UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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)
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)
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.
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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 | |||
2 | ||||
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 |
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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,
![-s- Gene L. Needles, Jr.](https://capedge.com/proxy/N-CSRS/0000950123-10-083402/d75832d7583003.gif)
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.
1
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.
2
Performance Overview
American Beacon Treasury Inflation Protected Securities FundSM
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.
3
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
4
Fund Expenses
American Beacon Treasury Inflation Protected Securities FundSM
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). |
5
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
6
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
7
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
8
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
9
American Beacon Treasury Inflation Protected Securities Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)
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”).
10
American Beacon Treasury Inflation Protected Securities Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)
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.
11
American Beacon Treasury Inflation Protected Securities Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)
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
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
12
American Beacon Treasury Inflation Protected Securities Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)
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 17th (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
13
American Beacon Treasury Inflation Protected Securities Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)
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 | Y | |||||||||||||||
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 | A | |||||||||||||||
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* | $ | — | $ | 28 | $ | — | 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.
14
American Beacon Treasury Inflation Protected Securities Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)
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.
15
American Beacon Treasury Inflation Protected Securities Fund
Financial Highlights
(For a share outstanding throughout the period)
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 | 2009A | 2008 | 2007B | 2006 | 2005 | 30, 2010 | 30, 2010 | 31, 2009A | 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. |
16
Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
(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; |
17
Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
(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; |
18
Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
(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
19
Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
(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.”
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 and a subadvisor by Fund, 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. 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.
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
20
Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
(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;
21
Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
(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
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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
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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 |
![(PHOTO OF GENE L. NEEDLES)](https://capedge.com/proxy/N-CSRS/0000950123-10-083402/d75832d7583202.jpg)
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.
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%.
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.*
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, | ||||||
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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.
1
Performance Overview
American Beacon S&P 500® Index Fund
June 30, 2010 (Unaudited)
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.
2
Performance Overview
American Beacon S&P 500® Index Fund
June 30, 2010 (Unaudited)
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. |
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.
3
Performance Overview
American Beacon Small Cap Index FundSM
June 30, 2010 (Unaudited)
American Beacon Small Cap Index FundSM
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.
4
Performance Overview
American Beacon Small Cap Index FundSM
June 30, 2010 (Unaudited)
American Beacon Small Cap Index FundSM
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 |
5
Performance Overview
American Beacon International Equity Index FundSM
June 30, 2010 (Unaudited)
American Beacon International Equity Index FundSM
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.
6
Performance Overview
American Beacon International Equity Index FundSM
June 30, 2010 (Unaudited)
American Beacon International Equity Index FundSM
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
![(PIE CHART)](https://capedge.com/proxy/N-CSRS/0000950123-10-083402/d75832d7583204.gif)
% 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 |
7
Fund Expenses
June 30, 2010 (Unaudited)
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. |
8
American Beacon Funds
Statements of Assets and Liabilities
June 30, 2010 (Unaudited) (in thousands, except share and per share amounts)
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
See accompanying Financial Statements of the respective Master Portfolios
9
American Beacon Funds
Statements of Operations
Six Months ended June 30, 2010 (Unaudited) (in thousands)
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
See accompanying Financial Statements of the respective Master Portfolios
10
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
See accompanying Financial Statements of the respective Master Portfolios
11
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.
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.
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.
12
American Beacon Funds
Notes to Financial Statements
June 30, 2010 (Unaudited)
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
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.
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. 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.
13
American Beacon Funds
Notes to Financial Statements
June 30, 2010 (Unaudited)
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. |
14
American Beacon Funds
Notes to Financial Statements
June 30, 2010 (Unaudited)
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 | |||||
15
American Beacon Funds
Notes to Financial Statements
June 30, 2010 (Unaudited)
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.
16
American Beacon S&P 500 Index FundSM
Financial Highlights
(For a share outstanding throughout each period)
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. |
17
American Beacon S&P 500 Index FundSM
Financial Highlights
(For a share outstanding throughout each period)
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. |
18
American Beacon Small Cap Index Fund
Financial Highlights
(For a share outstanding throughout each period)
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 incomeA | 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. |
19
American Beacon International Equity Index Fund
Financial Highlights
(For a share outstanding throughout each period)
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 incomeA | 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. |
20
American Beacon Funds
Disclosure Regarding the Board of Trustees’ Approval of the
Management Agreement of the Funds (Unaudited)
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 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, 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; |
21
American Beacon Funds
Disclosure Regarding the Board of Trustees’ Approval of the
Management Agreement of the Funds (Unaudited)
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
22
American Beacon Funds
Disclosure Regarding the Board of Trustees’ Approval of the
Management Agreement of the Funds (Unaudited)
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.
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 new classes of the Funds and new series of the Beacon Trust. 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
23
American Beacon Funds
Disclosure Regarding the Board of Trustees’ Approval of the
Management Agreement of the Funds (Unaudited)
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.
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 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. 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.
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 International Equity Index 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 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
24
American Beacon Funds
Disclosure Regarding the Board of Trustees’ Approval of the
Management Agreement of the Funds (Unaudited)
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.
25
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.
26
State Street Equity 500 Index Portfolio
Portfolio of Investments — (continued)
June 30, 2010 (Unaudited)
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.
27
State Street Equity 500 Index Portfolio
Portfolio of Investments — (continued)
June 30, 2010 (Unaudited)
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.
28
State Street Equity 500 Index Portfolio
Portfolio of Investments — (continued)
June 30, 2010 (Unaudited)
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.
29
State Street Equity 500 Index Portfolio
Portfolio of Investments — (continued)
June 30, 2010 (Unaudited)
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.
30
State Street Equity 500 Index Portfolio
Portfolio of Investments — (continued)
June 30, 2010 (Unaudited)
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 | ended 06/30/10 | held at 06/30/10 | (000) | (000) | (000) | |||||||||||||||||||||
State Street Corp. | 90,925 | 6,300 | 6,900 | 90,325 | $ | 3,055 | $ | 2 | $ | (163 | ) |
See Notes to Financial Statements.
31
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.
32
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.
33
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.
34
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.
35
State Street Equity 500 Index Portfolio
Notes to Financial Statements
June 30, 2010 (Unaudited)
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
36
State Street Equity 500 Index Portfolio
Notes to Financial Statements (continued)
June 30, 2010 (Unaudited)
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
37
State Street Equity 500 Index Portfolio
Notes to Financial Statements (continued)
June 30, 2010 (Unaudited)
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
38
State Street Equity 500 Index Portfolio
Notes to Financial Statements (continued)
June 30, 2010 (Unaudited)
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
39
State Street Equity 500 Index Portfolio
Notes to Financial Statements (continued)
June 30, 2010 (Unaudited)
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.
40
State Street Equity 500 Index Portfolio
General Information
June 30, 2010 (Unaudited)
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.
41
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
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 | Shares | |||||||||||||||
Held at | 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 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 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.
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.
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.
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 foreign currencies (foreign currency exchange rate 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
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
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 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 the annual rate of 0.01% of average daily value of the Series’ net assets.
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
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:
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.
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 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 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.
91 | MASTER INTERNATIONAL INDEX SERIES | JUNE 30, 2010 |
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 MSCI EAFE Index before fees and expenses.
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.
MASTER INTERNATIONAL INDEX SERIES | JUNE 30, 2010 | 92 |
Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (continued)
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 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.
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.
93 | MASTER INTERNATIONAL INDEX SERIES | JUNE 30, 2010 |
Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (concluded)
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.
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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:
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By E-mail: | On the Internet: | ||
american_beacon.funds@ambeacon.com | Visit our website at www.americanbeaconfunds.com | ||
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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
00075744
![(GRAPHIC)](https://capedge.com/proxy/N-CSRS/0000950123-10-083402/d75832d7582901.gif)
Report Semi-Annual June 30, 2010 GLOBAL REAL ESTATE FUND |
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 | |||
2 | ||||
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.
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.
American Beacon Funds | June 30, 2010 |
![(PHOTO)](https://capedge.com/proxy/N-CSRS/0000950123-10-083402/d75832d7582902.jpg)
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.
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.
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,
![-s- Gene L. Needles](https://capedge.com/proxy/N-CSRS/0000950123-10-083402/d75832d7582903.gif)
Gene L. Needles, Jr.
President
American Beacon Funds
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.
1
Market Overview
June 30, 2010 (Unaudited)
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.
2
Performance Overview
American Beacon Global Real Estate FundSM
June 30, 2010 (Unaudited)
American Beacon Global Real Estate FundSM
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.
3
Performance Overview
American Beacon Global Real Estate FundSM
June 30, 2010 (Unaudited)
American Beacon Global Real Estate FundSM
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
![(PIE CHART)](https://capedge.com/proxy/N-CSRS/0000950123-10-083402/d75832d7582904.gif)
% of | ||||
Equities | ||||
North America | 42.7 | % | ||
Pacific Rim | 41.2 | % | ||
Europe | 15.0 | % | ||
South America | 1.1 | % |
4
Fund Expenses
American Beacon Global Real Estate FundSM
June 30, 2010 (Unaudited)
American Beacon Global Real Estate FundSM
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 | ||||||||||
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). |
5
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
6
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
7
American Beacon Global Real Estate Fund
Statement of Assets and Liabilities
June 30, 2010 (Unaudited) (in thousands, except share and per share amounts)
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
8
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
9
American Beacon Global Real Estate Fund
Statement of Changes in Net Assets
(in thousands)
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
10
American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)
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.
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.
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.
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.
11
American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)
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.
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”).
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
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):
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 |
12
American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)
Notes to Financial Statements
June 30, 2010 (Unaudited)
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, 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
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.
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.
13
American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)
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
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
14
American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)
Notes to Financial Statements
June 30, 2010 (Unaudited)
May 17th (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
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 borrowed from the USG Select Fund on average $788,854, for 3 days at 0.85% with interest charges of $54.
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 17th, the inception date of Class A. |
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 reimbursements.
15
American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)
Notes to Financial Statements
June 30, 2010 (Unaudited)
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 distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.
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 | ) | |
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.
16
American Beacon Global Real Estate Fund
Notes to Financial Statements
June 30, 2010 (Unaudited)
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.
17
American Beacon Global Real Estate Fund
Financial Highlights
(For a share outstanding throughout the period)
Financial Highlights
(For a share outstanding throughout the period)
Y ClassE | Investor ClassE | 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. |
18
Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
(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
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Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
(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; |
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Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
(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.
21
Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
(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 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 | |
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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. | |||
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. | |||
President | ||||
Date: September 2, 2010 | ||||
By | /s/ Melinda G. Heika | |||
Treasurer | ||||
Date: September 2, 2010 |