20,384		709
Tesoro Corp.		26,365		308
Valero Energy Corp.		98,009		1,762
Williams Cos., Inc.		102,568		1,875

				182,180

Financials — 16.5%
AFLAC, Inc.		85,390		3,644
Allstate Corp.		98,006		2,816
American Express Co.		216,764		8,605
American International Group, Inc.^(a)		24,133		831
Ameriprise Financial, Inc.		47,007		1,698
AON Corp.		49,047		1,821
Apartment Investment & Management Co. Class A		21,052		408
Assurant, Inc.		20,831		723
AvalonBay Communities, Inc.		14,398		1,344
Bank of America Corp.		1,811,671		26,034
Bank of New York Mellon Corp.		219,285		5,414
BB&T Corp.		125,770		3,309
Berkshire Hathaway, Inc. Class B^(a)		299,003		23,828
Boston Properties, Inc.		25,467		1,817
Capital One Financial Corp.		82,963		3,343
CB Richard Ellis Group, Inc. Class A^(a)		47,275		643
Charles Schwab Corp.		178,593		2,532
Chubb Corp.		59,975		2,999
Cincinnati Financial Corp.		27,114		701
Citigroup, Inc.^(a)(b)		4,100,502		15,418
CME Group, Inc.		12,091		3,404
Comerica, Inc.		33,344		1,228
Developers Diversified Realty Corp.		1,532		15
Discover Financial Services		100,705		1,408
E*Trade Financial Corp.^(a)		30,531		361
Equity Residential		51,657		2,151
Federated Investors, Inc. Class B		14,870		308
Fifth Third Bancorp		137,816		1,694
First Horizon National Corp.^(a)		44,500		509
Franklin Resources, Inc.		27,180		2,343
Genworth Financial, Inc. Class A^(a)		83,951		1,097
Goldman Sachs Group, Inc.		93,434		12,265
Hartford Financial Services Group, Inc.		78,297		1,733
HCP, Inc.		50,600		1,632
Health Care REIT, Inc.		20,800		876
Hudson City Bancorp, Inc.		84,392		1,033
Huntington Bancshares, Inc.		118,556		657
IntercontinentalExchange, Inc.^(a)		13,780		1,558
Invesco Ltd.		84,800		1,427
J.P. Morgan Chase & Co.		717,515		26,268
Janus Capital Group, Inc.		36,007		320
KeyCorp		155,975		1,199
Kimco Realty Corp.		71,369		959
Legg Mason, Inc.		27,042		758
Leucadia National Corp.^(a)		35,436		691
Lincoln National Corp.		51,992		1,263
Loews Corp.		62,531		2,083
M & T Bank Corp.		14,137		1,201
Marsh & McLennan Cos., Inc.		100,253		2,261
Marshall & Ilsley Corp.		86,593		622
Mastercard, Inc. Class A		17,600		3,512
MetLife, Inc.		148,596		5,611
Moody’s Corp.		34,766		693
Morgan Stanley		253,530		5,884
NASDAQ OMX Group, Inc.^(a)		28,600		508
Northern Trust Corp.		42,506		1,985
NYSE Euronext		47,300		1,307
Paychex, Inc.		55,738		1,447
People’s United Financial, Inc.		69,500		938
PNC Financial Services Group, Inc.		93,817		5,301
Principal Financial Group, Inc.		58,991		1,383

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio
Portfolio of Investments — (continued)
June 30, 2010 (Unaudited)


			Market
			Value
	Shares		(000)
COMMON STOCKS — (continued)
Financials — (continued)
Progressive Corp.		117,301	$	2,196
ProLogis		88,691		898
Prudential Financial, Inc.		84,439		4,531
Public Storage, Inc.		25,187		2,214
Regions Financial Corp.		206,189		1,357
Simon Property Group, Inc.		52,715		4,257
SLM Corp.^(a)		92,354		960
State Street Corp.^(c)		90,325		3,055
SunTrust Banks, Inc.		87,618		2,041
T. Rowe Price Group, Inc.		45,275		2,010
Torchmark Corp.		15,021		744
Total System Services, Inc.		37,775		514
Travelers Cos., Inc.		90,604		4,462
U.S. Bancorp		346,652		7,748
Unum Group		60,129		1,305
Ventas, Inc.		26,700		1,254
Visa, Inc.		81,000		5,731
Vornado Realty Trust		28,914		2,109
Wells Fargo Co.		943,949		24,165
Western Union Co.		125,385		1,869
XL Capital, Ltd. Class A		58,768		941
Zions Bancorp		25,453		549
	��
				284,731

Health Care — 11.6%
Abbott Laboratories		280,806		13,136
Aetna, Inc.		78,950		2,083
Allergan, Inc.		56,092		3,268
AmerisourceBergen Corp.		49,686		1,577
Amgen, Inc.^(a)		174,136		9,160
Baxter International, Inc.		109,561		4,453
Becton, Dickinson & Co.		42,997		2,907
Biogen Idec, Inc.^(a)		49,431		2,345
Boston Scientific Corp.^(a)		265,834		1,542
Bristol-Myers Squibb Co.		310,616		7,747
C.R. Bard, Inc.		16,497		1,279
Cardinal Health, Inc.		63,757		2,143
CareFusion Corp.^(a)		31,178		708
Celgene Corp.^(a)		83,618		4,249
Cephalon, Inc.^(a)		13,300		755
Cerner Corp.^(a)		11,700		888
CIGNA Corp.		51,596		1,603
Coventry Health Care, Inc.^(a)		26,203		463
DaVita, Inc.^(a)		18,200		1,136
Dentsply International, Inc.		26,700		799
Eli Lilly & Co.		184,075		6,166
Express Scripts, Inc.^(a)		99,998		4,702
Forest Laboratories, Inc.^(a)		52,202		1,432
Genzyme Corp.^(a)		48,692		2,472
Gilead Sciences, Inc.^(a)		163,999		5,622
Hospira, Inc.^(a)		29,203		1,678
Humana, Inc.^(a)		29,307		1,338
Intuitive Surgical, Inc.^(a)		7,100		2,241
Johnson & Johnson		499,549		29,503
King Pharmaceuticals, Inc.^(a)		48,592		369
Laboratory Corp. of America Holdings^(a)		18,422		1,388
Life Technologies Corp.^(a)		33,287		1,573
McKesson Corp.		49,855		3,348
Mead Johnson Nutrition Co.		35,818		1,795
Medco Health Solutions, Inc.^(a)		84,268		4,641
Medtronic, Inc.		200,178		7,260
Merck & Co., Inc.		562,870		19,684
Millipore Corp.^(a)		9,335		996
Mylan, Inc.^(a)		54,109		922
Patterson Cos., Inc.		18,294		522
Pfizer, Inc.		1,457,911		20,790
Quest Diagnostics, Inc.		27,100		1,349
St. Jude Medical, Inc.^(a)		59,626		2,152
Stryker Corp.		51,689		2,588
Tenet Healthcare Corp.^(a)		73,370		318
UnitedHealth Group, Inc.		209,896		5,961
Varian Medical Systems, Inc.^(a)		23,060		1,206
Watson Pharmaceuticals, Inc.^(a)		17,746		720
Wellpoint, Inc.^(a)		78,238		3,828
Zimmer Holdings, Inc.^(a)		37,152		2,008

				200,813

Industrials — 10.4%
3M Co.		128,872		10,180
Amphenol Corp. Class A		31,200		1,226
Avery Dennison Corp.		21,188		681
Boeing Co.		137,088		8,602
Caterpillar, Inc.		113,279		6,805
CH Robinson Worldwide, Inc.		29,061		1,618
Cintas Corp.		25,088		601
CSX Corp.		71,038		3,526
Cummins, Inc.		35,158		2,290
Danaher Corp.		95,372		3,540
Deere & Co.		77,137		4,295
Dover Corp.		34,395		1,437
Eaton Corp.		30,995		2,028
Emerson Electric Co.		136,448		5,961
Equifax, Inc.		22,083		620
Expeditors International Washington, Inc.		39,220		1,353
Fastenal Co.		22,500		1,129
FedEx Corp.		56,900		3,989
First Solar, Inc.^(a)		8,670		987
Flir Systems, Inc.^(a)		28,900		841
Flowserve Corp.		10,500		890
Fluor Corp.		32,260		1,371
General Dynamics Corp.		70,161		4,109
General Electric Co.^(b)		1,926,733		27,783
Goodrich Co.		22,445		1,487
Honeywell International, Inc.		138,781		5,417
Illinois Tool Works, Inc.		70,571		2,913
Iron Mountain, Inc.		32,200		723
ITT Industries, Inc.		31,592		1,419
Jacobs Engineering Group, Inc.^(a)		22,300		813
L-3 Communications Holdings, Inc.		20,303		1,438
Leggett & Platt, Inc.		27,098		544
Lockheed Martin Corp.		57,352		4,273
Masco Corp.		64,323		692
Monster Worldwide, Inc.^(a)		22,609		263
Norfolk Southern Corp.		67,255		3,568
Northrop Grumman Corp.		55,211		3,006
PACCAR, Inc.		66,474		2,650

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio
Portfolio of Investments — (continued)
June 30, 2010 (Unaudited)


			Market
			Value
	Shares		(000)
COMMON STOCKS — (continued)
Industrials — (continued)
Pall Corp.		21,509	$	739
Parker-Hannifin Corp.		29,603		1,642
Pitney Bowes, Inc.		34,927		767
Precision Castparts Corp.		25,907		2,666
Quanta Services, Inc.^(a)		39,500		816
R.R. Donnelley & Sons Co.		36,109		591
Raytheon Co.		69,082		3,343
Republic Services, Inc.		60,403		1,796
Robert Half International, Inc.		26,540		625
Rockwell Automation, Inc.		24,305		1,193
Rockwell Collins, Inc.		28,931		1,537
Roper Industries, Inc.		17,000		951
Ryder Systems, Inc.		7,921		319
Southwest Airlines Co.		136,986		1,522
Stericycle, Inc.^(a)		14,800		971
Textron, Inc.		49,939		847
Thermo Fisher Scientific, Inc.^(a)		74,524		3,655
Union Pacific Corp.		91,668		6,372
United Parcel Service, Inc. Class B		179,646		10,220
United Technologies Corp.		169,378		10,994
W.W. Grainger, Inc.		11,469		1,141
Waste Management, Inc.		88,539		2,770

				180,545

Information Technology — 17.2%
Adobe Systems, Inc.^(a)		95,657		2,528
Advanced Micro Devices, Inc.^(a)		99,186		726
Agilent Technologies, Inc.^(a)		60,468		1,719
Akamai Technologies, Inc.^(a)		30,124		1,222
Altera Corp.		52,854		1,311
Analog Devices, Inc.		53,269		1,484
AOL, Inc.^(a)(d)		1		—
Apple, Inc.^(a)		164,684		41,423
Applied Materials, Inc.		245,007		2,945
Autodesk, Inc.^(a)		41,576		1,013
Automatic Data Processing, Inc.		91,917		3,701
BMC Software, Inc.^(a)		31,221		1,081
Broadcom Corp. Class A		75,759		2,498
CA, Inc.		67,099		1,235
Cisco Systems, Inc.^(a)		1,034,219		22,039
Citrix Systems, Inc.^(a)		33,967		1,434
Cognizant Technology Solutions Corp. Class A^(a)		54,384		2,722
Computer Sciences Corp.		27,744		1,255
Compuware Corp.^(a)		37,450		299
Corning, Inc.		283,076		4,572
Dell, Inc.^(a)		313,150		3,777
Dun & Bradstreet Corp.		9,400		631
Electronic Arts, Inc.^(a)		60,100		865
EMC Corp.^(a)		372,184		6,811
Fidelity National Information Services, Inc.		58,077		1,558
Fiserv, Inc.^(a)		26,452		1,208
Google, Inc. Class A^(a)		43,690		19,440
Harris Corp.		23,700		987
Hewlett-Packard Co.		425,316		18,408
Intel Corp.		1,008,456		19,614
International Business Machines Corp.		232,242		28,677
Intuit, Inc.^(a)		57,563		2,001
Jabil Circuit, Inc.		31,651		421
Juniper Networks, Inc.^(a)		92,593		2,113
KLA-Tencor Corp.		30,605		853
Lexmark International Group, Inc. Class A^(a)		12,642		418
Linear Technology Corp.		39,863		1,109
LSI Corp.^(a)		114,762		528
McAfee, Inc.^(a)		28,200		866
MEMC Electronic Materials, Inc.^(a)		36,378		359
Microchip Technology, Inc.		32,489		901
Micron Technology, Inc.^(a)		157,162		1,334
Microsoft Corp.^(b)		1,377,635		31,699
Molex, Inc.		23,305		425
Motorola, Inc.^(a)		422,265		2,753
National Semiconductor Corp.		42,096		567
NetApp, Inc.^(a)		63,057		2,353
Novell, Inc.^(a)		68,720		390
Novellus Systems, Inc.^(a)		15,230		386
NVIDIA Corp.^(a)		103,156		1,053
Oracle Corp.		706,562		15,163
PerkinElmer, Inc.		21,118		437
QLogic Corp.^(a)		17,922		298
QUALCOMM, Inc.		298,111		9,790
Red Hat, Inc.^(a)		33,300		964
SAIC, Inc.^(a)		54,800		917
Salesforce.com, Inc.^(a)		19,700		1,691
SanDisk Corp.^(a)		40,667		1,711
Symantec Corp.^(a)		147,863		2,052
Tellabs, Inc.		73,830		472
Teradata Corp.^(a)		28,920		882
Teradyne, Inc.^(a)		28,149		274
Texas Instruments, Inc.		225,399		5,247
VeriSign, Inc.^(a)		32,421		861
Waters Corp.^(a)		17,365		1,124
Western Digital Corp.^(a)		43,000		1,297
Xerox Corp.		247,701		1,992
Xilinx, Inc.		51,302		1,296
Yahoo!, Inc.^(a)		217,019		3,001

				297,181

Materials — 3.4%
Air Products & Chemicals, Inc.		38,809		2,515
Airgas, Inc.		14,300		889
AK Steel Holding Corp.		20,000		238
Alcoa, Inc.		187,149		1,883
Allegheny Technologies, Inc.		17,228		761
Ball Corp.		17,262		912
Bemis Co., Inc.		21,162		571
CF Industries Holdings, Inc.		12,650		803
Cliffs Natural Resources, Inc.		23,400		1,104
Dow Chemical Co.		208,828		4,953
E.I. Du Pont de Nemours & Co.		164,012		5,673
Eastman Chemical Co.		12,204		651
Ecolab, Inc.		40,966		1,840
FMC Corp.		12,600		724
Freeport-McMoRan Copper & Gold, Inc. Class B		85,352		5,047

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio
Portfolio of Investments — (continued)
June 30, 2010 (Unaudited)


			Market
			Value
	Shares		(000)
COMMON STOCKS — (continued)
Materials — (continued)
International Flavors & Fragrances, Inc.		13,031	$	553
International Paper Co.		75,811		1,716
MeadWestvaco Corp.		30,320		673
Monsanto Co.		99,155		4,583
Newmont Mining Corp.		89,206		5,508
Nucor Corp.		57,654		2,207
Owens-Illinois, Inc.^(a)		30,400		804
Pactiv Corp.^(a)		22,615		630
Plum Creek Timber Co., Inc.		29,311		1,012
PPG Industries, Inc.		28,971		1,750
Praxair, Inc.		55,711		4,233
Sealed Air Corp.		29,692		586
Sherwin-Williams Co.		17,096		1,183
Sigma-Aldrich Corp.		20,934		1,043
Titanium Metals Corp.^(a)		16,600		292
United States Steel Corp.		26,678		1,028
Vulcan Materials Co.		22,561		989
Weyerhaeuser Co.		36,537		1,286

				58,640

Telecommunication Services — 2.9%
American Tower Corp. Class A^(a)		73,400		3,266
AT&T, Inc.		1,065,950		25,785
CenturyTel, Inc.		52,073		1,735
Frontier Communications Corp.		60,384		429
JDS Uniphase Corp.^(a)		42,723		420
MetroPCS Communications, Inc.^(a)		51,700		423
Qwest Communications International, Inc.		275,190		1,445
Sprint Nextel Corp.^(a)		520,165		2,206
Verizon Communications, Inc.		512,666		14,365
Windstream Corp.		90,413		955

				51,029

Utilities — 3.5%
AES Corp.^(a)		115,195		1,064
Allegheny Energy, Inc.		28,359		587
Ameren Corp.		40,160		955
American Electric Power Co., Inc.		87,352		2,822
CenterPoint Energy, Inc.		77,511		1,020
CMS Energy Corp.		37,956		556
Consolidated Edison, Inc.		52,152		2,248
Constellation Energy Group, Inc.		34,214		1,103
Dominion Resources, Inc.		109,162		4,229
DTE Energy Co.		29,884		1,363
Duke Energy Corp.		238,420		3,815
Edison International		57,119		1,812
Entergy Corp.		34,598		2,478
Exelon Corp.		119,921		4,553
FirstEnergy Corp.		53,707		1,892
Integrys Energy Group, Inc.		14,716		644
NextEra Energy, Inc.		75,221		3,668
Nicor, Inc.		9,400		381
NiSource, Inc.		48,582		704
Northeast Utilities		32,000		815
NRG Energy, Inc.^(a)		47,200		1,001
Oneok, Inc.		18,600		804
Pepco Holdings, Inc.		41,700		654
PG&E Corp.		67,826		2,788
Pinnacle West Capital Corp.		20,360		740
PPL Corp.		82,375		2,055
Progress Energy, Inc.		52,281		2,050
Public Service Enterprise Group, Inc.		92,324		2,893
SCANA Corp.		18,300		654
Sempra Energy		43,386		2,030
Southern Co.		149,043		4,960
TECO Energy, Inc.		34,951		527
Wisconsin Energy Corp.		20,100		1,020
Xcel Energy, Inc.		79,151		1,631

				60,516

TOTAL COMMON STOCKS (Cost $1,329,377)				1,685,327


	Par
	Amount
	(000)
U.S. GOVERNMENT SECURITIES — 0.4%
United States Treasury Bill^(b)(e)(f) 0.08% due 10/14/10	$	3,715	3,714
United States Treasury Bill^(b)(e)(f) 0.13% due 09/16/10		3,000	2,999

TOTAL U.S. GOVERNMENT SECURITIES (Cost $6,713)			6,713


	Shares
	(000)
MONEY MARKET FUNDS — 2.1%
AIM Short Term Investment Prime Portfolio		35,549		35,549
Federated Money Market Obligations Trust		576		576

TOTAL MONEY MARKET FUNDS (Cost $36,125)				36,125

TOTAL INVESTMENTS^(g)† — 99.9% (Identified Cost $1,372,215)				1,728,165

Other Assets in Excess of Liabilities — 0.1%				1,807

NET ASSETS — 100.0%			$	1,729,972


(a)		Non-income producing security.

(b)		All or part of this security has been designated as collateral for futures contracts.

(c)		Affiliated issuer. See table that follows for more information.

(d)		Amount is less than $1,000.

(e)		Rate represents annualized yield at date of purchase.

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio
Portfolio of Investments — (continued)
June 30, 2010 (Unaudited)


(f)		Value determined based on Level 2 inputs established by provisions surrounding Fair Value Measurements and Disclosures. (Note 2)

(g)		Unless otherwise indicated, the values of the Securities of the Portfolio are determined based on Level 1 inputs established by provisions surrounding Fair Value Measurements and Disclosures. (Note 2)

†		See Note 2 of the Notes to Financial Statements.


			Unrealized
	Number of		Depreciation
	Contracts		(000)
Schedule of Futures Contracts S&P 500 Financial Futures Contracts (long) Expiration Date 09/2010		894	$	(2,753	)


Total unrealized depreciation on open futures contracts purchased			$	(2,753	)

Affiliate Table

Certain investments made by the Portfolio were made in securities affiliated with State Street and SSgA FM. Investments in State Street Corp., the holding company of State Street, were made according to its representative portion of the S&P 500® Index. The market value of this investment at June 30, 2010 is listed in the Portfolio of Investments.

Income earned

Shares purchased

Shares sold for

Value at

for the six months

Realized loss

Security

Number of shares

for the six months

the six months

Number of shares

06/30/10

ended 06/30/10

on shares sold

Description

held at 12/31/09

ended 06/30/10

held at 06/30/10

(000)

State Street Corp.

90,925

6,300

6,900

90,325

3,055

(163

)

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Statement of Assets and Liabilities

June 30, 2010 (Unaudited)

(Amounts in thousands)


Assets
Investments in unaffiliated issuers at market value (identified cost $1,368,940)	$	1,725,110
Investments in non-controlled affiliates at market value (identified cost $3,275) (Note 4)		3,055

Total investments at market value (identified cost $1,372,215)		1,728,165
Dividends and interest		2,261

Total assets		1,730,426
Liabilities
Daily variation margin on futures contracts		389
Management fees (Note 4)		65

Total liabilities		454

Net Assets	$	1,729,972

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Statement of Operations

Six Months Ended June 30, 2010 (Unaudited)

(Amounts in thousands)


Investment Income
Interest	$	35
Dividend income — unaffiliated issuers		17,606
Dividend income — non-controlled affiliated issuer		2

Total investment income		17,643


Expenses
Management fees (Note 4)		415

Total expenses		415

Net Investment Income	$	17,228


Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments — unaffiliated issuers	$	16,015
Investments — non-controlled affiliated issuer		(163	)
Futures contracts		(236	)

		15,616

Net change in net unrealized appreciation (depreciation) on:
Investments		(152,753	)
Futures contracts		(3,300	)

		(156,053	)

Net realized and unrealized loss		(140,437	)

Net Decrease in Net Assets Resulting from Operations	$	(123,209	)

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Statements of Changes in Net Assets

(Amounts in thousands)


	For The
	Six Months Ended			For The
	June 30, 2010			Year Ended
	(Unaudited)			December 31, 2009
Increase (Decrease) in Net Assets From Operations:
Net investment income	$	17,228		$	38,199
Net realized gain (loss) on investments and futures contracts		15,616			(88,220	)
Net change in net unrealized appreciation (depreciation) on investments and futures contracts		(156,053	)		473,395


Net increase (decrease) in net assets resulting from operations		(123,209	)		423,374


Capital Transactions:
Contributions		171,603			267,641
Withdrawals		(211,808	)		(319,837	)

Net decrease in net assets from capital transactions		(40,205	)		(52,196	)

Net Increase (Decrease) in Net Assets		(163,414	)		371,178
Net Assets
Beginning of period		1,893,386			1,522,208

End of period	$	1,729,972		$	1,893,386

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Financial Highlights

The following table includes selected supplemental data and ratios to average net assets:


	Six Months
	Ended
	06/30/10			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	(Unaudited)			12/31/09			12/31/08			12/31/07			12/31/06			12/31/05
Supplemental Data and Ratios:
Net assets, end of period (in thousands)	$	1,729,972		$	1,893,386		$	1,522,208		$	2,422,377		$	2,766,696		$	2,453,109
Ratios to average net assets:
Operating expenses		0.045	%*		0.045	%		0.045	%		0.045	%		0.045	%		0.045	%
Net investment income		1.87	%*		2.28	%		2.30	%		1.96	%		1.94	%		1.84	%
Portfolio turnover rate^(a)		10	%**		19	%		14	%		12	%		10	%		8	%
Total return^(b)		(6.62	)%**		26.50	%		(37.02	)%		5.49	%		15.75	%		4.87	%


(a)		The portfolio turnover rate excludes in-kind security transactions.

(b)		Results represent past performance and are not indicative of future results.

*		Annualized.

**		Not annualized.

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Notes to Financial Statements
June 30, 2010 (Unaudited)

1. Organization

State Street Master Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and was organized as a business trust under the laws of the Commonwealth of Massachusetts on July 27, 1999. The Trust comprises eleven investment portfolios: the State Street Equity 500 Index Portfolio, the State Street Equity 400 Index Portfolio, the State Street Equity 2000 Index Portfolio, the State Street Aggregate Bond Index Portfolio, the State Street Money Market Portfolio, the State Street Tax Free Money Market Portfolio, the State Street Short-Term Tax Exempt Bond Portfolio, the State Street Limited Duration Bond Portfolio, the State Street Treasury Money Market Portfolio, the State Street Treasury Plus Money Market Portfolio and the State Street U.S. Government Money Market Portfolio. Information presented in these financial statements pertains only to the State Street Equity 500 Index Portfolio (the “Portfolio”). At June 30, 2010, the following Portfolios were in operation: the Portfolio, the State Street Money Market Portfolio, the State Street Tax Free Money Market Portfolio, the State Street Short-Term Tax Exempt Bond Portfolio, the State Street Treasury Money Market Portfolio, the State Street Treasury Plus Money Market Portfolio and the State Street U.S. Government Money Market Portfolio. The Portfolio is authorized to issue an unlimited number of non-transferable beneficial interests.

The Portfolio’s investment objective is to replicate, as closely as possible, before expenses, the performance of the Standard & Poor’s 500 Index (the “S&P 500® Index”). The Portfolio uses a passive management strategy designed to track the performance of the S&P 500® Index. The S&P 500® Index is a well-known, unmanaged, stock index that includes common stocks of 500 companies from several industrial sectors representing a significant portion of the market value of all stocks publicly traded in the United States. There is no assurance that the Portfolio will achieve its objective.

2. Significant Accounting Policies

The following is a summary of the significant accounting policies consistently followed by the Portfolio in the preparation of its financial statements.

Security valuation – The Portfolio’s investments are valued each business day by independent pricing services. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price if no sale has occurred) on the primary market or exchange on which they trade. Investments in other mutual funds are valued at the net asset value per share. Fixed-income securities and options are valued on the basis of the closing bid price. Futures contracts are valued on the basis of the last sale price. Money market instruments maturing within 60 days of the valuation date are valued at amortized cost, a method by which each money market instrument is initially valued at cost, and thereafter a constant accretion or amortization of any discount or premium is recorded until maturity of the security. The Portfolio may value securities for which market quotations are not readily available at “fair value,” as determined in good faith pursuant to procedures established by the Board of Trustees.

The Portfolio adopted provisions surrounding Fair Value Measurements and Disclosures that defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This applies to fair value measurements that are already required or permitted by other accounting standards and is intended to increase consistency of those measurements and applies broadly to securities and other types of assets and liabilities. In accordance with these provisions, fair value is defined as the price that the portfolio would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most

State Street Equity 500 Index Portfolio
Notes to Financial Statements (continued)
June 30, 2010 (Unaudited)

advantageous market of the investment. Various inputs are used in determining the value of the Portfolio’s investments.

The three tier hierarchy of inputs is summarized below:

	•		Level 1 — quoted prices in active markets for identical securities

	•		Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

	•		Level 3 — significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used, as of June 30, 2010, in valuing the Portfolio’s assets carried at fair value (amounts in thousands):


	Quoted Prices in
	Active Markets for			Significant Other		Significant
	Identical Assets			Observable Inputs		Unobservable Inputs
Description	(Level 1)			(Level 2)		(Level 3)		Total
INVESTMENTS:
Common Stocks	$	1,685,327		$	—	$	—	$	1,685,327
U.S. Government Securities		—			6,713		—		6,713
Money Market Funds		36,125			—		—		36,125
OTHER LIABILITIES:
Futures contracts		(2,753	)		—		—		(2,753	)

TOTAL ASSETS AND LIABILITIES	$	1,718,699		$	6,713	$	—	$	1,725,412

The type of inputs used to value each security under the provisions surrounding Fair Value Measurement and Disclosures is identified in the Portfolio of Investments, which also includes a breakdown of the Portfolio’s investments by category.

The Portfolio adopted updated provisions surrounding Fair Value Measurements and Disclosures effective March 31, 2010. This update applies to the Portfolio’s disclosures about transfers in and out of Level 1 and Level 2 of the fair value hierarchy and the reasons for the transfers as well as disclosures about the valuation techniques and inputs used to measure fair value for investments that fall in either Level 2 or Level 3 fair value hierarchy.

As of the period ended June 30, 2010, there were no securities transferred from Level 1 to Level 2 and no securities transferred from Level 2 to Level 1.

Securities transactions, investment income and expenses – Securities transactions are recorded on a trade date basis for financial statement purposes. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis and includes amortization of premium and

State Street Equity 500 Index Portfolio
Notes to Financial Statements (continued)
June 30, 2010 (Unaudited)

accretion of discount on investments. Realized gains and losses from securities transactions are recorded on the basis of identified cost. Expenses are accrued daily based on average daily net assets.

All of the net investment income and realized and unrealized gains and losses from the security transactions of the Portfolio are allocated pro rata among the partners in the Portfolio based on each partner’s daily ownership percentage.

Federal income taxes: The Portfolio is not required to pay federal income taxes on its net investment income and net capital gains because it is treated as a partnership for federal income tax purposes. All interest, dividends, gains and losses of the Portfolio are deemed to have been “passed through” to the Portfolio’s partners in proportion to their holdings in the Portfolio, regardless of whether such items have been distributed by the Portfolio. Each partner is responsible for tax liability based on its distributive share; therefore, no provision has been made for federal income taxes.

The Portfolio has reviewed the tax positions for open years as of and during the year ended December 31, 2009, and determined it did not have a liability for any unrecognized tax expenses. The Portfolio recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of June 30, 2010, tax years 2006 through 2009 remain subject to examination by the Portfolio’s major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.

At June 30, 2010, the book cost of investments was $1,372,215 which approximates cost computed on a federal tax basis. The aggregate gross unrealized appreciation and gross unrealized depreciation was $488,044 and $132,094, respectively, resulting in net appreciation of $355,950 for all securities as computed on a federal income tax basis.

Futures: The Portfolio may enter into financial futures contracts as part of its strategy to track the performance of the S&P 500® Index. Upon entering into a futures contract, the Portfolio is required to deposit with the broker cash or securities in an amount equal to a certain percentage of the contract amount. Variation margin payments are made or received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security or index, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. The Portfolio recognizes a realized gain or loss when the contract is closed. The Portfolio voluntarily segregates securities in an amount equal to the outstanding value of the open futures contracts in accordance with Securities and Exchange Commission requirements.

The primary risks associated with the use of futures contracts are an imperfect correlation between the change in market value of the securities held by the Portfolio and the prices of futures contracts and the possibility of an illiquid market.

The Portfolio adopted provisions surrounding Derivatives and Hedging which requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. The following table, grouped into appropriate risk

State Street Equity 500 Index Portfolio
Notes to Financial Statements (continued)
June 30, 2010 (Unaudited)

categories, discloses the amounts related to the Portfolio’s use of derivative instruments and hedging activities at June 30, 2010:

Liability Derivatives⁽¹⁾(amounts in thousands)


			Foreign
	Interest Rate		Exchange		Credit		Equity			Commodity		Other
	Contracts Risk		Contracts Risk		Contracts Risk		Contracts Risk			Contracts Risk		Contracts Risk		Total
Futures Contracts	$	—	$	—	$	—	$	(2,753	)	$	—	$	—	$	(2,753	)


⁽¹⁾		Portfolio of Investments: Unrealized depreciation of futures contracts.

Transactions in derivative instruments during the six months ended June 30, 2010, were as follows:

Realized Gain (Loss)⁽¹⁾(amounts in thousands)


			Foreign
	Interest Rate		Exchange		Credit		Equity			Commodity		Other
	Contracts Risk		Contracts Risk		Contracts Risk		Contracts Risk			Contracts Risk		Contracts Risk		Total
Futures Contracts	$	—	$	—	$	—	$	(236	)	$	—	$	—	$	(236	)

Change in Appreciation (Depreciation)⁽²⁾(amounts in thousands)


			Foreign
	Interest Rate		Exchange		Credit		Equity			Commodity		Other
	Contracts Risk		Contracts Risk		Contracts Risk		Contracts Risk			Contracts Risk		Contracts Risk		Total
Futures Contracts	$	—	$	—	$	—	$	(3,300	)	$	—	$	—	$	(3,300	)


⁽¹⁾		Statement of Operations location: Net realized gain (loss) on: Futures contracts

⁽²⁾		Statement of Operations location: Net change in unrealized appreciation (depreciation) on: Futures contracts

Use of estimates: The Portfolio’s financial statements are prepared in accordance with U.S. generally accepted accounting principles, which require the use of management estimates. Actual results could differ from those estimates.

3. Securities Transactions

For the period ended June 30, 2010, purchases and sales of investment securities, excluding short-term investments, futures contracts, contributions in-kind and fair value of withdrawals, aggregated to $169,814 and $190,169, respectively.

4. Related Party Fees and Transactions

The Portfolio has entered into an investment advisory agreement with SSgA Funds Management, Inc. (“SSgA FM” or the “Adviser”), a subsidiary of State Street Corporation and an affiliate of State Street Bank and Trust Company (“State Street”), under which SSgA FM directs the investments of the Portfolio in accordance with its investment objective, policies, and limitations. The Trust has contracted with State Street to provide custody, administration and transfer agent services to the Portfolio. In compensation for SSgA FM’s services as investment adviser and for State Street’s services as administrator, custodian and transfer agent (and for assuming ordinary operating expenses of the Portfolio, including ordinary legal, audit and trustees expense), State Street receives a unitary fee, calculated daily, at the annual rate of 0.045% of the Portfolio’s average daily net assets. For the period ended June 30, 2010, these fees amounted to $415.

Certain investments made by the Portfolio were made in securities affiliated with State Street and SSgA FM. Investments in State Street Corporation, the holding company of State Street, were made according

State Street Equity 500 Index Portfolio
Notes to Financial Statements (continued)
June 30, 2010 (Unaudited)

to its representative portion of the S&P 500® Index. The market value of this investment at June 30, 2010 is listed in the Portfolio of Investments.

5. Trustees’ Fees

Pursuant to certain agreements with State Street and its affiliates, each Independent Trustee receives for his or her services a $30,000 retainer in addition to $2,500 for each in-person meeting and $500 for each telephonic meeting from State Street or its affiliates. These fees are paid through a unitary fee.

6. Indemnifications

The Trust’s organizational documents provide that its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, both in some of its principal service contracts and in the normal course of its business, the Trust enters into contracts that provide indemnifications to other parties for certain types of losses or liabilities. The Trust’s maximum exposure under these arrangements is unknown as this could involve future claims against the Trust. Management does not expect any significant claims.

7. Subsequent Events

In accordance with provisions surrounding Subsequent Events adopted by the Portfolio, management has evaluated the possibility of subsequent events existing in the Portfolio’s financial statements. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements.

State Street Equity 500 Index Portfolio
General Information
June 30, 2010 (Unaudited)

Proxy Voting Policies and Procedures and Record

The Trust has adopted proxy voting procedures relating to portfolio securities held by the Portfolio. A description of the policies and procedures are available (i) without charge, upon request, by calling (877) 521-4083 or (ii) on the website of the Securities and Exchange Commission (the “SEC”) at www.sec.gov. Information on how the Portfolio voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by August 31 (i) without charge, upon request, by calling (877) 521-4083 or (ii) on the SEC’s website at www.sec.gov.

Quarterly Portfolio Schedule

The Trust files a complete schedule of portfolio holdings with the SEC for the first and third quarters of its fiscal year (as of March and September of each year) on Form N-Q. The Trust’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Trust’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The most recent Form N-Q is available without charge, upon request, by calling (877) 521-4083.

Schedule of Investments June 30, 2010 (Unaudited)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Advertising Agencies — 0.9%
Arbitron, Inc.		8,013	$	205,373
Constant Contact, Inc. (a)(b)		8,610		183,651
DG FastChannel, Inc. (a)		7,510		244,676
Dex One Corp. (a)		15,000		285,000
Harte-Hanks, Inc.		11,633		121,565
InterDigital, Inc. (a)(b)		13,144		324,525
National CineMedia, Inc.		13,123		218,629
QuinStreet, Inc. (a)		3,136		36,095
SuperMedia, Inc. (a)		3,894		71,221
Valassis Communications, Inc. (a)		14,966		474,722
ValueClick, Inc. (a)		24,393		260,761
Viad Corp.		6,376		112,537

				2,538,755
Aerospace — 1.4%
AAR Corp. (a)		11,639		194,837
AeroVironment, Inc. (a)		4,967		107,933
Applied Energetics, Inc. (a)		24,385		25,117
Argon ST, Inc. (a)		4,031		138,223
Astronics Corp. (a)		2,930		47,935
Ceradyne, Inc. (a)		7,587		162,134
Cubic Corp.		4,676		170,113
Curtiss-Wright Corp.		13,509		392,301
Ducommun, Inc.		3,300		56,430
Esterline Technologies Corp. (a)		8,871		420,929
GenCorp, Inc. (a)		17,546		76,851
Heico Corp.		8,748		314,228
Herley Industries, Inc. (a)		4,257		60,705
Kaman Corp., Class A		7,809		172,735
Kratos Defense & Security Solutions, Inc. (a)		4,949		51,965
LMI Aerospace, Inc. (a)		2,724		42,957
Ladish Co., Inc. (a)		4,734		107,556
Moog, Inc., Class A (a)		13,539		436,362
Orbital Sciences Corp. (a)		17,124		270,046
Teledyne Technologies, Inc. (a)		10,752		414,812
Triumph Group, Inc.		4,955		330,152

				3,994,321
Agriculture, Fishing & Ranching — 0.5%
The Andersons, Inc.		5,575		181,689
Cadiz, Inc. (a)		4,204		50,742
Cal-Maine Foods, Inc.		4,243		135,479
Calavo Growers, Inc.		3,536		63,507
Fresh Del Monte Produce, Inc. (a)		11,876		240,370
Limoneira Co.		2,434		52,964
Pilgrims Pride Corp. (a)		15,377		101,027
Sanderson Farms, Inc.		6,786		344,322
Seaboard Corp.		96		144,960

				1,315,060
Air Transport — 1.0%
Air Transport Services Group, Inc. (a)		16,200		77,112
AirTran Holdings, Inc. (a)		40,304		195,475
Alaska Air Group, Inc. (a)		10,698		480,875
Allegiant Travel Co. (b)		4,560		194,666
Atlas Air Worldwide Holdings, Inc. (a)		7,760		368,600
Bristow Group, Inc. (a)		10,773		316,726
Hawaiian Holdings, Inc. (a)		15,735		81,350
JetBlue Airways Corp. (a)		73,190		401,813
PHI, Inc. (a)		4,223		59,502
Pinnacle Airlines Corp. (a)		6,116		33,271
Republic Airways Holdings, Inc. (a)		10,400		63,544
SkyWest, Inc.		16,732		204,465
US Airways Group, Inc. (a)(b)		48,454		417,189

				2,894,588
Alternative Energy — 0.3%
Clean Energy Fuels Corp. (a)(b)		12,215		182,492
Comverge, Inc. (a)		7,823		70,094
EnerNOC, Inc. (a)(b)		5,961		187,414
Green Plains Renewable Energy (a)		4,980		50,896
Rex American Resources Corp. (a)		2,365		37,840
Syntroleum Corp. (a)		22,130		36,293
USEC, Inc. (a)		34,150		162,554

				727,583
Aluminum — 0.1%
Century Aluminum Co. (a)		19,199		169,527
Kaiser Aluminum Corp.		4,605		159,656

				329,183
Asset Management & Custodian — 0.9%
American Capital Ltd. (a)(b)		101,892		491,120
Apollo Investment Corp.		58,849		549,061
Artio Global Investors, Inc.		8,318		130,925
Calamos Asset Management, Inc., Class A		5,840		54,195
Capital Southwest Corp.		869		76,394
Cohen & Steers, Inc. (b)		5,134		106,479
Cowen Group, Inc., Class A (a)		11,221		46,006
Diamond Hill Investments Group		728		41,270
Epoch Holding Corp.		4,127		50,638
Fifth Street Finance Corp.		13,513		149,048
Financial Engines, Inc. (a)		4,059		55,203
GAMCO Investors, Inc., Class A		2,066		76,855
Golub Capital BDC, Inc.		2,265		32,661
Harris & Harris Group, Inc. (a)		9,712		39,722
JMP Group, Inc.		4,706		29,130
MCG Capital Corp.		23,131		111,723
MVC Capital, Inc.		7,347		94,923
NGP Capital Resources Co.		6,861		49,193
National Financial Partners Corp. (a)		12,618		123,278
Oppenheimer Holdings, Inc.		3,009		72,066
Solar Capital Ltd.		1,659		31,952
THL Credit, Inc. (a)		2,766		31,809
TICC Capital Corp.		8,304		69,754
Virtus Investment Partners, Inc. (a)		1,648		30,851
Westwood Holdings Group, Inc.		1,758		61,794

				2,606,050
Auto Parts — 0.7%
ATC Technology Corp. (a)		5,990		96,559
American Axle & Manufacturing Holdings, Inc. (a)		16,952		124,258
Amerigon, Inc. (a)		6,500		47,970
ArvinMeritor, Inc. (a)		28,139		368,621
Dana Holding Corp. (a)		42,025		420,250
Dorman Products, Inc. (a)		3,377		68,654
Exide Technologies (a)		22,951		119,345
Fuel Systems Solutions, Inc. (a)(b)		4,251		110,313
Standard Motor Products, Inc.		5,982		48,275
Stoneridge, Inc. (a)		4,767		36,182
Superior Industries International, Inc.		6,929		93,126
Tenneco, Inc. (a)		17,879		376,532
U.S. Auto Parts Network, Inc. (a)		4,321		25,926

				1,936,011

See Notes to Financial Statements.



42	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Auto Services — 0.1%
Cooper Tire & Rubber Co. (b)		18,228	$	355,446
Back Office Support, HR, & Consulting — 1.4%
APAC Customer Services, Inc. (a)		10,021		57,120
Administaff, Inc.		6,459		156,049
The Advisory Board Co. (a)		4,685		201,268
Barrett Business Services, Inc.		2,631		32,624
CBIZ, Inc. (a)		13,553		86,197
CDI Corp.		4,021		62,446
CRA International, Inc. (a)		3,485		65,623
Compass Diversified Holdings		10,042		134,663
Corporate Executive Board Co.		10,242		269,057
CoStar Group, Inc. (a)		6,194		240,327
Diamond Management & Technology Consultants, Inc.		7,358		75,861
Dice Holdings, Inc. (a)		5,025		34,773
ExlService Holdings, Inc. (a)		4,738		81,351
Forrester Research, Inc. (a)		4,445		134,506
GP Strategies Corp. (a)		4,600		33,396
Heidrick & Struggles International, Inc.		5,334		121,722
Hudson Highland Group, Inc. (a)		10,272		45,197
Huron Consulting Group, Inc. (a)		6,670		129,465
ICF International, Inc. (a)		5,280		126,350
Kelly Services, Inc., Class A (a)		8,245		122,603
Kforce, Inc. (a)		9,379		119,582
Korn/Ferry International (a)		13,821		192,112
LECG Corp. (a)		9,818		25,527
Liquidity Services, Inc. (a)		4,300		55,728
LoopNet, Inc. (a)		6,083		75,003
MAXIMUS, Inc.		5,236		303,007
Manpower, Inc.		—		17
Navigant Consulting, Inc. (a)		15,244		158,233
On Assignment, Inc. (a)		11,551		58,102
Resources Connection, Inc. (a)		13,972		190,019
SFN Group, Inc. (a)		16,030		87,524
SYKES Enterprises, Inc. (a)		12,455		177,235
TeleTech Holdings, Inc. (a)		9,140		117,815
TrueBlue, Inc. (a)		13,277		148,570
Volt Information Sciences, Inc. (a)		4,837		40,631

				3,959,703
Banks: Diversified — 6.2%
1st Source Corp.		4,666		78,949
1st United BanCorp., Inc. (a)		6,966		51,270
Alliance Financial Corp.		1,610		44,758
American National Bankshares, Inc.		2,097		44,855
Ameris Bancorp		7,382		71,310
Ames National Corp.		2,595		50,706
Arrow Financial Corp.		2,945		68,029
Bancfirst Corp.		2,089		76,228
Banco Latinoamericana De Comercio Exterior SA		8,601		107,426
The Bancorp, Inc. (a)		7,101		55,601
Bancorp Rhode Island, Inc.		1,320		34,584
Bank of Marin Bancorp		1,727		55,143
Bank of the Ozarks, Inc.		3,914		138,830
Boston Private Financial Holdings, Inc.		21,013		135,114
Bridge Bancorp, Inc.		2,116		51,376
Bryn Mawr Bank Corp.		2,799		46,967
CNB Financial Corporation		3,069		33,698
CVB Financial Corp. (b)		26,827		254,856
Camden National Corp.		2,404		66,038
Capital City Bank Group, Inc. (b)		3,783		46,834
Cardinal Financial Corp.		8,913		82,356
Cathay General Bancorp		23,631		244,108
Center Financial Corp. (a)		11,027		56,789
Centerstate Banks, Inc.		6,845		69,066
Chemical Financial Corp.		7,349		160,061
Citizens & Northern Corp.		3,947		42,233
Citizens Banking Corp. (a)		119,962		101,968
City Holding Co.		4,704		131,148
CoBiz Financial, Inc.		10,294		67,837
Columbia Banking System, Inc.		11,788		215,249
Community Bank System, Inc.		9,923		218,604
Community Trust Bancorp, Inc.		4,181		104,943
Danvers Bancorp, Inc.		5,866		84,764
Eagle Bancorp, Inc. (a)		5,134		60,479
Enterprise Financial Services Corp.		4,884		47,082
F.N.B. Corp.		34,235		274,907
Financial Institutions, Inc.		3,303		58,661
First Bancorp, Inc.		2,937		38,563
First Bancorp, North Carolina		4,594		66,567
First Busey Corp. (b)		16,534		74,899
First Commonwealth Financial Corp.		26,125		137,156
First Community Bancshares, Inc.		4,913		72,172
First Financial Bancorp		17,309		258,770
First Financial Bankshares, Inc.		6,139		295,225
First Financial Corp.		3,422		88,322
First Merchants Corp.		8,112		68,790
First Midwest Bancorp, Inc.		22,176		269,660
The First of Long Island Corp.		1,918		49,312
First South Bancorp, Inc.		2,851		30,249
FirstMerit Corp.		32,081		549,548
German American Bancorp, Inc.		3,588		54,896
Glacier Bancorp, Inc.		21,509		315,537
Greene County Bancshares, Inc. (a)		3,759		48,002
Hancock Holding Co.		8,558		285,495
Heartland Financial USA, Inc. (b)		4,086		70,606
Home Bancshares, Inc.		6,655		151,801
Hudson Valley Holding Corp.		3,608		83,417
IBERIABANK Corp.		7,945		409,009
International Bancshares Corp.		15,758		263,001
Investors Bancorp, Inc. (a)		14,211		186,448
Lakeland Bancorp, Inc.		6,523		55,576
Lakeland Financial Corp.		4,970		99,301
MA Independent Bank Corp.		6,415		158,322
MB Financial, Inc.		15,893		292,272
MT First Interstate Bancsystem, Inc.		3,928		61,787
MainSource Financial Group, Inc.		6,605		47,358
Merchants Bancshares, Inc.		1,733		38,507
Meridian Interstate Bancorp, Inc. (a)		3,105		33,845
Metro Bancorp, Inc. (a)		4,251		52,457
Midsouth Bancorp, Inc.		2,564		32,742
NBT Bancorp, Inc.		10,316		210,653
Nara Bancorp, Inc. (a)		11,626		98,007
National Bankshares, Inc.		2,223		53,863
National Penn Bancshares, Inc.		38,212		229,654
Old National Bancorp		25,936		268,697
Oriental Financial Group		9,855		124,764
Orrstown Financial Service, Inc.		2,100		46,473
Pacific Continental Corp.		5,880		55,684
PacWest Bancorp		9,298		170,246
Park National Corp. (b)		3,678		239,217
Peapack-Gladstone Financial Corp.		2,883		33,731
Penns Woods Bancorp, Inc.		1,395		42,436
Peoples Bancorp, Inc.		3,253		47,169
Pinnacle Financial Partners, Inc. (a)		10,234		131,507

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	43


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Banks: Diversified (concluded)
PrivateBancorp, Inc.		15,651	$	173,413
Prosperity Bancshares, Inc.		13,829		480,558
Provident Financial Services, Inc.		17,989		210,291
Renasant Corp.		6,616		94,940
Republic Bancorp, Inc., Class A		2,989		66,954
Rockville Financial, Inc.		2,684		31,966
Roma Financial Corp.		2,733		29,680
S&T Bancorp, Inc. (b)		7,470		147,607
SCBT Financial Corp.		3,877		136,548
SVB Financial Group (a)		12,436		512,736
SY Bancorp, Inc.		3,648		83,831
Sandy Spring Bancorp, Inc.		7,344		102,889
Sierra Bancorp		3,072		35,328
Signature Bank (a)		12,173		462,696
Simmons First National Corp., Class A		5,178		135,974
Southside Bancshares, Inc.		4,953		97,277
Southwest Bancorp, Inc.		5,806		77,162
State Bancorp, Inc.		5,431		51,595
StellarOne Corp.		7,122		90,948
Sterling Bancorp		8,268		74,412
Sterling Bancshares, Inc.		27,802		130,947
Suffolk Bancorp		2,985		92,356
Susquehanna Bancshares, Inc.		38,936		324,337
Taylor Capital Group, Inc. (a)		3,084		39,907
Texas Capital Bancshares, Inc. (a)		10,935		179,334
Tompkins Trustco, Inc.		2,401		90,638
Tower Bancorp, Inc.		1,863		40,781
Towne Bank (b)		7,182		104,283
Trico Bancshares		4,347		73,595
TrustCo Bank Corp. NY		23,237		130,127
Trustmark Corp.		18,948		394,497
UMB Financial Corp.		9,330		331,775
Umpqua Holdings Corp.		34,358		394,430
Union First Market Bankshares Corp.		5,521		67,687
United Bankshares, Inc. (b)		11,591		277,489
United Community Banks, Inc. (a)		28,666		113,231
Univest Corp. of Pennsylvania		5,148		89,163
Virginia Commerce Bancorp (a)		6,485		40,531
Washington Banking Co.		4,760		60,880
Washington Trust Bancorp, Inc.		4,461		76,015
Webster Financial Corp.		19,554		350,799
WesBanco, Inc.		7,031		118,472
West Bancorp., Inc. (a)		5,064		34,486
West Coast Bancorp (a)		28,990		73,924
Westamerica Bancorp. (b)		8,584		450,832
Western Alliance Bancorp (a)		17,825		127,805
Whitney Holding Corp.		28,802		266,418
Wilshire Bancorp, Inc.		6,088		53,270
Wintrust Financial Corp.		9,271		309,095

				17,958,449
Banks: Savings, Thrift & Mortgage Lending — 1.1%
Abington Bancorp, Inc.		6,673		58,189
Astoria Financial Corp.		25,494		350,797
Bank Mutual Corp.		14,337		81,434
BankFinancial Corp.		6,200		51,522
Beneficial Mutual Bancorp, Inc. (a)		10,346		102,219
Berkshire Hills Bancorp, Inc.		4,386		85,439
BofI Holding, Inc. (a)		2,218		31,318
Brookline Bancorp, Inc.		17,740		157,531
Dime Community Bancshares, Inc.		8,192		101,007
ESB Financial Corp.		2,997		39,111
ESSA Bancorp, Inc.		4,914		60,491
First Financial Holdings, Inc.		5,188		59,403
Flagstar BanCorp., Inc. (a)		14,476		45,455
Flushing Financial Corp.		9,466		115,769
Great Southern Bancorp, Inc.		3,095		62,860
Heritage Financial Corp. (a)		2,942		44,042
Home Bancorp, Inc. (a)		2,774		35,812
Home Federal Bancorp, Inc.		5,300		66,939
Kearny Financial Corp.		4,644		42,539
NewAlliance Bancshares, Inc.		31,305		350,929
Northfield Bancorp, Inc.		5,502		71,416
Northwest Bancshares, Inc.		32,849		376,778
OceanFirst Financial Corp.		4,601		55,534
Ocwen Financial Corp. (a)		22,274		226,972
OmniAmerican Bancorp, Inc. (a)		3,994		45,092
Oritani Financial Corp.		16,846		168,460
Provident New York Bancorp		11,920		105,492
Territorial BanCorp., Inc.		3,793		71,877
United Financial Bancorp, Inc.		5,370		73,301
ViewPoint Financial Group		3,233		44,777
WSFS Financial Corp.		1,549		55,656
Westfield Financial, Inc.		9,012		75,070

				3,313,231
Beverage: Brewers & Distillers — 0.1%
Boston Beer Co., Inc., Class A (a)		2,675		180,429
Beverage: Soft Drinks — 0.1%
Coca-Cola Bottling Co. Consolidated		1,333		63,877
Farmer Bros. Co.		2,387		36,020
Heckmann Corp. (a)(b)		27,229		126,342
National Beverage Corp.		3,470		42,612
Peet’s Coffee & Tea, Inc. (a)		3,552		139,487

				408,338
Biotechnology — 3.1%
AMAG Pharmaceuticals, Inc. (a)		6,316		216,955
AVI BioPharma, Inc. (a)		34,178		55,027
Accelrys, Inc. (a)		8,858		57,134
Acorda Therapeutics, Inc. (a)		11,626		361,685
Affymax, Inc. (a)		6,383		38,170
Albany Molecular Research, Inc. (a)		7,440		38,465
Allos Therapeutics, Inc. (a)		23,763		145,667
Alnylam Pharmaceuticals, Inc. (a)		10,998		165,190
Arena Pharmaceuticals, Inc. (a)(b)		30,910		94,894
Ariad Pharmaceuticals, Inc. (a)		33,664		94,932
Arqule, Inc. (a)		12,752		54,834
Array Biopharma, Inc. (a)		16,502		50,331
BioMimetic Therapeutics, Inc. (a)		4,824		53,643
Biosante Pharmaceuticals, Inc. (a)		20,480		36,045
Biotime, Inc. (a)		6,680		41,149
Celera Corp. (a)		24,703		161,805
Celldex Therapeutics, Inc. (a)		9,844		44,889
Cepheid, Inc. (a)		17,847		285,909
Chelsea Therapeutics International, Inc. (a)		10,081		29,537
Clinical Data, Inc. (a)		3,345		41,612
Combinatorx, Inc. (a)		21,729		31,507
Cubist Pharmaceuticals, Inc. (a)		17,260		355,556
Curis, Inc. (a)		23,604		32,810
Cypress Bioscience, Inc. (a)		12,166		27,982
Cytokinetics, Inc. (a)		14,961		35,458
Cytori Therapeutics, Inc. (a)		12,791		44,513

See Notes to Financial Statements.



44	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Biotechnology (concluded)
CytRx Corp. (a)		37,640	$	28,983
Dyax Corp. (a)		30,092		68,309
Dynavax Technologies Corp. (a)		22,519		41,885
Emergent Biosolutions, Inc. (a)		5,657		92,435
Enzo Biochem, Inc. (a)		10,424		42,426
Enzon Pharmaceuticals, Inc. (a)(b)		14,968		159,409
Exact Sciences Corp. (a)		11,168		49,139
Exelixis, Inc. (a)		32,821		113,889
Furiex Pharmaceuticals, Inc. (a)		2,637		26,792
Genomic Health, Inc. (a)(b)		4,272		55,237
Geron Corp. (a)(b)		29,274		146,955
Halozyme Therapeutics, Inc. (a)		21,725		152,944
Idenix Pharmaceuticals, Inc. (a)		11,092		55,460
ImmunoGen, Inc. (a)		20,445		189,525
Immunomedics, Inc. (a)(b)		19,500		60,255
Incyte Corp. (a)		26,476		293,089
Inhibitex, Inc. (a)		15,621		39,833
Inovio Pharmaceuticals, Inc. (a)		26,434		26,963
InterMune, Inc. (a)		13,725		128,329
Kensey Nash Corp. (a)		2,432		57,663
Keryx Biopharmaceuticals, Inc. (a)		15,456		56,569
Lexicon Genetics, Inc. (a)		60,374		77,279
Ligand Pharmaceuticals, Inc., Class B (a)		37,409		54,617
MannKind Corp. (a)(b)		18,741		119,755
Martek Biosciences Corp. (a)		9,923		235,274
Maxygen, Inc. (a)		9,719		53,746
Medivation, Inc. (a)(b)		10,272		90,804
Metabolix, Inc. (a)		8,165		116,841
Micromet, Inc. (a)		24,448		152,555
Momenta Pharmaceuticals, Inc. (a)		12,111		148,481
NPS Pharmaceuticals, Inc. (a)		17,999		115,914
Nabi Biopharmaceuticals (a)		13,970		75,997
Nektar Therapeutics (a)		28,384		343,446
Neuralstem, Inc. (a)		13,499		33,747
Neurocrine Biosciences, Inc. (a)		14,916		83,530
Neurogesx, Inc. (a)		3,644		24,160
Novavax, Inc. (a)(b)		25,850		56,094
Omeros Corp. (a)		6,077		45,091
Onyx Pharmaceuticals, Inc. (a)		18,755		404,920
Opko Health, Inc. (a)		27,628		62,439
Orexigen Therapeutics, Inc. (a)		10,000		42,000
Osiris Therapeutics, Inc. (a)		5,369		31,194
PDL BioPharma, Inc.		35,489		199,448
Peregrine Pharmaceuticals, Inc. (a)		16,080		34,572
Pharmasset, Inc. (a)		8,933		244,228
Progenics Pharmaceuticals, Inc. (a)		8,908		48,816
Pure Bioscience (a)		11,689		27,937
RTI Biologics, Inc. (a)		17,025		49,883
Rigel Pharmaceuticals, Inc. (a)		16,005		115,236
Sangamo Biosciences, Inc. (a)		14,038		52,081
Savient Pharmaceuticals, Inc. (a)		20,161		254,029
Seattle Genetics, Inc. (a)		25,137		301,393
Sequenom, Inc. (a)		18,740		110,753
StemCells, Inc. (a)(b)		39,100		36,754
Targacept, Inc. (a)		7,207		139,311
Theravance, Inc. (a)		18,828		236,668
Vanda Pharmaceuticals, Inc. (a)		8,575		56,681
ViroPharma, Inc. (a)		23,299		261,182
ZIOPHARM Oncology, Inc. (a)		15,216		48,387
ZymoGenetics, Inc. (a)		16,266		68,642

				9,135,673
Building Materials — 0.9%
Acuity Brands, Inc.		12,990		472,576
Ameron International Corp.		2,766		166,873
Builders FirstSource, Inc. (a)		14,690		35,256
Gibraltar Industries, Inc. (a)		9,304		93,970
Griffon Corp. (a)		13,307		147,175
Headwaters, Inc. (a)		18,810		53,420
LSI Industries, Inc.		6,524		31,837
Louisiana-Pacific Corp. (a)		37,659		251,939
NCI Building Systems, Inc. (a)		5,660		47,374
Quanex Building Products Corp.		11,482		198,524
Simpson Manufacturing Co., Inc.		11,690		286,990
Texas Industries, Inc.		6,233		184,123
Trex Co., Inc. (a)		4,741		95,247
Watsco, Inc.		8,294		480,388

				2,545,692
Building: Climate Control — 0.1%
Aaon, Inc.		3,785		88,228
Comfort Systems USA, Inc.		11,590		111,960
Interline Brands, Inc. (a)		9,882		170,860

				371,048
Building: Roofing, Wallboard & Plumbing — 0.1%
Beacon Roofing Supply, Inc. (a)		13,733		247,469
Cable Television Services — 0.1%
Knology, Inc. (a)		9,458		103,376
Mediacom Communications Corp., Class A (a)		12,803		86,036

				189,412
Casinos & Gambling — 0.3%
Ameristar Casinos, Inc.		8,272		124,576
Boyd Gaming Corp. (a)		16,324		138,591
Isle of Capri Casinos, Inc. (a)		5,003		46,328
Monarch Casino & Resort, Inc. (a)		3,071		31,109
Multimedia Games, Inc. (a)		8,949		40,271
Pinnacle Entertainment, Inc. (a)		18,409		174,149
Scientific Games Corp., Class A (a)		19,554		179,897
Shuffle Master, Inc. (a)		16,308		130,627

				865,548
Chemicals: Diversified — 1.3%
A Schulman, Inc.		9,477		179,684
Aceto Corp.		8,177		46,854
American Vanguard Corp.		6,310		50,038
Arch Chemicals, Inc.		6,774		208,233
Georgia Gulf Corp. (a)		10,107		134,827
Hawkins, Inc. (b)		2,718		65,449
Innophos Holdings, Inc.		6,469		168,712
KMG Chemicals, Inc.		1,950		28,002
LSB Industries, Inc. (a)		5,200		69,212
Landec Corp. (a)		8,333		49,081
OM Group, Inc. (a)		9,242		220,514
Olin Corp.		23,480		424,753
Omnova Solutions, Inc. (a)		13,628		106,435
PolyOne Corp. (a)		27,896		234,884
Rockwood Holdings, Inc. (a)		15,642		354,917
Sensient Technologies Corp.		14,793		383,583
Solutia, Inc. (a)		36,205		474,286
TPC Group, Inc. (a)		2,517		41,782
W.R. Grace & Co. (a)		21,780		458,251
Westlake Chemical Corp.		5,884		109,266

				3,808,763

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	45


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Chemicals: Specialty — 0.5%
Balchem Corp.		8,523	$	213,075
Calgon Carbon Corp. (a)		16,780		222,167
Kraton Performance Polymers, Inc. (a)		3,420		64,262
NewMarket Corp.		3,072		268,247
Polypore International, Inc. (a)		6,608		150,266
Quaker Chemical Corp.		3,395		91,970
Senomyx, Inc. (a)		12,066		45,730
Stepan Co.		2,341		160,195
Zep, Inc.		6,589		114,912

				1,330,824
Coal — 0.3%
Cloud Peak Energy, Inc. (a)		9,460		125,439
International Coal Group, Inc. (a)		39,462		151,929
James River Coal Co. (a)		8,287		131,929
L&L Energy, Inc. (a)		5,132		44,135
Patriot Coal Corp. (a)		23,433		275,338

				728,770
Commercial Finance & Mortgage Companies — 0.1%
Asta Funding, Inc.		3,837		37,871
Federal Agricultural Mortgage Corp., Class B		3,005		42,160
Medallion Financial Corp.		5,845		38,577
NewStar Financial, Inc. (a)		8,659		55,072

				173,680
Commercial Services: Rental & Leasing — 0.5%
Aircastle Ltd.		15,396		120,859
CAI International, Inc. (a)		3,206		38,151
Electro Rent Corp.		5,153		65,907
H&E Equipment Services, Inc. (a)		8,621		64,571
Marlin Business Services, Inc. (a)		2,802		33,876
McGrath RentCorp		7,260		165,383
Mobile Mini, Inc. (a)		10,970		178,592
PHH Corp. (a)(b)		16,627		316,578
RSC Holdings, Inc. (a)		14,971		92,371
TAL International Group, Inc.		5,066		113,833
United Rentals, Inc. (a)		18,078		168,487

				1,358,608
Commercial Vehicles & Parts — 0.2%
Commercial Vehicle Group, Inc. (a)		7,476		76,330
Force Protection, Inc. (a)		21,241		87,088
Miller Industries, Inc.		3,090		41,622
Modine Manufacturing Co. (a)		13,946		107,105
Rush Enterprises, Inc., Class A (a)		9,793		130,835
Spartan Motors, Inc.		10,027		42,113
Wabash National Corp. (a)		17,718		125,975

				611,068
Communications Technology — 2.6%
AboveNet, Inc. (a)		6,735		317,757
Acme Packet, Inc. (a)		13,167		353,929
Adtran, Inc.		18,543		505,668
Anaren, Inc. (a)		4,568		68,246
Anixter International, Inc. (a)		8,399		357,797
Aruba Networks, Inc. (a)(b)		22,033		313,750
Aviat Networks, Inc. (a)		18,591		67,485
Bel Fuse, Inc.		3,259		53,806
BigBand Networks, Inc. (a)		15,609		47,139
Black Box Corp.		5,322		148,431
Comtech Telecommunications Corp. (a)		8,487		254,016
Digi International, Inc. (a)		7,738		63,993
DigitalGlobe, Inc. (a)		8,155		214,477
EMS Technologies, Inc. (a)		4,700		70,594
Echelon Corp. (a)(b)		10,208		74,825
Emulex Corp. (a)		24,180		221,972
Extreme Networks, Inc. (a)		27,499		74,247
Finisar Corp. (a)		22,658		337,604
GSI Technology, Inc. (a)		6,262		35,819
GeoEye, Inc. (a)		6,798		211,690
Globecomm Systems, Inc. (a)		6,819		56,257
Harmonic, Inc. (a)		29,307		159,430
Hughes Communications, Inc. (a)		3,025		73,598
Infinera Corp. (a)		26,645		171,327
Ixia (a)		9,981		85,737
KVH Industries, Inc. (a)		4,559		56,623
Loral Space & Communications Ltd. (a)		3,371		144,009
NETGEAR, Inc. (a)		10,573		188,622
Network Equipment Technologies, Inc. (a)		9,849		34,373
Novatel Wireless, Inc. (a)		9,400		53,956
Oclaro, Inc. (a)		14,947		165,762
Oplink Communications, Inc. (a)		6,474		92,773
PC-Tel, Inc. (a)		6,452		32,518
Plantronics, Inc.		14,449		413,241
Riverbed Technology, Inc. (a)		18,918		522,515
SeaChange International, Inc. (a)		8,651		71,198
Shoretel, Inc. (a)		13,690		63,522
Sonus Networks, Inc. (a)		62,969		170,646
Sycamore Networks, Inc.		6,039		100,368
Syniverse Holdings, Inc. (a)		20,692		423,152
Tekelec (a)		20,484		271,208
Viasat, Inc. (a)		9,945		323,809

				7,467,889
Computer Services Software & Systems — 6.2%
3PAR, Inc. (a)		11,779		109,662
ACI Worldwide, Inc. (a)(c)		10,249		199,548
Actuate Corp. (a)		13,953		62,091
Acxiom Corp. (a)		20,521		301,453
American Reprographics Co. (a)		11,289		98,553
American Software, Class A		7,446		34,401
ArcSight, Inc. (a)		7,433		166,425
Ariba, Inc. (a)		27,012		430,301
Art Technology Group, Inc. (a)		47,601		162,795
Aspen Technology, Inc. (a)		18,777		204,482
Avid Technology, Inc. (a)		8,943		113,844
Bell Microproducts, Inc. (a)		10,049		70,142
Blackbaud, Inc.		13,479		293,438
Blackboard, Inc. (a)		10,236		382,110
Blue Coat Systems, Inc. (a)		12,500		255,375
Bottomline Technologies, Inc. (a)		8,343		108,709
CACI International, Inc., Class A (a)		9,034		383,764
CDC Corp., Class A (a)		30,340		63,107
CSG Systems International, Inc. (a)		10,267		188,194
Ciber, Inc. (a)		19,702		54,575
CommVault Systems, Inc. (a)		13,005		292,612
Compellent Technologies, Inc. (a)		7,042		85,349
Computer Task Group, Inc. (a)		4,822		31,150
ComScore, Inc. (a)		6,814		112,227
Concur Technologies, Inc. (a)		12,059		514,678
DealerTrack Holdings, Inc. (a)		12,132		199,571
Delrek, Inc. (a)		6,015		50,165
DemandTec, Inc. (a)		5,800		39,150

See Notes to Financial Statements.



46	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Computer Services Software & Systems (continued)
Digimarc Corp. (a)		2,239	$	41,981
Digital River, Inc. (a)		11,836		282,999
DivX, Inc. (a)		10,141		77,680
Double-Take Software, Inc. (a)		6,507		68,258
DynaVox, Inc., Class A (a)		2,910		46,589
EPIQ Systems, Inc. (a)		9,930		128,395
EarthLink, Inc.		32,160		255,994
Ebix, Inc. (a)(b)		8,146		127,729
Epicor Software Corp. (a)		14,572		116,430
Fortinet, Inc. (a)		11,935		196,211
Hypercom Corp. (a)		14,288		66,296
iGate Corp.		7,274		93,253
infoGROUP, Inc. (a)		11,948		95,345
Infospace, Inc. (a)		11,014		82,825
Integral Systems, Inc. (a)		5,614		35,649
Interactive Intelligence, Inc. (a)		4,034		66,279
Internap Network Services Corp. (a)		16,205		67,575
Internet Brands, Inc., Class A (a)		8,900		91,937
Internet Capital Group, Inc. (a)		11,289		85,796
JDA Software Group, Inc. (a)		12,520		275,190
KIT Digital, Inc. (a)		6,183		54,534
Kenexa Corp. (a)		7,014		84,168
Keynote Systems, Inc.		4,271		38,524
Lawson Software, Inc. (a)		41,384		302,103
Limelight Networks, Inc. (a)		12,872		56,508
Lionbridge Technologies, Inc. (a)		18,434		84,243
LivePerson, Inc. (a)		13,488		92,528
Local.com Corp. (a)		5,102		34,898
LogMeIn, Inc. (a)		4,574		119,976
Magma Design Automation, Inc. (a)		16,266		46,195
Manhattan Associates, Inc. (a)		6,837		188,359
Mantech International Corp., Class A (a)		6,640		282,665
Mentor Graphics Corp. (a)		32,123		284,289
Mercury Computer Systems, Inc. (a)		7,342		86,122
MicroStrategy, Inc., Class A (a)		2,698		202,593
Moduslink Global Solutions, Inc. (a)		13,831		83,401
Monotype Imaging Holdings, Inc. (a)		6,966		62,764
NCI, Inc., Class A (a)		2,092		47,237
NIC, Inc.		16,995		108,938
NetScout Systems, Inc. (a)		9,278		131,933
NetSuite, Inc. (a)		5,486		69,343
OpenTable, Inc. (a)		4,796		198,890
Openwave Systems, Inc. (a)		26,129		53,042
Opnet Technologies, Inc.		4,149		60,949
PDF Solutions, Inc. (a)		7,469		35,851
PROS Holdings, Inc. (a)		6,019		39,124
Parametric Technology Corp. (a)		34,742		544,407
Pegasystems, Inc.		4,869		156,344
Perficient, Inc. (a)		7,167		63,858
Progress Software Corp. (a)		12,626		379,159
Quest Software, Inc. (a)		17,902		322,952
Rackspace Hosting, Inc. (a)(b)		29,055		532,869
Radiant Systems, Inc. (a)		8,787		127,060
RealNetworks, Inc. (a)		25,832		85,246
RightNow Technologies, Inc. (a)		6,671		104,668
SAVVIS, Inc. (a)		11,422		168,475
SRA International, Inc., Class A (a)		12,853		252,819
SS&C Technologies Holdings, Inc. (a)		3,743		60,000
SYNNEX Corp. (a)		6,747		172,858
Saba Software, Inc. (a)		9,072		46,721
Sapient Corp.		30,916		313,488
Smith Micro Software, Inc. (a)		9,251		87,977
SolarWinds, Inc. (a)		10,495		168,340
Sonic Solutions, Inc. (a)		7,856		65,598
SonicWALL, Inc. (a)		16,684		196,037
Sourcefire, Inc. (a)		8,313		157,947
Stanley, Inc. (a)		4,219		157,706
SuccessFactors, Inc. (a)		18,971		394,407
Support.com, Inc. (a)		14,780		61,485
Synchronoss Technologies, Inc. (a)		6,195		117,519
Syntel, Inc.		3,960		134,442
TIBCO Software, Inc. (a)		49,698		599,358
TNS, Inc. (a)		7,901		137,793
Taleo Corp., Class A (a)		11,992		291,286
TeleCommunication Systems, Inc., Class A (a)		13,870		57,422
Terremark Worldwide, Inc. (a)		17,798		139,002
Tier Technologies, Inc., Class B (a)		4,796		29,160
Tyler Technologies, Inc. (a)		9,295		144,258
Ultimate Software Group, Inc. (a)		7,524		247,239
Unica Corp. (a)		5,343		51,186
Unisys Corp. (a)		12,776		236,228
United Online, Inc.		25,946		149,449
VASCO Data Security International, Inc. (a)		8,346		51,495
VeriFone Systems, Inc. (a)		25,654		485,630
VirnetX Holding Corp.		10,104		59,816
Virtusa Corp. (a)		4,485		41,845
Wave Systems Corp., Class A (a)		24,643		79,843
Websense, Inc. (a)		12,973		245,190
Zix Corp. (a)		18,399		41,582

				18,119,623
Computer Technology — 0.9%
ADPT Corp. (a)		35,000		101,150
Cray, Inc. (a)		11,034		61,570
Hutchinson Technology, Inc. (a)		7,643		33,094
Imation Corp. (a)		9,203		84,576
Immersion Corp. (a)		9,000		45,540
Insight Enterprises, Inc. (a)		14,106		185,635
Intermec, Inc. (a)		14,702		150,695
Isilon Systems, Inc. (a)		8,122		104,286
Netezza Corp. (a)		15,362		210,152
Network Engines, Inc. (a)		11,600		31,436
Palm, Inc. (a)		49,394		281,052
Quantum Corp. (a)		63,826		119,993
Radisys Corp. (a)		7,569		72,057
Rimage Corp. (a)		3,020		47,807
STEC, Inc. (a)(b)		12,189		153,094
Safeguard Scientifics, Inc. (a)		6,233		65,820
Silicon Graphics International Corp. (a)		9,459		66,970
Stratasys, Inc. (a)		6,210		152,518
Super Micro Computer, Inc. (a)		7,404		99,954
Synaptics, Inc. (a)(b)		10,123		278,382
Xyratex Ltd. (a)		9,124		129,105

				2,474,886
Construction — 0.5%
EMCOR Group, Inc. (a)		19,827		459,392
Granite Construction, Inc.		10,376		244,666
Great Lakes Dredge & Dock Corp.		18,018		108,108
Insituform Technologies, Inc., Class A (a)		11,784		241,336
Orion Marine Group, Inc. (a)		8,146		115,673
Primoris Services Corp.		6,696		42,185

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	47


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Construction (concluded)
Sterling Construction Co., Inc. (a)		4,995	$	64,635
Tutor Perini Corp. (a)		8,000		131,840

				1,407,835
Consumer Electronics — 0.1%
Audiovox Corp., Class A (a)		5,923		43,534
TiVo, Inc. (a)		34,999		258,293
Universal Electronics, Inc. (a)		4,299		71,492

				373,319
Consumer Lending — 0.8%
Advance America, Cash Advance Centers, Inc.		16,921		69,884
Cash America International, Inc.		8,877		304,215
Credit Acceptance Corp. (a)		1,932		94,224
Dollar Financial Corp. (a)		7,443		147,297
Encore Capital Group, Inc. (a)		4,290		88,417
Ezcorp, Inc. (a)		13,929		258,383
First Cash Financial Services, Inc. (a)		9,146		199,383
The First Marblehead Corp. (a)		17,700		41,595
MGIC Investment Corp. (a)		60,244		415,081
MoneyGram International, Inc. (a)		25,981		63,653
Nelnet, Inc., Class A		8,025		154,722
Portfolio Recovery Associates, Inc. (a)		5,109		341,179
Student Loan Corp.		1,317		31,713
World Acceptance Corp. (a)		4,939		189,213

				2,398,959
Consumer Services: Miscellaneous — 0.6%
Ancestry.com, Inc. (a)		5,738		101,104
Coinstar, Inc. (a)		9,487		407,656
Core-Mark Holdings Co., Inc. (a)		3,341		91,543
The Knot, Inc. (a)		9,100		70,798
Move, Inc. (a)		47,666		97,715
Nutrisystem, Inc. (b)		9,439		216,531
Pre-Paid Legal Services, Inc. (a)		2,270		103,262
Sotheby’s Holdings, Inc., Class A		20,069		458,978
Steiner Leisure Ltd. (a)		4,470		171,827

				1,719,414
Containers & Packaging — 0.5%
AEP Industries, Inc. (a)		1,480		35,342
Graham Packaging Co., Inc. (a)		5,205		62,304
Graphic Packaging Holding Co. (a)		33,561		105,717
Myers Industries, Inc.		10,815		87,493
Rock-Tenn Co., Class A		11,573		574,831
Silgan Holdings, Inc.		16,046		455,386

				1,321,073
Cosmetics — 0.1%
Elizabeth Arden, Inc. (a)		7,466		108,406
Inter Parfums, Inc.		4,595		65,387
Revlon, Inc., Class A (a)		3,396		37,900

				211,693
Diversified Financial Services — 0.4%
American Physicians Service Group, Inc.		2,250		55,013
Duff & Phelps Corp.		8,332		105,233
Evercore Partners, Inc., Class A		4,668		108,998
FBR Capital Markets Corp. (a)		16,015		53,330
Gleacher & Co, Inc. (a)		23,338		59,512
Main Street Capital Corp.		3,852		57,510
MidwestOne Financial Group, Inc.		2,364		36,595
Piper Jaffray Cos. (a)		5,140		165,611
Sanders Morris Harris Group, Inc.		6,664		36,985
Stifel Financial Corp. (a)		9,178		398,233
Thomas Weisel Partners Group, Inc. (a)		6,946		40,912
Triangle Capital Corp.		3,700		52,614

				1,170,546
Diversified Manufacturing Operations — 0.3%
A.M. Castle & Co. (a)		5,157		71,631
Barnes Group, Inc.		14,488		237,458
Federal Signal Corp.		18,741		113,195
Lydall, Inc. (a)		5,349		40,866
OSI Systems, Inc. (a)		4,879		135,490
Raven Industries, Inc.		4,907		165,415
Standex International Corp.		3,822		96,888
Trimas Corp. (a)		4,741		53,621

				914,564
Diversified Materials & Processing — 0.8%
Belden, Inc.		14,079		309,738
Cabot Microelectronics Corp. (a)		7,105		245,762
Clarcor, Inc.		15,016		533,368
Encore Wire Corp.		5,683		103,374
Hexcel Corp. (a)		28,858		447,588
Insteel Industries, Inc.		5,495		63,852
Koppers Holdings, Inc.		6,232		140,095
Rogers Corp. (a)		4,777		132,657
Symyx Technologies, Inc. (a)		10,942		54,820
Tredegar Corp.		7,422		121,127
Uranium Energy Corp. (a)(b)		18,951		44,724

				2,197,105
Diversified Media — 0.1%
Belo Corp., Class A (a)		27,870		158,580
EW Scripps Co. (a)		10,108		75,103
Playboy Enterprises, Inc., Class B (a)		7,607		31,949

				265,632
Diversified Retail — 0.7%
99 Cents Only Stores (a)		13,806		204,329
The Bon-Ton Stores, Inc. (a)		3,747		36,533
Dillard’s, Inc., Class A		13,767		295,991
Fred’s, Inc.		12,008		132,809
GSI Commerce, Inc. (a)		18,639		536,803
Gaiam, Inc.		5,289		32,104
HSN, Inc. (a)		11,723		281,352
Overstock.com, Inc. (a)(b)		4,521		81,694
PriceSmart, Inc.		4,889		113,572
Saks, Inc. (a)(b)		40,531		307,630
Tuesday Morning Corp. (a)		9,188		36,660

				2,059,477
Drug & Grocery Store Chains — 0.7%
Arden Group, Inc., Class A		421		36,993
Casey’s General Stores, Inc.		15,298		533,900
drugstore.com, Inc. (a)		28,687		88,356
The Great Atlantic & Pacific Tea Co., Inc. (a)(b)		9,827		38,325
Ingles Markets, Inc., Class A		4,469		67,259
Nash Finch Co.		3,900		133,224
The Pantry, Inc. (a)		7,116		100,407
PetMed Express, Inc. (b)		6,993		124,475
Rite Aid Corp. (a)		168,748		165,373
Ruddick Corp.		13,161		407,859
Spartan Stores, Inc.		7,079		97,124
Village Super Market, Inc., Class A		2,149		56,411

See Notes to Financial Statements.



48	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010



Schedule of Investments (continued)		Master Small Cap Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Drug & Grocery Store Chains (concluded)
Weis Markets, Inc.		3,461	$	113,902
Winn-Dixie Stores, Inc. (a)		16,954		163,437

				2,127,045
Education Services — 0.7%
Ambassadors Group, Inc.		5,800		65,482
American Public Education, Inc. (a)		5,551		242,579
Archipelago Learning, Inc. (a)		3,702		42,314
Bridgepoint Education, Inc. (a)		5,887		93,073
Capella Education Co. (a)		5,034		409,516
Corinthian Colleges, Inc. (a)(b)		26,265		258,710
Franklin Covey Co. (a)		4,416		28,704
Grand Canyon Education, Inc. (a)		9,362		219,352
K12, Inc. (a)		7,606		168,701
Lincoln Educational Services Corp. (a)		4,957		102,064
Renaissance Learning, Inc.		4,064		59,700
Rosetta Stone, Inc. (a)		3,179		72,990
School Specialty, Inc. (a)		5,795		104,716
Universal Technical Institute, Inc. (a)		6,341		149,901

				2,017,802
Electronic Components — 0.6%
3D Systems Corp. (a)		5,663		71,071
Acacia Research — Acacia Technologies (a)		10,280		146,284
Checkpoint Systems, Inc. (a)		11,829		205,351
Cogent, Inc. (a)		15,757		141,970
DDi Corp.		4,341		32,688
Methode Electronics, Inc.		11,486		111,874
Microvision, Inc. (a)(b)		27,143		80,343
Multi-Fineline Electronix, Inc. (a)		3,172		79,173
NVE Corp. (a)		1,453		63,249
Park Electrochemical Corp.		6,214		151,684
ScanSource, Inc. (a)		8,100		201,933
Smart Modular Technologies WWH, Inc. (a)		16,041		93,840
TTM Technologies, Inc. (a)		24,204		229,938
Technitrol, Inc.		12,261		38,745
Universal Display Corp. (a)(b)		9,161		164,715

				1,812,858
Electronic Entertainment — 0.2%
DTS, Inc. (a)		5,248		172,502
THQ, Inc. (a)		20,568		88,854
Take-Two Interactive Software, Inc. (a)		21,193		190,737

				452,093
Electronics — 0.5%
Agilysys, Inc.		5,739		38,394
American Science & Engineering, Inc.		2,708		206,377
CPI International, Inc. (a)		2,382		37,135
Coherent, Inc. (a)		7,599		260,646
Daktronics, Inc. (b)		10,489		78,667
II-VI, Inc. (a)		7,540		223,410
IPG Photonics Corp. (a)		7,892		120,195
iRobot Corp. (a)(b)		6,403		120,312
Newport Corp. (a)		11,302		102,396
Richardson Electronics Ltd.		4,678		42,102
Rofin-Sinar Technologies, Inc. (a)		9,613		200,143
SRS Labs Inc. (a)		3,970		36,326
Spectrum Control, Inc. (a)		4,019		56,186

				1,522,289
Energy Equipment — 0.2%
Capstone Turbine Corp. (a)		74,225		72,740
Energy Conversion Devices, Inc. (a)(b)		14,124		57,908
Evergreen Solar, Inc. (a)(b)		60,516		41,272
FuelCell Energy, Inc. (a)(b)		22,326		26,345
GT Solar International, Inc. (a)(b)		18,825		105,420
PowerSecure International, Inc. (a)		5,733		52,113
STR Holdings, Inc. (a)		8,537		160,496

				516,294
Engineering & Contracting Services — 0.4%
Dycom Industries, Inc. (a)		11,783		100,745
Exponent, Inc. (a)		4,270		139,714
Furmamite Corp. (a)		11,632		46,179
Hill International, Inc. (a)		8,249		33,491
Layne Christensen Co. (a)		5,980		145,135
MYR Group, Inc. (a)		6,129		102,293
Michael Baker Corp. (a)		2,424		84,598
Mistras Group, Inc. (a)		4,545		48,722
Tetra Tech, Inc. (a)		18,448		361,765
VSE Corp.		1,300		41,366

				1,104,008
Entertainment — 0.5%
Ascent Media Corp., Class A (a)		4,785		120,869
CKx, Inc. (a)		16,600		82,834
Cinemark Holdings, Inc.		17,250		226,838
Lions Gate Entertainment Corp. (a)		20,771		144,982
Live Nation, Inc. (a)		42,373		442,798
LodgeNet Interactive Corp. (a)		8,242		30,578
Rentrak Corp. (a)		3,003		73,063
Warner Music Group Corp. (a)		13,884		67,476
World Wrestling Entertainment, Inc.		7,483		116,435

				1,305,873
Environmental, Maintenance & Security Service — 0.7%
ABM Industries, Inc.		15,588		326,569
The Brink’s Co.		14,185		269,940
Cornell Cos., Inc. (a)		3,463		93,051
DynCorp. International, Inc. (a)		4,664		81,713
G&K Services, Inc., Class A		5,760		118,944
The Geo Group, Inc. (a)		14,737		305,793
Healthcare Services Group, Inc.		13,283		251,713
Mac-Gray Corp.		3,825		42,610
Rollins, Inc.		12,756		263,922
Standard Parking Corp. (a)		4,894		77,472
Unifirst Corp.		4,225		185,984

				2,017,711
Fertilizers — 0.0%
Rentech, Inc. (a)		67,534		66,859
Financial Data & Systems — 1.0%
Advent Software, Inc. (a)		4,735		222,356
Cardtronics, Inc. (a)		8,306		107,646
Cass Information Systems, Inc.		2,650		90,762
CyberSource Corp. (a)		21,275		543,151
Euronet Worldwide, Inc. (a)		14,840		189,804
Fair Isaac Corp.		13,693		298,370
Global Cash Access, Inc. (a)		15,346		110,645
Heartland Payment Systems, Inc.		11,416		169,413
Jack Henry & Associates, Inc.		25,493		608,773
Online Resources Corp. (a)		8,641		35,860
S1 Corp. (a)		15,922		95,691
Wright Express Corp. (a)		11,591		344,253

				2,816,724

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	49



Schedule of Investments (continued)		Master Small Cap Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Foods — 1.2%
American Italian Pasta Co., Class A (a)		6,546	$	346,087
B&G Foods, Inc., Class A		14,604		157,431
Chiquita Brands International, Inc. (a)		13,431		163,187
Diamond Foods, Inc.		6,537		268,671
Dole Food Co.,Inc. (a)		10,938		114,083
Hain Celestial Group, Inc. (a)		12,323		248,555
J&J Snack Foods Corp.		4,273		179,893
John B. Sanfilippo & Son, Inc. (a)		2,787		40,328
Lancaster Colony Corp.		5,760		307,354
Lance, Inc.		7,862		129,644
Medifast, Inc. (a)(b)		4,013		103,977
Natures Sunshine Prods, Inc. (a)		2,607		21,821
Nutraceutical International Corp. (a)		3,224		49,198
Seneca Foods Corp. (a)		2,425		78,231
Smart Balance, Inc. (a)		19,404		79,362
Synutra International, Inc. (a)(b)		5,506		89,032
Tootsie Roll Industries, Inc. (b)		7,110		168,151
TreeHouse Foods, Inc. (a)		10,391		474,453
United Natural Foods, Inc. (a)		12,933		386,438

				3,405,896
Forest Products — 0.1%
Deltic Timber Corp.		3,216		134,429
Universal Forest Products, Inc.		5,783		175,283

				309,712
Forms & Bulk Printing Services — 0.3%
Bowne & Co., Inc.		12,199		136,873
Consolidated Graphics, Inc. (a)		2,846		123,061
Deluxe Corp.		15,460		289,875
Ennis, Inc.		7,966		119,570
Innerworkings, Inc. (a)		7,589		51,833
M&F Worldwide Corp. (a)		3,238		87,750
Multi-Color Corp.		3,634		37,212
Schawk, Inc.		3,513		52,519

				898,693
Fruit & Grain Processing — 0.0%
MGP Ingredients, Inc. (a)		4,055		26,885
Funeral Parlors & Cemeteries — 0.1%
Matthews International Corp., Class A		8,962		262,407
Stewart Enterprises, Inc., Class A (b)		24,407		132,042

				394,449
Gas Pipeline — 0.0%
Crosstex Energy, Inc. (a)		12,816		82,151
Glass — 0.0%
Apogee Enterprises, Inc.		8,400		90,972
Gold — 0.5%
Allied Nevada Gold Corp. (a)		19,087		375,632
Capital Gold Corp. (a)		15,345		61,380
Coeur d’Alene Mines Corp. (a)(b)		26,326		415,424
Golden Star Resources Ltd. (a)		77,301		338,579
Jaguar Mining, Inc. (a)		25,288		223,293
US Gold Corp. (a)		27,610		138,326

				1,552,634
Health Care Facilities — 0.8%
Amsurg Corp. (a)		9,174		163,481
Assisted Living Concepts, Inc. (a)		2,996		88,652
Capital Senior Living Corp. (a)		8,668		43,080
Emeritus Corp. (a)(b)		6,088		99,295
The Ensign Group, Inc.		4,340		71,697
Five Star Quality Care, Inc. (a)		10,222		30,870
Hanger Orthopedic Group, Inc. (a)		7,743		139,064
HealthSouth Corp. (a)		28,473		532,730
Kindred Healthcare, Inc. (a)		11,821		151,782
LCA-Vision, Inc. (a)		5,807		32,171
MedCath Corp. (a)		6,451		50,705
National Healthcare Corp.		2,638		90,905
Psychiatric Solutions, Inc. (a)		16,999		556,207
Select Medical Holdings Corp. (a)		14,941		101,300
Skilled Healthcare Group, Inc., Class A (a)		6,500		44,135
Sun Healthcare Group, Inc. (a)		13,255		107,100
Sunrise Senior Living, Inc. (a)		17,074		47,466
US Physical Therapy, Inc. (a)		3,141		53,020

				2,403,660
Health Care Management Services — 1.0%
AMERIGROUP Corp. (a)		15,391		499,900
American Dental Partners, Inc. (a)		5,087		61,603
Bioscript, Inc. (a)		11,949		62,613
Catalyst Health Solutions, Inc. (a)		11,325		390,712
Centene Corp. (a)		14,664		315,276
Computer Programs & Systems, Inc.		2,981		121,982
Contiucare Corp. (a)		8,500		28,475
HealthSpring, Inc. (a)		17,298		268,292
Magellan Health Services, Inc. (a)		9,855		357,934
MedQuist, Inc.		3,866		30,580
Metropolitan Health Networks, Inc. (a)		12,257		45,719
Molina Healthcare, Inc. (a)		3,927		113,098
Transcend Services, Inc. (a)		2,879		38,866
Triple-S Management Corp. (a)		6,174		114,528
Universal American Financial Corp. (a)		9,529		137,218
WellCare Health Plans, Inc. (a)		12,671		300,809

				2,887,605
Health Care Services — 1.6%
AMN Healthcare Services, Inc. (a)		10,290		76,969
Accretive Health, Inc. (a)		3,486		46,120
Air Methods Corp. (a)		3,356		99,841
Alliance Healthcare Services, Inc. (a)		8,390		33,896
Allied Healthcare International, Inc. (a)		14,629		33,939
Almost Family, Inc. (a)		2,400		83,832
Amedisys, Inc. (a)(b)		8,510		374,185
athenahealth, Inc. (a)(b)		9,983		260,856
CardioNet, Inc. (a)		7,300		40,004
Chemed Corp.		6,776		370,241
Chindex International, Inc. (a)		4,073		51,035
Corvel Corp. (a)		2,199		74,304
Cross Country Healthcare, Inc. (a)		9,676		86,987
Eclipsys Corp. (a)		17,250		307,740
Gentiva Health Services, Inc. (a)		8,459		228,478
HMS Holdings Corp. (a)		8,155		442,164
Health Grades, Inc. (a)		8,104		48,624
Healthways, Inc. (a)		10,253		122,216
IPC The Hospitalist Co., Inc. (a)		4,889		122,714
LHC Group, Inc. (a)		4,589		127,345
MWI Veterinary Supply, Inc. (a)		3,775		189,732
Medidata Solutions, Inc. (a)		5,772		89,408
Odyssey HealthCare, Inc. (a)		10,070		269,070
Omnicell, Inc. (a)		9,899		115,719
PharMerica Corp. (a)		9,253		135,649
Phase Forward, Inc. (a)		12,036		200,760
Quality Systems, Inc. (b)		5,646		327,412

See Notes to Financial Statements.



50	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010



Schedule of Investments (continued)		Master Small Cap Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Health Care Services (concluded)
RehabCare Group, Inc. (a)		7,397	$	161,107
Res-Care, Inc. (a)		7,749		74,855
Rural/Metro Corp. (a)		5,908		48,091
Team Health Holdings, Inc. (a)		4,721		60,995
Virtual Radiologic Corp. (a)		2,290		39,296

				4,743,584
Health Care: Miscellaneous — 0.1%
MedAssets, Inc. (a)		12,966		299,255
The Providence Service Corp. (a)		4,019		56,266

				355,521
Home Building — 0.2%
Beazer Homes USA, Inc. (a)(b)		22,635		82,165
Hovnanian Enterprises, Inc., Class A (a)(b)		14,514		53,412
M/I Homes, Inc. (a)		5,786		55,777
Meritage Homes Corp. (a)		9,663		157,314
Ryland Group, Inc.		13,220		209,140
Standard-Pacific Corp. (a)		32,431		107,995

				665,803
Hotel/Motel — 0.2%
Gaylord Entertainment Co. (a)(b)		10,488		231,680
Marcus Corp.		6,605		62,483
Morgans Hotel Group Co. (a)		7,160		44,106
Orient Express Hotels Ltd., Class A (a)		27,486		203,396

				541,665
Household Appliances — 0.0%
National Presto Industries, Inc.		1,455		135,111
Household Equipment & Products — 0.3%
American Greetings Corp., Class A		11,990		224,932
Blyth, Inc.		1,806		61,530
CSS Industries, Inc.		2,367		39,056
Central Garden & Pet Co., Class A (a)		17,383		155,926
Helen of Troy Ltd. (a)		9,354		206,349
Libbey, Inc. (a)		5,086		66,016

				753,809
Household Furnishings — 0.3%
American Woodmark Corp.		2,887		49,368
Ethan Allen Interiors, Inc.		7,504		104,981
Furniture Brands International, Inc. (a)		13,457		70,245
Hooker Furniture Corp.		3,663		39,048
Kid Brands, Inc. (a)		4,135		29,069
Kirkland’s, Inc. (a)		5,125		86,484
La-Z-Boy, Inc. (a)		15,619		116,049
Lifetime Brands, Inc. (a)		3,048		44,562
Sealy Corp. (a)(b)		15,196		40,573
Select Comfort Corp. (a)		16,524		144,585

				724,964
Insurance: Life — 0.5%
American Equity Investment Life Holding Co.		17,240		177,917
CNO Financial Group, Inc. (a)		66,420		328,779
Citizens, Inc. (a)		10,851		72,268
Delphi Financial Group, Inc., Class A		14,074		343,546
FBL Financial Group, Inc., Class A		3,994		83,874
Kansas City Life Insurance Co.		1,294		38,264
Life Partners Holdings, Inc. (b)		2,400		49,104
National Western Life Insurance Co., Class A		651		99,447
The Phoenix Cos., Inc. (a)		35,095		74,050
Presidential Life Corp.		6,294		57,275
Primerica, Inc. (a)		7,450		159,728

				1,484,252
Insurance: Multi-Line — 0.6%
AMBAC Financial Group, Inc. (a)(b)		66,900		44,823
Alterra Capital Holdings Ltd.		28,798		540,826
Crawford & Co., Class B (a)		8,394		26,525
eHealth, Inc. (a)		7,297		82,967
Flagstone Reinsurance Holdings SA		15,888		171,908
Horace Mann Educators Corp.		11,797		180,494
Maiden Holdings Ltd.		15,714		103,241
Pico Holdings, Inc. (a)		6,784		203,317
Platinum Underwriters Holdings Ltd.		13,382		485,633

				1,839,734
Insurance: Property-Casualty — 1.9%
American Physicians Capital, Inc.		2,471		76,230
American Safety Insurance Holdings Ltd. (a)		3,415		53,684
Amerisafe, Inc. (a)		5,800		101,790
AmTrust Financial Services, Inc.		6,892		82,980
Argo Group International Holdings Ltd.		9,379		286,904
Baldwin & Lyons, Inc., Class B		2,803		58,891
CNA Surety Corp. (a)		5,410		86,939
Donegal Group, Inc., Class A		3,797		46,665
EMC Insurance Group, Inc.		1,697		37,215
Employers Holdings, Inc.		10,980		161,735
Enstar Group Ltd. (a)		2,112		140,321
FPIC Insurance Group, Inc. (a)		3,100		79,515
First American Financial Corp.		31,155		395,045
First Mercury Financial Corp.		4,747		50,223
Greenlight Capital Re Ltd. (a)		8,600		216,634
Hallmark Financial Services, Inc. (a)		3,700		36,815
Harleysville Group, Inc.		3,591		111,429
Hilltop Holdings, Inc. (a)		12,333		123,453
Infinity Property & Casualty Corp.		4,082		188,507
Meadowbrook Insurance Group, Inc.		16,552		142,844
Montpelier Re Holdings Ltd.		21,267		317,516
NYMAGIC, Inc.		1,680		32,407
National Interstate Corp.		2,137		42,355
Navigators Group, Inc. (a)		3,703		152,304
PMA Capital Corp., Class A (a)		10,332		67,675
The PMI Group, Inc. (a)		43,187		124,811
ProAssurance Corp. (a)		9,685		549,721
RLI Corp.		5,474		287,440
Radian Group, Inc.		40,010		289,672
Safety Insurance Group, Inc.		3,961		146,636
SeaBright Holdings, Inc.		7,100		67,308
Selective Insurance Group, Inc.		16,192		240,613
State Auto Financial Corp.		4,512		69,981
Stewart Information Services Corp.		5,580		50,332
Tower Group, Inc.		13,359		287,619
United America Indemnity, Ltd. (a)		8,747		64,378
United Fire & Casualty Co.		6,919		137,135

				5,405,722
International Trade & Diversified Logistics — 0.0%
Global Sources Ltd. (a)		7,205		56,487
Leisure Time — 0.6%
Callaway Golf Co.		19,553		118,100
Churchill Downs, Inc.		3,502		114,866
Interval Leisure Group, Inc. (a)		12,097		150,608
Life Time Fitness, Inc. (a)(b)		12,512		397,756

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	51



Schedule of Investments (continued)		Master Small Cap Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Leisure Time (concluded)
Pool Corp.		14,922	$	327,090
Smith & Wesson Holding Corp. (a)(b)		18,518		75,739
Speedway Motorsports, Inc.		3,755		50,918
Sport Supply Group, Inc.		2,550		34,323
Steinway Musical Instruments, Inc. (a)		1,929		34,317
Sturm Ruger & Co., Inc. (b)		5,800		83,114
Vail Resorts, Inc. (a)		10,873		379,576
West Marine, Inc. (a)		4,708		51,223

				1,817,630
Luxury Items — 0.0%
Movado Group, Inc. (a)		4,878		52,097
Machinery: Agricultural — 0.1%
Alamo Group, Inc.		2,049		44,463
Lindsay Manufacturing Co. (b)		3,742		118,584
Titan International, Inc. (b)		10,664		106,320
Titan Machinery, Inc. (a)		4,129		54,214

				323,581
Machinery: Construction & Handling — 0.1%
Astec Industries, Inc. (a)		5,964		165,382
Douglas Dynamics, Inc. (a)		3,610		41,515
NACCO Industries, Inc., Class A		1,761		156,306

				363,203
Machinery: Engines — 0.1%
Briggs & Stratton Corp. (b)		14,974		254,857
Machinery: Industrial — 1.2%
Actuant Corp., Class A		20,308		382,400
Altra Holdings, Inc. (a)		8,247		107,376
Applied Industrial Technologies, Inc.		12,673		320,880
Chart Industries, Inc. (a)		8,674		135,141
Colfax Corp. (a)		7,314		76,139
Columbus McKinnon Corp. (a)		5,910		82,563
DXP Enterprises, Inc. (a)		2,655		41,551
EnPro Industries, Inc. (a)		6,208		174,755
Flow International Corp. (a)		15,069		35,563
Gerber Scientific, Inc. (a)		7,928		42,415
Graham Corp.		2,900		43,471
John Bean Technologies Corp.		8,539		130,220
Kadant, Inc. (a)		3,870		67,415
MTS Systems Corp.		4,986		144,594
Middleby Corp. (a)		4,990		265,418
Nordson Corp.		10,210		572,577
Sauer-Danfoss, Inc. (a)		3,667		44,811
Tecumseh Products Co., Class A (a)		5,904		65,652
Tennant Co.		5,701		192,808
Twin Disc, Inc.		2,812		31,944
Woodward Governor Co.		18,276		466,586

				3,424,279
Machinery: Specialty — 0.1%
Albany International Corp., Class A		8,262		133,762
Cascade Corp.		2,762		98,355
Presstek, Inc. (a)		8,791		31,032
Xerium Technologies, Inc. (a)		2,278		32,165

				295,314
Machinery: Tools — 0.0%
Thermadyne Holdings Corp. (a)		2,827		30,560
Manufactured Housing — 0.0%
Cavco Industries, Inc. (a)		2,065		72,646
Skyline Corp.		2,279		41,045

				113,691
Medical & Dental Instruments & Supplies — 2.9%
ATS Medical, Inc. (a)		15,932		63,250
AGA Medical Holdings, Inc. (a)		4,172		52,943
Abiomed, Inc. (a)		9,579		92,725
Align Technology, Inc. (a)(b)		17,751		263,957
Alphatec Holdings, Inc. (a)		15,557		72,184
American Medical Systems Holdings, Inc. (a)		22,526		498,275
AngioDynamics, Inc. (a)		7,482		110,359
Antares Pharma, Inc. (a)		22,592		39,762
Atrion Corp.		485		65,499
CONMED Corp. (a)		8,746		162,938
Cantel Medical Corp.		3,900		65,130
Cerus Corp. (a)		12,661		40,009
Conceptus, Inc. (a)(b)		9,391		146,312
CryoLife, Inc. (a)		8,828		47,583
Cutera, Inc. (a)		4,309		39,686
Delcath Systems, Inc. (a)(b)		11,310		71,705
Endologix, Inc. (a)		15,024		68,059
ev3, Inc. (a)		24,904		558,099
Exactech, Inc. (a)		2,570		43,896
Hansen Medical, Inc. (a)		13,638		29,049
Heartware International, Inc. (a)		2,834		198,578
ICU Medical, Inc. (a)		3,474		111,759
Immucor, Inc. (a)		20,828		396,773
Insulet Corp. (a)		11,536		173,617
Integra LifeSciences Holdings Corp. (a)		6,252		231,324
Invacare Corp.		8,673		179,878
Landauer, Inc.		2,845		173,204
MAKO Surgical Corp. (a)(b)		7,835		97,546
Medical Action Industries, Inc. (a)		4,374		52,444
Meridian Bioscience, Inc.		12,175		206,975
Merit Medical Systems, Inc. (a)		8,461		135,968
Micrus Endovascular Corp. (a)		4,944		102,786
Neogen Corp. (a)		6,965		181,438
NuVasive, Inc. (a)		11,730		415,946
OraSure Technologies, Inc. (a)		14,175		65,630
Orthofix International NV (a)		5,308		170,121
Orthovita, Inc. (a)		20,673		41,966
Owens & Minor, Inc.		18,720		531,274
PSS World Medical, Inc. (a)		16,998		359,508
Quidel Corp. (a)		6,522		82,764
Rochester Medical Corp. (a)		3,485		32,933
SenoRx, Inc. (a)		5,168		56,745
Staar Surgical Co. (a)		10,846		62,039
Steris Corp.		17,603		547,101
SurModics, Inc. (a)		5,222		85,693
Symmetry Medical, Inc. (a)		10,772		113,537
Synovis Life Technologies, Inc. (a)		3,504		53,541
Unilife Corp. (a)		14,688		85,484
Vascular Solutions, Inc. (a)		5,200		65,000
Volcano Corp. (a)		15,089		329,242
West Pharmaceutical Services, Inc.		9,818		358,259
Wright Medical Group, Inc. (a)		11,613		192,892
Young Innovations, Inc.		1,731		48,728

				8,472,113

See Notes to Financial Statements.



52	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010



Schedule of Investments (continued)		Master Small Cap Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Medical Equipment — 1.6%
Abaxis, Inc. (a)		6,631	$	142,102
Accuray, Inc. (a)		15,482		102,646
Affymetrix, Inc. (a)		21,334		125,871
Analogic Corp.		3,861		175,714
ArthroCare Corp. (a)		8,102		248,326
Bruker BioSciences Corp. (a)		21,672		263,532
Caliper Life Sciences, Inc. (a)		13,968		59,643
Cyberonics, Inc. (a)		8,390		198,675
Cynosure, Inc., Class A (a)		3,189		34,346
DexCom, Inc. (a)		17,475		202,011
Dionex Corp. (a)		5,274		392,702
Greatbatch, Inc. (a)		6,925		154,497
Haemonetics Corp. (a)		7,398		395,941
HealthTronics, Inc. (a)		13,977		67,509
IRIS International, Inc. (a)		4,995		50,649
Luminex Corp. (a)		11,218		181,956
MELA Sciences, Inc. (a)(b)		7,100		52,824
Masimo Corp.		15,550		370,246
Merge Healthcare, Inc. (a)		16,158		47,343
Natus Medical, Inc. (a)		8,590		139,931
NxStage Medical, Inc. (a)		7,596		112,725
Palomar Medical Technologies, Inc. (a)		5,600		62,664
Sirona Dental Systems, Inc. (a)		9,985		347,877
Solta Medical, Inc. (a)		18,695		35,521
Somanetics Corp. (a)		3,627		90,494
SonoSite, Inc. (a)		4,385		118,877
Spectranetic Corp. (a)		10,358		53,654
Stereotaxis, Inc. (a)		8,900		29,459
Syneron Medical Ltd. (a)		10,712		110,119
Tomotherapy, Inc. (a)		15,541		49,420
Vital Images, Inc. (a)		4,496		57,324
Zoll Medical Corp. (a)		6,423		174,063

				4,648,661
Medical Services — 0.4%
America Service Group, Inc.		2,800		48,160
Bio-Reference Labs, Inc. (a)		7,170		158,959
Clarient, Inc. (a)		17,140		52,791
eResearch Technology, Inc. (a)		14,897		117,388
Genoptix, Inc. (a)		5,261		90,489
inVentiv Health, Inc. (a)		10,224		261,735
Kendle International, Inc. (a)		4,663		53,718
Parexel International Corp. (a)		17,543		380,332

				1,163,572
Metal Fabricating — 0.6%
Ampco-Pittsburgh Corp.		2,674		55,699
Dynamic Materials Corp.		3,900		62,556
Hawk Corp., Class A (a)		1,630		41,484
Haynes International, Inc.		3,740		115,304
Kaydon Corp.		9,968		327,548
L.B. Foster Co., Class A (a)		3,143		81,467
Metals USA Holdings Corp. (a)		3,533		52,818
Mueller Industries, Inc.		11,310		278,226
Mueller Water Products, Inc., Series A		46,750		173,443
Northwest Pipe Co. (a)		2,800		53,200
RBC Bearings, Inc. (a)		6,554		190,000
RTI International Metals, Inc. (a)		9,016		217,376
Worthington Industries, Inc.		18,003		231,519

				1,880,640
Metals & Minerals: Diversified — 0.6%
AMCOL International Corp.		7,154		168,119
Brush Engineered Materials, Inc. (a)		6,133		122,537
General Moly, Inc. (a)(b)		19,739		60,796
Globe Specialty Metals, Inc. (a)		18,516		191,270
Hecla Mining Co. (a)(b)		72,210		376,936
Minerals Technologies, Inc.		5,611		266,747
Oil-Dri Corp. of America		1,989		45,648
Thompson Creek Metals Co., Inc. (a)		41,886		363,570
US Energy Corp. Wyoming (a)		8,622		40,955
United States Lime & Minerals Inc. (a)		857		33,012

				1,669,590
Miscellaneous Consumer Staples — 0.0%
Spectrum Brands Holdings, Inc. (a)		5,543		140,404
Office Supplies & Equipment — 0.6%
ACCO Brands Corp. (a)		16,844		84,052
Electronics for Imaging, Inc. (a)		13,775		134,306
HNI Corp.		13,606		375,390
Herman Miller, Inc.		17,189		324,356
Kimball International, Inc., Class B		10,241		56,633
Knoll, Inc.		14,243		189,289
Steelcase, Inc., Class A		23,284		180,451
United Stationers, Inc. (a)		7,232		393,927

				1,738,404
Offshore Drilling & Other Services — 0.0%
Hercules Offshore, Inc. (a)		35,312		85,808
Vantage Drilling Co. (a)		39,120		52,812

				138,620
Oil Well Equipment & Services — 1.6%
Basic Energy Services, Inc. (a)		7,333		56,464
Boots & Coots, Inc. (a)		25,145		74,178
CARBO Ceramics, Inc.		5,699		411,411
Cal Dive International, Inc. (a)		28,504		166,748
Complete Production Services, Inc. (a)		23,432		335,078
Dawson Geophysical Co. (a)		2,509		53,366
Dril-Quip, Inc. (a)		10,159		447,199
Global Industries Ltd. (a)		30,427		136,617
Golar LNG Ltd.		11,218		110,722
Gulf Island Fabrication, Inc.		4,470		69,374
Helix Energy Solutions Group, Inc. (a)		31,339		337,521
Hornbeck Offshore Services, Inc. (a)		6,996		102,142
ION Geophysical Corp. (a)		38,400		133,632
Key Energy Services, Inc. (a)		37,690		345,994
Lufkin Industries, Inc.		8,999		350,871
Matrix Service Co. (a)		8,128		75,672
Natural Gas Services Group (a)		3,800		57,494
Newpark Resources, Inc. (a)		26,969		163,162
OYO Geospace Corp. (a)		1,276		61,861
Parker Drilling Co. (a)		35,339		139,589
Pioneer Drilling Co. (a)		16,506		93,589
RPC, Inc.		8,751		119,451
Seahawk Drilling, Inc. (a)		3,601		35,002
Superior Well Services, Inc. (a)		6,970		116,538
T-3 Energy Services, Inc. (a)		4,033		112,521
Tesco Corp. (a)		9,221		113,234
Tetra Technologies, Inc. (a)		22,703		206,143
Union Drilling, Inc. (a)		5,000		27,550
Willbros Group, Inc. (a)		11,910		88,134

				4,541,257

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	53



Schedule of Investments (continued)		Master Small Cap Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Oil: Crude Producers — 2.3%
ATP Oil & Gas Corp. (a)(b)		13,437	$	142,298
American Oil & Gas, Inc. (a)		15,434		96,926
Apco Oil and Gas International, Inc.		2,877		67,638
Approach Resources, Inc. (a)		4,519		31,091
Arena Resources, Inc. (a)		11,820		377,058
BPZ Resources, Inc. (a)(b)		29,584		122,774
Berry Petroleum Co., Class A		15,372		395,368
Bill Barrett Corp. (a)		13,762		423,457
Brigham Exploration Co. (a)		35,026		538,700
CAMAC Energy, Inc. (a)		14,747		55,006
Callon Petroleum Co. (a)		8,829		55,623
Carrizo Oil & Gas, Inc. (a)		9,485		147,302
Cheniere Energy, Inc. (a)		17,934		50,574
Clayton Williams Energy, Inc. (a)		1,839		77,459
Contango Oil & Gas Co. (a)		3,578		160,115
Delta Petroleum Corp. (a)(b)		57,892		49,787
Endeavour International Corp. (a)(b)		44,941		47,637
Energy Partners Ltd. (a)		8,941		109,170
Energy XXI Bermuda Ltd. (a)		15,311		241,608
FX Energy, Inc. (a)(b)		14,142		51,194
GMX Resources, Inc. (a)		9,519		61,778
Gastar Exploration Ltd. (a)		13,813		49,865
GeoResources, Inc. (a)		4,137		57,628
Goodrich Petroleum Corp. (a)		7,467		89,604
Gulfport Energy Corp. (a)		8,340		98,912
Harvest Natural Resources, Inc. (a)		10,327		76,110
Houston American Energy Corp.		5,613		55,344
Kodiak Oil & Gas Corp. (a)		36,268		115,695
Magnum Hunter Resources Corp. (a)		15,097		65,823
McMoRan Exploration Co. (a)		25,059		278,405
Miller Petroleum, Inc. (a)		5,648		32,532
Northern Oil And Gas, Inc. (a)		13,419		172,300
Panhandle Oil & Gas, Inc.		2,313		61,133
Penn Virginia Corp.		13,727		276,050
Petroleum Development Corp. (a)		5,920		151,670
Petroquest Energy, Inc. (a)(b)		16,789		113,494
Ram Energy Resources, Inc. (a)		18,416		38,121
Resolute Energy Corp. (a)		11,653		142,633
Rex Energy Corp. (a)		9,908		100,071
Rosetta Resources, Inc. (a)		15,956		316,088
Stone Energy Corp. (a)		13,032		145,437
Swift Energy Co. (a)		11,381		306,263
TransAtlantic Petroleum Ltd. (a)		44,169		140,016
Vaalco Energy, Inc.		15,700		87,920
Venoco, Inc. (a)		6,120		100,796
W&T Offshore, Inc.		10,772		101,903
Warren Resources, Inc. (a)		22,405		64,974

				6,541,350
Oil: Refining & Marketing — 0.2%
CVR Energy, Inc. (a)		9,594		72,147
Delek US Holdings, Inc.		5,108		37,289
Western Refining, Inc. (a)(b)		16,102		80,993
World Fuel Services Corp.		18,046		468,113

				658,542
Paints & Coatings — 0.2%
Ferro Corp. (a)		25,925		191,067
H.B. Fuller Co.		14,573		276,742

				467,809
Paper — 0.4%
Boise, Inc. (a)		21,076		115,707
Buckeye Technologies, Inc. (a)		11,828		117,688
Clearwater Paper Corp. (a)		3,430		187,827
Kapstone Paper and Packaging Corp. (a)		11,493		128,032
Neenah Paper, Inc.		4,400		80,520
P.H. Glatfelter Co.		13,748		149,166
Schweitzer-Mauduit International, Inc.		5,451		275,003
Wausau Paper Corp. (a)		14,696		99,492

				1,153,435
Personal Care — 0.1%
Female Health Co.		5,798		30,092
USANA Health Sciences, Inc. (a)		1,919		70,101
WD-40 Co.		5,183		173,112

				273,305
Pharmaceuticals — 1.7%
Akorn, Inc. (a)		17,640		52,391
Alexza Pharmaceuticals, Inc. (a)		13,346		36,301
Alkermes, Inc. (a)		28,381		353,343
Ardea Biosciences, Inc. (a)		4,203		86,414
Auxilium Pharmaceuticals, Inc. (a)		12,631		296,828
Avanir Pharmaceuticals, Inc. (a)		22,165		56,964
BMP Sunstone Corp. (a)		8,800		45,320
BioCryst Pharmaceuticals, Inc. (a)(b)		8,850		52,304
Biospecifics Technologies (a)		1,320		26,242
Cadence Pharmaceuticals, Inc. (a)(b)		8,030		56,290
Cambrex Corp. (a)		10,201		32,133
Corcept Therapeutics Inc. (a)		8,329		25,986
Depomed, Inc. (a)		16,956		47,477
Durect Corp. (a)		27,553		66,954
Eurand NV (a)		5,745		55,669
Hi-Tech Pharmacal Co., Inc. (a)		3,015		69,074
Impax Laboratories, Inc. (a)		18,877		359,796
Inspire Pharmaceuticals, Inc. (a)		17,600		87,824
Ironwood Pharmaceuticals, Inc. (a)		6,167		73,511
Isis Pharmaceuticals, Inc. (a)		28,287		270,707
Jazz Pharmaceuticals, Inc. (a)		4,786		37,474
MAP Pharmaceuticals, Inc. (a)		4,360		57,203
Medicines Co. (a)		16,314		124,150
Medicis Pharmaceutical Corp., Class A		18,068		395,328
Obagi Medical Products, Inc. (a)		5,300		62,646
Optimer Pharmaceuticals, Inc. (a)(b)		10,234		94,869
Pain Therapeutics, Inc. (a)		11,625		64,635
Par Pharmaceutical Cos., Inc. (a)		10,572		274,449
Pharmacyclics, Inc. (a)		11,687		77,835
Pozen, Inc. (a)(b)		8,114		56,879
Prestige Brands Holdings, Inc. (a)		13,149		93,095
Questcor Pharmaceuticals, Inc. (a)		16,801		171,538
SIGA Technologies, Inc. (a)(b)		9,971		76,777
Salix Pharmaceuticals Ltd. (a)		17,151		669,404
Santarus, Inc. (a)		16,300		40,424
Sciclone Pharmaceuticals, Inc. (a)		11,500		30,590
Somaxon Pharmaceuticals, Inc. (a)		8,867		31,921
Spectrum Pharmaceuticals, Inc. (a)		15,332		60,101
SuperGen, Inc. (a)		16,900		34,138
Vical, Inc. (a)		17,525		54,327
Vivus, Inc. (a)(b)		24,475		234,960
Xenoport, Inc. (a)		8,568		84,052

				4,978,323

See Notes to Financial Statements.



54	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010



Schedule of Investments (continued)		Master Small Cap Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Photography — 0.1%
CPI Corp.		1,600	$	35,872
Eastman Kodak Co. (a)(b)		80,402		348,945

				384,817
Plastics — 0.0%
Spartech Corp. (a)		9,426		96,616
Power Transmission Equipment — 0.2%
Advanced Energy Industries, Inc. (a)		11,090		136,296
Generac Holdings, Inc. (a)		5,901		82,673
Maxwell Technologies, Inc. (a)		8,097		92,306
Powell Industries, Inc. (a)		2,733		74,720
Power-One, Inc. (a)(b)		22,841		154,177
Vicor Corp. (a)		6,060		75,689

				615,861
Precious Metals & Minerals — 0.1%
Horsehead Holding Corp. (a)		13,263		100,268
Stillwater Mining Co. (a)		13,339		154,999

				255,267
Printing & Copying Services — 0.0%
Casella Waste Systems, Inc. (a)		9,023		34,468
Cenveo, Inc. (a)		16,859		92,387

				126,855
Producer Durables: Miscellaneous — 0.1%
Blount International, Inc. (a)		14,435		148,248
Park-Ohio Holdings Corp. (a)		2,524		36,320

				184,568
Production Technology Equipment — 1.1%
ATMI, Inc. (a)(c)		9,522		139,402
Axcelis Technologies, Inc. (a)		32,969		51,102
Brooks Automation, Inc. (a)		19,825		153,247
Cognex Corp.		11,951		210,099
Cohu, Inc.		7,308		88,646
Cymer, Inc. (a)		9,022		271,021
Electro Scientific Industries, Inc. (a)		8,534		114,014
Entegris, Inc. (a)		39,461		156,660
FEI Co. (a)		11,372		224,142
FSI International, Inc. (a)		10,061		42,156
Intevac, Inc. (a)		6,819		72,759
Kulicke & Soffa Industries, Inc. (a)		21,206		148,866
LTX-Credence Corp. (a)		44,577		126,153
MKS Instruments, Inc. (a)		15,106		282,784
Mattson Technology, Inc. (a)		15,683		59,439
Nanometrics, Inc. (a)		5,562		56,121
Photronics, Inc. (a)		16,527		74,702
Rudolph Technologies, Inc. (a)		9,702		73,250
Tessera Technologies, Inc. (a)		15,063		241,761
Ultra Clean Holdings, Inc. (a)		6,803		57,961
Ultratech, Inc. (a)		7,331		119,275
Veeco Instruments, Inc. (a)		12,175		417,359

				3,180,919
Publishing — 0.2%
AH Belo Corp. (a)		5,951		39,515
Courier Corp.		3,552		43,370
The Dolan Co. (a)		9,334		103,794
Journal Communications, Inc., Class A (a)		13,481		53,519
Lee Enterprises, Inc. (a)		14,445		37,124
Martha Stewart Living Omnimedia, Inc., Class A (a)(b)		8,182		40,255
McClatchy Co., Class A (a)		18,295		66,594
Media General, Inc., Class A (a)		6,979		68,115
Scholastic Corp.		9,233		222,700

				674,986
Radio & TV Broadcasters — 0.1%
Entercom Communications Corp. (a)		7,520		66,326
Entravision Communications Corp., Class A (a)		16,361		34,522
Fisher Communications, Inc. (a)		2,214		37,284
Gray Television, Inc. (a)		15,494		37,340
Lin TV Corp., Class A (a)		9,380		50,746
Sinclair Broadcast Group, Inc., Class A (a)		14,285		83,282

				309,500
Railroad Equipment — 0.1%
American Railcar Industries, Inc. (a)		3,077		37,170
Freightcar America, Inc.		3,739		84,576
Greenbrier Cos., Inc. (a)		5,876		65,812

				187,558
Railroads — 0.2%
Genesee & Wyoming, Inc., Class A (a)		11,625		433,729
Railamerica, Inc. (a)		7,311		72,525

				506,254
Real Estate — 0.2%
Avatar Holdings, Inc. (a)		2,784		53,397
Consolidated-Tomoka Land Co.		1,783		50,815
Forestar Group, Inc. (a)		10,878		195,369
HFF, Inc., Class A (a)		6,093		43,078
Kennedy-Wilson Holdings, Inc. (a)		6,551		66,165
Tejon Ranch Co. (a)		4,022		92,828
Thomas Properties Group, Inc.		11,507		38,088

				539,740
Real Estate Investment Trusts (REITs) — 7.0%
Acadia Realty Trust		12,118		203,825
Agree Realty Corp.		2,837		66,159
Alexander’s, Inc.		605		183,267
American Campus Communities, Inc.		15,684		428,016
American Capital Agency Corp.		9,830		259,709
Anworth Mortgage Asset Corp.		33,944		241,681
Apollo Commercial Real Estate Finance, Inc.		3,545		58,351
Ashford Hospitality Trust, Inc. (a)		12,616		92,475
Associated Estates Realty Corp.		9,883		127,985
BioMed Realty Trust, Inc.		33,767		543,311
CBL & Associates Properties, Inc.		41,396		514,966
CapLease, Inc.		18,138		83,616
Capstead Mortgage Corp.		20,701		228,953
Cedar Shopping Centers, Inc.		16,867		101,539
Chatham Lodging Trust (a)		2,902		51,859
Chesapeake Lodging Trust (a)		2,700		42,714
Cogdell Spencer, Inc.		13,672		92,423
Colonial Properties Trust		21,062		306,031
Colony Financial, Inc.		4,607		77,858
Cousins Properties, Inc.		27,130		182,859
CreXus Investment Corp.		4,299		53,437
Cypress Sharpridge Investments, Inc.		4,963		62,832
DCT Industrial Trust, Inc.		63,486		286,957
DiamondRock Hospitality Co.		46,060		378,613
Dupont Fabros Technology, Inc.		12,285		301,720
Dynex Capital Corp.		5,596		51,651
Eastgroup Properties, Inc.		8,039		286,028
Education Realty Trust, Inc.		17,657		106,472

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	55



Schedule of Investments (continued)		Master Small Cap Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Real Estate Investment Trusts (REITs) (continued)
Entertainment Properties Trust		13,874	$	528,183
Equity Lifestyle Properties, Inc.		7,728		372,721
Equity One, Inc.		10,835		169,026
Excel Trust, Inc. (a)		4,950		59,400
Extra Space Storage, Inc.		26,139		363,332
FelCor Lodging Trust, Inc. (a)		20,109		100,344
First Industrial Realty Trust, Inc. (a)		19,395		93,484
First Potomac Realty Trust		11,385		163,602
Franklin Street Properties Corp.		20,734		244,869
Getty Realty Corp.		6,400		143,424
Gladstone Commercial Corp.		3,396		55,491
Glimcher Realty Trust		20,874		124,826
Government Properties Income Trust		6,359		162,282
Hatteras Financial Corp.		10,659		296,533
Healthcare Realty Trust, Inc.		18,534		407,192
Hersha Hospitality Trust		33,705		152,347
Highwoods Properties, Inc.		20,100		557,976
Home Properties, Inc.		11,685		526,643
Inland Real Estate Corp.		22,534		178,469
InvesCo. Mortgage Capital, Inc.		7,613		152,336
Investors Real Estate Trust		23,381		206,454
iStar Financial, Inc. (a)		28,545		127,311
Kilroy Realty Corp.		16,092		478,415
Kite Realty Group Trust		17,141		71,649
LTC Properties, Inc.		7,137		173,215
LaSalle Hotel Properties		20,868		429,255
Lexington Corporate Properties Trust		29,743		178,755
MFA Financial, Inc.		82,515		610,611
MPG Office Trust, Inc. (a)		15,205		44,551
Medical Properties Trust, Inc.		33,299		314,343
Mid-America Apartment Communities, Inc.		9,145		470,693
Mission West Properties, Inc.		7,564		51,586
Monmouth Real Estate Investment Corp., Class A		9,554		70,604
National Health Investors, Inc.		7,270		280,331
National Retail Properties, Inc.		24,593		527,274
Newcastle Investment Corp.		19,170		51,376
NorthStar Realty Finance Corp. (b)		23,873		63,741
Omega Healthcare Investors, Inc.		27,488		547,836
One Liberty Properties, Inc.		2,710		40,406
PS Business Parks, Inc.		5,439		303,387
Parkway Properties, Inc.		6,821		99,382
Pebblebrook Hotel Trust (a)		5,757		108,519
Pennsylvania Real Estate Investment Trust (b)		16,753		204,722
PennyMac Mortgage Investment Trust (a)(d)		5,384		85,606
Post Properties, Inc.		14,536		330,403
Potlatch Corp.		11,795		421,435
RAIT Investment Trust (a)		24,762		46,305
Ramco-Gershenson Properties Trust		11,649		117,655
Redwood Trust, Inc.		23,454		343,367
Resource Capital Corp.		13,458		76,441
Retail Opportunity Investments Corp.		12,776		123,288
Saul Centers, Inc.		1,974		80,204
Sovran Self Storage, Inc.		8,221		283,049
Starwood Property Trust, Inc.		14,314		242,622
Strategic Hotel Capital, Inc. (a)		42,484		186,505
Sun Communities, Inc.		5,893		152,982
Sunstone Hotel Investors, Inc. (a)		29,684		294,762
Tanger Factory Outlet Centers, Inc.		11,965		495,112
Terreno Realty Corp. (a)		3,018		53,449
Two Harbors Investment Corp.		8,082		66,676
UMH Properties, Inc.		4,073		41,015
U-Store-It Trust		22,165		165,351
Universal Health Realty Income Trust		3,555		114,222
Urstadt Biddle Properties, Inc., Class A		5,100		82,263
Walter Investment Management Corp.		7,872		128,707
Washington Real Estate Investment Trust		18,064		498,386
Winthrop Realty Trust		5,921		75,848

				20,227,856
Recreational Vehicles & Boats — 0.4%
Arctic Cat, Inc. (a)		3,895		35,483
Brunswick Corp.		26,633		331,048
Drew Industries, Inc. (a)		5,705		115,241
Polaris Industries, Inc.		9,304		508,185
Winnebago Industries, Inc. (a)		8,686		86,339

				1,076,296
Rental & Leasing Services: Consumer — 0.4%
Amerco, Inc. (a)		2,575		141,754
Avis Budget Group, Inc. (a)		30,824		302,692
Dollar Thrifty Automotive Group, Inc. (a)		8,589		365,977
Rent-A-Center, Inc. (a)		19,678		398,676

				1,209,099
Restaurants — 1.4%
AFC Enterprises, Inc. (a)		8,088		73,601
BJ’s Restaurants, Inc. (a)		6,887		162,533
Biglari Holdings, Inc. (a)		441		126,523
Bob Evans Farms, Inc.		9,261		228,006
Buffalo Wild Wings, Inc. (a)		5,479		200,422
CEC Entertainment, Inc. (a)		6,628		233,703
CKE Restaurants, Inc.		16,631		208,386
California Pizza Kitchen, Inc. (a)		5,971		90,461
The Cheesecake Factory, Inc. (a)		18,127		403,507
Cracker Barrel Old Country Store, Inc.		7,197		335,092
Denny’s Corp. (a)		30,612		79,591
DineEquity, Inc. (a)		5,438		151,829
Domino’s Pizza, Inc. (a)		10,973		123,995
Jack in the Box, Inc. (a)		16,539		321,684
Jamba, Inc. (a)		19,330		41,173
Krispy Kreme Doughnuts, Inc. (a)		18,203		61,344
Landry’s Restaurants, Inc. (a)		2,270		55,524
McCormick & Schmick’s Seafood Restaurants, Inc. (a)		4,974		37,106
O’Charleys, Inc. (a)		6,066		32,150
P.F. Chang’s China Bistro, Inc.		6,964		276,123
Papa John’s International, Inc. (a)		6,392		147,783
Red Robin Gourmet Burgers, Inc. (a)		4,820		82,711
Ruby Tuesday, Inc. (a)		19,506		165,801
Ruth’s Hospitality Group, Inc. (a)		9,465		39,564
Sonic Corp. (a)		18,590		144,072
Texas Roadhouse, Inc., Class A (a)		17,371		219,222

				4,041,906
Scientific Instruments: Control & Filter — 0.6%
Brady Corp.		14,581		363,358
CIRCOR International, Inc.		5,175		132,376
ESCO Technologies, Inc.		7,939		204,429
Energy Recovery, Inc. (a)		12,672		50,688
The Gorman-Rupp Co.		3,731		93,462
ICx Technologies, Inc. (a)		3,998		29,185
L-1 Identity Solutions, Inc. (a)		22,957		188,018
Mine Safety Appliances Co.		7,819		193,755
PMFG, Inc. (a)		4,578		69,357
Robbins & Myers, Inc.		8,062		175,268

See Notes to Financial Statements.



56	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010



Schedule of Investments (continued)		Master Small Cap Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Scientific Instruments: Control & Filter (concluded)
Sun Hydraulics, Inc.		3,823	$	89,688
Watts Water Technologies, Inc., Class A		8,759		251,033
X-Rite, Inc. (a)		10,766		39,726

				1,880,343
Scientific Instruments: Electrical — 1.1%
A123 Systems, Inc. (a)		21,936		206,856
AZZ, Inc.		3,766		138,476
A.O. Smith Corp.		7,230		348,414
Advanced Battery Technologies, Inc. (a)		18,142		59,506
American Superconductor Corp. (a)(b)		13,477		359,701
Baldor Electric Co.		14,038		506,491
Ballantyne Strong, Inc. (a)		4,590		33,232
Broadwind Energy, Inc. (a)		28,531		79,887
Ener1, Inc. (a)(b)		18,847		63,703
EnerSys (a)		14,439		308,561
Franklin Electric Co., Inc.		7,026		202,489
GrafTech International Ltd. (a)		36,049		527,036
Houston Wire & Cable Co.		5,400		58,590
Littelfuse, Inc. (a)		6,609		208,911
SatCon Technology Corp. (a)		22,564		64,533
Taser International, Inc. (a)		18,100		70,590
UQM Technologies, Inc. (a)		11,357		38,500

				3,275,476
Scientific Instruments: Gauges & Meters — 0.1%
Badger Meter, Inc.		4,487		173,602
Faro Technologies, Inc. (a)		4,949		92,596
Keithley Instruments, Inc.		3,591		31,708
Measurement Specialties, Inc. (a)		4,531		62,075
Zygo Corp. (a)		5,298		42,967

				402,948
Scientific Instruments: Pollution Control — 0.4%
Clean Harbors, Inc. (a)		6,874		456,502
Darling International, Inc. (a)		24,857		186,676
EnergySolutions, Inc.		26,650		135,648
Fuel Tech, Inc. (a)		5,653		35,727
Met-Pro Corp.		4,810		51,756
Metalico, Inc. (a)		11,625		46,268
Team, Inc. (a)		5,856		76,421
US Ecology, Inc.		5,707		83,151
Waste Services, Inc. (a)		8,326		97,081

				1,169,230
Securities Brokerage & Services — 0.6%
BGC Partners, Inc.		17,354		88,679
GFI Group, Inc.		19,718		110,026
Gladstone Investment Corp.		7,282		42,454
International Assets Holding Corp., Inc. (a)		3,930		62,880
Investment Technology Group, Inc. (a)		12,834		206,114
KBW, Inc. (a)		10,582		226,878
Knight Capital Group, Inc., Class A (a)		27,794		383,279
LaBranche & Co., Inc. (a)		11,366		48,646
Ladenburg Thalmann Financial Services, Inc. (a)		28,230		35,288
MF Global Holdings Ltd. (a)		25,761		147,095
MarketAxess Holdings, Inc.		8,261		113,919
optionsXpress Holdings, Inc. (a)		12,382		194,893
Penson Worldwide, Inc. (a)(b)		6,251		35,256
SWS Group, Inc.		8,390		79,705
TradeStation Group, Inc. (a)		12,177		82,195

				1,857,307
Semiconductors & Components — 2.4%
AXT, Inc. (a)		9,878		44,550
Actel Corp. (a)		6,718		86,125
Advanced Analogic Technologies, Inc. (a)		13,817		44,076
Amkor Technology, Inc. (a)		31,661		174,452
Anadigics, Inc. (a)		20,070		87,505
Applied Micro Circuits Corp. (a)		19,783		207,326
Cavium Networks, Inc. (a)		13,373		350,239
Ceva, Inc. (a)		6,500		81,900
Cirrus Logic, Inc. (a)		19,670		310,983
Conexant Systems, Inc. (a)		24,961		55,913
DSP Group, Inc. (a)		7,375		47,126
Diodes, Inc. (a)		10,251		162,683
Entropic Communications, Inc. (a)		17,163		108,813
Exar Corp. (a)		11,472		79,501
Formfactor, Inc. (a)		15,202		164,182
Hittite Microwave Corp. (a)		8,196		366,689
IXYS Corp. (a)		7,474		66,070
Integrated Device Technology, Inc. (a)		49,076		242,926
Integrated Silicon Solutions, Inc. (a)		7,952		59,958
Kopin Corp. (a)		20,596		69,820
Lattice Semiconductor Corp. (a)		35,243		152,955
MIPS Technologies, Inc. (a)		14,100		72,051
MaxLinear, Inc., Class A (a)		2,353		32,895
Micrel, Inc.		15,328		156,039
Microsemi Corp. (a)		24,917		364,536
Microtune, Inc. (a)		17,666		37,628
Monolithic Power Systems, Inc. (a)		9,767		174,439
MoSys, Inc. (a)		8,948		39,550
Netlogic Microsystems, Inc. (a)		18,814		511,741
Omnivision Technologies, Inc. (a)		15,518		332,706
PLX Technology, Inc. (a)		11,831		49,572
Pericom Semiconductor Corp. (a)		7,865		75,504
Power Integrations, Inc.		7,415		238,726
RF Micro Devices, Inc. (a)		80,737		315,682
Rubicon Technology, Inc. (a)(b)		4,338		129,229
Semtech Corp. (a)		18,583		304,204
Sigma Designs, Inc. (a)(b)		9,481		94,905
Silicon Image, Inc. (a)		23,791		83,506
Spansion, Inc., Class A (a)		3,931		64,115
Standard Microsystems Corp. (a)		6,829		158,979
Supertex, Inc. (a)		3,024		74,572
Trident Microsystems, Inc. (a)		22,663		32,181
TriQuint Semiconductor, Inc. (a)		46,225		282,435
Virage Logic Corp. (a)		7,132		84,799
Volterra Semiconductor Corp. (a)		7,492		172,765
Zoran Corp. (a)		15,589		148,719

				6,995,270
Shipping — 0.7%
American Commercial Lines, Inc. (a)		2,846		64,063
Baltic Trading Ltd. (a)		5,148		58,533
DHT Holdings, Inc.		15,389		59,248
Eagle Bulk Shipping, Inc. (a)(b)		18,931		79,889
Excel Maritime Carriers Ltd. (a)		12,211		62,520
Genco Shipping & Trading Ltd. (a)		7,618		114,194
General Maritime Corp.		15,769		95,245
Gulfmark Offshore, Inc., Class A (a)		7,019		183,898
Horizon Lines, Inc., Class A		9,959		42,127
International Shipholding Corp.		1,916		42,401
Knightsbridge Tankers Ltd.		5,294		93,121
Nordic American Tanker Shipping Ltd.		14,029		394,075
Overseas Shipholding Group, Inc.		7,646		283,208
Scorpio Tankers, Inc. (a)		4,234		48,479

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	57



Schedule of Investments (continued)		Master Small Cap Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Shipping (concluded)
Ship Finance International Ltd.		13,466	$	240,772
Teekay Tankers Ltd., Class A		8,271		92,056
Ultrapetrol Bahamas Ltd. (a)		7,658		33,312

				1,987,141
Specialty Retail — 3.4%
America’s Car Mart, Inc. (a)		3,000		67,890
AnnTaylor Stores Corp. (a)		17,652		287,198
Asbury Automotive Group, Inc. (a)		8,791		92,657
Barnes & Noble, Inc.		11,497		148,311
bebe Stores, Inc.		10,082		64,525
Big 5 Sporting Goods Corp.		6,701		88,051
Blue Nile, Inc. (a)		3,806		179,186
Brown Shoe Co., Inc.		13,121		199,177
The Buckle, Inc. (b)		7,821		253,557
Build-A-Bear Workshop, Inc. (a)		5,470		37,087
Cabela’s, Inc., Class A (a)(b)		11,905		168,337
Casual Male Retail Group, Inc. (a)		13,313		45,530
The Cato Corp., Class A		8,465		186,399
Charming Shoppes, Inc. (a)		35,216		132,060
The Children’s Place Retail Stores, Inc. (a)		8,320		366,246
Christopher & Banks Corp.		11,093		68,666
Citi Trends, Inc. (a)		4,526		149,086
Coldwater Creek, Inc. (a)		18,604		62,509
Collective Brands, Inc. (a)		19,436		307,089
DSW, Inc., Class A (a)		4,292		96,398
Destination Maternity Corp. (a)		1,643		41,568
Dress Barn, Inc. (a)		17,826		424,437
Express, Inc. (a)		4,836		79,165
The Finish Line, Inc., Class A		15,349		213,812
Genesco, Inc. (a)		7,254		190,853
Group 1 Automotive, Inc. (a)		7,380		173,651
Gymboree Corp. (a)		8,878		379,179
Haverty Furniture Cos., Inc.		5,638		69,291
hhgregg, Inc. (a)		3,990		93,047
Hibbett Sports, Inc. (a)		8,580		205,577
Hot Topic, Inc.		13,641		69,296
Jo-Ann Stores, Inc. (a)		8,170		306,457
Jos. A. Bank Clothiers, Inc. (a)		5,515		297,755
Lithia Motors, Inc., Class A		6,400		39,552
Lumber Liquidators Holdings, Inc. (a)		6,723		156,848
MarineMax, Inc. (a)		6,986		48,483
Men’s Wearhouse, Inc.		15,812		290,308
Midas, Inc. (a)		4,370		33,518
Monro Muffler, Inc.		5,964		235,757
Nu Skin Enterprises, Inc., Class A		14,804		369,064
OfficeMax, Inc. (a)		25,445		332,312
Pacific Sunwear of California, Inc. (a)		20,563		65,802
Penske Auto Group, Inc. (a)		13,303		151,122
The Pep Boys — Manny, Moe & Jack		15,933		141,166
Pier 1 Imports, Inc. (a)		31,433		201,486
Regis Corp.		17,181		267,508
Retail Ventures, Inc. (a)		7,100		55,522
Rue21, Inc. (a)		4,466		135,498
Sally Beauty Co., Inc. (a)		28,075		230,215
Shoe Carnival, Inc. (a)		2,891		59,294
Shutterfly, Inc. (a)		8,116		194,459
Sonic Automotive, Inc. (a)		12,135		103,876
Stage Stores, Inc.		11,784		125,853
Stamps.com, Inc. (a)		3,303		33,856
Stein Mart, Inc. (a)		8,438		52,569
Systemax, Inc.		3,350		50,485
The Talbots, Inc. (a)		21,066		217,190
Ulta Salon Cosmetics & Fragrance, Inc. (a)		9,462		223,871
Vitacost.com, Inc. (a)		4,529		40,716
Vitamin Shoppe, Inc. (a)		4,838		124,095
The Wet Seal, Inc., Class A (a)		30,611		111,730
Zumiez, Inc. (a)		6,297		101,445

				9,737,647
Steel — 0.0%
Olympic Steel, Inc.		2,846		65,372
Universal Stainless & Alloy Products, Inc. (a)		2,234		35,722

				101,094
Sugar — 0.0%
Imperial Sugar Co., New Shares		3,800		38,380
Synthetic Fibers & Chemicals — 0.0%
Zoltek Cos., Inc. (a)		8,614		72,961
Technology: Miscellaneous — 0.4%
Benchmark Electronics, Inc. (a)		18,912		299,755
CTS Corp.		10,392		96,022
LaBarge, Inc. (a)		4,029		45,971
Plexus Corp. (a)		12,110		323,822
Sanmina-SCI Corp. (a)		23,931		325,701
Vocus, Inc. (a)		5,183		79,196

				1,170,467
Telecommunications Equipment — 0.4%
ADC Telecommunications, Inc. (a)		29,267		216,868
Applied Signal Technology, Inc.		4,140		81,351
Arris Group, Inc. (a)		38,030		387,526
Brightpoint, Inc. (a)		21,306		149,142
Mastec, Inc. (a)		15,770		148,238
Powerwave Technologies, Inc. (a)		39,877		61,411
Symmetricom, Inc. (a)		13,696		69,713
UTStarcom, Inc. (a)		35,961		66,168

				1,180,417
Textile Products — 0.1%
Culp, Inc. (a)		2,850		31,236
Interface, Inc., Class A		15,334		164,687
Unifi, Inc. (a)		13,182		50,355

				246,278
Textiles, Apparel & Shoes — 1.9%
Carter’s, Inc. (a)		17,755		466,069
Cherokee, Inc.		2,567		43,896
Columbia Sportswear Co. (b)		3,398		158,585
Crocs, Inc. (a)		25,808		273,049
Deckers Outdoor Corp. (a)		3,859		551,335
G-III Apparel Group, Ltd. (a)		4,704		107,675
Iconix Brand Group, Inc. (a)		21,561		309,832
Joe’s Jeans, Inc. (a)		13,665		27,057
Jones Apparel Group, Inc.		26,051		412,908
K-Swiss, Inc., Class A (a)		8,063		90,547
Kenneth Cole Productions, Inc., Class A (a)		2,624		28,890
Lacrosse Footwear, Inc.		1,607		27,062
Liz Claiborne, Inc. (a)(b)		28,565		120,544
Maidenform Brands, Inc. (a)		6,913		140,749
Oxford Industries, Inc.		4,306		90,125
Perry Ellis International, Inc. (a)		3,121		63,044
Quiksilver, Inc. (a)		39,110		144,707
R.G. Barry Corp.		2,908		32,075
Skechers U.S.A., Inc., Class A (a)		10,354		378,128

See Notes to Financial Statements.



58	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010



Schedule of Investments (continued)		Master Small Cap Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Textiles, Apparel & Shoes (concluded)
Steven Madden Ltd. (a)		7,373	$	232,397
Timberland Co., Class A (a)		12,400		200,260
True Religion Apparel, Inc. (a)		7,649		168,813
Under Armour, Inc., Class A (a)(b)		10,509		348,163
Volcom, Inc. (a)		5,857		108,764
The Warnaco Group, Inc. (a)		13,248		478,783
Weyco Group, Inc.		2,232		50,845
Wolverine World Wide, Inc.		14,752		372,045

				5,426,347
Tobacco — 0.2%
Alliance One International, Inc. (a)		26,971		96,017
Star Scientific, Inc. (a)(b)		29,459		48,313
Universal Corp.		7,179		284,862
Vector Group Ltd.		12,751		214,472

				643,664
Toys — 0.1%
Jakks Pacific, Inc. (a)		8,650		124,387
Leapfrog Enterprises, Inc. (a)		10,508		42,242
RC2 Corp. (a)		6,624		106,713

				273,342
Transportation: Miscellaneous — 0.2%
Dynamex, Inc. (a)		3,319		40,492
Echo Global Logistics, Inc. (a)		3,489		42,601
HUB Group, Inc., Class A (a)		11,232		337,072
Pacer International, Inc. (a)		10,918		76,317
Textainer Group Holdings Ltd.		2,909		70,223

				566,705
Truckers — 0.7%
Arkansas Best Corp.		7,685		159,464
Celadon Group, Inc. (a)		6,181		87,399
Forward Air Corp.		8,768		238,928
Heartland Express, Inc.		14,967		217,321
Knight Transportation, Inc.		17,681		357,863
Marten Transport Ltd. (a)		4,731		98,310
Old Dominion Freight Line, Inc. (a)		8,354		293,560
Patriot Transportation Holding, Inc. (a)		486		39,322
Roadrunner Transportation Systems, Inc. (a)		3,336		47,405
Saia, Inc. (a)		5,023		75,345
USA Truck, Inc. (a)		2,610		42,073
Werner Enterprises, Inc.		12,793		280,039

				1,937,029
Utilities: Electrical — 1.7%
Allete, Inc.		9,300		318,432
Avista Corp.		16,513		322,499
Black Hills Corp.		11,807		336,145
CH Energy Group, Inc.		4,892		191,962
Central Vermont Public Service Corp.		4,000		78,960
Cleco Corp.		17,888		472,422
Dynegy, Inc. (a)		30,896		118,950
El Paso Electric Co. (a)		13,121		253,891
The Empire District Electric Co.		12,245		229,839
IDACORP, Inc.		14,314		476,227
MGE Energy, Inc.		6,993		252,028
NorthWestern Corp.		10,842		284,060
Otter Tail Corp.		10,878		210,272
PNM Resources, Inc.		26,237		293,330
Pike Electric Corp. (a)		5,114		48,174
Portland General Electric Co.		22,494		412,315
UIL Holdings Corp.		9,175		229,650
Unisource Energy Corp.		10,771		325,069
Unitil Corp.		3,917		81,904

				4,936,129
Utilities: Gas Distributors — 1.2%
Chesapeake Utilities Corp.		3,004		94,326
The Laclede Group, Inc.		6,857		227,172
New Jersey Resources Corp.		12,243		430,954
Nicor, Inc. (c)		13,339		540,229
Northwest Natural Gas Co.		7,884		343,506
Piedmont Natural Gas Co.		21,252		537,675
South Jersey Industries, Inc.		8,845		379,981
Southwest Gas Corp.		13,534		399,253
WGL Holdings, Inc.		14,991		510,144

				3,463,240
Utilities: Telecommunications — 0.9%
Alaska Communications Systems Group, Inc.		13,857		117,646
Atlantic Tele-Network, Inc.		2,830		116,879
Cbeyond Communications, Inc. (a)		8,142		101,775
Cincinnati Bell, Inc. (a)		60,401		181,807
Cogent Communications Group, Inc. (a)		13,732		104,088
Consolidated Communications Holdings, Inc.		7,815		132,933
FiberTower Corp. (a)		14,458		68,242
General Communication, Inc., Class A (a)		14,734		111,831
Global Crossing Ltd. (a)		9,389		99,242
Globalstar, Inc. (a)		23,452		36,116
ICO Global Communications Holdings Ltd. (a)		28,778		46,332
IDT Corp., Class B (a)		4,600		58,650
Iridium Communications, Inc. (a)		10,375		104,165
j2 Global Communications, Inc. (a)		13,482		294,447
NTELOS Holdings Corp.		8,950		153,940
Neutral Tandem, Inc. (a)		9,922		111,622
PAETEC Holding Corp. (a)		37,848		129,062
Premiere Global Services, Inc. (a)		18,173		115,217
RCN Corp. (a)		10,738		159,030
Shenandoah Telecom Co.		7,233		128,313
USA Mobility, Inc.		6,780		87,598
Vonage Holdings Corp. (a)		32,033		73,676

				2,532,611
Utilities: Water — 0.3%
American States Water Co.		5,607		185,816
Artesian Resources Corp., Class A		2,560		47,258
California Water Service Group		5,853		208,952
Connecticut Water Service, Inc.		2,957		62,156
Consolidated Water Co., Inc.		4,715		53,657
Middlesex Water Co.		4,598		72,878
SJW Corp.		4,025		94,346
Southwest Water Co.		8,584		89,960
York Water Co.		4,423		62,807

				877,830

Total Common Stocks — 96.5%				280,035,773

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	59



Schedule of Investments (continued)		Master Small Cap Index Series (Percentages shown are based on Net Assets)


Investment Companies	Shares		Value

BlackRock Kelso Capital Corp. (d)		17,107	$	168,846
Gladstone Capital Corp.		6,400		69,184
Hercules Technology Growth Capital, Inc.		11,650		101,771
Kayne Anderson Energy Development Co.		3,254		49,363
Pennantpark Investment Corp.		9,717		92,797
Prospect Capital Corp.		19,928		192,305

Total Investment Companies — 0.2%				674,266


Warrants (e)


Alternative Energy — 0.0%
GreenHunter Energy, Inc. (Expires 8/27/11) (b)(f)		180		—

Communications Technology — 0.0%
Lantronix, Inc. (Expires 2/09/11)		138		—

Total Warrants — 0.0%				—

Total Long-Term Investments (Cost — $265,134,275) — 96.8%				280,710,039


Short-Term Securities	Shares		Value

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.16% (d)(g)		10,162,728	$	10,162,728


	Beneficial
	Interest
	(000)

BlackRock Liquidity Series, LLC Money Market Series, 0.27% (d)(g)(h)	$	14,418		14,418,243

Total Short-Term Securities (Cost — $24,580,971) — 8.5%				24,580,971

*Total Investments (Cost — $289,715,246) — 105.2%**				305,291,010
Liabilities in Excess of Other Assets — (5.2)%				(15,218,865	)

Net Assets — 100.0%			$	290,072,145


*		The cost and unrealized appreciation (depreciation) of investments as of June 30, 2010, as computed for federal income tax purposes were as follows:


Aggregate cost	$	302,295,372

Gross unrealized appreciation	$	33,709,686
Gross unrealized depreciation		(30,714,048	)

Net unrealized appreciation	$	2,995,638


(a)		Non-income producing security.

(b)		Security, or a portion of security, is on loan.

(c)		All or a portion of security has been pledged as collateral in connection with open financial futures contracts.

(d)		Investments in companies considered to be an affiliate of the Series during the period, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


	Shares/								Shares/
	Beneficial		Shares/			Shares/			Beneficial
	Interest Held		Beneficial			Beneficial			Interest Held		Value
	at December 31,		Interest			Interest			at June 30,		at June 30,
Affiliate	2009		Purchased			Sold			2010		2010		Income

BlackRock Kelso Capital Corp.		3,100		14,007			—			17,107	$	168,846	$	2,144
BlackRock Liquidity Funds, TempFund, Institutional Class		9,452,117		710,611	¹		—			10,162,728	$	10,162,728	$	5,223
BlackRock Liquidity Series, LLC Money Market Series	$	17,386,620		—		$	(2,968,377	)²	$	14,418,243	$	14,418,243	$	93,053
PennyMac Mortgage Investment Trust		3,500		1,884			—			5,384	$	85,606		—


¹		Represents net shares sold.

²		Represents net shares purchased.

See Notes to Financial Statements.



60	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010



Schedule of Investments (concluded)		Master Small Cap Index Series


(e)		Warrants entitle the Series to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date.

(f)		Restricted security as to resale, representing 0.0% of net assets was as follows:

Acquisition

Issue

Date

Cost

Value

GreenHunter Energy, Inc.

06/27/08

—


(g)		Represents the current yield as of report date.

(h)		Security was purchased with the cash collateral from loaned securities.

•

Financial futures contacts purchased as of June 30,2010 were as follows:

Expiration

Notional

Unrealized

Contracts

Issue

Date

Value

Depreciation

153

Russell 2000 MINI

September 2010

9,615,472

(316,132

)

•		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 rating group indexes, and/or as defined by Series management. This definition may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

•		Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivatives, which are as follows:

	•		Level 1 — price quotations in active markets/exchanges for identical assets and liabilities

	•		Level 2 — other observable inputs (including,but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

	•		Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Series’ own assumptions used in determining the fair value of investments and derivatives)

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Series’ policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the inputs used as of June 30, 2010 in determining the fair valuation of the Series’ investments and derivatives:


Valuation Inputs	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities:
Long-Term Investments¹	$	280,710,039		—		—	$	280,710,039
Short-Term Securities		10,162,728	$	14,418,243		—		24,580,971

Total	$	290,872,767	$	14,418,243		—	$	305,291,010


¹		See above Schedule of Investments for values in each industry.


	Derivative Financial Instruments²

Valuation Inputs	Level 1			Level 2		Level 3		Total

Liabilities:
Equity contracts	$	(316,132	)		—		—	$	(316,132	)


²		Derivative financial instruments are financial futures contacts which are shown at the unrealized appreciation/depreciation on the instrument.

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	61



Statement of Assets and Liabilities		Master Small Cap Index Series

June 30, 2010 (Unaudited)


Assets

Investments at value — unaffiliated (including securities loaned of $13,644,499) (cost — $264,865,912)	$	280,455,587
Investments at value — affiliated (cost — $24,849,334)		24,835,423
Cash collateral for financial futures contracts		517,000
Investments sold receivable		1,494,370
Dividends receivable		307,245
Securities lending income receivable — affiliated		33,194
Prepaid expenses		54,144

Total assets		307,696,963


Liabilities

Collateral on securities loaned, at value		14,418,243
Investments purchased payable		2,988,212
Withdrawals payable to investors		91,487
Margin variation payable		85,529
Investment advisory fees payable		1,997
Other affiliates payable		1,107
Directors’ fees payable		482
Other accrued expenses payable		37,761

Total liabilities		17,624,818

Net Assets	$	290,072,145


Net Assets Consist of

Investors’ capital	$	274,812,513
Net unrealized appreciation/depreciation		15,259,632

Net Assets	$	290,072,145

See Notes to Financial Statements.



62	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010



Statement of Operations		Master Small Cap Index Series

Six Months Ended June 30, 2010 (Unaudited)


Investment Income

Dividends — unaffiliated	$	1,168,923
Foreign taxes withheld		(3,021	)
Security lending — affiliated		93,053
Dividends — affiliated		7,367

Total income		1,266,322


Expenses

Professional		41,536
Accounting services		32,325
Custodian		23,564
Investment advisory		13,082
Directors		4,052
Printing		698
Other		5,223

Total expenses		120,480
Less fees waived by advisor		(21,608	)

Total expenses after fees waived		98,872

Net investment income		1,167,450


Realized and Unrealized Gain (Loss)

Net realized gain (loss) from:
Investments		1,959,978
Financial futures contracts		(774,407	)

		1,185,571


Net change in unrealized appreciation/depreciation on:
Investments		(18,638,780	)
Financial futures contracts		(404,705	)

		(19,043,485	)

Total realized and unrealized loss		(17,857,914	)

Net Decrease in Net Assets Resulting from Operations	$	(16,690,464	)

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	63



Statements of Changes in Net Assets		Master Small Cap Index Series


	Six Months
	Ended
	June 30,			Year Ended
	2010			December 31,
Increase (Decrease) in Net Assets:	(Unaudited)			2009

Operations

Net investment income	$	1,167,450		$	4,243,420
Net realized gain (loss)		1,185,571			(30,867,280	)
Net change in unrealized appreciation/depreciation		(19,043,485	)		124,588,792

Net increase (decrease) in net assets resulting from operations		(16,690,464	)		97,964,932


Capital Transactions

Proceeds from contributions		133,107,328			171,416,855
Value of withdrawals		(55,981,415	)		(384,465,211	)

Net increase (decrease) in net assets derived from capital transactions		77,125,913			(213,048,356	)


Net Assets

Total increase (decrease) in net assets		60,435,449			(115,083,424	)
Beginning of period		229,636,696			344,720,120

End of period	$	290,072,145		$	229,636,696



Financial Highlights		Master Small Cap Index Series


	Six Months
	Ended
	June 30,
	2010			Year Ended December 31,
	(Unaudited)			2009			2008			2007			2006			2005

Total Investment Return

Total investment return		(1.84	)%¹		27.37	%		(33.57	)%		(1.46	)%		18.13	%		4.63	%


Ratios to Average Net Assets

Total expenses		0.09	%²		0.09	%		0.08	%		0.06	%		0.07	%		0.08	%

Total expenses after fees waived and paid indirectly		0.08	%²		0.07	%		0.07	%		0.06	%		0.07	%		0.07	%

Net investment income		0.89	%²		1.27	%		1.60	%		1.69	%		1.55	%		1.17	%


Supplemental Data

Net assets, end of period (000)	$	290,072		$	229,637		$	344,720		$	630,394		$	561,373		$	370,145

Portfolio turnover		16	%		43	%		42	%		26	%		40	%		37	%


¹		Aggregate total investment return.

²		Annualized.

See Notes to Financial Statements.



64	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010



Notes to Financial Statements (Unaudited)		Master Small Cap Index Series

1. Organization and Significant Accounting Policies:

Master Small Cap Index Series (the “Series”), a non-diversified, open-end management investment company, is a series of Quantitative Master Series LLC (the “Master LLC”). The Master LLC is registered as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), and is organized as a Delaware limited liability company. The Master LLC’s Limited Liability Company Agreement permits the Board of Directors of the Master LLC (the “Board”) to issue non-transferable interests, subject to certain limitations. The Series’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

The following is a summary of significant accounting policies followed by the Master LLC:

Valuation: The Series’ policy is to fair value its financial instruments at market value using independent dealers or pricing services selected under the supervision of the Board. Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid price. If no bid price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end investment companies are valued at net asset value each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

The Series values its investment in BlackRock Liquidity Series, LLC Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the net assets of the underlying fund. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments will follow the parameters of investments by a money market fund that is subject to Rule 2a-7 promulgated by the Securities and Exchange Commission (the “SEC”) under the 1940 Act. The Series may withdraw up to 25% of its investment daily, although the manager of the Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the market value of such investment or is not available, the investment will be valued in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the investment advisor and/or the sub-advisor seeks to determine the price that the Series might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor and/or sub-advisor deems relevant. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof.

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the SEC require that the Series either delivers collateral or segregates assets in connection with certain investments (e.g., financial futures contracts), the Series will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or other liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, each party has requirements to deliver/deposit securities as collateral for certain investments.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization of premium and accretion of discount on debt securities, is recognized on the accrual basis.

Securities Lending: The Series may lend securities to financial institutions that provide cash 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. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions. 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 if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	65



Notes to Financial Statements (continued)		Master Small Cap Index Series

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 Master LLC. 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 of 1986, as amended.

The Series files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Series’ US federal tax returns remains open for each of the four years ended December 31, 2009. The statutes of limitations on the Series’ state and local tax returns may remain open for an additional year depending upon the jurisdiction.

2. Derivative Financial Instruments:

The Series engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Series and to economically hedge, or protect, its exposure to certain risks such as equity risk. These contracts may be transacted on an exchange. Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counter-party does not perform under the contract. Counterparty risk related to exchange traded financial futures contracts is minimal because of the protection against defaults provided by the exchange on which they trade.

Financial Futures Contracts: The Series purchases or sells financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk). Financial futures contracts are contracts for delayed delivery of securities or currencies at a specific future date and at a specific price or yield. Pursuant to the contract, the Series agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as margin variation and are recognized by the Series as unrealized gains or losses. When the contract is closed, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures transactions involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest rates and the underlying assets.

Derivative Instruments Categorized by Risk Exposure:

Fair Value of Derivative Instruments as of June 30, 2010


	Liability Derivatives
	Statement of
	Assets and
	Liabilities
	Location	Value

Equity contracts	Net unrealized appreciation/depreciation*	$	316,132


*		Includes cumulative appreciation/depreciation of financial futures contracts as reported in the Schedule of Investments. Only current day’s margin variation is reported within the Statement of Assets and Liabilities.

The Effect of Derivative Instruments on the Statement of Operations
Six Months Ended June 30, 2010


	Net Realized Loss from
	Financial Futures Contracts
Equity contracts	$	(774,407	)


	Net Change in Unrealized
	Appreciation/Depreciation on
	Financial Futures Contracts
Equity contracts	$	(404,705	)

For the six months ended June 30, 2010, the average quarterly balance of outstanding derivative financial instruments was as follows:


Financial futures contracts:
Average number of contracts purchased		120
Average notional value of contracts purchased	$	7,727,206

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate of the Series for 1940 Act purposes, but BAC and Barclays are not.

The Master LLC, on behalf of the Series, entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the “Manager”), the Series’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. 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 the Manager a monthly fee at an annual rate 0.01% of the Series’ average daily net assets.

The Manager contractually agreed to waive and/or reimburse fees and/or expenses to ensure that the management fee of the Series, when



66	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010



Notes to Financial Statements (continued)		Master Small Cap Index Series

combined with the administration fee of BlackRock Small Cap Index Fund of BlackRock Index Funds, Inc., will not exceed 0.30%. No fees are currently being waived for the Series.

The Manager entered into a contractual arrangement with the Master LLC with respect to the Series under which the Manager will waive and/or reimburse its fees and/or expenses so that the total annual operating expenses incurred by the Series (excluding interest expense, acquired fund fees and certain other Series’ expenses) will not exceed 0.08% of the average daily value of the Series’ net assets. For the six months ended June 30, 2010, the Manager waived $18,703, which is included in fees waived by advisor in the Statement of Operations.

The Manager has agreed not to reduce or discontinue these contractual waivers or reimbursements before May 1, 2011 unless approved by the Board, including a majority of the non-interested trustees.

The Manager voluntarily agreed to waive its advisory fees by the amount of investment advisory fees the Series pays to the Manager indirectly through its investment in affiliated money market funds; however, the Manager does not waive its advisory fees by the amount of investment advisory fees paid through its investment in other affiliated investment companies, if any. For the six months ended June 30, 2010, the manager waived advisory fees in the amount of $2,905, which is included in fees waived by advisor in the Statement of Operations.

The Manager entered into a sub-advisory agreement with BlackRock Investment Management, LLC (“BIM”), an affiliate of the Manager.The Manager pays BIM for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by the Series to the Manager.

For the six months ended June 30, 2010, the Series reimbursed the Manager $4,186 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Master LLC, on behalf of the Series, received an exemptive order from the SEC permitting, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BIM as the securities lending agent. 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 company managed by the Manager or in registered money market funds advised by the Manager or its affiliates. The market value of securities on loan and the value of the related collateral are shown in the Statement of Assets and Liabilities as securities loaned and collateral on securities loaned, at value, respectively. The cash collateral invested by BIM is disclosed in the Schedule of Investments. The share of income earned by the Series on such investments is shown as securities lending — affiliated in the Statement of Operations. For the six months ended June 30, 2010, BIM received $23,627 in securities lending agent fees related to securities lending activities for the Series.

Certain officers and/or directors of the Master LLC are officers and/or directors of BlackRock or its affiliates.

4. Investments:

Purchases and sales of investments, excluding short-term securities for the six months ended June 30, 2010, were $115,391,532 and $42,064,540, respectively.

5. Borrowings:

The Master LLC, on behalf of the Series, along with certain other funds managed by the Manager and its affiliates, is a party to a $500 million credit agreement with a group of lenders, which expires in November 2010.The Series may borrow under the credit agreement to fund shareholder redemptions.The Series paid its pro rata share of a 0.02% upfront fee on the aggregate commitment amount which was allocated to the Series based on its net assets as of October 31, 2009, a commitment fee of 0.10% per annum based on the Series’ pro rata share of the unused portion of the credit agreement, which is included in miscellaneous in the Statement of Operations, and interest at a rate equal to the higher of (a) the one-month LIBOR plus 1.25% per annum and (b) the Fed Funds rate plus 1.25% per annum on amounts borrowed.The Series did not borrow under the credit agreement during the six months ended June 30, 2010.

6. Concentration, Market and Credit Risk:

In the normal course of business, the Series invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Series may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Series; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Series may be exposed to counterparty credit risk, or the risk that an entity with which the Series has unsettled or open transactions may fail to or be unable to perform its commitments. The Series manages counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Series to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Series’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Series’ Statement of Assets and Liabilities, less any collateral held by the Series.

The Series invests a significant portion of its assets in securities in the financial services sector. Changes in economic conditions affecting the sector would have a greater impact on the Series and could affect the value, income and/or liquidity of positions in such securities.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	67



Notes to Financial Statements (concluded)		Master Small Cap Index Series

7. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Series through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.



68	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement

The Board of Directors (the “Board,” and the members of which are referred to as “Board Members”) of Quantitative Master Series LLC (the “Master LLC”) met on April 20, 2010 and May 18 – 19, 2010 to consider the approval of the Master LLC’s investment advisory agreement (the “Advisory Agreement”) with BlackRock Advisors, LLC (the “Manager”), the Master LLC’s investment advisor, on behalf of Master Small Cap Index Series (the “Portfolio”), a series of the Master LLC. The Board also considered the approval of the sub-advisory agreement (the “Sub-Advisory Agreement”) between the Manager and BlackRock Investment Management, LLC (the “Sub-Advisor”), with respect to the Portfolio. The Manager and the Sub-Advisor are referred to herein as “BlackRock.” The Advisory Agreement and the Sub-Advisory Agreement are referred to herein as the “Agreements.”

Activities and Composition of the Board

The Board consists of thirteen individuals, eleven of whom are not “interested persons” of the Master LLC as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Master LLC and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Co-Chairs of the Board are each Independent Board Members. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight and Contract Committee and an Executive Committee, each of which is composed of Independent Board Members (except for the Executive Committee, which also has one interested Board Member) and is chaired by Independent Board Members. The Board also has one ad hoc committee, the Joint Product Pricing Committee, which consists of Independent Board Members and directors/trustees of the boards of certain other BlackRock-managed funds, who are not “interested persons” of their respective funds.

The Agreements

Pursuant to the 1940 Act, the Board is required to consider the continuation of the Agreements on an annual basis. In connection with this process, the Board assessed, among other things, the nature, scope and quality of the services provided to the Portfolio by the personnel of BlackRock and its affiliates, including investment management, administrative and shareholder services, oversight of fund accounting and custody, marketing services and assistance in meeting applicable legal and regulatory requirements.

From time to time throughout the year, the Board, acting directly and through its committees, considers at each of its meetings factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to the Portfolio and its shareholders. Among the matters the Board considered were: (a) investment performance of an affiliated feeder fund that invests all of its investable assets in the Portfolio (the “representative feeder fund”) for one-, three- and five-year periods, as applicable, against its peer funds, and applicable benchmarks, if any, as well as senior management’s and portfolio managers’ analysis of the reasons for any over performance or underperformance against its peers and/or benchmarks, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Portfolio, such as marketing and distribution and fund accounting; (c) the Portfolio’s operating expenses; (d) the resources devoted to and compliance reports relating to the Portfolio’s investment objective, policies and restrictions; (e) the Master LLC’s compliance with its Code of Ethics and compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) the use of brokerage commissions and execution quality of portfolio transactions; (j) BlackRock’s implementation of the Master LLC’s valuation and liquidity procedures; (k) an analysis of contractual and actual management fees for products with similar investment objectives across the open-end fund, closed-end fund and institutional account product channels; and (l) periodic updates on BlackRock’s business.

Board Considerations in Approving the Agreements

The Approval Process: Prior to the April 20, 2010 meeting, the Board requested and received materials specifically relating to the Agreements. The Board is engaged in a process with BlackRock to periodically review the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April meeting included: (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on fees and expenses of the Portfolio and the representative feeder fund, as applicable, and the investment performance of the representative feeder fund as compared with a peer group of funds as determined by Lipper (collectively, “Peers”); (b) information on the profitability of the Agreements to BlackRock and a discussion of fall-out benefits to BlackRock and its affiliates and significant shareholders; (c) a general analysis provided by BlackRock concerning investment advisory fees charged to other clients, such as institutional clients and closed-end funds, under similar investment mandates, as well as the performance of such other clients, as applicable; (d) the impact of economies of scale; (e) a summary of aggregate amounts paid by the Portfolio to BlackRock; and (f) if applicable, a comparison of management fees to similar BlackRock open-end funds, as classified by Lipper.

At an in-person meeting held on April 20, 2010, the Board reviewed materials relating to its consideration of the Agreements. As a result of the discussions that occurred during the April 20, 2010 meeting, the Board presented BlackRock with questions and requests for additional information and BlackRock responded to these requests with additional written information in advance of the May 18 – 19, 2010 Board meeting.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	69

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (continued)

At an in-person meeting held on May 18 – 19, 2010, the Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and the Master LLC with respect to the Portfolio and the Sub-Advisory Agreement between the Manager and the Sub-Advisor with respect to the Portfolio, each for a one-year term ending June 30, 2011. In approving the continuation of the Agreements, the Board considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Portfolio and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Portfolio; (d) economies of scale; and (e) other factors deemed relevant by the Board Members.

The Board also considered other matters it deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to the distribution of Portfolio shares, services related to the valuation and pricing of portfolio holdings of the Portfolio, direct and indirect benefits to BlackRock and its affiliates and significant shareholders from their relationship with the Portfolio and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as controlling, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of the Portfolio. The Board received information regarding the investment performance of the representative feeder fund. The Board met with BlackRock’s senior management personnel responsible for investment operations, including the senior investment officers. The Board also reviewed the materials provided by the portfolio management team discussing performance of the representative feeder fund and the Portfolio’s investment objective, strategies and outlook.

The Board considered, among other factors, the number, education and experience of BlackRock’s investment personnel generally and the Portfolio’s portfolio management team, investments by portfolio managers in the funds they manage, BlackRock’s portfolio trading capabilities, BlackRock’s use of technology, BlackRock’s commitment to compliance and BlackRock’s approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board also reviewed a general description of BlackRock’s compensation structure with respect to the Portfolio’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent.

In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to the Portfolio. BlackRock and its affiliates and significant shareholders provide the Portfolio with certain administrative, shareholder and other services (in addition to any such services provided to the Portfolio by third parties) and officers and other personnel as are necessary for the operations of the Portfolio. In addition to investment advisory services, BlackRock and its affiliates provide the Portfolio with other services, including: (i) preparing disclosure documents, such as the prospectus, the statement of additional information and periodic shareholder reports; (ii) assisting with daily accounting and pricing; (iii) overseeing and coordinating the activities of other service providers; (iv) organizing Board meetings and preparing the materials for such Board meetings; (v) providing legal and compliance support; and (vi) performing other administrative functions necessary for the operation of the Portfolio, such as tax reporting and fulfilling regulatory filing requirements. The Board reviewed the structure and duties of BlackRock’s fund administration, accounting, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Portfolio and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of the Portfolio. The Board noted that the Portfolio’s investment results correspond directly to the investment results of the representative feeder fund. In preparation for the April 20, 2010 meeting, the Board was provided with reports, independently prepared by Lipper, which included a comprehensive analysis of the representative feeder fund’s performance. The Board also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with its review, the Board received and reviewed information regarding the investment performance of the representative feeder fund as compared to a representative group of similar funds as determined by Lipper and to all funds in the representative feeder fund’s applicable Lipper category. The Board was provided with a description of the methodology used by Lipper to select peer funds. The Board regularly reviews the performance of the Portfolio and the representative feeder fund, as applicable, throughout the year. The Board attaches more importance to performance over relatively long periods of time, typically three to five years.

The Board noted that the representative feeder fund performed below the median of its Lipper Performance Universe in each of the one-, three- and five-year periods reported. The Board and BlackRock reviewed the reasons for the representative feeder fund’s underperformance during these periods compared with its Peers. The Board was informed that, among other things, over the one-, three- and five-year periods, the representative feeder fund met its objective of matching the risk and return of the Russell 2000 Index prior to fees and expenses.



70	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (continued)

The Board and BlackRock discussed BlackRock’s strategy for improving the Portfolio’s performance and BlackRock’s commitment to providing the resources necessary to assist the Portfolio’s portfolio managers and to improve the Portfolio’s performance.

C. Consideration of the Advisory Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Portfolio: The Board, including the Independent Board Members, reviewed the information provided by Lipper regarding the Portfolio’s contractual advisory fee rate. The Board considered the services provided and the fees charged by BlackRock to other types of clients with similar investment mandates, including separately managed institutional accounts.

The Board received and reviewed statements relating to BlackRock’s financial condition and profitability with respect to the services it provided the Portfolio. The Board was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Portfolio. The Board reviewed BlackRock’s profitability with respect to the Portfolio and other funds the Board currently oversees for the year ended December 31, 2009 compared to available aggregate profitability data provided for the year ended December 31, 2008. The Board reviewed BlackRock’s profitability with respect to other fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, expense allocations and business mix, and the difficulty of comparing profitability as a result of those factors.

The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. Nevertheless, to the extent such information was available, the Board considered BlackRock’s operating margin, in general, compared to the operating margin for leading investment management firms whose operations include advising open-end funds, among other product types. That data indicates that operating margins for BlackRock with respect to its registered funds are generally consistent with margins earned by similarly situated publicly traded competitors. In addition, the Board considered, among other things, certain third party data comparing BlackRock’s operating margin with that of other publicly traded asset management firms. That third party data indicates that larger asset bases do not, in themselves, translate to higher profit margins.

In addition, the Board considered the cost of the services provided to the Portfolio by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management and distribution of the Portfolio and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock’s methodology in allocating its costs to the management of the Portfolio. The Board also considered whether BlackRock has the financial resources necessary to attract and retain high-quality investment management personnel to perform its obligations under the Agreements and to continue to provide the high quality of services that is expected by the Board.

The Board noted that the Portfolio’s contractual advisory fee rate was lower than or equal to the median contractual advisory fee rate paid by comparable funds, in each case before taking into account any expense reimbursements or fee waivers. The Board also noted that BlackRock has contractually agreed to waive fees and/or reimburse expenses so that the advisory fee of the Portfolio, when combined with the administration fee of the representative feeder fund, will not exceed a specified amount. Additionally, the Board noted that BlackRock has contractually agreed to waive fees and/or reimburse expenses in order to limit, to a specified amount, the Portfolio’s total operating expenses as a percentage of the Portfolio’s average daily net assets.

D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of the Portfolio increase. The Board also considered the extent to which the Portfolio benefits from such economies and whether there should be changes in the advisory fee rate or structure in order to enable the Portfolio to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the asset level of the Portfolio.

E. Other Factors Deemed Relevant by the Board Members: The Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates and significant shareholders may derive from their respective relationships with the Portfolio, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates and significant shareholders as service providers to the Portfolio, including for administrative and distribution services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain mutual fund transactions to assist in managing all or a number of its other client accounts. The Board further noted that BlackRock completed the acquisition of a complex of exchange-traded funds (“ETFs”) on December 1, 2009, and that BlackRock’s funds may invest in such ETFs without any offset against the management fees payable by the funds to BlackRock.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010	71

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (concluded)

In connection with its consideration of the Agreements, the Board also received information regarding BlackRock’s brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

The Board noted the competitive nature of the open-end fund marketplace, and that the shareholders of a fund are able to redeem their shares if they believe that the fund’s fees and expenses are too high or if they are dissatisfied with the performance of the fund.

Conclusion

The Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and the Master LLC, with respect to the Portfolio, for a one-year term ending June 30, 2011 and the Sub-Advisory Agreement between the Manager and the Sub-Advisor, with respect to the Portfolio, for a one-year term ending June 30, 2011. As part of its approval, the Board considered the detailed review of BlackRock’s fee structure, as it applies to the Master LLC, being conducted by the ad hoc Joint Product Pricing Committee. Based upon its evaluation of all of the aforementioned factors in their totality, the Board, including the Independent Board Members, was satisfied that the terms of the Agreements were fair and reasonable and in the best interest of the Portfolio and its shareholders. In arriving at a decision to approve the Agreements, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for the Portfolio reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. Certain aspects of the arrangements may be the subject of more attention in some years than in others, and the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.



72	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2010



Schedule of Investments June 30, 2010 (Unaudited)		Master International Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Australia — 7.8%
AGL Energy Ltd.		36,440	$	448,184
AMP Ltd.		166,653		723,284
AXA Asia Pacific Holdings Ltd.		83,908		383,876
Alumina Ltd.		197,274		249,665
Amcor Ltd.		99,510		530,348
Aristocrat Leisure Ltd.		34,664		105,642
Arrow Energy Ltd. (a)		34,672		140,336
Asciano Group (a)		237,702		319,208
Australia & New Zealand Banking Group Ltd.		208,100		3,737,768
Australian Stock Exchange Ltd.		13,995		341,398
BGP Holdings Plc (a)		783,183		10
BHP Billiton Ltd.		275,602		8,573,865
Bendigo and Adelaide Bank Ltd.		28,068		191,308
Billabong International Ltd.		16,993		123,405
BlueScope Steel Ltd. (a)		146,506		254,696
Boral Ltd.		47,943		192,043
Brambles Ltd.		114,949		523,487
CFS Retail Property Trust		141,553		223,745
CSL Ltd.		46,112		1,259,018
CSR Ltd.		121,841		170,635
Caltex Australia Ltd.		11,968		93,904
Coca-Cola Amatil Ltd.		45,808		458,668
Cochlear Ltd.		4,588		285,781
Commonwealth Bank of Australia Ltd.		126,022		5,094,762
Computershare Ltd.		36,181		319,974
Crown Ltd.		36,450		236,300
DB RREEF Trust		385,315		247,249
Energy Resources of Australia Ltd.		5,323		58,782
Fairfax Media Ltd.		171,024		186,871
Fortescue Metals Group Ltd. (a)		100,703		341,527
Foster’s Group Ltd.		156,998		743,627
General Property Trust		143,224		334,407
Goodman Fielder Ltd.		116,560		131,405
Goodman Group		498,305		263,559
Harvey Norman Holdings Ltd.		47,603		131,491
Incitec Pivot Ltd.		132,340		299,297
Insurance Australia Group Ltd.		168,879		480,392
Intoll Group		183,728		160,086
Leighton Holdings Ltd.		10,946		263,263
Lend Lease Group		43,397		264,274
MacArthur Coal Ltd.		11,154		111,466
Macquarie Group Ltd.		27,250		837,571
Map Group		53,883		120,761
Metcash Ltd.		61,185		215,049
Mirvac Group		240,043		262,151
National Australia Bank Ltd.		174,283		3,369,633
Newcrest Mining Ltd.		40,143		1,171,235
OZ Mineral Ltd.		250,020		198,013
OneSteel Ltd.		107,501		265,975
Orica Ltd.		29,385		618,127
Origin Energy Ltd.		71,512		892,165
Paladin Resources Ltd. (a)		54,836		163,283
QBE Insurance Group Ltd.		84,889		1,288,113
Qantas Airways Ltd.		88,991		163,134
Rio Tinto Ltd.		35,845		1,971,276
SP AusNet		126,344		81,121
Santos Ltd.		68,292		713,687
Sims Metal Management Ltd.		13,095		186,065
Sonic Healthcare Ltd.		29,853		259,776
Stockland		193,769		601,385
Suncorp-Metway Ltd.		103,451		692,106
Tabcorp Holdings Ltd.		49,044		259,922
Tatts Group Ltd.		102,272		191,761
Telstra Corp. Ltd.		354,286		965,695
Toll Holdings Ltd.		53,675		244,437
Transurban Group		103,581		367,679
Wesfarmers Ltd., Ordinary Shares		82,761		1,978,106
Wesfarmers Ltd., Partially Protected Shares		12,351		296,165
Westfield Group		180,671		1,835,938
Westpac Banking Corp.		244,496		4,309,605
Woodside Petroleum Ltd.		45,015		1,564,692
Woolworths Ltd.		101,932		2,307,232
WorleyParsons Ltd.		15,599		287,002

				57,677,866
Austria — 0.3%
Erste Bank der Oesterreichischen Sparkassen AG		15,415		489,092
IMMOFINANZ Immobilien Anlagen AG		79,517		204,170
Immoeast AG NPV (a)		30,710		—
OMV AG		12,154		364,992
Raiffeisen International Bank Holding AG (a)		4,520		171,674
Telekom Austria AG		26,876		298,856
Verbund — Oesterreichische Elektrizitaetswirtschafts AG		6,175		188,945
Vienna Insurance Group		3,349		139,017
Voestalpine AG		8,818		240,156

				2,096,902
Belgium — 0.9%
Anheuser-Busch InBev NV		59,406		2,856,322
Anheuser-Busch InBev NV VVPR Strip (a)		24,368		89
Belgacom SA		12,337		387,898
Colruyt SA		1,220		286,994
Delhaize Group		8,189		594,241
Dexia NV (a)		44,011		153,579
Fortis		180,870		402,494
Groupe Bruxelles Lambert SA		6,548		454,053
KBC Bancassurance Holding		13,157		504,312
Mobistar SA		2,338		124,223
Nationale A Portefeuille		2,247		95,591
Solvay SA		4,823		411,850
UCB SA		8,119		254,970
Umicore SA		9,158		264,220

				6,790,836

Portfolio Abbreviation

ADR American Depositary Receipts

See Notes to Financial Statements.



73	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010



Schedule of Investments (continued)		Master International Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Bermuda — 0.1%
Mongolia Energy Co. Ltd. (a)		277,140	$	96,418
SeaDrill Ltd.		22,705		409,552
Yue Yuen Industrial Holdings Ltd.		59,285		184,012

				689,982
Cayman Islands — 0.1%
Foxconn International Holdings Ltd. (a)		179,313		116,086
Lifestyle International Holdings Ltd.		52,466		101,513
Sands China Ltd. (a)		161,800		239,137

				456,736
Denmark — 1.0%
A.P. Moller — Maersk A/S, Class A		45		342,244
A.P. Moller — Maersk A/S, Class B		110		866,340
Carlsberg A/S		8,668		660,580
Coloplast A/S, Class B		1,866		185,218
DSV A/S		16,787		241,692
Danske Bank A/S		36,966		711,315
Novo-Nordisk A/S, Class B		35,870		2,898,036
Novozymes A/S, Class B		3,735		398,543
TrygVesta A/S		2,275		119,858
Vestas Wind Systems A/S (a)		17,032		708,806
William Demant Holding (a)		1,985		145,187

				7,277,819
Finland — 1.0%
Elisa Corp.		10,661		184,394
Fortum Oyj		37,127		814,965
Kesko Oyj, Class B		5,511		178,261
Kone Oyj, Class B		12,504		497,852
Metso Oyj		10,339		331,330
Neste Oil Oyj		10,756		156,063
Nokia Oyj		308,437		2,514,016
Nokian Renkaat Oyj		8,578		209,932
OKO Bank		11,663		118,429
Orion Oyj		7,586		141,879
Outokumpu Oyj		10,321		155,079
Rautaruukki Oyj		7,372		107,446
Sampo Oyj		35,153		741,155
Sanoma Oyj		6,877		118,737
Stora Enso Oyj, Class R		47,152		340,709
UPM-Kymmene Oyj		42,226		559,044
Wartsila Oyj		6,344		288,474

				7,457,765
France — 9.1%
AXA SA		141,175		2,156,749
Accor SA (a)		11,870		549,527
Aeroports de Paris		2,495		160,063
Air France-KLM (a)		11,270		133,993
Air Liquide		23,206		2,343,499
Alcatel SA (a)		187,830		478,335
Alstom		17,179		777,821
Atos Origin SA (a)		3,692		148,245
BNP Paribas SA		77,895		4,190,822
BioMerieux		1,006		103,285
Bouygues		18,708		722,158
Bureau Veritas SA		3,936		213,178
CNP Assurances		3,007		204,576
Cap Gemini SA		11,846		520,628
Carrefour SA		49,319		1,956,366
Casino Guichard Perrachon SA		4,470		339,206
Christian Dior SA		5,175		496,708
Cie de Saint-Gobain SA		31,903		1,188,853
Cie Générale d’Optique Essilor International SA		17,047		1,013,018
Compagnie Générale de Géophysique SA (a)		11,558		205,616
Compagnie Générale des Etablissements Michelin		12,310		857,667
Credit Agricole SA		75,615		784,518
Dassault Systèmes SA		4,756		288,117
EDP Renovaveis SA (a)		19,120		112,605
Eiffage		3,323		144,257
Electricité de France SA		21,594		821,581
Eramet		468		115,673
Eurazeo		2,412		138,366
European Aeronautic Defense and Space Co.		33,122		675,949
Eutelsat Communications		8,009		268,123
Foncière Des Regions		1,951		160,831
France Telecom SA		152,565		2,646,233
GDF Suez		102,235		2,908,653
Gecina SA		1,623		146,618
Groupe Danone		47,859		2,565,736
Groupe Eurotunnel SA		38,326		259,017
Hermes International		4,286		568,179
ICADE		1,913		161,458
Iliad SA		1,458		113,220
Imerys SA		3,106		158,049
Ipsen		2,637		80,286
JCDecaux SA		5,627		131,107
Klepierre		7,292		201,471
L’Oreal SA		19,743		1,933,044
LVMH Moet Hennessy Louis Vuitton SA		20,162		2,194,495
Lafarge SA		16,693		910,233
Lagardere SCA		9,607		299,636
Legrand Promesses		10,662		316,034
M6-Metropole Television SA		5,646		114,168
Natixis		71,265		309,465
Neopost SA		2,501		181,106
PagesJaunes Groupe SA		10,867		112,008
Pernod-Ricard SA		16,382		1,270,675
Peugeot SA		12,342		313,707
Pinault-Printemps-Redoute		6,164		765,713
Publicis Groupe		10,373		413,778
Renault SA		15,615		578,809
Safran SA		13,513		376,950
Sanofi-Aventis		86,641		5,218,165
Schneider Electric SA		19,464		1,965,868
Scor SE		13,345		254,881
Société BIC SA		2,183		155,042
Société Générale SA		51,770		2,130,284
Société Télévision Française 1		9,864		128,518
Sodexho Alliance SA		7,631		423,498
Suez Environnement SA		21,811		359,933
Technip SA		8,006		459,192
Thales SA		7,174		231,607
Total SA		173,574		7,748,155
Unibail — Rodamco		7,568		1,233,452
Vallourec SA		4,425		762,926
Veolia Environnement SA		28,051		659,003
Vinci SA		35,960		1,493,122
Vivendi SA		101,112		2,054,812

				67,578,639

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010	74



Schedule of Investments (continued)		Master International Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Germany — 7.6%
Adidas-Salomon AG		17,002	$	823,152
Allianz AG, Registered Shares		37,292		3,690,923
BASF SE		75,455		4,122,897
Bayer AG		67,939		3,796,536
Bayerische Motoren Werke AG		27,425		1,332,215
Bayerische Motoren Werke AG, Preference Shares		4,252		148,760
Beiersdorf AG		8,190		452,335
Celesio AG		6,290		137,157
Commerzbank AG		57,991		404,821
Continental AG		4,014		208,365
DaimlerChrysler AG		74,104		3,748,596
Deutsche Bank AG, Registered Shares		51,020		2,865,760
Deutsche Boerse AG		16,243		986,822
Deutsche Lufthansa AG		18,393		254,275
Deutsche Post AG		70,456		1,027,260
Deutsche Postbank AG		7,057		204,551
Deutsche Telekom AG		233,276		2,753,961
E.ON AG		147,947		3,978,039
Fraport AG		3,203		136,220
Fresenius AG		2,292		151,941
Fresenius AG, Preference Shares		6,530		431,322
Fresenius Medical Care AG		15,859		854,181
GEA Group AG		13,334		265,386
Hannover Rueckversicherung AG, Registered Shares		4,935		211,492
HeidelbergCement AG		11,420		539,718
Henkel KGaA		10,535		431,177
Henkel KGaA, Preference Shares		14,483		707,218
Hochtief AG		3,665		218,821
Infineon Technologies AG (a)		88,113		510,828
K+S AG		11,649		535,347
Linde AG		13,939		1,465,686
MAN SE		8,859		730,355
Merck KGaA		5,239		384,327
Metro AG		10,518		536,646
Muenchener Rueckversicherungs AG, Registered Shares		16,264		2,042,159
Porsche Automobil Holding SE, Preference Shares		7,038		300,894
Puma AG Rudolf Dassler Sport		420		111,628
Qiagen NV (a)		18,812		365,987
RWE AG		34,419		2,252,243
RWE AG, Preference Shares		3,102		186,759
SAP AG		70,522		3,135,925
Salzgitter AG		3,386		201,784
Siemens AG		67,578		6,044,171
Suedzucker AG		5,874		106,128
TUI AG		12,274		107,858
ThyssenKrupp AG		27,156		669,211
United Internet AG		10,588		115,941
Volkswagen AG		2,425		205,728
Volkswagen AG, Preference Shares		14,101		1,237,374
Wacker Chemie AG		1,309		189,613

				56,320,493
Greece — 0.3%
Alpha Bank AE		40,797		199,393
Bank of Cyprus Public Co. Ltd.		46,058		184,455
Coca-Cola Hellenic Bottling Co. SA		14,798		317,138
EFG Eurobank Ergasias SA		27,241		120,971
Hellenic Telecommunications Organization SA (a)		21,160		159,070
National Bank of Greece SA		49,385		531,754
OPAP SA		17,926		223,038
Piraeus Bank SA		29,254		123,473
Public Power Corp. (a)		9,559		137,060

				1,996,352
Hong Kong — 2.4%
ASM Pacific Technology Ltd.		16,504		128,215
BOC Hong Kong Holdings Ltd.		301,400		686,428
Bank of East Asia Ltd.		123,532		445,653
CLP Holdings Ltd.		159,687		1,155,829
Cathay Pacific Airways Ltd.		93,263		184,449
Cheung Kong Holdings Ltd.		114,835		1,333,147
Cheung Kong Infrastructure Holdings Ltd.		37,500		139,417
Esprit Holdings Ltd.		93,187		500,541
Hang Lung Group Ltd.		65,000		350,296
Hang Lung Properties Ltd.		168,000		642,591
Hang Seng Bank Ltd.		62,253		832,342
Henderson Land Development Co., Ltd.		87,491		512,440
The Hong Kong & China Gas Ltd.		350,319		866,253
Hong Kong Exchanges and Clearing Ltd.		83,427		1,301,167
HongKong Electric Holdings Ltd.		112,500		670,083
Hopewell Holdings Ltd.		46,849		132,314
Hutchison Whampoa Ltd.		177,176		1,098,974
Hysan Development Co. Ltd.		55,791		157,714
Kerry Properties Ltd.		58,000		250,615
Li & Fung Ltd.		189,990		850,011
The Link Real Estate Investment Trust		178,414		444,494
MTR Corp.		116,000		395,586
NWS Holdings Ltd.		73,000		131,943
New World Development Ltd.		205,484		333,593
Orient Overseas International Ltd.		18,057		129,078
PCCW Ltd.		321,000		93,643
Shangri-La Asia Ltd.		106,990		197,473
Sino Land Co.		136,421		243,802
Sun Hung Kai Properties Ltd.		116,324		1,590,844
Swire Pacific Ltd., Class A		62,577		710,327
Television Broadcasts Ltd.		24,000		111,291
Wharf Holdings Ltd.		111,870		548,080
Wheelock and Co., Ltd.		76,000		214,253
Wing Hang Bank Ltd.		14,500		141,569
Wynn Macau Ltd. (a)		124,000		202,211

				17,726,666
Ireland — 0.3%
Anglo Irish Bank Corp. Plc (a)		62,641		1
Bank of Ireland (a)		276,647		224,886
CRH Plc		57,903		1,201,097
Elan Corp. Plc (a)		40,603		184,303
James Hardie Industries SE, Chess Depository Interest (a)		34,963		181,050
Kerry Group Plc		11,352		317,061
Ryanair Holdings Plc (a)		29,444		129,184

				2,237,582
Israel — 0.8%
Bank Hapoalim Ltd. (a)		80,458		289,793
Bank Leumi Le-Israel BM		95,850		341,546
Bezeq Israeli Telecommunication Corp. Ltd.		139,036		303,919
Cellcom Israel Ltd.		4,310		107,342
Delek Group Ltd.		304		63,002
Discount Investment Corp.		2,157		34,119
Elbit Systems Ltd.		2,059		104,513
Israel Chemicals Ltd.		35,906		374,057
The Israel Corp. Ltd. (a)		197		122,165

See Notes to Financial Statements.



75	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010



Schedule of Investments (continued)		Master International Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Israel (concluded)
Israel Discount Bank Ltd. (a)		50,455	$	85,316
Makhteshim-Agan Industries Ltd.		18,550		61,901
Nice Systems Ltd. (a)		5,144		130,545
Ormat Industries		5,090		37,657
Partner Communications Co. Ltd.		7,239		111,114
Teva Pharmaceutical Industries Ltd.		76,289		3,985,892
United Mizrahi Bank Ltd. (a)		11,429		83,170

				6,236,051
Italy — 2.7%
A2A SpA		94,579		129,115
Assicurazioni Generali SpA		96,220		1,677,816
Autogrill SpA (a)		9,990		119,445
Autostrade SpA		19,461		344,904
Banca Carige SpA		49,397		96,496
Banca Monte dei Paschi di Siena SpA		180,685		204,445
Banca Popolare di Milano Scarl		32,797		135,019
Banco Popolare SpA		51,827		284,141
Enel SpA		541,027		2,290,802
Eni SpA		213,884		3,926,078
Exor SpA		5,439		91,442
Fiat SpA		62,194		638,834
Finmeccanica SpA		32,777		339,782
Intesa Sanpaolo SpA		636,143		1,675,411
Intesa Sanpaolo SpA, Non-Convertible Savings Shares		76,292		151,957
Luxottica Group SpA		9,379		227,084
Mediaset SpA		57,153		325,009
Mediobanca SpA		38,112		283,894
Mediolanum SpA		18,571		72,548
Parmalat SpA		139,556		324,374
Pirelli & C. SpA		223,531		123,098
Prysmian SpA		14,478		207,790
Saipem SpA		21,532		655,828
Snam Rete Gas SpA		116,299		464,126
Telecom Italia SpA		781,910		863,506
Telecom Italia SpA, Non-Convertible Savings Shares		488,602		446,320
Terna SpA		105,319		379,071
Unicredit SpA		1,267,087		2,802,849
Unione Di Banche Italiane ScpA		49,558		426,703

				19,707,887
Japan — 22.6%
The 77 Bank Ltd.		29,000		155,772
ABC-Mart, Inc.		2,200		86,303
Acom Co., Ltd.		3,370		43,547
Advantest Corp.		12,900		269,581
Aeon Co., Ltd.		48,700		515,311
Aeon Credit Service Co., Ltd.		6,100		54,327
Aeon Mall Co. Ltd.		6,900		136,693
Air Water Inc.		12,000		131,019
Aisin Seiki Co., Ltd.		15,500		417,300
Ajinomoto Co., Inc.		54,000		488,549
Alfresa Holdings Corp.		3,200		154,660
All Nippon Airways Co., Ltd. (a)		68,000		215,548
Amada Co., Ltd.		29,000		190,624
Aozora Bank Ltd.		46,000		59,572
Asahi Breweries Ltd.		31,400		531,949
Asahi Glass Co., Ltd.		82,100		770,905
Asahi Kasei Corp.		102,000		532,884
Asics Corp.		13,000		119,027
Astellas Pharma, Inc.		37,500		1,256,464
The Bank of Kyoto Ltd.		26,000		214,041
The Bank of Yokohama Ltd.		99,000		452,872
Benesse Holdings, Inc.		5,600		254,928
Bridgestone Corp.		54,300		858,601
Brother Industries Ltd.		19,100		198,282
Canon, Inc.		93,100		3,469,786
Canon Marketing Japan Inc.		5,700		80,223
Casio Computer Co., Ltd.		20,100		120,725
Central Japan Railway Co.		123		1,015,592
The Chiba Bank Ltd.		62,000		374,301
Chiyoda Corp.		13,000		94,406
Chubu Electric Power Co., Inc.		54,800		1,359,938
Chugai Pharmaceutical Co., Ltd.		18,200		323,954
The Chugoku Bank Ltd.		14,000		164,967
Chugoku Electric Power Co.		24,100		496,376
Chuo Mitsui Trust Holdings, Inc.		81,000		285,643
Citizens Holding Co., Ltd.		19,500		119,124
Coca-Cola West Holdings Co., Ltd.		5,300		87,575
Cosmo Oil Co., Ltd.		50,000		119,390
Credit Saison Co., Ltd.		12,900		135,011
Dai Nippon Printing Co., Ltd.		46,000		530,901
Dai-ichi Life Insurance Co.		668		926,277
Daicel Chemical Industries Ltd.		22,000		148,425
Daido Steel Co., Ltd.		25,000		106,911
Daihatsu Motor Co., Ltd.		16,000		148,917
Daiichi Sankyo Co., Ltd.		56,100		1,002,276
Daikin Industries Ltd.		19,000		579,316
Dainippon Pharma Co., Ltd.		13,400		102,603
Daito Trust Construction Co., Ltd.		6,300		356,761
Daiwa House Industry Co., Ltd.		39,000		350,850
Daiwa Securities Group, Inc.		135,000		569,964
Dena Co. Ltd.		6,500		171,628
Denki Kagaku Kogyo Kabushiki Kaisha		38,000		176,874
Denso Corp.		40,400		1,116,612
Dentsu, Inc.		13,513		356,885
Diamond Lease Co., Ltd.		4,690		158,205
Dowa Mining Co., Ltd.		21,350		102,289
East Japan Railway Co.		28,049		1,867,659
Eisai Co., Ltd.		20,500		680,208
Electric Power Development Co.		9,400		298,154
Elpida Memory, Inc. (a)		14,300		219,698
FamilyMart Co., Ltd.		5,200		171,719
Fanuc Ltd.		15,800		1,784,177
Fast Retailing Co., Ltd.		4,300		650,652
Fuji Electric Holdings Co., Ltd.		48,800		140,512
Fuji Heavy Industries Ltd. (a)		48,000		257,140
Fuji Media Holdings, Inc.		44		63,170
Fuji Photo Film Co., Ltd.		38,400		1,109,740
Fujitsu Ltd.		152,000		950,125
Fukuoka Financial Group, Inc.		62,000		258,083
Furukawa Electric Co., Ltd.		51,000		222,507
GS Yuasa Corp.		30,000		196,313
The Gunma Bank Ltd.		32,000		169,693
The Hachijuni Bank Ltd.		35,000		196,481
Hakuhodo DY Holdings, Inc.		2,070		103,706
Hankyu Hanshin Holdings, Inc.		93,000		410,400
Hino Motors Ltd.		23,000		113,403
Hirose Electric Co., Ltd.		2,600		238,117
The Hiroshima Bank Ltd.		41,000		163,871
Hisamitsu Pharmaceutical Co., Ltd.		5,300		210,228
Hitachi Chemical Co., Ltd.		8,500		157,914
Hitachi Construction Machinery Co., Ltd.		7,800		143,608

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010	76



Schedule of Investments (continued)		Master International Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Japan (continued)
Hitachi High-Technologies Corp.		5,900	$	108,388
Hitachi Ltd. (a)		374,000		1,358,483
Hitachi Metals Ltd.		14,000		141,736
Hokkaido Electric Power Co., Inc.		14,800		318,820
Hokuhoku Financial Group, Inc.		104,100		191,232
Hokuriku Electric Power		14,300		313,591
Honda Motor Co., Ltd.		135,700		3,985,895
Hoya Corp.		36,400		774,507
IHI Corp.		106,000		168,680
Ibiden Co., Ltd.		10,400		280,161
Idemitsu Kosan Co., Ltd.		1,800		135,529
Inpex Corp.		68		377,163
Isetan Mitsukoshi Holdings Ltd.		30,205		294,456
Isuzu Motors Ltd.		96,000		288,480
Ito En, Ltd.		4,300		65,771
Itochu Corp.		125,300		979,528
Itochu Techno-Science Corp.		2,600		95,012
The Iyo Bank Ltd.		20,000		185,989
J Front Retailing Co. Ltd.		38,600		185,773
JFE Holdings, Inc.		38,200		1,181,793
JGC Corp.		17,000		257,962
JS Group Corp.		20,300		387,483
JSR Corp.		14,400		241,888
JTEKT Corp.		15,900		147,046
JX Holdings, Inc. (a)		187,160		925,057
Jafco Co., Ltd.		2,500		55,303
Japan Petroleum Explora		2,400		97,917
Japan Prime Realty Investment Corp.		58		122,176
Japan Real Estate Investment Corp.		40		325,824
Japan Retail Fund Investment Corp.		133		161,984
The Japan Steel Works, Ltd.		25,000		219,748
Japan Tobacco, Inc.		374		1,163,550
The Joyo Bank Ltd.		53,000		210,138
Jupiter Telecommunications Co., Ltd.		196		187,651
KDDI Corp.		243		1,158,305
Kajima Corp.		69,800		158,244
Kamigumi Co., Ltd.		21,000		161,138
Kaneka Corp.		25,000		145,031
The Kansai Electric Power Co., Inc.		62,600		1,526,703
Kansai Paint Co., Ltd.		18,000		154,510
Kao Corp.		44,000		1,035,269
Kawasaki Heavy Industries Ltd.		115,000		278,828
Kawasaki Kisen Kaisha Ltd. (a)		55,000		223,648
Keihin Electric Express Railway Co., Ltd.		38,000		335,843
Keio Electric Railway Co., Ltd.		47,000		303,452
Keisei Electric Railway Co., Ltd.		24,000		134,183
Keyence Corp.		3,420		790,849
Kikkoman Corp.		14,000		146,167
Kinden Corp.		12,000		102,185
Kintetsu Corp.		132,000		402,783
Kirin Holdings Co., Ltd.		68,000		856,092
Kobe Steel Ltd.		202,000		384,779
Koito Manufacturing Co., Ltd.		8,000		117,807
Komatsu Ltd.		78,500		1,413,481
Konami Corp.		7,400		114,128
Konica Minolta Holdings, Inc.		39,000		375,191
Kubota Corp.		94,000		721,009
Kuraray Co., Ltd.		28,000		328,484
Kurita Water Industries Ltd.		9,100		248,666
Kyocera Corp.		13,500		1,092,911
Kyowa Hakko Kirin Co. Ltd.		21,000		199,159
Kyushu Electric Power Co., Inc.		30,800		690,772
Lawson, Inc.		4,900		214,315
Mabuchi Motor Co., Ltd.		2,300		105,015
Makita Corp.		9,000		240,840
Marubeni Corp.		134,000		686,938
Marui Group Co. Ltd.		18,800		126,636
Maruichi Steel Tube Ltd.		3,700		70,773
Matsui Securities Co., Ltd.		9,400		57,395
Mazda Motor Corp.		122,400		286,030
McDonald’s Holdings Co. Japan Ltd.		5,500		123,156
Medipal Holdings Corp.		12,200		144,902
Meiji Holdings Co LTD		5,493		224,735
Minebea Co., Ltd.		28,000		155,110
Mitsubishi Chemical Holdings Corp.		98,000		447,315
Mitsubishi Corp.		111,600		2,308,830
Mitsubishi Electric Corp.		160,000		1,248,787
Mitsubishi Estate Co., Ltd.		98,000		1,364,324
Mitsubishi Gas Chemical Co., Inc.		32,000		155,161
Mitsubishi Heavy Industries Ltd.		247,200		852,776
Mitsubishi Logistics Corp.		9,000		100,300
Mitsubishi Materials Corp. (a)		90,000		239,222
Mitsubishi Motors Corp. (a)		315,000		398,468
Mitsubishi Tanabe Pharma Corp.		18,000		274,250
Mitsubishi UFJ Financial Group, Inc.		1,045,974		4,749,462
Mitsui & Co., Ltd.		143,300		1,671,707
Mitsui Chemicals, Inc.		71,000		198,426
Mitsui Engineering & Shipbuilding Co., Ltd.		59,000		119,168
Mitsui Fudosan Co., Ltd.		70,000		974,293
Mitsui Mining & Smelting Co., Ltd.		47,000		124,035
Mitsui OSK Lines Ltd.		93,000		614,885
Mitsui Sumitomo Insurance Group Holdings, Inc.		44,970		962,508
Mitsumi Electric Co., Ltd.		6,800		115,357
Mizuho Financial Group, Inc.		1,139,040		1,868,949
Murata Manufacturing Co., Ltd.		16,500		786,853
NEC Corp.		212,000		550,324
NGK Insulators Ltd.		21,000		327,076
NGK Spark Plug Co., Ltd.		13,000		161,392
NHK Spring Co., Ltd.		12,000		109,764
NKSJ Holdings, Inc. (a)		115,100		688,660
NOK Corp.		8,400		133,391
NSK Ltd.		35,000		243,080
NTN Corp.		41,000		167,841
NTT Data Corp.		102		376,502
NTT DoCoMo, Inc.		1,267		1,918,605
NTT Urban Development Co.		89		70,705
Namco Bandai Holdings, Inc.		15,200		133,658
Nidec Corp.		9,100		761,826
Nikon Corp.		26,000		448,079
Nintendo Co., Ltd.		8,200		2,407,596
Nippon Building Fund, Inc.		42		333,250
Nippon Electric Glass Co.		28,500		326,454
Nippon Express Co., Ltd.		69,000		310,919
Nippon Meat Packers, Inc.		15,000		185,156
Nippon Paper Group, Inc.		7,894		218,500
Nippon Sanso Corp.		22,000		174,702
Nippon Sheet Glass Co., Ltd.		53,000		129,660
Nippon Steel Corp.		422,000		1,394,896
Nippon Telegraph & Telephone Corp.		42,876		1,746,592
Nippon Yusen Kabushiki Kaisha		124,000		451,890
The Nishi-Nippon City Bank Ltd.		56,000		160,378
Nissan Chemical Industries Ltd.		11,000		122,925
Nissan Motor Co., Ltd. (a)		205,600		1,432,719

See Notes to Financial Statements.



77	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010



Schedule of Investments (continued)		Master International Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Japan (continued)
Nissha Printing Co. Ltd.		2,300	$	61,451
Nisshin Seifun Group, Inc.		15,500		175,015
Nisshin Steel Co., Ltd.		62,000		98,579
Nisshinbo Industries, Inc.		12,000		115,026
Nissin Foods Holdings Co., Ltd.		5,400		198,223
Nitori Co., Ltd.		3,000		258,597
Nitto Denko Corp.		13,410		439,893
Nomura Holdings, Inc.		291,700		1,593,698
Nomura Real Estate Holdings, Inc.		8,300		103,876
Nomura Real Estate Office Fund, Inc.		24		119,480
Nomura Research Institute Ltd.		8,100		171,960
OJI Paper Co., Ltd.		69,000		338,303
ORIX Corp.		8,490		615,056
Obayashi Corp.		53,000		210,118
Obic Co., Ltd.		600		115,816
Odakyu Electric Railway Co., Ltd.		51,000		437,797
Olympus Corp.		17,600		416,926
Omron Corp.		16,500		359,690
Ono Pharmaceutical Co., Ltd.		6,800		276,423
Oracle Corp. Japan		3,200		157,249
Oriental Land Co., Ltd.		4,100		342,648
Osaka Gas Co., Ltd.		158,000		569,900
Otsuka Shokai Co., Ltd.		1,300		82,851
Panasonic Corp.		161,500		2,016,627
Panasonic Electric Works Ltd.		30,873		303,463
Rakuten, Inc.		586		423,405
Resona Holdings, Inc.		49,256		601,120
Ricoh Co., Ltd.		55,000		701,334
Rinnai Corp.		3,000		153,989
Rohm Co., Ltd.		7,900		474,388
SBI Holdings, Inc.		1,367		169,823
SMC Corp.		4,400		588,596
Sankyo Co., Ltd. (Gunma)		4,500		203,407
Santen Pharmaceutical Co., Ltd.		5,900		210,922
Sanyo Electric Co., Ltd. (a)		148,000		190,424
Sapporo Hokuyo Holdings, Inc.		28,289		124,781
Sapporo Holdings Ltd.		23,000		98,870
Secom Co., Ltd.		17,100		759,344
Sega Sammy Holdings, Inc.		16,232		233,167
Seiko Epson Corp.		10,600		136,997
Sekisui Chemical Co., Ltd.		35,000		218,324
Sekisui House Ltd.		47,000		401,968
Senshu Ikeda Holdings, Inc.		49,470		72,038
Seven & I Holdings Co., Ltd.		63,700		1,459,449
Seven Bank Ltd.		56		101,640
Sharp Corp.		83,000		875,537
Shikoku Electric Power Co., Inc.		14,500		414,697
Shimadzu Corp.		20,000		150,756
Shimamura Co., Ltd.		1,900		171,793
Shimano, Inc.		5,300		227,405
Shimizu Corp.		48,000		164,046
Shin-Etsu Chemical Co., Ltd.		33,900		1,576,187
Shinko Electric Industries		6,200		80,571
Shinko Securities Co., Ltd.		48,300		107,686
Shinsei Bank Ltd.		81,000		68,476
Shionogi & Co., Ltd.		24,200		501,708
Shiseido Co., Ltd.		28,300		623,769
The Shizuoka Bank Ltd.		49,000		427,038
Showa Denko KK		116,000		209,503
Showa Shell Sekiyu KK		15,100		104,115
Softbank Corp.		66,900		1,774,406
Sojitz Corp.		102,000		159,409
Sony Corp.		82,600		2,203,191
Sony Financial Holdings, Inc.		71		236,839
Square Enix Holdings Co., Ltd.		5,300		97,625
Stanley Electric Co., Ltd.		11,900		197,068
Sumco Corp. (a)		9,400		155,796
Sumitomo Chemical Co., Ltd.		128,000		495,383
Sumitomo Corp.		93,800		936,781
Sumitomo Electric Industries Ltd.		61,200		713,221
Sumitomo Heavy Industries Ltd.		44,000		258,172
Sumitomo Metal Industries Ltd.		273,000		617,264
Sumitomo Metal Mining Co., Ltd.		44,000		548,902
Sumitomo Mitsui Financial Group, Inc.		110,550		3,128,826
Sumitomo Realty & Development Co., Ltd.		29,000		492,766
Sumitomo Rubber Industries, Ltd.		14,400		127,007
The Sumitomo Trust & Banking Co., Ltd.		116,000		590,575
Suruga Bank Ltd.		17,000		154,290
Suzuken Co., Ltd.		5,200		174,058
Suzuki Motor Corp.		26,500		520,073
Sysmex Corp.		2,800		159,023
T&D Holdings, Inc.		22,100		472,551
TDK Corp.		10,000		547,222
THK Co., Ltd.		9,700		200,683
Taiheiyo Cement Corp. (a)		75,000		94,703
Taisei Corp.		83,000		166,002
Taisho Pharmaceutical Co., Ltd.		11,000		216,997
Takashimaya Co., Ltd.		22,000		175,367
Takeda Pharmaceutical Co., Ltd.		61,800		2,654,474
Teijin Ltd.		77,000		228,610
Terumo Corp.		13,700		656,088
Tobu Railway Co., Ltd.		66,000		355,490
Toho Co., Ltd.		8,600		142,576
Toho Gas Co., Ltd.		35,000		186,695
Tohoku Electric Power Co., Inc.		34,700		744,956
Tokio Marine Holdings, Inc.		59,800		1,572,133
Tokuyama Corp.		25,000		110,038
The Tokyo Electric Power Co., Inc.		100,200		2,725,785
Tokyo Electron Ltd.		14,300		770,301
Tokyo Gas Co., Ltd.		209,000		954,115
Tokyo Steel Manufacturing Co., Ltd.		9,200		106,355
Tokyo Tatemono Co., Ltd.		32,000		98,615
Tokyu Corp.		92,000		374,458
Tokyu Land Corp.		38,000		132,835
TonenGeneral Sekiyu KK		23,000		199,001
Toppan Printing Co., Ltd.		45,000		355,841
Toray Industries, Inc.		116,700		559,352
Toshiba Corp. (a)		333,000		1,649,540
Tosoh Corp.		45,000		116,490
Toto Ltd.		24,000		159,420
Toyo Seikan Kaisha Ltd.		12,200		178,025
Toyo Suisan Kaisha, Ltd.		8,000		190,941
Toyoda Gosei Co., Ltd.		5,700		141,363
Toyota Boshoku Corp.		5,100		74,464
Toyota Industries Corp.		14,500		367,953
Toyota Motor Corp.		226,500		7,782,235
Toyota Tsusho Corp.		17,100		243,737
Trend Micro, Inc.		7,900		213,495
Tsumura & Co.		5,000		153,091
UNY Co., Ltd.		16,100		122,339
USS Co., Ltd.		1,940		138,583
Ube Industries Ltd.		79,000		186,791
Uni-Charm Corp.		3,400		383,405

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010	78



Schedule of Investments (continued)		Master International Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Japan (concluded)
Ushio, Inc.		8,700	$	134,029
West Japan Railway Co.		138		504,648
Yahoo! Japan Corp.		1,176		468,724
Yakult Honsha Co., Ltd.		8,000		217,623
Yamada Denki Co., Ltd.		6,670		435,816
Yamaguchi Financial Group, Inc.		17,000		162,470
Yamaha Corp.		13,300		135,807
Yamaha Motor Co., Ltd. (a)		20,800		274,980
Yamato Kogyo Co. Ltd.		3,800		94,717
Yamato Transport Co., Ltd.		32,300		427,507
Yamazaki Baking Co., Ltd.		10,000		134,862
Yaskawa Electric Corp.		19,000		140,948
The Yasuda Trust & Banking Co., Ltd. (a)		136,000		116,949
Yokogawa Electric Corp.		17,700		109,561

				167,678,903
Kazakhstan — 0.0%
Eurasian Natural Resources Corp.		20,964		266,764
Luxembourg — 0.4%
ArcelorMittal		70,598		1,893,569
SES Global		24,336		506,105
Tenaris SA		38,378		661,937

				3,061,611
Netherlands — 2.6%
ASML Holding NV		35,884		987,525
Aegon NV (a)		126,902		674,083
Akzo Nobel NV		19,290		1,002,599
Corio NV		4,679		227,217
Delta Lloyd NV		6,510		109,714
Fugro NV		5,592		258,337
Heineken Holding NV		8,948		326,891
Heineken NV		20,454		866,991
ING Groep NV CVA (a)		314,834		2,329,939
Koninklijke Ahold NV		98,855		1,222,828
Koninklijke Boskalis Westminster NV		5,548		215,563
Koninklijke DSM NV		12,579		500,041
Koninklijke KPN NV		134,438		1,713,620
Koninklijke Philips Electronics NV		79,926		2,386,761
Koninklijke Vopak NV		5,668		207,708
Randstad Holdings NV		8,980		352,872
Reed Elsevier NV		55,984		619,757
SBM Offshore NV		13,278		189,958
STMicroelectronics NV		51,718		410,769
TNT NV		30,204		760,753
Unilever NV		133,837		3,654,991
Wolters Kluwer NV		23,838		457,142

				19,476,059
New Zealand — 0.1%
Auckland International Airport Ltd.		81,425		104,099
Contact Energy Ltd.		26,924		104,732
Fletcher Building Ltd.		48,182		257,840
Sky City Ltd.		51,491		100,323
Telecom Corp. of New Zealand Ltd.		156,365		201,363

				768,357
Norway — 0.6%
Aker Solutions ASA		13,242		151,406
DnB NOR ASA		79,785		767,388
Norsk Hydro ASA		55,513		250,688
Orkla ASA		62,744		401,257
Renewable Energy Corp. ASA (a)		39,887		94,313
Statoil ASA		91,994		1,772,248
Telenor ASA		63,310		797,536
Telenor ASA — ADR		1,431		53,849
Yara International ASA		15,383		432,409

				4,721,094
Portugal — 0.2%
Banco Comercial Portugues SA, Registered Shares		228,344		171,463
Banco Espirito Santo SA, Registered Shares		44,077		173,919
Brisa-Auto Estradas de Portugal SA, Private Shares		15,277		92,457
Cimpor Cimentos de Portugal SA		16,593		93,239
Energias de Portugal SA		141,304		420,527
Galp Energia SGPS SA		18,556		277,173
Jeronimo Martins SGPS SA		18,779		172,058
Portugal Telecom SGPS SA, Registered Shares		47,138		471,143

				1,871,979
Singapore — 1.6%
Ascendas Real Estate Investment Trust		126,962		163,962
CapitaLand Ltd.		206,749		527,198
CapitaMall Trust		179,700		234,279
CapitaMalls Asia Ltd.		110,000		164,464
City Developments Ltd.		44,535		350,556
ComfortDelgro Corp. Ltd.		153,816		159,519
Cosco Corp. Ltd.		79,002		83,105
DBS Group Holdings Ltd.		141,407		1,372,339
Fraser and Neave Ltd.		79,096		289,233
Genting Singapore Plc (a)		491,227		406,298
Golden Agri-Resources Ltd.		540,251		202,535
Jardine Cycle & Carriage Ltd.		8,721		185,587
K-Green Trust (a)		20,723		15,550
Keppel Corp. Ltd.		103,616		625,588
Keppel Land Ltd.		59,000		162,808
Neptune Orient Lines Ltd.		73,350		103,603
Noble Group Ltd.		241,839		292,308
Olam International Ltd.		102,900		188,869
Oversea-Chinese Banking Corp.		201,914		1,271,476
Sembcorp Industries Ltd.		78,590		227,271
Sembcorp Marine Ltd.		69,197		189,096
Singapore Airlines Ltd.		43,009		445,966
Singapore Exchange Ltd.		69,000		361,852
Singapore Press Holdings Ltd.		112,316		302,335
Singapore Technologies Engineering Ltd.		135,213		316,093
Singapore Telecommunications Ltd.		659,132		1,424,987
StarHub Ltd.		52,157		83,856
UOL Group Ltd.		41,457		111,659
United Overseas Bank Ltd.		99,572		1,385,233
Wilmar International Ltd.		103,670		424,171
Yangzijiang Shipbuilding Holdings Ltd.		126,183		120,355

				12,192,151
Spain — 3.4%
ACS Actividades de Construccion y Servicios SA		11,465		421,330
Abertis Infraestructuras SA		24,957		358,729
Acciona SA		2,167		164,921
Acerinox SA		7,858		122,108
Banco Bilbao Vizcaya Argentaria SA		293,119		3,019,991
Banco de Sabadell SA		78,231		354,256
Banco de Valencia SA		16,846		74,986
Banco Popular Espanol SA		70,609		357,877
Banco Santander SA		675,975		7,088,416
Bankinter SA		24,950		152,010
Corp. Mapfre SA		60,921		165,659

See Notes to Financial Statements.



79	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010



Schedule of Investments (continued)		Master International Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

Spain (concluded)
Criteria Caixacorp. SA		67,746	$	277,043
Enagas		14,444		217,574
Ferrovial SA		35,567		230,044
Fomento de Construcciones y Contratas SA		3,049		65,271
Gamesa Corp. Tecnologica SA (a)		16,197		139,084
Gas Natural SDG SA		18,479		267,042
Gestevision Telecinco SA		7,629		67,798
Grifols SA		11,816		120,777
Iberdrola Renovables		69,262		217,367
Iberdrola SA		324,167		1,822,004
Iberia Lineas Aereas de Espana		42,454		119,848
Inditex SA		18,140		1,034,370
Indra Sistemas SA		7,647		122,263
Mapfre SA (a)		1,777		4,881
Red Electrica de Espana		8,746		313,151
Repsol YPF SA		60,680		1,224,530
Telefonica SA		337,361		6,249,522
Zardoya Otis SA		11,277		144,878

				24,917,730
Sweden — 2.8%
Alfa Laval AB		27,457		356,566
Assa Abloy AB, Series B		25,366		507,014
Atlas Copco AB, Class A		54,621		798,596
Atlas Copco AB, Class B		31,722		418,777
Boliden AB		21,891		241,953
Electrolux AB		19,427		444,117
Getinge AB, Class B		16,221		313,924
Hennes & Mauritz AB, B Shares		84,043		2,309,701
Holmen AB, Class B		4,661		110,651
Husqvarna AB		33,227		199,808
Investor AB		37,047		599,282
Kinnevik Investment AB		17,606		281,874
Millicom International Cellular SA — ADR		6,165		500,237
Modern Times Group AB		4,005		219,247
Nordea Bank AB		265,984		2,193,348
SKB AB		31,677		568,513
SSAB AB, Series A		14,628		196,396
SSAB AB, Series B		6,561		78,754
Ratos AB		8,157		204,363
Sandvik AB		82,150		1,002,061
Scania AB		25,915		395,562
Securitas AB		25,233		228,724
Skandinaviska Enskilda Banken AB, Class A		115,413		611,519
Skanska AB, Class B		32,491		470,067
Svenska Cellulosa AB		46,497		546,867
Svenska Handelsbanken, Class A		39,933		976,916
Swedbank AB, A Shares		57,595		528,531
Swedish Match AB		19,381		423,520
Tele2 AB		25,290		377,846
Telefonaktiebolaget LM Ericsson		247,507		2,745,403
TeliaSonera AB		186,401		1,197,748
Volvo AB, B Shares		90,501		1,000,833

				21,048,718
Switzerland — 7.8%
ABB Ltd.		181,362		3,157,622
Actelion Ltd. (a)		8,266		309,494
Adecco SA, Registered Shares		9,975		475,876
Aryzta AG		6,515		250,662
Baloise Holding AG		4,033		280,721
Compagnie Financière Richemont SA		43,111		1,505,103
Crédit Suisse Group AG		92,465		3,476,429
GAM Holdings Ltd.		16,634		179,756
Geberit AG		3,159		491,526
Givaudan SA		621		527,436
Holcim Ltd.		20,307		1,359,388
Julius Baer Group Ltd.		16,782		478,498
Kuehne & Nagel International AG		4,391		452,004
Lindt & Spruengli AG		72		156,222
Lindt & Spruengli AG ‘R’		9		220,551
Logitech International SA (a)		15,054		203,777
Lonza Group AG, Registered Shares		3,676		244,746
Nestlé SA, Registered Shares		284,724		13,729,059
Nobel Biocare Holding AG		9,935		171,025
Novartis AG, Registered Shares		173,289		8,398,127
Pargesa Holding SA		2,175		142,624
Roche Holding AG		57,698		7,941,652
SGS SA		445		600,595
Schindler Holding AG		3,942		332,257
Schindler Holding AG, Registered Shares		1,890		157,750
Sika AG		165		292,488
Sonova Holding AG		3,719		456,387
Straumann Holding AG, Registered Shares		656		141,875
The Swatch Group Ltd., Bearer Shares		2,504		706,191
The Swatch Group Ltd., Registered Shares		3,649		186,476
Swiss Life Holding		2,475		236,543
Swiss Reinsurance Co., Registered Shares		29,217		1,200,475
Swisscom AG		1,894		642,103
Syngenta AG		7,803		1,802,618
Synthes, Inc.		4,818		553,975
UBS AG		298,975		3,960,766
Zurich Financial Services AG		12,141		2,676,042

				58,098,839
United Kingdom — 20.4%
3i Group Plc		79,229		312,488
ARM Holdings Plc		107,367		444,379
Admiral Group Plc		16,316		341,694
Aggreko Plc		21,214		445,341
Amec Plc		27,184		333,040
Anglo American Plc (a)		108,154		3,768,642
Antofagasta Plc		32,079		373,227
Associated British Foods Plc		29,005		420,041
AstraZeneca Plc		119,298		5,624,399
Autonomy Corp PLC (a)		17,661		481,410
Aviva Plc		229,956		1,068,648
BAE Systems Plc		292,544		1,361,562
BG Group Plc		277,302		4,124,264
BHP Billiton Plc		181,287		4,700,503
BP Plc (a)		1,541,463		7,379,232
BT Group Plc		643,847		1,242,814
Balfour Beatty Plc		55,595		197,733
Barclays Plc		931,125		3,716,586
British Airways Plc (a)		48,900		142,068
British American Tobacco Plc		164,009		5,204,953
British Land Co. Plc		70,762		457,082
British Sky Broadcasting Plc		93,044		971,544
Bunzl Plc		26,664		267,007
Burberry Group Plc		35,400		399,793
Cable & Wireless Worldwide		209,855		271,529
Cairn Energy Plc (a)		114,438		703,039
Capita Group Plc		50,872		560,468
Capital Shopping Centers Group Plc		38,691		178,747
Carnival Plc		13,602		440,587

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010	80



Schedule of Investments (continued)		Master International Index Series (Percentages shown are based on Net Assets)


Common Stocks	Shares		Value

United Kingdom (continued)
Centrica Plc		423,524	$	1,869,018
Cobham Plc		93,617		296,572
Compass Group Plc		155,104		1,179,950
Diageo Plc		205,863		3,233,674
Experian Group Ltd.		83,714		728,002
Firstgroup Plc		39,467		214,233
Fresnillo Plc		14,480		210,218
GlaxoSmithKline Plc		426,363		7,240,005
Group 4 Securicor Plc		115,171		456,624
HSBC Holdings Plc		1,430,625		13,069,751
Hammerson Plc		57,667		293,970
Home Retail Group		71,142		225,911
ICAP Plc		45,159		270,670
ITV Plc (a)		296,490		221,569
Imperial Tobacco Group Plc		83,792		2,341,203
Inmarsat Plc		35,578		377,235
Intercontinental Hotels Group Plc		21,038		331,561
International Power Plc		123,803		553,025
Invensys Plc		65,422		234,208
Investec Plc		38,219		257,177
J Sainsbury Plc		98,375		469,373
Johnson Matthey Plc		17,537		389,619
Kazakhmys Plc		17,543		257,513
Kingfisher Plc		192,285		602,344
Land Securities Group Plc		61,829		511,682
Legal & General Group Plc		477,395		556,423
Lloyds TSB Group Plc (a)		3,312,735		2,615,293
London Stock Exchange Group Plc		12,623		105,389
Lonmin Plc (a)		12,630		263,720
Man Group Plc		139,632		462,867
Marks & Spencer Group Plc		128,763		634,339
National Grid Plc		285,204		2,082,263
Next Plc		15,353		457,742
Old Mutual Plc		442,077		676,840
Pearson Plc		66,269		871,554
Petrofac Ltd.		21,216		373,252
Prudential Plc		209,151		1,577,542
Rangold Resources Ltd.		7,343		698,085
Reckitt Benckiser Plc		50,406		2,344,600
Reed Elsevier Plc		99,174		735,354
Resolution Ltd.		195,142		184,558
Rexam Plc		71,587		322,038
Rio Tinto Plc, Registered Shares		118,982		5,225,016
Rolls-Royce Group Plc		153,956		1,285,037
Royal & Sun Alliance Insurance Group		278,885		494,742
Royal Bank of Scotland Group Plc (a)		1,383,236		842,418
Royal Dutch Shell Plc		291,190		7,348,481
Royal Dutch Shell Plc, Class B		221,427		5,352,041
SABMiller Plc		78,065		2,188,980
Sage Group Plc		106,838		367,586
Schroders Plc		9,304		167,452
Scottish & Southern Energy Plc		76,711		1,277,543
Sego Plc		59,362		223,820
Serco Group Plc		40,080		350,018
Severn Trent Plc		19,368		355,468
Shire Ltd.		45,786		939,264
Smith & Nephew Plc		72,324		683,284
Smiths Group Plc		31,869		507,380
Standard Chartered Plc		166,384		4,051,515
Standard Life Plc		182,615		471,914
TUI Travel Plc		47,505		147,797
Tesco Plc		656,053		3,701,062
Thomas Cook Group Plc		68,661		181,737
Tomkins Plc		71,514		240,193
Tullow Oil Plc		72,385		1,076,748
Unilever Plc		105,699		2,825,545
United Utilities Group Plc		55,598		435,075
Vedanta Resources Plc		9,950		312,623
Vodafone Group Plc		4,321,070		8,903,520
Whitbread Plc		14,314		298,919
William Morrison Supermarkets Plc		172,764		682,683
Wolseley Plc (a)		23,222		460,954
WPP Plc		102,066		961,510
Xstrata Plc		169,099		2,214,291

				151,304,402

Total Common Stocks — 96.9%				719,658,183


Rights

France — 0.0%
Foncière Des Regions (Expires 7/13/10)		1,775		8,074
Norway — 0.0%
Norsk Hydro ASA (Expires 7/09/10)		16,895		8,723
Spain — 0.0%
Zardoya Otis SA (Expires 6/30/10)		11,277		7,185

Total Rights — 0.0%				23,982


Warrants (b)

Hong Kong — 0.0%
Henderson Land Development Co., Ltd. (Expires 6/01/11)		13,757		2,332

Total Warrants — 0.0%				2,332

Total Long-Term Investments (Cost — $816,151,101) — 96.9%				719,684,497

See Notes to Financial Statements.



81	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010



Schedule of Investments (continued)		Master International Index Series (Percentages shown are based on Net Assets)


Short-Term Securities	Shares		Value

BlackRock Liquidity Funds, TempCash, Institutional Class, 0.20% (c)(d)		3,354,915	$	3,354,915

Total Short-Term Securities (Cost — $3,354,915) — 0.4%				3,354,915

*Total Investments (Cost — $819,506,016) — 97.3%**				723,039,412
Other Assets Less Liabilities — 2.7%				19,823,217

Net Assets — 100.0%			$	742,862,629


*		The cost and unrealized appreciation (depreciation) of investments as of June 30, 2010, as computed for federal income tax purposes, were as follows:


Aggregate cost	$	851,961,122

Gross unrealized appreciation	$	38,324,642
Gross unrealized depreciation		(167,246,352	)

Net unrealized depreciation	$	(128,921,710	)


(a)		Non-income producing security.

(b)		Warrants entitle the Series to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date.

(c)		Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Shares

Held at

December 31,

Net

June 30,

Affiliate

2009

Activity

2010

Income

BlackRock Liquidity Funds, TempCash, Institutional Class

6,620,218

(3,265,303

)

3,354,915

3,682


(d)		Represents the current yield as of report date.

•		Financial futures contracts purchased as of June 30, 2010 were as follows:


				Expiration	Notional		Unrealized
Contracts		Issue	Exchange	Date	Value		Depreciation

	98	DJ Euro Stoxx 50	Eurex	September 2010	$	3,190,813	$	(113,333	)
	49	Emini MSCI	Chicago	September 2010	$	3,224,319		(2,079	)
	30	FTSE 100 Index Futures	LIFFE	September 2010	$	2,310,055		(122,471	)
	9	SPI 200 Index Futures	Sydney	September 2010	$	849,618		(42,421	)
	21	TOPIX Index Futures	Tokyo	September 2010	$	2,044,048		(52,474	)

Total							$	(332,778	)

•

Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivatives, which are as follows:

	•		Level 1 — price quotations in active markets/exchanges for identical assets and liabilities

	•		Level 2 — other observable inputs (including,but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

	•		Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Series’ own assumptions used in determining the fair value of investments and derivatives)

The following table summarizes the inputs used as of June 30, 2010 in determining the fair valuation of the Series’ investments and derivatives:


Valuation Inputs	Level 1		Level 2		Level 3		Total

Assets:
Investments in Securities:
Long-Term Investments:
Common Stocks:
Australia		—	$	57,677,856	$	10	$	57,677,866
Austria		—		2,096,902		—		2,096,902
Belgium		—		6,790,836		—		6,790,836
Bermuda		—		689,982		—		689,982
Cayman Islands		—		456,736		—		456,736
Denmark		—		7,277,819		—		7,277,819
Finland		—		7,457,765		—		7,457,765
France		—		67,578,639		—		67,578,639
Germany	$	836,662		55,483,831		—		56,320,493
Greece		—		1,996,352		—		1,996,352
Hong Kong		3,564,112		14,162,554		—		17,726,666
Ireland		317,061		1,920,521		—		2,237,582
Israel		—		6,236,051		—		6,236,051
Italy		—		19,707,887		—		19,707,887
Japan		6,525,889		161,153,014		—		167,678,903
Kazakhstan		—		266,764		—		266,764
Luxembourg		—		3,061,611		—		3,061,611
Netherlands		—		19,476,059		—		19,476,059
New Zealand		—		768,357		—		768,357
Norway		53,849		4,667,245		—		4,721,094
Portugal		—		1,871,979		—		1,871,979
Singapore		15,550		12,176,601		—		12,192,151
Spain		4,881		24,912,849		—		24,917,730
Sweden		—		21,048,718		—		21,048,718
Switzerland		—		58,098,839		—		58,098,839
United Kingdom		184,558		151,119,844		—		151,304,402
Rights:
France		—		8,074		—		8,074
Norway		—		8,723		—		8,723
Spain		7,185		—		—		7,185
Warrants:
Hong Kong		2,332		—		—		2,332
Short-Term Securities		3,354,915		—		—		3,354,915

Total	$	14,866,994	$	708,172,408	$	10	$	723,039,412

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010	82



Schedule of Investments (concluded)		Master International Index Series

The following table summarizes the inputs used as of June 30, 2010 in determining the fair valuation of the Series’ derivatives:


	Derivative Financial Instruments¹
Valuation Inputs	Level 1			Level 2		Level 3		Total

Liabilities:
Equity contracts	$	(332,778	)		—		—	$	(332,778	)


¹		Derivative financial instruments are financial futures contracts, which are shown at the unrealized appreciation/depreciation on the instrument.

The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:


	Common Stocks

Assets:
Balance, as of December 31, 2009	$	15
Accrued discounts/premiums		—
Net realized gain (loss)		—
Net change in unrealized appreciation/depreciation²		(5	)
Purchases		—
Sales		—
Transfers in³		—
Transfers out³		—

Balance, as of June 30, 2010	$	10


²		Included in the related net change in unrealized appreciation/depreciation on the Statement of Operations. The change in unrealized appreciation/depreciation on securities still held at June 30, 2010 was $(5).

³		The Series’ policy is to recognize transfers in and transfers out as of the end of the period of the event or the change in circumstances that caused the transfer.

See Notes to Financial Statements.



83	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010



Statement of Assets and Liabilities		Master International Index Series


June 30, 2010 (Unaudited)


Assets

Investments at value — unaffiliated (cost — $816,151,101)	$	719,684,497
Investments at value — affiliated (cost — $3,354,915)		3,354,915
Cash		301,482
Foreign currency at value (cost — $5,869,225)		5,891,088
Cash pledged for financial futures contracts		1,077,000
Contributions receivable from investors		8,485,526
Dividends receivable		4,508,186
Investments sold receivable		18,017
Investment advisory fees receivable		702
Prepaid expenses		62,805
Other assets		11,026

Total assets		743,395,244


Liabilities

Margin variation payable		401,010
Other affiliates payable		3,387
Directors’ fees payable		625
Other liabilities		104
Other accrued expenses payable		127,489

Total liabilities		532,615

Net Assets	$	742,862,629


Net Assets Consist of

Investors’ capital	$	839,798,928
Net unrealized appreciation/depreciation		(96,936,299	)

Net Assets	$	742,862,629

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010	84



Statement of Operations		Master International Index Series


Six Months Ended June 30, 2010 (Unaudited)


Investment Income

Dividends	$	14,556,138
Foreign taxes withheld		(1,598,285	)
Dividends — affiliated		3,682

Total income		12,961,535


Expenses

Custodian		178,712
Accounting services		86,789
Professional		50,815
Investment advisory		36,028
Directors		11,094
Printing		1,710
Miscellaneous		76,450

Total expenses		441,598
Less fees waived by advisor		(29,248	)

Total expenses after fees waived		412,350

Net investment income		12,549,185


Realized and Unrealized Loss

Net realized loss from:
Investments		(11,048,510	)
Financial futures contracts		(2,337,179	)
Foreign currency transactions		(1,125,051	)

		(14,510,740	)


Net change in unrealized appreciation/depreciation on:
Investments		(100,537,722	)
Financial futures contracts		(839,552	)
Foreign currency transactions		(93,423	)

		(101,470,697	)

Total realized and unrealized loss		(115,981,437	)

Net Decrease in Net Assets Resulting from Operations	$	(103,432,252	)

See Notes to Financial Statements.



85	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010



Statements of Changes in Net Assets		Master International Index Series


	Six Months
	Ended
	June 30,			Year Ended
	2010			December 31,
Increase (Decrease) in Net Assets:	(Unaudited)			2009

Operations

Net investment income	$	12,549,185		$	22,305,320
Net realized gain (loss)		(14,510,740	)		520,540
Net change in unrealized appreciation/depreciation		(101,470,697	)		184,128,794

Net increase (decrease) in net assets resulting from operations		(103,432,252	)		206,954,654


Capital Transactions

Proceeds from contributions		195,115,034			359,210,927
Value of withdrawals		(98,100,069	)		(523,005,063	)

Net increase (decrease) in net assets derived from capital transactions		97,014,965			(163,794,136	)


Net Assets

Total increase (decrease) in net assets		(6,417,287	)		43,160,518
Beginning of period		749,279,916			706,119,398

End of period	$	742,862,629		$	749,279,916



Financial Highlights		Master International Index Series


	Six Months
	Ended
	June 30,
	2010			Year Ended December 31,
	(Unaudited)			2009			2008			2007			2006			2005

Total Investment Return

Total investment return		(13.98	)%¹		28.99	%		(41.94	)%		10.80	%		26.61	%		13.64	%


Ratios to Average Net Assets

Total expenses		0.12	%²		0.09	%		0.11	%		0.10	%		0.11	%		0.10	%

Total expenses after fees waived		0.11	%²		0.09	%		0.10	%		0.09	%		0.10	%		0.10	%

Net investment income		3.48	%²		2.98	%		3.54	%		2.86	%		2.70	%		2.53	%


Supplemental Data

Net assets, end of period (000)	$	742,863		$	749,280		$	706,119		$	1,143,172		$	829,986		$	523,155

Portfolio turnover		4	%		30	%		30	%		30	%		23	%		11	%


¹		Aggregate total investment return.

²		Annualized.

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010	86



Notes to Financial Statements (Unaudited)		Master International Index Series

1. Organization and Significant Accounting Policies:

Master International Index Series (the “Series”), a non-diversified open-end management investment company, is a series of Quantitative Master Series LLC (the “Master LLC”). The Master LLC is registered as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), and is organized as a Delaware limited liability company. The Master LLC’s Limited Liability Company Agreement permits the Board of Directors (the “Board”) to issue non-transferable interests, subject to certain limitations. The Series’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

The following is a summary of significant accounting policies followed by the Series:

Valuation: The Series’ policy is to fair value its financial instruments and derivatives at market value using independent dealers or pricing services selected under the supervision of the Board. Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end investment companies are valued at net asset value each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

Securities and other assets and liabilities denominated in foreign currencies are translated into US dollars using exchange rates determined as of the close of business on the New York Stock Exchange (“NYSE”). Foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close 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 instruments, those instruments may be Fair Value Assets and be valued at their fair values, as determined in good faith by the investment advisor using a pricing service and/or policies approved by the Board. Each business day, the Series uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of business on the NYSE, which follows the close of the local markets.

Foreign Currency Transactions: The Series’ books and records are maintained in US dollars. Purchases and sales of investment securities are recorded at the rates of exchange prevailing on the date the transactions are entered into. Generally, when the US dollar rises in value against foreign currency, the Series’ investments denominated in that currency will lose value because its currency is worth fewer US dollars; the opposite effect occurs if the US dollar falls in relative value.

The Series reports foreign currency related transactions as components of realized gain (loss) for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes.

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that the Series either delivers collateral or segregates assets in connection with certain investments (e.g., financial futures contracts and foreign currency exchange contracts) the Series will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or other liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third-party broker-dealers, each party has requirements to deliver/deposit securities as collateral for certain investments.



87	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010



Notes to Financial Statements (continued)		Master International Index Series

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Series has determined the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income is recognized on the accrual basis.

Income Taxes: The Master LLC is classified as a partnership for federal income tax purposes. As such, each investor in the Master LLC is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Master LLC. Therefore, no federal income tax provision is required. It is intended that the Master LLC’s assets will be managed so an investor in the Master LLC can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

The Master LLC files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master LLC’s US federal tax returns remains open for each of the four years ended December 31, 2009. The statutes of limitations on the Master LLC’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. There are no uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to the Series are charged to the Series. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods. The Series has an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which if applicable are shown as fees paid indirectly in the Statement of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

2. Derivative Financial Instruments:

The Series engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Series and to economically hedge, or protect, their exposure to certain risks such as equity risk and foreign currency exchange rate risk. These contracts may be transacted on an exchange or OTC. Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. The Series’ maximum risk of loss from counterparty credit risk on OTC derivatives is generally the aggregate unrealized gain netted against any collateral pledged by/posted to the counterparty.

The Series may mitigate counterparty risk by procuring collateral and through netting provisions included within an International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreement implemented between a Fund and each of its respective counterparties. The ISDA Master Agreement allows the Fund to offset with each separate counterparty certain derivative financial instrument’s payables and/or receivables with collateral held. The amount of collateral moved to/from applicable counterparties is generally based upon minimum transfer amounts of up to $500,000. To the extent amounts due to the Series from its counterparties are not fully collateralized contractually or otherwise, the Series bears the risk of loss from counterparty non-performance. See Note 1 “Segregation and Collateralization” for information with respect to collateral practices. In addition, the Series manages counterparty risk by entering into agreements only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

Certain ISDA Master Agreements allow counterparties of OTC derivatives to terminate derivative contracts prior to maturity in the event the Series’ net assets decline by a stated percentage or the Series fails to meet the terms of its ISDA Master Agreements, which would cause the Series to accelerate payment of any net liability owed to the counterparty.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010	88


Notes to Financial Statements (continued)		Master International Index Series

daily fluctuation in value of the contract. Such receipts or payments are known as margin variation and are recognized by the Series as unrealized gains or losses. When the contract is closed, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures transactions involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest rates and the underlying assets.

Foreign Currency Exchange Contracts: The Series enters into foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to gain exposure to foreign currencies (foreign currency exchange rate risk). A foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Foreign currency exchange contracts, when used by the Series, help to manage the overall exposure to the currency backing some of the investments held by the Series. The contract is marked-to-market daily and the change in market value is recorded by the Series as an unrealized gain or loss. When the contract is closed, the Series records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of foreign currency exchange contracts involves the risk that the value of a foreign currency contract changes unfavorably due to movements in the value of the referenced foreign currencies and the risk that a counterparty to the contract does not perform it obligations under the agreement.

Derivative Instruments Categorized by Risk Exposure:

Fair Value of Derivative Instruments as of June 30, 2010


	Liability Derivatives
	Statement of
	Assets and
	Liabilities
	Location	Value

Equity contracts	Net unrealized appreciation/ depreciation*	$	332,778


*		Includes cumulative appreciation/depreciation of financial futures contracts as reported in the Schedule of Investments. Only current day’s margin variation is reported within the Statement of Assets and Liabilities.

The Effect of Derivative Instruments on the Statement of Operations
Six Months Ended June 30, 2010


	Net Realized Loss from
	Financial			Foreign
	Futures			Currency
	Contracts			Transactions

Foreign currency transactions		—		$	(169,373	)
Equity contracts	$	(2,337,179	)		—


	Net Change in Unrealized
	Appreciation/Depreciation on
	Financial			Foreign
	Futures			Currency
	Contracts			Transactions

Foreign currency transactions		—		$	147,613
Equity contracts	$	(839,552	)		—

For the six months ended June 30, 2010, the average quarterly balance of outstanding derivative financial instruments was as follows:


Foreign currency exchange contracts:
Average number of contracts — US dollars purchased		4
Average number of contracts — US dollars sold		4
Average US dollar amounts purchased	$	697,357
Average US dollar amounts sold	$	362,827
Financial futures contracts:
Average number of contracts purchased		290
Average notional value of contracts purchased	$	16,377,099

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The Master LLC, on behalf of the Series, entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the “Manager”), the Series’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. 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 the Manager a monthly fee at the annual rate of 0.01% of average daily value of the Series’ net assets.



89	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010



Notes to Financial Statements (concluded)		Master International Index Series

expenses incurred by the Series (excluding interest expense, acquired fund fees and certain other Series’ expenses) will not exceed 0.12% of the average daily value of the Series’ net assets. The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement before May 1, 2011 unless approved by the Board, including a majority of the non-interested directors. For the six months ended June 30, 2010, The Series waived $27,145, which is included in fees waived by advisor in the Statement of Operations.

The Manager voluntarily agreed to waive its advisory fees by the amount of investment advisory fees the Series pays to the Manager indirectly through its investment in affiliated money market funds; however, the Manager does not waive its advisory fees by the amount of investment advisory fees paid through its investment in other affiliated investment companies, if any. For the six months ended June 30, 2010, the Series waived $2,103, which is included in fees waived by advisor in the Statement of Operations.

The Manager entered into a sub-advisory agreement with BlackRock Investment Management, LLC (“BIM”), an affiliate of the Manager. The Manager pays BIM for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by the Series to the Manager.

For the six months ended June 30, 2010, the Series reimbursed the Manager $7,716 for certain accounting services, which is included in accounting services in the Statement of Operations.

Certain officers and/or directors of the Master LLC are officers and/or directors of BlackRock or its affiliates.

4. Investments:

Purchases and sales of investments, excluding short-term securities, for the six months ended June 30, 2010 were $855,474,651 and $28,273,521, respectively.

5. Borrowings:

The Master LLC, on behalf of the Series, along with certain other funds managed by the Manager and its affiliates, is a party to a $500 million credit agreement with a group of lenders, which expires in November 2010. The Series may borrow under the credit agreement to fund shareholder redemptions. The Series paid its pro rata share of 0.02% upfront fee on the aggregate commitment amount which was allocated to the Series based on its net assets as of October 31, 2009, a commitment fee of 0.10% per annum based on the Series pro rata share of the unused portion of the credit agreement, which is included in miscellaneous in the Statement of Operations, and interest at a rate equal to the higher of (a) the one-month LIBOR plus 1.25% per annum and (b) the Fed Funds rate plus 1.25% per annum on amounts borrowed. The Series did not borrow under the credit agreement during the six months ended June 30, 2010.

6. Concentration, Market and Credit Risk:

In the normal course of business, the Series invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Series may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Series; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Series may be exposed to counterparty credit risk, or the risk that an entity with which the Series has unsettled or open transactions may fail to or be unable to perform on its commitments. The Series manages counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Series to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Series’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Series’ Statement of Assets and Liabilities, less any collateral held by the Series.

The Series invests a substantial amount of its assets in issuers located in a single country or a limited number of countries. When the Series concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in those countries may have a significant impact on their investment performance. Please see the Schedule of Investments for concentrations in specific countries.

As of June 30, 2010, the Series had the following industry classifications:


	Percent of
	Long-Term
Industry	Investments

Commercial Banks		14	%
Pharmaceuticals		8
Oil, Gas & Consumable Fuels		7
Metals & Mining		6
Other*		65


*		All other industries held were each less than 5% of long-term investments.

7. Subsequent Events:



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010	90

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement

The Board of Directors (the “Board,” and the members of which are referred to as “Board Members”) of Quantitative Master Series LLC (the “Master LLC”) met on April 20, 2010 and May 18 – 19, 2010 to consider the approval of the Master LLC’s investment advisory agreement (the “Advisory Agreement”) with BlackRock Advisors, LLC (the “Manager”), the Master LLC’s investment advisor, on behalf of Master International Index Series (the “Portfolio”), a series of the Master LLC. The Board also considered the approval of the sub-advisory agreement (the “Sub-Advisory Agreement”) between the Manager and BlackRock Investment Management, LLC (the “Sub-Advisor”), with respect to the Portfolio. The Manager and the Sub-Advisor are referred to herein as “BlackRock.” The Advisory Agreement and the Sub-Advisory Agreement are referred to herein as the “Agreements.”

Activities and Composition of the Board

The Agreements

From time to time throughout the year, the Board, acting directly and through its committees, considers at each of its meetings factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to the Portfolio and its shareholders. Among the matters the Board considered were: (a) investment performance of an affiliated feeder fund that invests all of its investable assets in the Portfolio (the “representative feeder fund”) for one-, three- and five-year periods, as applicable, against its peer funds, and applicable benchmarks, if any, as well as senior management and portfolio managers’ analysis of the reasons for any over performance or underperformance against its peers and/or benchmarks, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Portfolio, such as marketing and distribution and fund accounting; (c) the Portfolio’s operating expenses; (d) the resources devoted to and compliance reports relating to the Portfolio’s investment objective, policies and restrictions; (e) the Master LLC’s compliance with its Code of Ethics and compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) the use of brokerage commissions and execution quality of portfolio transactions; (j) BlackRock’s implementation of the Master LLC’s valuation and liquidity procedures; (k) an analysis of contractual and actual management fees for products with similar investment objectives across the open-end fund, closed-end fund and institutional account product channels; and (l) periodic updates on BlackRock’s business.

Board Considerations in Approving the Agreements



91	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (continued)

The Board also considered other matters it deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to the distribution of Portfolio shares, services related to the valuation and pricing of portfolio holdings of the Portfolio, direct and indirect benefits to BlackRock and its affiliates and significant shareholders from their relationship with the Portfolio and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review.The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as controlling, and each Board Member may have attributed different weights to the various items considered.

B. The Investment Performance of the Portfolio and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of the Portfolio. The Board noted that the Portfolio’s investment results correspond directly to the investment results of the representative feeder fund. In preparation for the April 20, 2010 meeting, the Board was provided with reports, independently prepared by Lipper, which included a comprehensive analysis of the representative feeder fund’s performance. The Board also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with its review, the Board received and reviewed information regarding the investment performance of the representative feeder fund as compared to a representative group of similar funds as determined by Lipper and to all funds in the representative feeder fund’s applicable Lipper category.The Board was provided with a description of the methodology used by Lipper to select peer funds. The Board regularly reviews the performance of the Portfolio and the representative feeder fund, as applicable, throughout the year.The Board attaches more importance to performance over relatively long periods of time, typically three to five years.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010	92

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (continued)



93	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (concluded)

Conclusion



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2010	94

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Delivery of Documents

To obtain more information about the Fund:




By E-mail:			On the Internet:
american_beacon.funds@ambeacon.com			Visit our website at www.americanbeaconfunds.com





By Telephone:			By Mail:

Institutional and Investor Class			American Beacon Funds
Call (800) 658-5811			P.O. Box 219643
			Kansas City, MO 64121



Availability of Quarterly Portfolio Schedules			Availability of Proxy Voting Policy and Records
In addition to the Schedule of Investments provided in each semi-annual and annual report, each Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available on the Funds’ website (www.americanbeaconfunds.com) approximately thirty days after the end of each fiscal quarter.			A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available in each Fund’s Statement of Additional Information, which may be obtained free of charge by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. Each Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:


		Custodian State Street Bank and Trust Boston, Massachusetts		Transfer Agent Boston Financial Data Services Kansas City, Missouri		Independent Registered Public Accounting Firm Ernst & Young LLP Dallas, Texas		Distributor Foreside Fund Services, LLC Portland, Maine

This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus or summary prospectus.

American Beacon Funds, American Beacon Small Cap Index Fund, and American Beacon International Equity Index Fund are service marks of American Beacon Advisors, Inc.

SAR 6/10
00075744

Report Semi-Annual June 30, 2010 GLOBAL REAL ESTATE FUND

About American Beacon Advisors

Contents


Message from American Beacon		1
Market and Performance Overview		2
Schedule of Investments		6
Additional Information	Back Cover



American Beacon Funds		June 30, 2010

Fellow Shareholders,

Our intent focus on finding opportunity regardless of market direction has long formed the investment philosophy at the heart of all American Beacon mutual funds:

With portfolios invested for the current economic reality—and conservatively managed for the longer term—investors are better positioned to ride out the inevitable economic storms, whenever and wherever they occur.

For the six months ended June 30, 2010, the American Beacon Global Real Estate Fund (Y Class) generated a total return of -5.54%. This performance reflects the delicate nature of the global economic recovery and the recent operating environment for companies in the broader equity market, including real estate investment trusts.

Given that shifting global markets often give rise to new opportunities, American Beacon continuously looks for new and innovative strategies for capitalizing on them over time. This year, that led to the addition of this Fund along with two other actively managed funds to our lineup: the American Beacon Zebra Small Cap Equity and American Beacon Zebra Large Cap Equity Funds. All were created to capitalize on longer-term growth opportunities.

Such new additions are also a reflection of our commitment to you, a commitment we summarize as: Oversight 360. Ours is a continuous commitment to cast a watchful and analytical eye over all the factors that influence our fellow shareholders’ investments and the strategies that we feel will help them reach their long-term goals.

Sincerely,

Gene L. Needles, Jr.
President
American Beacon Funds

Market Overview
June 30, 2010 (Unaudited)

Market performance during the six-month period ended June 30, 2010 was driven largely by the realization that the global economic recovery has been quite fragile and is unlikely to complete the long-hoped for V-shaped upswing.

Though real estate investment trusts (REITs) remain under pressure due to weak employment markets in the U.S., Europe and Japan, signs of stabilization have begun to emerge in nearly every property sector. Additionally, an increase in transactions involving prime assets in major markets offers some evidence of increased confidence in pricing. The improved health of the capital markets and the accompanying low level of interest rates also created an opportunity for portfolio companies to lower their capital costs. Global REITs were active issuers of both equity and debt, taking advantage of the increasingly lower cost of capital. Over the past 15 months, exchange-listed REITs have raised more than $70 billion of equity and more than $43 billion in debt.

However, market performance remained caught in the crossfire between the influences of positive and negative factors.

Negative Global Factors:

• Economic activity slowed during the period, most notably in the U.S. and China

• The sovereign debt crisis in Europe increased uncertainty for a global economic recovery

• Credit conditions remained restrictive for small businesses and consumers in the U.S.

• Removal of U.S. government stimulus has not been met with an equal amount of private demand which has led to worries of a double dip recession

• Austerity measures announced in Europe impacted the outlook for medium-term growth

Positive Global Factors:

• Real estate transaction volumes continued to increase. For some secondary assets, prices are generally higher than the market had expected

• Earnings results from property companies are trending better than expected.

• Dividends of REITs are viewed to be safe with upside potential for increases over the next few years.

• Low interest rates, which are predicted to last through 2011, are providing strong support for yield-oriented buyers of real estate income.

Market Outlook

The continued lack of strong employment growth in the U.S., Europe and Japan translates into very lackluster net absorption demand for office space. Tenants that are seeking space are generally looking to upgrade the location’s quality of their premises. Therefore, superior quality buildings in prime locations are seeing a larger portion of demand and are able to maintain occupancy rates and rents.

In terms of investment demand, a similar approach has been taken by investors who are seeking secure income in primary markets. The low interest rate environment makes the spread to property yields very attractive (more than 3.50% over long-term bond yields in most markets) which is also driving demand for prime assets with secure income. There has been a slight increase in activity for secondary assets in secondary locations, although the spread between the pricing of these assets and prime assets remains wide, and the amount of transactions has been very limited.

Performance Overview
American Beacon Global Real Estate Fund^SM
June 30, 2010 (Unaudited)

The Y Class of the Global Real Estate Fund returned -5.54% for the six months ended June 30, 2010. The Fund underperformed the FTSE EPRA/NAREIT Developed Index (“Index”) return of - -4.23% and the Lipper Global Real Estate Funds Index return of -5.41% for the period.


	Annualized Total Returns
	Periods Ended 6/30/10
							Since
							Inception
	6 Months*			1 Year			10/26/07
Y Class(1,4,5)		-5.54	%		19.85	%		-16.47	%
Investor Class(1,4,5)		-5.71	%		19.53	%		-16.75	%
A Class excluding load (1,2,4)		-5.71	%		19.53	%		-16.75	%
A Class with load (1,2,4)		-11.08	%		12.70	%		-18.57	%
FTSE EPRA/NAREIT Global Real Estate Index (3)		-4.23	%		25.05	%		-16.64	%
Lipper Global Real Estate Index(3)		-5.41	%		21.38	%		-16.79	%


*		Not annualized

1.		Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Please note that the recent growth rate in the stock market helped to produce short-term returns that are not typical and may not continue in the future.

2.		Fund performance represents the total returns achieved by the Investor Class up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since inception. Maximum sales charge is the maximum front-end sales charge (load) imposed on purchases (as a % of the offering price). A Class has a maximum sales charge of 5.75%

3.		The FTSE EPRA/NAREIT Global Real Estate Index is a market-capitalization weighted index of approximately 330 stocks designed to track listed real estate companies in North America, Europe and Asia-Pacific that meet the size, liquidity and revenue minimums of the index. The Lipper Global Real Estate Index tracks the results of the 10 largest mutual funds in the Lipper Global Real Estate category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index.

4.		The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Y, Investor, and A Class shares was 1.27%, 1.55%, and 1.67%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

5.		A portion of the fees charged to the Y and Investor Classes of the Fund were waived from their inception to March 1, 2010. Performance prior to waiving fees was lower than the actual returns shown.

The Fund underperformed the Index by 1.31% over the six-month period due to stock selection and country/regional allocation.

From a country/regional perspective, overweighting the United Kingdom (down 19.9%) and underweighting the United States (up 4.9%) led to the Fund’s relative underperformance, despite positive contribution from underweighting Continental Europe (down 15.7%). Security selections in the United Kingdom (Land Securities Group PLC – down 1.9%, Great Portland Estates PLC – up 3.5% during the period the securities were held by the Fund) added value, while selections in Singapore (Capitaland Ltd. – down 11.5%, Yanlord Land Group Ltd. – down 19.0%) detracted for the period.

The Fund is designed with a total return perspective. It is expected to provide ongoing income through the payment of dividends while seeking to generate long-term capital appreciation through the underlying properties held.

Performance Overview
American Beacon Global Real Estate Fund^SM
June 30, 2010 (Unaudited)

Top Ten Holdings


	% of
	Net Assets
Simon Property Group, Inc.		5.1	%
Westfield Group		4.9	%
Mitsubishi Estate Co. Ltd.		3.6	%
Unibail-Rodamco		3.4	%
Vornado Realty Trust		3.4	%
CapitaLand Ltd.		3.2	%
Sun Hung Kai Properties Ltd.		3.1	%
Stockland		2.9	%
Digital Realty Trust, Inc.		2.6	%
Public Storage, Inc.		2.5	%

Regional Allocation


	% of
	Equities
North America		42.7	%
Pacific Rim		41.2	%
Europe		15.0	%
South America		1.1	%

Fund Expenses
American Beacon Global Real Estate Fund^SM
June 30, 2010 (Unaudited)

Fund Expense Example

The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2010 through June 30, 2010.

Actual Expenses

Hypothetical Example for Comparison Purposes


	Beginning		Ending
	Account		Account		Expenses Paid
	Value		Value		During Period
	1/1/10		6/30/10		1/1/10-6/30/10
Y Class*
Actual	$	1,000.00	$	944.62	$	6.65
Hypothetical	$	1,000.00	$	1,017.95	$	6.90
(5% return before expenses)

Investor Class*
Actual	$	1,000.00	$	942.90	$	8.00
Hypothetical	$	1,000.00	$	1,016.56	$	8.30
(5% return before expenses)

A Class**
Actual	$	1,000.00	$	958.54	$	1.83
Hypothetical	$	1,000.00	$	1,004.26	$	1.91
(5% return before expenses)


*		Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 1.38% and 1.66% for the Y and Investor Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half year period.

**		Beginning account value for A Class is the inception date of 5/17/10. Expenses are equal to the Class annualized expense ratio for the period of 1.55% multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the period (45) by the days in the year (365).

American Beacon Global Real Estate Fund

Schedule of Investments

June 30, 2010 (unaudited)


	Shares		Value
	(dollars in thousands)
AUSTRALIA - 12.22%
COMMON STOCKS - 12.22%
CFS Retail Property Trust*		106,000	$	168
Dexus Property Group*		464,583		299
ING Industrial Fund*		400,000		125
ING Office Fund		577,854		280
Stockland*		188,327		585
Westfield Group*		94,856		966

Total Australia				2,423


BRAZIL - 1.12%
COMMON STOCKS - 1.12%
Gafisa S.A., 2501^†		18,357		222


CANADA - 4.60%
COMMON STOCKS - 4.60%
Allied Properties Real Estate Investment Trust*		9,986		184
Boardwalk Real Estate Investment Trust*		4,574		172
Canadian Apartment Properties Real Estate Investment Trust*		11,456		161
Canadian Real Estate Investment Trust*		31		1
First Capital Realty Inc.		11,870		152
RioCan Real Estate Investment Trust*		13,552		242

Total Canada				912


FRANCE - 3.42%
COMMON STOCKS - 3.42%
Fonciere des Regions expires 12/31/10^{‡ §}		3		0
Unibail-Rodamco*		4,180		678

Total France				678


HONG KONG/CHINA - 13.36%
COMMON STOCKS - 13.36%
China Resources Land Ltd.		174,470		328
Hang Lung Properties Ltd.^§		126,132		486
Henderson Land Development Co. Ltd.		49,192		287
Kerry Properties Ltd.		90,000		386
Link Real Estate Investment Trust*		127,214		315
Longfor Properties		149,690		148
Sino-Ocean Land Holdings Ltd.		111,027		79
Sun Hung Kai Properties Ltd.		45,641		620

Total Hong Kong/China				2,649


ITALY - 0.00%
COMMON STOCKS - 0.00%
Beni Stabili S.p.A, 2500^§**		552		0


JAPAN - 7.05%
COMMON STOCKS - 7.05%
Frontier Real Estate Investment Corp.*^§		3		21
Japan Excellent, Inc.*		5		24
Japan Prime Realty Investment Corporation*		98		206
Mitsubishi Estate Co. Ltd.		51,698		717
Mori Trust Sogo REIT, Inc. *^§		12		89
NTT Urban Development Corp.		279		220
Tokoyo Tatemono Co., Ltd.^§		39,000		120

Total Japan				1,397


NETHERLANDS - 2.83%
COMMON STOCKS - 2.83%
Corio NV*^§		5,054		246
Eurocommercial Properties NV*		5,943		190
ProLogis European Properties^§		24,938		125

Total Netherlands				561


NORWAY - 0.66%
COMMON STOCKS - 0.66%
Norwegian Property ASA, 2500^§		100,350		131


SINGAPORE - 8.25%
COMMON STOCKS - 8.25%
Ascendas Real Estate Investment Trust*		140,000		181
CapitaCommercial Trust*		194,372		168
CapitaLand Ltd.		247,161		630
CapitaMall Trust*		206,726		269
CapitaMalls Asia Ltd.		75,008		112
Overseas Union Enterprise Ltd.^§		65,000		125
Yanlord Land Group Ltd.		122,895		150

Total Singapore				1,635


SWEDEN - 0.85%
COMMON STOCKS - 0.85%
Wihlborgs Fastigheter AB, 2500		8,900		169


UNITED KINGDOM - 7.12%
COMMON STOCKS - 7.12%
Big Yellow Group Plc*		27,773		121
British Land Co. Plc*		75,889		485
Derwent London Plc*		13,560		252
Great Portland Estates Plc*		39,200		168
Helical Bar Plc		40,057		164
St. Modwen Properties Plc^§		80,667		222

Total United Kingdom				1,412


UNITED STATES - 37.22%
COMMON STOCKS - 37.22%
Alexandria Real Estate Equities, Inc.*		5,542		351
American Campus Communities, Inc.*		13,341		365
AvalonBay Communities, Inc.		3,706		346
BioMed Realty Trust, Inc.*		12,598		203
BRE Properties, Inc.*		5,961		220
Brookdale Senior Living, Inc.^§		8,288		124
Chesapeake Lodging Trust^§		5,050		80
Digital Realty Trust, Inc.*		8,884		512
Douglas Emmett, Inc.*		12,823		182
Duke Realty Corp.*		21,895		249
Equity Lifestyle Properties, Inc.*		4,555		220
Federal Realty Investment Trust*		3,400		239
HCP, Inc.*		13,888		447
Health Care Real Estate Investment Trust, Inc.*		9,377		395
Hersha Hospitality Trust*		42,414		192
Kite Realty Group Trust*		26,948		113
LTC Properties, Inc.*		1,922		47
Marriott International, Inc.		4,495		135
Pebblebrook Hotel Trust^§		5,521		104
Public Storage, Inc.*		5,745		505
Simon Property Group, Inc.*		12,523		1,012
Tanger Factory Outlet Centers, Inc.*		4,126		171
UDR, Inc.*		17,320		331

See accompanying notes

American Beacon Global Real Estate Fund

Schedule of Investments

June 30, 2010 (Unaudited)


	Shares		Value
	(dollars in thousands)
U-Store-It Trust*		22,171	$	165
Vornado Realty Trust*		9,214		672

Total United States				7,380


SHORT-TERM INVESTMENTS- 0.50%
JPMorgan U.S. Government Money Market Fund		99,784		100


TOTAL INVESTMENTS - 99.20% (Cost $17,613)				19,669
OTHER ASSETS, NET OF LIABILITIES - 0.80%				158
TOTAL NET ASSETS - 100.00%			$	19,827


^*		REIT

^†		ADR — American Depository Receipt

^‡		Warrant

^§		Non-income producing security.

^**		Private Placement

Percentages are stated as a percent of net assets.

Sector Diversification


	Percent of
	Net Assets
Diversified		33.5	%
Retail		21.4	%
Office		13.1	%
Residential		10.9	%
Not Classified		5.4	%
Healthcare		4.5	%
Self Storage		4.1	%
Specialty		2.6	%
Industrial		2.2	%
Industrial/Office Mixed		1.3	%
Lodging/Resorts		1.0	%

See accompanying notes

American Beacon Global Real Estate Fund
Statement of Assets and Liabilities
June 30, 2010 (Unaudited) (in thousands, except share and per share amounts)


Assets:
Investments in securities, at value ^A	$	19,669
Foreign currency, at value ^B		142
Receivable for investments sold		56
Dividends and interest receivable		67
Receivable for fund shares sold		5
Receivable for tax reclaims		4
Prepaid expenses		13

Total assets		19,956

Liabilities:
Payable for investments purchased		45
Payable for fund shares redeemed		20
Management and investment advisory fees payable (Note 2)		35
Administrative service and service fees payable		8
Professional fees payable		4
Other liabilities		17

Total liabilities		129

Net assets	$	19,827


Analysis of Net Assets:
Paid-in-capital		34,005
Undistributed net investment income (loss)		(202	)
Accumulated net realized loss		(16,031	)
Unrealized appreciation of investments, futures contracts, and foreign currency		2,055

Net assets	$	19,827


Shares outstanding (no par value):
Y Class		3,231,204

Investor Class		187,969

A Class		166


Net asset value, offering and redemption price per share:
Y Class	$	5.80

Investor Class	$	5.78


Net asset value and redemption price per share:
A Class	$	5.78


Maximum offering price per share:
A Class	$	6.13



A Cost of investments in securities	$	17,613
B Cost of foreign currency	$	142

See accompanying notes


American Beacon Global Real Estate Fund Statement of Operations For the Six Months ended June 30, 2010 (Unaudited) (in thousands)


Investment Income:
Dividend income (net of foreign taxes)*	$	471

Total investment income		471

Expenses:
Management and investment advisory fees (Note 2)		81
Administrative service fees (Note 2):
Y Class		45
Investor Class		2
Transfer agent fees:
Investor Class		2
Y Class		27
Custody and fund accounting fees		8
Professional fees		27
Registration fees and expenses		10
Service fees:
Investor Class (Note 2)		2
Y Class (Note 2)		7
Prospectus and shareholder reports		4
Trustee fees		8
Other expenses		39

Total expenses		262

Net fees waived and expenses reimbursed by Manager (Note 2)		(101	)

Net expenses		161

Net investment income		310


Realized and unrealized gain (loss) on investments:
Net realized gain (loss) from:
Investments		943
Foreign currency transactions		(69	)
Change in net unrealized appreciation or depreciation of:
Investments		(2,181	)

Net loss on investments		(1,307	)

Net decrease in net assets resulting from operations	$	(997	)


* Foreign taxes	$	14

See accompanying notes

American Beacon Global Real Estate Fund
Statement of Changes in Net Assets
(in thousands)


	Six Months
	Ended			Year Ended
	June 30,			December
	2010			31, 2009
	(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	310		$	517
Net realized gain (loss) on investments, futures contracts, and foreign currency transactions		874			(11,884	)
Change in net unrealized appreciation or (depreciation) of investments, futures contracts, and foreign currency translations		(2,181	)		17,570

Net increase (decrease) in net assets resulting from operations		(997	)		6,203


Distributions to Shareholders:
Net investment income:
Y Class		—			(842	)
Investor Class		—			(100	)
Net realized gain on investments:

Net distributions to shareholders		—			(942	)


Capital Share Transactions:
Proceeds from sales of shares		24,518			3,294
Reinvestment of dividends and distributions		—			364
Cost of shares redeemed		(31,191	)		(9,556	)
Redemption fees		1			12

Net (decrease) in net assets from capital share transactions		(6,672	)		(5,886	)

Net (decrease) in net assets		(7,669	)		(625	)

Net Assets:
Beginning of period		27,496			28,121

End of Period *	$	19,827		$	27,496


* Includes undistributed net investment (loss) of	$	(202	)	$	(582	)

See accompanying notes

American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)

1. Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”) is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the “Act”), as amended, as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Global Real Estate Fund (the “Fund”), a series of the Trust.

Reorganization

The Fund is the accounting and performance successor to the CNL Global Real Estate Fund (the “Predecessor Fund”). On March 1, 2010, the Fund acquired all the net assets of the Predecessor Fund pursuant to a plan of reorganization, in exchange for Y and Investor Class shares of the Fund. The acquisition was accounted for as a tax-free exchange of 3,881,253 Y Class shares and 193,564 Investor Class shares of the Fund for the net assets of the Predecessor Fund, which amounted to $24,238,869 including $3,297,338 of unrealized appreciation, after the close of business on February 28, 2010. Accounting and performance history of the Institutional and A Shares of the Predecessor Fund were redesignated as that of the Y and Investor Class Shares of the Fund, respectively.

For financial reporting purposes, assets received and shares issued by the Fund were recorded at fair value; however, the cost basis of the investments received from the Predecessor Fund was carried forward to align ongoing reporting of the Fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.

The Predecessor Fund had a distribution plan pursuant to Rule 12b-1 for the Class A shares. Under this plan, the Fund collected 0.25% of the average daily net assets for distribution or service activity conducted on behalf of the Fund. Class A shares were converted to Investor Shares on March 1, and this distribution plan was terminated. Prior to the reorganization the distributor for the Fund received $0 in sales commissions from the sale of Class A shares.

Class Disclosure

May 17, 2010 is the inception date of the A Class.

The Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:


Class:		Offered to:
Y Class		Investors making an initial investment of $100,000

Investor Class		General public and investors investing through an intermediary

A Class		Investors investing through an intermediary with applicable front-end sales charges

Administrative service fees, service fees and distribution fees vary amongst the classes as described more fully in footnote 2.

American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)

Security Valuation

Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities for which market quotations are available are valued at the last sale price of official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.

Most foreign markets close before the Exchange. Developments that could affect the values of securities that occur between the close of a foreign market and the close of the Exchange normally will not be reflected in security valuations. If such developments are so significant that they will in the judgment of the pricing committee of the Fund, clearly and materially affect the value of securities, the foreign market closing prices may be adjusted to reflect the fair value of the securities as of the close of the Exchange, as determined in good faith and pursuant to procedures approved by the Board. Adjustments to the closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Of the total investments at June 30, 2010, $11,055,571 or 55.8% was valued at fair value based on procedures established by the Board.

Valuation Inputs

Level 1 — Quoted prices in active markets for identical securities.

Level 2 — Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.

The Fund’s investments are summarized by level based on the inputs used to determine their values. As of June 30, 2010, the Fund’s investments were classified as follows (in thousands):


	Level 1		Level 2		Level 3		Total
Asset Description:
Common Stock	$	8,513	$	11,056	$	—	$	19,569
Short-Term Investments		100		—		—		100

Total Investments	$	8,613	$	11,056	$	—	$	19,669

American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)

Security Transactions and Investment Income

Dividend income, net of foreign taxes, is recorded on the ex-dividend date except certain dividends from foreign securities which are recorded as soon as the information is available to the Fund. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.

Currency Translations

All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses and purchases and sales of investments are translated into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and is reported with all other foreign currency gains and losses in the Fund’s Statement of Operations.

Forward Foreign Currency Exchange Contracts

The Fund may enter into forward foreign currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of Fund securities denominated in foreign currencies. Forward foreign currency contracts are valued at the forward exchange rate prevailing on the day of valuation. The Fund bears the market risk that arises from changes in foreign exchange rates, and accordingly, the unrealized gain (loss) on these contracts is reflected in the accompanying financial statements. The Fund also bears the credit risk if the counterparty fails to perform under the contract.

Dividends to Shareholders

Dividends from net investment income of the Fund normally will be declared and paid at least quarterly. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.

Use of Estimates

Redemption Fees

The Fund imposes a 2% redemption fee on shares held for less than 90 days. The fee is deducted from the redemption proceeds and is intended to offset the trading costs, market impact and other costs associated with short-term trading activities in the Fund. The “first-in, first-out” method is used to determine the holding period. The fee is allocated to all classes of the Fund pro-rata based on the respective net assets. Prior to March 1, 2010 the Fund had a redemption fee of 1% for shares redeemed within 75 days of purchase.

American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)

Other

2. Transactions with Affiliates

Management Agreement

Prior to March 1, 2010, the manager of the Predecessor Fund received an annual rate of 1.00% of the average daily net assets. Since March 1, the Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory and portfolio management services. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Fund an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to the investment advisor hired by the Manager to direct investment activities of the Fund. Management fees paid including amounts paid by the Predecessor Fund during the six months ended June 30, 2010 were as follows: (in thousands)


			Amounts paid to		Net Amounts Retained
Management Fee Rate	Management Fee		Investment Advisors		by Manager
0.35% - 1.00%	$	81	$	77	$	4

Administrative Services Agreement

As of March 1, the Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Y and Investor Classes and 0.40% of the average daily net assets of the A Class of the Fund.

Distribution Plans

The Fund, except for the A Class of the Fund, has adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Fund for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Fund does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.

A separate Distribution Plan (the “Distribution Plan”) has been adopted pursuant to Rule 12b-1 under the Act for the A Class of the Fund. Under the Distribution Plan, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the A Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.

Sales Commissions

The Fund’s distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset expenses that the Manager pays to Foreside. Since

American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)

May 17^th (the inception date of the A Class) there has been $0 in sales commissions received by Foreside from the sale of Class A shares.

Services Plan

The Manager and the Trust entered into a Service Plan which obligates the Manager to oversee additional shareholder servicing of the Y, Investor, and A Classes of the Fund. As compensation for performing the duties required under the Service Plan, the Manager receives an annualized fee of 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A Class and up to 0.375% of the average daily net assets of the Investor Class of the Fund.

Investment in Affiliated Funds

Interfund Lending Program

Reimbursement of Expenses

Prior to March 1, the Predecessor Fund contractually agreed to reimburse operating expenses to the extent that total annual fund expenses exceeded 1.80% for Class A (now Investor Class) and 1.55% for Institutional Class (now Class Y). At the time of reorganization the Predecessor Fund had reimbursed the Fund $5,332 and $95,230 for the A and Institutional Classes, respectively.

After the reorganization the Manager agreed to reimburse operating expenses to the extent that total annual fund operating expenses exceed the Fund’s expense caps. For the period ended June 30, 2010, the Predecessor Fund and the Manager reimbursed the following:


									Total reimbursed for
	Expense Cap			Reimbursed		Expense Cap			the period ended
Class:	1/1/10-2/28/10			prior to 3/1/10		3/1/10-6/30/10			6/30/10
Y		1.55	%	$	95,230		1.27	%	$	95,230
Investor		1.80	%		5,332		1.55	%		5,417
A		N/A			N/A		1.55	%*		—


*		From May 17^th, the inception date of Class A.

American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)

3. Federal Income and Excise Taxes

The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns on income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation, as applicable, as the income is earned or capital gains are recorded.

The tax character of distributions paid during the six months ended June 30, 2010 and the fiscal year ended December 31, 2009 were as follows (in thousands):


	Six Months
	Ended		Year Ended
	June 30,		December 31,
	2010		2009
	(Unaudited)
Distributions paid from:
Ordinary income*	$	—	$	942
Tax return of capital		—		—

Total taxable distributions	$	—	$	942


*		For tax purposes, short-term capital gains distributions are considered ordinary income distributions.

As of June 30, 2010, the components of distributable earnings on a tax basis were as follows (in thousands):


Cost basis of investments for federal income tax purposes	$	20,237

Unrealized appreciation		1,550
Unrealized depreciation		(2,118	)


Net unrealized appreciation/(depreciation)		(568	)

Undistributed ordinary income		459
Undistributed long-term gain/(loss)		(14,069	)


Distributable earnings	$	(14,178	)

American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)

Accordingly, the following amounts represent current year permanent differences derived from reclassifications of income from real estate. Investment securities, foreign currency, investments in passive foreign investment companies and partnership transactions that have been reclassified as of June 30, 2010 (in thousands):


Paid in capital	$	(7	)
Undistributed net investment income		70
Accumulated net realized gain (loss)		(64	)
Unrealized appreciation (depreciation) of investments and foreign currency		1

At June 30, 2010, the capital loss carry forward positions for federal income tax purposes were $948 and $13,121 expiring in 2016 and 2017, respectively (in thousands). The Fund utilized $222 (in thousands) of net capital loss carryovers for the six months ended June 30, 2010.

4. Investment Transactions

Purchases and proceeds from sales of investments for the six months ended June 30, 2010, excluding short-term investments, were $6,463,148 and $12,736,953, respectively.

5. Capital Share Transactions

The tables below summarize the activity in capital shares (dollars and shares in thousands):

Six Months Ended June 30, 2010


	Y Class						Investor Class						A Class
	Shares			Amount			Shares			Amount			Shares		Amount
Shares sold		3,898		$	23,195			222		$	1,322			—	$	1
Reinvestment of dividends		—			—			0			0			—		—
Shares redeemed		(4,595	)		(27,617	)^*		(585	)		(3,573	)^*		—		—

Net increase (decrease) in shares outstanding		(697	)	$	(4,422	)		(363	)	$	(2,251	)		—	$	1

Year Ended December 31, 2009


	Y Class						Investor Class
	Shares			Amount			Shares			Amount
Shares sold		346		$	1,482			376		$	1,812
Reinvestment of dividends		49			266			17			98
Shares redeemed		(2,290	)		(8,941	)		(111	)		(603	)

Net increase (decrease) in shares outstanding		(1,896	)	$	(7,193	)		282		$	1,307


^*		Net of Redemption Fees

6. Subsequent Events

Management has evaluated the possibility of subsequent events existing in the Fund’s financial statements. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements.

American Beacon Global Real Estate Fund
Financial Highlights
(For a share outstanding throughout the period)


	Y Class^E												Investor Class^E												A Class
	Six												Six
	Months									October			Months									October
	Ended			Year Ended						26 to			Ended			Year Ended						26 to			May 17 to
	June 30,			December 31,						December			June 30,			December 31,						December			June 30,
	2010			2009			2008			31, 2007			2010			2009			2008			31, 2007			2010
	(unaudited)												(unaudited)												(unaudited)
Net asset value, beginning of period	$	6.14		$	4.62		$	8.64		$	10.00		$	6.13		$	4.61		$	8.64		$	10.00		$	6 .03

Income from investment operations:
Net investment income (loss)		0.05			0 .11	^C		0 .13	^C		0 .04	^C		(0.14	)		0 .09	^C		0 .10	^C		0 .07	^C		0 .01
Net gains (losses) on securities (both realized and unrealized)		(0.39	)		1.62			(4.06	)		(1.31	)		(0.21	)		1.63			(4.06	)		(1.35	)		(0 .26	)

Total income (loss) from investment operations		(0.34	)		1.73			(3.93	)		(1.27	)		(0.35	)		1.72			(3.96	)		(1.28	)		(0 .25	)

Less distributions:
Dividends from net investment income		—			(0.21	)		(0.09	)		(0.09	)		—			(0.20	)		(0.07	)		(0.08	)		—
Distributions from net realized gains on securities		—			—			—			—			—			—			—			—			—
Tax return of capital		—			—			—			—			—			—			—			—			—

Total distributions		—			(0.21	)		(0.09	)		(0.09	)		—			(0.20	)		(0.07	)		(0.08	)		—

Net asset value, end of period	$	5.80		$	6.14		$	4.62		$	8.64		$	5.78		$	6.13		$	4.61		$	8.64		$	5 .78

Total return		(5.54	)%^A		38.03	%		(45.66	)%		(12.73	)%^A		(5 .71	)%^A		37.77	%		(45.91	)%		(12 .77	)%^A		(4 .15	)%^A

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	18,739		$	24,119		$	26,880		$	4,517		$	1,087		$	3,378		$	1,241		$	61		$	1
Ratios to average net assets (annualized):

Expenses, after expense reimbursements (recoupments)		1.38	%		1.55	%		1.55	%		1 .55	%^B		1.66	%		1.80	%		1.80	%		1 .80	%^B		1 .55	%^B

Expenses, before expense reimbursements (recoupments)		2.26	%		4.05	%		5.49	%		28 .94	%^B		2.54	%		4.24	%		4.99	%		29 .19	%^B		1 .62	%^B

Net investment income, after expense reimbursements (recoupements)		2.71	%		2.19	%		2.09	%		2 .45	%^B		2.33	%		1.72	%		1.69	%		4 .30	%^B		2 .02	%^B

Net investment income (loss), before expense reimbursements (recoupments)		1.83	%		(0.31	)%		(1.85	)%		(24 .94	)%^B		1.44	%		(0.72	)%		(1.50	)%		(23 .09	)%^B		1 .94	%^B

Portfolio turnover rate		28	% ^A		62	%		25	%		6	% ^A		28	% ^A		62	%		25	%		6	% ^A		28	% ^A,D


^A		Not annualized.

^B		Annualized.

^C		Per share numbers have been calculated using average shares method.

^D		Portfolio turnover rate is for the period from January 1, 2010 to June 30, 2010.

^E		Prior to the reorganization on March 1, 2010 the Y Class was known as the Institutional Class and the Investor Class was known as the A Class.

Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)

At the November 18, 2009 Board meeting, the Board of Trustees (“Board”) considered the approval of the Investment Management Agreement (“Management Agreement”) between American Beacon Advisors, Inc. (“Manager”) and American Beacon Funds (“Trust”) on behalf of the American Beacon Global Real Estate Fund (“Fund”), pending the reorganization of the CNL Global Real Estate Fund (“CNL Fund”) into a new series of the Trust (“Reorganization”). Prior to the meeting, the Board requested and reviewed information provided by the Manager in connection with its consideration of the Management Agreement and the Investment Committee of the Board met with representatives of the Manager. The Board considered, among other materials, responses by the Manager to inquiries requesting:

	•		a description of all material aspects of the Reorganization;

	•		a description of the advisory and related services proposed to be provided to the Fund;

	•		identification of the professional personnel to perform services for the Fund and their education, experience and responsibilities;

	•		a comparison of the performance of the CNL Fund with its industry peer group;

	•		an analysis of the proposed advisory fee, a comparison to the fees charged to other comparable clients and an explanation of any differences between the fee schedules; and

	•		any other information the Manager believed would be material to the Board’s consideration of the Agreement.

The Board did not identify any particular information that was most relevant to its consideration to approve the Management Agreement, and each Trustee may have afforded different weight to the various factors. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the approval. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the approval of the Management Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of the Management Agreement were reasonable and fair and that the approval of the Management Agreement was in the best interests of the Fund and its shareholders. Provided below is an overview of the primary factors the Trustees considered in approving the Management Agreement.

Nature, extent and quality of the services to be provided by the Manager. The Board considered the background and experience of key investment personnel who will have primary responsibility for the day-to-day management of the Fund and the Manager’s representation that it was adequately staffed to service the Fund. In addition, the Board noted that the current sub-advisor of the CNL Fund, CB Richard Ellis Global Real Estate Securities, LLC (“CBRE”), will provide subadvisory services to the Fund after the Reorganization, ensuring continuity of management. The Board also considered the Manager’s disciplined investment approach and goal to provide consistent above average long-term performance at a low cost on behalf of the existing series of the Trust and the Manager’s record in building improved compliance, control and credit functions that reduce risks for all series of the Trust. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management to be provided by the Manager were appropriate for the Fund and, thus, determined to approve the Management Agreement for the Fund.

Performance. The Board evaluated the investment performance of the CNL Fund and CBRE, the current sub-advisor to the CNL Fund. The Board evaluated the one-year performance of the CNL Fund relative to its industry peer group within the Lipper Global Real Estate category. In particular, the Board noted that the CNL Fund outperformed its peer group for the one-year period ended September 30, 2009. Thus, the Board concluded that it was satisfied with the historical investment performance record of CBRE.

Comparisons of the amounts to be paid to the Manager under the Management Agreement and other Global Real Estate Funds in the relevant Morningstar category. In evaluating the Management Agreement, the Board reviewed the Manager’s proposed combined management and administrative services fee schedule (“Management Fee”). The Board considered a comparison of the Management Fee to be charged by the Manager under the Management Agreement versus the fees charged by comparable funds in the Global Real Estate Funds Morningstar category. The Board noted that the Management Fee is lower than the average fee

Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)

rate charged by comparable funds in the Fund’s Morningstar peer group. This information assisted the Board in concluding that the Management Fee appeared to be within a reasonable range for the services to be provided to the Fund, in light of all the factors considered.

Costs of the services to be provided and profits to be realized by the Managers from the relationship with the Fund. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues to be earned and the expenses to be incurred by the Manager in connection with the services to be provided to the Fund. Specifically, the Board considered that the Manager will pay the amount due to CBRE out of its management fees. The Board also considered that the Manager will receive service and administrative fees to compensate the Manager for providing administrative services to the Fund and to compensate third-party administrators and broker-dealers for services to Fund shareholders. Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services to be performed by the Manager.

Extent to which economies of scale would be realized as the Fund grows and whether fee levels reflect these economies of scale for the benefit of Fund investors. The Board considered that the fees to be paid to CBRE are passed through the Manager by the Fund and that the Manager would not benefit economically from the proposed fee agreement. The Board also considered the Manager’s representation that it does not expect achieving economies of scale in the near term. Thus, the Board concluded that economies of scale were not a material factor in approving the Management Agreement.

Benefits to be derived by the Manager from the relationship with the Fund. The Board considered the Manager’s representation that it does not anticipate any material “fall-out” benefits resulting from its proposed relationship with the Fund. After consideration of this information, the Board concluded that the potential benefits that may accrue to the Manager by virtue of its relationship with the Fund were not a material factor in approving the Management Agreement.

Board’s Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not “interested persons” of the Fund, the Manager or CBRE, as that term is defined in the 1940 Act, concluded that the proposed management fee is reasonable and that the approval of the Management Agreement is in the best interests of the Fund and its shareholders and, as a result, approved the Management Agreement.

Disclosure Regarding the Board of Trustees’ Approval of Appointment of CB Richard Ellis Global Real Estate Securities, LLC

At the November 18, 2009 Board meeting, the Board approved CB Richard Ellis Global Real Estate Securities, LLC (“CBRE”) as an investment sub-advisor to the American Beacon Global Real Estate Securities Fund (“Fund”), a new series of the Trust, following the reorganization of the CNL Global Real Estate Fund (“CNL Fund”) into the Fund. Prior to the meeting, the Board requested and reviewed information provided by CBRE in connection with its consideration of CBRE as an investment advisor to the Fund and the Investment Committee of the Board met with representatives from CBRE. The Board considered, among other materials, responses by CBRE to inquiries requesting:

	•		a description of the advisory and related services proposed to be provided to the Fund;

	•		identification of the professional personnel to perform services for the Fund and their education, experience and responsibilities;

	•		a comparison of investment performance of accounts managed by CBRE that have investment objectives and policies comparable to the Fund with the performance of applicable peer groups and indices;

	•		an analysis of the proposed subadvisory fee;

	•		a description of the portfolio managers’ compensation, including any incentive arrangements, and if compensation is tied to performance, a description of the oversight mechanisms to prevent a manager with lagging performance from taking undue risks;

Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)

	•		a description of CBRE’s compliance program and matters, as well as its trading activities;

	•		a discussion of CBRE’s financial condition and the potential impact of recent market events on services to be performed for the Fund; and

	•		any other information CBRE believed would be material to the Board’s consideration of the Agreement.

The Board considered multiple factors when evaluating CBRE and in approving the Investment Advisory Agreement between American Beacon Advisors, Inc. (“Manager”) and CBRE on behalf of the Fund (“Agreement”), including CBRE’s experience in managing portfolios containing global real estate securities, its reputation and financial condition, the past performance of the CNL Fund, its overall capabilities to perform the services under the Agreement and its willingness to perform those services for the Fund. A discussion of the factors relating to the Board’s selection of CBRE and approval of the Agreement follows.

Nature, extent and quality of the services to be provided by CBRE. The Board considered CBRE’s investment philosophy and investment process, as well as the background and experience of its portfolio managers. The Board also considered CBRE’s investment resources, infrastructure and the adequacy of its compliance program. In addition, the Board took into consideration the Manager’s recommendation on behalf of CBRE. CBRE also represented that it was adequately staffed and resourced to effectively service the Fund and that it plans to hire additional staff as necessary. Based on this information, the Board concluded that the nature, extent and quality of the advisory services to be provided by CBRE were appropriate for the Fund in light of its investment objective, and, thus, supported a decision to approve the Agreement.

Performance of CBRE. The Board evaluated CBRE’s historical investment performance record in managing portfolios containing real estate securities. In particular, the Board evaluated the performance history of a composite of accounts managed by CBRE relative to the FTSE EPRA/NAREIT Global Developed Real Estate Index (“Index”) for the one- and three-year periods ended September 30, 2009. The Board noted that the composite slightly underperformed the Index for the relevant time periods. The Board also noted that the CNL Fund, which is currently subadvised by CBRE, outperformed its relevant peer group for the one-year period ended September 30, 2009. Thus, the Board concluded that the historical investment performance record of CBRE supported approval of the Agreement.

Comparisons of the amounts to be paid under the Agreement with those under contracts between CBRE and its other clients. In evaluating the Agreement, the Board reviewed the proposed advisory fee rate to be paid by the Manager for services performed on behalf of the Fund, noting that the Manager was still seeking to negotiate a slightly lower fee rate with CBRE.

The Board also noted that CBRE’s investment advisory fee rate under the Agreement will be paid by the Manager out of its management fee, which was lower than the industry average fee rate for accounts with a similar investment mandate. Consequently, the Board concluded that the fee rate to be paid to CBRE by the Manager was not a material factor in approving the Agreement.

Costs of the services to be provided and profits to be realized by CBRE and its affiliates from the relationship with the Fund. The Board considered that the fees to be paid to CBRE are passed through the Manager by the Fund and that the Manager would not benefit economically from the proposed fee agreement. Based on the foregoing information, the Board concluded that economies of scale were not a material factor in approving the Agreement.

Extent to which economies of scale would be realized as the Fund grows and whether fee levels reflect these economies of scale for the benefit of Fund investors. The Board considered that the fees to be paid to CBRE are passed through the Manager by the Fund and that the Manager would not benefit economically from the proposed fee agreement. The Board also considered CBRE’s representation that due to its increasing client base, it is able to leverage its platform to provide economies of scale to the benefit of its clients. Thus, the Board concluded that the Fund will receive economies of scale from its relationship with CBRE.

Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)

Benefits to be derived by CBRE from the relationship with the Fund. The Board considered the “fall-out” or ancillary benefits that may accrue to CBRE as a result of the advisory relationship with the Fund. In this regard, the Board considered CBRE’s representation that it does not anticipate accruing any “fall-out” benefits as a result of its relationship with the Fund. After consideration of this information, the Board concluded that the potential benefits that may accrue to CBRE by virtue of its relationship with the Fund were not a material factor in approving the Agreement.

Board’s Conclusion. The Board did not identify any single factor as being of paramount importance, and different Trustees may have given different weight to different factors. However, based on the various considerations described above, the Board, including a majority of Trustees who are not “interested persons” of the Fund, the Manager or CBRE, as that term is defined in the 1940 Act, concluded that the proposed investment advisory fee is reasonable and that the approval of the Agreement is in the best interests of the Fund and its shareholders and, as a result, approved the Agreement.

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Delivery of Documents

To obtain more information about the Fund:



By E-mail:		On the Internet:
american_beacon.funds@ambeacon.com		Visit our website at www.americanbeaconfunds.com


By Telephone:		By Mail:
Call (800) 658-5811		American Beacon Funds
		P.O. Box 219643
		Kansas City, MO 64121-9643


Availability of Quarterly Portfolio Schedules		Availability of Proxy Voting Policy and Records

In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available on the Funds’ website (www.americanbeaconfunds.com) approximately twenty days after the end of each month.		A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:


Custodian	Transfer Agent	Independent Registered	Distributor
State Street Bank and	Boston Financial Data	Public Accounting	Foreside Fund Services,
Trust	Services	Firm	LLC
Boston, Massachusetts	Kansas City, Missouri	Ernst & Young LLP	Portland, Maine
		Dallas, Texas

This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus or summary prospectus.

American Beacon Funds and American Beacon Global Real Estate Fund are service marks of American Beacon Advisors, Inc

SAR 6/10

ITEM 2. CODE OF ETHICS.

The Trust did not amend the code of ethics that applies to its principal executive and financial officers (the “Code”) nor did it grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.

ITEM 6. SCHEDULE OF INVESTMENTS.

The schedules of investments for each series of the Trust are included in the shareholder report presented in Item 1.


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 Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust’s Board of Trustees since the Trust last disclosed such procedures in Schedule 14A.

ITEM 11. CONTROLS AND PROCEDURES.

	(a)		Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective.

	(b)		There were no changes in the Trust’s internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

ITEM 12. EXHIBITS.

	(a)(1)		Not Applicable.

	(a)(2)		A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT.

	(a)(3)		Not Applicable.

	(b)		The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT.

SIGNATURES

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.

(Registrant): American Beacon Funds


By		/s/ Gene L. Needles, Jr. Gene L. Needles, Jr.
		President

Date: September 2, 2010

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/ Gene L. Needles, Jr. Gene L. Needles, Jr.
		President

Date: September 2, 2010

By		/s/ Melinda G. Heika Melinda G. Heika
		Treasurer

Date: September 2, 2010

American Beacon Balanced Fund (AABPX) N-CSRSCertified semi-annual shareholder report (management investment company)