UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-04984
AMERICAN BEACON FUNDS
(Exact name of registrant as specified in charter)
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Address of principal executive offices)-(Zip code)
Douglas G. Herring, PRESIDENT
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Name and address of agent for service)
Registrant's telephone number, including area code: (817) 967-3509
Date of fiscal year end: December 31, 2007
Date of reporting period: June 30, 2007
ITEM 1. REPORTS TO STOCKHOLDERS.
G U I D A N C E | V I S I O N | E X P E R I E N C E
[AMERICAN BEACON FUNDS LOGO]
SEMI-ANNUAL REPORT
June 30, 2007
S&P 500 INDEX FUND
SMALL CAP INDEX FUND
INTERNATIONAL EQUITY INDEX FUND
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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
President's Message ............................................... 1
Performance Overviews ............................................. 2
American Beacon Funds
Statements of Assets and Liabilities ........................... 10
Statements of Operations ....................................... 11
Statements of Changes in Net Assets ............................ 12
Notes to Financial Statements .................................. 13
Financial Highlights ........................................... 18
State Street Equity 500 Index Portfolio
Portfolio of Investments ....................................... 22
Statements of Assets and Liabilities ........................... 29
Statement of Operations ........................................ 30
Statements of Changes in Net Assets ............................ 31
Financial Highlights ........................................... 32
Notes to Financial Statements .................................. 33
Master Small Cap Index Series
Summary of Investments ......................................... 37
Statement of Assets and Liabilities ............................ 43
Statement of Operations ........................................ 44
Statements of Changes in Net Assets ............................ 45
Financial Highlights ........................................... 45
Notes to Financial Statements .................................. 46
Master International Index Series
Summary of Investments ......................................... 49
Statements of Assets and Liabilities ........................... 54
Statements of Operations ....................................... 55
Statements of Changes in Net Assets ............................ 56
Financial Highlights ........................................... 56
Notes to Financial Statements .................................. 57
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
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, 2007
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(PHOTO OF DOUGLAS G. HERRING)
FELLOW SHAREHOLDERS,
I am pleased to present to you the Semi-Annual Report for the American
Beacon S&P 500 Index Fund, the International Equity Index Fund and the Small Cap
Index Fund for the six months ended June 30, 2007.
For this period, the three Funds posted strong returns - 6.86%, 10.66% and
6.65%, respectively. In comparison, the S&P 500 Index gained 6.96%, the MSCI
EAFE Index returned 10.74% and the Russell 2000 Index was up 6.45%.
Please review the enclosed portfolio listings and detailed financial data.
As always, we welcome the opportunity to serve your financial needs. Should you
have any questions about the enclosed information, please do not hesitate to
contact us at 800-967-9009. You may access Fund and account information at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
American Beacon Funds.
Sincerely,
/s/ Douglas G. Herring
Douglas G. Herring
President
American Beacon Funds
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DOMESTIC MARKET OVERVIEW
June 30, 2007 (Unaudited)
Signs of stress in the fixed income markets brought a cautious end to the first
half of 2007, with U.S. stocks and bonds both slipping. Risk aversion tended to
increase in the second quarter, especially after hopes for an official rate cut
eroded through May. But in contrast to their less discriminating behavior during
the panicky episodes of April 2005 and May 2006, investors focused their dismay
in spring 2007 on specific sectors and instruments rather than on the broad
market. The second quarter did bring a record high for the S&P 500(R) Index, but
the underpinnings of the global liquidity that has been buoying the capital
markets clearly began to creak.
After peaking in early June, major equity averages explored a lower trading
range and closed the month with modest losses. The S&P 500 retreated 1.7% for
the month, paring its second quarter return to 6.3%, and its first-half gain
back to 7.0%. With mid caps a touch weaker in June, the broader Russell 1000(R)
Index lost 1.9%, trimming its second quarter result to 5.9%. Since the start of
2007, the Russell 1000 retained a 7.2% return. The S&P 400 Index of mid cap
stocks shed 2.2% in June, leaving it with a 5.8% second quarter gain, and a
still healthy 12% advance since the start of 2007.
Despite expanding caution in the bond world during June, smaller stocks
held in impressively well on the equity side. With an abundance of short sellers
trying to compress the elevated valuations of small caps, prices found ready
support during market disruptions. As a result, the Russell 2000(R) Index
limited its June decline to 1.5% and retained a 4.4% return for the second
quarter. For the first half as a whole, the Russell 2000 gained 6.5%. The S&P
600 Index, also a benchmark for small caps, declined 1.6% in June, but added
5.2% for the second quarter to extend its first-half return to 8.6%.
With a rise in credit concerns putting financial stocks on the defensive,
growth-oriented benchmarks outpaced value themes in June to establish a more
measurable advantage on a year-to-date basis. The Russell 1000(R) Growth Index
limited its June loss to 1.5%, against a 2.3% drop for the Russell 1000(R) Value
Index. Russell 1000 Growth added 6.9% for the second quarter and gained 8.1% for
the six-month period, while Russell 1000 Value managed only 4.9% for the quarter
and had a 6.2% return from the start of 2007. The gap grew even greater in the
small cap arena, with the Russell 2000(R) Growth Index limiting its June dip to
0.6%, against a 2.3% decline for the Russell 2000(R) Value Index. Russell
2000(R) Growth advanced 6.7% for the second quarter and was ahead 9.3% from the
start of the year, while Russell 2000(R) Value only edged 2.3% higher on the
June quarter and returned 3.8% for the six-month period.
S&P is a trademark of the McGraw-Hill Companies, Inc. and has been licensed for
use, "Standard and Poor's(R)", "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.
Russell 1000, Russell 2000, Russell 1000 Growth, Russell 1000 Value, Russell
2000 Growth, and Russell 2000 Value Indexes are registered trademarks of Frank
Russell Company.
2
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PERFORMANCE OVERVIEW
AMERICAN BEACON S&P 500 INDEX FUND+
JUNE 30, 2007 (UNAUDITED)
For the six months ended June 30, 2007, the total return of the
Institutional Class of the American Beacon S&P 500 Index Fund was 6.86%,
slightly below the S&P 500 Index return of 6.96% and slightly in excess of the
Lipper S&P 500 Objective Funds Index return of 6.82%.
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 6/30/07
---------------------------------------
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS
--------- ------ ------- --------
Institutional Class(1,4) .................. 6.86% 20.43% 10.49% 6.97%
PlanAhead Class(1,2,4) .................... 6.65% 19.88% 9.99% 6.57%
Lipper S&P 500 Objective Funds Index (3) .. 6.82% 20.31% 10.42% 6.84%
S&P 500 Index (3) ......................... 6.96% 20.59% 10.71% 7.13%
* 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 ten-year period represents the total returns
achieved by the Institutional Class from 6/30/97 to 3/2/98, the inception
date of the PlanAhead Class, and the returns of the PlanAhead Class since
its inception. Because the Institutional Class had lower expenses, its
performance was better than the PlanAhead Class would have realized during
the same period. A portion of the fees charged to the PlanAhead 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
Fund prospectus for the Institutional and PlanAhead Class shares was 0.14%
and 0.61%, 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.
Nine out of ten sectors in the S&P 500 Index (the "Index") had positive
returns for the first six months of 2007. Energy was the top performing sector,
returning 17.2% for the period. Firm product prices continued to boost oil
stocks, but shares in oil service names also remained in steady upward trends.
The Materials sector was the second best performer, gaining 16.7%, led by
Freeport-McMoRan and U.S. Steel. The Telecommunication Services sector tacked on
15.9%, while the Industrials sector was up 11.0% for the six-month period. The
weakest and only sector posting a negative return for the first six months was
the interest-rate sensitive Financials sector. Financials lost 0.8% in the first
half of 2007.
The best performing security in the Index for the six-month period was
electronics retailer RadioShack with a 97.5% gain. Also impressive were
Medimmune and Amazon.com with gains of 78.9% and 73.4%, respectively. Lexmark
International posted the worst return for the period, losing 32.6%. The next
worst performers were homebuilders Pulte Homes and Lennar Corp. On the back of
the slowdown in new home sales, these stocks lost 32.0% and 29.9%, respectively.
As of June 30, 2007, the Fund's largest sector weightings were Financials
(20.9% of assets), Information Technology (15.4% of assets), and Health Care
(11.7% of assets), consistent with the top sector weightings in the Index.
The investment manager continues to utilize a replication strategy,
typically 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.
3
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PERFORMANCE OVERVIEW
AMERICAN BEACON S&P 500 INDEX FUND+
JUNE 30, 2007 (UNAUDITED)
TOP TEN HOLDINGS
%of
Equities*
---------
Exxon Mobil Corp. 3.5%
General Electric Co. 2.9%
AT&T, Inc. 1.9%
Citigroup, Inc. 1.9%
Microsoft Corp. 1.9%
Bank of America Corp. 1.6%
Procter & Gamble Co. 1.4%
American International Group, Inc. 1.4%
Chevron Corp. 1.4%
Pfizer, Inc. 1.3%
* Percent of the equities of State Street Equity 500 Index Portfolio
EQUITY SECTOR ALLOCATION
%of
Equities*
---------
Financials 20.9%
Information Technology 15.4%
Health Care 11.7%
Industrials 11.4%
Energy 10.8%
Consumer Discretionary 10.2%
Consumer Staples 9.3%
Telecommunication Services 3.7%
Utilities 3.5%
Materials 3.1%
* 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.
4
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PERFORMANCE OVERVIEW
AMERICAN BEACON SMALL CAP INDEX FUND(SM)
JUNE 30, 2007 (UNAUDITED)
For the six months ended June 30, 2007, the total return of the
Institutional Class of the American Beacon Small Cap Index Fund was 6.65%. The
Fund's performance exceeded the Russell 2000(R) Index return of 6.45%, but
substantially lagged the Lipper Small-Cap Core Funds Index return of 9.54%.
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 6/30/07
----------------------------------------
SINCE
INCEPTION
6 MONTHS* 1 YEAR 5 YEARS (7/31/00)
--------- ------ ------- ---------
Institutional Class(1,3) ............... 6.65% 16.31% 13.71% 8.89%
Lipper Small- Cap Core Funds Index(2) .. 9.54% 17.17% 13.79% 10.26%
Russell 2000 Index(2) .................. 6.45% 16.44% 13.88% 9.04%
* 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 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 0.18%. The expense ratio above may vary from
the expense ratio presented in other sections of this report that are based
on expenses incurred during the period covered by this report.
Eight of the 10 sectors in the Russell 2000 Index ("Index") recorded
positive returns for the six-month period. The Materials sector was, by far, the
performance leader, advancing 22.1%, followed by Industrials, up 15.3%, and
Energy, which was up 14.6%. Conversely, Financials and Utilities declined -6.2%
and -4.0%, respectively. The Health Care sector, while posting a gain of 4.4%,
lagged the broad Index return and was the third worst performing sector.
The strongest performers among individual stocks in the Index included
Rural Cellular Corp. and TBS International Ltd., which were up 233.4% and
224.9%, respectively. NetBank, Inc., Bally Total Fitness Holding Corp. and
AtheroGenics, Inc. recorded the lowest returns within the Index for the first
half of the year, down -93.3%, -80.4% and -78.4%, respectively.
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.
TOP TEN HOLDINGS
%OF
EQUITIES*
---------
CF Industries Holdings, Inc. 0.2%
Polycom, Inc. 0.2%
Florida East Coast Industries, Inc. 0.2%
FLIR Systems, Inc. 0.2%
Sotheby's 0.2%
Hologic, Inc. 0.2%
ValueClick, Inc. 0.2%
Time Warner Telecom Incorporated 0.2%
Alexandria Real Estate Equities, Incorporated 0.2%
Equinix, Inc. 0.2%
EQUITY SECTOR ALLOCATION
%OF
EQUITIES*
---------
Financials 21.4%
Industrials 19.0%
Information Technology 17.4%
Consumer Discretionary 14.7%
Health Care 11.4%
Materials 5.6%
Energy 4.4%
Consumer Staples 3.1%
Utilities 2.5%
Telecommunication Services 0.5%
* Percent of equity portion of Master Small Cap Index Series
5
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INTERNATIONAL MARKET OVERVIEW
JUNE 30, 2007 (UNAUDITED)
In the first quarter of 2007, speculation regarding a slowing U.S. economy
and its effect on demand for foreign goods and commodities, coupled with a
significant correction in the Chinese equity market at the end of February, made
for a volatile period. The global economy proved to be extremely resilient,
however, with most markets managing to eke out gains for the quarter. In Europe,
stocks benefited from continued robust economic expansion and strong corporate
profits. Germany led the way in the region, with its market up 4.9%. The U.K.
market was up 2.5% and France's market advanced 1.7%. Japanese equities posted a
marginal gain of 0.9% for the first quarter, as a decline in business sentiment
(due to uncertainty surrounding the U.S. economy), a minor increase in the yen
and the global sell-off in late February depressed performance.
Positive momentum returned to the markets in the second half of the period
as corporate activity dominated the headlines. Concerns about the U.S. mortgage
market and rising interest rates around the globe, coupled with another
substantial decline in Shanghai's main stock index in June, were headwinds.
Despite these issues, global equities remained exceptionally resilient, buoyed
by healthy economies and strong corporate earnings. European stocks, in
particular, produced significant gains in the second quarter, thanks to robust
exports and continually strong merger-and-acquisition activity. German stocks
skyrocketed 17.21%, French equities were up 11.40% and U.K. stocks trailed the
pack with a 7.76% gain. As was the case in the first quarter, Japanese stocks
continued to struggle somewhat compared to other developed markets, but still
advanced 4.97% for the quarter.
The inflation background was fairly benign during the semi-annual period,
though there was some noteworthy central bank activity. In the U.S., the Federal
Reserve Board remained on hold, opting to keep the federal funds target rate
unchanged at 5.25%. In contrast, the European Central Bank ("ECB") continued to
tighten monetary policy, increasing its benchmark interest rate two times (0.25%
each) to end the period at 4.0%. Given the ECB's continued concerns regarding
higher oil prices, wage increase demands and volatile markets, further rate
increases are widely expected. Meanwhile, the Bank of Japan increased its policy
rate by 0.25% to 0.5% in February, but opted to leave the monetary policy
unchanged in June. The U.S. dollar outperformed most major currencies in the
first half of 2007, advancing 2.4% and 2.5% against the euro and pound,
respectively. However, the dollar declined 3.6% versus the yen for the period.
6
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PERFORMANCE OVERVIEW
AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM)
JUNE 30, 2007 (UNAUDITED)
For the six months ended June 30, 2007, the Institutional Class of the
American Beacon International Equity Index Fund posted a total return of 10.66%,
slightly below the MSCI EAFE Index return of 10.74% and well below the Lipper
International Funds Index return of 11.48%.
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 6/30/07
----------------------------------------
SINCE
INCEPTION
6 MONTHS* 1 YEAR 5 YEARS (7/31/00)
--------- ------ ------- ---------
Institutional Class (1,3) ............... 10.66% 26.98% 17.71% 7.22%
Lipper International Funds lndex(2) ..... 11.48% 28.40% 17.55% 7.72%
MSCI EAFE Index(2) ...................... 10.74% 27.00% 17.73% 7.37%
* 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.
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. Performance is that of the MSCI EAFE Index through 9/30/01, the
MSCI Provisional EAFE Index from 10/1/01 through 5/31/02, and the MSCI EAFE
Index thereafter. One cannot invest directly in an index.
3. The total annual Fund operating expense ratio in the most recent prospectus
for the Fund was 0.22%. The expense ratio above may vary from the expense
ratio presented in other sections of this report that are based on expenses
incurred during the period covered by this report.
International markets remained on a persistently upward path during the
first six months of 2007 with all 21 countries in the MSCI EAFE Index ("EAFE")
posting positive returns. The strongest performers were Finland (up 28.8%),
Germany (up 24.7%) and Norway (up 23.8%). Conversely, Japan (up 2.9%), Ireland
(up 2.9%) and Italy (up 6.1%) were the weakest markets.
All 10 sectors within EAFE recorded positive returns, led by Materials (up
25.7%), Industrials (up 20.1%) and Energy (up 16.9%). The sectors posting the
lowest returns were Health Care (up 1.1%), Financials (up 5.7%) and Information
Technology (up 9.3%).
The top performing securities were Neptune Orient Lines Ltd. and Leighton
Holdings, with returns of 154.4% and 119.6%, respectively. The worst performers
were Altana and Goodwill Group, with returns of -61.1% and -57.8%, respectively.
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 EAFE such that the characteristics of
the portfolio closely track the characteristics of EAFE.
7
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PERFORMANCE OVERVIEW
AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM)
JUNE 30, 2007 (UNAUDITED)
TOP TEN HOLDINGS
% OF
EQUITIES*
---------
BP PLC 1.7%
HSBC Holdings PLC 1.5%
Vodafone Group PLC 1.3%
Total S.A. 1.2%
Toyota Motor Corp. 1.2%
Nestle S.A. 1.1%
GlaxoSmithKline PLC 1.1%
Royal Dutch Shell PLC 1.1%
Novartis AG 0.9%
Roche Holding AG 0.9%
EQUITY SECTOR ALLOCATION
% OF
EQUITIES* EAFE
--------- -----
Financials 30.5% 30.5%
Consumer Discretionary 13.5% 13.5%
Industrials 12.9% 12.9%
Energy 8.3% 8.3%
Materials 7.9% 7.9%
Telecommunications 6.9% 6.9%
Health Care 6.4% 6.4%
Consumer Staples 5.5% 5.5%
Utilities 4.7% 4.7%
Information Technology 3.4% 3.4%
* Percent of equity portion of Master International Index Series
COUNTRY ALLOCATION
(PIECHART)
% OF
EQUITIES* EAFE
--------- -----
United Kingdom 23.1% 23.1%
Japan 21.2% 21.2%
France 10.4% 10.4%
Germany 8.4% 8.4%
Switzerland 6.6% 6.6%
Australia 6.2% 6.2%
Spain 4.0% 4.0%
Italy 3.8% 3.8%
Netherlands 3.5% 3.5%
Sweden 2.6% 2.6%
Finland 1.7% 1.6%
Hong Kong 1.7% 1.7%
Belgium 1.2% 1.2%
Norway 1.1% 1.0%
Singapore 1.1% 1.1%
Denmark 0.8% 0.9%
Ireland 0.8% 0.8%
Greece 0.7% 0.7%
Austria 0.6% 0.6%
Portugal 0.4% 0.4%
New Zealand 0.1% 0.2%
* Percent of equity portion of Master International Index Series
8
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FUND EXPENSES
JUNE 30, 2007 (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, 2007
through June 30, 2007.
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 PlanAhead
Classes that invest in a Fund through an IRA may be subject to a custodial IRA
fee of $12 that is typically deducted each December. If your account was subject
to a custodial IRA fee during the period, your costs would have been $12 higher.
Actual
S&P 500 SMALL CAP INTERNATIONAL
INSTITUTIONAL CLASS INDEX INDEX EQUITY INDEX
- ------------------- --------- --------- -------------
Beginning Account Value 1/1/07 ....................... $1,000.00 $1,000.00 $1,000.00
Ending Account Value 6/30/07 ......................... $1,068.56 $1,066.49 $1,106.58
Expenses Paid During Period* 1/1/07 - 6/30/07 ........ $ 0.67 $ 0.98 $ 1.00
Annualized Expense Ratio ............................. 0.13% 0.19% 0.19%
S&P 500
PLANAHEAD CLASS INDEX
- --------------- ---------
Beginning Account Value 1/1/07 ....................... $1,000.00
Ending Account Value 6/30/07 ......................... $1,066.48
Expenses Paid During Period* 1/1/07 - 6/30/07......... $ 3.21
Annualized Expense Ratio ............................. 0.63%
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 PlanAhead Classes that invest in a Fund through an IRA may be
subject to a custodial IRA fee of $12 that is typically deducted each December.
If your account was subject to a custodial IRA fee during the period, your costs
would have been $12 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
INSTITUTIONAL CLASS INDEX INDEX EQUITY INDEX
- ------------------- --------- --------- -------------
Beginning Account Value 1/1/07 .................................. $1,000.00 $1,000.00 $1,000.00
Ending Account Value 6/30/07 .................................... $1,024.15 $1,023.85 $1,023.84
Expenses Paid During Period* 1/1/07 - 6/30/07 ................... $ 0.66 $ 0.96 $ 0.96
Annualized Expense Ratio ........................................ 0.13% 0.19% 0.19%
S&P 500
PLANAHEAD CLASS INDEX
- --------------- ---------
Beginning Account Value 1/1/07 .................................. $1,000.00
Ending Account Value 6/30/07 .................................... $1,021.68
Expenses Paid During Period* 1/1/07 - 6/30/07 ................... $ 3.14
Annualized Expense Ratio ........................................ 0.63%
* 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.
9
<PG$PCN,012000000>
AMERICAN BEACON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2007 (Unaudited) (in thousands, except share and per share amounts)
INTERNATIONAL
S&P 500 INDEX SMALL CAP EQUITY INDEX
FUND INDEX FUND FUND
------------- ---------- -------------
ASSETS:
Investment in Portfolio, at value ........................... $ 255,512 $ 66,947 $ 386,361
Receivable for fund shares sold ............................. 552 -- 33
Prepaid expenses ............................................ 11 -- 1
----------- ---------- -----------
TOTAL ASSETS ............................................. 256,075 66,947 386,395
----------- ---------- -----------
LIABILITIES:
Payable for fund shares redeemed ............................ 42 135 4,429
Administrative service and service fees payable (Note 2) .... 18 2 16
Other liabilities ........................................... 45 37 90
----------- ---------- -----------
TOTAL LIABILITIES ........................................ 105 174 4,535
----------- ---------- -----------
NET ASSETS ..................................................... $ 255,970 $ 66,773 $ 381,860
=========== ========== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital ............................................. 173,308 58,395 322,222
Undistributed net investment income (expense) ............... 1,137 655 5,897
Accumulated net realized gain (loss) ........................ (37,188) 1,717 2,609
Unrealized net appreciation (depreciation) of investments and
futures contracts ........................................ 118,713 6,006 51,132
----------- ---------- -----------
NET ASSETS ..................................................... $ 255,970 $ 66,773 $ 381,860
=========== ========== ===========
Shares outstanding (no par value):
Institutional Class ......................................... 11,601,014 4,205,925 27,053,047
=========== ========== ===========
PlanAhead Class ............................................. 962,213 -- --
=========== ========== ===========
Net asset value, offering and redemption price per share:
Institutional Class ......................................... $ 20.39 $ 15.88 $ 14.12
=========== ========== ===========
PlanAhead Class ............................................. $ 20.15 $ -- $ --
=========== ========== ===========
See accompanying notes
See accompanying Financial Statements of the respective Master Portfolios
attached
10
<PG$PCN,013000000>
AMERICAN BEACON FUNDS
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2007 (IN THOUSANDS) (UNAUDITED)
INTERNATIONAL
S&P 500 SMALL CAP EQUITY INDEX
INDEX FUND INDEX FUND FUND
---------- ---------- -------------
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Dividend income ......................................... $ 2,629 $ 390 $ 6,191
Interest income ......................................... 160 284 212
Securities lending income ............................... -- 46 --
Portfolio expenses ...................................... (63) (27) (112)
Other income ............................................ -- -- 38
------- ------ -------
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ....... 2,726 693 6,329
------- ------ -------
FUND EXPENSES:
Administrative service fees (Note 2):
Institutional Class .................................. 65 23 78
PlanAhead Class ...................................... 23 -- --
Sub-administrative service fees:
Institutional Class .................................. -- 10 75
Transfer agent fees:
Institutional ........................................ -- 3 3
PlanAhead ............................................ 5 -- --
Custody and accounting fees ............................. 3 4 10
Professional fees ....................................... 6 11 8
Registration fees ....................................... 17 -- --
Service fees - PlanAhead Class (Note 2) ................. 23 -- --
Printing ................................................ 8 2 4
Other expenses .......................................... 15 8 10
------- ------ -------
TOTAL FUND EXPENSES .................................. 165 61 188
------- ------ -------
NET INVESTMENT INCOME ...................................... 2,561 632 6,141
------- ------ -------
REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM MASTER
PORTFOLIO
Net realized gain (loss) from:
Investments .......................................... 6,946 2,285 2,808
Foreign currency transactions ........................ 100 -- 263
Futures contracts .................................... 225 192 69
Change in net unrealized appreciation or depreciation of:
Investments .......................................... 7,039 3,238 23,011
Foreign currency transactions ........................ -- -- 14
Futures contracts .................................... (52) (21) (55)
------- ------ -------
NET GAIN ON INVESTMENTS .............................. 14,258 5,694 26,110
------- ------ -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $16,819 $6,326 $32,251
======= ====== =======
See accompanying notes
See accompanying Financial Statements of the respective Master Portfolios
attached
11
<PG$PCN,014000000>
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
INTERNATIONAL EQUITY INDEX
S&P 500 INDEX FUND SMALL CAP INDEX FUND FUND
---------------------------- ---------------------------- ----------------------------
Six Months Year ended Six Months Year ended Six Months Year ended
ended June 30, December 31, ended June 30, December 31, ended June 30, December 31,
2007 2006 2007 2006 2007 2006
-------------- ------------ -------------- ------------ -------------- ------------
(unaudited) (unaudited) (unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ............. $ 2,561 $ 4,545 $ 632 $ 1,753 $ 6,141 $ 2,658
Net realized gain on investments,
foreign currency, and futures
contracts ...................... 7,271 816 2,477 5,769 3,140 1,943
Change in net unrealized
appreciation or depreciation of
investments and futures
contracts ...................... 6,987 32,077 3,217 (2,382) 22,970 22,488
--------- --------- --------- --------- -------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ... 16,819 37,438 6,326 5,140 32,251 27,089
--------- --------- --------- --------- -------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class ............... (1,357) (3,900) -- (1,732) -- (2,887)
PlanAhead Class ................... (81) (517) -- -- -- --
Net realized gain form investments,
foreign currency, and futures
transactions:
Institutional Class ............... -- -- -- -- -- (877)
PlanAhead Class ................... -- -- -- -- -- --
--------- --------- --------- --------- -------- ---------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS ................ (1,438) (4,507) -- (1,732) -- (3,764)
--------- --------- --------- --------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ..... 113,963 28,321 8,971 232,022 240,463 108,842
Reinvestment of dividends and
distributions .................. 1,428 4,484 -- 1,732 -- 3,764
Cost of shares redeemed ........... (113,866) (101,514) (100,401) (131,397) (52,967) (64,018)
--------- --------- --------- --------- -------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS ................ 1,525 (68,709) (91,430) 102,357 187,496 48,588
--------- --------- --------- --------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS 16,906 (35,778) (85,104) 105,765 219,747 71,913
--------- --------- --------- --------- -------- ---------
NET ASSETS:
Beginning of period ............... 239,064 274,842 151,877 46,113 162,113 90,200
--------- --------- --------- --------- -------- ---------
END OF PERIOD * ................... $ 255,970 $ 239,064 $ 66,773 $ 151,877 $381,860 $ 162,113
========= ========= ========= ========= ======== =========
* Includes undistributed net
investment income (loss) of ....... $ 1,137 $ 13 $ 655 $ 24 $ 5,897 $ (243)
========= ========= ========= ========= ======== =========
See accompanying notes
See accompanying Financial Statements of the respective Master Portfolios
attached
12
<PG$PCN,015000000>
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Funds (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940 (the
"Act"), as amended, as a no load, diversified, 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 AMR Corporation 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
AMERICAN BEACON: PORTFOLIOS: FUND AT JUNE 30, 2007
- ---------------- --------------------------------------- ----------------------
S&P 500 Index Fund State Street Equity 500 Index Portfolio 9.3%
Small Cap Index Fund Master Small Cap Index Series 11.9%
International Equity Index Fund Master International Index Series 31.2%
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 $2 million Administrative Service Fee - 0.05%
PLANAHEAD CLASS General public and investors investing through an intermediary Administrative Service Fee - 0.25%
Service Fee - 0.25%
Investment income, net capital gains (losses) and all expenses
incurred by the S&P 500 Index Fund are allocated based on the relative net
assets of each class, except for service fees and certain other fees and
expenses related solely to one class of shares.
Security Valuation
Valuation of securities by each Portfolio is discussed in the
Portfolio's Notes to Financial Statements, which are included elsewhere in this
report.
13
<PG$PCN,016000000>
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (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.
Recently Issued Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
("FIN 48"). FIN 48 provides guidance on how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing each Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. The Funds
adopted the provisions of FIN 48 effective January 1, 2007. Tax positions taken
by the Funds have been deemed to meet the more likely than not threshold, and
therefore, there have been no adjustments to the Funds' net asset value per
share.
In September 2006, the FASB issued Statement on Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"). This standard
clarifies the definition of fair value for financial reporting, establishes a
framework for measuring fair value and requires additional disclosures about the
use of fair value measurements. FAS 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The Manager is evaluating the impact of FAS 157;
however, it is not expected to have a material impact on the Funds' net assets
or results of operations.
14
<PG$PCN,017000000>
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (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. 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 and
management 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 PlanAhead Class of the S&P 500 Index Fund.
Service Plans
The Manager and the Trust entered into a Service Plan that obligates
the Manager to oversee additional shareholder servicing of the PlanAhead 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 PlanAhead Class of the S&P 500 Index Fund.
Expense Reimbursement Plan
The Funds have 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' 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. For the six months ended June 30, 2007 there are
no fees subject to recoupment.
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 to be reduced by
the total expense ratio of its corresponding Portfolio, net of any fee waivers.
Other
At June 30, 2007, the employee benefit plans of AMR Corporation and
subsidiary companies owned 89.1% of the Institutional Class of the S&P 500 Index
Fund, 98.6% of the Small Cap Index Fund and 84.5% of the International Equity
Index Fund.
15
<PG$PCN,018000000>
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
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.
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 tax character of distributions paid during the six months ended June
30, 2007 and fiscal year ended December 31, 2006 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,
2007 2006 2007 2006 2007 2006
----------- ------------ ----------- ------------ ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME:*
Institutional Class ....... $1,357 $3,990 $-- $1,732 $-- $2,887
PlanAhead Class ........... 81 517 -- -- -- --
LONG-TERM CAPITAL GAIN:
Institutional Class ....... -- -- -- -- -- 877
PlanAhead Class ........... -- -- -- -- -- --
------ ------ --- ------ --- ------
TOTAL TAXABLE DISTRIBUTIONS .. $1,438 $4,507 $-- $1,732 $-- $3,764
====== ====== === ====== === ======
* For tax purposes, short-term capital gains are considered ordinary income
distributions.
At June 30, 2007 capital loss carry forward positions for federal income
tax purposes were as follows (in thousands):
FUND 2007 2008 2009 2010 2011 2012 2013 2014 TOTAL
- ---- ---- ------ ------ ------- ---- ------ ------ ---- -------
S&P 500 Index .... $45 $8,848 $1,300 $11,516 $635 $1,060 $2,311 $286 $26,001
Small Cap Index .. -- -- -- -- -- -- -- 220 220
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, 2007
INSTITUTIONAL CLASS PLANAHEAD CLASS
------------------- ----------------
S&P 500 INDEX FUND SHARES AMOUNT SHARES AMOUNT
- ------------------ ------ ---------- ------ -------
Shares sold ........................... 5,700 $ 109,919 209 $ 4,044
Reinvestment of dividends ............. 71 1,357 4 71
Shares redeemed ....................... (5,793) (111,965) (97) (1,901)
------ --------- --- -------
Net increase (decrease) in shares
outstanding ........................ (22) $ (689) 116 $ 2,214
====== ========= === =======
16
<PG$PCN,019000000>
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
INSTITUTIONAL CLASS
-------------------
SMALL CAP INDEX FUND SHARES AMOUNT
- -------------------- ------ ----------
Shares sold ............................ 602 $ 8,971
Reinvestment of dividends .............. -- --
Shares redeemed ........................ (6,593) (100,401)
------ ---------
Net (decrease) in shares outstanding ... (5,991) $ (91,430)
====== =========
INSTITUTIONAL CLASS
-------------------
INTERNATIONAL EQUITY INDEX FUND SHARES AMOUNT
- ------------------------------- ------ --------
Shares sold ............................ 18,157 $240,463
Reinvestment of dividends .............. -- --
Shares redeemed ........................ (3,811) (52,967)
------ --------
Net increase in shares outstanding ..... 14,346 $187,496
====== ========
Year ended December 31, 2006
INSTITUTIONAL CLASS PLANAHEAD CLASS
------------------- -----------------
S&P 500 INDEX FUND SHARES AMOUNT SHARES AMOUNT
- ------------------ ------ --------- ------ -------
Shares sold 874 $ 15,548 732 $ 12,773
Reinvestment of dividends 222 3,990 28 494
Shares redeemed (2,834) (49,785) (2,850) (51,729)
------ -------- ------ --------
Net (decrease) in shares outstanding (1,738) $(30,247) (2,090) $(38,462)
====== ======== ====== ========
INSTITUTIONAL CLASS
-------------------
SMALL CAP INDEX FUND SHARES AMOUNT
- -------------------- ------ ----------
Shares sold ............................ 16,217 $ 232,022
Reinvestment of dividends .............. 118 1,732
Shares redeemed ........................ (9,747) (131,397)
------ ---------
Net increase in shares outstanding ..... 6,588 $ 102,357
====== =========
INSTITUTIONAL CLASS
-------------------
INTERNATIONAL EQUITY INDEX FUND SHARES AMOUNT
- ------------------------------- ------ --------
Shares sold ............................ 9,373 $108,842
Reinvestment of dividends .............. 298 3,764
Shares redeemed ........................ (5,697) (64,018)
------ --------
Net increase in shares outstanding ..... 3,974 $ 48,588
====== ========
17
<PG$PCN,020000000>
AMERICAN BEACON S&P 500 INDEX FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
Institutional Class
---------------------------------------------------------
Six Months
ended Year Ended December 31,
June 30, ------------------------------------------
2007 2006 2005 2004 2003
----------- -------- -------- -------- --------
(unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 19.19 $ 16.90 $ 16.43 $ 15.10 $ 11.96
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income:(A) ................................ 0.20 0.33 0.29 0.29 0.21
Net gain (loss) on investments, foreign
currency and futures transactions (both
realized and unrealized) .............................. 1.11 2.30 0.47 1.32 3.14
-------- -------- -------- -------- --------
Total income (loss) from investment operations .............. 1.31 2.63 0.76 1.61 3.35
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ..................... (0.11) (0.34) (0.29) (0.28) (0.21)
Tax return of capital .................................... -- -- 0.00(B) -- --
-------- -------- -------- -------- --------
Total distributions ......................................... (0.11) (0.34) (0.29) (0.28) (0.21)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD .............................. $ 20.39 $ 19.19 $ 16.90 $ 16.43 $ 15.10
======== ======== ======== ======== ========
TOTAL RETURN ................................................ 6.86%(C) 15.69% 4.74% 10.76% 28.26%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ................. $236,589 $223,008 $225,857 $244,668 $245,251
Ratios to average net assets (annualized):(A)
Net investment income, net of waivers ................. 1.87% 1.85% 1.75% 1.85% 1.63%
Net investment income, before waivers ................. 1.87% 1.85% 1.75% 1.85% 1.63%
Expenses, including expenses of the master portfolio,
net of waivers ..................................... 0.13% 0.14% 0.13% 0.17% 0.14%
Expenses, including expenses of the master portfolio,
before waivers ..................................... 0.13% 0.14% 0.13% 0.17% 0.14%
- ----------
(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) The tax return of capital is calculated based upon outstanding shares at
the time of distribution. Amounts are less than $0.01 per share.
(C) Not annualized.
18
<PG$PCN,021000000>
PlanAhead Class
- -------- ---------------------------------------------------------------
Six Months Year Ended December 31,
ended June -------------------------------------------------
2002 30, 2007 2006 2005 2004 2003 2002
- -------- ----------- ------- ------- ------- ------- -------
(unaudited)
$ 15.62 $ 18.97 $ 16.69 $ 16.23 $ 14.96 $ 11.85 $ 15.49
- -------- ------- ------- ------- ------- ------- -------
0.20 0.34 0.17 0.21 0.21 0.15 0.14
(3.66) 0.93 2.33 0.48 1.31 3.12 (3.64)
- -------- ------- ------- ------- ------- ------- -------
(3.46) 1.27 2.50 0.69 1.52 3.27 (3.50)
- -------- ------- ------- ------- ------- ------- -------
(0.20) (0.09) (0.22) (0.23) (0.25) (0.16) (0.14)
-- -- -- 0.00(B) -- -- --
- -------- ------- ------- ------- ------- ------- -------
(0.20) (0.09) (0.22) (0.23) (0.25) (0.16) (0.14)
- -------- ------- ------- ------- ------- ------- -------
$ 11.96 $ 20.15 $ 18.97 $ 16.69 $ 16.23 $ 14.96 $ 11.85
======== ======= ======= ======= ======= ======= =======
-22.27% 6.65%(C) 15.09% 4.32% 10.21% 27.65% -22.59%
======== ======= ======= ======= ======= ======= =======
$195,368 $19,381 $16,056 $48,985 $46,344 $34,729 $24,885
1.47% 1.35% 1.37% 1.28% 1.43% 1.16% 1.06%
1.47% 0.58% 1.37% 1.28% 1.43% 1.15% 0.98%
0.14% 0.63% 0.61% 0.61% 0.62% 0.63% 0.55%
0.14% 0.63% 0.61% 0.61% 0.62% 0.64% 0.63%
19
<PG$PCN,022000000>
AMERICAN BEACON SMALL CAP INDEX FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
Institutional Class
-----------------------------------------------------------------
Six Months Year Ended December 31,
ended June ---------------------------------------------------
30, 2007 2006 2005 2004 2003 2002
----------- -------- ------- ------- ------- -------
(unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 14.89 $ 12.78 $ 12.57 $ 11.27 $ 7.70 $ 9.79
------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A) ................................. 0.16 0.17 0.16 0.14 0.04 0.11
Net gain (loss) on investments, foreign
currency and futures transactions (both
realized and unrealized) .............................. 0.83 2.11 0.42 1.87 3.57 (2.10)
------- -------- ------- ------- ------- -------
Total income (loss) from investment operations .............. 0.99 2.28 0.58 2.01 3.61 (1.99)
------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ..................... -- (0.17) (0.17) (0.13) (0.04) (0.10)
Distributions from net realized gains on investments ..... -- -- (0.15) (0.58) -- --
Tax return of capital .................................... -- -- (0.05)(B) -- -- --
------- -------- ------- ------- ------- -------
Total distributions ......................................... -- (0.17) (0.37) (0.71) (0.04) (0.10)
------- -------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .............................. $ 15.88 $ 14.89 $ 12.78 $ 12.57 $ 11.27 $ 7.70
======= ======== ======= ======= ======= =======
TOTAL RETURN ................................................ 6.65%(C) 17.85% 4.51% 17.91% 46.90% -20.37%
======= ======== ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ................. $66,773 $151,878 $46,113 $39,196 $67,756 $11,227
Ratios to average net assets (annualized):(A)
Net investment income ................................. 1.38% 1.49% 1.12% 0.90% 1.04% 1.13%
Expenses, including expenses of the master portfolio .. 0.19% 0.18% 0.18% 0.22% 0.24% 0.20%
- ----------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the Master Small Cap Index Series.
(B) The tax return of capital is calculated based upon outstanding shares at
the time of distribution.
(C) Not annualized.
20
<PG$PCN,023000000>
AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
Institutional Class
------------------------------------------------------------------
Six Months Year Ended December 31,
ended June ----------------------------------------------------
30, 2007 2006 2005 2004 2003 2002
----------- -------- ------- ------- ------- --------
(unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 12.76 $ 10.33 $ 9.39 $ 8.01 $ 5.86 $ 7.07
-------- -------- ------- ------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A) ................................. 0.26 0.23 0.21 0.17 0.14 0.11
Net gain (loss) on investments, foreign
currency and futures transactions (both
realized and unrealized) .............................. 1.10 2.50 1.06 1.44 2.13 (1.23)
-------- -------- ------- ------- ------- --------
Total income (loss) from investment operations .............. 1.36 2.73 1.27 1.61 2.27 (1.12)
-------- -------- ------- ------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ..................... -- (0.23) (0.24) (0.23) (0.12) (0.09)
Distributions from net realized gains on investments ..... -- (0.07) -- -- -- --
Tax return of capital .................................... -- -- (0.09)(B) -- -- --
-------- -------- ------- ------- ------- --------
Total distributions ......................................... -- (0.30) (0.33) (0.23) (0.12) (0.09)
-------- -------- ------- ------- ------- --------
NET ASSET VALUE, END OF PERIOD .............................. $ 14.12 $ 12.76 $ 10.33 $ 9.39 $ 8.01 $ 5.86
======== ======== ======= ======= ======= ========
TOTAL RETURN ................................................ 10.66%(C) 26.52% 13.58% 20.12% 38.87% -15.65%
======== ======== ======= ======= ======= ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ................. $381,860 $162,113 $90,200 $23,156 $10,043 $ 4,912
Ratios to average net assets (annualized):(A)
Net investment income ................................. 3.94% 2.44% 2.49% 2.16% 2.71% 1.97%
Expenses, including expenses of the master portfolio .. 0.19% 0.22% 0.23% 0.26% 0.31% 0.25%
- ----------
(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) The tax return of capital is calculated based upon outstanding shares at
the time of distribution.
(C) Not annualized.
21
<PG$PCN,024000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2007 (UNAUDITED)
MARKET
VALUE
SHARES (000)
--------- ----------
COMMON STOCKS -- 97.8%
CONSUMER DISCRETIONARY --10.3%
Abercrombie & Fitch Co. 17,968 $ 1,311
Amazon.Com, Inc. (a) 62,212 4,256
Apollo Group, Inc. Class A (a) 29,068 1,698
AutoNation, Inc. (a) 30,992 695
AutoZone, Inc. (a) 9,180 1,254
Bed Bath & Beyond, Inc. (a) 55,467 1,996
Best Buy Co., Inc. 82,076 3,830
Big Lots, Inc. (a) 22,762 670
Black & Decker Corp. 13,556 1,197
Brunswick Corp. 19,033 621
Carnival Corp. 89,754 4,377
CBS Corp. Class B 146,179 4,871
Centex Corp. 24,662 989
Circuit City Stores, Inc. 29,424 444
Citadel Broadcasting Corp. 3,251 21
Clear Channel Communications, Inc. 99,109 3,748
Coach, Inc. (a) 73,865 3,500
Comcast Corp. Class A (a) 621,038 17,464
D.R. Horton, Inc. 54,763 1,091
Darden Restaurants, Inc. 29,106 1,280
Dillard's, Inc. Class A 12,590 452
DIRECTV Group, Inc. (a) 154,582 3,572
Dollar General Corp. 64,764 1,420
Dow Jones & Co., Inc. 13,543 778
Eastman Kodak Co. 59,594 1,659
eBay, Inc. (a) 228,599 7,356
EW Scripps Co. Class A 17,240 788
Family Dollar Stores, Inc. 31,412 1,078
Federated Department Stores, Inc. 91,734 3,649
Ford Motor Co. 380,839 3,588
Fortune Brands, Inc. 29,847 2,459
Gannett Co., Inc. 46,671 2,565
Gap, Inc. 108,086 2,064
General Motors Corp. 111,466 4,213
Genuine Parts Co. 34,965 1,734
Goodyear Tire & Rubber Co. (a) 36,774 1,278
H&R Block, Inc. 65,556 1,532
Harley-Davidson, Inc. 50,693 3,022
Harman International Industries, Inc. 13,518 1,579
Harrah's Entertainment, Inc. 37,162 3,168
Hasbro, Inc. 33,001 1,037
Hilton Hotels Corp. 76,361 2,556
Home Depot, Inc. 394,424 15,521
Host Hotels & Resorts, Inc. 106,440 2,461
International Game Technology 66,380 2,635
Interpublic Group of Cos., Inc. (a) 96,155 1,096
JC Penney & Co., Inc. 45,541 3,296
Johnson Controls, Inc. 39,671 4,593
Jones Apparel Group, Inc. 21,438 606
MARKET
VALUE
SHARES (000)
--------- ----------
KB HOME 15,150 $ 596
Kohl's Corp. (a) 63,936 4,541
Leggett & Platt, Inc. 35,226 777
Lennar Corp. Class A 28,603 1,046
Limited Brands 70,205 1,927
Liz Claibome, Inc. 21,298 794
Lowe's Cos., Inc. 303,360 9,310
Marriot International, Inc. Class A 64,846 2,804
Mattel, Inc. 80,655 2,040
McDonald's Corp. 240,039 12,184
McGraw-Hill, Inc. 68,066 4,634
Meredith Corp. 8,079 498
New York Times Co. Class A 29,823 758
Newell Rubbermaid, Inc. 56,935 1,676
News Corp. Class A 467,500 9,916
NIKE, Inc. Class B 76,244 4,444
Nordstrom, Inc. 44,751 2,288
Office Depot, Inc. (a) 56,890 1,724
OfficeMax, Inc. 15,495 609
Omnicom Group, Inc. 66,656 3,527
Polo Ralph Lauren Corp. 12,304 1,207
Pulte Homes, Inc. 43,857 985
Radioshack Corp. 28,165 933
Sears Holdings Corp. (a) 16,315 2,765
Sherwin-Williams Co. 21,092 1,402
Snap-On, Inc. 12,096 611
Stanley Works 16,880 1,025
Staples, Inc. 145,213 3,446
Starbucks Corp. (a) 146,505 3,844
Starwood Hotels & Resorts
Worldwide, Inc. 42,240 2,833
Target Corp. 171,207 10,889
Tiffany & Co. 28,084 1,490
Time Warner, Inc. 761,827 16,029
TJX Cos., Inc. 92,681 2,549
Tribune Co. 17,026 501
V.F. Corp. 17,300 1,584
Viacom, Inc. Class B (a) 137,461 5,723
Walt Disney Co. 395,717 13,510
Wendy's International, Inc. 17,426 640
Whirlpool Corp. 15,833 1,761
Wyndham Worldwide Corp. (a) 35,125 1,274
Yum! Brands, Inc. 105,270 3,444
----------
281,606
----------
CONSUMER STAPLES -- 9.1%
Altria Group, Inc. 420,867 29,520
Anheuser-Busch Cos., Inc. 153,484 8,006
Archer-Daniels-Midland Co. 131,829 4,362
Avon Products, Inc. 89,296 3,282
Brown-Forman Corp. Class B 16,341 1,194
Campbell Soup Co. 44,856 1,741
Clorox Co. 31,063 1,929
Coca-Cola Co. 402,502 21,055
Coca-Cola Enterprises, Inc. 57,499 1,380
See notes to financial statements
22
<PG$PCN,025000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2007 (UNAUDITED)
MARKET
VALUE
SHARES (000)
--------- ----------
CONSUMER STAPLES -- (CONTINUED)
Colgate-Palmolive Co. 102,023 $ 6,616
ConAgra Foods, Inc. 99,003 2,659
Constellation Brands, Inc. Class A (a) 38,122 926
Costco Wholesale Corp. 90,679 5,307
CVS Corp. 307,120 11,194
Dean Foods Co. (a) 25,866 824
Estee Lauder Cos, Inc. Class A 23,812 1,084
General Mills, Inc. 69,037 4,033
H.J. Heinz Co. 65,954 3,131
Hershey Foods Corp. 33,366 1,689
Kellogg Co. 51,066 2,645
Kimberly-Clark Corp. 90,686 6,066
Kraft Foods, Inc. 322,401 11,365
Kroger Co. 141,594 3,983
McCormick & Co., Inc. 25,963 991
Molson Coors Brewing Co., Class B 9,447 873
Pepsi Bottling Group, Inc. 27,090 912
PepsiCo, Inc. 327,327 21,227
Procter & Gamble Co. 631,273 38,628
Reynolds American, Inc. 34,855 2,273
Safeway, Inc. 86,702 2,950
Sara Lee Corp, 148,645 2,586
SuperValu, Inc. 41,934 1,942
Sysco Corp. 123,421 4,072
Tyson Foods, Inc., Class A 52,309 1,205
UST Corp. 32,960 1,770
Wal-Mart Stores, Inc. 487,134 23,436
Walgreen Co. 199,284 8,677
Whole Foods Market, Inc. 28,605 1,096
Wrigley Wm, Jr. Co. 42,241 2,336
----------
248,965
----------
ENERGY --10.3%
Anadarko Petroleum Corp. 93,562 4,864
Apache Corp. 66,938 5,461
Baker Hughes, Inc. 64,253 5,406
BJ Services Co. 60,161 1,711
Chesapeake Energy Corp. 83,052 2,874
Chevron Texaco Corp. 431,562 36,355
ConocoPhillips 326,980 25,668
Devon Energy Corp. 88,290 6,912
El Paso Corp. 142,038 2,447
ENSCO International, Inc. 30,760 1,877
EOG Resources, Inc. 49,439 3,612
ExxonMobil Corp. 1,128,765 94,681
Halliburton Co. 183,720 6,338
Hess Corp. 53,187 3,136
Marathon Oil Corp. 136,639 8,193
Murphy Oil Corp. 38,497 2,288
Nabors Industries, Ltd. (a) 57,066 1,905
National Oilwell Varco, Inc. (a) 35,561 3,707
Noble Corp. 26,379 2,573
Occidental Petroleum Corp. 166,901 9,660
MARKET
VALUE
SHARES (000)
--------- ----------
Rowan Cos., Inc. 22,960 $ 941
Schlumberger, Ltd. 235,434 19,998
Smith International, Inc. 40,947 2,401
Sunoco, Inc. 24,942 1,987
Transocean, Inc. (a) 58,106 6,158
Valero Energy Corp. 110,546 8,165
Weatherford International Ltd. (a) 66,724 3,686
Williams Cos., Inc. 121,119 3,830
XTO Energy, Inc. 75,963 4,565
----------
281,399
----------
FINANCIALS -- 20.5%
ACE, Ltd. 65,299 4,082
AFLAC, Inc. 97,052 4,988
Allstate Corp. 120,863 7,434
Ambac Financial Group, Inc. 20,719 1,806
American Express Co. 238,051 14,564
American International Group, Inc. 520,393 36,443
Ameriprise Financial, Inc. 48,098 3,058
AON Corp. 58,523 2,494
Apartment Investment & Management Co. Class A 19,984 1,008
Archstone-Smith Trust 43,300 2,559
Assurant, Inc. 16,894 995
AvalonBay Communities, Inc. 16,308 1,939
Bank of America Corp. 888,598 43,444
Bank of New York Co., Inc. 150,074 6,219
BB&T Corp. 107,292 4,365
Bear Steams Cos., Inc. 23,904 3,347
Boston Properties, Inc. 23,315 2,381
Capital One Financial Corp. 82,500 6,471
CB Richard Ellis Group, Inc. Class A (a) 38,377 1,401
Charles Schwab Corp. 203,287 4,171
Chicago Mercantile Exchange Holdings, Inc. 7,088 3,788
Chubb Corp. 79,482 4,303
Cincinnati Financial Corp. 35,173 1,527
CIT Group, INC. 39,188 2,149
Citigroup, Inc. 990,655 50,812
Comerica, Inc. 31,970 1,901
Commerce Bancorp, Inc. 38,888 1,438
Compass Bancshares, Inc. 26,546 1,831
Countrywide Financial Corp. 119,222 4,334
Developers Diversified Realty Corp. 25,878 1,364
E*Trade Financial Corp. (a) 87,673 1,937
Equity Residential 57,810 2,638
Fannie Mae 193,026 12,610
Federal Home Loan Mortgage Corp. 131,778 7,999
Federated Investors, Inc. Class B 18,710 717
See notes to financial statements
23
<PG$PCN,026000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2007 (UNAUDITED)
MARKET
VALUE
SHARES (000)
--------- ----------
FINANCIALS -- (CONTINUED)
Fidelity National Information Services, Inc. 33,590 $ 1,823
Fifth Third Bancorp 110,120 4,379
First Horizon National Corp. 25,778 1,005
Franklin Resources, Inc. 33,138 4,390
General Growth Properties, Inc. 49,200 2,605
Genworth Financial, Inc. Class A 82,313 2,832
Goldman Sachs Group, Inc. 82,179 17,812
Hartford Financial Services Group, Inc. 63,658 6,271
Hudson City Bancorp, Inc. 101,557 1,241
Huntington Bancshares, Inc. 73,381 1,669
J.P. Morgan Chase & Co. 683,768 33,129
Janus Capital Group, Inc. 39,115 1,089
KeyCorp 77,804 2,671
Kimco Realty Corp. 45,938 1,749
Legg Mason, Inc. 26,743 2,631
Lehman Brothers Holdings, Inc. 104,674 7,800
Lincoln National Corp. 53,551 3,799
Loews Corp. 90,370 4,607
M & T Bank Corp. 15,577 1,665
Marsh & McLennan Cos., Inc. 112,397 3,471
Marshall & Ilsley Corp. 50,056 2,384
MBIA, Inc. 25,381 1,579
Mellon Financial Corp. 82,999 3,652
Merrill Lynch & Co., Inc. 174,966 14,624
MetLife, Inc. 147,901 9,537
MGIC Investment Corp. 17,204 978
Moody's Corp. 46,079 2,866
Morgan Stanley 210,637 17,668
National City Corp. 115,690 3,855
Northern Trust Corp. 36,975 2,375
Plum Creek Timber Co., Inc. 36,715 1,530
PNC Financial Services Group, Inc. 70,027 5,013
Principal Financial Group, Inc. 53,345 3,109
Progressive Corp. 148,429 3,552
ProLogis 50,990 2,901
Prudential Financial, Inc. 93,249 9,067
Public Storage, Inc. 24,979 1,919
Regions Financial Corp. 141,629 4,688
SAFECO Corp. 21,816 1,358
Simon Property Group, Inc. 44,342 4,126
SLM Corp. 82,235 4,735
Sovereign Bancorp, Inc. 74,062 1,566
State Street Corp. (b) 79,755 5,455
SunTrust Banks, Inc. 70,517 6,046
Synovus Financial Corp. 63,785 1,958
T. Rowe Price Group, Inc. 52,100 2,703
Torchmark Corp. 18,352 1,230
Travelers Cos, Inc. 134,350 7,188
U.S. Bancorp 349,394 11,513
MARKET
VALUE
SHARES (000)
--------- ----------
UnumProvident Corp. 70,272 $ 1,835
Vornado Realty Trust 25,663 2,819
Wachovia Corp. 382,551 19,606
Washington Mutual, Inc. 176,813 7,539
Wells Fargo Co. 671,168 23,605
Western Union Co. 154,006 3,208
XL Capital, Ltd. Class A 35,985 3,033
Zions Bancorp 22,548 1,734
----------
561,709
----------
HEALTHCARE -- 11.3%
Abbott Laboratories 308,173 16,503
Aetna, Inc. 104,478 5,161
Allergan, Inc. 60,720 3,500
AmerisourceBergen Corp. 38,733 1,916
Amgen, Inc. (a) 232,946 12,880
Applera Corp. - Applied Biosystems Group 37,974 1,160
Barr Pharmaceuticals, Inc. (a) 22,041 1,107
Bausch & Lomb, Inc. 11,192 777
Baxter International, Inc. 129,248 7,282
Becton, Dickinson & Co. 48,231 3,593
Biogen Idec, Inc. (a) 68,259 3,652
Biomet, Inc. 49,805 2,277
Boston Scientific Corp, (a) 239,920 3,680
Bristol-Myers Squibb Co. 395,541 12,483
C.R. Bard, Inc. 21,057 1,740
Cardinal Health, Inc. 77,324 5,462
Celgene Corp. (a) 76,266 4,372
CIGNA Corp. 57,603 3,008
Coventry Health Care, Inc. (a) 30,418 1,754
Eli Lilly & Co. 196,716 10,993
Express Scripts, Inc. (a) 53,300 2,666
Forest Laboratories, Inc. (a) 63,392 2,894
Genzyme Corp. (a) 53,296 3,432
Gilead Sciences, Inc. (a) 184,760 7,163
Hospira, Inc. (a) 32,361 1,263
Humana, Inc. (a) 34,211 2,084
IMS Health, Inc. 39,562 1,271
Johnson & Johnson 579,829 35,729
King Pharmaceuticals, Inc. (a) 50,479 1,033
Laboratory Corp. of America Holdings (a) 23,679 1,853
Manor Care, Inc. 14,550 950
McKesson Corp. 58,326 3,479
Medco Health Solutions, Inc. (a) 56,280 4,389
Medtronic, Inc. 229,638 11,909
Merck & Co., Inc. 432,929 21,560
Millipore Corp. (a) 11,096 833
Mylan Laboratories Inc. 50,291 915
Patterson Cos., Inc. (a) 28,798 1,073
Pfizer, Inc. 1,404,988 35,926
Quest Diagnostics, Inc. 32,622 1,685
Schering-Plough Corp. 299,793 9,126
St. Jude Medical, Inc. (a) 67,700 2,809
See notes to financial statements
24
<PG$PCN,027000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2007 (UNAUDITED)
MARKET
VALUE
SHARES (000)
--------- ----------
HEALTH CARE -- (CONTINUED)
Stryker Corp. 58,889 $ 3,715
Tenet Healthcare Corp. (a) 97,769 636
Thermo Electron Corp. (a) 83,180 4,302
UnitedHealth Group, Inc. 267,658 13,688
Varian Medical Systems, Inc. (a) 26,073 1,108
Watson Pharmaceuticals, Inc. (a) 21,553 701
Wellpoint, Inc. (a) 122,052 9,743
Wyeth 268,757 15,411
Zimmer Holdings, Inc. (a) 46,854 3,977
----------
310,623
----------
INDUSTRIALS -- 11.2%
3M Co. 144,762 12,564
Allied Waste Industries, Inc. (a) 52,668 709
American Standard Cos., Inc. 35,873 2,116
Avery Dennison Corp. 18,781 1,249
Boeing Co. 157,581 15,153
Burlington Northern Santa Fe Corp. 71,276 6,068
Caterpillar, Inc. 128,707 10,078
CH Robinson Worldwide, Inc. 35,545 1,867
Cintas Corp. 28,292 1,116
Cooper Industries, Ltd. 37,463 2,139
CSX Corp. 86,266 3,889
Cummins, Inc. 21,304 2,156
Danaher Corp. 47,929 3,619
Deere & Co. 45,011 5,435
Domtar Corp. (a)(c) 11 0
Dover Corp. 42,036 2,150
Eaton Corp. 29,664 2,759
Emerson Electric Co. 158,691 7,427
Equifax, Inc. 25,928 1,152
FedEx Corp. 61,080 6,778
Fluor Corp. 18,030 2,008
General Dynamics Corp. 81,517 6,376
General Electric Co. 2,061,275 78,906
Goodrich Co. 25,914 1,543
Honeywell International, Inc. 156,653 8,816
Illinois Tool Works, Inc. 82,716 4,482
Ingersoll-Rand Co. Class A 59,524 3,263
ITT Industries, Inc. 36,449 2,489
L-3 Communications Holdings, Inc. 25,371 2,471
Lockheed Martin Corp. 70,511 6,637
Masco Corp. 75,908 2,161
Monster Worldwide, Inc. (a) 26,635 1,095
Norfolk Southern Corp. 78,545 4,129
Northrop Grumman Corp. 69,403 5,404
PACCAR, Inc. 49,138 4,277
Pall Corp. 25,444 1,170
Parker-Hannifin Corp. 23,146 2,266
Pitney Bowes, Inc. 44,710 2,093
MARKET
VALUE
SHARES (000)
--------- ----------
Precision Castparts Corp. 27,733 $ 3,366
R.R. Donnelley & Sons Co. 44,044 1,916
Raytheon Co. 88,385 4,763
Robert Half International, Inc. 34,790 1,270
Rockwell Automation, Inc. 31,718 2,202
Rockwell Collins, Inc. 32,802 2,317
Ryder Systems, Inc. 12,618 679
Southwest Airlines Co. 152,983 2,281
Terex Corp. (a) 21,093 1,715
Textron, Inc. 25,544 2,813
Tyco International, Ltd. 394,492 13,330
Union Pacific Corp. 53,823 6,198
United Parcel Service, Inc. Class B 212,895 15,541
United Technologies Corp. 198,704 14,094
W.W. Grainger, Inc. 14,510 1,350
Waste Management, Inc. 103,974 4,060
----------
305,905
----------
INFORMATION TECHNOLOGY -- 14.7%
Adobe Systems, Inc. (a) 118,964 4,776
Advanced Micro Devices, Inc. (a) 111,815 1,599
Affiliated Computer Services, Inc. Class A (a) 19,803 1,123
Agilent Technologies, Inc. (a) 78,002 2,998
Altera Corp. 73,156 1,619
Analog Devices, Inc. 65,749 2,475
Apple Computer, Inc. (a) 173,850 21,217
Applied Materials, Inc. 277,682 5,518
Autodesk, Inc. (a) 47,540 2,238
Automatic Data Processing, Inc. 109,180 5,292
Avaya, Inc. (a) 87,050 1,466
BMC Software, Inc. (a) 40,985 1,242
Broadcom Corp. Class A (a) 93,725 2,741
CA, Inc. 84,371 2,179
CIENA Corp. (a) 17,644 637
Cisco Systems, Inc. (a) 1,215,336 33,847
Citrix Systems, Inc. (a) 37,473 1,262
Cognizant Technology Solutions Corp. Class A (a) 29,295 2,200
Computer Sciences Corp. (a) 35,540 2,102
Compuware Corp. (a) 55,966 664
Convergys Corp. (a) 28,608 693
Corning, Inc. (a) 315,821 8,069
Dell, Inc. (a) 452,998 12,933
Electronic Arts, Inc. (a) 61,035 2,888
Electronic Data Systems Corp. 101,195 2,806
EMC Corp. (a) 423,883 7,672
First Data Corp. 152,248 4,974
Fiserv, Inc. (a) 34,824 1,978
Google, Inc. Class A (a) 43,842 22,946
Hewlett-Packard Co. 526,347 23,486
IAC (a) 44,529 1,541
Intel Corp. 1,162,615 27,624
See notes to financial statements
25
<PG$PCN,028000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2007 (UNAUDITED)
MARKET
VALUE
SHARES (000)
--------- ----------
INFORMATION TECHNOLOGY -- (CONTINUED)
International Business Machines Corp. 273,311 $ 28,766
Intuit, Inc. (a) 70,239 2,113
Jabil Circuit, Inc. 38,313 846
Juniper Networks, Inc. (a) 111,786 2,814
KLA-Tencor Corp. 38,510 2,116
Lexmark International Group, Inc. Class A (a) 19,500 962
Linear Technology Corp. 51,047 1,847
LSI Logic Corp. (a) 158,096 1,187
Maxim Integrated Products, Inc. 65,786 2,198
MEMC Electronic Materials, Inc. (a) 45,701 2,793
Micron Technology, Inc. (a) 154,889 1,941
Microsoft Corp. 1,686,090 49,689
Molex, Inc. 29,396 882
Motorola, Inc. 465,173 8,234
National Semiconductor Corp. 58,215 1,646
NCR Corp. (a) 36,427 1,914
Network Appliance, Inc. (a) 72,665 2,122
Novell, Inc. (a) 70,374 548
Novellus Systems, Inc. (a) 25,633 727
NVIDIA Corp. (a) 69,660 2,878
Oracle Corp. (a) 796,528 15,700
Paychex, Inc. 68,992 2,699
PerkinElmer, Inc. 25,526 665
QLogic Corp. (a) 32,708 545
QUALCOMM, Inc. 332,965 14,447
SanDisk Corp. (a) 46,706 2,286
Solectron Corp, (a) 189,755 698
Sun Microsystems, Inc. (a) 719,014 3,782
Symantec Corp. (a) 178,049 3,597
Tektronix, Inc. 17,074 576
Tellabs, Inc. (a) 87,077 937
Teradyne, Inc. (a) 39,375 692
Texas Instruments, Inc. 287,600 10,822
Unisys Corp. (a) 71,488 653
VeriSign, Inc. (a) 50,839 1,613
Waters Corp. (a) 21,019 1,248
Xerox Corp. (a) 189,335 3,499
Xilinx, Inc. 59,910 1,604
Yahoo!, Inc. (a) 242,665 6,583
----------
403,674
----------
MATERIALS -- 3.2%
Air Products & Chemicals, Inc. 43,196 3,472
Alcoa, Inc. 172,861 7,006
Allegheny Technologies, Inc. 20,893 2,191
Ashland, Inc. 10,958 701
Ball Corp. 20,545 1,092
Bemis Co., Inc. 21,774 723
Consol Energy, Inc. 36,737 1,694
Dow Chemical Co. 190,941 8,443
MARKET
VALUE
SHARES (000)
--------- ----------
E.I Du Pont de Nemours & Co. 184,120 $ 9,361
Eastman Chemical Co. 17,106 1,100
Ecolab, Inc. 36,565 1,561
Freeport-McMoRan Copper & Gold, Inc. Class B 74,393 6,161
Hercules, Inc. (a) 23,605 464
International Flavors & Fragrances, Inc. 16,168 843
International Paper Co. 87,485 3,416
MeadWestvaco Corp. 37,604 1,328
Monsanto Co. 107,954 7,291
Newmont Mining Corp. 88,998 3,476
Nucor Corp. 60,165 3,529
Pactiv Corp. (a) 27,591 880
Peabody Energy Corp. 52,048 2,518
PPG Industries, Inc. 32,126 2,445
Praxair, Inc. 63,409 4,565
Rohm & Haas Co. 29,482 1,612
Sealed Air Corp. 33,377 1,035
Sigma-Aldrich Corp. 27,317 1,166
Temple-Inland, Inc. 21,386 1,316
United States Steel Corp. 23,224 2,526
Vulcan Materials Co. 19,491 2,233
Weyerhaeuser Co. 42,127 3,325
----------
87,473
----------
TELECOMMUNICATION SERVICES -- 3.7%
ALLTEL Corp. 69,403 4,688
AT&T, Inc. 1,234,806 51,244
CenturyTel, Inc. 22,933 1,125
Citizens Communications Co. 69,518 1,062
Embarq Corp. 30,412 1,927
JDS Uniphase Corp. (a) 43,752 588
Qwest Communications International, Inc. (a) 308,851 2,996
Sprint Corp. (Fon Group) 579,048 11,992
Verizon Communications, Inc. 581,637 23,946
Windstream Corp. 98,878 1,459
----------
101,027
----------
UTILITIES --3.5%
AES Corp. (a) 133,637 2,924
Allegheny Energy, Inc. (a) 33,697 1,743
Ameren Corp. 40,308 1,976
American Electric Power Co., Inc. 80,381 3,620
CenterPoint Energy, Inc. 64,938 1,130
CMS Energy Corp. 46,141 794
Consolidated Edison, Inc. 50,471 2,277
Constellation Energy Group, Inc. 36,543 3,185
Dominion Resources, Inc. 69,255 5,977
DTE Energy Co. 36,388 1,755
Duke Energy Corp. 251,870 4,609
Dynegy, Inc. (a) 82,789 782
Edison International 64,331 3,610
See notes to financial statements
26
<PG$PCN,029000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2007 (UNAUDITED)
MARKET
VALUE
SHARES (000)
--------- ----------
UTILITIES -- (CONTINUED)
Entergy Corp. 40,018 $ 4,296
Exelon Corp. 133,510 9,693
FirstEnergy Corp. 61,294 3,968
FPL Group, Inc. 80,411 4,563
Integrys Energy Group, Inc. 15,378 780
KeySpan Corp. 36,347 1,526
Nicor, Inc. 9,319 400
NiSource, Inc. 56,685 1,174
PG&E Corp. 69,971 3,170
Pinnacle West Capital Corp. 20,748 827
PPL Corp. 75,961 3,554
Progress Energy, Inc. 50,365 2,296
Public Service Enterprise Group, Inc. 49,987 4,388
Questar Corp. 35,350 1,868
Sempra Energy 53,280 3,156
Southern Co. 148,478 5,091
Spectra Energy Corp. 127,058 3,298
TECO Energy, Inc. 43,371 745
TXU Corp. 91,207 6,138
Xcel Energy, Inc. 83,653 1,712
----------
97,025
----------
TOTAL COMMON STOCKS
(Cost $1,593,337,921) 2,679,406
----------
PAR
AMOUNT
(000)
---------
U.S. Government Securities -- 0.2%
United States Treasury Bill
4.6% due 09/06/07 (d)(e) $4,299 4,262
----------
TOTAL U.S. GOVERNMENT SECURITIES
(Cost $4,261,836) 4,262
----------
SHARES
(000)
---------
MONEY MARKET FUNDS -- 1.5%
AIM Short Term Investment Prime Portfolio 40,921 $ 40,921
Federated Money Market Obligations Trust 540 540
----------
TOTAL MONEY MARKET FUNDS
(Cost $41,461,153) 41,461
----------
TOTAL INVESTMENTS -- 99.5%
(identified cost $1,639,060,910) $2,725,129
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.5% 13,046
----------
NET ASSETS -- 100.0% $2,738,175
==========
(a) Non-income producing security.
(b) Affiliated issuer. See table that follows for more information.
(c) Amounts is less than $1,000.
(d) Rate represents annualized yield at date of purchase.
(e) Security held as collateral in relation to initial margin requirements on
futures contracts.
See notes to financial statements
27
<PG$PCN,030000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2007 (UNAUDITED)
NUMBER UNREALIZED
OF DEPRECIATION
CONTRACTS (000)
--------- ------------
Schedule of Futures Contracts
S&P 500 Financial Futures Contracts (long) Expiration
Date 09/2007 770 $(324)
-----
Total unrealized depreciation on open futures
contracts purchased $(324)
=====
AFFILIATE TABLE
Realized
Income Earned Gain
Number of Shares purchased Shares sold for Number of for the 6 Months on shares
Security shares held for the 6 Months the 6 Months shares held ended 6/30/07 sold
Description at 12/31/2006 ended 6/30/07 ended 6/30/07 at 6/30/07 (000) (000)
- ------------------ ------------- ---------------- --------------- ----------- ---------------- ---------
State Street Corp. 69,744 17,100 7,089 79,755 $29 $139
See notes to financial statements
28
<PG$PCN,031000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2007 (UNAUDITED) (AMOUNTS IN THOUSANDS)
ASSETS
Investments in unaffiliated issuers at market (identified cost
$1,635,907) .................................................... $2,719,674
Investments in non-controlled affiliates at market (identified cost
$3,154) (Note 4) ............................................... 5,455
----------
2,725,129
Receivables:
Investment securities sold .................................. 14,207
Dividends and interest ...................................... 3,151
----------
TOTAL ASSETS .............................................. 2,742,487
----------
LIABILITIES
Payables:
Investment securities purchased ............................. 4,137
Daily variation margin on futures contracts ................. 70
Management fees (Note 4) .................................... 105
TOTAL LIABILITIES ........................................ 4,312
----------
NET ASSETS ........................................................ $2,738,175
==========
See notes to financial statements
29
<PG$PCN,032000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF OPERATIONS
JUNE 30, 2007 (UNAUDITED) (AMOUNTS IN THOUSANDS)
INVESTMENT INCOME
Dividend income - unaffiliated issuers .................. $ 25,994
Dividend income - non-controlled affiliated issuer ...... 29
Interest ................................................ 1,569
--------
TOTAL INVESTMENT INCOME .............................. 27,592
--------
EXPENSES
Management fees (Note 4) ................................ $ 628
-------
TOTAL EXPENSES ....................................... 628
--------
NET INVESTMENT INCOME ...................................... 26,964
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on:
Investments - unaffiliated issuers ...................... 72,669
Investments - non-controlled affiliated issuer .......... 139
Futures contracts ....................................... 2,479
------- --------
75,287
--------
Net change in net unrealized appreciation (depreciation) on:
Investments ............................................. 85,942
Futures contracts ....................................... (336)
-------
85,606
--------
Net realized and unrealized gain ........................... 160,893
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $187,857
========
See notes to financial statements
30
<PG$PCN,033000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
FOR THE
SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 2007 DECEMBER 31,
(UNAUDITED) 2006
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income ..................................... $ 26,964 $ 49,532
Net realized gain on investments and futures contracts .... 75,287 9,894
Net change in net unrealized appreciation (depreciation) .. 85,606 318,596
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... 187,857 378,022
---------- ----------
CAPITAL TRANSACTIONS
Proceeds from contributions ............................... 213,154 310,574
Contributions in-kind ..................................... -- 8,054
Fair value of withdrawals ................................. (429,532) (383,063)
---------- ----------
NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS ... (216,378) (64,435)
---------- ----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .................. (28,521) 313,587
NET ASSETS
Beginning of period .......................................... 2,766,696 2,453,109
---------- ----------
END OF PERIOD ................................................ $2,738,175 $2,766,696
========== ==========
See notes to financial statements
31
<PG$PCN,034000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected supplemental data and ratios to average
net assets:
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
6/30/2007 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/2006 12/31/2005 12/31/2004 12/31/2003 12/31/2002
----------- ---------- ---------- ---------- ---------- ----------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in
thousands) ............... $2,738,175 $2,766,696 $2,453,109 $2,767,467 $2,714,672 $1,992,548
Ratios to average net assets:
Operating expenses .......... 0.045%+ 0.045% 0.045% 0.045% 0.045% 0.045%
Net investment income ....... 1.98%+ 1.94% 1.84% 1.97% 1.74% 1.57%
Portfolio turnover rate* ....... 7%++ 10% 8% 9% 12% 13%
Total return (a) ............... 6.95%++ 15.75% 4.87% 10.86% 28.62% -22.16%
- ----------
* The portfolio turnover rate excludes in-kind security transactions.
+ Annualized
++ Not Annualized
(a) Results represent past performance and are not indicative of future
results.
See notes to financial statements
32
<PG$PCN,035000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (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
nine 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 Tax Free Limited Duration Bond Portfolio, the State Street Limited
Duration Bond 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, 2007,
only the Portfolio, the State Street Money Market Portfolio, the State Street
Tax Free Money Market Portfolio and the State Street Tax Free Limited Duration
Bond Portfolio were in operation. The Portfolio is authorized to issue an
unlimited number of nontransferable beneficial interests.
The Portfolio's investment objective is to replicate, as closely as
possible, before expenses, the performance of the Standard & Poor's 500
Composite Stock Price Index (the "S&P 500(R) Index"). The Portfolio uses a
passive management strategy designed to track the performance of the S&P 500(R)
Index. The S&P 500(R) 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.
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 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.
33
<PG$PCN,036000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
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.
Futures:
The Portfolio may enter into financial futures contracts as part of
its strategy to track the performance of the S&P 500(R) 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.
Use of Estimates: The Portfolio's financial statements are prepared in
accordance with U.S. generally accepted accounting principles that require the
use of management estimates. Actual results could differ from those estimates.
3. SECURITIES TRANSACTIONS
For the six months ended June 30, 2007, purchases and sales of
investment securities, excluding short-term investments, futures contracts, and
in-kind contributions and withdrawals, aggregated to $181,886,420 and
$350,888,232, respectively. The aggregate value of in-kind contributions was $0.
At June 30, 2007, the book cost of investments was $1,639,060,910
which approximates cost computed on a federal tax basis. The aggregate gross
unrealized appreciation and gross unrealized depreciation was $1,127,577,940 and
$41,510,236, respectively, resulting in net appreciation of $1,086,067,704 for
all securities as computed on a federal income tax basis.
The differences between book and tax cost amounts are primarily due to
wash sale loss deferrals.
4. RELATED PARTY FEES AND TRANSACTIONS
The Portfolio has entered into an investment advisory agreement with
SSgA Funds Management, Inc. ("SSgA FM" or the "Adviser"), a subsidiary of State
Street Corp. and an affiliate of State Street Bank and Trust Company ("State
Street"), under which SSgA FM directs the investments of the Portfolio in
accordance with its investment objective, policies, and limitations. The Trust
has contracted with State Street to provide custody, administration and transfer
agent services to the Portfolio. In compensation for SSgA FM's services as
investment adviser and for State Street's services as administrator, custodian
and transfer agent (and for assuming ordinary operating expenses of the
Portfolio, including ordinary legal, audit and trustees expense),
34
<PG$PCN,037000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
State Street receives a unitary fee, calculated daily, at the annual rate of
0.045% of the Portfolio's average daily net assets.
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(R) Index. The market value of this investment at June 30,
2007 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.
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.
7. NEW ACCOUNTING PRONOUNCEMENTS
On July 13, 2006, the Financial Accounting Standards Board (FASB)
released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
(FIN 48). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Portfolio's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet a more-likely-than-not threshold
would be recorded as a tax expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be applied
to all open tax years as of the effective date. Recent SEC guidance allows
implementing FIN 48 in portfolio NAV calculations as late as the Portfolio's
last NAV calculation in the first required financial statement reporting period.
As a result, the Portfolio has incorporated FIN 48 in its semi annual report at
June 30, 2007. At this time, management has evaluated the implication of FIN 48
and there is no impact to the financial statements.
In addition, in September 2006, Statement of Accounting Standards No.
157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal
years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have, if any, on the Portfolio's financial statement
disclosures.
35
<PG$PCN,038000000>
STATE STREET EQUITY 500 INDEX PORTFOLIO
GENERAL INFORMATION
JUNE 30, 2007 (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 (i) 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.
36
<PG$PCN,039000000>
Summary Schedule of Investments MASTER SMALL CAP INDEX SERIES
as of June 30, 2007 (Unaudited)
This summary schedule of investments is presented to help investors focus on the
Series' principal holdings. It includes the Series' 50 largest holdings and each
investment of any issuer that exceeds 1% of the Series' net assets. "Other
Securities" represent all issues not required to be disclosed under the rules
adopted by the Securities and Exchange Commission. A complete schedule of
investments is available without charge, upon request, by calling 800-441-7762
or on the Securities and Exchange Commission's Web site at http://www.sec.gov.
SHARES PERCENT OF
INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS
- -------- ------- --------------------------------------- ------------ ----------
ADVERTISING AGENCIES 43,380 ValueClick, Inc. (a) $ 1,277,975 0.2%
Other Securities 2,534,555 0.3
------------ ----
3,812,530 0.5
AEROSPACE Other Securities 4,394,880 0.6
AGRICULTURE, FISHING & RANCHING Other Securities 478,326 0.1
AIR TRANSPORT Other Securities 5,824,630 0.8
ALUMINUM Other Securities 1,045,607 0.1
AUTO PARTS: AFTER MARKET Other Securities 1,053,865 0.1
AUTO PARTS: ORIGINAL EQUIPMENT 33,380 Lear Corp. (a) 1,188,662 0.2
Other Securities 3,146,789 0.4
------------ ----
4,335,451 0.6
AUTO, TRUCKS & PARTS Other Securities 1,513,121 0.2
BANKS: NEW YORK CITY Other Securities 439,890 0.1
BANKS: OUTSIDE NEW YORK CITY Other Securities 35,911,526 5.1
BEVERAGE: BREWERS (WINERIES) Other Securities 220,360 0.0
BEVERAGE: SOFT DRINKS Other Securities 781,587 0.1
BIOTECHNOLOGY RESEARCH & PRODUCTION 26,900 OSI Pharmaceuticals, Inc. (a) 974,049 0.1
Other Securities 15,302,071 2.2
------------ ----
16,276,120 2.3
BUILDING: CEMENT Other Securities 128,612 0.0
BUILDING: HEATING & PLUMBING Other Securities 348,549 0.0
BUILDING: MATERIALS Other Securities 3,836,870 0.5
BUILDING: MISCELLANEOUS Other Securities 1,206,526 0.2
BUILDING: ROOFING & WALLBOARD Other Securities 378,027 0.1
CABLE TELEVISION SERVICES Other Securities 1,026,185 0.1
CASINOS & GAMBLING Other Securities 3,930,029 0.6
CHEMICALS 24,100 CF Industries Holdings, Inc. 1,443,349 0.2
53,600 Hercules, Inc. (a) 1,053,240 0.2
Other Securities 7,780,378 1.1
------------ ----
10,276,967 1.5
COAL Other Securities 931,209 0.1
COMMERCIAL INFORMATION SERVICES Other Securities 1,724,243 0.2
COMMUNICATIONS & MEDIA Other Securities 992,516 0.1
COMMUNICATIONS TECHNOLOGY 13,472 Anixter International, Inc. (a) 1,013,229 0.1
63,300 Foundry Networks, Inc. (a) 1,054,578 0.2
Other Securities 15,075,972 2.1
------------ ----
17,143,779 2.4
COMPUTER SERVICES, SOFTWARE & SYSTEMS 13,500 Equinix, Inc. (a)(e) 1,234,845 0.2
18,798 Micros Systems, Inc. (a) 1,022,611 0.1
57,295 Nuance Communications, Inc. (a) 958,545 0.1
52,660 Parametric Technology Corp. (a) 1,137,983 0.2
Other Securities 28,170,836 4.0
------------ ----
32,524,820 4.6
JUNE 30, 2007 37
<PG$PCN,040000000>
Summary Schedule of Investments (continued) MASTER SMALL CAP INDEX SERIES
SHARES PERCENT OF
INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS
- -------- ------- --------------------------------------- ------------ ----------
COMPUTER TECHNOLOGY Other Securities $ 7,297,690 1.0%
CONSTRUCTION 13,836 EMCOR Group, Inc. (a) 1,008,644 0.1
15,671 Granite Construction, Inc. 1,005,765 0.1
12,700 Washington Group International, Inc. (a) 1,016,127 0.2
Other Securities 823,429 0.1
------------ ----
3,853,965 0.5
CONSUMER ELECTRONICS Other Securities 5,329,447 0.8
CONSUMER PRODUCTS Other Securities 4,536,670 0.6
CONTAINERS & PACKAGING: METALS & GLASS 30,200 AptarGroup, Inc. 1,073,912 0.1
Other Securities 1,913,039 0.3
------------ ----
2,986,951 0.4
CONTAINERS & PACKAGING: PAPER & PLASTIC Other Securities 533,328 0.1
COPPER Other Securities 553,864 0.1
COSMETICS Other Securities 1,195,112 0.2
DIVERSIFIED FINANCIAL SERVICES Other Securities 4,347,862 0.6
DIVERSIFIED MATERIALS & PROCESSING 19,360 Acuity Brands, Inc. 1,167,021 0.2
Other Securities 4,282,780 0.6
------------ ----
5,449,801 0.8
DRUG & GROCERY STORE CHAINS Other Securities 4,349,368 0.6
DRUGS & PHARMACEUTICALS Other Securities 15,930,727 2.3
EDUCATION SERVICES Other Securities 3,369,000 0.5
ELECTRICAL & ELECTRONICS Other Securities 1,925,233 0.3
ELECTRICAL: EQUIPMENT & COMPONENTS 19,901 Baldor Electric Co. 980,721 0.1
Other Securities 5,414,399 0.8
------------ ----
6,395,120 0.9
ELECTRICAL: HOUSEHOLD APPLIANCE Other Securities 121,563 0.0
ELECTRONICS 28,800 Flir Systems, Inc. (a) 1,332,000 0.2
Other Securities 3,828,510 0.5
------------ ----
5,160,510 0.7
ELECTRONICS: INSTRUMENTS, GAUGES 14,002 Itron, Inc. (a) 1,091,316 0.1
& METERS Other Securities 480,540 0.1
------------ ----
1,571,856 0.2
ELECTRONICS: MEDICAL SYSTEMS 23,480 Hologic, Inc. (a)(e) 1,298,679 0.2
24,664 Illumina, Inc. (a) 1,001,112 0.1
Other Securities 4,804,491 0.7
------------ ----
7,104,282 1.0
ELECTRONICS: SEMI-CONDUCTORS/ 102,300 ON Semiconductor Corp. (a) 1,096,656 0.2
COMPONENTS Other Securities 12,216,144 1.7
------------ ----
13,312,800 1.9
ELECTRONICS: TECHNOLOGY Other Securities 3,368,291 0.5
ENERGY MISCELLANEOUS Other Securities 3,798,979 0.5
ENGINEERING & CONTRACTING SERVICES Other Securities 3,504,237 0.5
ENTERTAINMENT 17,855 Gaylord Entertainment Co. (a) 957,742 0.1
Other Securities 1,464,958 0.2
------------ ----
2,422,700 0.3
FERTILIZERS 40,300 Terra Industries, Inc. (a) 1,024,426 0.1
FINANCE COMPANIES 16,600 International Securities Exchange, Inc. 1,084,810 0.1
Other Securities 1,291,080 0.2
------------ ----
2,375,890 0.3
FINANCE: SMALL LOAN Other Securities 957,944 0.1
38 JUNE 30, 2007
<PG$PCN,041000000>
Summary Schedule of Investments (continued) MASTER SMALL CAP INDEX SERIES
SHARES PERCENT OF
INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS
- -------- ------- --------------------------------------- ------------ ----------
FINANCIAL DATA PROCESSING 24,000 Deluxe Corp. $ 974,640 0.2%
SERVICES & SYSTEMS Other Securities 4,307,441 0.6
------------ ----
5,282,081 0.8
FINANCIAL INFORMATION SERVICES Other Securities 1,673,969 0.2
FINANCIAL MISCELLANEOUS 28,736 Sotheby's Holdings, Inc. Class A 1,322,431 0.2
Other Securities 4,897,432 0.7
------------ ----
6,219,863 0.9
FOODS Other Securities 6,600,707 0.9
FOREST PRODUCTS Other Securities 558,374 0.1
FORMS & BULK PRINTING SERVICES Other Securities 445,119 0.1
FUNERAL PARLORS & CEMETERIES Other Securities 383,455 0.1
GLASS Other Securities 414,518 0.1
GOLD Other Securities 737,281 0.1
HEALTH CARE FACILITIES Other Securities 4,537,699 0.6
HEALTH CARE MANAGEMENT SERVICES Other Securities 4,048,774 0.6
HEALTH CARE SERVICES Other Securities 4,546,296 0.6
HOMEBUILDING Other Securities 1,825,623 0.3
HOTEL/MOTEL Other Securities 464,749 0.1
HOUSEHOLD FURNISHINGS Other Securities 3,147,714 0.4
IDENTIFICATION CONTROL & FILTER DEVICES Other Securities 3,940,953 0.6
INDUSTRIAL PRODUCTS Other Securities 366,459 0.1
INSURANCE: LIFE Other Securities 3,008,617 0.4
INSURANCE: MULTI-LINE Other Securities 7,207,342 1.0
INSURANCE: PROPERTY-CASUALTY 36,800 Aspen Insurance Holdings Ltd. 1,032,976 0.2
27,715 Ohio Casualty Corp. 1,200,337 0.2
Other Securities 10,784,738 1.5
------------ ----
13,018,051 1.9
INVESTMENT MANAGEMENT COMPANIES 46,546 Apollo Investment Corp. 1,001,677 0.1
Other Securities 4,514,143 0.7
------------ ----
5,515,820 0.8
JEWELRY, WATCHES & GEMSTONES Other Securities 813,360 0.1
LEISURE TIME Other Securities 3,595,489 0.5
MACHINE TOOLS Other Securities 74,970 0.0
MACHINERY & ENGINEERING Other Securities 551,355 0.1
MACHINERY: AGRICULTURAL Other Securities 473,282 0.1
MACHINERY: CONSTRUCTION & HANDLING Other Securities 779,935 0.1
MACHINERY: ENGINES Other Securities 732,487 0.1
MACHINERY: INDUSTRIAL/SPECIALTY Other Securities 4,380,590 0.6
MACHINERY: OIL WELL 40,143 Hanover Compressor Co. 957,411 0.1
EQUIPMENT & SERVICES Other Securities 8,994,420 1.3
------------ ----
9,951,831 1.4
MACHINERY: SPECIALTY 15,600 Bucyrus International, Inc. 1,104,168 0.2
Other Securities 818,758 0.1
------------ ----
1,922,926 0.3
MANUFACTURED HOUSING Other Securities 532,733 0.1
MANUFACTURING Other Securities 486,868 0.1
JUNE 30, 2007 39
<PG$PCN,042000000>
Summary Schedule of Investments (continued) MASTER SMALL CAP INDEX SERIES
SHARES PERCENT OF
INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS
- -------- ------- --------------------------------------- ------------ ----------
MEDICAL & DENTAL 19,240 Inverness Medical Innovations, Inc. (a) $ 981,625 0.1%
INSTRUMENTS & SUPPLIES 21,000 Kyphon, Inc. (a) 1,011,150 0.2
13,860 Ventana Medical Systems, Inc. (a) 1,070,962 0.2
Other Securities 15,639,512 2.2
------------ ----
18,703,249 2.7
MEDICAL SERVICES Other Securities 1,946,975 0.3
METAL FABRICATING Other Securities 6,715,498 1.0
METALS & MINERALS MISCELLANEOUS Other Securities 4,320,988 0.6
MILLING: FRUIT & GRAIN PROCESSING Other Securities 84,500 0.0
MISCELLANEOUS BUSINESS & Other Securities 151,116 0.0
CONSUMER DISCRETIONARY
MISCELLANEOUS CONSUMER STAPLES Other Securities 270,940 0.0
MISCELLANEOUS HEALTH CARE Other Securities 30,429 0.0
MISCELLANEOUS MATERIALS & COMMODITIES Other Securities 1,391,648 0.2
MISCELLANEOUS MATERIALS & PROCESSING Other Securities 1,908,381 0.3
MISCELLANEOUS PRODUCER DURABLES Other Securities 421,134 0.1
MISCELLANEOUS TECHNOLOGY Other Securities 885,031 0.1
MULTI-SECTOR COMPANIES Other Securities 2,708,379 0.4
OFFICE FURNITURE & BUSINESS EQUIPMENT Other Securities 1,991,458 0.3
OFFSHORE DRILLING Other Securities 1,244,583 0.2
OIL: CRUDE PRODUCERS 70,062 PetroHawk Energy Corp. (a) 1,111,183 0.2
Other Securities 13,462,900 1.9
------------ ----
14,574,083 2.1
OIL: INTEGRATED DOMESTIC Other Securities 747,002 0.1
OIL: INTEGRATED INTERNATIONAL Other Securities 124,131 0.0
PAINTS & COATINGS Other Securities 1,369,136 0.2
PAPER Other Securities 2,839,977 0.4
PHOTOGRAPHY Other Securities 111,200 0.0
PLASTICS Other Securities 516,616 0.1
POLLUTION CONTROL & ENVIRONMENTAL Other Securities 1,123,980 0.2
SERVICES
POWER TRANSMISSION EQUIPMENT Other Securities 649,280 0.1
PRINTING & COPYING SERVICES Other Securities 1,649,408 0.2
PRODUCTION TECHNOLOGY EQUIPMENT Other Securities 7,575,909 1.1
PUBLISHING: MISCELLANEOUS Other Securities 1,853,298 0.3
PUBLISHING: NEWSPAPERS Other Securities 1,991,706 0.3
RADIO & TV BROADCASTERS Other Securities 3,405,506 0.5
RAILROAD EQUIPMENT Other Securities 1,352,623 0.2
RAILROADS 16,081 Florida East Coast Industries, Inc. (e) 1,334,401 0.2
Other Securities 443,870 0.1
------------ ----
1,778,271 0.3
REAL ESTATE Other Securities 1,273,429 0.2
REAL ESTATE INVESTMENT TRUSTS (REITS) 12,776 Alexandria Real Estate Equities, Inc. 1,236,972 0.2
25,400 Anthracite Capital, Inc. (c)(g) 297,180 0.0
38,559 Nationwide Health Properties, Inc. 1,048,805 0.1
18,986 Post Properties, Inc. 989,740 0.1
43,900 Realty Income Corp. 1,105,841 0.2
Other Securities 37,007,151 5.3
41,685,689 5.9
RECREATIONAL VEHICLES & BOATS Other Securities 1,793,180 0.3
40 JUNE 30, 2007
<PG$PCN,043000000>
Summary Schedule of Investments (continued) MASTER SMALL CAP INDEX SERIES
SHARES PERCENT OF
INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS
- -------- ------- --------------------------------------- ------------ ----------
RENTAL & LEASING SERVICES: COMMERCIAL Other Securities $ 1,000,893 0.1%
RENTAL & LEASING SERVICES: CONSUMER Other Securities 2,303,921 0.3
RESTAURANTS 13,500 Chipotle Mexican Grill, Inc. Class B (a) 1,061,505 0.2
13,568 Jack in the Box, Inc. (a) 962,514 0.1
Other Securities 9,815,916 1.4
------------ ----
11,839,935 1.7
RETAIL 22,500 Men's Wearhouse, Inc. 1,149,075 0.2
15,916 Priceline.com, Inc. (a) 1,094,066 0.1
Other Securities 22,676,226 3.2
------------ ----
24,919,367 3.5
SAVINGS & LOAN Other Securities 10,314,810 1.5
SCIENTIFIC EQUIPMENT & SUPPLIERS Other Securities 1,090,068 0.2
SECURITIES BROKERAGE & SERVICES Other Securities 3,370,260 0.5
SERVICES: COMMERCIAL Other Securities 23,583,914 3.4
SHIPPING Other Securities 4,563,432 0.6
SHOES Other Securities 4,314,822 0.6
STEEL Other Securities 1,784,447 0.3
SUGAR Other Securities 157,029 0.0
TELECOMMUNICATIONS EQUIPMENT 67,600 Andrew Corp. (a) 976,144 0.1
20,361 Belden, Inc. 1,126,981 0.2
39,900 Polycom, Inc. (a) 1,340,640 0.2
Other Securities 3,394,688 0.5
------------ ----
6,838,453 1.0
TEXTILE PRODUCTS Other Securities 494,528 0.1
TEXTILES APPAREL MANUFACTURERS Other Securities 5,342,752 0.8
TIRES & RUBBER Other Securities 1,072,121 0.2
TOBACCO Other Securities 1,714,973 0.2
TOYS Other Securities 1,055,135 0.2
TRANSPORTATION MISCELLANEOUS Other Securities 1,573,041 0.2
TRUCKERS Other Securities 2,894,702 0.4
UTILITIES: CABLE TV & RADIO Other Securities 289,731 0.0
UTILITIES: ELECTRICAL Other Securities 9,458,219 1.3
UTILITIES: GAS DISTRIBUTORS Other Securities 5,405,760 0.8
UTILITIES: MISCELLANEOUS Other Securities 636,404 0.1
UTILITIES: TELECOMMUNICATIONS 62,900 Time Warner Telecom, Inc. Class A (a) 1,264,290 0.2
Other Securities 7,515,229 1.0
------------ ----
8,779,519 1.2
UTILITIES: WATER Other Securities 1,117,476 0.2
WHOLESALE & INTERNATIONAL TRADE Other Securities 534,013 0.1
WHOLESALERS Other Securities 2,132,963 0.3
------------ ----
TOTAL COMMON STOCKS
(COST -- $505,540,295) 629,324,552 89.5
============ ====
EXCHANGE-TRADED FUNDS
169,590 iShares Russell 2000 Index Fund (e) 14,065,795 2.0
------------ ----
TOTAL EXCHANGE-TRADED FUNDS
(COST -- $12,334,264) 14,065,795 2.0
============ ====
JUNE 30, 2007 41
<PG$PCN,044000000>
Summary Schedule of Investments (concluded) MASTER SMALL CAP INDEX SERIES
SHARES PERCENT OF
INDUSTRY HELD MUTUAL FUNDS VALUE NET ASSETS
- -------- ----------- ------------ ------------ ----------
INVESTMENT MANAGEMENT COMPANIES Other Securities $ 839,367 0.1%
TOTAL MUTUAL FUNDS
(COST -- $834,885) 839,367 0.1
OTHER INTERESTS (B)
OIL: CRUDE PRODUCERS Other Securities 0 0.0
TOTAL OTHER INTERESTS
(COST -- $0) 0 0.0
BENEFICIAL
INTEREST SHORT-TERM SECURITIES
----------- ---------------------
$58,707,799 BlackRock Liquidity Series,LLC
Cash Sweep Series I, 5.33% (c)(f) 58,707,799 8.3
79,242,375 BlackRock Liquidity Series,LLC
Money Market Series, 5.33% (c)(d)(f) 79,242,375 11.3
TOTAL SHORT-TERM SECURITIES
(COST -- $137,950,174) 137,950,174 19.6
------------ -----
TOTAL INVESTMENTS (COST -- $656,659,618*) 782,179,888 111.2%
LIABILITIES IN EXCESS OF OTHER ASSETS (79,137,700) (11.2)
------------ -----
NET ASSETS $703,042,188 100.0%
============ =====
* The cost and unrealized appreciation (depreciation) of investments, as of
June 30, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost .................. $661,793,190
============
Gross unrealized appreciation ... $139,737,560
Gross unrealized depreciation ... (19,350,862)
------------
Net unrealized appreciation ..... $120,386,698
============
(a) Non-income producing security.
(b) Other interests represent beneficial interest in liquidation trusts and
other reorganization entities and are non-income producing.
(c) Investments in companies considered to be an affiliate of the Series, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
(d) Security was purchased with the cash proceeds from securities loans.
(e) Security, or a portion of security, is on loan.
(f) Represents the current yield as of June 30, 2007.
(g) Security held as collateral in connection with open future contracts.
- - 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, and or as defined by Series management.
This definition may not apply for purposes of this report, which may
combine industry sub-classifications for reporting ease.
- - "Other Securities" represents issues that are not identified as the 50
largest holdings of the Series and issues not exceeding 1% of net assets.
Some securities, or a portion thereof, in this category are either held as
collateral in connection with open financial futures contracts or are out
on loan.
INTEREST/
PURCHASE REALIZED DIVIDEND
AFFILIATE COST SALE COST GAIN INCOME
- --------- ----------- ----------- -------- ----------
BlackRock Liquidity Series,LLC
Cash Sweep Series -- $50,105,151** -- $1,633,563
BlackRock Liquidity Series,LLC
Money Market Series $45,075,895* -- -- $ 372,569
Anthracite Capital,Inc $ 44,389 $ 6,196 $119 $ 14,058
* Represents net purchase cost.
** Represents net sale cost.
- - Financial futures contracts purchased as of June 30,2007,were as follows:
NUMBER OF EXPIRATION FACE UNREALIZED
CONTRACTS ISSUE DATE VALUE DEPRECIATION
- --------- ------- ---------- ----------- ------------
141 Russell September
2000 2007
Index $59,797,945 $(429,895)
See Notes to Financial Statements.
42 JUNE 30, 2007
<PG$PCN,045000000>
Statement of Assets and Liabilities MASTER SMALL CAP INDEX SERIES
AS OF JUNE 30,2007 (UNAUDITED)
ASSETS
Investments in unaffiliated securities,at value
(including securities loaned of $75,927,045)
(identified cost -- $518,414,835) ............. $643,932,534
Investments in affiliated securities, at value
(identified cost -- $138,244,783) ............. 138,247,354
Cash ............................................. 28,466
Receivables:
Securities sold ............................... $1,594,408
Contributions ................................. 1,250,872
Dividends ..................................... 883,157
Securities lending ............................ 139,034 3,867,471
----------
Prepaid expenses and other assets ................ 765,788
------------
Total assets ..................................... 786,841,613
------------
LIABILITIES
Collateral on securities loaned,at value ......... 79,242,375
Payables:
Withdrawals ................................... 1,973,651
Securities purchased .......................... 1,504,012
Variation margin .............................. 221,009
Investment adviser ............................ 5,626
Other affiliates .............................. 5,600 3,709,898
----------
Accrued expenses ................................. 847,152
------------
Total liabilities ................................ 83,799,425
------------
NET ASSETS
NET ASSETS .................................... $703,042,188
------------
NET ASSETS CONSIST OF
Investors' capital ............................... $577,951,813
Unrealized appreciation -- net ................... 125,090,375
------------
Net assets ....................................... $703,042,188
============
See Notes to Financial Statements.
JUNE 30, 2007 43
<PG$PCN,046000000>
Statement of Operations MASTER SMALL CAP INDEX SERIES
FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)
INVESTMENT INCOME
Dividends (net of $1,164 foreign withholding tax and $14,058
from affiliates) ............................................ $ 3,010,692
Interest from affiliates ....................................... 1,633,563
Securities lending -- net ...................................... 372,569
-----------
Total income ................................................... 5,016,824
-----------
EXPENSES
Accounting services ............................................ $ 54,034
Professional fees .............................................. 49,046
Investment advisory fees ....................................... 30,658
Custodian fees ................................................. 28,730
Trustees' fees and expenses .................................... 2,311
Printing and shareholder reports ............................... 384
Pricing fees ................................................... 60
Other .......................................................... 4,429
-----------
Total expenses ................................................. 169,652
-----------
Investment income -- net ....................................... 4,847,172
-----------
REALIZED & UNREALIZED GAIN -- NET
Realized gain on:
Investments -- net (including $119 gain from affiliates) .... 15,757,308
Financial futures contracts -- net .......................... 2,579,173 18,336,481
-----------
Change in unrealized appreciation/depreciation on:
Investments -- net .......................................... 16,804,556
Financial futures contracts -- net .......................... 100,348 16,904,904
----------- -----------
Total realized and unrealized gain -- net ...................... 35,241,385
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $40,088,557
===========
See Notes to Financial Statements.
44 JUNE 30, 2007
<PG$PCN,047000000>
Statements of Changes in Net Assets MASTER SMALL CAP INDEX SERIES
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
2007 DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: (UNAUDITED) 2006
- ---------------------------------- ------------- -------------
OPERATIONS
Investment income -- net ....................................... $ 4,847,172 $ 7,477,587
Realized gain -- net ........................................... 18,336,481 25,599,413
Change in unrealized appreciation/depreciation -- net .......... 16,904,904 31,237,076
------------- -------------
Net increase in net assets resulting from operations ........... 40,088,557 64,314,076
------------- -------------
CAPITAL TRANSACTIONS
Proceeds from contributions .................................... 329,087,687 555,696,889
Fair value of withdrawals ...................................... (227,506,633) (428,783,737)
------------- -------------
Net increase in net assets derived from capital transactions ... 101,581,054 126,913,152
------------- -------------
NET ASSETS
Total increase in net assets ................................... 141,669,611 191,227,228
Beginning of period ............................................ 561,372,577 370,145,349
------------- -------------
End of period .................................................. $ 703,042,188 $ 561,372,577
============= =============
See Notes to Financial Statements.
Financial Highlights MASTER SMALL CAP INDEX SERIES
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
THE FOLLOWING RATIOS HAVE BEEN DERIVED FROM 2007 ----------------------------------------------------
INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. (UNAUDITED) 2006 2005 2004 2003 2002
------------ -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN
Total investment return ......................... 6.69%+ 18.13% 4.63% 18.15% 47.11% (20.19%)
-------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses, net of reimbursement .................. .06%* .07% .07% .08% .09% .08%
-------- -------- -------- -------- -------- --------
Expenses ........................................ .06%* .07% .08% .08% .10% .14%
-------- -------- -------- -------- -------- --------
Investment income -- net ........................ 1.58%* 1.55% 1.17% 1.11% 1.13% 1.26%
-------- -------- -------- -------- -------- --------
SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ........ $703,042 $561,373 $370,145 $365,661 $335,659 $181,915
-------- -------- -------- -------- -------- --------
Portfolio turnover .............................. 18% 40% 37% 38% 29% 39%
-------- -------- -------- -------- -------- --------
* Annualized.
+ Aggregate total investment return.
See Notes to Financial Statements.
JUNE 30, 2007 45
<PG$PCN,048000000>
Notes to Financial Statements (Unaudited) MASTER SMALL CAP INDEX SERIES
1. SIGNIFICANT ACCOUNTING POLICIES:
Master Small Cap Index Series (the "Series"), a non-diversified investment
company, is part of Quantitative Master Series LLC (the "Master LLC"). The
Master LLC is registered under the Investment Company Act of 1940, as amended,
and is organized as a Delaware limited liability company. Prior to June 15,
2007, the Master LLC was organized as a Delaware statutory trust (the "Trust").
The Limited Liability Company Agreement (the "LLC Agreement") permits the
Directors (and prior to June 15, 2007, the Declaration of Trust permitted the
Trustees) to issue non-transferable interests in the Series subject to certain
limitations. Throughout this report the Trust and the Master LLC are referred to
as the Master LLC and the Board of Trustees is referred to as the Board of
Directors. The Series' financial statements are prepared in conformity with U.S.
generally accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to present a fair statement of the
results for the interim period. All such adjustments are of a normal, recurring
nature. The following is a summary of significant accounting policies followed
by the Series.
(A) VALUATION OF INVESTMENTS -- Equity securities that are held by the Series
that are traded on stock exchanges or the NASDAQ Global Market are valued at the
last sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available asked
price for short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Directors of the Master
LLC. Long positions traded in the over-the-counter ("OTC") market, NASDAQ
Capital Market or Bulletin Board are valued at the last available bid price or
yield equivalent obtained from one or more dealers or pricing services approved
by the Board of Directors of the Master LLC. Short positions traded in the OTC
market are valued at the last available asked price. Portfolio securities that
are traded both in the OTC market and on a stock exchange are valued according
to the broadest and most representative market.
Options written or purchased are valued at the last sale price in the case of
exchange-traded options. Options traded in the OTC market are valued at the last
asked price (options written) or the last bid price (options purchased). Swap
agreements are valued based upon quoted fair valuations received daily by the
Series from a pricing service or counterparty. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their last sale
price as of the close of such exchanges. Valuation of short-term investment
vehicles is generally based on the net asset value of the underlying investment
vehicle or amortized cost.
Repurchase agreements are valued at cost plus accrued interest. The Series
employs pricing services to provide certain securities prices for the Series.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Directors of the Master LLC, including valuations furnished by the
pricing services retained by the Series, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Master LLC under the general supervision by the Board of
Directors of the Master LLC. Such valuations and procedures will be reviewed
periodically by the Board of Directors of the Master LLC.
Generally, trading in foreign securities, as well as U.S. government securities,
money market instruments and certain fixed income securities is substantially
completed each day at various times prior to the close of business on the New
York Stock Exchange ("NYSE"). The values of such securities used in computing
the net assets of the Series are determined as of such times. Foreign currency
exchange rates are generally determined as of the close of business on the NYSE.
Occasionally, events affecting the values of such securities and such exchange
rates may occur between the times at which they are determined and the close of
business on the NYSE that may not be reflected in the computation of the Series'
net assets. If events (for example,a company announcement, market volatility or
a natural disaster) occur during such periods that are expected to materially
affect the value of such securities,those securities will be valued at their
fair value as determined in good faith by the Board of Directors of the Master
LLC or by BlackRock Advisors, LLC ("the Manager"), an indirect, wholly owned
subsidiary of BlackRock, Inc., using a pricing service and/or procedures
approved by the Board of Directors of the Master LLC.
(B) DERIVATIVE FINANCIAL INSTRUMENTS -- The Series may engage in various
portfolio investment strategies both to increase the return of the Series and to
hedge, or protect, its exposure to interest rate movements and movements in the
securities markets. Losses may arise due to changes in the value of the contract
or if the counterparty does not perform under the contract.
46 JUNE 30, 2007
<PG$PCN,049000000>
Notes to Financial Statements (continued) MASTER SMALL CAP INDEX SERIES
- - Financial futures contracts -- The Series may purchase or sell financial
futures contracts and options on such financial futures contracts.
Financial futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specified price or yield.
Upon entering into a contract, the Series deposits, and maintains, as
collateral such initial margin as required by the exchange on which the
transaction is effected. Pursuant to the contract,the Series agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Series as unrealized gains or
losses. When the contract is closed, the Series records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed.
- - Options -- The Series may purchase and write call and put options. When the
Series writes an option,an amount equal to the premium received by the
Series is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked-to-market to reflect the current
market value of the option written. When a security is purchased or sold
through an exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or deducted
from (or added to) the proceeds of the security sold. When an option
expires (or the Series enters into a closing transaction), the Series
realizes a gain or loss on the option to the extent of the premiums
received or paid (or a gain or loss to the extent that the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(C) INCOME TAXES -- The Series is classified as a partnership for federal income
tax purposes. As such,each investor in the Series is treated as owner of its
proportionate share of the net assets, income, expenses and realized and
unrealized gains and losses of the Series. Therefore, no federal income tax
provision is required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends and capital gains at various rates. 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.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis.
(E) SECURITIES LENDING -- The Series may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. The
market value of the loaned securities is determined at the close of business of
the Series and any additional required collateral is delivered to the Series on
the next business day. Where the Series receives securities as collateral for
the loaned securities, it collects a fee from the borrower. The Series typically
receives the income on the loaned securities but does not receive the income on
the collateral. Where the Series receives cash collateral, it may invest such
collateral and retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and the
borrower, after notice,is required to return borrowed securities within five
business days. The Series may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans. In the event
that the borrower defaults on its obligation to return borrowed securities
because of insolvency or for any other reason,the Series could experience delays
and costs in gaining access to the collateral. The Series also could suffer a
loss where the value of the collateral falls below the market value of the
borrowed securities, in the event of borrower default or in the event of losses
on investments made with cash collateral.
(F) RECENT ACCOUNTING PRONOUNCEMENTS -- Effective June 29,2007,the Master LLC
implemented Financial Accounting Standards Board ("FASB") Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
Statement No. 109 "("FIN 48").FIN 48 prescribes the minimum recognition
threshold a tax position must meet in connection with accounting for
uncertainties in income tax positions taken or expected to be taken by an
entity, including investment companies, before being measured and recognized in
the financial statements. Management has evaluated the application of FIN 48 to
the Master LLC,and has determined that the adoption of FIN 48 does not have a
material impact on the Master LLC's financial statements. The Master LLC files
U.S. and various state tax returns. No income tax returns are currently under
examination. The statute of limitations on the Master LLC's tax returns remains
open for the years ended December 31, 2003, through December 31, 2006.
JUNE 30, 2007 47
<PG$PCN,050000000>
Notes to Financial Statements (concluded) MASTER SMALL CAP INDEX SERIES
In September 2006, Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements"("FAS 157"), was issued and is effective for fiscal years
beginning after November 15, 2007. FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. At this time, management is evaluating the implications of FAS 157
and its impact on the Fund's financial statements, if any, has not been
determined.
In addition,in February 2007,Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for fiscal years beginning after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provisions of FAS 157. FAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. FAS 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. At this time, management is evaluating
the implications of FAS 159 and its impact on the Fund's financial statements,if
any, has not been determined.
2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES:
The Master LLC has entered into an Investment Advisory Agreement with the
Manager. Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC Financial
Services Group, Inc. are the principal owners of BlackRock, Inc.
The Manager is responsible for the management of the Series' investments and
provides the necessary personnel, facilities,equipment and certain other
services necessary to the operations of the Series. For such services,the Series
pays a monthly fee at an annual rate of .01% of the average daily value of the
Series' net assets. The Manager has entered into a contractual arrangement with
the Series under which all expenses incurred by the Series will not exceed .08%.
This arrangement has a one-year term and is renewable.
In addition,the Manager has entered into a sub-advisory agreement with BlackRock
Investment Management, LLC ("BIM"), an affiliate of the Manager, under which the
Manager pays BIM for services it provides a monthly fee of an annual rate that
is a percentage of the management fee paid by the Series to the Manager.
Merrill Lynch Trust Company ("MLTC"), an indirect, wholly owned subsidiary of
Merrill Lynch, is the Series' custodian. Effective July 17, 2007, State Street
Bank&Trust Co. became the Series' custodian.
The Master LLC has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of Merrill
Lynch, or its affiliates. As of June 30, 2007, the Series lent securities with a
value of $88,142 to MLPF&S or its affiliates. Pursuant to that order, the Master
LLC has retained BIM as the securities lending agent for a fee based on a share
of the returns on investment of cash collateral. BIM may, on behalf of the
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. For the six months ended June 30, 2007, BIM received $118,728 in
securities lending agent fees.
For the six months ended June 30, 2007, the Series reimbursed the Manager $5,829
for certain accounting services.
Certain officers and/or trustees of the Master LLC are officers and/or directors
of BlackRock, Inc. or its affiliates.
3. INVESTMENTS:
Purchases and sales (including in-kind redemptions) of investments,excluding
short-term securities,for the six months ended June 30, 2007 were $258,417,198
and $98,031,953, respectively.
4. SHORT-TERM BORROWINGS:
The Master LLC, on behalf of the Series, along with certain other funds managed
by the Manager and its affiliates, is party to a $500,000,000 credit agreement
with a group of lenders which expires November 2007. The Series may borrow under
the credit agreement to fund shareholder redemptions and for other lawful
purposes other than for leverage. The Series may borrow up to the maximum amount
allowable under the Series' current prospectus and statement of additional
information, subject to various other legal,regulatory or contractual limits.
The Series pays a commitment fee of .06% per annum based on the fund's pro rata
share of the unused portion of the credit agreement. Amounts borrowed under the
credit agreement bear interest at a rate equal to, at each fund's election, the
federal funds rate plus .35% or a base rate as defined in the credit agreement.
The Series did not borrow under the credit agreement during the six months ended
June 30, 2007.
48 JUNE 30, 2007
<PG$PCN,051000000>
Summary Schedule of Investments MASTER INTERNATIONAL INDEX SERIES
As of June 30, 2007 (Unaudited) (in U.S. dollars)
This summary schedule of investments is presented to help investors focus on the
Series' principal holdings.It includes the Series' 50 largest holdings and each
investment of any issuer that exceeds 1% of the Series' net assets."Other
Securities"represent all issues not required to be disclosed under the rules
adopted by the Securities and Exchange Commission.A complete schedule
ofinvestments is available without charge,upon request,by calling 800-441-7762
or on the Securities and Exchange Commission's Website at http://www.sec.gov.
SHARES PERCENT OF
INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS
- -------- --------- ------------------------------------ -------------- ----------
AEROSPACE & DEFENSE Other Securities $ 7,754,745 0.6%
AIR FREIGHT & LOGISTICS Other Securities 5,683,050 0.5
AIRLINES Other Securities 3,673,391 0.3
AUTO COMPONENTS Other Securities 8,970,653 0.7
AUTOMOBILES 75,546 DaimlerChrysler AG 6,988,912 0.6
138,200 Honda Motor Co.,Ltd. 5,018,352 0.4
230,500 Toyota Motor Corp. 14,536,804 1.2
Other Securities 11,781,389 0.9
-------------- ----
38,325,457 3.1
BEVERAGES Other Securities 16,439,101 1.3
BIOTECHNOLOGY Other Securities 1,367,160 0.1
BUILDING PRODUCTS Other Securities 8,074,180 0.7
CAPITAL MARKETS 97,055 Credit Suisse Group 6,890,038 0.6
42,330 Deutsche Bank AG Registered Shares 6,161,182 0.5
173,246 UBS AG 10,360,859 0.8
Other Securities 13,737,557 1.1
-------------- ----
37,149,636 3.0
CHEMICALS 40,667 BASF AG 5,341,373 0.4
Other Securities 31,793,475 2.6
-------------- ----
37,134,848 3.0
COMMERCIAL BANKS 147,900 ABN AMRO Holding NV 6,781,561 0.6
70,204 BNP Paribas SA 8,339,084 0.7
290,558 Banco Bilbao Vizcaya Argentaria SA 7,105,568 0.6
517,105 Banco Santander Central Hispano SA 9,505,417 0.8
558,207 Barclays Plc 7,766,284 0.6
111,239 Commonwealth Bank of Australia Ltd. 5,204,055 0.4
321,445 HBOS Plc 6,322,604 0.5
988,642 HSBC Holdings Plc 18,102,519 1.5
481,326 Lloyds TSB Group Plc 5,350,592 0.4
677 Mitsubishi UFJ Financial Group,Inc. 7,461,006 0.6
797 Mizuho Financial Group,Inc. 5,506,102 0.4
807,211 Royal Bank of Scotland Group Plc 10,214,033 0.8
29,633 Societe Generale SA 5,490,355 0.4
568 Sumitomo Mitsui Financial Group,Inc. 5,295,127 0.4
649,240 UniCredito Italiano SpA 5,797,880 0.5
Other Securities 69,243,860 5.6
-------------- ----
183,486,047 14.8
COMMERCIAL SERVICES & SUPPLIES Other Securities 12,317,807 1.0
COMMUNICATIONS EQUIPMENT 337,349 Nokia Oyj 9,474,543 0.7
1,250,446 Telefonaktiebolaget LM Ericsson 4,987,896 0.4
Other Securities 3,297,262 0.3
-------------- ----
17,759,701 1.4
COMPUTERS & PERIPHERALS Other Securities 5,327,830 0.4
CONSTRUCTION & ENGINEERING Other Securities 11,619,465 0.9
CONSTRUCTION MATERIALS Other Securities 10,559,720 0.9
CONSUMER FINANCE Other Securities 3,938,928 0.3
CONTAINERS & PACKAGING Other Securities 1,189,003 0.1
DISTRIBUTORS Other Securities 1,506,274 0.1
JUNE 30, 2007 49
<PG$PCN,052000000>
Summary Schedule of Investments (continued) MASTER INTERNATIONAL INDEX SERIES
(in U.S. dollars)
SHARES PERCENT OF
INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS
- -------- --------- ------------------------------------ -------------- ----------
DIVERSIFIED CONSUMER SERVICES Other Securities $ 432,523 0.0%
DIVERSIFIED FINANCIAL SERVICES 152,241 ING Groep NV CVA 6,700,707 0.5
Other Securities 12,001,395 1.0
-------------- ----
18,702,102 1.5
DIVERSIFIED TELECOMMUNICATION 367,946 Telefonica SA 8,188,297 0.7
SERVICES Other Securities 33,210,526 2.7
-------------- ----
41,398,823 3.4
ELECTRIC UTILITIES 50,794 E.ON AG 8,528,735 0.7
Other Securities 27,422,804 2.2
-------------- ----
35,951,539 2.9
ELECTRICAL EQUIPMENT Other Securities 14,352,233 1.2
ELECTRONIC EQUIPMENT & INSTRUMENTS Other Securities 12,604,127 1.0
ENERGY EQUIPMENT & SERVICES Other Securities 4,110,503 0.3
FOOD & STAPLES RETAILING 678,089 Tesco Plc 5,673,366 0.5
Other Securities 17,330,381 1.4
-------------- ----
23,003,747 1.9
FOOD PRODUCTS 35,209 Nestle SA Registered Shares 13,378,488 1.1
Other Securities 19,583,147 1.6
-------------- ----
32,961,635 2.7
GAS UTILITIES Other Securities 4,710,788 0.4
HEALTH CARE EQUIPMENT & SUPPLIES Other Securities 6,689,941 0.5
HEALTH CARE PROVIDERS & SERVICES Other Securities 2,440,066 0.2
HEALTH CARE TECHNOLOGY Other Securities 366,010 0.0
HOTELS,RESTAURANTS & LEISURE Other Securities 12,337,743 1.0
HOUSEHOLD DURABLES Other Securities 21,172,246 1.7
HOUSEHOLD PRODUCTS Other Securities 4,162,927 0.3
IT SERVICES Other Securities 4,145,230 0.3
INDEPENDENT POWER PRODUCERS & Other Securities 1,548,104 0.1
ENERGY TRADERS
INDUSTRIAL CONGLOMERATES 70,074 Siemens AG 10,083,919 0.8
Other Securities 9,691,059 0.8
-------------- ----
19,774,978 1.6
INSURANCE 128,703 AXA SA 5,532,384 0.4
37,185 Allianz AG Registered Shares 8,721,182 0.7
Other Securities 46,573,172 3.8
-------------- ----
60,826,738 4.9
INTERNET & CATALOG RETAIL Other Securities 1,080,661 0.1
INTERNET SOFTWARE & SERVICES Other Securities 902,212 0.1
LEISURE EQUIPMENT & PRODUCTS Other Securities 4,270,850 0.4
LIFE SCIENCES TOOLS & SERVICES Other Securities 129,697 0.0
MACHINERY Other Securities 29,053,268 2.4
MARINE Other Securities 4,988,858 0.4
MEDIA Other Securities 24,404,884 2.0
METALS & MINING 126,834 Anglo American Plc (b) 7,446,652 0.6
81,778 Arcelor Mittal 5,111,306 0.4
296,625 BHP Billiton Ltd. 8,863,373 0.7
202,912 BHP Billiton Plc 5,636,662 0.5
86,423 Rio Tinto Plc Registered Shares 6,611,689 0.5
Other Securities 27,453,893 2.2
-------------- ----
61,123,575 4.9
50 JUNE 30, 2007
<PG$PCN,053000000>
Summary Schedule of Investments (continued) MASTER INTERNATIONAL INDEX SERIES
(in U.S. dollars)
SHARES PERCENT OF
INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS
- -------- --------- ------------------------------------ -------------- ----------
MULTILINE RETAIL Other Securities $ 5,873,141 0.5%
MULTI-UTILITIES Other Securities 19,132,242 1.6
OFFICE ELECTRONICS 88,800 Canon,Inc. 5,207,501 0.4
Other Securities 2,514,752 0.2
-------------- ----
7,722,253 0.6
OIL,GAS & CONSUMABLE FUELS 1,652,954 BP Plc 19,888,862 1.6
215,605 Eni SpA 7,817,279 0.6
4,487 Eni SpA (a)(c) 324,634 0.0
314,244 Royal Dutch Shell Plc 12,793,170 1.0
235,510 Royal Dutch Shell Plc Class B 9,817,472 0.8
177,462 Total SA 14,388,304 1.2
Other Securities 20,395,053 1.7
-------------- ----
85,424,774 6.9
PAPER & FOREST PRODUCTS Other Securities 4,141,012 0.3
PERSONAL PRODUCTS Other Securities 3,834,424 0.3
PHARMACEUTICALS 130,352 AstraZeneca Plc 6,985,676 0.6
490,915 GlaxoSmithKline Plc 12,788,335 1.0
201,122 Novartis AG Registered Shares 11,291,107 0.9
62,542 Roche Holding AG 11,081,603 0.9
83,230 Sanofi-Aventis 6,723,927 0.6
Other Securities 16,293,613 1.3
-------------- ----
65,164,261 5.3
REAL ESTATE INVESTMENT TRUSTS (REITS) Other Securities 17,410,844 1.4
REAL ESTATE MANAGEMENT & DEVELOPMENT Other Securities 20,038,765 1.6
ROAD & RAIL Other Securities 9,793,210 0.8
SEMICONDUCTORS & Other Securities 8,710,688 0.7
SEMICONDUCTOR EQUIPMENT
SOFTWARE Other Securities 9,112,087 0.7
SPECIALTY RETAIL Other Securities 9,424,931 0.8
TEXTILES,APPAREL & LUXURY GOODS Other Securities 10,678,667 0.9
THRIFTS & MORTGAGE FINANCE Other Securities 915,250 0.1
TOBACCO Other Securities 11,444,280 0.9
TRADING COMPANIES & DISTRIBUTORS Other Securities 13,545,374 1.1
TRANSPORTATION INFRASTRUCTURE Other Securities 4,214,527 0.3
WATER UTILITIES Other Securities 1,156,044 0.1
WIRELESS TELECOMMUNICATION 4,510,161 Vodafone Group Plc 15,112,699 1.2
SERVICES Other Securities 7,702,851 0.6
-------------- ----
22,815,550 1.8
TOTAL COMMON STOCKS
(COST -- $889,550,832) 1,190,475,328 96.1
EXCHANGE-TRADED FUNDS
284,277 iShares MSCI EAFE Index Fund (c) 22,921,255 1.8
TOTAL EXCHANGE-TRADED FUNDS
(COST -- $17,644,632) 22,921,255 1.8
JUNE 30, 2007 51
<PG$PCN,054000000>
Summary Schedule of Investments (continued) MASTER INTERNATIONAL INDEX SERIES
(in U.S. dollars)
PERCENT OF
INDUSTRY PREFERRED STOCKS VALUE NET ASSETS
- -------- ------------------------------------ -------------- ----------
AUTOMOBILES Other Securities $ 2,409,499 0.2%
HOUSEHOLD PRODUCTS Other Securities 959,482 0.1
MEDIA Other Securities 198,125 0.0
MULTI-UTILITIES Other Securities 201,177 0.0
-------------- -----
TOTAL PREFERRED STOCKS (COST -- $2,134,986) 3,768,283 0.3
-------------- -----
RIGHTS
MACHINERY Other Securities 23,116 0.0
REAL ESTATE INVESTMENT TRUSTS (REITS) Other Securities 4,516 0.0
-------------- -----
TOTAL RIGHTS (COST -- $25,522) 27,632 0.0
-------------- -----
TOTAL INVESTMENTS (COST -- $909,355,972*) 1,217,192,498 98.2
OTHER ASSETS LESS LIABILITIES 22,239,999 1.8
-------------- -----
NET ASSETS $1,239,432,497 100.0%
============== =====
* The cost and unrealized appreciation (depreciation) of investments as of
June 30, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost ................. $918,449,793
------------
Gross unrealized appreciation .. $306,851,241
Gross unrealized depreciation .. (8,108,536)
------------
Net unrealized appreciation .... $298,742,705
============
(a) Depositary receipts.
(b) Non-income producing security.
(c) All or a portion of security held as collateral in connection with open
financial futures.
- - "Other Securities" represent issues that are not identified as the 50
largest holdings of the Series and issues not exceeding 1% of net assets.
- - For Series compliance purposes,the Series' industry classifications refer
to any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Series management. This definition may apply for purposes of
this report, which may combine industry sub-classifications for reporting
ease.
- - Financial futures contracts purchased as of June 30, 2007 were as follows:
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
CONTRACTS ISSUE EXCHANGE DATE FACE VALUE (DEPRECIATION)
- --------- ----- --------- -------------- ----------- -------------
4 Hang Seng Index Future Hong Kong July 2007 $ 561,201 $ (1,681)
43 OMX Stock Index Future Stockholm July 2007 $ 800,426 (11,215)
227 DJ Euro Stoxx 50 Eurex September 2007 $13,745,745 125,880
60 FTSE 100 Index Future LIFFE September 2007 $ 7,985,811 12,101
13 SPI 200 Index Future Sydney September 2007 $ 1,738,711 (9,173)
48 TOPIX Index Future Tokyo September 2007 $ 6,870,319 49,478
--------
TOTAL UNREALIZED APPRECIATION -- NET $165,390
========
52 JUNE 30, 2007
<PG$PCN,055000000>
Summary Schedule of Investments (concluded)
MASTER INTERNATIONAL INDEX SERIES (in U.S. dollars)
- - Forward foreign exchange contracts purchased as of June 30, 2007 were as
follows:
UNREALIZED
FOREIGN CURRENCY SETTLEMENT APPRECIATION
PURCHASED DATE (DEPRECIATION)
- ---------------- ----------- --------------
AUD 3,613,000 August 2007 $ 65,449
CHF 5,056,200 August 2007 (11,327)
EUR 11,882,900 August 2007 (5,249)
GBP 6,279,400 August 2007 117,900
JPY 1,517,444,700 August 2007 (313,481)
SEK 7,241,400 August 2007 (3,585)
---------
TOTAL UNREALIZED DEPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS -- NET
(USD COMMITMENT -- $49,527,364) $(150,293)
=========
- - Forward foreign exchange contracts sold as of June 30, 2007 were as
follows:
UNREALIZED
FOREIGN CURRENCY SETTLEMENT APPRECIATION
SOLD DATE (DEPRECIATION)
- ---------------- ----------- --------------
AUD 3,613,000 August 2007 $ (33,654)
CHF 5,056,200 August 2007 (13,056)
EUR 11,882,900 August 2007 (52,855)
GBP 6,279,400 August 2007 (99,153)
JPY 1,517,444,700 August 2007 64,494
SEK 7,241,400 August 2007 (6,599)
---------
TOTAL UNREALIZED DEPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS -- NET
(USD COMMITMENT -- $49,236,247) $(140,823)
=========
- - Investments in companies considered to be an affiliate of the Series, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
NET INTEREST
AFFILIATE ACTIVITY INCOME
- --------- ------------ --------
BlackRock Liquidity Series, LLC Cash Sweep Series $(25,751,297) $760,130
- - Currency Abbreviations:
AUD Australian Dollar
JPY Japanese Yen
CHF Swiss Franc
SEK Swedish Krona
EUR Euro
USD U.S.Dollar
GBP British Pound
See Notes to Financial Statements.
JUNE 30, 2007 53
<PG$PCN,056000000>
Statement of Assets and Liabilities MASTER INTERNATIONAL INDEX SERIES
AS OF JUNE 30,2007 (UNAUDITED)
ASSETS
Investments in unaffiliated securities,at value (identified cost--$909,355,972) .. $1,217,192,498
Foreign cash (cost--$7,094,550) .................................................. 7,158,903
Unrealized appreciation on forward foreign exchange contracts .................... 247,843
Receivables:
Securities sold ............................................................... $38,135,301
Dividends ..................................................................... 3,323,359
Contributions ................................................................. 2,608,468
Variation margin .............................................................. 1,717,180
Interest ...................................................................... 233,274 46,017,582
-----------
Prepaid expenses and other assets ................................................ 1,627,054
--------------
Total assets ..................................................................... 1,272,243,880
--------------
LIABILITIES
Unrealized depreciation on forward exchange contracts ............................ 538,959
Bank overdraft ................................................................... 16,760,363
Payables:
Securities purchased .......................................................... 8,551,662
Beneficial interest redeemed .................................................. 6,360,600
Investment adviser ............................................................ 10,117
Other affiliates .............................................................. 9,814 14,932,193
-----------
Accrued expenses and other liabilities ........................................... 579,868
--------------
Total liabilities ................................................................ 32,811,383
--------------
NET ASSETS
NET ASSETS ....................................................................... $1,239,432,497
--------------
NET ASSETS CONSIST OF
Investors' capital ............................................................... $ 931,343,783
Unrealized appreciation -- net ................................................... 308,088,714
--------------
Net assets ....................................................................... $1,239,432,497
--------------
See Notes to Financial Statements.
54 JUNE 30, 2007
<PG$PCN,057000000>
Statement of Operations MASTER INTERNATIONAL INDEX SERIES
FOR THE SIX MONTHS ENDED JUNE 30,2007 (UNAUDITED)
INVESTMENT INCOME
Dividends (net of $2,291,346 foreign withholding tax) ............................ $ 19,873,151
Interest (including $760,130 from affiliates) .................................... 763,613
------------
Total income ..................................................................... 20,636,764
------------
EXPENSES
Custodian fees ................................................................... $ 192,211
Accounting services .............................................................. 69,495
Investment advisory fees ......................................................... 54,131
Pricing fees ..................................................................... 31,741
Professional fees ................................................................ 31,505
Directors' fees and expenses ..................................................... 2,976
Printing and shareholder reports ................................................. 608
Other ............................................................................ 8,493
-----------
Total expenses ................................................................... 391,160
------------
Investment income -- net ......................................................... 20,245,604
------------
REALIZED & UNREALIZED GAIN (LOSS) -- NET
Realized gain on:
Investments -- net ............................................................ 7,388,347
Financial futures contracts -- net ............................................ 2,697,339
Foreign currency transactions -- net .......................................... 124,837 10,210,523
-----------
Change in unrealized appreciation/depreciation on:
Investments -- net ............................................................ 80,930,319
Financial futures contracts -- net ............................................ (500,013)
Foreign currency transactions -- net .......................................... (381,967) 80,048,339
----------- ------------
Total realized and unrealized gain -- net ........................................ 90,258,862
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................. $110,504,466
============
See Notes to Financial Statements.
JUNE 30, 2007 55
<PG$PCN,058000000>
Statements of Changes in Net Assets MASTER INTERNATIONAL INDEX SERIES
INCREASE (DECREASE) INNET ASSETS:
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
2007 DECEMBER 31,
(UNAUDITED) 2006
-------------- -------------
OPERATIONS
Investment income -- net ..................................... $ 20,245,604 $ 17,659,987
Realized gain -- net ......................................... 10,210,523 12,066,140
Change in unrealized appreciation/depreciation -- net ........ 80,048,339 126,438,123
-------------- -------------
Net increase in net assets resulting from operations ......... 110,504,466 156,164,250
-------------- -------------
CAPITAL TRANSACTIONS
Proceeds from contributions .................................. 459,741,058 517,743,669
Fair value of withdrawals .................................... (160,798,808) (367,077,433)
-------------- -------------
Net increase in net assets derived from capital transactions.. 298,942,250 150,666,236
-------------- -------------
NET ASSETS
Total increase in net assets ................................. 409,446,716 306,830,486
Beginning of period .......................................... 829,985,781 523,155,295
-------------- -------------
End of period ................................................ $1,239,432,497 $ 829,985,781
-------------- -------------
See Notes to Financial Statements
Financial Highlights MASTER INTERNATIONAL INDEX SERIES
THE FOLLOWING RATIOS HAVE BEEN DERIVED FROM INFORMATION PROVIDED IN THE
FINANCIAL STATEMENTS.
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30,2007 ----------------------------------------------------
(UNAUDITED) 2006 2005 2004 2003 2002
----------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN
Total investment return ....................... 10.69%+ 26.61% 13.64% 20.32% 38.97% (15.81%)
RATIOS TO AVERAGE NET ASSETS
Expenses, net of reimbursement ................ .07%* .10% .10% .09% .09% .08%
Expenses ...................................... .07%* .11% .10% .10% .10% .16%
Investment income -- net ...................... 3.74%* 2.70% 2.53% 2.55% 2.23% 2.21%
SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ...... $1,239,432 $829,986 $523,155 $322,067 $553,129 $166,820
Portfolio turnover ............................ 8% 23% 11% 14% 9% 20%
* Annualized
+ Aggregate total investment return.
See Notes to Financial Statements.
56 JUNE 30, 2007
<PG$PCN,059000000>
Notes to Financial Statements (Unaudited) MASTER INTERNATIONAL INDEX SERIES
1. SIGNIFICANT ACCOUNTING POLICIES:
Master International Index Series (the "Series"), a non-diversified investment
company,is part of Quantitative Master Series LLC (the "Master LLC"). The Master
LLC is registered under the Investment Company Act of 1940,as amended, and is
organized as a Delaware limited liability company. Prior to June 15,2007, the
Master LLC was organized as a Delaware statutory trust (the "Trust"). The Master
LLC's Limited Liability Company Agreement (the "LLC Agreement") permits the
Directors (and prior to June 15, 2007, the Declaration of Trust permitted the
Trustees) to issue non-transferable interests in the Series, subject to certain
limitations. Throughout this report the Trust and the Master LLC are referred to
as the Master LLC and the Board of Trustees is referred to as the Board of
Directors. The Series' financial statements are prepared in conformity with U.S.
generally accepted accounting principles,which may require the use of management
accruals and estimates. Actual results may differ from these estimates. These
unaudited financial statements reflect all adjustments,which are, in the opinion
of management, necessary to present a fair statement of the results for the
interim period. All such adjustments are of a normal, recurring nature. The
following is a summary of significant accounting policies followed by the
Series.
(a) Valuation of investments -- Equity securities that are held by the Series
that are traded on stock exchanges or the NASDAQ Global Market are valued at the
last sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available asked
price for short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Directors of the Master
LLC. Long positions traded in the over-the-counter ("OTC") markets, NASDAQ
Capital Market or Bulletin Board are valued at the last available bid price or
yield equivalent obtained from one or more dealers or pricing services approved
by the Board of Directors of the Master LLC. Short positions traded in the OTC
markets are valued at the last available asked price. Portfolio securities that
are traded both in the OTC markets and on a stock exchange are valued according
to the broadest and most representative market.
Options written or purchased are valued at the last sale price in the case of
exchange-traded options. Options traded in the OTC market are valued at the last
asked price (options written) or the last bid price (options purchased). Swap
agreements are valued based upon quoted fair valuations received daily by the
Series from a pricing service or counter-party. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their last sale
price as of the close of such exchanges. Valuation of short-term investment
vehicles is generally based on the net asset value of the underlying investment
vehicle or amortized cost.
Repurchase agreements are valued at cost plus accrued interest. The Series
employs pricing services to provide certain securities prices for the Series.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Directors of the Master LLC, including valuations furnished by the
pricing services retained by the Series, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Series under the general supervision of the Master LLC's
Board of Directors. Such valuations and procedures will be reviewed periodically
by the Board of Directors of the Master LLC.
Generally, trading in foreign securities,as well as U.S. government securities
and money market instruments and certain fixed income securities, is
substantially completed each day at various times prior to the close of business
on the New York Stock Exchange ("NYSE"). The values of such securities used in
computing the net assets of the Series are determined as of such times. Foreign
currency exchange rates will generally be determined as of the close of business
on the NYSE. Occasionally,events affecting the values of such securities and
such exchange rates may occur between the times at which they are determined and
the close of business on the NYSE that may not be reflected in the computation
of the Series' net assets. If events (for example, a company announcement,
market volatility or a natural disaster) occur during such periods that are
expected to materially affect the value of such securities, those securities
will be valued at their fair value as determined in good faith by the Master
LLC's Board of Directors or by Black Rock Advisors, LLC (the "Manager"), an
indirect, wholly owned subsidiary of Black Rock, Inc., using a pricing service
and/or procedures approved by the Master LLC's Board of Directors.
(b) Derivative financial instruments -- The Series may engage in various
portfolio investment strategies to provide liquidity or as a proxy for a direct
investment in securities underlying the Series' index. Losses may arise due to
changes in the value of the contract due to an unfavorable change in the price
of the underlying security or if the counterparty does not perform under the
contract. The counterparty for certain instruments may pledge cash or securities
as collateral.
JUNE 30, 2007 57
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Notes to Financial Statements (continued) MASTER INTERNATIONAL INDEX SERIES
- - Financial futures contracts -- The Series may purchase or sell financial
futures contracts and options on such financial futures contracts.
Financial futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or yield. Upon
entering into a contract, the Series deposits and maintains as collateral
such initial margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Series agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value
of the contract. Such receipts or payments are known as variation margin
and are recorded by the Series as unrealized gains or losses. When the
contract is closed, the Series records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed.
- - Options -- The Series may purchase and write call and put options. When the
Series writes an option,an amount equal to the premium received by the
Series is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked-to-market to reflect the current
market value of the option written. When a security is purchased or sold
through an exercise of an option, the related premium paid (or received) is
added to(or deducted from) the basis of the security acquired or deducted
from (or added to) the proceeds of the security sold. When an option
expires (or the Series enters into a closing transaction), the Series
realizes a gain or loss on the option to the extent of the premiums
received or paid (or a gain or loss to the extent that the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
- - Forward foreign exchange contracts -- The Series may enter into forward
foreign exchange contracts as a hedge against either specific transactions
or portfolio positions. 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.
- - Foreign currency options and futures -- The Series may also purchase or
sell listed or OTC foreign currency options, foreign currency futures and
related options on foreign currency futures as a short or long hedge
against possible variations in foreign exchange rates. Such transactions
may be effected with respect to hedges on non-U.S. dollar-denominated
securities owned by the Series, sold by the Series but not yet delivered,or
committed or anticipated to be purchased by the Series.
(c) Foreign currency transactions -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into U.S. dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.
The Series invests in foreign securities, which may involve a number of risk
factors and special considerations not present with investments in securities of
U.S. corporations.
(d) Income taxes -- The Series is classified as a partnership for federal income
tax purposes. As such, each investor in the Series is treated as owner of its
proportionate share of the net assets, income, expenses and realized and
unrealized gains and losses of the Series. Therefore, no federal income tax
provision is required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends and capital gains at various rates. It is
intended that the Series' assets will be managed so an investor in the Series
can satisfy the requirements of Subchapter M of the Internal Revenue Code.
(e) Security transactions and investment income -- Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Realized gains and losses on security transactions are determined on the
identified cost basis. 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. Interest income is recognized on the accrual basis.
(f) Securities lending -- The Series may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. The
market value of the loaned securities is determined at the close of business of
the Series and any additional required collateral is delivered to the Series on
the next business day. Where the Series receives securities as collateral for
the loaned securities, it collects a fee from the borrower. The Series typically
receives the income on the loaned securities
58 JUNE 30, 2007
<PG$PCN,061000000>
Notes to Financial Statements (continued) MASTER INTERNATIONAL INDEX SERIES
but does not receive the income on the collateral. Where the Series receives
cash collateral, it may invest such collateral and retain the amount earned on
such investment, net of any amount rebated to the borrower. Loans of securities
are terminable at any time and the borrower, after notice, is required to return
borrowed securities within five business days. The Series may pay reasonable
finder's, lending agent, administrative and custodial fees in connection with
its loans. In the event that the borrower defaults on its obligation to return
borrowed securities because of insolvency or for any other reason, the Series
also could suffer a loss where the value of the collateral falls below the
market value of the borrowed securities, in the event of borrower default or in
the event of losses on investments made with cash collateral.
(g) Recent accounting pronouncements -- Effective June 29, 2007, the Series
implemented Financial Accounting Standards Board ("FASB") Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
Statement No. 109"("FIN 48"). FIN 48 prescribes the minimum recognition
threshold a tax position must meet in connection with accounting for
uncertainties in income tax positions taken or expected to be taken by an
entity, including investment companies, before being measured and recognized in
the financial statements. Management has evaluated the application of FIN 48 to
the Series,and has determined that the adoption of FIN 48 does not have a
material impact on the Series' financial statements. The Series files U.S. and
various state tax returns. No income tax returns are currently under
examination. The statute of limitations on the Series' tax returns remains open
for the years ended December 31, 2003 through December 31, 2006.
In September 2006, Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"), was issued and is effective for fiscal years
beginning after November 15, 2007. FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. At this time, management is evaluating the implications of FAS 157
and its impact on the Series' financial statements, if any, has not been
determined.
In addition, in February 2007, Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for fiscal years beginning after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provisions of FAS 157.
FAS 159 permits entities to choose to measure many financial instruments and
certain other items at fair value that are not currently required to be measured
at fair value. FAS 159 also establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and liabilities. At this
time, management is evaluating the implications of FAS 159 and its impact on the
Series' financial statements, if any, has not been determined.
(h) Bank overdraft -- The Series recorded a bank overdraft which resulted from
management estimates of available cash.
2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES:
The Master LLC has entered into an Investment Advisory Agreement with the
Manager. Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC Financial
Services Group, Inc. are the principal owners of BlackRock, Inc.
The Manager is responsible for the management of the Series' investments and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Series. For such services, the
Series pays a monthly fee at an annual rate of .01% of the average daily value
of the Series' net assets. The Manager has entered into a contractual
arrangement with the Series under which the expenses incurred by the Series will
not exceed .12%. This arrangement has a one-year term and is renewable.
In addition, the Manager has entered into a sub-advisory agreement with
BlackRock Investment Management, LLC ("BIM"), an affiliate of the Manager, under
which the Manager pays BIM for services it provides a monthly fee at an annual
rate that is a percentage of the management fee paid by the Series to the
Manager.
For the six months ended June 30, 2007, the Series reimbursed the Manager $8,962
for certain accounting services.
In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly owned
subsidiary of Merrill Lynch,or its affiliates, received $40,963 in commissions
on the execution of portfolio security transactions for the Series for the six
months ended June 30, 2007.
Certain officers and/or directors of the Master LLC are officers and/or
directors of BlackRock, Inc. or its affiliates.
JUNE 30, 2007 59
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Notes to Financial Statements (concluded) MASTER INTERNATIONAL INDEX SERIES
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities,for the six
months ended June 30, 2007 were $408,936,386 and $79,280,648, respectively.
4. COMMITMENTS:
At June 30, 2007, the Series had entered into foreign exchange contracts, in
addition to the contracts listed on the Schedule of Investments, under which it
had agreed to buy and sell various foreign currencies with approximate values of
$263,000 and $15,001,000, respectively.
5. SHORT-TERM 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 $500,000,000 credit agreement
with a group of lenders, which expires November 2007. The Series may borrow
under the credit agreement to fund shareholder redemptions and for other lawful
purposes other than for leverage. The Series may borrow up to the maximum amount
allowable under the Series' current prospectus and statement of additional
information, subject to various other legal, regulatory or contractual limits.
The Series pays a commitment fee of .06% per annum based on the Series' pro rata
share of the unused portion of the credit agreement. Amounts borrowed under the
credit agreement bear interest at a rate equal to, at each fund's election, the
federal funds rate plus .35% or a base rate as defined in the credit agreement.
The Series did not borrow under the credit agreement during the six months ended
June 30,2007.
60 JUNE 30, 2007
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED)
INTERIM RENEWAL
In prior years, the Board of Trustees ("Board" or "Trustees") typically has
considered the annual renewal of the existing Management Agreement between
American Beacon Advisors, Inc. (the "Manager") and the American Beacon Funds
(the "Trust"), on behalf of the International Equity Index, S&P 500 Index, and
Small Cap Index Funds (each, a "Fund" and collectively, the "Funds"), at the
Board meeting held in the first quarter of each year. At the November 15, 2006
meeting, the Board decided to conduct these annual renewals at their second
quarter meeting each year to enable the Trustees to consider more year-end data
in their deliberations. At the March 8, 2007 Board meeting, the Board considered
renewal of the Management Agreement on an interim basis until the Board meeting
scheduled for the second quarter, at which meeting the Board would perform a
comprehensive review of factors relevant to an annual renewal.
In connection with the interim renewal, the Board, with the assistance of
independent legal counsel, requested and received certain relevant information
from the Manager. 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. The Board considered several
factors at its March 2007 meeting but 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 these factors.
The Board determined that certain factors typically considered in connection
with an annual renewal were not material with respect to an interim renewal.
In determining whether to renew the Management Agreement on an interim basis,
the Trustees considered the best interests of each Fund separately. The
following considerations and conclusions are applicable to all Funds.
Cost of Services. The Board considered that the Manager's fee rate schedule for
the Funds had not changed since the last contract renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the
Management Agreement, the Trustees considered that the Manager continues to
provide high-quality services to each Fund at a low cost to investors and
provides a comprehensive compliance program for each Fund. Based on this
information, the Board concluded that the nature, extent and quality of the
management and advisory services provided by the Manager were appropriate for
each Fund and, thus, supported a decision to renew the Management Agreement on
an interim basis.
Investment Performance. The Board considered the performance reports and
discussions with management at Board and Investment Committee meetings
throughout the year.
In considering the renewal of the Management Agreement with the Manager with
respect to the International Equity Index Fund, the Trustees considered that the
Fund outperformed both its benchmark index and the respective Lipper index for
the 2006 calendar year. In considering the renewal of the Management Agreement
with the Manager with respect to the S&P 500 Index Fund, the Trustees considered
that the Fund outperformed its benchmark index (before the deduction of fund
expenses) and its respective Lipper index for the 2006 calendar year. In
considering the renewal of the Management Agreement with the Manager with
respect to the Small Cap Index Fund, the Trustees considered that the Fund
outperformed its respective Lipper index and underperformed its benchmark index
for the 2006 calendar year.
Based on these considerations, among others, the Trustees determined that the
Funds and their shareholders would benefit from the Manager's continued
management of the Funds until the next regular Board meeting and approved the
renewal of the Agreement with respect to each of the Funds on an interim basis
until the next regular Board meeting.
61
<PG$PCN,064000000>
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED)
ANNUAL RENEWAL
At its May 25, 2007 meeting, the Board considered the renewal of the existing
Management Agreement. In preparation for the Board's consideration to renew the
Management 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 4, 2007 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.
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 Manager's most recent audited or unaudited financial
statements as well as its SEC Form ADV registration statement;
- a summary of any material past, pending or anticipated litigation or
regulatory proceedings involving the Manager or its personnel,
including the results of any recent regulatory examination or
independent audit;
- a comparison of the performance of each Fund to comparable investment
companies and appropriate indices, including comments on the relative
performance of each Fund versus the respective peer group average;
- a profit/loss analysis of the Manager and any actual or anticipated
economies of scale in relation to the services it provides to each
Fund;
- a description of any payments by the firm to support the Funds'
marketing efforts;
- 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;
- an evaluation of other benefits to the Manager or Funds as a result of
their relationship, if any;
- confirmation that the Manager's financial condition does not raise
concerns that the Manager would be unable to continue providing the
same scope and quality of services to the Funds;
- a description of the scope of portfolio management services provided
to the Funds and the Manager's other clients, including other
registered investment companies, whether such services differ, and any
advantages or disadvantages that might accrue to the Funds due to the
Manager'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;
- a discussion regarding the Manager's participation in "soft dollar"
arrangements, if any, or other brokerage allocation policies with
respect to Fund transactions, including the Manager's methodology for
obtaining the most favorable execution and the use of any affiliated
broker-dealers;
- a discussion of whether the Manager receives, with respect to the
Funds, other compensation, including any payment for order flow or ECN
liquidity rebates;
- a description of any actual or potential conflicts of interest
anticipated in managing Fund assets;
- a description of trade allocation procedures among accounts managed by
the Manager;
62
<PG$PCN,065000000>
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED)
- a summary of any material changes to the Manager's compliance program
with regard to federal, state, corporate and Fund requirements and a
certification to the reasonable design of the compliance program;
- a discussion of any material compliance problems and remedial actions;
- information regarding the Manager's code of ethics, insider trading
policy and disaster recovery plan, including a description of any
material changes thereto;
- a description of the Manager's affiliation with any broker-dealer;
- a discussion of any anticipated change in the Manager's controlling
persons;
- verification of the Manager's insurance coverage with regards to the
services provided to the Funds;
- 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 any revenue sharing activities with respect to the
Funds;
- a discussion of any rebate arrangements between the Manager and
service providers to the Funds pursuant to which the Manager receives
direct or indirect benefits from the service provider; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
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, the class used for comparative purposes was the
class with the longest performance history, which in most cases is 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.
The Trustees also received a memorandum from their legal counsel detailing the
Board's responsibilities pertaining to the renewal of the Management and
Investment Advisory Agreements. This memorandum explained the regulatory
requirements surrounding the Trustees' process for evaluating investment
advisors and the terms of the contracts.
Provided below is an overview of the primary factors the Board considered at its
May 25, 2007 meeting. 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.
CONSIDERATIONS WITH RESPECT TO ALL FUNDS
In determining whether to approve the continuance of the Management Agreement,
the Trustees considered the best interests of each Fund separately. In addition,
while the Management Agreement for all of the Funds was considered at the same
Board meeting, the Board considered each Fund's investment management
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 the Fund and the investment advisor;
(3) the Manager's cost for providing the services and the profitability of the
advisory business to the Manager; (4) the extent to which economies of scale
have been taken into account in setting the 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 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 from its
relationship with a Fund. The Trustees posed questions to various management
personnel of the Manager regarding certain key aspects of the material submitted
in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the
Management Agreement, the Board considered: the background and experience of key
investment personnel and the Manager's ability to retain them; the Manager's
disciplined investment approach and goal to provide consistent above average
long-term performance at a low cost; the Manager's continuing efforts to add new
series and share classes to enhance the Funds' product line; the Manager's
record in building improved compliance, control and credit functions that reduce
risks to the Funds; the addition of personnel to manage the Funds, promote sales
and improve services,
63
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DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
OF THE FUNDS (UNAUDITED)
including the addition of a separate new information technology (IT) department
at the Manager; the high rankings received by the Funds in service surveys; and
the active role played by the Manager in monitoring and, as appropriate,
recommending replacements for the master portfolios.
Based on the foregoing information, the Board concluded that the nature, extent
and quality of the management services provided by the Manager were appropriate
for each Fund and, thus, supported a decision to renew the Management Agreement.
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. With respect to Lipper data, 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."
Cost of Services and Profits Realized. In analyzing the cost of services and
profitability of the Manager by Fund, the Board considered the revenues earned
and the expenses incurred by the Manager. The profitability levels were noted at
both an individual Fund level and at an aggregate level for all Funds. The Board
also considered that the Management Agreement stipulates that to the extent that
a Fund invests all of its investable assets in another registered investment
company, the Fund will not pay the Manager a management fee. The Funds operate
under a master-feeder structure whereby each Fund invests all of its assets 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 Funds.
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. The Board also noted that the non-Institutional Classes of the
Funds maintain higher expense ratios in order to compensate third party
distributors but the net fee to the Manager is generally the same for all
Classes.
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. 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 considered the Manager's representations that its costs have
increased due primarily to greater service provider and regulatory costs. The
Manager also represented that it anticipates further economies of scale would be
largely offset by higher costs of adding and retaining qualified personnel,
improving technology and increasing demands on its advisory business.
Based on the foregoing information, the Board concluded that the Manager's fee
schedule provides for a reasonable sharing of benefits from any economies of
scale with each Fund.
Benefits Derived from the Relationship with the Funds. The Board considered the
"fall-out" or ancillary benefits that accrue to the Manager as a result of the
advisory relationships with the Funds, including expanding the level of assets
under management by the Manager. In addition, the Board noted that the Manager
provides services to the Trust at a relatively low cost, and the benefit plans
of AMR Corporation have invested a substantial number of assets in the Funds,
which helps reduce costs.
64
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DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
OF THE FUNDS (UNAUDITED)
Based on the foregoing information, the Board concluded that the potential
benefits accruing to the Manager by virtue of its relationships with the Funds
appear to be fair and reasonable.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO EACH FUND
The performance comparisons below were made versus each Fund's Lipper peer
universe median. References to the Lipper expense group below are to the group
of comparable mutual funds included in the analysis provided to the Trustees by
Lipper. All performance comparisons are for periods ended March 31, 2007, unless
otherwise noted.
Additional Considerations and Conclusions with Respect to the International
Equity Index Fund. In considering the renewal of the Management Agreement with
respect to the International Equity Index Fund (the "Fund"), the Trustees
considered the following additional factors: (1) the performance of the Fund was
higher than its Lipper peer universe median for the one-, three- and five-year
periods; (2) the Fund's actual management fee (including administrative fees)
and the total expense ratio was lower than the Lipper expense group median.
Based on these considerations and those noted above with respect to all Funds,
the Trustees (1) concluded that the fees paid to the Manager under the
Management Agreement are fair and reasonable, (2) determined that the 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 Fund.
Additional Considerations and Conclusions with Respect to the S&P 500 Index
Fund. In considering the renewal of the Management Agreement with respect to the
S&P 500 Index Fund (the "Fund"), the Trustees considered the following
additional factors: (1) the Fund outperformed its peer universe median for the
one-, three-, five- and ten-year periods; and (2) the Fund's actual management
fee (including administrative fees) and the total expense ratio was lower than
its Lipper expense group median.
Based on these considerations and those noted above with respect to all Funds,
the Trustees (1) concluded that the fees paid to the Manager under the
Management Agreement are fair and reasonable, (2) determined that the 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 Fund.
Additional Considerations and Conclusions with Respect to the Small Cap Index
Fund. In considering the renewal of the Management Agreement with respect to the
Small Cap Index Fund (the "Fund"), the Trustees considered the following
additional factors: (1) the Fund outperformed its peer universe median for the
one-year period and underperformed for the three- and five-year periods; and (2)
the Fund's actual management fee (including administrative fees) and the total
expense ratio was lower than its Lipper expense group median.
Based on these considerations and those noted above with respect to all Funds,
the Trustees (1) concluded that the fees paid to the Manager under the
Management Agreement are fair and reasonable, (2) determined that the 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 Fund.
65
<PG$PCN,068000000>
(AMERICAN BEACON FUNDS(SM) LOGO)
DELIVERY OF DOCUMENTS
To reduce expenses, your financial institution may mail only one copy of the
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 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:
(KEYBOARD GRAPHIC) (MOUSE GRAPHIC)
BY E-MAIL: ON THE INTERNET:
Visit our website at
american_beacon.funds@ambeacon.com www.americanbeaconfunds.com
(TELEPHONE GRAPHIC) (MAILBOX GRAPHIC)
BY TELEPHONE: BY MAIL:
Institutional Class American Beacon Funds
Call (800) 658-5811 P.O. Box 219643
PlanAhead Class(R) Kansas City, MO 64121
(800) 388-3344
AVAILABILITY OF QUARTERLY PORTFOLIO AVAILABILITY OF PROXY VOTING POLICY
SCHEDULES AND RECORDS
In addition to the Schedule of A description of the policies and
Investments provided in each procedures that the Funds use to
semi-annual and annual report, each determine how to vote proxies
Fund files a complete schedule of its relating to portfolio securities is
portfolio holdings with the available in each Fund's Statement of
Securities and Exchange Commission Additional Information, which may be
("SEC") on Form N-Q as of the first obtained free of charge by calling
and third fiscal quarters. The Fund's 1-800-967-9009 or by accessing the
Forms N-Q are available on the SEC's SEC's website at www.sec.gov. Each
website at www.sec.gov. The Forms N-Q Fund's proxy voting record for the
may also be reviewed and copied at most recent year ended June 30 is
the SEC's Public Reference Room, 450 filed annually with the SEC on Form
Fifth Street, NW, Washington, DC N-PX. The Fund's Forms N-PX are
20549. Information regarding the available on the SEC's website at
operation of the SEC's Public www.sec.gov. The Fund's proxy voting
Reference Room may be obtained by record may also be obtained by
calling 1-800-SEC-0330. A complete calling 1-800-967-9009.
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.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FORESIDE FUND SERVICES
TRUST SERVICES FIRM Portland, Maine
Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP
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.
American Beacon Funds is a service mark of AMR Corporation. American Beacon
Small Cap Index Fund and American Beacon International Equity Index Fund are
service marks of American Beacon Advisors, Inc.
SAR 6/07
540289
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON FUNDS(SM) LOGO)
Semi-Annual Report
June 30, 2007
TREASURY INFLATION PROTECTED SECURITIES FUND
<PG$PCN,002000000>
ABOUT AMERICAN BEACON
Since 1986, American Beacon Advisors has offered a variety of products and
investment advisory services to numerous institutional and retail clients,
including a variety of mutual funds, corporate cash management, and separate
account management.
Our clients include defined benefit plans, defined contribution plans,
foundations, endowments, corporations, financial planners, and other
institutional investors. With American Beacon Advisors, you can put the
experience of a multi-billion dollar asset management firm to work for your
company.
CONTENTS
President's Message ............................................... 1
Market and Performance Overview ................................... 2
Schedule of Investments ........................................... 5
Additional Information ............................................ Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of
the reporting period and are subject to change. Each advisor's strategies and
the Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
American Beacon Funds June 30, 2007
<PG$PCN,003000000>
(PHOTO OF DOUGLAS G. HERRING)
FELLOW SHAREHOLDERS,
I am pleased to present to you the Semi-Annual Report for the American
Beacon Treasury Inflation Protected Securities Fund for the six months ended
June 30, 2007.
For this period, the Fund performed well, returning 2.10% versus the Lipper
TIPS Fund Index return of 1.39%.
Please review the enclosed portfolio listings and detailed financial data.
As always, we welcome the opportunity to serve your financial needs. Should you
have any questions about the enclosed information, please do not hesitate to
contact us at 800-967-9009. You may access Fund and account information at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
American Beacon Funds.
Sincerely,
/s/ Douglas G. Herring
Douglas G. Herring
President
American Beacon Funds
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.
1
<PG$PCN,004000000>
MARKET OVERVIEW
JUNE 30, 2007 (UNAUDITED)
A sudden global risk aversion trade in late-February brought the first
meaningful correction in equity prices in nine months and initiated a
significant rally in high-quality bond markets. During the first half of 2007,
the Lehman Brothers U.S. 1-10 year TIPS Index returned 2.49% while the Lehman
Brothers Aggregate Index returned 0.98%. During the second quarter, real yields
were markedly higher as strong economic data and increased growth projections
diminished the probability of a near-term ease by the Federal Reserve Board. The
ten-year Treasure Inflation Protected Securities ("TIPS") yield reached a
multi-year high of over 2.75% during the period before ending the first half of
the year at 2.65%. Through June, year-over-year Consumer Price Index ("CPI") had
advanced at a 2.7% clip. Current TIPS valuations suggest that investors project
CPI to average 2.4% annually over the next decade. This is well below the 3.1%
average of the past 25 years.
Due to the decrease in the federal budget deficit, the U.S. Treasury
("Treasury") has been lowering their borrowing requirements and cutting back
TIPS auctions by about 20%. The Treasury auctioned $6.0 billion of 10-year TIPS
in April and the auction was met with reasonably strong demand. TIPS yields rose
during the first half of the year and the real yield curve flattened in shape.
The most pronounced increase was in the short portion of the curve where real
yields rose by 0.33%. Yields on five-year and 30-year TIPS rose by 0.20% and
0.26%, respectively.
2
<PG$PCN,005000000>
PERFORMANCE OVERVIEW
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM)
JUNE 30, 2007 (UNAUDITED)
The Institutional Class of the Fund returned 2.10% for the period from
January 1, 2007 through June 30, 2007, trailing the Lehman Brothers 1-10 Yr U.S.
TIPS Index (the "Index") return of 2.49%. The Fund outperformed the Lipper TIPS
Index return of 1.39% for the same time period.
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 6/30/07
SINCE
6 INCEPTION
MONTHS* 1 YEAR 3 YEARS 6/30/04
------- ------ ------- ---------
Institutional Class(1,3) .................... 2.10% 3.38% 2.99% 2.99%
Lehman Bros. 1- 10 Yr. U.S. TIPS Index(2) ... 2.49% 4.19% 3.63% 3.63%
Lehman Bros. U.S. TIPS Index(2) ............. 1.73% 3.99% 3.80% 3.80%
Lipper TIPS Funds Index(2) .................. 1.39% 3.54% 3.62% 3.62%
* 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 Lehman Bros. 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 Lehman Bros. U.S. TIPS Index includes
all maturities. The Lipper TIPS Funds Index tracks the results of the 30
largest mutual funds in the Lipper TIPS Fund category. Lipper is an
independent mutual fund research and ranking service. One cannot directly
invest in an index.
3. The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Fund was 0.49%. After contractual expense
reimbursements through February 28, 2008, the net expense ratio disclosed
in the most recent prospectus was 0.35%. 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 underperformed the Index for the six-month period by 39 basis
points. While part of the underperformance can be attributed to Fund expenses,
sub-advisor performance also negatively impacted the Fund over the past six
months. The underperformance occurred in both the first and second quarters of
the year. In the first quarter, exposure to non-Index securities (U.S. corporate
inflation-linked bonds and German and French government inflation-linked bonds)
hurt performance as spreads between corporate and government yields widened. In
the second quarter, non-U.S. government inflation-linked bonds continued to
underperform, and an overweight position in intermediate-term TIPS subtracted
value as the TIPS yield curve flattened. Lastly, the Fund held a position in the
inflation-linked debt of the Student Loan Marketing Association ("SLMA"). This
position was negatively impacted by the structure of a pending private equity
transaction which would subordinate current SLMA unsecured bondholders.
The Fund remains focused on investing primarily in TIPS to provide
inflation protection and income to its shareholders.
TOP TEN HOLDINGS
% OF
NET
ASSETS
------
U.S. Treasury Note, 3.375%, Due 1/15/2012 13.7%
U.S. Treasury Note, 0.875%, Due 4/15/2010 11.1%
U.S. Treasury Note, 1.875%, Due 7/15/2015 10.0%
U.S. Treasury Note, 2.000%, Due 1/15/2016 9.2%
U.S. Treasury Note, 3.000%, Due 7/15/2012 7.4%
U.S. Treasury Note, 2.000%, Due 1/15/2014 7.2%
U.S. Treasury Note, 1.875%, Due 7/15/2013 6.0%
U.S. Treasury Note, 1.625%, Due 1/15/2015 5.8%
U.S. Treasury Note, 2.500%, Due 7/15/2016 5.4%
U.S. Treasury Note, 3.500%, Due 1/15/2011 4.7%
3
<PG$PCN,006000000>
PERFORMANCE OVERVIEW
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM)
JUNE 30, 2007 (UNAUDITED)
PORTFOLIO DIVERSIFICATION
% OF
FIXED INCOME
------------
A 0.3%
AA 0.6%
AAA 98.9%
UNCLASSIFIED 0.2%
(PERFORMANCE GRAPH)
U.S. Government Sponsored Agency Instruments 0.2%
Corporate Obligations 1.2%
U.S. Government Treasury Obligations 98.6%
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, 2007 through June
30, 2007.
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*
1/1/07 6/30/07 1/1/07-6/30/07
--------- --------- --------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,020.99 $2.00
Hypothetical $1,000.00 $1,022.81 $2.01
(5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratio for the six-month
period of 0.40% for the Institutional Class, multiplied by the average
account value over the period, multiplied by the number derived by dividing
the number of days in the most recent fiscal half-year (181) by days in the
year (365) to reflect the half-year period.
4
<PG$PCN,007000000>
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
SCHEDULE OF INVESTMENTS
June 30, 2007 (Unaudited)
PAR
AMOUNT VALUE
-------- -------
(DOLLARS IN
THOUSANDS)
CORPORATE OBLIGATIONS - 1.15%
Allstate Life Global Funding, 3.83%, Due 3/1/2010 ++.... $ 100 $ 93
Lehman Brothers Holdings, Inc., 4.05%, Due 6/2/2009 ++.. 105 101
Merrill Lynch & Co., Inc., 3.94%, Due 3/2/2009 ++....... 150 144
Toyota Motor Credit Corp., 5.03%, Due 2/5/2016 ++....... 110 105
-------
TOTAL CORPORATE OBLIGATIONS 443
-------
U.S. AGENCY OBLIGATIONS - 0.25%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.25%
3.919%, Due 2/17/2009 ++................................ 100 96
-------
U.S. TREASURY OBLIGATIONS - 97.16%
3.875%, Due 1/15/2009 #................................. 1,040 1,056
4.25%, Due 1/15/2010 #.................................. 823 854
0.875%, Due 4/15/2010 #................................. 4,489 4,263
3.50%, Due 1/15/2011 #.................................. 1,757 1,808
2.375%, Due 4/15/2011 #................................. 1,431 1,416
3.375%, Due 1/15/2012 #................................. 5,109 5,273
3.00%, Due 7/15/2012 #.................................. 2,799 2,853
1.875%, Due 7/15/2013 #................................. 2,402 2,304
2.00%, Due 1/15/2014 #.................................. 2,874 2,762
2.00%, Due 7/15/2014 #.................................. 1,809 1,736
1.625%, Due 1/15/2015 #................................. 2,381 2,213
1.875%, Due 7/15/2015 #................................. 4,069 3,845
2.00%, Due 1/15/2016 #.................................. 3,738 3,549
2.50%, Due 7/15/2016 #.................................. 2,092 2,069
2.375%, Due 1/15/2017 #................................. 789 770
4.625%, Due 2/15/2017................................... 650 630
-------
TOTAL U.S. TREASURY OBLIGATIONS 37,401
-------
SHARES
--------
SHORT TERM INVESTMENTS - 0.35%
American Beacon Money Market Select Fund @.............. 136,724 137
-------
TOTAL INVESTMENTS - 98.91% (COST $38,742) $38,077
OTHER ASSETS, NET OF LIABILITIES - 1.09% 419
-------
TOTAL NET ASSETS - 100.00% $38,496
=======
See accompanying notes
5
<PG$PCN,008000000>
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
SCHEDULE OF INVESTMENTS
June 30, 2007 (Unaudited)
Percentages are stated as a percent of net assets.
++ The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
# Inflation-Indexed Note.
@ The Fund/Trust is affiliated by having the same investment advisor.
See accompanying notes
6
<PG$PCN,009000000>
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS:
Investments in unaffiliated securities, at value A........... $ 37,940
Investments in affiliated securities, at value B............. 137
Dividends and interest receivable............................ 396
Receivable for fund shares sold.............................. 51
Receivable for expense reimbursement......................... 3
----------
TOTAL ASSETS.............................................. 38,527
----------
LIABILITIES:
Management and investment advisory fees payable (Note 2)..... 15
Administrative service and service fees payable.............. 3
Other liabilities............................................ 13
----------
TOTAL LIABILITIES......................................... 31
----------
NET ASSETS...................................................... $ 38,496
==========
ANALYSIS OF NET ASSETS:
Paid-in-capital.............................................. 39,401
Undistributed net investment income.......................... 1,280
Accumulated net realized loss................................ (1,520)
Unrealized depreciation of investments, futures contracts,
and foreign currency...................................... (665)
----------
NET ASSETS...................................................... $ 38,496
==========
SHARES OUTSTANDING (NO PAR VALUE):
Institutional Class.......................................... 3,955,287
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Institutional Class.......................................... $ 9.73
==========
A Cost of investments in unaffiliated securities................ $ 38,605
B Cost of investments in affiliated securities.................. $ 137
See accompanying notes
7
<PG$PCN,010000000>
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS)
INVESTMENT INCOME:
Dividend income from affiliated securities ......................... $ 25
Interest income .................................................... 1,346
------
TOTAL INVESTMENT INCOME ......................................... 1,371
------
EXPENSES:
Management and investment advisory fees (Note 2) ................... 42
Administrative service fees (Note 2):
Institutional Class ............................................. 19
Custody and fund accounting fees ................................... 2
Professional fees .................................................. 13
Registration fees and expenses ..................................... 12
Prospectus and shareholder reports ................................. 2
Other expenses ..................................................... 1
------
TOTAL EXPENSES .................................................. 91
------
Net fees waived and expenses reimbursed by Manager (Note 2) ........ (14)
------
NET EXPENSES .................................................... 77
------
NET INVESTMENT INCOME ................................................. 1,294
------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments ..................................................... (80)
Foreign currency transactions ................................... 1
Change in net unrealized appreciation or depreciation of:
Investments ..................................................... (420)
------
NET LOSS ON INVESTMENTS ...................................... (499)
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. $ 795
======
See accompanying notes
8
<PG$PCN,011000000>
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
STATEMENT OF CHANGES OF NET ASSETS (IN THOUSANDS)
Six Months
Ended Year Ended
June 30, December
2007 31, 2006
----------- ----------
(unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................................... $ 1,294 $ 926
Net realized loss on investments, futures contracts, and foreign
currency transactions ................................................ (79) (975)
Change in net unrealized appreciation or (depreciation) of
investments, futures contracts, and foreign currency translations .... (420) 357
-------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................. 795 308
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class .................................................. -- (952)
Net realized gain on investments:
Institutional Class .................................................. -- (95)
-------- --------
NET DISTRIBUTIONS TO SHAREHOLDERS ................................. -- (1,047)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ........................................... 15,239 16,407
Reinvestment of dividends and distributions ............................. -- 1,048
Cost of shares redeemed ................................................. (11,330) (13,508)
-------- --------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ........... 3,909 3,947
-------- --------
NET INCREASE IN NET ASSETS ................................................. 4,704 3,208
-------- --------
NET ASSETS:
Beginning of period ..................................................... 33,792 30,584
-------- --------
END OF PERIOD* .......................................................... $ 38,496 $ 33,792
======== ========
*Includes undistributed net investment income of ........................... $ 1,280 $ --
======== ========
See accompanying notes
9
<PG$PCN,012000000>
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Funds (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940 (the
"Act"), as amended, as a no load, 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 AMR Corporation and was organized in 1986 to provide business
management, advisory, administrative and asset management consulting services to
the Trust and other investors.
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. When a price is unavailable from
a pricing service or when the price provided by the pricing service is deemed
not to represent fair value, 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 the 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").
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.
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.
10
<PG$PCN,013000000>
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
Dividends to Shareholders
Dividends from net investment income of the Fund normally will be
declared and paid semi-annually. Distributions, if any, of net realized capital
gains are generally paid annually and recorded on the ex-dividend date.
Currency Translation
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
in 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.
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.
Recently Issued Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
("FIN 48"). FIN 48 provides guidance on how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. The Fund
adopted the provisions of FIN 48 effective January 1, 2007. Tax positions taken
by the Fund have been deemed to meet the more likely than not threshold, and
therefore there have been no adjustments to the Fund's net asset value per
share.
In September 2006, the FASB issued Statement on Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"). This standard
clarifies the definition of fair value for financial reporting, establishes a
framework for measuring fair value and requires additional disclosures about the
use of fair value measurements. FAS 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The Manager is evaluating the impact of FAS 157;
however, it is not expected to have a material impact on the Fund's net assets
or results of operations.
11
<PG$PCN,014000000>
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (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 administrative,
investment advisory, and fund management. Investment assets of the Fund are
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 0.10% 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, 2007 were as follows:
AMOUNTS PAID TO NET AMOUNTS
MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY
FEE RATE FEE ADVISORS MANAGER
- ---------- ---------- --------------- -----------
0.22% $42,232 $23,036 $19,196
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services
Agreement which obligates the Manager to provide or oversee administrative and
management services to the Fund. As compensation for performing the duties
required under the Administrative Services Agreement, the Manager receives an
annualized fee of 0.10% of the average daily net assets of the Fund.
Investment in Affiliated Funds
The Fund is permitted, pursuant to an exemptive order by the
Securities and Exchange Commission ("SEC") and procedures approved by the Board,
to invest up to 25% of its total assets in the American Beacon Money Market
Select Fund (the "Select Fund"). The Fund and the Select Fund have the same
investment advisor and, therefore, are considered to be affiliated. The Manager
serves as investment advisor to the Select Fund and receives from the Select
Fund an annualized fee equal to 0.10% of the Select Fund's average daily net
assets. During the six months ended June 30, 2007, fees earned by the Manager
from the Select Fund were $469.
Interfund Lending Program
Pursuant to an exemptive order by the SEC, the Fund, along with other
registered investment companies having management contracts with the Manager,
may participate in an interfund lending program as a borrower. This program
provides an alternative credit facility allowing the Fund to borrow from other
participating Funds. For the six months ended June 30, 2007, the Fund did not
utilize the credit facility.
12
<PG$PCN,015000000>
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
Reimbursement of Expenses
The Manager agreed to reimburse the Fund to the extent that total
annual fund operating expenses exceed the Fund's expense cap. For the period
ended June 30, 2007, the Manager waived or reimbursed expenses of $13,589.
3. FEDERAL INCOME 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.
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 tax character of distributions paid during the six months ended
June 30, 2007 and the fiscal year ended December 31, 2006 were as follows (in
thousands):
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2007 2006
----------- ------------
(UNAUDITED)
DISTRIBUTIONS PAID FROM:
Ordinary income*.......... $-- $ 952
Tax return of capital..... -- 95
--- ------
TOTAL TAXABLE DISTRIBUTIONS.. $-- $1,047
=== ======
* For tax purposes, short-term capital gains distributions are considered
ordinary income distributions.
As of June 30, 2007, the components of distributable earnings on a tax
basis were as follows (in thousands):
Cost basis of investments for federal income tax purposes... $38,888
Unrealized appreciation..................................... 8
Unrealized depreciation..................................... (819)
-------
Net unrealized appreciation/(depreciation).................. (811)
Undistributed ordinary income............................... 1,279
Undistributed long-term gain/(loss)......................... (1,373)
-------
Distributable earnings...................................... $ (905)
=======
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 sales and current recognition
of unrealized appreciation/(depreciation) on open foreign currency transactions.
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.
13
<PG$PCN,016000000>
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
Accordingly, the following amounts represent current year permanent
differences derived from foreign currency transactions and return of capital
that have been reclassified as of June 30, 2007 (in thousands):
Paid-in-capital................................................. $ --
Undistributed net investment income............................. (14)
Accumulated net realized gain (loss)............................ 14
Unrealized appreciation (depreciation) of investments, futures
contracts and foreign currency............................... --
At June 30, 2007, the capital loss carry forward positions for federal
income tax purposes were $144,311, 974,237 and $254,530, expiring in 2013, 2014
and 2015, respectively.
4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of Investment transactions for the
six months ended June 30, 2007, excluding short-term investments, were
$46,581,136 and $40,994,536, respectively. The Fund had purchases and sales of
U.S. Government securities of $46,014,793 and $40,066,581, respectively.
A summary of the Fund's transactions in the Select Fund for the six
months ended June 30, 2007 is set forth below:
DECEMBER 31, 2006 JUNE 30, 2007
AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE
- --------- ------------------- ----------- ----------- -------------------
Select Fund.... $1,430,704 $17,280,372 $18,574,352 $136,724
5. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares (dollars and
shares in thousands):
Six Months Ended June 30, 2007
INSTITUTIONAL CLASS
-------------------
SHARES AMOUNT
------ --------
Shares sold ......................... 1,579 $ 15,239
Reinvestment of dividends ........... -- --
Shares redeemed ..................... (1,169) (11,330)
------ --------
Net increase in shares outstanding .. 410 $ 3,909
====== ========
Year Ended December 31, 2006
INSTITUTIONAL CLASS
-------------------
SHARES AMOUNT
------ --------
Shares sold ......................... 1,696 $ 16,407
Reinvestment of dividends ........... 109 1,048
Shares redeemed ..................... (1,397) (13,508)
------ --------
Net increase in shares outstanding .. 408 $ 3,947
====== ========
14
<PG$PCN,017000000>
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Institutional Class
----------------------------------------------
Six
Months Year Ended June
Ended December 31, 30 to
June 30, ------------------ December
2007 2006 2005 31, 2004(A)
----------- ------- -------- ---------
(unaudited)
Net asset value, beginning of period ....................... $ 9.53 $ 9.75 $ 10.16 $ 10.00
------- ------- ------- -------
Income from investment operations:
Net investment income ................................... 0.33 0.29 0.56(B) 0.18(B)
Net gains (losses) on securities (both realized and
unrealized) .......................................... (0.13) (0.19) (0.37) 0.21
------- ------- ------- -------
Total income (loss) from investment operations ............. 0.20 0.10 0.19 0.39
------- ------- ------- -------
Less distributions:
Dividends from net investment income .................... -- (0.29) (0.55) (0.23)
Distributions from net realized gains on securities ..... -- (0.05) --(C)
Tax return of capital ................................... -- (0.03) -- --
------- ------- ------- -------
Total distributions ........................................ -- (0.32) (0.60) (0.23)
------- ------- ------- -------
Net asset value, end of period ............................. $ 9.73 $ 9.53 $ 9.75 $ 10.16
======= ======= ======= =======
Total return ............................................... 2.10%(D) 1.05% 1.86% 3.94%(D)
======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ................ $38,496 $33,792 $30,584 $20,943
Ratios to average net assets (annualized):
Expenses, after expense reimbursements
(recoupments) ..................................... 0.40% 0.49% 0.44% 0.46%
Expenses, before expense reimbursements
(recoupments) ..................................... 0.47% 0.49% 0.39% 0.62%
Net investment income, after expense reimbursements
(recoupements) .................................... 6.73% 2.94% 5.45% 3.34%
Net investment income, before expense
reimbursements (recoupments) ...................... 6.66% 2.94% 5.50% 3.18%
Portfolio turnover rate ................................. 110%(D) 259% 355% 190%(D)
(A) The American Beacon Treasury Inflation Protected Securities Fund commenced
active operations on June 30, 2004.
(B) Based on average shares outstanding.
(C) Amount represents less than $0.01 per share.
(D) Not annualized.
15
<PG$PCN,018000000>
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
INTERIM RENEWAL
In prior years, the Board of Trustees ("Board" or "Trustees")
typically has considered the annual renewal of the existing Management Agreement
between American Beacon Advisors, Inc. (the "Manager") and the American Beacon
Funds (the "Trust"), on behalf of the Treasury Inflation Protected Securities
Fund (the "Fund"), and each Investment Advisory Agreement between the Manager
and a sub-advisor at the Board meeting held in the first quarter of each year.
At the November 15, 2006 meeting, the Board decided to conduct these annual
renewals at their second quarter meeting each year to enable the Trustees to
consider more year-end data in their deliberations. At the March 8, 2007 Board
meeting, the Board considered renewal of the Management and Investment Advisory
Agreements on an interim basis until the Board meeting scheduled for the second
quarter, at which meeting the Board would perform a comprehensive review of
factors relevant to an annual renewal.
In connection with the interim renewal, the Board, with the assistance
of independent legal counsel, requested and received certain relevant
information from the Manager. 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. The Board considered
several factors at its March 2007 meeting but did not identify any particular
information that was most relevant to its consideration to renew the Management
and Investment Advisory Agreements, and each Trustee may have afforded different
weight to these factors. The Board determined that certain factors typically
considered in connection with an annual renewal were not material with respect
to an interim renewal.
In determining whether to renew the Management and Investment Advisory
Agreements on an interim basis, the Trustees considered the best interests of
the Fund. The following considerations and conclusions are applicable to the
Fund.
Cost of Services. The Board considered that the fee rate schedules for the
Manager and the sub-advisors had not changed since the last contract renewal.
The Board considered that, in many cases, the Manager has negotiated the lowest
sub-advisory fee a sub-advisor charges for any comparable client accounts.
Nature, Extent and Quality of Services. With respect to the renewal of the
Management Agreement, the Trustees considered that the Manager continues to
provide high-quality services to the Fund at a low cost to investors and
provides a comprehensive compliance program for the Fund. Additionally, the
Manager allocates the assets of the Fund among the Fund's sub-advisors, and
monitors and evaluates the performance of the sub-advisors. Based on this
information, the Board concluded that the nature, extent and quality of the
management and advisory services provided by the Manager and each sub-advisor
were appropriate for the Fund and, thus, supported a decision to renew the
Management and each Investment Advisory Agreement on an interim basis.
Investment Performance. The Board considered the performance reports and
discussions with management at Board and Committee meetings throughout the year.
Based on, among others, these considerations and those noted above,
the Trustees determined that the Fund and its shareholders would benefit from
the Manager's and the sub-advisors' continued management of the Fund until the
next regular Board meeting and approved the renewal of the Agreements on an
interim basis until the next regular Board meeting.
ANNUAL RENEWAL
At its May 25, 2007 meeting, the Board considered the renewal of the
existing Management Agreement between the Manager and the Fund and each
Investment Advisory Agreement between the Manager and a subadvisor. In
preparation for the Board's consideration to renew these Agreements, 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.
16
<PG$PCN,019000000>
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
In addition, the Board's Investment Committee worked with Lipper to
obtain relevant comparative information regarding the performance, fees and
expenses of the Fund. The Investment Committee held a separate meeting on May 4,
2007 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.
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 Fund, or any
other area, including how these changes might affect the Fund;
- a copy of the firm's most recent audited or unaudited financial
statements as well as its SEC Form ADV registration statement;
- a summary of any material past, 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 the
Fund;
- a description of any payments by the firm to support the Fund's
marketing efforts;
- 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;
- an evaluation of other benefits to the firm or Fund as a result of
their relationship, if any;
- confirmation that the firm's financial condition does not raise
concerns that the firm would be unable to continue providing the same
scope and quality of services to the Fund;
- a description of the scope of portfolio management services provided
to the Fund and the firm's other clients, including other registered
investment companies, whether such services differ, and any advantages
or disadvantages that might accrue to the Fund due to the firm's
involvement in other activities;
- a description of the personnel who are assigned primary responsibility
for managing the Fund, including any changes during the past year, and
a discussion of the adequacy of current and projected staffing levels
to service the Fund;
- a description of the basis upon which portfolio managers are
compensated, including any "incentive" arrangements;
- 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 the most favorable execution and the use of any affiliated
broker-dealers;
- a discussion of whether the firm receives, with respect to the Fund,
other compensation, including any payment for order flow or ECN
liquidity rebates;
- a description of any actual or potential conflicts of interest
anticipated in managing Fund assets;
- a description of trade allocation procedures among accounts managed by
the firm;
- a summary of any material changes to the firm's compliance program
with regard to federal, state, corporate and Fund requirements and a
certification to the reasonable design of the compliance program;
- a discussion of any material compliance problems and remedial actions;
17
<PG$PCN,020000000>
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
- information regarding the firm's code of ethics, insider trading
policy and disaster recovery plan, including a description of any
material changes thereto;
- 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 Fund.
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 the Fund to comparable investment
companies and appropriate indices, including comments on the relative
performance of each subadvisor and the 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 Manager's securities lending practices and the
fees received from such practices;
- a description of any revenue sharing activities with respect to the
Fund;
- a discussion of any rebate arrangements between the Manager and
service providers to the Fund 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 the Fund and each subadvisor to the Fund; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
The Board also obtained an analysis provided by Lipper that compared: (i)
investment performance of the Fund versus comparable investment companies and
appropriate indices; (ii) total Fund expenses versus comparable mutual funds,
and (iii) the Fund's investment advisory fees versus comparable mutual funds.
References below to the Fund's Lipper peer group are to the group of comparable
mutual funds included in the analysis provided by Lipper.
The Trustees also received a memorandum from their legal counsel detailing
the Board's responsibilities pertaining to the renewal of the Management and
Investment Advisory Agreements. This memorandum explained the regulatory
requirements surrounding the Trustees' process for evaluating investment
advisors and the terms of the contracts.
Provided below is an overview of the primary factors the Board considered
at its May 25, 2007 meeting. The Board did not identify any particular
information that was most relevant to its consideration to renew the Management
and Investment Advisory Agreements, and each Trustee may have afforded different
weight to the various factors.
CONSIDERATIONS WITH RESPECT TO ALL SERIES OF THE TRUST
In determining whether to approve the continuance of the Management
Agreement and each Investment Advisory Agreement, the Trustees considered the
best interests of the Fund separately from the other series of the Trust. In
addition, while the Management Agreement and the Investment Advisory Agreements
for the Fund were considered at the same Board meeting, the Board considered the
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 the Fund and the investment advisor; (3) the Manager's or subadvisor's cost
for providing the services and the profitability of the advisory business to the
Manager or subadvisor; (4) the extent to which economies of scale have been
taken into account in setting the fee schedule; (5) whether fee levels reflect
these economies of scale for the benefit of Fund investors; (6) comparisons of
services and fees
18
<PG$PCN,021000000>
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
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
material submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the
Management Agreement, the Board considered: the background and experience of key
investment personnel and the Manager's ability to retain them; the Manager's
disciplined investment approach and goal to provide consistent above average
long-term performance at a low cost; the Manager's continuing efforts to add new
series and share classes to enhance the Trust's' product line; the Manager's
record in building improved compliance, control and credit functions that reduce
risks to the Trust; the addition of personnel to manage the series of the Trust,
promote sales and improve services, including the addition of a separate new
information technology (IT) department at the Manager; the high rankings
received by the Trust in service surveys; and the active role played by the
Manager in monitoring and, as appropriate, recommending replacements for the
investment subadvisors.
With respect to the renewal of the Investment Advisory Agreements, the
Trustees considered the background and experience of each subadvisor's
investment personnel responsible for managing series of the Trust, 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 series of the Trust
and, thus, supported a decision to renew the Management and each Investment
Advisory Agreement.
Investment Performance. The Board evaluated the comparative information provided
by Lipper and the Manager regarding investment performance by each series of the
Trust relative to its benchmark index(es) and peer group. With respect to Lipper
data, 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 the Fund's
performance appears below under "Additional Considerations and Conclusions with
Respect to the Fund."
Cost of Services and Profits Realized. In analyzing the cost of services and
profitability of the Manager and a subadvisor by series, the Board considered
the revenues earned and the expenses incurred by the Manager and those
subadvisors that provided such data. The profitability levels were noted at both
an individual series level and at an aggregate level for all series of the
Trust.
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. The Board further considered that each sub-advised
series 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 Trust and to
compensate third-party administrators and broker-dealers for services to Trust
shareholders. In addition, the Board considered that the Manager receives
management fees for overseeing the securities lending relationships on behalf of
various series of the Trust.
In analyzing the cost of services and profitability of each subadvisor
in connection with its investment advisory services to a series, 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
19
<PG$PCN,022000000>
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
nature of the relationship between the Manager and the subadvisors with respect
to the negotiation of subadvisory fees.
Based on the foregoing information, the Board concluded that the
profitability levels were reasonable in light of the services performed by the
Manager and the subadvisors. A discussion regarding the Board's considerations
with respect to the Fund's fee rates is set forth below under "Additional
Considerations and Conclusions with Respect to the 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 each series of the Trust grows and whether fee levels reflect
these economies of scale for the benefit of Trust shareholders. In this regard,
the Board considered that the Manager has negotiated breakpoints in the
subadvisory fee rates. The Board also noted, for purposes of determining the fee
rates chargeable to the Trust, many subadvisors have agreed to take into account
other assets of AMR Corporation and its pension plans that are managed by the
subadvisors. Thus, many series of the Trust are able to receive lower effective
fee rates. This fee arrangement also benefits AMR Corporation and its pension
plans. The Board also noted that the Trust had experienced substantial recent
asset growth.
The Board also considered the Manager's representations that its costs
have increased due primarily to greater service provider and regulatory costs.
The Manager also represented that it anticipates further economies of scale
would be largely offset by higher costs of adding and retaining qualified
personnel, improving technology and increasing demands on its advisory business.
Based on the foregoing information, the Board concluded that the
Manager and subadvisor fee schedules provide for a reasonable sharing of
benefits from any economies of scale with each series of the Trust.
BENEFITS DERIVED FROM THE RELATIONSHIP WITH THE TRUST. 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 Trust, 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. In addition, the Board noted that
the Manager provides services to the Trust at a relatively low cost, and the
benefit plans of AMR Corporation have invested a substantial number of assets in
the Trust, which helps reduce costs. The Board also considered that certain of
the subadvisors reimburse the Manager for certain of its costs relating to
distribution activities for the Trust.
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 Trust appear to be fair and reasonable.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE FUND
The performance comparisons below were made versus the Fund's Lipper
peer universe median. References to the Lipper expense group below are to the
group of comparable mutual funds included in the analysis provided to the
Trustees by Lipper. All performance comparisons are for periods ended March 31,
2007, unless otherwise noted.
In considering the renewal of the Management Agreement with respect to
the Fund, the Trustees considered the following additional factors: (1) the Fund
outperformed its peer universe median for the one- and two-year periods; (2) the
Manager's explanation regarding the limitations of Lipper's methodology on the
selection of a particular peer group for the Fund; (3) the actual management fee
(including administrative fees) and the total expense ratio of the Institutional
Class of Fund shares was lower than its Lipper expense group median; (4) the
Manager's explanation that the Lipper data does not reflect the imposition of a
more recent fee waiver for the Fund; and (5) the Manager contractually agreed to
continue to waive fees and/or
20
<PG$PCN,023000000>
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
reimburse expenses to the extent necessary to maintain a competitive total
expense ratio for the Fund's Institutional Class.
In considering the renewal of the Investment Advisory Agreements with
Brown Brothers Harriman & Co. ("BBH") and NISA Investment Advisors LLC ("NISA"),
the Trustees considered the following additional factors: (1) BBH and NISA each
outperformed the peer universe median for the one- and two-year periods; (2) BBH
underperformed its market benchmark index with respect to its allocated portion
of the Fund's assets for the one-year period ended December 31, 2006; (3) NISA
outperformed its market benchmark index with respect to its allocated portion of
the Fund's assets for the 2006 and 2005 calendar years; (4) the fee schedules of
each subadvisor include breakpoints, which reduce fee rates as the assets of the
Fund increase; (5) each subadvisor also represented that it does not charge a
lower advisory fee to any other comparable clients; and (6) the Manager's
recommendation to continue to retain each subadvisor.
Based on these considerations and those noted above with respect to
all Fund, the Trustees (1) concluded that the fees paid to the Manager and the
subadvisors under the Management and Investment Advisory Agreements are fair and
reasonable, (2) determined that the Fund and its shareholders would benefit from
the continued management of the Fund by the Manager and subadvisors and (3)
approved the renewal of the Management and Investment Advisory Agreements with
respect to the Fund.
21
<PG$PCN,024000000>
(AMERICAN BEACON FUNDS(SM) LOGO)
DELIVERY OF DOCUMENTS
To reduce expenses, your financial institution may mail only one copy of the
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 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:
(KEYBOARD GRAPHIC) (MOUSE GRAPHIC)
BY E-MAIL: ON THE INTERNET:
american_beacon.funds@ambeacon.com Visit our website at
www.americanbeaconfunds.com
(TELEPHONE GRAPHIC) (MAILBOX GRAPHIC)
BY TELEPHONE: BY MAIL:
Call (800) 658-5811 American Beacon Funds
P.O. Box 219643
Kansas City, MO 64121-9643
AVAILABILITY OF QUARTERLY PORTFOLIO AVAILABILITY OF PROXY VOTING POLICY AND
SCHEDULES RECORDS
In addition to the Schedule of A description of the policies and
Investments provided in each procedures the Fund uses to determine
semi-annual and annual report, the how to vote proxies relating to
Fund files a complete schedule of its portfolio securities is available in the
portfolio holdings with the Fund's Statement of Additional
Securities and Exchange Commission Information, is available free of charge
("SEC") on Form N-Q as of the first on the Fund's website
and third fiscal quarters. The Fund's (www.americanbeaconfunds.com) and by
Forms N-Q are available on the SEC's calling 1-800-967-9009 or by accessing
website at www.sec.gov. The Forms N-Q the SEC's website at www.sec.gov. The
may also be reviewed and copied at Fund's proxy voting record for the most
the SEC's Public Reference Room, 450 recent year ended June 30 is filed
Fifth Street, NW, Washington, DC annually with the SEC on Form N-PX. The
20549. Information regarding the Fund's Forms N-PX are available on the
operation of the SEC's Public SEC's website at www.sec.gov. The Fund's
Reference Room may be obtained by proxy voting record may also be obtained
calling 1-800-SEC-0330. A complete by calling 1-800-967-9009.
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 month.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FORESIDE FUND SERVICES
TRUST SERVICES FIRM Portland, Maine
Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP
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.
American Beacon Funds is a service mark of AMR Corporation. American Beacon
Treasury Inflation Protected Securities Fund is a service mark of American
Beacon Advisors, Inc
SAR 6/07
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON FUND(SM) LOGO)
Semi-Annual Report
(GRAPHICS)
June 30, 2007
MONEY MARKET FUND
U.S GOVERNMENT MONEY MARKET 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
President's Message .............................................. 1
Financial Highlights
Money Market Fund.............................................. 16
U.S. Government Money Market Fund ............................. 20
Schedule of Investments
Money Market Portfolio ........................................ 22
U.S. Government Money Market Portfolio ........................ 27
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
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, 2007
(PHOTO OF DOUGHS G. HERRING)
Fellow Shareholders,
I am pleased to present to you the Semi-Annual Report for the American
Beacon Money Market Fund and the U.S. Government Money Market Fund for the six
months ended June 30, 2007.
For this period, both Funds performed well versus their respective Lipper
peer groups. The American Beacon Money Market Fund - Institutional Class and -
Cash Management Class returned 2.60% and 2.62%, respectively, outperforming the
Lipper Institutional Money Market Funds Average return of 2.47%. The American
Beacon U.S. Government Money Market Fund - Cash Management Class gained 2.59%
versus the Lipper Institutional U.S. Government Money Market Funds Average
return of 2.46%.
Please review the enclosed portfolio listings and detailed financial data.
As always, we welcome the opportunity to serve your financial needs. Should you
have any questions about the enclosed information, please do not hesitate to
contact us at 800-967-9009. You may access Fund and account information at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
American Beacon Funds.
Sincerely,
/s/ Douglas G. Herring
----------------------
Douglas G. Herring
President
American Beacon Funds
1
ECONOMIC OVERVIEW
JUNE 30, 2007 (Unaudited)
Annualized Gross Domestic Product ("GDP") growth came in at an anemic 0.7%
during the first quarter of 2007, the lowest rate of growth in four years.
Inventory drawdowns, a widening trade deficit and an ongoing slump in the
housing market were the main contributors to the slowdown. GDP growth in the
second quarter recovered to an estimated 3.4% annualized rate as consumer
spending held strong and business investment rebounded. The labor market
remained a bright spot for the economy. Higher wages enabled consumers to keep
spending despite increasing energy prices and declining home values. Payroll
gains averaged 148,000 per month during the second quarter of 2007 and the
unemployment rate remained near a six-year low at 4.5% in June.
The Federal Open Market Committee ("Fed") left rates unchanged at 5.25% at
both the May and June meetings. This marked eight consecutive meetings with no
movement from the Fed. In its June statement, the Fed acknowledged that the
economy was expected to expand at a moderate pace and that core inflation
measures had improved modestly. However, Fed officials remained concerned about
the high level of resource utilization and stated that "a sustained moderation
in inflation pressures has yet to be convincingly demonstrated." Thus the Fed's
inflation bias remained in place after the June meeting.
Though economic growth recovered in the second quarter and the Fed has been
unremitting in its commitment to contain inflation, the market is fearful that
subprime mortgage difficulties could spill over into the broader economy. As
such, the Fed continues to maintain ample flexibility by stating that "future
policy adjustments will depend on the evolution of the outlook for both
inflation and economic growth."
2
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
JUNE 30, 2007 (Unaudited)
The Money Market Fund will maintain the strategy of purchasing high quality
commercial paper maturing in 3 months or less and 3-month London Interbank
Offered Rate (LIBOR) based variable rate securities until it becomes apparent
that the Fed is on the verge of lowering interest rates. In addition, we remain
conservative on credit risk given the volatile credit spread environment and
effects of the subprime mortgage difficulties.
For the six months ended June 30, 2007, the total return of the Cash
Management Class of the American Beacon Money Market Fund was 2.62%. The Fund
outperformed the Lipper Institutional Money Market Average return of 2.47% by 15
basis points (0.15%). Lipper Inc. ranked the Cash Management Class of the Fund
17th among 350, 20th among 298, and 18th among 252 Institutional Money Market
Funds for the one-year, three-year and five-year periods ended June 30, 2007,
respectively. The Lipper Institutional Money Market Average is calculated by
taking an arithmetic average of the returns of the mutual funds in the Lipper
Institutional Money Market Funds category. Lipper is an independent mutual fund
research and ranking service that ranks mutual funds in various categories by
making comparative calculations using total returns.
Cash Management Class Total Returns as of June 30, 2007
1year 5 Years* 10 Years*
----- -------- ---------
American Beacon Money Market Fund 5.36% 2.80% 3.91%
Lipper Institutional Money Market
Funds Average 5.04% 2.51% 3.68%
* Annualised
ANNUALIZED TOTAL
RETURNS AS OF
6/30/2007
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Cash Management
Class (1,2,5) ................... 5.36% 2.80% 3.91%
Institutional Class (1,3,5) ..... 5.32% 2.71% 3.86%
PlanAheadClass (1,5) ........... 5.03% 2.44% 3.56%
BBH Comset Class (1,4,5)....... 5.36% 2.80% 3.91%
1. Performance shown is historical and may not be indicative of future
returns. Investment returns will vary, and shares may be worth more or less
at redemption than at original purchase. An investment in this Fund is
neither insured nor guaranteed by the Federal Deposit Insurance Corporation
or any other government agency. Although the Fund seeks to preserve the
value of an investment at $1.00 per share it is possible to lose money by
investing in the Fund. 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 and ten-year periods represent the total
returns achieved by the Institutional Class from 7/1/97 to 12/1/01, the
inception date of the Cash Management Class, and the returns of the Cash
Management Class thereafter. Expenses of the Cash Management Class are
lower than those of the Institutional Class. Therefore, total returns shown
are lower than they would have been had the Cash Management Class been in
place since 7/1/97. A portion of the fees charged to the Cash Management
Class of the Fund has been waived. Performance prior to waiving fees was
lower than the actual returns shown.
3. A portion of the fees charged to the Institutional Class of the Fund has
been waived since 2006. Performance prior to waiving fees was lower than
the actual returns shown for periods since 2006.
4. Fund performance represents the total returns achieved by the Institutional
Class from 7/1/97 to 12/1/01, the total returns achieved by the Cash
Management Class from 12/1/01 up to 4/2/07, the inception date of the BBH
Comset Class, and the returns of the BBH Comset Class thereafter. Expenses
of the BBH Comset Class are lower than those of the Institutional and Cash
Management Classes through 12/31/03. Therefore, total returns shown through
12/31/03 are lower than they would have been had the BBH Comset Class been
in place during that period. Expenses of the BBH Comset Class have been the
same as those of the Cash Management Class since 1/1/04.
5. The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Cash Management, Institutional, PlanAhead and the
BBH Comset Class shares was 0.20%, 0.23%, 0.49% and 0.19%, respectively.
After expense reimbursement, the net expense ratio set forth in the most
recent Fund prospectus for the Cash Management, Institutional and BBH
Comset Class shares was 0.15%, 0.18% and 0.15%, 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.
3
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
JUNE 30, 2007 (Unaudited)
PORTFOLIO STATISTICS AS OF JUNE 30, 2007
CASH BBH
MANAGEMENT INSTITUTIONAL PLANAHEAD COMSET
CLASS CLASS CLASS CLASS
---------- ------------- --------- -------
7-day
Current
Yield* 5.24% 5.19% 4.89% 5.24%
7-day
Effective
Yield* 5.38% 5.32% 5.01% 5.38%
30-day Yield* 5.22% 5.17% 4.87% 5.22%
Weighted
Avg. Maturity 35 Days 35 Days 35 Days 35 Days
Moody's
Rating Aaa N/A N/A Aaa
S&P Rating AAAm N/A N/A AAAm
* Annualized. You may call 1-800-388-3344 to obtain the Fund's current seven
day yield. Yield is a more accurate reflection of the Fund's current
earnings than total returns.
TOP TEN ISSUERS AS OF JUNE 30, 2007
% OF
NET ASSETS**
------------
General Electric Capital Corp. 5.2%
Royal Bank of Scotland plc 5.2%
Bank of America 4.9%
Lehman Brothers 4.8%
Calyon N.Y. 4.7%
Citigroup 4.7%
FCAR Owner Trust, Series I 4.6%
Natixis 4.5%
US Bank, NA 4.0%
Toyota Motor Credit Corp. 3.8%
** Percent of net assets of American Beacon Master Money Market Portfolio.
ASSET ALLOCATION AS OF JUNE 30, 2007
% OF
NET ASSETS**
------------
Bank CDs, TDs and Notes 36.8%
Corporate Notes 34.8%
Commercial Paper 20.2%
Repurchase Agreements 8.6%
Funding Agreements 0.9%
Liabilities, Net of Other Assets -1.3%
** Percent of net assets of American Beacon Master Money Market Portfolio.
4
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
JUNE 30, 2007 (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, 2007 through June 30,
2007.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in these lines, 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 "Actual" line under the heading "Expenses Paid During Period" for the
applicable Class to estimate the expenses you paid on your account during this
period. Shareholders of the PlanAhead Class that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide 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. Shareholders
of the PlanAhead Class that invest in the Fund through an IRA may be subject to
a custodial IRA fee of $12 that is typically deducted each December. If your
account was subject to a custodial IRA fee during the period, your costs would
have been $12 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 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" lines of the
table are 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 Expenses Paid
Account Account During Period*
Value Value 1/1/07-
1/1/07 06/30/07 06/30/07
--------- --------- --------------
CASH MANAGEMENT CLASS
Actual ..................... $1,000.00 $1,026.20 $0.75
Hypothetical (5% return
before expenses) ........... $1,000.00 $1,024.05 $0.75
INSTITUTIONAL CLASS
Actua ...................... $1,000.00 $1,025.99 $0.95
Hypothetical (5% return
before expenses) ........... $1,000.00 $1,023.85 $0.95
PLANAHEAD CLASS
Actual ..................... $1,000.00 $1,024.62 $2.26
Hypothetical (5% return
before expenses) ........... $1,000.00 $1,022.56 $2.26
Beginning Ending Expenses Paid
Account Account During Period**
Value Value 4/2/07-
4/2/07 06/30/07 06/30/07
--------- --------- ---------------
BBH COMSET CLASS
Actual .................... $1,000.00 $1,012.93 $0.37
Hypothetical (5% return
before expenses) .......... $1,000.00 $1,011.96 $0.37
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.15%, 0.19%, 0.45% for the Cash Management,
Institutional and PlanAhead 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.
** Expenses are equal to the Fund's annualized expense ratios for the period
of 0.15% for the BBH ComSet Class 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 (90) by days in the year (365) to
reflect the half-year period.
5
PERFORMANCE OVERVIEW
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM)
JUNE 30, 2007 (Unaudited)
The U.S. Government Money Market Fund will maintain the strategy of
primarily transacting overnight repurchase agreements until it becomes more
apparent that the Fed is on the verge of lowering interest rates. We remain
conservative on credit risk given the volatile credit spread environment and
effects of the subprime mortgage difficulties.
For the year ended June 30, 2007, the total return of the Cash Management
Class of the American Beacon U.S. Government Money Market Fund was 2.59%. The
Fund outperformed the Lipper Institutional U.S. Government Money Market Average
return of 2.46% by 13 basis points (0.13%). Lipper Inc. ranked the Cash
Management Class of the Fund 8th among 148, 8th among 106 and 7th among 66
Institutional U.S. Government Money Market Funds for the one-year, five-year and
ten-year periods ended June 30, 2007, respectively. The Lipper Institutional
U.S. Government Money Market Average is calculated by taking an arithmetic
average of the returns of the mutual funds in the Lipper Institutional U.S.
Government Money Market Funds category. Lipper is an independent mutual fund
research and ranking service that ranks mutual funds in various categories by
making comparative calculations using total returns.
Cash Management Class Total Returns as of June 30, 2007
(PERFORMANCE GRAPH)
1year 5 Years* 10 Years*
----- -------- ---------
American Beacon U.S.
Government Money Market Fund 5.29% 2.74% 3.81%
Lipper Institutional U.S.
Government Money Market FundS
Average 5.02% 2.50% 3.62%
* Annualized
ANNUALIZED TOTAL RETURNS
AS OF 6/30/2007
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Cash Management Class
(1,2,4)................. 5.29% 2.74% 3.81%
PlanAhead Class (1,3,4).... 4.82% 2.31% 3.43%
1 Performance shown is historical and may not be indicative of future
returns. Investment returns will vary, and shares may be worth more or less
at redemption than at original purchase. An investment in this Fund is
neither insured nor guaranteed by the Federal Deposit Insurance Corporation
or any other government agency. Although the Fund seeks to preserve the
value of an investment at $1.00 per share it is possible to lose money by
investing in the Fund. 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 Prior to December 1, 2001, the Cash Management Class of the Fund was known
as the Institutional Class. A portion of the fees charged to the Cash
Management Class of the Fund has been waived since 2002. Performance prior
to waiving fees was lower than actual returns shown for periods since 2002.
3 A portion of the fees charged to the PlanAhead Class of the Fund has been
waived since 2003. Performance prior to waiving fees was lower than the
actual returns shown for periods since 2003.
4 The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Cash Management and the PlanAhead Class shares was
0.64% and 1.02%, respectively. After expense reimbursement, the net expense
ratio set forth in the most recent Fund prospectus for the Cash Management,
Institutional and BBH Comset Class shares was 0.15% and 0.63%,
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.
PORTFOLIO STATISTICS AS OF JUNE 30, 2007
CASH
MANAGEMENT PLANAHEAD
CLASS CLASS
---------- ---------
7-day Current Yield* 5.23% 4.73%
7-day Effective Yield* 5.37% 4.85%
30-day Yield* 5.19% 4.69%
Weighted Avg. Maturity 13 Days 13 Days
Moody's Rating Aaa N/A
S&P Rating AAAm N/A
* Annualized. You may call 1-800-388-3344 to obtain the Fund's current seven
day yield. Yield is a more accurate reflection of the Fund's current
earnings than total returns.
6
PERFORMANCE OVERVIEW
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM)
JUNE 30, 2007 (Unaudited)
ASSET ALLOCATION AS OF JUNE 30, 2007
% OF
NET ASSETS**
------------
Repurchase Agreements 94.7%
Government Securities 5.2%
Net Other Assets 0.1%
** Percent of net assets of the American Beacon Master U.S. Government Money
Market Portfolio.
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, 2007 through June 30,
2007.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in these lines, 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 "Actual" line under the heading "Expenses Paid During Period" for the
applicable Class to estimate the expenses you paid on your account during this
period. Shareholders of the PlanAhead Class that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide 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. Shareholders
of the PlanAhead Class that invest in the Fund through an IRA may be subject to
a custodial IRA fee of $12 that is typically deducted each December. If your
account was subject to a custodial IRA fee during the period, your costs would
have been $12 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 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" lines of the
table are 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 Expenses Paid
Account Account During Period*
Value Value 1/1/07-
1/1/07 06/30/07 06/30/07
--------- --------- --------------
CASH MANAGEMENT CLASS
Actual . . . . . . . . . . $1,000.00 $1,025.93 $0.83
Hypothetical (5% return
before expenses) . . . . . $1,000.00 $1,023.85 $0.82
PLANAHEAD CLASS
Actual . . . . . . . . . . $1,000.00 $1,023.46 $3.26
Hypothetical (5% return
before expenses) . . . . . $1,000.00 $1,021.77 $3.26
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.19% and 0.65% for the Cash Management and PlanAhead
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.
7
AMERICAN BEACON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
ASSETS:
Investment in Portfolio, at value ........................ $ 927,269 $ 22,174
Receivable for fund shares sold .......................... 86 --
Receivable from Manager for expense reimbursement
(Note 2) .............................................. 155 1
Prepaid expenses ......................................... 78 11
------------ -----------
TOTAL ASSETS .......................................... 927,588 22,186
------------ -----------
LIABILITIES:
Payable for fund shares redeemed ......................... 88 --
Dividends payable ........................................ 754 29
Administrative service and service fees payable
(Note 2) .............................................. 72 1
Distribution fees payable (Note 2) ....................... 1 --
Other liabilities ........................................ 5 9
------------ -----------
TOTAL LIABILITIES ..................................... 920 39
------------ -----------
NET ASSETS .................................................. $ 926,668 $ 22,147
============ ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital .......................................... 926,668 22,147
============ ===========
NET ASSETS .................................................. $ 926,668 $ 22,147
SHARES OUTSTANDING (NO PAR VALUE):
Cash Management Class .................................... 622,413,677 20,478,365
============ ===========
Institutional Class ...................................... 224,681,036 N/A
============ ===========
PlanAhead Class .......................................... 59,105,741 1,669,039
============ ===========
BBH ComSet Class ......................................... 20,467,642 N/A
============ ===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Cash Management Class .................................... $ 1.00 $ 1.00
============ ===========
Institutional Class ...................................... $ 1.00 N/A
============ ===========
PlanAhead Class .......................................... $ 1.00 $ 1.00
============ ===========
BBH ComSet Class ......................................... $ 1.00 N/A
============ ===========
See accompanying notes
8
AMERICAN BEACON FUNDS
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Interest income ................................. $31,526 $246
Portfolio expenses .............................. (632) (5)
------- ----
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO 30,894 241
------- ----
FUND EXPENSES:
Administrative service fees (Note 2):
Cash Management Class ........................ 240 1
Institutional Class .......................... 151 --
PlanAhead Class .............................. 76 1
Platinum Class ............................... 81 10
BBH ComSet Class ............................. 3 --
Transfer agent fees:
Cash Management Class ........................ 11 --
Institutional Class .......................... 5 --
PlanAhead Class .............................. 4 3
BBH ComSet Class ............................. 2 --
Professional fees ............................... 9 7
Registration fees and expenses .................. 42 29
Service fees - PlanAhead Class (Note 2) ......... 191 2
Distribution fees - Platinum Class (Note 2) ..... 31 4
Prospectus and shareholder reports .............. 26 1
Other expenses .................................. -- 4
------- ----
TOTAL FUND EXPENSES .......................... 872 62
------- ----
Less waiver and reimbursement of expenses (Note 2) . (230) (42)
------- ----
NET FUND EXPENSES ............................... 642 20
------- ----
NET INVESTMENT INCOME .............................. 30,252 221
------- ----
REALIZED GAIN ALLOCATED FROM PORTFOLIO:
Net realized gain on investments ................ 10 --
------- ----
NET GAIN ON INVESTMENTS ...................... 10 --
------- ----
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $30,262 $221
------- ----
See accompanying notes
9
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
JUNE 30, 2007 (UNAUDITED)(IN THOUSANDS)
MONEY MARKET U.S. GOVERNMENT MONEY MARKET
------------------------------- -------------------------------
Year ended Year ended
Six Months ended December 31, Six Months ended December 31,
June 30, 2007 2006 June 30, 2007 2006
---------------- ------------ ---------------- ------------
(unaudited) (unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ....................... $ 30,252 $ 36,739 $ 221 $ 607
Net realized gain on investments ............ 10 1 -- --
NET INCREASE IN NET ASSETS RESULTING FROM
----------- ----------- -------- --------
OPERATIONS ............................ 30,262 36,740 221 607
----------- ----------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Cash Management Class .................... (17,905) (21,235) (109) (304)
Institutional Class ...................... (7,833) (4,754) -- --
PlanAhead Class .......................... (3,757) (9,290) (45) (114)
Platinum Class ........................... (544) (1,460) (67) (189)
BBH ComSet Class ......................... (212) -- -- --
Net realized gain on investments:
Cash Management Class .................... (6) -- -- --
Institutional Class ...................... (3) -- -- --
PlanAhead Class .......................... (2) (1) -- --
Platinum Class ........................... -- -- -- --
BBH ComSet Class ......................... -- -- -- --
----------- ----------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS ......... (30,262) (36,740) (221) (607)
----------- ----------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ............... 3,817,043 5,755,911 31,546 39,131
Reinvestment of dividends and distributions . 25,802 32,640 79 225
Cost of shares redeemed ..................... (4,126,659) (5,091,891) (19,116) (58,084)
----------- ----------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS ............ (283,814) 696,660 12,509 (18,728)
----------- ----------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS .......... (283,814) 696,660 12,509 (18,728)
----------- ----------- -------- --------
NET ASSETS:
Beginning of period ......................... 1,210,482 513,822 9,638 28,366
----------- ----------- -------- --------
END OF PERIOD ............................... $ 926,668 $ 1,210,482 $ 22,147 $ 9,638
=========== =========== ======== ========
See accompanying notes
10
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)(IN THOUSANDS)
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, no-load, open-end management investment
company with separate series. The following series are included in this report:
American Beacon Money Market and American Beacon U.S. Government Money Market
Funds (each a "Fund" and collectively, the "Funds").
The BBH Comset Class of the Money Market Fund commenced operations on April
2, 2007. The Platinum Class of the Funds was fully liquidated effective May 31,
2007.
Each Fund invests all of its investable assets in the corresponding
portfolio of the American Beacon Master Trust, an open-end diversified
management investment company, as follows:
AMERICAN BEACON: (ARROW) invests assets in (ARROW) AMERICAN BEACON MASTER TRUST:
Money Market Fund Money Market Portfolio
U.S. Government Money Market Fund U.S. Government Money Market Portfolio
Each Fund has the same investment objectives as its corresponding American
Beacon Master Trust Portfolio. The value of such investment reflects each Fund's
proportionate interest in the net assets of the corresponding portfolio (5.5%
and 2.8% at June 30, 2007 of the American Beacon Master Trust Money Market and
U.S. Government Money Market Portfolios, respectively) (each a "Portfolio" and
collectively the "Portfolios"). The financial statements of the Portfolios are
included elsewhere in this report and should be read in conjunction with the
Funds' financial statements.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation and was organized in 1986 to provide business management,
advisory, administrative and asset management consulting services to the Trust
and other investors.
The following is a summary of the significant accounting policies followed
by the Funds.
Class Disclosure
Each Fund has multiple classes of shares designed to meet the needs of
different groups of investors. Please note that not all Funds offer all classes.
The following table sets forth the differences amongst the classes:
CLASS: OFFERED TO: SERVICE AND DISTRIBUTION FEES:
- ------ ------------------------------------ ----------------------------------
CASH MANAGEMENT CLASS Investors making an initial Administrative Service Fee - 0.07%
investment of $10 million for Money
Market and $2 million for U.S.
Government Money Market, or
investors investing through an
intermediary
INSTITUTIONAL CLASS Investors making an initial Administrative Service Fee - 0.10%
investment of $2 million
PLANAHEAD CLASS General public and investors Administrative Service Fee - 0.10%
investing through an intermediary Service Fee - 0.25%
BBH COMSET Investors making an initial Administrative Service Fee - 0.08%
investment of at least $10 million
in BBH ComSet(SM) who meet the
eligibility requirements established
by Brown Brothers Harriman & Co.
Valuation of Investments
The Funds record their investment in the Portfolios at fair value.
Valuation of securities by the Portfolios is discussed in Note 1 of the
Portfolios' Notes to Financial Statements, which are included elsewhere in this
report.
11
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 2007 (UNAUDITED)(IN THOUSANDS)
Investment Income and Dividends to Shareholders
Each Fund records its share of net investment income (loss) and realized
gain (loss) in the Portfolio each day. All net investment income (loss) and
realized gain (loss) of each Portfolio are allocated pro rata among the
corresponding Fund and other investors in each Portfolio at the time of such
determination. The Funds generally declare dividends daily from net investment
income and net short-term capital gain, if any, payable monthly.
Dividends to shareholders are determined in accordance with federal income
tax principles that may treat certain transactions differently than U.S.
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.
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.
Recently Issued Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
("FIN 48"). FIN 48 provides guidance on how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing each Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. The Funds
adopted the provisions of FIN 48 effective January 1, 2007. Tax positions taken
by the Funds have been deemed to meet the more likely than not threshold, and
therefore, there have been no adjustments to the Funds' net asset value per
share.
In September 2006, the FASB issued Statement on Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"). This standard
clarifies the definition of fair value for financial reporting, establishes a
framework for measuring fair value and requires additional disclosures about the
use of fair value measurements. FAS 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The Manager is evaluating the impact of FAS 157;
however, it is not expected to have a material impact on the Funds' net assets
or results of operations.
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.
12
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 2007 (UNAUDITED)(IN THOUSANDS)
2. TRANSACTIONS WITH AFFILIATES
Administrative Services Agreement
As compensation for providing administrative services to the Funds, the
Manager receives an annualized fee of 0.10% of the average daily net assets of
each of the Institutional and PlanAhead Classes of the Funds, 0.08% of the
average daily net assets of the BBH Class of the Money Market Fund and 0.07% of
the Cash Management Class of the Funds.
Distribution Plan
The Trust 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 Funds for distribution purposes. However, the Plan authorizes the
fees received 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.
Service Agreement
The Manager and the Trust entered into a Service Agreement which obligates
the Manager to oversee additional shareholder servicing of the PlanAhead Class.
As compensation for performing the duties required under the Service Agreement,
the Manager receives 0.25% based on the daily net assets of the PlanAhead Class.
Reimbursement and Waiver of Expenses
The Manager contractually agreed to reimburse the following Funds for
distribution and other expenses through February 29, 2008 to the extent total
annual fund operating expenses exceed the following amounts:
FUND CLASS EXPENSE CAP AMOUNT
- ---- --------------- ----------- -------
Money Market Fund Institutional 0.18%** $50,430
Money Market Fund Cash Management 0.15% 163,573
U.S. Government Money Market Fund Cash Management 0.15%* 1,290
U.S. Government Money Market Fund PlanAhead 0.65% 1,312
* Prior to March 1, 2007, the expense cap was 0.19%.
** Prior to March 1, 2007, fees were voluntarily waived by the Manager to
arrive at expense cap.
The Manager voluntarily agreed to reimburse the BBH ComSet Class of the
Money Market Fund for other expenses through February 29, 2008 to the extent
total annual fund operating expenses exceeded 0.15%. The Manager reimbursed
expenses totaling $6,494 to the BBH ComSet Class of the Money Market Fund during
the six months ended June 30, 2007.
Expense Reimbursement Plan
The Funds have adopted an Expense Reimbursement Plan whereby the Manager
may seek recoupment of fees waived or expenses reimbursed for a period of up to
three years. However, recoupment will occur only if the Class' average net
assets have grown or expenses have declined sufficiently to allow recoupment
without causing its expense ratio to exceed the previously agreed upon expense
limit. The following waived fees or reimbursed expenses are subject to potential
recovery expiring in:
13
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 2007 (UNAUDITED)(IN THOUSANDS)
U.S. GOVERNMENT
YEAR MONEY MARKET MONEY MARKET*
- ---- ------------ ---------------
2007 .. $140,252 $13,955
2008 .. 293,487 40,129
2009 .. 260,591 23,815
2010 .. 230,471 2,602
* Excludes waived fees or reimbursed expenses related to the Platinum class,
which was closed May 14, 2007
The Funds have not recorded a liability for this potential reimbursement
due to the current assessment that a reimbursement is unlikely.
3. FEDERAL INCOME 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 tax provision is required.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes because of temporary or permanent
book-to-tax differences. To the extent these differences are permanent,
reclassifications are made to the appropriate equity accounts in the period that
the differences arise. Temporary differences are not reflected in the financial
records.
Dividends are categorized in accordance with federal 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 tax character of distributions paid for the six months ended June 30,
2007 and the year ended December 31, 2006 were as follows (in thousands):
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
----------------------------- -------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31, ENDED JUNE DECEMBER 31,
2007 2006 30, 2007 2006
-------------- ------------ ---------- ------------
DISTRIBUTIONS PAID FROM
ORDINARY INCOME:*
Cash Management Class .. $17,912 $21,235 $109 $304
Institutional Class .... 7,836 4,754 -- --
PlanAhead Class ........ 3,759 9,291 45 114
Platinum Class ......... 543 1,460 67 189
BBH ComSet Class ....... 212 -- -- --
------- ------- ---- ----
TOTAL DISTRIBUTIONS PAID .. $30,262 $36,740 $221 $607
======= ======= ==== ====
* For tax purposes short-term capital gains distributions are considered
ordinary income distributions.
As of June 30, 2007, the components of distributable earnings on a tax
basis were the same as book. The cost basis of investments for federal income
tax purposes was also the same as the book basis.
The Funds do not have capital loss carry forwards as of June 30, 2007.
14
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 2007 (UNAUDITED)(IN THOUSANDS)
4. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each class of
the Funds (in thousands). Each share is valued at $1.00:
Six Months Ended June 30, 2007
Cash
Management Institutional PlanAhead Platinum
Class Class Class Class
---------- ------------- --------- --------
Money Market Fund
Shares sold ........................................ 2,886,591 523,291 328,658 14,014
Reinvestment of dividends .......................... 15,172 7,108 3,019 502
Shares redeemed .................................... (2,781,254) (810,121) (443,088) (48,173)
---------- -------- -------- -------
Net increase (decrease) in shares outstanding ...... 120,509 (279,722) (111,411) (33,657)
========== ======== ======== =======
BBH
ComSet Class
------------
Money Market Fund
Shares sold ........................................ 64,489
Reinvestment of dividends .......................... 1
Shares redeemed .................................... (44,023)
-------
Net increase in shares outstanding ................. 20,467
=======
Cash
Management PlanAhead Platinum
Class Class Class
---------- --------- --------
U.S. Government Money Market Fund
Shares sold ........................................ 24,185 3,062 4,299
Reinvestment of dividends .......................... 5 12 62
Shares redeemed .................................... (7,280) (3,463) (8,373)
------ ---- ------
Net increase (decrease) in shares outstanding ...... 16,910 (389) (4,012)
====== ==== ======
Year Ended December 31, 2006
Cash
Management Institutional PlanAhead Platinum
Class Class Class Class
---------- ------------- --------- --------
Money Market Fund
Shares sold ........................................ 3,868,924 1,325,652 515,551 45,785
Reinvestment of dividends .......................... 19,760 3,586 7,834 1,460
Shares redeemed .................................... (3,586,788) (861,256) (589,770) (54,077)
---------- --------- -------- -------
Net increase (decrease) in shares outstanding ...... 301,896 467,982 (66,385) (6,832)
========== ========= ======== =======
Cash
Management PlanAhead Platinum
Class Class Class
---------- --------- --------
U.S. Government Money Market Fund
Shares sold ........................................ 20,648 8,290 10,194
Reinvestment of dividends .......................... 0 36 189
Shares redeemed .................................... (39,597) (8,201) (10,286)
------- ------ -------
Net increase (decrease) in shares outstanding ...... (18,949) 125 97
======= ====== =======
15
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Cash Management Class
----------------------------------------------------------------
Six Months Year Ended December 31,
Ended June --------------------------------------------------
30, 2007 2006 2005 2004 2003 2002
----------- -------- -------- -------- -------- ------
(Unaudited)
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- ------
Income from investment operations:
Net investment income(A) ................................. 0 .03 0 .05 0 .03 0 .01 0 .01 0 .02
Net realized gain on investments(B) ...................... -- -- -- -- -- --
-------- -------- -------- -------- -------- ------
Total income from investment operations ..................... 0.03 0.05 0.03 0.01 0.01 0.02
-------- -------- -------- -------- -------- ------
Less distributions:
Less Dividends from net investment income ................ (0.03) (0.05) (0.03) (0.01) (0.01) (0.02)
Distributions from net realized gains on investments(B) .. -- -- -- -- -- --
-------- -------- -------- -------- -------- ------
Total distributions ......................................... (0.03) (0.05) (0.03) (0.01) (0.01) (0.02)
-------- -------- -------- -------- -------- ------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======
Total return ................................................ 2.62%(C) 5.05% 3.19% 1.30% 1.08% 1.73%
======== ======== ======== ======== ======== ======
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $622,414 $501,905 $200,010 $434,587 $117,395 $6,641
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.15% 0.15% 0.15% 0.15% 0.16% 0.19%
Expenses, before waivers .............................. 0.20% 0.20% 0.23% 0.23% 0.24% 0.22%
Net investment income, net of waivers ................. 5.23% 5.04% 3.08% 1.34% 1.03% 1.73%
Net investment income, before waivers ................. 5.18% 4.99% 3.00% 1.26% 0.95% 1.70%
- ----------
(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 American Beacon Master Money Market Portfolio.
(B) Amount is less than $0.01 per share.
(C) Not annualized.
16
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Institutional Class
----------------------------------------------------------------
Six Months Year Ended December 31,
Ended June --------------------------------------------------
30, 2007 2006 2005 2004 2003 2002
----------- -------- ------- ------- -------- --------
(Unaudited)
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- ------- ------- -------- --------
Income from investment operations:
Net investment income(A) ................................. 0.03 0.05 0.03 0.01 0.01 0.02
Net realized gain on investments(B) ...................... -- -- -- -- -- --
-------- -------- ------- ------- -------- --------
Total income from investment operations ..................... 0.03 0.05 0.03 0.01 0.01 0.02
-------- -------- ------- ------- -------- --------
Less distributions:
Less Dividends from net investment income ................ (0.03) (0.05) (0.03) (0.01) (0.01) (0.02)
Distributions from net realized gains on investments(B) .. -- -- -- -- -- --
-------- -------- ------- ------- -------- --------
Total distributions ......................................... (0.03) (0.05) (0.03) (0.01) (0.01) (0.02)
-------- -------- ------- ------- -------- --------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= ======= ======== ========
Total return ................................................ 2.60%(C) 4.99% 3.06% 1.20% 0.97% 1.67%
======== ======== ======= ======= ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $224,681 $504,403 $36,421 $34,146 $159,092 $474,922
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.19% 0.19% 0.28% 0.24% 0.27% 0.24%
Expenses, before waivers .............................. 0.22% 0.23% 0.28% 0.24% 0.27% 0.24%
Net investment income, net of waivers ................. 5.19% 5.06% 3.07% 1.05% 1.00% 1.68%
Net investment income, before waivers ................. 5.15% 5.02% 3.07% 1.05% 1.00% 1.68%
- ----------
(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 American Beacon Master Money Market Portfolio.
(B) Amount is less than $0.01 per share.
(C) Not annualized.
17
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
PlanAhead Class
------------------------------------------------------------------
Six Months Year Ended December 31,
Ended June ----------------------------------------------------
30, 2007 2006 2005 2004 2003 2002
----------- -------- -------- -------- -------- --------
(Unaudited)
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income(A) ................................. 0.02 0.05 0.03 0.01 0.01 0.01
Net realized gain on investments(B) ...................... -- -- -- -- -- --
------- -------- -------- -------- -------- --------
Total income from investment operations ..................... 0.02 0.05 0.03 0.01 0.01 0.01
------- -------- -------- -------- -------- --------
Less distributions:
Less Dividends from net investment income ................ (0.02) (0.05) (0.03) (0.01) (0.01) (0.01)
Distributions from net realized gains on investments(B) .. -- -- -- -- -- --
------- -------- -------- -------- -------- --------
Total distributions ......................................... (0.02) (0.05) (0.03) (0.01) (0.01) (0.01)
------- -------- -------- -------- -------- --------
Net asset value, end of period .............................. $ 1.00 $1 .00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======== ======== ======== ======== ========
Total return ................................................ 2.46%(C) 4.69% 2.82% 0.93% 0.70% 1.37%
======= ======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $59,106 $170,518 $236,903 $132,438 $126,972 $155,535
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.45% 0.49% 0.51% 0.51% 0.54% 0.54%
Expenses, before waivers .............................. 0.46% 0.49% 0.51% 0.51% 0.54% 0.54%
Net investment income, net of waivers ................. 4.92% 4.59% 2.83% 0.94% 0.71% 1.36%
Net investment income, before waivers ................. 4.91% 4.59% 2.83% 0.94% 0.71% 1.36%
(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 American Beacon Master Money Market Portfolio.
(B) Amount is less than $0.01 per share.
(C) Not annualized.
See accompanying notes
18
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
BBH
ComSet Class
------------
April 02 to
June 30,
2007
------------
(Unaudited)
Net asset value, beginning of period ........................ $ 1.00
-------
Income from investment operations:
Net investment income(A) ................................. 0.01
Net realized gain on investments(B) ...................... --
-------
Total income from investment operations ..................... 0.01
-------
Less distributions:
Less Dividends from net investment income ................ (0.01)
Distributions from net realized gains on investments(B) .. --
-------
Total distributions ......................................... (0.01)
-------
Net asset value, end of period .............................. $ 1.00
=======
Total return ................................................ 1.29%(C)
=======
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $20,467
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.15%
Expenses, before waivers .............................. 0.31%
Net investment income, net of waivers ................. 5.22%
Net investment income, before waivers ................. 5.06%
- ----------
(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 American Beacon Master Money Market Portfolio.
(B) Amount is less than $0.01 per share.
(C) Not annualized.
See accompanying notes
19
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Cash Management Class
-------------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ----------------------------------------------
2007 2006 2005 2004 2003 2002
----------- ------ ------- ------- ------- -------
(Unaudited)
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------ ------- ------- ------- -------
Income from investment operations:
Net investment income(A).................................. 0.03 0.05 0.03 0.01 0.01 0.02
Net realized gain on investments(B)....................... -- -- -- -- -- --
------- ------ ------- ------- ------- -------
Total income from investment operations ..................... 0.03 0.05 0.03 0.01 0.01 0.02
------- ------ ------- ------- ------- -------
Less distributions:
Less Dividends from net investment income ................ (0.03) (0.05) (0.03) (0.01) (0.01) (0.02)
Distributions from net realized gains on investments(B)... -- -- -- -- -- --
------- ------ ------- ------- ------- -------
Total distributions ......................................... (0.03) (0.05) (0.03) (0.01) (0.01) (0.02)
------- ------ ------- ------- ------- -------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ====== ======= ======= ======= =======
Total return ................................................ 2.59%(C) 4.97% 3.12% 1.22% 1.04% 1.67%
======= ====== ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $20,478 $3,568 $22,518 $28,591 $22,060 $38,310
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.16% 0.19% 0.19% 0.19% 0.19% 0.19%
Expenses, before waivers .............................. 1.20% 0.64% 0.38% 0.29% 0.37% 0.23%
Net investment income, net of waivers ................. 5.17% 4.60% 2.99% 1.21% 1.04% 1.69%
Net investment income, before waivers ................. 4.14% 4.16% 2.80% 1.11% 0.86% 1.65%
(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 American Beacon Master U.S. Government Money Market Portfolio.
(B) Amount is less than $0.01 per share.
(C) Not annualized.
See accompanying notes
20
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
PlanAhead Class
--------------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, -----------------------------------------------
2007 2006 2005 2004 2003 2002
----------- ------ ------ ------- ------- --------
(Unaudited)
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------- --------
Income from investment operations:
Net investment income(A).................................. 0.02 0.04 0.03 0.00(B) 0.01 0.01
Net realized gain on investments(B)....................... -- -- -- -- -- --
------ ------ ------ ------ ------- --------
Total income from investment operations...................... 0.02 0.04 0.03 -- 0.01 0.01
------ ------ ------ ------ ------- --------
Less distributions:
Less Dividends from net investment income................. (0.02) (0.04) (0.03) 0.00(B) (0.01) (0.01)
Distributions from net realized gains on investments(B)... -- -- -- -- -- --
------ ------ ------ ------ ------- --------
Total distributions.......................................... (0.02) (0.04) (0.03) -- (0.01) (0.01)
------ ------ ------ ------ ------- --------
Net asset value, end of period............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======= ========
Total return................................................. 2.35%(C) 4.51% 2.71% 0.85% 0.61% 1.30%
====== ====== ====== ====== ======= ========
Ratios and supplemental data:
Net assets, end of period (in thousands).................. $1,669 $2,058 $1,933 $5,370 $26,785 $175,115
Ratios to average net assets (annualized):(A)
Expenses, net of waivers............................... 0.65% 0.63% 0.58% 0.56% 0.58% 0.55%
Expenses, before waivers............................... 1.75% 1.02% 0.61% 0.57% 0.62% 0.55%
Net investment income, net of waivers.................. 4.68% 4.39% 2.47% 0.68% 0.72% 1.25%
Net investment income, before waivers.................. 3.59% 4.00% 2.44% 0.67% 0.68% 1.25%
(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 American Beacon Master U.S. Government Money Market Portfolio.
(B) Amount is less than $0.01 per share.
(C) Not annualized.
See accompanying notes
21
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2007 (Unaudited)
PAR
AMOUNT VALUE
-------- ----------
(DOLLARS IN THOUSANDS)
FUNDING AGREEMENTS - 0.89%
Metropolitan Life Insurance Co., 5.41%, Due 11/21/2007 ++ ......... $150,000 $ 150,000
----------
MEDIUM-TERM NOTES - 32.06%
ABN Amro Bank NV, 5.409%, Due 4/18/2008 ++ # ...................... 132,050 132,133
American Honda Finance Corp.,
5.31%, Due 7/10/2007 ++ # ...................................... 33,040 33,040
5.385%, Due 7/23/2007 ++ # ..................................... 10,000 10,000
5.38%, Due 8/23/2007 ++ # ...................................... 20,000 20,002
5.47%, Due 8/23/2007 ++ # ...................................... 5,500 5,501
5.38%, Due 9/19/2007 ++ # ...................................... 25,000 25,003
5.465%, Due 10/22/2007 ++ # .................................... 10,000 10,004
5.39%, Due 11/15/2007 ++ # ..................................... 42,000 42,009
5.375%, Due 1/23/2008 ++ ....................................... 40,000 40,011
5.42%, Due 2/22/2008 ++ # ...................................... 33,200 33,219
5.327%, Due 5/9/2008 ++ # ...................................... 15,000 15,000
ASIF Global Financing XXI, 5.71%, Due 3/14/2008 ++ # .............. 32,650 32,736
ASIF Global Financing XXXII, 5.41%, Due 2/25/2008 ++ # ............ 206,600 206,713
Bank of America Corp.,
5.46%, Due 9/7/2007 ++ # ....................................... 183,180 183,223
5.786%, Due 5/5/2008 ++ ........................................ 32,000 32,125
Berkshire Hathaway Finance Corp.,
5.40%, Due 1/11/2008 ++ # ...................................... 128,085 128,147
5.42%, Due 5/16/2008 ++ # ...................................... 23,750 23,772
Citigroup Global Markets Holdings, Inc., 5.43%, Due 8/16/2007 ++ .. 58,800 58,808
Citigroup, Inc.,
5.416%, Due 11/1/2007 ++ ....................................... 130,115 130,162
5.405%, Due 5/2/2008 ++ ........................................ 199,700 199,838
Commonwealth Bank of Australia, 5.355%, Due 1/31/2008 ++ # ........ 175,000 175,035
Credit Suisse USA, Inc., 5.47%, Due 6/2/2008 ++ ................... 25,053 25,084
General Electric Capital Corp.,
5.445%, Due 10/17/2007 ++ ...................................... 180,000 180,000
5.41%, Due 1/3/2008 ++ ......................................... 211,500 211,608
5.406%, Due 1/15/2008 ++ ....................................... 324,455 324,604
5.40%, Due 3/4/2008 ++ ......................................... 40,886 40,907
5.416%, Due 4/15/2008 ++ ....................................... 65,000 65,050
5.41%, Due 5/19/2008 ++ ........................................ 20,000 20,016
Goldman Sachs Group, Inc.,
5.474%, Due 7/2/2007 ++ ........................................ 64,350 64,350
5.475%, Due 10/5/2007 ++ ....................................... 12,700 12,705
HBOS Treasury Services plc, 5.357%, Due 7/17/2008 ++ # ............ 59,500 59,515
HSBC Finance Corp.,
5.505%, Due 7/27/2007 ++ ....................................... 97,525 97,538
5.39%, Due 10/4/2007 ++ ........................................ 115,000 115,022
5.36%, Due 5/21/2008 ++ ........................................ 162,770 162,803
22
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2007 (Unaudited)
PAR
AMOUNT VALUE
-------- ----------
(DOLLARS IN THOUSANDS)
JPMorgan Chase & Co., 5.425%, Due 1/25/2008 ++ .................... $220,000 $ 220,129
Merrill Lynch & Co., Inc.,
5.39%, Due 8/24/2007 ++ ........................................ 39,830 39,833
5.47%, Due 8/27/2007 ++ ........................................ 77,000 77,017
5.485%, Due 10/19/2007 ++ ...................................... 83,000 83,037
5.39%, Due 2/14/2008 ++ ........................................ 61,300 61,324
5.46%, Due 6/16/2008 ++ ........................................ 93,350 93,463
Monumental Global Funding II, 5.39%, Due 9/13/2007 ++ # ........... 21,500 21,502
Morgan Stanley,
5.48%, Due 7/27/2007 ++ ........................................ 58,595 58,602
5.484%, Due 1/18/2008 ++ ....................................... 68,900 68,958
Royal Bank of Scotland plc,
5.36%, Due 12/21/2007 ++ # ..................................... 230,000 230,044
5.36%, Due 4/11/2008 ++ # ...................................... 435,500 435,638
5.365%, Due 4/21/2008 ++ # ..................................... 50,000 50,017
5.33%, Due 7/18/2008 ++ # ...................................... 150,000 150,000
Toyota Motor Credit Corp.,
5.327%, Due 8/10/2007 ++ ....................................... 60,000 60,002
5.33%, Due 9/14/2007 ++ ........................................ 95,000 95,005
5.33%, Due 10/12/2007 ++ ....................................... 4,800 4,800
5.346%, Due 4/15/2008 ++ ....................................... 100,000 100,022
5.33%, Due 6/17/2008 ++ ........................................ 24,000 24,004
Wachovia Corp., 5.435%, Due 7/20/2007 ++ .......................... 179,152 179,163
Wells Fargo & Co.,
5.42%, Due 9/28/2007 ++ ........................................ 269,901 269,971
5.33%, Due 7/14/2008 ++ # ...................................... 150,000 150,000
----------
TOTAL MEDIUM-TERM NOTES ........................................... 5,388,214
----------
PROMISSORY NOTES - 2.68%
Goldman Sachs Group, Inc., 5.36%, Due 5/9/2008 ++ ................. 450,000 450,000
----------
CERTIFICATES OF DEPOSIT AND BANK NOTES - 25.94%
Allied Irish Banks N.Y., 5.336%, Due 8/8/2007 ++ .................. 15,000 15,000
Bank of New York,
5.335%, Due 11/16/2007 ++ ...................................... 77,500 77,505
5.335%, Due 11/19/2007 ++ ...................................... 5,000 5,000
Bank of Nova Scotia N.Y., 5.335%, Due 10/31/2007 ++ ............... 64,860 64,863
Barclays Bank N.Y.,
5.32%, Due 8/24/2007 ........................................... 250,000 250,000
5.35%, Due 10/2/2007 ........................................... 250,000 250,000
BNP Paribas N.Y., 5.29%, Due 10/3/2007 ++ ......................... 100,000 99,994
Branch Banking & Trust,
5.307%, Due 8/10/2007 ++ ....................................... 50,000 49,999
5.36%, Due 11/16/2007 ++ ....................................... 100,000 100,017
Caylon N.Y.,
5.327%, Due 8/10/2007 ++ ....................................... 542,000 541,999
23
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2007 (Unaudited)
PAR
AMOUNT VALUE
-------- ----------
(DOLLARS IN THOUSANDS)
Caylon N.Y.,
5.28%, Due 9/13/2007 ++ ........................................ $185,700 $ 185,690
5.29%, Due 10/3/2007 ++ ........................................ 67,500 67,497
Credit Suisse N.Y.,
5.338%, Due 8/13/2007 ++ ....................................... 125,000 125,001
5.33%, Due 2/26/2008 ++ ........................................ 250,000 250,000
Deutsche Bank N.Y., 5.36%, Due 6/19/2008 ++ ....................... 280,000 280,084
HSBC Bank USA, 5.43%, Due 9/21/2007 ++ ............................ 203,550 203,600
M&I Marshall & Ilsley Bank,
5.341%, Due 8/1/2007 ++ ........................................ 50,000 50,000
5.33%, Due 2/15/2008 ++ ........................................ 196,500 196,504
National City Bank,
5.30%, Due 10/4/2007 ++ ........................................ 135,000 134,994
5.40%, Due 1/10/2008 ++ ........................................ 6,925 6,928
Nordea Bank Finland N.Y., 5.298%, Due 5/28/2008 ++ ................ 21,600 21,592
Suntrust Bank, 5.429%, Due 4/2/2008 ++ ............................ 53,020 53,064
US Bank, NA,
5.39%, Due 9/10/2007 ++ ........................................ 250,000 250,037
5.39%, Due 9/28/2007 ++ ........................................ 60,000 60,011
5.379%, Due 10/1/2007 ++ ....................................... 135,450 135,474
5.32%, Due 1/3/2008 ++ ......................................... 221,500 221,503
Wachovia Bank, 5.35%, Due 9/28/2007 ++ ............................ 50,000 50,003
Westpac Bank N.Y., 5.316%, Due 1/15/2008 ++ ....................... 46,000 45,999
World Savings Bank FSB,
5.36%, Due 10/19/2007 ++ ....................................... 400,000 400,050
5.42%, Due 12/7/2007 ++ ........................................ 117,400 117,446
5.41%, Due 6/20/2008 ++ ........................................ 50,000 50,041
----------
TOTAL CERTIFICATES OF DEPOSIT AND BANK NOTES ...................... 4,359,895
----------
COMMERCIAL PAPER - 20.20%
Barton Capital LLC,
5.28%, Due 7/2/2007 ............................................ 50,000 49,993
5.29%, Due 7/13/2007 # ......................................... 37,856 37,789
Beta Finance Corp., 5.26%, Due 9/12/2007 .......................... 40,000 39,573
Citigroup Funding, Inc.,
5.26%, Due 8/23/2007 ........................................... 200,000 198,451
5.26%, Due 8/29/2007 ........................................... 150,000 148,707
Falcon Asset Securitization LLC, 5.26%, Due 9/28/2007 ............. 77,749 76,738
FCAR Owner Trust, Series I,
5.27%, Due 8/15/2007 ........................................... 300,000 298,018
5.285%, Due 9/17/2007 .......................................... 475,000 469,566
Fountain Square Commercial Funding Corp.,
5.26%, Due 8/21/2007 # ......................................... 10,000 9,926
5.275%, Due 9/19/2007 # ........................................ 90,378 89,319
General Electric Capital Corp., 5.04%, Due 11/9/2007 .............. 40,000 39,266
Golden Funding Corp., 5.375%, Due 7/16/2007 ....................... 150,000 149,664
24
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2007 (Unaudited)
PAR
AMOUNT VALUE
--------- -----------
(DOLLARS IN THOUSANDS)
K2 USA LLC, 5.26%, Due 9/18/2007 # ............... $ 36,100 $ 35,683
Kitty Hawk Funding Corp., 5.32%, Due 7/31/2007 ... 30,000 29,867
Lexington Parker Capital Co. LLC, 5.26%,
Due 10/18/2007 ................................ 25,000 24,602
Long Lane Master Trust IV,
5.32%, Due 7/23/2007 # ........................ 24,101 24,023
5.34%, Due 7/26/2007 # ........................ 414,549 413,414
Park Avenue Receivables Co. LLC,
5.30%, Due 7/20/2007 .......................... 250,000 249,301
5.265%, Due 8/22/2007 ......................... 60,000 59,544
Sheffield Receivables Corp., 5.29%,
Due 7/23/2007 # ............................... 42,850 42,712
Stanfield Victoria Funding LLC,
5.26%, Due 8/21/2007 # ........................ 45,000 44,665
5.26%, Due 8/28/2007 # ........................ 25,000 24,788
5.265%, Due 9/4/2007 # ........................ 25,000 24,762
5.27%, Due 9/6/2007 # ......................... 115,000 113,873
Three Rivers Funding Corp., 5.28%,
Due 7/11/2007 # ............................... 87,156 87,028
Toyota Motor Credit Corp.,
5.20%, Due 7/30/2007 .......................... 100,000 99,581
5.20%, Due 7/31/2007 .......................... 200,000 199,133
5.20%, Due 8/1/2007 ........................... 50,000 49,776
UBS Finance Delaware LLC,
5.20%, Due 8/6/2007 ........................... 140,000 139,272
5.20%, Due 8/10/2007 .......................... 100,000 99,422
Yorktown Capital LLC, 5.28%, Due 7/5/2007 ........ 25,249 25,234
-----------
TOTAL COMMERCIAL PAPER ........................... 3,393,690
-----------
TIME DEPOSITS - 10.92%
ING Bank, NV, 5.344%, Due 7/2/2007 ............... 620,000 620,000
Natixis, 5.375%, Due 7/2/2007 .................... 750,000 750,000
Rabobank Nederland, 5.34%, Due 12/1/2006 ......... 464,487 464,487
-----------
TOTAL TIME DEPOSITS .............................. 1,834,487
-----------
REPURCHASE AGREEMENTS - 8.63%
Bank of America, NA, 5.475%, Due 7/2/2007
(Held at Bank of New York, Collateralized by
Whole Loan Mortgages valued at $618,000, 0.00%,
2/23/2036) .................................... 600,000 600,000
Citigroup, Inc., 5.475%, Due 7/2/2007 (Held at
JPMorgan Chase, NYC, Collateralized by Whole
Loan Mortgages valued at $53,028, 0.00%,
4/24/2037 - 6/25/2037) ........................ 50,000 50,000
Lehman Brothers Holdings, Inc., 5.41%,
Due 7/2/2007 (Held at JPMorgan Chase, NYC,
Collateralized by Asset Backed Securities
valued at $662,937, 0.00% - 8.9%, 9/17/2007 -
2/25/2047) .................................... 650,000 650,000
5.445%, Due 7/2/2007 (Held at JPMorgan Chase,
NYC, Collateralized by Corporate Obligations
valued at $115,908, 0.00% - 8.25%,
9/15/2010 - 8/1/2037; and Medium-Term Notes
valued at $37,081, 5.9%, 12/21/2035) ....... 150,000 150,000
-----------
TOTAL REPURCHASE AGREEMENTS ...................... 1,450,000
-----------
TOTAL INVESTMENTS - 101.32% (COST $17,026,286) ...... $17,026,286
LIABILITIES, NET OF OTHER ASSETS - (1.32%) .......... (222,280)
-----------
TOTAL NET ASSETS - 100.00% .......................... $16,804,006
===========
25
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2007 (Unaudited)
Percentages are stated as a percent of net assets.
++ The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
# Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $3,120,235 or 18.57% of net
assets. The Fund has no right to demand registration of these securities.
26
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2007 (Unaudited)
PAR
AMOUNT VALUE
---------- -----------
(DOLLARS IN THOUSANDS)
U.S. AGENCY OBLIGATIONS - 5.17%
FEDERAL FARM CREDIT BANK - 1.34%
5.10%, Due 8/14/2007 ++ .......................... $ 10,851 $ 10,783
--------
FEDERAL HOME LOAN BANK - 3.73%
5.30%, Due 2/22/2008 ++ .......................... 15,000 14,999
5.30%, Due 5/7/2008 ++ ........................... 15,000 14,999
--------
29,998
--------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.10%
5.05%, Due 12/31/2007 ++ ......................... 793 773
--------
TOTAL U.S. AGENCY OBLIGATIONS ....................... 41,554
--------
REPURCHASE AGREEMENTS - 94.75%
Banc of America Securities, LLC, 5.375%,
Due 7/2/2007 (Held at Bank of New York,
Collateralized by U.S. Government Obligations
valued at $255,000, 5.5%, 6/1/2033) ........... 250,000 250,000
Barclays Capital, Inc., 5.35%, Due 7/2/2007
(Held at Bank of New York, Collateralized by
U.S. Government Obligations valued at $224,400,
3.998% - 6.277%, 6/1/2035 - 7/1/2037) ......... 220,000 220,000
Goldman Sachs, 5.35%, Due 7/2/2007 (Held at Bank
of New York, Collateralized by U.S. Government
Obligations valued at $297,745, 4.0% - 7.5%,
1/1/2009 - 4/1/2037) .......................... 291,907 291,907
--------
TOTAL REPURCHASE AGREEMENTS ...................... 761,907
--------
TOTAL INVESTMENTS - 99.92% (COST $803,461) .......... $803,461
OTHER ASSETS, NET OF LIABILITIES - 0.08% ............ 604
--------
TOTAL NET ASSETS - 100.00% .......................... $804,065
========
Percentages are stated as a percent of net assets.
++ The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
27
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS)
U.S.
GOVERNMENT
MONEY MONEY
MARKET MARKET
----------- -----------
ASSETS:
Investment in securities at value
(cost - $15,576,286 and $41,554,
respectively) ................................ $15,576,286 $ 41,554
Repurchase agreement (cost - $1,450,000 and
$761,907, respectively) ...................... 1,450,000 761,907
Dividends and interest receivable ............... 75,748 680
Prepaid expenses ................................ 164 7
----------- --------
TOTAL ASSETS ................................. 17,102,198 804,148
----------- --------
LIABILITIES:
Management and investment advisory fees payable
(Note 2) ........................................ 1,435 61
Other liabilities ............................... 296,757 22
----------- --------
TOTAL LIABILITIES ............................ 298,192 83
----------- --------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL
INTERESTS $16,804,006 $804,065
=========== ========
See accompanying notes
28
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS)
U.S.
Government
Money Money
Market Market
-------- ----------
INVESTMENT INCOME:
Interest income ..................................... $433,809 $19,778
-------- -------
TOTAL INVESTMENT INCOME .......................... 433,809 19,778
-------- -------
EXPENSES:
Management and investment advisory fees (Note 2) .... 8,087 371
Custodian fees ...................................... 291 12
Professional fees ................................... 66 16
Other expenses ...................................... 235 6
-------- -------
TOTAL EXPENSES ................................... 8,679 405
-------- -------
NET INVESTMENT INCOME .................................. 425,130 19,373
-------- -------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments .................... 128 1
-------- -------
NET GAIN ON INVESTMENTS .......................... 128 1
-------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $425,258 $19,374
======== =======
See accompanying notes
29
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
U.S. GOVERNMENT MONEY
MONEY MARKET MARKET
------------------------------ ---------------------------
Six Months Year Ended Six Months Year Ended
Ended June 30, December 31, Ended June December 31,
2007 2006 30, 2007 2006
-------------- ------------- ------------ ------------
(unaudited) (unaudited)
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income ........................... $ 425,130 $ 530,893 $ 19,373 $ 17,196
Net realized gain on investments ................ 128 12 1 1
------------ ------------- ----------- ------------
TOTAL INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ................................ 425,258 530,905 19,374 17,197
------------ ------------- ----------- ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions ................................... 18,498,503 131,682,048 1,960,272 3,002,185
Withdrawals ..................................... (14,847,924) (126,270,825) (1,738,977) (2,695,546)
------------ ------------- ----------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS ................................. 3,650,579 5,411,223 221,295 306,639
------------ ------------- ----------- ------------
NET INCREASE IN NET ASSETS ................... 4,075,837 5,942,128 240,669 323,836
------------ ------------- ----------- ------------
NET ASSETS:
Beginning of period ............................. 12,728,169 6,786,041 563,396 239,560
------------ ------------- ----------- ------------
END OF PERIOD ................................... $ 16,804,006 $ 12,728,169 $ 804,065 $ 563,396
============ ============= =========== ============
See accompanying notes
30
AMERICAN BEACON MASTER TRUST PORTFOLIOS
FINANCIAL HIGHLIGHTS
Money Market
---------------------------------------------------
Six Months Year Ended December 31,
Ended June -------------------------------------
30, 2007 2006 2005 2004 2003 2002
----------- ----- ----- ----- ----- -----
(unaudited)
Total return ................................ 2.64%(A) 5.09% 3.25% 1.34% 1.13% 1.81%
Ratios to average net assets (annualized):
Expenses ................................. 0.11% 0.11% 0.11% 0.11% 0.11% 0.11%
Net investment income .................... 5.26% 5.03% 3.20% 1.30% 1.14% 1.81%
U.S. Government Money Market
---------------------------------------------------
Six Months Year Ended December 31,
Ended June -------------------------------------
30, 2007 2006 2005 2004 2003 2002
----------- ----- ----- ----- ----- -----
(unaudited)
Total return ................................ 2.61%(A) 5.04% 3.19% 1.30% 1.11% 1.74%
Ratios to average net assets (annualized):
Expenses ................................. 0.11% 0.12% 0.12% 0.11% 0.12% 0.12%
Net investment income .................... 5.22% 4.97% 3.15% 1.30% 1.13% 1.71%
- ----------
(A) Not annualized
31
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Master Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a no load, open-end management
investment company that was organized as a trust under the laws of the
Commonwealth of Massachusetts pursuant to a Declaration of Trust dated as of
November 1, 2004. Prior to November 1, 2004, the Trust was organized as a trust
under the laws of the State of New York. Beneficial interests in the Trust are
divided into separate series, each having distinct investment objectives and
policies. These financial statements relate to the American Beacon Master Money
Market Portfolio and American Beacon Master U.S. Government Money Market
Portfolio (each a "Portfolio" and collectively the "Portfolios"). The objective
of each Portfolio is current income, liquidity and the maintenance of a stable
price of $1.00 per share. The assets of each Portfolio belong only to that
Portfolio, and the liabilities of each Portfolio are borne solely by that
Portfolio and no other.
American Beacon Advisors, Inc. (the "Manager") is a wholly owned subsidiary
of AMR Corporation and was organized in 1986 to provide business management,
advisory, administrative and asset management consulting services.
The following is a summary of the significant accounting policies followed
by the Portfolios.
Security Valuation
Securities of the Portfolios are valued at amortized cost, which
approximates fair value. In the event that a deviation of 1/2 of 1% or more
exists between the $1.00 per share price of the Portfolios, calculated at
amortized cost, and the price per share calculated by reference to market
quotations, or if there is any other deviation that the Trust's Board of
Trustees (the "Board") believes would result in a material dilution to
shareholders or purchasers, the Board will promptly consider the appropriate
action that should be initiated.
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. Interest income is earned from settlement date, recorded on
the accrual basis, and adjusted, if necessary, for amortization of premiums or
accretion of discounts on investment grade short-term securities and zero coupon
instruments. For financial and tax reporting purposes, realized gains and losses
are determined on the basis of specific lot identification.
Federal Income Taxes
The Portfolios will be treated as partnerships for federal income tax
purposes. As such, each investor in a Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that each
Portfolio's assets will be managed in such a way that an investor in the
Portfolio will be able to satisfy the requirements of subchapter M of the
Internal Revenue Code.
Repurchase Agreements
Under the terms of a repurchase agreement, securities are acquired by a
Portfolio from a securities dealer or a bank that are subject to resale at a
later date. Repurchase agreements are fully collateralized by U.S. Treasury or
U.S. Government agency securities and are valued at cost, which approximates
market value. All collateral is held at the custodian bank. The collateral is
monitored daily by the Manager so that the collateral's market value exceeds the
carrying value of the repurchase agreement plus accrued interest.
32
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
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.
Recently Issued Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
("FIN 48"). FIN 48 provides guidance on how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing each Portfolio's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. The Portolios
adopted the provisions of FIN 48 effective January 1, 2007. Tax positions taken
by the Portfolios have been deemed to meet the more likely than not threshold,
and therefore, there have been no adjustments to the Portfolios' net asset value
per share.
In September 2006, the FASB issued Statement on Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"). This standard
clarifies the definition of fair value for financial reporting, establishes a
framework for measuring fair value and requires additional disclosures about the
use of fair value measurements. FAS 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The Manager is evaluating the impact of FAS 157;
however, it is not expected to have a material impact on the Portfolios' net
assets or results of operations.
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 administrative,
investment advisory and portfolio management services. The Manager serves as the
sole investment advisor to each of the Portfolios. As compensation for
performing the duties required under the Management Agreement, the Manager
receives from the Portfolios 0.10% of the average daily net assets of each of
the Portfolios.
33
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission,
the Portfolios, along with other registered investment companies having
management contracts with the Manager, may participate in an interfund lending
program. This program provides an alternative credit facility allowing the Money
Market Portfolio to lend money to other participating series managed by the
Manager. For the six months ended June 30, 2007, the Money Market Portfolio
earned $8,708 under the credit facility. This amount is included in interest
income on the financial statements.
34
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS
(UNAUDITED)
INTERIM RENEWAL
In prior years, the Board of Trustees ("Board" or "Trustees") typically has
considered the annual renewal of the existing Management Agreements between
American Beacon Advisors, Inc. (the "Manager") and the American Beacon Funds
(the "Trust"), on behalf of the Money Market and U.S. Government Money Market
Funds (each, a "Fund" and collectively, the "Funds"), and between the Manager
and the American Beacon Master Trust, on behalf of the Money Market and U.S.
Government Money Market Portfolios (collectively, the "Portfolios"), at the
Board meeting held in the first quarter of each year. (The term "Funds" is used
throughout this section to refer to both the Funds and the Portfolios.) At the
November 15, 2006 meeting, the Board decided to conduct these annual renewals at
their second quarter meeting each year to enable the Trustees to consider more
year-end data in their deliberations. At the March 8, 2007 Board meeting, the
Board considered renewal of the Management Agreements on an interim basis until
the Board meeting scheduled for the second quarter, at which meeting the Board
would perform a comprehensive review of factors relevant to an annual renewal.
In connection with the interim renewal, the Board, with the assistance of
independent legal counsel, requested and received certain relevant information
from the Manager. 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. The Board considered several
factors at its March 2007 meeting.but 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 these factors.
The Board determined that certain factors typically considered in connection
with an annual renewal were not material with respect to an interim renewal.
In determining whether to renew the Management Agreement on an interim basis,
the Trustees considered the best interests of each Fund separately. The
following considerations and conclusions are applicable to all Funds.
Cost of Services. With respect to the Management Agreement, the Board noted that
the Manager proposed to continue most of the expense waivers and reimbursements
that were in place for each applicable Fund's 2006 fiscal year as well as
implement additional waivers and/or reimbursements.
Nature, Extent and Quality of Services. With respect to the renewal of the
Management Agreement, the Trustees considered that the Manager continues to
provide high-quality services to each Fund at a low cost to investors and
provides a comprehensive compliance program for each Fund. Based on this
information, the Board concluded that the nature, extent and quality of the
management and advisory services provided by the Manager were appropriate for
each Fund and, thus, supported a decision to renew the Management Agreement on
an interim basis.
Investment Performance. The Board considered the performance reports and
discussions with management at Board and Committee meetings throughout the year.
In considering the renewal of the Management Agreement with the Manager for the
Funds, the Trustees considered that 1) each Fund outperformed its respective
benchmark index for the 2006 calendar year, and 2) the fee rate schedules for
the Manager had not changed since the last contract renewal.
Based on, among others, considerations and those noted above with respect to all
Funds, the Trustees determined that the Funds and their shareholders would
benefit from the Manager's continued management of the Funds until the next
regular Board meeting and approved the renewal of the Agreement with respect to
each of the Funds on an interim basis until the next regular Board meeting.
35
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS - CONTINUED
(UNAUDITED)
ANNUAL RENEWAL
At its May 25, 2007 meeting, the Board considered the renewal of the Management
Agreements. In preparation for the Board's consideration to renew the
Agreements, 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 4, 2007 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.
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 Manager's SEC Form ADV registration statement;
- a summary of any material past, pending or anticipated litigation or
regulatory proceedings involving the Manager or its personnel,
including the results of any recent regulatory examination or
independent audit;
- a comparison of performance of each Fund to comparable investment
companies and appropriate indices, including comments on the relative
performance of each Fund versus the respective peer group average;
- a profit/loss analysis of the Manager 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;
- an evaluation of other benefits to the Manager or Funds as a result of
their relationship, if any;
- confirmation that the Manager's financial condition does not raise
concerns that the Manager would be unable to continue providing the
same scope and quality of services to the Funds;
- a description of the scope of portfolio management services provided
to the Funds and other clients, including other registered investment
companies, whether such services differ, and any advantages or
disadvantages that might accrue to the Funds due to the manager'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;
- a discussion regarding the Manager's participation in "soft dollar"
arrangements, if any, or other brokerage allocation policies with
respect to Fund transactions, including the Manager's methodology for
obtaining the most favorable 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 description of trade allocation procedures among accounts managed by
the Manager;
36
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS - CONTINUED
(UNAUDITED)
- a summary of any material changes to the Manager's compliance program
with regard to federal, state, corporate and Fund requirements and a
certification to the reasonable design of the compliance program;
- a discussion of any material compliance problems and remedial actions;
- information regarding the Manager's code of ethics, insider trading
policy and disaster recovery plan, including a description of any
material changes thereto;
- a description of the Manager's affiliation with any broker-dealer;
- a discussion of any anticipated change in the Manager's controlling
persons;
- verification of the Manager's insurance coverage with regards to the
services provided to the Funds.
- 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 any revenue sharing activities with respect to the
Funds;
- a discussion of any rebate arrangements between the Manager and
service providers to the Funds pursuant to which the Manager receives
direct or indirect benefits from the service provider;
- a discussion of whether the Manager receives, with respect to the
Funds, other compensation; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
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, the class used for comparative purposes was the
class with the longest performance history, which in most cases is 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.
The Trustees also received a memorandum from their legal counsel detailing the
Board's responsibilities pertaining to the renewal of the Management Agreements.
This memorandum explained the regulatory requirements surrounding the Trustees'
process for evaluating investment advisors and the terms of the contracts.
Provided below is an overview of the primary factors the Board considered at its
May 25, 2007 meeting. The Board did not identify any particular information that
was most relevant to its consideration to renew the Management and Investment
Advisory Agreements, and each Trustee may have afforded different weight to the
various factors.
CONSIDERATIONS WITH RESPECT TO ALL FUNDS
In determining whether to approve the continuance of the Management Agreements,
the Trustees considered the best interests of each Fund separately. In addition,
while the Management Agreements for all of the Funds were considered at the same
Board meeting, the Board considered each Fund's investment management
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 the Fund and the investment advisor;
(3) the Manager's cost for providing the services and the profitability of the
advisory business to the Manager; (4) the extent to which economies of scale
have been taken into account in setting the 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 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 from its
relationship with a Fund. The Trustees posed questions to various management
personnel of the Manager regarding certain key aspects of the material submitted
in support of the renewal.
37
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS - CONTINUED
(UNAUDITED)
Nature, Extent and Quality of Services. With respect to the renewal of each
Management Agreement the Board considered: the background and experience of key
investment personnel and the Manager's ability to retain them; the Manager's
disciplined investment approach and goal to provide consistent above average
long-term performance at a low cost; the Manager's continuing efforts to add new
series and share classes to enhance the Funds' product line; the Manager's
record in building improved compliance, control and credit functions that reduce
risks to the Funds; the addition of personnel to manage the Funds, promote sales
and improve services, including the addition of a separate new information
technology department at the Manager; and the high rankings received by the
Funds in service surveys.
Based on the foregoing information, the Board concluded that the nature, extent
and quality of the management services provided by the Manager were appropriate
for each Fund and, thus, supported a decision to renew each Management
Agreement.
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. With respect to Lipper data, 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."
Cost of Services and Profits Realized. In analyzing the cost of services and
profitability of the Manager by Fund, the Board considered the revenues earned
and the expenses incurred by the Manager. The profitability levels 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 Trust stipulates that to
the extent that a Fund invests all of its investable assets in another
registered investment company, the Fund will not pay the Manager a management
fee. Each Fund operates under a master-feeder structure whereby each Fund
invests all of its assets in a corresponding portfolio of the American Beacon
Master Trust. As such, the Manager receives a management fee from the master
portfolio. The Board also considered the Manager's advisory fees for services
provided by the Manager to institutional separate accounts with similar
investment strategies. 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. 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. The Board also noted that the
non-Institutional Classes of the Funds maintain higher expense ratios in order
to compensate third party distributors but the net fee to the Manager is
generally the same for all Classes.
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 noted that the Funds have experienced substantial
recent
38
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS - CONTINUED
(UNAUDITED)
asset growth. With respect to the Funds, the Board noted that, although the fee
schedules for these Funds do not have breakpoints, the effective advisory fee
rates are low by industry standards and the performance of these Funds has been
highly competitive and, in many cases, among the top performers among similar
funds.
The Board also considered the Manager's representations that its costs have
increased due primarily to greater service provider and regulatory costs. The
Manager also represented that it anticipates further economies of scale would be
largely offset by higher costs of adding and retaining qualified personnel,
improving technology and increasing demands on its advisory business.
Based on the foregoing information, the Board concluded that the Manager fee
schedule provides for a reasonable sharing of benefits from any economies of
scale with each Fund.
Benefits Derived from the Relationship with the Funds. The Board considered the
"fall-out" or ancillary benefits that accrue to the Manager as a result of the
advisory relationships with the Funds, including greater exposure in the
marketplace with respect to the Manager's investment process and expanding the
level of assets under management by the Manager. The Board also considered that
the Funds permit institutional investors access to such investments at a more
favorable cost and that the Manager's relationship with the Funds continues to
be a significant factor in attracting separate account assets for the Manager.
In addition, the Board noted that the Manager provides services to the Trust at
a relatively low cost.
Based on the foregoing information, the Board concluded that the potential
benefits accruing to the Manager by virtue of its relationship with the Funds
appear to be fair and reasonable.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO EACH FUND
The performance of each Fund was compared to the respective Lipper Average,
which includes all comparable funds in the Lipper category, and the Lipper
Index, which includes the 30 largest funds in the Lipper category. References to
the Lipper expense group below are to the group of comparable mutual funds
included in the analysis provided to the Trustees by Lipper. All performance
comparisons are for periods ended March 31, 2007, unless otherwise noted.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE MONEY MARKET FUND
In considering the renewal of the Management Agreement with the Fund, the
Trustees considered the following additional factors: (1) the Money Market Fund
underperformed the Lipper Index for all reported periods except the one-year,
but outperformed the Lipper Average for all reported periods; (2) the actual
management fee and total expense ratio of the Money Market Fund were both lower
than its Lipper expense group median; (3) the Manager is subject to a risk of
financial responsibility should the Fund be unable to maintain a stable $1.00
per share net asset value; (4) the Manager's explanation that fee schedule
"breakpoints" were not warranted due to, among other factors, the low base
management fee charged to the Fund; and (5) the Manager has contractually agreed
to waive fees and/or reimburse Fund expenses to the extent necessary to maintain
a competitive total expense ratio for the Institutional and Cash Management
Classes of the Money Market Fund.
Based on these considerations and those noted above with respect to all Funds,
the Trustees (1) concluded that the fees paid to the Manager under the
Management Agreement are fair and reasonable, (2) determined that the 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 Fund.
39
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS - CONTINUED
(UNAUDITED)
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE U.S. GOVERNMENT
MONEY MARKET FUND
In considering the renewal of the Management Agreement with respect to the Fund,
the Trustees considered the following additional factors: (1) the Cash
Management Class of the U.S. Government Money Market Fund ("Cash Management
Class") outperformed the Lipper Index and Average for all reported periods; (2)
the actual management fee (including administrative fees) and the total expense
ratio of the Cash Management Class was lower than its Lipper expense group
median; (3) the Manager is subject to a risk of financial responsibility should
the Fund be unable to maintain a stable $1.00 per share net asset value; (4) the
Manager's explanation that fee schedule "breakpoints" were not warranted due to,
among other factors, the low, base management fee charged to the Fund; and (5)
the Manager has contractually agreed to continue to waive fees and/or reimburse
Fund expenses to the extent necessary to maintain a competitive total expense
ratio for all Classes of the U.S. Government Money Market Fund.
Based on these considerations and those noted above with respect to all Funds,
the Trustees (1) concluded that the fees paid to the Manager under the
Management Agreement are fair and reasonable, (2) determined that the 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 Fund.
40
(THIS PAGE INTENTIONALLY LEFT BLANK)
41
(AMERICAN BEACON FUNDS(SM) LOGO)
DELIVERY OF DOCUMENT
To reduce expenses, your financial institution may mail only one copy of the
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 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:
(KEYBOARD GRAPHIC) (MOUSE GRAPHIC)
BY E-MAIL: ON THE INTERNET:
Visit our website at
american_beacon.funds@ambeacon.com www.americanbeaconfunds.com
(TELEPHONE GRAPHIC) (MAILBOX GRAPHIC)
BY TELEPHONE: BY MAIL:
Institutional Class American Beacon Funds
Call (800)658-5811 4151 Amon Carter Blvd., MD 2450
PlanAhead Class Fort Worth, TX 76155
Call (800) 388-3344
AVAILABILITY OF QUARTERLY PORTFOLIO AVAILABILITY OF PROXY VOTING POLICY AND
SCHEDULES RECORDS
In addition to the Schedule of A description of the policies and
Investments provided in each procedures the Fund uses to determine
semi-annual and annual report, the how to vote proxies relating to
Fund files a complete schedule of its portfolio securities is available in the
portfolio holdings with the Fund's Statement of Additional
Securities and Exchange Commission Information, is available free of charge
("SEC") on Form N-Q as of the first on the Fund's website
and third fiscal quarters. The Fund's (www.americanbeaconfunds.com) and by
Forms N-Q are available on the SEC's calling 1-800-967-9009 or by accessing
website at www.sec.gov. The Forms N-Q the SEC's website at www.sec.gov. The
may also be reviewed and copied at Fund's proxy voting record for the most
the SEC's Public Reference Room, 450 recent year ended June 30 is filed
Fifth Street, NW, Washington, DC annually with the SEC on Form N-PX. The
20549. Information regarding the Fund's Forms N-PX are available on the
operation of the SEC's Public SEC's website at www.sec.gov. The Fund's
Reference Room may be obtained by proxy voting record may also be obtained
calling 1-800-SEC-0330. A complete by calling 1-800-967-9009.
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 month.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FORESIDE FUND SERVICES
TRUST SERVICES FIRM Portland, Maine
Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP
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.
American Beacon Funds is a service mark of AMR Corporation. PlanAhead Class is a
registered service mark of American Beacon Advisors, Inc. American Beacon Money
Market Fund and American Beacon U.S. Government Money Market Fund are service
marks of American Beacon Advisors, Inc.
SAR 6/07
540291
42
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. The shareholder report for the S&P
500 Index Fund, the Small Cap Index Fund and the International Equity Index
Fund presented in Item 1 includes a summary schedule of investments for the
Master International Index Series and the Master Small Cap Index Series, both
of which are series of the Master Quantitative Series Trust. A complete
schedule of investments for each of these two series follows.
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007 (unaudited)
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
Advertising Agencies - 0.5% 17,900 Catalina Marketing Corp. $ 563,850
8,000 DG FastChannel, Inc. (a) 163,040
13,100 Greenfield Online, Inc. (a) 208,421
14,500 inVentiv Health, Inc. (a) 530,845
12,200 Marchex, Inc. Class B 199,104
18,270 National CineMedia, Inc. (a) 511,743
20,800 Valassis Communications, Inc. (a) 357,552
43,380 ValueClick, Inc. (a) 1,277,975
-------------
3,812,530
- -----------------------------------------------------------------------------------------------------------------------------
Aerospace - 0.6% 3,000 AeroVironment, Inc. (a) 61,830
6,000 Argon ST, Inc. (a) 139,260
18,268 Curtiss-Wright Corp. 851,471
11,126 Heico Corp. (e) 468,182
7,700 Ladish Co., Inc. (a) 331,100
3,500 MTC Technologies, Inc. (a) 85,960
16,513 Moog, Inc. Class A (a) 728,388
25,835 Orbital Sciences Corp. (a) 542,793
16,634 Teledyne Technologies, Inc. (a) 764,332
3,600 TransDigm Group, Inc. (a) 145,656
4,600 United Industrial Corp. 275,908
-------------
4,394,880
- -----------------------------------------------------------------------------------------------------------------------------
Agriculture, Fishing & Ranching - 0.1% 1,200 Alico, Inc. 73,188
7,500 The Andersons, Inc. (e) 339,975
2,900 Cadiz, Inc. (a) 65,163
-------------
478,326
- -----------------------------------------------------------------------------------------------------------------------------
Air Transport - 0.8% 17,968 AAR Corp. (a) 593,124
23,100 ABX Air, Inc. (a) 186,186
39,820 AirTran Holdings, Inc. (a) 434,834
17,098 Alaska Air Group, Inc. (a) 476,350
1,000 Allegiant Travel Co. (a) 30,740
6,900 Atlas Air Worldwide Holdings, Inc. (a) 406,686
10,085 Bristow Group, Inc. (a) 499,712
14,095 EGL, Inc. (a) 655,136
15,600 ExpressJet Holdings, Inc. (a) 93,288
77,700 JetBlue Airways Corp. (a)(e) 912,975
7,900 Midwest Air Group, Inc. (a) 118,658
8,200 PHI, Inc. (a) 244,278
11,200 Pinnacle Airlines Corp. (a) 210,000
14,400 Republic Airways Holdings, Inc. (a) 293,040
28,100 SkyWest, Inc. 669,623
-------------
5,824,630
- -----------------------------------------------------------------------------------------------------------------------------
Aluminum - 0.1% 11,002 Century Aluminum Co. (a) 601,039
6,100 Kaiser Aluminum Corp. 444,568
-------------
1,045,607
- -----------------------------------------------------------------------------------------------------------------------------
Auto Parts: After Market - 0.1% 9,543 Aftermarket Technology Corp. (a) 283,236
7,350 Commercial Vehicle Group, Inc. (a) 136,930
7,100 Keystone Automotive Industries, Inc. (a) 293,727
3,800 Standard Motor Products, Inc. 57,114
12,999 Superior Industries International, Inc. 282,858
-------------
1,053,865
- -----------------------------------------------------------------------------------------------------------------------------
Auto Parts: Original Equipment - 0.6% 19,400 American Axle & Manufacturing Holdings, Inc. 574,628
12,300 Amerigon Inc. (a) 220,785
31,000 ArvinMeritor, Inc. 688,200
44,200 Hayes Lemmerz International, Inc. (a) 236,470
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
33,380 Lear Corp. (a) $ 1,188,662
7,300 Noble International Ltd. 149,212
2,873 Sauer-Danfoss, Inc. 85,500
2,500 Stoneridge, Inc. (a) 30,850
20,100 Tenneco, Inc. (a) 704,304
56,400 Visteon Corp. (a) 456,840
-------------
4,335,451
- -----------------------------------------------------------------------------------------------------------------------------
Auto, Trucks & Parts - 0.2% 7,700 Accuride Corp. (a) 118,657
28,500 Force Protection, Inc. (a) 588,240
4,000 Miller Industries, Inc. (a) 100,400
13,394 Modine Manufacturing Co. 302,704
12,300 Spartan Motors, Inc. 209,346
13,245 Wabash National Corp. 193,774
-------------
1,513,121
- -----------------------------------------------------------------------------------------------------------------------------
Banks: New York City - 0.1% 12,900 Signature Bank (a) 439,890
- -----------------------------------------------------------------------------------------------------------------------------
Banks: Outside New York City - 5.1% 3,784 1st Source Corp. 94,297
480 Abington Bancorp, Inc. 4,584
7,021 Alabama National Bancorp. 434,179
11,718 Amcore Financial, Inc. 339,705
7,450 AmericanWest Bancorp 135,814
5,900 Ameris Bancorp 132,573
2,190 Bancfirst Corp. 93,776
8,800 Banco Latinoamericano de Exportaciones, SA 'E' 165,440
7,515 The Bancorp, Inc. (a) 168,035
5,200 Bank of the Ozarks, Inc. 144,924
10,100 BankFinancial Corp. 156,045
7,013 Banner Corp. 238,863
17,333 Boston Private Financial Holdings, Inc. 465,738
26,365 CVB Financial Corp. 293,179
4,021 Capital City Bank Group, Inc. (e) 126,018
4,100 Capital Corp. of the West 98,236
6,000 Capitol Bancorp Ltd. 163,980
11,925 Cascade Bancorp (e) 275,825
22,244 Cathay General Bancorp 746,064
24,000 Centennial Bank Holdings, Inc. (a) 203,280
5,700 Center Financial Corp. 96,444
12,248 Central Pacific Financial Corp. 404,306
10,748 Chemical Financial Corp. 278,051
19,982 Chittenden Corp. 698,371
36,387 Citizens Banking Corp. 665,882
9,193 City Holding Co. 352,368
5,898 CityBank 185,846
1,700 Clifton Savings Bancorp, Inc. 18,428
8,026 CoBiz Financial, Inc. 145,431
7,141 Columbia Banking System, Inc. 208,874
4,800 Community Bancorp (a) 134,304
11,800 Community Bank System, Inc. 236,236
8,699 Community Banks, Inc. 280,282
6,723 Community Trust Bancorp, Inc. 217,153
16,904 Corus Bankshares, Inc. (e) 291,763
2,000 Enterprise Financial Services Corp. 49,720
35,300 First BanCorp 387,947
4,136 First Bancorp 77,467
4,514 First Busey Corp. 90,235
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
13,123 First Charter Corp. $ 255,505
32,240 First Commonwealth Financial Corp. (e) 352,061
11,311 First Community Bancorp, Inc. 647,102
3,094 First Community Bancshares, Inc. 96,502
14,387 First Financial Bancorp 215,661
7,953 First Financial Bankshares, Inc. 308,656
5,744 First Financial Corp. 168,644
5,846 First Merchants Corp. 140,479
23,500 First Midwest Bancorp, Inc. 834,485
3,600 First Regional Bancorp (a) 91,584
1,700 First South Bancorp, Inc. (e) 45,730
11,500 First State Bancorp. 244,835
38,200 FirstMerit Corp. 799,526
14,300 Franklin Bank Corp. (a) 213,070
15,966 Frontier Financial Corp. 359,714
21,164 Glacier Bancorp, Inc. 430,687
24,700 Greater Bay Bancorp 687,648
2,800 Greene County Bancshares, Inc. 87,528
11,654 Hancock Holding Co. 437,608
17,704 Hanmi Financial Corp. 302,030
12,636 Harleysville National Corp. 203,692
4,300 Heartland Financial USA, Inc. 104,490
4,700 Heritage Commerce Corp. 111,296
2,300 Home Bancshares, Inc. 51,865
8,145 Independent Bank Corp./MA 240,603
13,645 Independent Bank Corp./MI 234,830
10,774 Integra Bank Corp. 231,318
21,210 International Bancshares Corp. 543,400
20,000 Investors Bancorp, Inc. (a) 268,600
10,148 Irwin Financial Corp. 151,916
4,196 Lakeland Bancorp, Inc. 55,807
4,000 Lakeland Financial Corp. 85,080
13,983 MB Financial, Inc. 485,769
6,727 Macatawa Bank Corp. 107,027
5,419 MainSource Financial Group, Inc. 90,985
8,480 Midwest Banc Holdings, Inc. 122,960
12,913 NBT Bancorp, Inc. 291,317
9,700 Nara Bancorp, Inc. 154,521
18,590 National Penn Bancshares, Inc. 310,081
32,795 Old National Bancorp 544,725
5,722 Old Second Bancorp, Inc. 166,854
3,541 Omega Financial Corp. 95,217
14,818 Oriental Financial Group 161,664
21,062 Pacific Capital Bancorp 568,253
4,715 Park National Corp. 399,785
4,110 Peoples Bancorp, Inc. 111,258
6,800 Pinnacle Financial Partners, Inc. (a) 199,648
8,200 Piper Jaffray Cos. (a) 456,986
4,050 Preferred Bank 162,000
9,796 PrivateBancorp, Inc. 282,125
15,400 Prosperity Bancshares, Inc. 504,504
16,024 Provident Bankshares Corp. 525,267
4,898 Renasant Corp. 111,381
2,954 Republic Bancorp, Inc. Class A 49,007
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
1,333 Royal Bancshares of Pennsylvania Class A $ 26,273
9,963 S&T Bancorp, Inc. 327,783
2,463 SCBT Financial Corp. 89,653
16,200 SVB Financial Group (a) 860,382
3,030 SY Bancorp, Inc. 71,993
7,314 Sandy Spring Bancorp, Inc. 229,952
1,403 Santander BanCorp 20,849
8,958 Seacoast Banking Corp. of Florida (e) 194,837
6,700 Security Bank Corp. 134,670
900 Sierra Bancorp 25,380
4,600 Simmons First National Corp. Class A 126,914
30,100 The South Financial Group, Inc. 681,464
4,680 Southside Bancshares, Inc. 101,650
8,900 Southwest Bancorp, Inc. 213,956
36,814 Sterling Bancshares, Inc. 416,366
16,002 Sterling Financial Corp. 168,341
4,400 Suffolk Bancorp 140,448
5,270 Sun Bancorp, Inc. (a) 88,905
15,100 Superior Bancorp (a) 154,473
23,916 Susquehanna Bancshares, Inc. 535,001
2,500 Taylor Capital Group, Inc. 68,825
13,261 Texas Capital Bancshares, Inc. (a) 296,383
2,840 Tompkins Trustco, Inc. 106,216
3,878 Trico Bancshares 86,712
39,361 TrustCo Bank Corp. NY 388,887
23,927 Trustmark Corp. 618,752
47,100 UCBH Holdings, Inc. 860,517
14,052 UMB Financial Corp. 518,097
3,896 USB Holding Co., Inc. 74,258
27,880 Umpqua Holdings Corp. 655,459
4,500 Union Bankshares Corp. 104,400
17,700 United Bankshares, Inc. 562,860
16,000 United Community Banks, Inc. 414,240
1,300 United Security Bancshares 26,494
2,750 Univest Corp. of Pennsylvania 61,930
7,554 Virginia Commerce Bancorp (a) 127,738
5,000 Washington Trust Bancorp, Inc. 126,050
1 Wells Fargo & Co. 19
10,863 WesBanco, Inc. 320,459
5,000 West Coast Bancorp 151,950
14,583 Westamerica Bancorp. 645,152
5,000 Western Alliance Bancorp (a) 149,250
7,300 Wilshire Bancorp, Inc. 88,914
12,000 Wintrust Financial Corp. 526,200
3,500 Yardville National Bancorp 119,525
-------------
35,911,526
- -----------------------------------------------------------------------------------------------------------------------------
Beverage: Brewers (Wineries) - 0.0% 5,600 Boston Beer Co., Inc. Class A (a) 220,360
- -----------------------------------------------------------------------------------------------------------------------------
Beverage: Soft Drinks - 0.1% 1,287 Coca-Cola Bottling Co. Consolidated 64,736
1,610 Farmer Bros. Co. 36,434
3,200 Green Mountain Coffee Roasters, Inc. (a) 251,968
12,900 Jones Soda Co. (a)(e) 180,858
3,108 National Beverage Corp. (a) 35,773
8,600 Peet's Coffee & Tea, Inc. (a) 211,818
-------------
781,587
- -----------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
Biotechnology Research & 16,500 Acadia Pharmaceuticals, Inc. (a) $ 225,555
Production - 2.3% 7,000 Acorda Therapeutics, Inc. (a) 119,420
5,400 Advanced Magnetics, Inc. (a) 314,064
11,287 Albany Molecular Research, Inc. (a) 167,612
16,980 Alexion Pharmaceuticals, Inc. (a) 765,119
26,900 Allos Therapeutics, Inc. (a) 118,898
14,900 Alnylam Pharmaceuticals, Inc. (a)(e) 226,331
5,600 Altus Pharmaceuticals, Inc. (a) 64,624
17,300 American Oriental Bioengineering, Inc. (a)(e) 153,970
31,600 Applera Corp. - Celera Genomics Group (a)(h) 391,840
30,700 Arena Pharmaceuticals, Inc. (a) 337,393
38,419 Ariad Pharmaceuticals, Inc. (a)(e) 210,920
8,600 Arqule, Inc. (a) 60,630
20,400 Array Biopharma, Inc. (a) 238,068
13,220 ArthroCare Corp. (a) 580,490
16,800 Bioenvision, Inc. (a)(e) 97,104
9,300 Bionovo, Inc. (a) 35,898
34,924 Cell Genesys, Inc. (a)(e) 116,995
26,367 Cubist Pharmaceuticals, Inc. (a) 519,694
17,200 Cypress Bioscience, Inc. (a) 227,556
10,000 Cytokinetics, Inc. (a) 56,500
9,024 Digene Corp. (a)(e) 541,891
24,600 Discovery Laboratories, Inc. (a) 69,618
38,096 Encysive Pharmaceuticals, Inc. (a)(e) 67,811
26,300 Enzon Pharmaceuticals, Inc. (a) 206,455
39,218 Exelixis, Inc. (a)(e) 474,538
45,900 GenVec, Inc. (a) 107,865
3,900 Genomic Health, Inc. (a)(e) 73,320
31,629 Geron Corp. (a)(e) 222,668
24,100 Halozyme Therapeutics, Inc. (a) 222,443
63,700 Human Genome Sciences, Inc. (a) 568,204
6,800 Idenix Pharmaceuticals, Inc. (a) 40,120
16,200 Immunomedics, Inc. (a) 67,230
36,524 Incyte Corp. (a) 219,144
9,200 Integra LifeSciences Holdings Corp. (a)(e) 454,664
13,214 InterMune, Inc. (a)(e) 342,771
6,600 Kendle International, Inc. (a) 242,682
6,200 Kensey Nash Corp. (a) 166,222
16,800 Keryx Biopharmaceuticals, Inc. (a) 164,136
11,600 Kosan Biosciences, Inc. (a) 60,552
14,850 MannKind Corp. (a)(e) 183,101
16,300 Martek Biosciences Corp. (a)(e) 423,311
9,901 Maxygen, Inc. (a) 84,852
12,000 Medivation, Inc. (a) 245,160
4,200 Metabolix, Inc. (a) 105,126
9,800 Momenta Pharmaceuticals, Inc. (a)(e) 98,784
18,700 Myriad Genetics, Inc. (a) 695,453
26,354 Nabi Biopharmaceuticals (a) 121,228
11,100 Nastech Pharmaceutical Co., Inc. (a)(e) 121,101
19,800 Neurocrine Biosciences, Inc. (a)(e) 222,354
8,200 Neurogen Corp. (a) 54,448
7,200 Novacea, Inc. (a) 68,040
26,900 OSI Pharmaceuticals, Inc. (a) 974,049
4,700 Omrix Biopharmaceuticals, Inc. (a) 147,862
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
400 Orexigen Therapeutics, Inc. (a) $ 6,008
3,400 Osiris Therapeutics, Inc. (a)(e) 45,934
8,600 PRA International, Inc. (a) 217,580
9,550 PharmaNet Development Group, Inc. (a) 304,454
17,000 Poniard Pharmaceuticals, Inc. (a) 115,600
11,300 Progenics Pharmaceuticals, Inc. (a) 243,741
12,100 Protalix BioTherapeutics, Inc. (a) 326,579
17,500 Regeneration Technologies, Inc. (a) 196,875
8,370 Rigel Pharmaceuticals, Inc. (a) 74,577
23,128 Savient Pharmaceuticals, Inc. (a) 287,250
13,900 Seattle Genetics, Inc. (a) 136,359
10,845 Tanox, Inc. (a) 210,501
23,032 Telik, Inc. (a) 77,848
7,100 Tercica, Inc. (a) 36,210
13,900 Vanda Pharmaceuticals, Inc. (a) 281,614
15,078 Verenium Corp. (a) 76,445
29,700 ViroPharma, Inc. (a) 409,860
45,000 XOMA Ltd. (a) 136,800
14,100 ZymoGenetics, Inc. (a) 206,001
-------------
16,276,120
- -----------------------------------------------------------------------------------------------------------------------------
Building: Cement - 0.0% 14,800 US Concrete, Inc. (a) 128,612
- -----------------------------------------------------------------------------------------------------------------------------
Building: Heating & Plumbing - 0.0% 2,100 Aaon, Inc. 66,885
10,800 Interline Brands, Inc. (a) 281,664
-------------
348,549
- -----------------------------------------------------------------------------------------------------------------------------
Building: Materials - 0.5% 4,800 Ameron International Corp. 432,912
3,200 BlueLinx Holdings, Inc. 33,568
12,800 Building Material Holding Corp. 181,632
12,012 LSI Industries, Inc. 215,015
10,068 NCI Building Systems, Inc. (a) 496,654
1,300 PGT, Inc. (a) 14,209
14,932 Simpson Manufacturing Co., Inc. 503,806
11,805 Texas Industries, Inc. 925,630
5,209 Trex Co., Inc. (a) 102,253
9,865 Watsco, Inc. 536,656
9,500 Zoltek Cos., Inc. (a) 394,535
-------------
3,836,870
- -----------------------------------------------------------------------------------------------------------------------------
Building: Miscellaneous - 0.2% 5,000 Builders FirstSource, Inc. (a) 80,300
17,800 Comfort Systems USA, Inc. 252,404
6,700 Drew Industries, Inc. (a) 222,038
13,800 Goodman Global, Inc. (a) 306,636
15,847 Griffon Corp. (a) 345,148
-------------
1,206,526
- -----------------------------------------------------------------------------------------------------------------------------
Building: Roofing & Wallboard - 0.1% 22,250 Beacon Roofing Supply, Inc. (a)(e) 378,027
- -----------------------------------------------------------------------------------------------------------------------------
Cable Television Services - 0.1% 177,900 Charter Communications, Inc. Class A (a)(e) 720,495
6,998 Crown Media Holdings, Inc. Class A (a)(e) 50,386
44,094 TiVo, Inc. (a) 255,304
-------------
1,026,185
- -----------------------------------------------------------------------------------------------------------------------------
Casinos & Gambling - 0.6% 11,000 Ameristar Casinos, Inc. 382,140
23,200 Bally Technologies, Inc. (a) 612,944
2,832 Churchill Downs, Inc. 148,340
6,705 Dover Downs Gaming & Entertainment, Inc. 100,642
6,875 Isle of Capri Casinos, Inc. (a)(e) 164,725
11,500 Lakes Entertainment, Inc. (a)(e) 135,815
11,300 MTR Gaming Group, Inc. (a) 174,020
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
17,474 Magna Entertainment Corp. Class A (a) $ 51,024
5,200 Monarch Casino & Resort, Inc. (a) 139,620
14,300 Multimedia Games, Inc. (a)(e) 182,468
25,894 Pinnacle Entertainment, Inc. (a) 728,916
3,500 Riviera Holdings Corp. (a) 127,225
17,800 Shuffle Master, Inc. (a) 295,480
16,500 Trump Entertainment Resorts, Inc. (a) 207,075
16,618 WMS Industries, Inc. (a) 479,595
-------------
3,930,029
- -----------------------------------------------------------------------------------------------------------------------------
Chemicals - 1.5% 5,433 American Vanguard Corp. (e) 77,800
9,156 Arch Chemicals, Inc. 321,742
5,800 Balchem Corp. 105,386
24,100 CF Industries Holdings, Inc. 1,443,349
10,500 Cabot Microelectronics Corp. (a) 372,645
21,301 Calgon Carbon Corp. (a)(e) 247,092
12,485 Cambrex Corp. 165,676
12,600 EnerSys (a) 230,580
17,264 Energy Conversion Devices, Inc. (a)(e) 532,076
21,900 Exide Technologies (a) 203,670
17,537 Georgia Gulf Corp. (e) 317,595
53,600 Hercules, Inc. (a) 1,053,240
5,500 Innophos Holdings, Inc. 78,650
4,900 Innospec, Inc. 290,129
7,700 LSB Industries, Inc. (a) 164,241
5,500 Landec Corp. (a) 73,700
9,341 Medis Technologies Ltd. (a)(e) 137,219
3,134 NL Industries, Inc. 31,403
6,700 NewMarket Corp. 324,079
6,665 Nuco2, Inc. (a) 171,091
13,000 OM Group, Inc. (a) 687,960
6,200 Pioneer Cos., Inc. (a) 213,094
38,967 PolyOne Corp. (a) 280,173
13,800 Rockwood Holdings, Inc. (a) 504,390
13,606 Schulman A, Inc. 331,034
16,500 Senomyx, Inc. (a) 222,750
4,000 ShengdaTech, Inc. (a) 21,280
2,655 Stepan Co. 80,393
9,400 Tronox, Inc. Class A 135,172
6,300 Tronox, Inc. Class B 88,515
20,700 UAP Holding Corp. 623,898
30,500 WR Grace & Co. (a) 746,945
-------------
10,276,967
- -----------------------------------------------------------------------------------------------------------------------------
Coal - 0.1% 25,900 Alpha Natural Resources, Inc. (a) 538,461
48,200 International Coal Group, Inc. (a) 288,236
9,200 US BioEnergy Corp. (a) 104,512
-------------
931,209
- -----------------------------------------------------------------------------------------------------------------------------
Commercial Information Services - 0.2% 14,158 Arbitron, Inc. 729,562
225,800 CMGI, Inc. (a) 440,310
12,061 infoUSA, Inc. 123,263
13,400 LECG Corp. (a) 202,474
9,800 LoopNet, Inc. (a) 228,634
-------------
1,724,243
- -----------------------------------------------------------------------------------------------------------------------------
Communications & Media - 0.1% 30,100 Entravision Communications Corp. Class A (a) 313,943
106,500 Gemstar-TV Guide International, Inc. (a) 523,980
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
8,900 Knology, Inc. (a) $ 154,593
-------------
992,516
- -----------------------------------------------------------------------------------------------------------------------------
Communications Technology - 2.4% 169,100 3Com Corp. (a) 698,383
6,000 Acme Packet, Inc. (a) 68,940
28,200 Adtran, Inc. 732,354
10,422 Anaren, Inc. (a) 183,531
13,472 Anixter International, Inc. (a) 1,013,229
1,100 Aruba Networks, Inc. (a) 22,110
24,000 Atheros Communications, Inc. (a) 740,160
58,500 Avanex Corp. (a) 105,300
24,050 Avocent Corp. (a) 697,690
5,159 Bel Fuse, Inc. 175,561
2,600 BigBand Networks, Inc. (a) 34,086
9,288 Black Box Corp. 384,337
1,000 CPI International, Inc. (a) 19,830
21,400 CSG Systems International, Inc. (a) 567,314
8,700 Cbeyond Communications, Inc. (a) 335,037
20,400 Cogent Communications Group, Inc. (a) 609,348
8,500 Comtech Group, Inc. (a) 140,335
11,325 Comtech Telecommunications Corp. (a) 525,706
8 CycleLogic, Inc. (a) 0
8,100 Digi International, Inc. (a) 119,394
13,900 Ditech Networks, Inc. (a) 113,841
6,400 EMS Technologies, Inc. (a) 141,184
15,213 Echelon Corp. (a)(e) 237,779
51,500 Extreme Networks, Inc. (a) 208,575
105,100 Finisar Corp. (a)(e) 397,278
63,300 Foundry Networks, Inc. (a) 1,054,578
5,400 GeoEye, Inc. (a) 117,342
39,196 Harmonic, Inc. (a) 347,669
9,250 Harris Stratex Networks, Inc. Class A (a) 166,315
1,600 Hughes Communications, Inc. (a) 83,488
12,200 InPhonic, Inc. (a)(e) 56,852
9,577 Inter-Tel, Inc. 229,178
16,900 InterVoice, Inc. (a) 140,777
15,329 Ixia (a) 141,947
22,000 j2 Global Communications, Inc. (a) 767,800
4,300 Loral Space & Communications Ltd. (a) 211,904
16,400 NETGEAR, Inc. (a) 594,500
7,000 Network Equipment Technologies, Inc. (a) 66,780
6,900 Nextwave Wireless, Inc. (a) 57,615
15,100 Novatel Wireless, Inc. (a) 392,902
9,702 Oplink Communications, Inc. (a) 145,530
1,300 Optium Corp. (a) 16,445
7,100 SeaChange International, Inc. (a) 55,096
20,138 Secure Computing Corp. (a) 152,847
16,800 Sirenza Microdevices, Inc. (a) 199,416
109,700 Sonus Networks, Inc. (a) 934,644
11,210 Standard Microsystems Corp. (a) 384,951
4,300 Switch and Data Facilities Co., Inc. (a) 82,517
69,400 Sycamore Networks, Inc. (a) 278,988
8,400 Syniverse Holdings, Inc. (a) 108,024
97,600 TIBCO Software, Inc. (a) 883,280
28,900 Tekelec (a) 416,738
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
27,730 Terremark Worldwide, Inc. (a) $ 178,859
47,800 Utstarcom, Inc. (a) 268,158
9,201 Viasat, Inc. (a) 295,352
13,500 Vonage Holdings Corp. (a) 41,985
-------------
17,143,779
- -----------------------------------------------------------------------------------------------------------------------------
Computer Services Software & Systems - 4.6% 19,500 Actuate Corp. (a) 132,405
25,802 Agile Software Corp. (a) 207,964
13,000 American Reprographics Co. (a) 400,270
6,300 Ansoft Corp. (a) 185,787
33,764 Ansys, Inc. (a) 894,746
34,080 Ariba, Inc. (a) 337,733
43,300 Art Technology Group, Inc. (a) 115,178
13,100 AsiaInfo Holdings, Inc. (a) 127,070
38,288 Aspen Technology, Inc. (a) 536,032
87,800 BearingPoint, Inc. (a) 641,818
19,126 Blackbaud, Inc. 422,302
14,000 Blackboard, Inc. (a) 589,680
5,900 Blue Coat Systems, Inc. (a) 292,168
34,167 Borland Software Corp. (a) 202,952
9,400 Bottomline Technologies, Inc. (a) 116,090
13,400 CACI International, Inc. Class A (a) 654,590
7,600 COMSYS IT Partners, Inc. (a) 173,356
17,340 Chordiant Software, Inc. (a) 271,544
23,602 Ciber, Inc. (a) 193,064
18,300 Commvault Systems, Inc. (a) 316,041
900 Comverge, Inc. (a) 27,909
17,000 Concur Technologies, Inc. (a) 388,450
12,100 Covansys Corp. (a) 410,553
13,100 DealerTrack Holdings, Inc. (a) 482,604
17,500 Digital River, Inc. (a) 791,875
7,400 DivX, Inc. (a)(e) 111,000
3,300 Double-Take Software, Inc. (a) 54,153
14,718 EPIQ Systems, Inc. (a) 237,835
6,300 eCollege.com, Inc. (a) 140,175
24,639 Electronics for Imaging, Inc. (a) 695,313
25,300 Epicor Software Corp. (a) 376,211
13,500 Equinix, Inc. (a)(e) 1,234,845
30,179 Gartner, Inc. Class A (a) 742,102
6,100 i2 Technologies, Inc. (a)(e) 113,704
5,100 iGate Corp. (a) 40,902
3,700 Imergent, Inc. (e) 90,502
9,700 Infocrossing, Inc. (a)(e) 179,159
41,600 Informatica Corp. (a) 614,432
3,100 Integral Systems, Inc. 75,361
3,500 Interactive Intelligence, Inc. (a) 72,100
14,200 Internet Capital Group, Inc. (a) 176,080
20,525 Interwoven, Inc. (a) 288,171
11,108 JDA Software Group, Inc. (a) 218,050
3,000 Keynote Systems, Inc. (a) 49,200
56,600 Lawson Software, Inc. (a)(e) 559,774
25,300 Lionbridge Technologies, Inc. (a) 149,017
9,400 LivePerson, Inc. (a) 50,290
15,000 MSC.Software Corp. (a) 203,100
24,400 Macrovision Corp. (a) 733,464
19,900 Magma Design Automation, Inc. (a) 279,396
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
12,739 Manhattan Associates, Inc. (a) $ 355,545
6,700 Mantech International Corp. Class A (a) 206,561
37,000 Mentor Graphics Corp. (a) 487,290
10,856 Mercury Computer Systems, Inc. (a) 132,443
4,200 MicroStrategy, Inc. Class A (a) 396,858
18,798 Micros Systems, Inc. (a) 1,022,611
14,900 Ness Technologies, Inc. (a) 193,849
57,295 Nuance Communications, Inc. (a) 958,545
14,600 Omniture, Inc. (a) 334,632
65,500 On2 Technologies, Inc. (a) 196,500
20,900 OpenTV Corp. (a) 44,308
42,733 Openwave Systems, Inc. (e) 267,509
42,900 Opsware, Inc. (a) 407,979
6,800 PDF Solutions, Inc. (a) 80,444
19,607 Packeteer, Inc. (a) 153,131
52,660 Parametric Technology Corp. (a) 1,137,983
1,800 Pegasystems, Inc. 19,674
19,208 Progress Software Corp. (a) 610,622
3,300 QAD, Inc. 27,390
27,300 Quest Software, Inc. (a) 441,987
44,400 RealNetworks, Inc. (a) 362,748
7,300 RightNow Technologies, Inc. (a) 119,793
11,880 SAVVIS, Inc. (a) 588,179
5,700 SI International, Inc. (a) 188,214
7,989 SPSS, Inc. (a) 352,634
16,000 SRA International, Inc. Class A (a) 404,160
14,361 SYKES Enterprises, Inc. (a) 272,715
4,300 SYNNEX Corp. (a) 88,623
40,992 Sapient Corp. (a) 316,868
10,000 Sigma Designs, Inc. (a) 260,900
12,700 Smith Micro Software, Inc. (a) 191,262
8,600 Solera Holdings, Inc. (a) 166,668
24,341 SonicWALL, Inc. (a) 209,089
40,100 Sourceforge, Inc. (a) 169,222
700 Stanley, Inc. (a) 12,334
39,700 Sybase, Inc. (a) 948,433
6,500 Synchronoss Technologies, Inc. (a) 190,710
3,783 Syntel, Inc. 114,965
9,400 Taleo Corp. Class A (a) 211,782
300 TechTarget, Inc. (a) 3,855
17,985 Transaction Systems Architects, Inc. Class A (a) 605,375
19,708 The TriZetto Group, Inc. (a) 381,547
16,900 Tyler Technologies, Inc. (a) 209,729
12,900 Ultimate Software Group, Inc. (a) 373,197
1,600 Unica Corp. (a) 26,400
13,400 VASCO Data Security International, Inc. (a) 304,314
12,380 Vignette Corp. (a) 237,201
8,900 Visual Sciences, Inc. (a) 137,683
19,502 Websense, Inc. (a) 414,418
32,400 Wind River Systems, Inc. (a) 356,400
21,608 Zoran Corp. (a) 433,024
-------------
32,524,820
- -----------------------------------------------------------------------------------------------------------------------------
Computer Technology - 1.0% 52,100 Adaptec, Inc. (a) 198,501
16,800 Advanced Analogic Technologies, Inc. (a) 162,960
20,500 Cray, Inc. (a) 156,415
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
35,600 Emulex Corp. (a) $ 777,504
18,609 FalconStor Software, Inc. (a) 196,325
133,400 Gateway, Inc. (a) 212,106
13,817 Hutchinson Technology, Inc. (a) 259,898
15,300 Imation Corp. 563,958
15,100 Immersion Corp. (a) 226,198
23,909 Intermec, Inc. (a)(e) 605,137
1,800 Isilon Systems, Inc. (a) 27,756
12,000 Komag, Inc. (a) 382,680
45,088 Palm, Inc. (e) 721,859
35,800 Perot Systems Corp. Class A (a) 610,032
74,600 Quantum Corp. (a) 236,482
14,600 Rackable Systems, Inc. (a)(e) 180,456
11,400 Radiant Systems, Inc. (a) 150,936
10,942 Radisys Corp. (a) 135,681
2,600 Rimage Corp. (a) 82,134
7,400 STEC, Inc. (a) 47,582
42,100 Safeguard Scientifics, Inc. (a) 118,301
1,200 Silicon Graphics, Inc. (a) 31,848
5,400 Stratasys, Inc. (a) 253,692
12,600 Synaptics, Inc. (a) 450,954
27,700 Trident Microsystems, Inc. (a) 508,295
-------------
7,297,690
- -----------------------------------------------------------------------------------------------------------------------------
Construction - 0.5% 5,251 Brookfield Homes Corp. (e) 152,752
13,836 EMCOR Group, Inc. (a) 1,008,644
15,671 Granite Construction, Inc. 1,005,765
10,900 Perini Corp. (a) 670,677
12,700 Washington Group International, Inc. (a) 1,016,127
-------------
3,853,965
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Electronics - 0.8% 71,900 CNET Networks, Inc. (a) 588,861
7,900 DTS, Inc. (a) 171,983
61,300 EarthLink, Inc. (a) 457,911
200 Glu Mobile, Inc. (a) 2,780
16,000 InfoSpace, Inc. 371,360
17,990 Internap Network Services Corp. (a) 259,416
21,800 Ipass, Inc. (a)(e) 118,156
8,300 LoJack Corp. (a) 185,007
11,274 Midway Games, Inc. (a)(e) 71,703
10,300 NIC, Inc. 70,452
21,100 NetFlix, Inc. (a)(e) 409,129
12,000 Sohu.com, Inc. (a) 383,880
29,437 THQ, Inc. (a) 898,417
31,700 Take-Two Interactive Software, Inc. (a) 633,049
29,050 United Online, Inc. 479,035
6,286 Universal Electronics, Inc. (a) 228,308
-------------
5,329,447
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Products - 0.6% 24,100 American Greetings Corp. Class A 682,753
13,200 Blyth, Inc. 350,856
3,391 CSS Industries, Inc. 134,317
7,200 Citi Trends, Inc. (a) 273,312
7,100 Mannatech, Inc. (e) 112,819
13,073 Matthews International Corp. Class A 570,114
13,663 Nautilus, Inc. 164,503
8,900 Oakley, Inc. 252,760
21,276 Playtex Products, Inc. (a) 315,098
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
8,513 RC2 Corp. (a) $ 340,605
21,100 Spectrum Brands, Inc. (a) 142,847
15,991 The Topps Co., Inc. 168,065
28,474 Tupperware Corp. 818,343
4,700 USANA Health Sciences, Inc. (a) 210,278
-------------
4,536,670
- -----------------------------------------------------------------------------------------------------------------------------
Containers & Packaging: Metals & 30,200 AptarGroup, Inc. 1,073,912
Glass - 0.4% 14,450 Greif, Inc. 861,365
17,842 Mobile Mini, Inc. (a) 520,986
9,600 Silgan Holdings, Inc. 530,688
-------------
2,986,951
- -----------------------------------------------------------------------------------------------------------------------------
Containers & Packaging: Paper & 2,100 AEP Industries, Inc. (a) 94,521
Plastic - 0.1% 25,100 Graphic Packaging Corp. (a) 121,484
14,352 Myers Industries, Inc. 317,323
-------------
533,328
- -----------------------------------------------------------------------------------------------------------------------------
Copper - 0.1% 16,082 Mueller Industries, Inc. 553,864
- -----------------------------------------------------------------------------------------------------------------------------
Cosmetics - 0.2% 10,593 Elizabeth Arden, Inc. (a) 256,986
15,600 Helen of Troy Ltd. (a) 421,200
1,800 Inter Parfums, Inc. 47,916
21,826 Nu Skin Enterprises, Inc. Class A 360,129
79,475 Revlon, Inc. Class A (a) 108,881
-------------
1,195,112
- -----------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.6% 300 ACA Capital Holdings, Inc. (a) 3,570
58,600 The BISYS Group, Inc. 693,238
2,100 Clayton Holdings, Inc. (a) 23,919
2,500 Enstar Group Ltd. (a) 301,775
19,950 Euronet Worldwide, Inc. (a)(e) 581,742
1,900 Evercore Partners, Inc. Class A 56,563
3,400 FCStone Group, Inc. (a) 194,854
23,800 F.N.B. Corp. 398,412
20,690 Freedom Acquisition Holdings, Inc. (a) 227,797
7,600 Greenhill & Co., Inc. (e) 522,196
8,900 Huron Consulting Group, Inc. (a) 649,789
7,700 Information Services Group, Inc. (a) 58,905
20,000 Interactive Brokers Group, Inc. Class A (a) 542,600
9,200 Marathon Acquisition Corp. (a) 72,496
1,400 Oritani Financial Corp. (a) 20,006
-------------
4,347,862
- -----------------------------------------------------------------------------------------------------------------------------
Diversified Materials & Processing - 0.8% 19,360 Acuity Brands, Inc. 1,167,021
18,014 Barnes Group, Inc. 570,683
20,094 Brady Corp. 746,291
24,210 Clarcor, Inc. 906,180
39,962 Hexcel Corp. (a) 841,999
6,300 Koppers Holdings, Inc. 212,184
32,014 Olin Corp. 672,294
13,345 Tredegar Corp. 284,249
3,000 Valhi, Inc. 48,900
-------------
5,449,801
- -----------------------------------------------------------------------------------------------------------------------------
Drug & Grocery Store Chains - 0.6% 432 Arden Group, Inc. Class A 58,925
24,407 Casey's General Stores, Inc. 665,335
8,831 The Great Atlantic & Pacific Tea Co., Inc. (a)(e) 296,192
6,364 Ingles Markets, Inc. Class A 219,240
14,283 Longs Drug Stores Corp. 750,143
6,777 Nash Finch Co. 335,462
18,642 Pathmark Stores, Inc. (a) 241,600
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
18,069 Ruddick Corp. $ 544,238
11,100 Spartan Stores, Inc. 365,301
1,000 Village Super Market, Inc. Class A 47,810
5,400 Weis Markets, Inc. 218,754
12,229 Wild Oats Markets, Inc. (a) 204,958
13,700 Winn-Dixie Stores, Inc. (a) 401,410
-------------
4,349,368
- -----------------------------------------------------------------------------------------------------------------------------
Drugs & Pharmaceuticals - 2.3% 14,900 Adams Respiratory Therapeutics, Inc. (a)(e) 586,911
500 Affymax, Inc. (a) 13,480
31,100 Akorn, Inc. (a) 217,389
4,200 Alexza Pharmaceuticals, Inc. (a) 34,734
41,800 Alkermes, Inc. (a) 610,280
18,825 Alpharma, Inc. Class A 489,638
15,400 Auxilium Pharmaceuticals, Inc. (a) 245,476
16,200 Beijing Med-Pharm Corp. (a) 172,854
6,100 Bentley Pharmaceuticals, Inc. (a) 74,054
43,948 BioMarin Pharmaceuticals, Inc. (a) 788,427
5,500 Bradley Pharmaceuticals, Inc. (a) 119,405
29,400 CV Therapeutics, Inc. (a)(e) 388,374
3,700 Cadence Pharmaceuticals, Inc. (a) 44,881
1,700 Caraco Pharmaceutical Laboratories Ltd. (a) 25,806
8,300 Chattem, Inc. (a)(e) 526,054
26,300 CytRx Corp. (a) 82,056
36,300 Dendreon Corp. (a)(e) 257,004
20,800 Durect Corp. (a) 80,080
100 Emergent Biosolutions, Inc. (a) 1,030
11,295 Enzo Biochem, Inc. (a)(e) 168,860
4,900 GTx, Inc. (a)(e) 79,331
20,300 Indevus Pharmaceuticals, Inc. (a) 136,619
40,889 Isis Pharmaceuticals, Inc. (a) 395,806
22,600 Javelin Pharmaceuticals, Inc. (a) 139,894
15,300 KV Pharmaceutical Co. Class A (a) 416,772
33,800 Ligand Pharmaceuticals, Inc. Class B 232,544
34,100 MGI Pharma, Inc. (a) 762,817
57,900 Medarex, Inc. (a)(e) 827,391
21,727 Medicines Co. (a) 382,830
24,300 Medicis Pharmaceutical Corp. Class A 742,122
43,200 Nektar Therapeutics (a)(e) 409,968
12,631 Noven Pharmaceuticals, Inc. (a) 296,197
2,300 Obagi Medical Products, Inc. (a) 40,756
20,800 Onyx Pharmaceuticals, Inc. (a) 559,520
17,600 Pain Therapeutics, Inc. (a)(e) 153,296
15,500 Par Pharmaceutical Cos., Inc. (a) 437,565
13,600 Penwest Pharmaceuticals Co. (a)(e) 169,592
36,915 Perrigo Co. 722,796
11,300 Pharmion Corp. (a) 327,135
13,300 Pozen, Inc. (a) 240,331
12,500 Quidel Corp. (a) 219,500
25,319 Regeneron Pharmaceuticals, Inc. (a) 453,716
23,800 Salix Pharmaceuticals Ltd. (a) 292,740
26,800 Santarus, Inc. (a)(e) 138,556
15,400 Sciele Pharma, Inc. (a)(e) 362,824
7,900 Somaxon Pharmaceuticals, Inc. (a) 96,064
26,882 SuperGen, Inc. (a) 149,464
1,600 Trubion Pharmaceuticals, Inc. (a) 33,408
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
9,046 United Therapeutics Corp. (a) $ 576,773
40,600 Valeant Pharmaceuticals International 677,614
21,500 Vivus, Inc. (a) 112,445
9,400 Xenoport, Inc. (a) 417,548
-------------
15,930,727
- -----------------------------------------------------------------------------------------------------------------------------
Education Services - 0.5% 11,404 Bright Horizons Family Solutions, Inc. (a) 443,730
3,600 Capella Education Co. (a) 165,708
42,300 Corinthian Colleges, Inc. (a) 689,067
26,000 DeVry, Inc. 884,520
2,149 Renaissance Learning, Inc. 28,259
6,920 Strayer Education, Inc. 911,433
9,700 Universal Technical Institute, Inc. (a) 246,283
-------------
3,369,000
- -----------------------------------------------------------------------------------------------------------------------------
Electrical & Electronics - 0.3% 29,429 Benchmark Electronics, Inc. (a) 665,684
5,300 Coleman Cable, Inc. (a) 137,058
6,800 OSI Systems, Inc. (a) 185,980
22,098 Plexus Corp. (a) 508,033
19,900 TTM Technologies, Inc. (a) 258,700
10,807 Universal Display Corp. (a) 169,778
-------------
1,925,233
- -----------------------------------------------------------------------------------------------------------------------------
Electrical Equipment & 8,981 AO Smith Corp. 358,252
Components - 0.9% 3,700 AZZ Inc. (a) 124,505
15,100 American Superconductor Corp. (a)(e) 291,581
19,901 Baldor Electric Co. 980,721
14,168 CTS Corp. 179,367
9,918 Cohu, Inc. 220,675
6,300 Color Kinetics, Inc. (a)(e) 210,483
8,360 Franklin Electric Co., Inc. (e) 394,425
12,116 Genlyte Group, Inc. (a) 951,591
11,460 Littelfuse, Inc. (a) 387,004
19,800 MKS Instruments, Inc. (a) 548,460
3,531 Powell Industries, Inc. (a) 112,145
30,500 Power-One, Inc. (a)(e) 121,390
11,100 Sonic Solutions, Inc. (a) 139,971
30,600 Taser International, Inc. (a) 426,870
16,661 Technitrol, Inc. 477,671
7,179 Triumph Group, Inc. 470,009
-------------
6,395,120
- -----------------------------------------------------------------------------------------------------------------------------
Electrical: Household Appliance - 0.0% 1,950 National Presto Industries, Inc. 121,563
- -----------------------------------------------------------------------------------------------------------------------------
Electronics - 0.7% 31,212 Aeroflex, Inc. (a) 442,274
15,763 Agilysys, Inc. 354,667
22,300 Arrowhead Research Corp. (a) 112,169
19,800 Avid Technology, Inc. (a)(e) 699,930
16,098 Daktronics, Inc. (e)(h) 345,785
28,800 Flir Systems, Inc. (a) 1,332,000
10,272 II-VI, Inc. (a) 279,090
54,766 MRV Communications, Inc. (a)(e) 177,990
19,380 Methode Electronics, Inc. 303,297
2,300 Multi-Fineline Electronix, Inc. (a)(e) 39,468
8,749 Park Electrochemical Corp. 246,547
35,500 Semtech Corp. (a) 615,215
6,767 Supertex, Inc. (a) 212,078
-------------
5,160,510
- -----------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
Electronics: Instruments, Gauges & 5,000 Faro Technologies, Inc. (a) $ 159,300
Meters - 0.2% 14,002 Itron, Inc. (a) 1,091,316
4,800 Measurement Specialties, Inc. (a) 113,664
1,700 OYO Geospace Corp. (a) 126,123
5,700 Zygo Corp. (a) 81,453
-------------
1,571,856
- -----------------------------------------------------------------------------------------------------------------------------
Electronics: Medical Systems - 1.0% 5,000 Accuray, Inc. (a) 110,900
29,800 Affymetrix, Inc. (a) 741,722
7,072 Analogic Corp. 519,863
10,500 Aspect Medical Systems, Inc. (a) 157,080
23,487 Bruker BioSciences Corp. (a) 211,618
4,700 Cynosure, Inc. Class A (a) 171,221
5,570 Datascope Corp. 213,220
23,250 eResearch Technology, Inc. (a) 221,107
8,100 Greatbatch, Inc. (a) 262,440
12,572 Haemonetics Corp. (a) 661,413
23,480 Hologic, Inc. (a)(e) 1,298,679
24,664 Illumina, Inc. (a) 1,001,112
12,151 Luminex Corp. (a) 149,579
29,900 Minrad International, Inc. (a) 177,307
12,500 Natus Medical, Inc. (a) 199,000
12,700 NxStage Medical, Inc. (a) 164,211
6,800 Quality Systems, Inc. (e) 258,196
7,300 Sirona Dental Systems, Inc. 276,159
2,300 Tomotherapy, Inc. (a) 50,416
6,800 Visicu, Inc. (a) 62,220
8,822 Zoll Medical Corp. (a) 196,819
-------------
7,104,282
- -----------------------------------------------------------------------------------------------------------------------------
Electronics: Semi-Conductors/ 23,900 AMIS Holdings, Inc. (a) 299,228
Components - 1.9% 11,516 Actel Corp. (a) 160,188
44,600 Amkor Technology, Inc. (a)(h) 702,450
25,600 Anadigics, Inc. (a)(e) 353,024
140,700 Applied Micro Circuits Corp. (a) 351,750
900 Cavium Networks, Inc. (a) 20,358
37,700 Cirrus Logic, Inc. (a)(h) 312,910
209,800 Conexant Systems, Inc. (a) 289,524
12,383 DSP Group, Inc. (a) 253,480
8,675 Diodes, Inc. (a) 362,355
15,727 Exar Corp. (a) 210,742
6,273 Excel Technology, Inc. (a) 175,268
19,800 Formfactor, Inc. (a) 758,340
19,700 Genesis Microchip, Inc. (a) 184,392
5,500 Hittite Microwave Corp. (a) 235,015
2,600 IPG Photonics Corp. (a) 51,870
16,793 IXYS Corp. (a) 140,222
59,700 Lattice Semiconductor Corp. (a) 341,484
18,900 MIPS Technologies, Inc. (a) 166,131
26,900 Micrel, Inc. 342,168
35,990 Microsemi Corp. (a)(e) 861,961
21,500 Microtune, Inc. (a) 112,445
7,300 Monolithic Power Systems, Inc. (a) 127,385
8,500 Netlogic Microsystems, Inc. (a)(e) 270,640
102,300 ON Semiconductor Corp. (a) 1,096,656
23,900 Omnivision Technologies, Inc. (a)(e) 432,829
8,300 PLX Technology, Inc. (a) 92,628
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
88,200 PMC-Sierra, Inc. (a) $ 681,786
11,293 Pericom Semiconductor Corp. (a) 126,030
84,400 RF Micro Devices, Inc. (a)(e) 526,656
23,000 SiRF Technology Holdings, Inc. (a) 477,020
42,676 Silicon Image, Inc. (a) 366,160
39,458 Silicon Storage Technology, Inc. (a) 147,178
69,533 Skyworks Solutions, Inc. (a) 511,068
35,700 Spansion LLC Class A (a) 396,270
16,900 Syntax-Brillian Corp. (a) 83,148
5,200 Techwell, Inc. (a) 68,120
19,700 Tessera Technologies, Inc. (a) 798,835
60,436 TriQuint Semiconductor, Inc. (a) 305,806
8,400 Volterra Semiconductor Corp. (a) 119,280
-------------
13,312,800
- -----------------------------------------------------------------------------------------------------------------------------
Electronics: Technology - 0.5% 7,400 3D Systems Corp. (a) 184,038
12,400 Acacia Research - Acacia Technologies (a) 200,384
4,000 American Science & Engineering, Inc. (a) 227,400
17,123 Checkpoint Systems, Inc. (a) 432,356
16,800 Cogent, Inc. (a) 246,792
13,680 Coherent, Inc. (a)(h) 417,377
4,952 Cubic Corp. 149,451
9,426 EDO Corp. 309,833
4,500 Eagle Test Systems, Inc. (a) 72,270
7,200 Gerber Scientific, Inc. (a) 83,664
6,450 Innovative Solutions & Support, Inc. (a) 149,769
15,500 Ionatron, Inc. (a) 60,450
33,900 Kemet Corp. (a) 238,995
10,400 ScanSource, Inc. (a) 332,696
19,100 Smart Modular Technologies WWH, Inc. (a) 262,816
-------------
3,368,291
- -----------------------------------------------------------------------------------------------------------------------------
Energy Miscellaneous - 0.5% 5,600 Alon USA Energy, Inc. 246,456
13,040 Aventine Renewable Energy Holdings, Inc. (a) 221,289
9,100 Clean Energy Fluels Corp. (a) 114,296
16,100 Crosstex Energy, Inc. (e) 462,553
4,300 Dawson Geophysical Co. (a) 264,278
400 EnerNOC, Inc. (a) 15,252
31,700 Evergreen Energy, Inc. (a)(e) 191,151
38,600 Evergreen Solar, Inc. (a)(e) 358,980
30,626 FuelCell Energy, Inc. (a)(e) 242,558
1,500 GeoMet, Inc. (a) 11,490
2,220 MarkWest Hydrocarbon, Inc. 127,495
12,100 Matrix Service Co. (a) 300,685
1,400 Nova Biosource Fuels, Inc. (a) 3,570
4,100 Ormat Technologies, Inc. (e) 154,488
15,100 Pacific Ethanol, Inc. (a)(e) 199,320
16,316 Penn Virginia Corp. 655,903
88,500 Rentech, Inc. (a)(e) 229,215
-------------
3,798,979
- -----------------------------------------------------------------------------------------------------------------------------
Engineering & Contracting Services - 0.5% 15,500 Aecom Technology Corp. (a) 384,555
5,800 Cal Dive International, Inc. (a) 96,454
8,100 Clean Harbors, Inc. (a) 400,302
17,802 Dycom Industries, Inc. (a) 533,704
9,700 ENGlobal Corp. (a) 117,855
16,300 InfraSource Services, Inc. (a) 604,730
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
7,200 Integrated Electrical Services, Inc. (a) $ 237,384
6,000 Layne Christensen Co. (a) 245,700
4,600 Michael Baker Corp. (a) 170,890
39,439 SAIC, Inc. (a) 712,663
-------------
3,504,237
- -----------------------------------------------------------------------------------------------------------------------------
Entertainment - 0.3% 7,000 Carmike Cinemas, Inc. 153,720
8,700 Cinemark Holdings, Inc. (a) 155,643
17,855 Gaylord Entertainment Co. (a) 957,742
28,500 Live Nation, Inc. (a) 637,830
9,472 Lodgenet Entertainment Corp. (a) 303,672
5,355 Speedway Motorsports, Inc. 214,093
-------------
2,422,700
- -----------------------------------------------------------------------------------------------------------------------------
Fertilizers - 0.1% 40,300 Terra Industries, Inc. (a) 1,024,426
- -----------------------------------------------------------------------------------------------------------------------------
Finance Companies - 0.3% 12,542 Accredited Home Lenders Holding Co. (a)(e) 171,449
6,000 Asta Funding, Inc. (e) 230,580
2,169 Credit Acceptance Corp. (a) 58,194
11,000 Delta Financial Corp. (e) 134,970
16,600 International Securities Exchange, Inc. 1,084,810
13,600 MVC Capital, Inc. (e) 255,816
3,600 NewStar Financial, Inc. (a) 51,228
9,100 World Acceptance Corp. (a) 388,843
-------------
2,375,890
- -----------------------------------------------------------------------------------------------------------------------------
Finance: Small Loan - 0.1% 26,900 Advance America, Cash Advance Centers, Inc. 477,206
6,900 Dollar Financial Corp. (a) 196,650
11,000 Encore Capital Group, Inc. (a) 137,280
5,700 Nelnet, Inc. Class A 139,308
500 QC Holdings, Inc. 7,500
-------------
957,944
- -----------------------------------------------------------------------------------------------------------------------------
Financial Data Processing Services & 8,000 Advent Software, Inc. (a) 260,400
Systems - 0.8% 15,300 Authorize.Net Holdings, Inc. (a) 273,717
1,050 Cass Information Systems, Inc. (e) 38,073
8,789 CompuCredit Corp. (a)(e) 307,791
10,300 CyberSource Corp. (a) 124,218
24,000 Deluxe Corp. 974,640
20,588 eFunds Corp. (a) 726,550
13,823 eSpeed, Inc. Class A (a) 119,431
7,700 ExlService Holdings, Inc. (a) 144,298
4,500 Heartland Payment Systems, Inc. (e) 131,985
30,700 Hypercom Corp. (a) 181,437
34,200 Jack Henry & Associates, Inc. 880,650
16,000 Online Resources Corp. (a) 175,680
12,000 TNS, Inc. 172,920
16,700 TradeStation Group, Inc. (a) 194,555
16,800 Wright Express Corp. (a) 575,736
-------------
5,282,081
- -----------------------------------------------------------------------------------------------------------------------------
Financial Information Services - 0.2% 4,900 Bankrate, Inc. (a) 234,808
27,140 INVESTools, Inc. (a) 270,314
13,800 Interactive Data Corp. 369,564
5,200 Morningstar, Inc. (a) 244,530
45,400 Move, Inc. (a) 203,392
29,522 S1 Corp. (a) 235,881
9,000 TheStreet.com, Inc. 97,920
400 Value Line, Inc. 17,560
-------------
1,673,969
- -----------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
Financial Miscellaneous - 0.9% 15,250 Advanta Corp. Class B $ 474,885
5,400 Asset Acceptance Capital Corp. (a) 95,580
12,919 Cash America International, Inc. 512,238
4,900 Federal Agricultural Mortgage Corp. Class B 167,678
14,000 Financial Federal Corp. 417,480
11,400 First Cash Financial Services, Inc. (a) 267,216
15,100 Global Cash Access, Inc. (a) 241,902
7,399 LandAmerica Financial Group, Inc. 713,930
8,000 Portfolio Recovery Associates, Inc. (e) 480,160
12,100 RAM Holdings Ltd. (a) 190,575
4,200 Sanders Morris Harris Group, Inc. 48,888
28,736 Sotheby's Holdings, Inc. Class A 1,322,431
12,116 Sterling Bancorp 194,219
7,522 Stewart Information Services Corp. 299,601
6,433 Stifel Financial Corp. (a) 378,839
4,976 Triad Guaranty, Inc. (a) 198,692
2,991 WSFS Financial Corp. 195,701
1,200 Wauwatosa Holdings, Inc. (a) 19,848
-------------
6,219,863
- -----------------------------------------------------------------------------------------------------------------------------
Foods - 0.9% 600 American Dairy, Inc. (a) 11,196
8,500 Cal-Maine Foods, Inc. 139,230
18,500 Chiquita Brands International, Inc. (e) 350,760
22,184 Flowers Foods, Inc. 740,058
10,100 Fresh Del Monte Produce, Inc. 253,005
14,957 Hain Celestial Group, Inc. (a) 405,933
4,700 J&J Snack Foods Corp. 177,378
13,500 Lance, Inc. 318,060
5,300 M&F Worldwide Corp. (a) 352,874
2,463 Maui Land & Pineapple Co., Inc. (a) 90,466
15,300 Performance Food Group Co. (a) 497,097
17,100 Pilgrim's Pride Corp. 652,707
12,895 Ralcorp Holdings, Inc. (a) 689,238
8,650 Sanderson Farms, Inc. 389,423
112 Seaboard Corp. 262,640
20,457 Sensient Technologies Corp. 519,403
15,203 Tootsie Roll Industries, Inc. 421,275
12,400 TreeHouse Foods, Inc. (a) 329,964
-------------
6,600,707
- -----------------------------------------------------------------------------------------------------------------------------
Forest Products - 0.1% 4,609 Deltic Timber Corp. 252,665
7,234 Universal Forest Products, Inc. 305,709
-------------
558,374
- -----------------------------------------------------------------------------------------------------------------------------
Forms & Bulk Printing Services - 0.1% 9,700 Ennis, Inc. 228,144
9,100 Innerworkings, Inc. (a)(e) 145,782
6,245 The Standard Register Co. 71,193
-------------
445,119
- -----------------------------------------------------------------------------------------------------------------------------
Funeral Parlors & Cemeteries - 0.1% 49,224 Stewart Enterprises, Inc. Class A 383,455
- -----------------------------------------------------------------------------------------------------------------------------
Glass - 0.1% 14,900 Apogee Enterprises, Inc. 414,518
- -----------------------------------------------------------------------------------------------------------------------------
Gold - 0.1% 133,200 Coeur d'Alene Mines Corp. (a)(e) 478,188
10,900 Royal Gold, Inc. (e) 259,093
-------------
737,281
- -----------------------------------------------------------------------------------------------------------------------------
Health Care Facilities - 0.6% 21,500 Assisted Living Concepts, Inc. (a) 228,975
10,800 Capital Senior Living Corp. (a) 101,736
1,100 Emeritus Corp. (a) 34,078
8,000 Genesis HealthCare Corp. (a) 547,360
11,390 Kindred Healthcare, Inc. (a) 349,901
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
8,750 LCA-Vision, Inc. (e) $ 413,525
6,000 MedCath Corp. (a) 190,800
1,800 National Healthcare Corp. 92,880
23,600 Psychiatric Solutions, Inc. (a) 855,736
6,800 Radiation Therapy Services, Inc. (a) 179,112
11,200 Res-Care, Inc. (a) 236,768
13,400 Skilled Healthcare Group, Inc. Class A (a) 207,834
22,100 Sun Healthcare Group, Inc. (a) 320,229
19,474 Sunrise Senior Living, Inc. (a) 778,765
-------------
4,537,699
- -----------------------------------------------------------------------------------------------------------------------------
Health Care Management Services - 0.6% 22,900 AMERIGROUP Corp. (a) 545,020
23,741 Allscripts Healthcare Solutions, Inc. (a)(e) 604,921
7,900 American Dental Partners, Inc. (a) 205,163
15,900 Amsurg Corp. (a) 383,826
19,000 Centene Corp. (a) 406,980
5,000 Computer Programs & Systems, Inc. 154,900
3,385 Corvel Corp. (a) 88,484
18,431 Eclipsys Corp. (a) 364,934
6,900 HMS Holdings Corp. (a) 132,066
17,300 HealthSpring, Inc. (a) 329,738
4,300 Molina Healthcare, Inc. (a) 131,236
12,100 Omnicell, Inc. (a) 251,438
14,800 Phase Forward, Inc. (a) 249,084
7,400 Vital Images, Inc. (a) 200,984
-------------
4,048,774
- -----------------------------------------------------------------------------------------------------------------------------
Health Care Services - 0.6% 5,700 Alliance Imaging, Inc. (a) 53,523
11,266 Amedisys, Inc. (a) 409,294
20,200 Apria Healthcare Group, Inc. (a) 581,154
5,500 Bio-Reference Labs, Inc. (a) 150,425
3,000 Emergency Medical Services Corp. (a) 117,390
14,712 Gentiva Health Services, Inc. (a) 295,123
37,400 HealthSouth Corp. (a)(e) 677,314
13,225 Healthcare Services Group, Inc. 390,138
16,500 Healthways, Inc. (a) 781,605
18,800 Hythiam, Inc. (a)(e) 162,620
6,300 LHC Group, Inc. (a) 165,060
10,500 Matria Healthcare, Inc. (a) 317,940
6,800 Nighthawk Radiology Holdings, Inc. (a)(e) 122,740
14,700 Odyssey HealthCare, Inc. (a) 174,342
6,800 Symbion, Inc. (a) 147,628
-------------
4,546,296
- -----------------------------------------------------------------------------------------------------------------------------
Homebuilding - 0.3% 15,700 Beazer Homes USA, Inc. 387,319
16,100 Hovnanian Enterprises, Inc. Class A (a)(e) 266,133
7,200 M/I Homes, Inc. 191,520
11,400 Meritage Homes Corp. (a) 304,950
25,700 Standard-Pacific Corp. 450,521
13,500 WCI Communities, Inc. (a) 225,180
-------------
1,825,623
- -----------------------------------------------------------------------------------------------------------------------------
Hotel/Motel - 0.1% 6,600 Lodgian, Inc. (a) 99,198
7,279 Marcus Corp. 172,949
7,900 Morgans Hotel Group Co. (a) 192,602
-------------
464,749
- -----------------------------------------------------------------------------------------------------------------------------
Household Furnishings - 0.4% 6,900 American Woodmark Corp. (e) 238,740
13,400 Ethan Allen Interiors, Inc. (e) 458,950
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
21,000 Furniture Brands International, Inc. $ 298,200
8,836 Haverty Furniture Cos., Inc. 103,116
4,500 Hooker Furniture Corp. 100,980
20,200 La-Z-Boy, Inc. (e) 231,492
4,400 Libbey, Inc. 94,908
6,600 Lifetime Brands, Inc. (e) 134,970
15,500 Sealy Corp. 256,060
21,400 Select Comfort Corp. (a) 347,108
34,100 Tempur-Pedic International, Inc. 883,190
-------------
3,147,714
- -----------------------------------------------------------------------------------------------------------------------------
Identification Control & Filter 15,612 Advanced Energy Industries, Inc. (a) 353,768
Devices - 0.6% 21,441 Asyst Technologies, Inc. (a) 155,018
5,700 Badger Meter, Inc. (e) 161,082
12,732 ESCO Technologies, Inc. (a) 461,662
4,018 The Gorman-Rupp Co. 128,013
27,028 L-1 Identity Solutions, Inc. (a)(e)(h) 552,723
12,226 Mine Safety Appliances Co. 535,010
6,112 Robbins & Myers, Inc. 324,731
4,300 Sun Hydraulics, Inc. 211,775
13,527 Veeco Instruments, Inc. (a) 280,550
5,996 Vicor Corp. 79,327
13,636 Watts Water Technologies, Inc. Class A 510,941
12,617 X-Rite, Inc. 186,353
-------------
3,940,953
- -----------------------------------------------------------------------------------------------------------------------------
Industrial Products - 0.1% 12,300 Smith & Wesson Holding Corp. (a) 206,025
5,400 TAL International Group, Inc. 160,434
-------------
366,459
- -----------------------------------------------------------------------------------------------------------------------------
Insurance: Life - 0.4% 24,700 American Equity Investment Life Holding Co. 298,376
20,900 Citizens, Inc. (a) 147,136
20,205 Delphi Financial Group, Inc. Class A 844,973
3,880 Great American Financial Resources, Inc. 93,857
1,042 Kansas City Life Insurance Co. 48,453
762 National Western Life Insurance Co. Class A 192,725
3,880 The Phoenix Cos., Inc. 730,987
12,693 Presidential Life Corp. 249,544
21,400 Scottish Re Group Ltd. (a) 104,646
14,000 Universal American Financial Corp. (a) 297,920
-------------
3,008,617
- -----------------------------------------------------------------------------------------------------------------------------
Insurance: Multi-Line - 1.0% 11,440 Alfa Corp. 178,121
27,800 Assured Guaranty Ltd. 821,768
4,386 CNA Surety Corp. (a) 82,939
11,009 Crawford & Co. Class B 74,421
2,600 EMC Insurance Group, Inc. 64,532
8,300 eHealth, Inc. (a) 158,447
4,625 FBL Financial Group, Inc. Class A 181,855
900 Flagstone Reinsurance Holdings Ltd. (a) 11,988
13,500 HealthExtras, Inc. (a) 399,330
16,006 Hilb Rogal & Hobbs Co. 686,017
18,768 Horace Mann Educators Corp. 398,632
1,240 Independence Holding Co. 25,333
29,200 Max Capital Group Ltd. 826,360
11,100 Meadowbrook Insurance Group, Inc. (a) 121,656
46,000 Montpelier Re Holdings Ltd. 852,840
6,697 Pico Holdings, Inc. (a) 289,712
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
24,700 Platinum Underwriters Holdings Ltd. $ 858,325
14,900 Primus Guaranty Ltd. (a) 159,728
8,400 Security Capital Assurance Ltd. 259,308
16,055 Zenith National Insurance Corp. 756,030
-------------
7,207,342
- -----------------------------------------------------------------------------------------------------------------------------
Insurance: Property-Casualty - 1.9% 11,900 21st Century Insurance Group 260,134
5,856 American Physicians Capital, Inc. (a) 237,168
11,200 Amerisafe, Inc. (a) 219,856
14,400 Amtrust Financial Services, Inc. 270,576
14,666 Argonaut Group, Inc. 457,726
36,800 Aspen Insurance Holdings Ltd. 1,032,976
4,032 Baldwin & Lyons, Inc. Class B 104,751
4,700 Bristol West Holdings, Inc. 105,139
23,100 Commerce Group, Inc. 802,032
3,400 Darwin Professional Underwriters, Inc. (a) 85,578
3,244 Donegal Group, Inc. Class A 48,336
23,280 Employers Holdings, Inc. 494,467
5,800 FPIC Insurance Group, Inc. (a) 236,466
3,977 First Acceptance Corp. (a) 40,406
8,500 First Mercury Financial Corp. (a) 178,245
29,500 Fremont General Corp. (e) 317,420
7,000 Greenlight Capital Re Ltd. (a) 157,710
7,300 Hallmark Financial Services, Inc. (a) 88,476
4,762 Harleysville Group, Inc. 158,860
26,600 IPC Holdings, Ltd. 858,914
8,400 Infinity Property & Casualty Corp. 426,132
4,500 James River Group, Inc. 149,535
3,858 The Midland Co. 181,095
4,000 NYMAGIC, Inc. 160,800
4,700 National Interstate Corp. 122,576
7,000 Navigators Group, Inc. (a) 377,300
10,900 Odyssey Re Holdings Corp. 467,501
27,715 Ohio Casualty Corp. 1,200,337
14,206 PMA Capital Corp. Class A (a) 151,862
13,700 PXRE Group Ltd. (a) 63,568
15,223 ProAssurance Corp. (a) 847,464
9,154 RLI Corp. 512,166
7,100 Safety Insurance Group, Inc. 293,940
12,900 SeaBright Insurance Holdings, Inc. (a) 225,492
26,408 Selective Insurance Group, Inc. 709,847
4,612 State Auto Financial Corp. 141,358
10,700 Tower Group, Inc. 341,330
8,200 United America Indemnity, Ltd. (a) 203,934
8,100 United Fire & Casualty Co. 286,578
-------------
13,018,051
- -----------------------------------------------------------------------------------------------------------------------------
Investment Management Companies - 0.8% 46,546 Apollo Investment Corp. 1,001,677
30,239 Ares Capital Corp. (e) 509,527
12,600 Calamos Asset Management, Inc. Class A 321,930
1,300 Capital Southwest Corp. 202,527
6,400 Cohen & Steers, Inc. 278,080
4,400 Cowen Group, Inc. (a) 78,804
7,300 Epoch Holding Corp. (a) 97,747
2,496 GAMCO Investors, Inc. Class A 139,901
6,200 Kohlberg Capital Corp. 115,010
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
27,200 MCG Capital Corp. $ 435,744
11,423 NGP Capital Resources Co. 190,993
15,900 National Financial Partners Corp. (e) 736,329
14,900 NexCen Brands, Inc. (a) 165,986
5,700 Technology Investment Capital Corp. 90,003
7,100 U.S. Global Investors, Inc. 160,815
3,800 WP Stewart & Co. Ltd. 41,382
36,500 Waddell & Reed Financial, Inc. Class A 949,365
-------------
5,515,820
- -----------------------------------------------------------------------------------------------------------------------------
Jewelry, Watches & Gemstones - 0.1% 19,000 Fossil, Inc. (a) 560,310
7,500 Movado Group, Inc. 253,050
-------------
813,360
- -----------------------------------------------------------------------------------------------------------------------------
Leisure Time - 0.5% 31,600 Callaway Golf Co. (h) 562,796
8,800 Great Wolf Resorts, Inc. (a) 125,400
24,200 K2, Inc. (a) 367,598
13,800 Life Time Fitness, Inc. (a)(e) 734,574
15,700 Premier Exhibitions, Inc. (a) 247,432
30,700 Six Flags, Inc. (a) 186,963
3,500 Steinway Musical Instruments, Inc. 121,065
6,800 Sturm Ruger & Co., Inc. (a) 105,536
9,500 Town Sports International Holdings, Inc. (a) 183,540
13,656 Vail Resorts, Inc. (a) 831,241
9,400 West Marine, Inc. (a) 129,344
-------------
3,595,489
- -----------------------------------------------------------------------------------------------------------------------------
Machine Tools - 0.0% 1,500 Hurco Companies, Inc. (a) 74,970
- -----------------------------------------------------------------------------------------------------------------------------
Machinery & Engineering - 0.1% 18,690 Applied Industrial Technologies, Inc. 551,355
- -----------------------------------------------------------------------------------------------------------------------------
Machinery: Agricultural - 0.1% 5,650 Gehl Co. (a) 171,534
6,813 Lindsay Manufacturing Co. (e) 301,748
-------------
473,282
- -----------------------------------------------------------------------------------------------------------------------------
Machinery: Construction & Handling - 0.1% 8,800 ASV, Inc. (a)(e) 152,064
6,817 Astec Industries, Inc. (a) 287,814
2,187 NACCO Industries, Inc. Class A 340,057
-------------
779,935
- -----------------------------------------------------------------------------------------------------------------------------
Machinery: Engines - 0.1% 21,500 Briggs & Stratton Corp. (e) 678,540
7,300 Raser Techonologies, Inc. (a)(e) 53,947
-------------
732,487
- -----------------------------------------------------------------------------------------------------------------------------
Machinery: Industrial/Specialty - 0.6% 11,900 Actuant Corp. Class A 750,414
1,300 Altra Holdings, Inc. (a) 22,464
7,700 Chart Industries, Inc. (a) 218,988
9,100 Columbus McKinnon Corp. (a) 293,020
8,300 EnPro Industries, Inc. (a) 355,157
3,900 Hardinge, Inc. 132,717
7,670 Kadant, Inc. (a) 239,304
6,000 Middleby Corp. (a) 358,920
14,710 Nordson Corp. 737,854
9,628 Tecumseh Products Co. Class A (a) 151,256
7,274 Tennant Co. 265,501
2,800 Twin Disc, Inc. 201,348
12,179 Woodward Governor Co. 653,647
-------------
4,380,590
- -----------------------------------------------------------------------------------------------------------------------------
Machinery: Oil Well Equipment & 10,200 Allis-Chalmers Energy, Inc. (a)(e) 234,498
Services - 1.4% 15,500 Basic Energy Services, Inc. (a) 396,335
8,802 CARBO Ceramics, Inc. 385,616
16,200 Complete Production Services, Inc. (a)(h) 418,770
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
10,176 Dril-Quip, Inc. (a) $ 457,411
4,800 Flotek Industries, Inc. (a) 287,760
6,417 Gulf Island Fabrication, Inc. 222,670
40,143 Hanover Compressor Co. (a) 957,411
12,200 Horizon Offshore, Inc. (a) 234,240
11,440 Hornbeck Offshore Services, Inc. (a) 443,414
29,046 Input/Output, Inc. (a) 453,408
6,500 Lufkin Industries, Inc. 419,575
8,200 NATCO Group, Inc. Class A (a) 377,528
42,820 Newpark Resources, Inc. (a) 331,855
21,200 Oil States International, Inc. (a) 876,408
51,981 Parker Drilling Co. (a) 547,880
14,000 RPC, Inc. 238,560
11,100 Sulphco, Inc. (a) 40,071
2,000 Superior Offshore International, Inc. (a) 36,400
5,700 Superior Well Services, Inc. (a) 144,837
900 T-3 Energy Services, Inc. (a) 30,105
5,200 Trico Marine Services, Inc. (a) 212,576
6,000 Union Drilling, Inc. (a) 98,520
12,826 Universal Compression Holdings, Inc. (a) 929,500
14,257 W-H Energy Services, Inc. (a) 882,651
9,900 Willbros Group, Inc. (a) 293,832
-------------
9,951,831
- -----------------------------------------------------------------------------------------------------------------------------
Machinery: Specialty - 0.3% 15,600 Bucyrus International, Inc. 1,104,168
5,100 Cascade Corp. 400,044
12,400 Flow International Corp. (a) 156,240
9,641 Semitool, Inc. (a) 92,650
12,200 TurboChef Technologies, Inc. (a) 169,824
-------------
1,922,926
- -----------------------------------------------------------------------------------------------------------------------------
Manufactured Housing - 0.1% 35,927 Champion Enterprises, Inc. (a) 353,162
4,205 Palm Harbor Homes, Inc. (a)(e) 59,501
4,001 Skyline Corp. 120,070
-------------
532,733
- -----------------------------------------------------------------------------------------------------------------------------
Manufacturing - 0.1% 20,959 Federal Signal Corp. 332,410
5,431 Standex International Corp. 154,458
-------------
486,868
- -----------------------------------------------------------------------------------------------------------------------------
Medical & Dental Instruments & 10,700 Abaxis, Inc. (a) 223,202
Supplies - 2.7% 12,600 Abiomed, Inc. (a)(e) 135,828
25,700 Align Technology, Inc. (a) 620,912
31,300 American Medical Systems Holdings, Inc. (a)(e) 564,652
9,100 AngioDynamics, Inc. (a) 163,891
9,208 Arrow International, Inc. 352,482
7,700 Bio-Rad Laboratories, Inc. Class A (a) 581,889
7,400 BioMimetic Therapeutics, Inc. (a) 115,662
14,528 CONMED Corp. (a) 425,380
2,100 Cantel Medical Corp. (a) 35,721
27,500 Cepheid, Inc. (a) 401,500
12,100 Conceptus, Inc. (a) 234,377
6,800 CryoLife, Inc. (a) 88,468
4,200 Cutera, Inc. (a) 104,664
9,669 Cyberonics, Inc. (a)(e) 162,633
9,400 DJO, Inc. (a) 387,938
5,100 ev3, Inc. (a) 86,088
8,600 FoxHollow Technologies, Inc. (a) 182,664
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
4,200 Hansen Medical, Inc. (a)(e) $ 79,338
8,300 I-Flow Corp. (a)(e) 138,942
7,250 ICU Medical, Inc. (a) 311,315
29,643 Immucor, Inc. (a) 829,115
12,522 Invacare Corp. 229,528
19,240 Inverness Medical Innovations, Inc. (a) 981,625
21,000 Kyphon, Inc. (a) 1,011,150
3,678 Landauer, Inc. 181,142
16,400 LifeCell Corp. (a) 500,856
6,050 Medical Action Industries, Inc. (a) 109,263
17,344 Mentor Corp. 705,554
14,400 Meridian Bioscience, Inc. 311,904
11,710 Merit Medical Systems, Inc. (a) 140,052
8,700 Micrus Endovascular Corp. (a) 214,020
4,800 Northstar Neuroscience, Inc. (a) 55,824
15,000 NuVasive, Inc. (a) 405,150
20,059 OraSure Technologies, Inc. (a) 164,083
5,900 Orthofix International NV (a) 265,323
19,598 Owens & Minor, Inc. 684,754
29,173 PSS World Medical, Inc. (a) 531,532
8,800 Palomar Medical Technologies, Inc. (a) 305,448
11,629 PolyMedica Corp. 475,045
16,900 Sonic Innovations, Inc. (a) 147,875
7,815 SonoSite, Inc. (a) 245,625
18,600 Spectranetic Corp. (a) 214,272
10,800 Stereotaxis, Inc. (a) 141,048
28,300 Steris Corp. 865,980
8,083 SurModics, Inc. (a) 404,150
14,400 Symmetry Medical, Inc. (a) 230,544
25,947 Thoratec Corp. (a) 477,165
13,860 Ventana Medical Systems, Inc. (a) 1,070,962
3,524 Vital Signs, Inc. 195,758
8,000 Volcano Corp. (a) 161,680
14,376 West Pharmaceutical Services, Inc. 677,828
15,400 Wright Medical Group, Inc. (a) 371,448
-------------
18,703,249
- -----------------------------------------------------------------------------------------------------------------------------
Medical Services - 0.3% 5,900 Air Methods Corp. (a) 216,353
17,000 Magellan Health Services, Inc. (a) 789,990
13,971 Option Care, Inc. 215,153
13,797 Parexel International Corp. (a) 580,302
10,195 RehabCare Group, Inc. (a) 145,177
-------------
1,946,975
- -----------------------------------------------------------------------------------------------------------------------------
Metal Fabricating - 1.0% 3,100 Ampco-Pittsburgh Corp. 124,279
5,600 CIRCOR International, Inc. 226,408
300 Compx International, Inc. 5,550
5,300 Dynamic Materials Corp. 198,750
10,150 Encore Wire Corp. (e) 298,816
4,600 Haynes International, Inc. (a) 388,378
8,000 Insteel Industries, Inc. 144,000
13,626 Kaydon Corp. 710,187
6,300 LB Foster Co. Class A (a) 180,684
53,660 Mueller Water Products, Inc. Series A (e) 915,440
5,900 Northwest Pipe Co. (a) 209,863
16,110 Quanex Corp. 784,557
10,000 RBC Bearings, Inc. (a) 412,500
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
10,013 RTI International Metals, Inc. (a) $ 754,680
12,693 Ryerson, Inc. 477,891
8,900 Superior Essex, Inc. (a) 332,415
700 Trimas Corp. (a) 8,456
7,458 Valmont Industries, Inc. 542,644
-------------
6,715,498
- -----------------------------------------------------------------------------------------------------------------------------
Metals & Minerals Miscellaneous - 0.6% 3,400 AM Castle & Co. 122,094
8,673 AMCOL International Corp. 236,860
23,900 Apex Silver Mines Ltd. (a) 482,302
8,211 Brush Engineered Materials, Inc. (a) 344,780
14,000 Compass Minerals International, Inc. 485,240
43,144 GrafTech International Ltd. (a) 726,545
57,800 Hecla Mining Co. (a) 493,612
29,200 Idaho General Mines, Inc. (a) 185,128
9,353 Minerals Technologies, Inc. 626,183
17,064 Stillwater Mining Co. (a) 187,875
23,500 US Gold Corp. (a) 129,250
27,300 Uranium Resources, Inc. (a) 301,119
-------------
4,320,988
- -----------------------------------------------------------------------------------------------------------------------------
Milling: Fruit & Grain Processing - 0.0% 5,000 MGP Ingredients, Inc. (e) 84,500
- -----------------------------------------------------------------------------------------------------------------------------
Miscellaneous Business & Consumer 4,200 Core-Mark Holdings Co., Inc. (a) 151,116
Discretionary - 0.0%
- -----------------------------------------------------------------------------------------------------------------------------
Miscellaneous Consumer Staples - 0.0% 9,500 Reddy Ice Holdings, Inc. 270,940
- -----------------------------------------------------------------------------------------------------------------------------
Miscellaneous Health Care - 0.0% 2,100 Animal Health International, Inc. (a) 30,429
- -----------------------------------------------------------------------------------------------------------------------------
Miscellaneous Materials & 11,850 Ceradyne, Inc. (a) 876,426
Commodities - 0.2% 17,379 Symyx Technologies Inc. (a) 200,032
9,589 WD-40 Co. 315,190
-------------
1,391,648
- -----------------------------------------------------------------------------------------------------------------------------
Miscellaneous Materials & 14,538 Insituform Technologies, Inc. Class A (a) 317,074
Processing - 0.3% 11,100 Metal Management, Inc. 489,177
7,655 Rogers Corp. (a) 283,235
36,459 USEC, Inc. (a) 801,369
2,300 Xerium Technologies, Inc. 17,526
-------------
1,908,381
- -----------------------------------------------------------------------------------------------------------------------------
Miscellaneous Producer Durables - 0.1% 20,300 Blount International, Inc. (a) 265,524
5,700 Park-Ohio Holdings Corp (a) 155,610
-------------
421,134
- -----------------------------------------------------------------------------------------------------------------------------
Miscellaneous Technology - 0.1% 12,200 IHS, Inc. Class A (a) 561,200
6,700 iRobot Corp. (a)(e) 132,995
7,600 Vocus, Inc. (a) 190,836
-------------
885,031
- -----------------------------------------------------------------------------------------------------------------------------
Multi-Sector Companies - 0.4% 13,200 Compass Diversified Trust 235,356
24,371 GenCorp, Inc. (a) 318,529
3,700 GenTek Inc. (a) 130,314
12,794 Kaman Corp. Class A 399,045
11,399 Lancaster Colony Corp. 477,504
6,900 Raven Industries, Inc. 246,399
2,565 Sequa Corp. Class A (a) 287,280
21,200 Walter Industries, Inc. 613,952
-------------
2,708,379
- -----------------------------------------------------------------------------------------------------------------------------
Office Furniture & Business 21,100 ACCO Brands Corp. (a) 486,355
Equipment - 0.3% 29,500 Herman Miller, Inc. 932,200
10,674 Kimball International, Inc. Class B 149,543
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
18,900 Knoll, Inc. $ 423,360
-------------
1,991,458
- -----------------------------------------------------------------------------------------------------------------------------
Offshore Drilling - 0.2% 11,954 Atwood Oceanics, Inc. (a) 820,283
4,000 Bois d'Arc Energy, Inc. (a) 68,120
11,000 Hercules Offshore, Inc. (a)(e) 356,180
-------------
1,244,583
- -----------------------------------------------------------------------------------------------------------------------------
Oil: Crude Producers - 2.1% 200 APCO Argentina, Inc. 16,958
10,600 ATP Oil & Gas Corp. (a) 515,584
5,800 Arena Resources, Inc. (a) 337,038
11,225 Atlas America, Inc. 603,119
28,200 BPZ Energy, Inc. (a) 157,356
16,202 Berry Petroleum Co. Class A 610,491
11,700 Bill Barrett Corp. (a) 430,911
19,800 Brigham Exploration Co. (a) 116,226
8,800 Bronco Drilling Co., Inc. (a) 144,408
9,800 Callon Petroleum Co. (a) 138,866
11,000 Carrizo Oil & Gas, Inc. (a) 456,170
4,300 Clayton Williams Energy, Inc. (a) 113,821
17,557 Comstock Resources, Inc. (a) 526,183
7,000 Contango Oil & Gas Co. (a) 254,030
3,000 Delek US Holdings, Inc. 79,950
23,500 EXCO Resources, Inc. (a) 409,840
14,400 Edge Petroleum Corp. (a) 201,744
21,500 Encore Acquisition Co. (a) 597,700
16,000 Energy Infrastructure Acquisition Corp. (a) 156,160
15,537 Energy Partners Ltd. (a) 259,312
20,400 FX Energy, Inc. (a) 186,660
22,600 GeoGlobal Resources, Inc. (a)(e) 115,034
4,600 Geokinectics, Inc. (a) 142,738
6,800 Goodrich Petroleum Corp. (a)(e) 235,484
85,743 Grey Wolf, Inc. (a) 706,522
11,400 Gulfport Energy Corp. (a) 227,772
16,300 Harvest Natural Resources, Inc. (a) 194,133
36,400 Mariner Energy, Inc. (a) 882,700
12,300 McMoRan Exploration Co. (a)(e) 172,200
38,911 Meridian Resource Corp. (a) 117,511
5,500 NTR Acquisition Co. (a) 52,085
31,500 Oilsands Quest, Inc. (a) 77,805
16,400 Parallel Petroleum Corp. (a) 359,160
70,062 PetroHawk Energy Corp. (a) 1,111,183
7,100 Petroleum Development Corp. (a) 337,108
18,100 Petroquest Energy, Inc. (a) 263,174
21,700 Pioneer Drilling Co. (a) 323,547
5,249 Resource America, Inc. Class A 108,182
20,300 Rosetta Resources, Inc. (a) 437,262
10,478 Stone Energy Corp. (a) 358,976
13,017 Swift Energy Co. (a) 556,607
19,400 TXCO Resources, Inc. (a) 199,432
9,400 Toreador Resources Corp. (a) 141,000
2,900 Venoco, Inc. (a) 54,143
11,110 VeraSun Energy Corp. (a) 160,873
25,900 Warren Resources, Inc. (a) 302,512
15,410 Whiting Petroleum Corp. (a) 624,413
-------------
14,574,083
- -----------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
Oil: Integrated Domestic - 0.1% 28,600 Delta Petroleum Corp. (a)(e) $ 574,002
5,000 GMX Resources Inc. (a)(e) 173,000
-------------
747,002
- -----------------------------------------------------------------------------------------------------------------------------
Oil: Integrated International - 0.0% 25,700 Vaalco Energy, Inc. (a) 124,131
- -----------------------------------------------------------------------------------------------------------------------------
Paints & Coatings - 0.2% 21,576 Ferro Corp. 537,890
26,380 H.B. Fuller Co. 788,498
1,693 Kronos Worldwide, Inc. 42,748
-------------
1,369,136
- -----------------------------------------------------------------------------------------------------------------------------
Paper - 0.4% 11,674 Albany International Corp. Class A 472,096
24,400 Bowater, Inc. (e) 608,780
13,298 Buckeye Technologies, Inc. (a) 205,720
8,892 Chesapeake Corp. 111,772
900 Multi-Color Corp. 35,379
9,700 Mercer International, Inc.-Sbi (a) 98,940
8,100 Neenah Paper, Inc. 334,206
19,901 P.H. Glatfelter Co. 270,455
13,980 Rock-Tenn Co. Class A 443,446
19,342 Wausau Paper Corp. 259,183
-------------
2,839,977
- -----------------------------------------------------------------------------------------------------------------------------
Photography - 0.0% 1,600 CPI Corp. 111,200
- -----------------------------------------------------------------------------------------------------------------------------
Plastics - 0.1% 5,600 The Lamson & Sessions Co. (a) 148,792
13,854 Spartech Corp. 367,824
-------------
516,616
- -----------------------------------------------------------------------------------------------------------------------------
Pollution Control & Environmental 7,100 American Ecology Corp. 152,082
Services - 0.2% 35,100 Darling International, Inc. (a) 320,814
5,900 Fuel Tech, Inc. (a) 202,075
17,146 Headwaters, Inc. (a) 296,111
3,400 Team, Inc. (a) 152,898
-------------
1,123,980
- -----------------------------------------------------------------------------------------------------------------------------
Power Transmission Equipment - 0.1% 13,951 Regal-Beloit Corp. 649,280
- -----------------------------------------------------------------------------------------------------------------------------
Printing & Copying Services - 0.2% 15,382 Bowne & Co., Inc. 300,103
23,300 Cenveo, Inc. (a) 540,327
6,400 Schawk, Inc. 128,128
17,800 VistaPrint Ltd. (a) 680,850
-------------
1,649,408
- -----------------------------------------------------------------------------------------------------------------------------
Production Technology Equipment - 1.1% 14,957 ATMI, Inc. (a)(h) 448,710
44,200 Axcelis Technologies, Inc. (a) 286,858
34,278 Brooks Automation, Inc. (a)(e) 622,146
19,256 Cognex Corp. 433,453
40,468 Credence Systems Corp. (a) 145,685
15,700 Cymer, Inc. (a)(h) 631,140
8,231 Dionex Corp. (a) 584,319
12,661 Electro Scientific Industries, Inc. (a) 263,349
57,299 Entegris, Inc. (a)(e) 680,712
10,090 Esterline Technologies Corp. (a) 487,448
13,955 FEI Co. (a) 452,979
10,900 Intevac, Inc. (a) 231,734
28,456 Kulicke & Soffa Industries, Inc. (a) 297,934
33,103 LTX Corp. (a) 184,053
9,200 MTS Systems Corp. 410,964
22,899 Mattson Technology, Inc. (a) 222,120
17,479 Photronics, Inc. (a) 260,088
6,800 Rofin-Sinar Technologies, Inc. (a) 469,200
12,673 Rudolph Technologies, Inc. (a) 210,499
5,200 Ultra Clean Holdings, Inc. (a) 72,696
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
13,490 Ultratech, Inc. (a) $ 179,822
-------------
7,575,909
- -----------------------------------------------------------------------------------------------------------------------------
Publishing: Miscellaneous - 0.3% 4,600 Consolidated Graphics, Inc. (a) 318,688
4,050 Courier Corp. 162,000
5,940 GateHouse Media, Inc. 110,187
14,182 Martha Stewart Living Omnimedia, Inc. Class A (e) 243,930
11,207 Playboy Enterprises, Inc. Class B (a) 126,975
100,200 Primedia, Inc. (a) 285,570
16,860 Scholastic Corp. (a) 605,948
-------------
1,853,298
- -----------------------------------------------------------------------------------------------------------------------------
Publishing: Newspapers - 0.3% 36,700 Belo Corp. Class A 755,653
19,000 Journal Communications, Inc. Class A 247,190
22,900 Lee Enterprises, Inc. 477,694
9,600 Media General, Inc. Class A 319,392
36,529 Sun-Times Media Group, Inc. 191,777
-------------
1,991,706
- -----------------------------------------------------------------------------------------------------------------------------
Radio & TV Broadcasters - 0.5% 19,900 CKX, Inc. (a) 275,018
102,330 Citadel Broadcasting Corp. 660,028
17,500 Cox Radio, Inc. Class A (a) 249,200
19,600 Cumulus Media, Inc. Class A (a)(e) 183,260
19,800 Emmis Communications Corp. Class A 182,358
14,200 Entercom Communications Corp. 353,438
2,200 Fisher Communications, Inc. (a) 111,738
18,200 Gray Television, Inc. 168,714
11,800 Lin TV Corp. Class A (a) 221,958
1,500 Nexstar Broadcasting Group, Inc. Class A (a) 19,710
33,200 Radio One, Inc. Class D (a) 234,392
3,383 Salem Communications Corp. Class A 37,517
21,364 Sinclair Broadcast Group, Inc. Class A 303,796
17,484 Spanish Broadcasting System, Inc. Class A (a) 75,181
24,000 Westwood One, Inc. 172,560
9,796 World Wrestling Entertainment, Inc. 156,638
-------------
3,405,506
- -----------------------------------------------------------------------------------------------------------------------------
Railroad Equipment - 0.2% 3,800 American Railcar Industries, Inc. (e) 148,200
5,300 Freightcar America, Inc. 253,552
7,000 Greenbrier Cos., Inc. (e) 211,540
20,239 Westinghouse Air Brake Technologies Corp. 739,331
-------------
1,352,623
- -----------------------------------------------------------------------------------------------------------------------------
Railroads - 0.3% 16,081 Florida East Coast Industries, Inc. (e) 1,334,401
14,875 Genesee & Wyoming, Inc. Class A (a) 443,870
-------------
1,778,271
- -----------------------------------------------------------------------------------------------------------------------------
Real Estate - 0.2% 800 AMREP Corp. 38,040
3,000 Avatar Holdings, Inc. (a)(e) 230,820
5,600 Bluegreen Corp. (a) 65,464
2,500 Consolidated-Tomoka Land Co. 173,225
11,100 Grubb & Ellis Co. (a) 128,760
7,100 HFF, Inc. Class A (a) 110,121
3,400 Quadra Realty Trust, Inc. (a) 42,534
5,500 Resource Capital Corp. 76,890
4,015 Tejon Ranch Co. (a) 177,463
14,400 Thomas Properties Group, Inc. 230,112
-------------
1,273,429
- -----------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts (REITs) -5.9% 15,801 Acadia Realty Trust 410,036
19,472 Affordable Residential Communities Inc. (a) 230,159
3,400 Agree Realty Corp. 106,250
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
17,700 Alesco Financial, Inc. $ 143,901
767 Alexander's, Inc. (a) 310,060
12,776 Alexandria Real Estate Equities, Inc. 1,236,972
10,050 American Campus Communities, Inc. 284,315
56,600 American Financial Realty Trust (h) 584,112
21,987 American Home Mortgage Investment Corp. (e) 404,121
25,400 Anthracite Capital, Inc. (c)(h) 297,180
19,800 Anworth Mortgage Asset Corp. 179,190
7,000 Arbor Realty Trust, Inc. 180,670
46,080 Ashford Hospitality Trust, Inc. (h) 541,901
11,400 Associated Estates Realty Corp. 177,726
3,800 BRT Realty Trust 98,838
28,420 BioMed Realty Trust, Inc. 713,910
7,800 CBRE Realty Finance, Inc. 92,742
16,300 Capital Lease Funding, Inc. 175,225
6,000 Capital Trust, Inc. 204,840
19,200 Cedar Shopping Centers, Inc. 275,520
17,000 Corporate Office Properties Trust (h) 697,170
17,400 Cousins Properties, Inc. 504,774
35,900 Crescent Real Estate EQT Co. (h) 805,596
8,600 Crystal River Capital, Inc. 208,808
71,110 DCT Industrial Trust, Inc. 765,144
20,900 Deerfield Triarc Capital Corp. 305,767
41,150 DiamondRock Hospitality Co. 785,142
21,540 Digital Realty Trust, Inc. 811,627
9,927 Eastgroup Properties, Inc. 435,001
15,300 Education Realty Trust, Inc. 214,659
11,580 Entertainment Properties Trust 622,772
27,040 Equity Inns, Inc. 605,696
8,794 Equity Lifestyle Properties, Inc. 458,959
15,000 Equity One, Inc. 383,250
28,050 Extra Space Storage, Inc. 462,825
27,170 FelCor Lodging Trust, Inc. 707,235
20,800 First Industrial Realty Trust, Inc. 806,208
13,100 First Potomac Realty Trust 305,099
23,300 Franklin Street Properties Corp. 385,382
62,700 Friedman Billings Ramsey Group, Inc. Class A 342,342
13,590 GMH Communities Trust 131,687
5,900 Getty Realty Corp. 155,052
16,156 Glimcher Realty Trust 403,900
6,550 Gramercy Capital Corp. 180,387
23,200 Healthcare Realty Trust, Inc. 644,496
17,700 Hersha Hospitality Trust 209,214
26,700 Highland Hospitality Corp. 512,640
24,800 Highwoods Properties, Inc. 930,000
15,720 Home Properties, Inc. 816,340
40,300 IMPAC Mortgage Holdings, Inc. (e) 185,783
25,200 Inland Real Estate Corp. 427,896
16,992 Innkeepers USA Trust 301,268
21,000 Investors Real Estate Trust 216,930
11,300 JER Investors Trust, Inc. 169,500
9,940 Kite Realty Group Trust 189,059
8,200 LTC Properties, Inc. 186,550
19,020 LaSalle Hotel Properties 825,848
28,692 Lexington Corporate Properties Trust 596,794
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
20,300 Luminent Mortgage Capital, Inc. (e) $ 204,827
35,300 MFA Mortgage Investments, Inc. 256,984
15,900 Maguire Properties, Inc. 545,847
26,400 Medical Properties Trust, Inc. 349,272
16,480 Meruelo Maddux Properties, Inc. (a) 134,477
11,029 Mid-America Apartment Communities, Inc. 578,802
3,700 Mission West Properties, Inc. 51,578
8,729 National Health Investors, Inc. 276,884
28,875 National Retail Properties, Inc. 631,208
38,559 Nationwide Health Properties, Inc. 1,048,805
20,300 Newcastle Investment Corp. 508,921
26,700 NorthStar Realty Finance Corp. 334,017
21,100 NovaStar Financial, Inc. (e) 147,278
29,200 Omega Healthcare Investors, Inc. 462,236
6,408 PS Business Parks, Inc. 406,075
6,204 Parkway Properties, Inc. 297,978
14,232 Pennsylvania Real Estate Investment Trust 630,905
18,986 Post Properties, Inc. 989,740
16,247 Potlatch Corp. 699,433
29,810 RAIT Investment Trust 775,656
9,400 Ramco-Gershenson Properties Trust 337,742
43,900 Realty Income Corp. 1,105,841
9,695 Redwood Trust, Inc. (e) 469,044
16,900 Republic Property Trust 207,025
6,222 Saul Centers, Inc. 282,168
33,314 Senior Housing Properties Trust 677,940
8,580 Sovran Self Storage, Inc. 413,213
44,900 Spirit Finance Corp. 653,744
32,300 Strategic Hotel Capital, Inc. 726,427
9,243 Sun Communities, Inc. 275,164
27,100 Sunstone Hotel Investors, Inc. 769,369
15,322 Tanger Factory Outlet Centers, Inc. 573,809
2,875 Tarragon Corp. (a) 24,323
18,270 U-Store-It Trust 299,445
4,627 Universal Health Realty Income Trust 154,079
9,200 Urstadt Biddle Properties, Inc. Class A 156,492
19,665 Washington Real Estate Investment Trust 668,610
8,955 Winston Hotels, Inc. 134,325
11,800 Winthrop Realty Trust, Inc. 81,538
-------------
41,685,689
- -----------------------------------------------------------------------------------------------------------------------------
Recreational Vehicles & Boats - 0.3% 5,643 Arctic Cat, Inc. 111,731
27,799 Fleetwood Enterprises, Inc. (a) 251,581
2,075 Marine Products Corp. 17,077
13,024 Monaco Coach Corp. 186,894
15,500 Polaris Industries, Inc. 839,480
13,090 Winnebago Industries, Inc. 386,417
-------------
1,793,180
- -----------------------------------------------------------------------------------------------------------------------------
Rental & Leasing Services: 5,253 Electro Rent Corp. 76,379
Commercial - 0.1% 5,900 H&E Equipment Services, Inc. (a) 163,666
2,900 Interpool, Inc. 78,010
11,010 McGrath RentCorp 370,927
13,100 Williams Scotsman International, Inc. (a) 311,911
-------------
1,000,893
- -----------------------------------------------------------------------------------------------------------------------------
Rental & Leasing Services: 18,393 Aaron Rents, Inc. 537,076
Consumer - 0.3% 4,600 Amerco, Inc. (a)(e) 347,300
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
11,895 Dollar Thrifty Automotive Group, Inc. (a) $ 485,792
5,900 RSC Holdings, Inc. (a) 118,000
31,100 Rent-A-Center, Inc. (a) 815,753
-------------
2,303,921
- -----------------------------------------------------------------------------------------------------------------------------
Restaurants - 1.7% 12,800 AFC Enterprises, Inc. (a) 221,312
32,400 Applebee's International, Inc. 780,840
4,700 BJ's Restaurants, Inc. (a) 92,778
2,700 Benihana, Inc. Class A (a) 54,000
17,380 Bob Evans Farms, Inc. 640,453
7,750 Buffalo Wild Wings, Inc. (a) 322,323
10,700 CBRL Group, Inc. 454,536
12,350 CEC Entertainment, Inc. (a) 434,720
27,400 CKE Restaurants, Inc. 549,918
15,750 California Pizza Kitchen, Inc. (a) 338,310
4,300 Carrols Restaurant Group, Inc. (a) 65,575
13,500 Chipotle Mexican Grill, Inc. Class B (a) 1,061,505
49,000 Denny's Corp. (a) 216,090
15,450 Domino's Pizza, Inc. 282,271
7,548 IHOP Corp. 410,838
13,568 Jack in the Box, Inc. (a) 962,514
28,700 Jamba, Inc. (a) 262,318
28,200 Krispy Kreme Doughnuts, Inc. (a)(e) 261,132
7,396 Landry's Restaurants, Inc. 223,803
3,800 McCormick & Schmick's Seafood Restaurants, Inc. (a) 98,572
1,300 Morton's Restaurant Group, Inc. (a) 23,543
13,684 O'Charleys, Inc. 275,869
11,208 P.F. Chang's China Bistro, Inc. (a) 394,522
11,696 Papa John's International, Inc. (a) 336,377
15,877 Rare Hospitality International, Inc. (a) 425,027
8,800 Red Robin Gourmet Burgers, Inc. (a) 355,256
23,600 Ruby Tuesday, Inc. 621,388
8,300 Ruth's Chris Steak House, Inc. (a) 141,017
31,520 Sonic Corp. (a) 697,222
9,828 The Steak n Shake Co. (a) 164,029
20,800 Texas Roadhouse, Inc. Class A (a) 266,032
25,850 Triarc Cos. 405,845
-------------
11,839,935
- -----------------------------------------------------------------------------------------------------------------------------
Retail - 3.5% 900 1-800 Contacts, Inc. (a) 21,114
15,424 1-800-FLOWERS.COM, Inc. Class A (a) 145,448
18,200 99 Cents Only Stores (a) 238,602
8,800 AC Moore Arts & Crafts, Inc. (a) 172,568
22,450 Aeropostale, Inc. (a) 935,716
8,600 Asbury Automotive Group, Inc. 214,570
8,400 bebe Stores, Inc. 134,484
9,900 Big 5 Sporting Goods Corp. 252,450
89,000 Blockbuster, Inc. Class A (a)(e) 383,590
5,800 Blue Nile, Inc. (a) 350,320
3,800 The Bon-Ton Stores, Inc. 152,228
9,200 Books-A-Million, Inc. 155,848
25,400 Borders Group, Inc. 484,124
19,127 Brown Shoe Co., Inc. 465,169
5,073 The Buckle, Inc. 199,876
6,300 Build-A-Bear Workshop, Inc. (a)(e) 164,682
17,834 CSK Auto Corp. (a) 328,146
13,800 Cabela's, Inc. Class A (a) 305,394
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
7,950 Cache, Inc. (a) $ 105,496
15,700 Casual Male Retail Group, Inc. (a) 158,570
12,995 The Cato Corp. Class A 285,110
30,434 Central Garden and Pet Co. Class A (a) 356,991
11,100 Charlotte Russe Holding, Inc. (a) 298,257
59,440 Charming Shoppes, Inc. (a) 643,735
9,485 The Children's Place Retail Stores, Inc. (a) 489,805
15,728 Christopher & Banks Corp. 269,735
5,200 Conn's, Inc. (a) 148,512
500 DEB Shops, Inc. 13,825
22,990 Dress Barn, Inc. (a) 471,755
10,200 Eddie Bauer Holdings, Inc. (a) 131,070
16,100 Ezcorp, Inc. (a) 213,164
4,800 FTD Group, Inc. 88,368
18,735 Fred's, Inc. 250,674
10,500 GSI Commerce, Inc. (a)(e) 238,455
7,500 Gaiam, Inc. (a) 136,725
5,800 Gander Mountain Co. (a)(e) 65,830
10,738 Genesco, Inc. (a) 561,705
10,532 Group 1 Automotive, Inc. 424,861
14,139 Guitar Center, Inc. (a) 845,654
14,258 Gymboree Corp. (a) 561,908
23,181 HOT Topic, Inc. (a) 251,977
15,875 Hibbett Sports, Inc. (a) 434,658
20,998 Insight Enterprises, Inc. (a) 473,925
12,205 Jo-Ann Stores, Inc. (a) 346,988
8,933 Jos. A. Bank Clothiers, Inc. (a) 370,452
1,788 Lawson Products, Inc. 69,196
6,800 Lithia Motors, Inc. Class A 172,312
7,100 MarineMax, Inc. (a) 142,142
22,500 Men's Wearhouse, Inc. 1,149,075
7,200 New York & Co. (a) 78,912
7,200 Overstock.com, Inc. (a)(e) 131,544
400 PC Connection, Inc. (a) 5,296
30,500 Pacific Sunwear of California, Inc. (a) 671,000
9,900 The Pantry, Inc. (a) 456,390
28,400 Payless Shoesource, Inc. (a) 896,020
20,710 The Pep Boys - Manny, Moe & Jack 417,514
12,800 PetMed Express, Inc. (a) 164,352
38,399 Pier 1 Imports, Inc. 326,008
3,800 PriceSmart, Inc. 93,974
15,916 Priceline.com, Inc. (a) 1,094,066
8,800 Retail Ventures, Inc. (a) 141,944
9,600 Rush Enterprises, Inc. Class A (a) 208,512
6,647 Russ Berrie & Co., Inc. (a) 123,834
35,900 Sally Beauty Co., Inc. (a) 323,100
9,654 School Specialty, Inc. (a) 342,138
4,400 Shutterfly, Inc. (a) 94,820
11,700 Sonic Automotive, Inc. 338,949
17,350 Stage Stores, Inc. 363,656
8,803 Stamps.com, Inc. (a) 121,305
11,824 Stein Mart, Inc. 144,962
300 Syms Corp. (a) 5,919
2,600 Systemax, Inc. 54,106
8,100 Talbots, Inc. 202,743
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
12,990 Tuesday Morning Corp. $ 160,556
13,366 Tween Brands, Inc. (a) 596,124
20,780 United Natural Foods, Inc. (a) 552,332
17,856 ValueVision Media, Inc. Class A (a) 202,130
6,400 Volcom, Inc. (a) 320,832
36,700 The Wet Seal, Inc. Class A (a) 220,567
21,300 Zale Corp. (a) 507,153
7,500 Zumiez, Inc. (a) 283,350
-------------
24,919,367
- -----------------------------------------------------------------------------------------------------------------------------
Savings & Loan - 1.5% 8,537 Anchor Bancorp Wisconsin, Inc. 223,584
26,738 Bank Mutual Corp. 308,289
19,442 BankAtlantic Bancorp, Inc. Class A 167,396
16,973 BankUnited Financial Corp. Class A 340,648
3,800 Berkshire Hills Bancorp, Inc. 119,738
31,887 Brookline Bancorp, Inc. 367,019
16,249 Dime Community Bancshares, Inc. 214,324
9,200 Downey Financial Corp. (e) 607,016
5,226 First Financial Holdings, Inc. 170,942
8,500 First Indiana Corp. 188,020
51,853 First Niagara Financial Group, Inc. 679,274
5,000 First Place Financial Corp. 105,600
12,650 First Republic Bank 678,799
8,300 FirstFed Financial Corp. (a)(e) 470,859
19,350 Flagstar Bancorp, Inc. 233,167
9,575 Flushing Financial Corp. 153,775
3,078 Great Southern Bancorp, Inc. 83,260
4,450 Horizon Financial Corp. 96,966
6,350 IBERIABANK Corp. 314,008
3,700 ITLA Capital Corp. 192,844
9,400 KNBT Bancorp, Inc. 138,180
6,600 Kearny Financial Corp. 88,968
15,560 MAF Bancorp, Inc. 844,286
300 NASB Financial, Inc. 10,095
49,300 NewAlliance Bancshares, Inc. 725,696
6,267 Northwest Bancorp, Inc. 163,819
13,965 Ocwen Financial Corp. (a) 186,153
12,811 PFF Bancorp, Inc. 357,811
15,028 Partners Trust Financial Group, Inc. 157,794
28,658 Provident Financial Services, Inc. 451,650
14,889 Provident New York Bancorp 201,150
3,500 Rockville Financial, Inc. 52,850
600 Roma Financial Corp. 9,942
22,343 Sterling Financial Corp. 646,606
9,800 TierOne Corp. 294,980
9,061 United Community Financial Corp. 90,429
1,700 ViewPoint Financial Group 29,257
39,633 W Holding Co., Inc. 104,631
4,512 Westfield Financial, Inc. 44,985
-------------
10,314,810
- -----------------------------------------------------------------------------------------------------------------------------
Scientific Equipment & Suppliers - 0.2% 18,935 Newport Corp. (a) 293,114
14,535 Varian, Inc. (a) 796,954
-------------
1,090,068
- -----------------------------------------------------------------------------------------------------------------------------
Securities Brokerage & Services - 0.5% 22,145 Centerline Holding Co. 398,610
6,300 GFI Group, Inc. (a) 456,624
11,100 KBW, Inc. (a) 326,118
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
48,900 Knight Capital Group, Inc. Class A (a)(h) $ 811,740
20,200 LaBranche & Co., Inc. (a) 149,076
49,900 Ladenburg Thalmann Financial Services, Inc. (a)(e) 114,770
13,500 MarketAxess Holdings, Inc. (a) 242,865
17,000 optionsXpress Holdings, Inc. 436,220
4,600 Penson Worldwide, Inc. (a) 112,838
9,706 SWS Group, Inc. 209,844
6,700 Thomas Weisel Partners Group, Inc. (a) 111,555
-------------
3,370,260
- -----------------------------------------------------------------------------------------------------------------------------
Services: Commercial - 3.4% 21,470 ABM Industries, Inc. 554,141
15,105 AMN Healthcare Services, Inc. (a) 332,310
10,161 Administaff, Inc. 340,292
7,800 The Advisory Board Co. (a) 433,368
8,800 Ambassadors Group, Inc. 312,664
5,400 Ambassadors International, Inc. 179,604
4,400 Barrett Business Services 113,652
20,553 CBIZ, Inc. (a) 151,064
7,501 CDI Corp. 241,532
6,400 CRA International, Inc. (a) 308,480
9,878 Casella Waste Systems, Inc. (a) 106,485
11,072 Chemed Corp. 733,963
8,450 CoStar Group, Inc. (a) 446,836
7,500 Coinmach Service Corp. Class A 99,225
12,092 Coinstar, Inc. (a) 380,656
5,200 Cornell Cos., Inc. (a) 127,712
16,100 Cross Country Healthcare, Inc. (a) 268,548
12,300 Diamond Management & Technology Consultants, Inc. 162,360
13,300 DynCorp. International, Inc. (a) 292,467
7,704 Exponent, Inc. (a) 172,338
17,741 FTI Consulting, Inc. (a) 674,690
4,200 First Advantage Corp. Class A (a) 96,642
4,981 Forrester Research, Inc. (a) 140,116
9,377 G&K Services, Inc. Class A 370,485
23,900 The Geo Group, Inc. (a) 695,490
13,300 Gevity HR, Inc. 257,089
9,200 Global Sources Ltd. (a) 208,840
23,700 Harris Interactive, Inc. (a) 126,795
9,158 Heidrick & Struggles International, Inc. (a) 469,256
21,200 Home Solutions of America, Inc. (a)(e) 126,776
10,700 Hudson Highland Group, Inc. (a) 228,873
3,500 ICT Group, Inc. (a) 65,485
46,300 IKON Office Solutions, Inc. 722,743
14,000 Jackson Hewitt Tax Service, Inc. 393,540
10,168 Kelly Services, Inc. Class A 279,213
12,300 Kenexa Corp. (a) 463,833
13,100 Kforce, Inc. (a) 209,338
12,600 The Knot, Inc. (a) 254,394
19,068 Korn/Ferry International (a) 500,726
20,522 Labor Ready, Inc. (a) 474,263
4,600 Liquidity Services, Inc. (a) 86,388
9,504 MAXIMUS, Inc. 412,284
44,505 MPS Group, Inc. (a) 595,032
6,442 Midas, Inc. (a) 146,040
5,300 Monro Muffler, Inc. 198,485
25,223 Navigant Consulting, Inc. (a) 468,139
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
20,000 Net 1 UEPS Technologies, Inc. (a) $ 483,000
15,300 On Assignment, Inc. (a) 164,016
22,264 PHH Corp. (a) 694,859
10,200 People Support, Inc. (a) 115,770
11,100 Perficient, Inc. (a) 229,770
4,760 Pre-Paid Legal Services, Inc. (a) 306,116
5,600 The Providence Service Corp. (a) 149,632
19,200 Regis Corp. 734,400
23,432 Resources Connection, Inc. (a) 777,474
12,302 Rollins, Inc. 280,117
24,000 Source Interlink Cos., Inc. (a) 119,520
24,529 Spherion Corp. (a) 230,327
1,000 Standard Parking Corp. (a) 35,130
6,200 Steiner Leisure Ltd. (a) 304,544
16,789 TeleTech Holdings, Inc. (a) 545,307
28,131 Tetra Tech, Inc. (a) 606,223
1,700 Travelzoo, Inc. (a) 45,203
4,700 Unifirst Corp. 207,035
3,300 Vertrue, Inc. (a) 160,974
8,800 Viad Corp. 371,096
6,138 Volt Information Sciences, Inc. (a) 113,185
29,827 Waste Connections, Inc. (a) 901,968
1,600 Waste Industries USA, Inc. 54,624
8,233 Waste Services, Inc. (a) 100,031
18,015 Watson Wyatt Worldwide, Inc. 909,397
12,400 World Fuel Services Corp. 521,544
-------------
23,583,914
- -----------------------------------------------------------------------------------------------------------------------------
Shipping - 0.6% 27,200 American Commercial Lines, Inc. (a)(h) 708,560
3,400 Arlington Tankers Ltd 97,512
7,700 Double Hull Tankers, Inc. 120,043
21,700 Eagle Bulk Shipping, Inc. 486,297
6,300 Genco Shipping & Trading Ltd. 259,938
10,300 General Maritime Corp. 275,834
18,800 Golar LNG Ltd. 313,208
11,300 Gulfmark Offshore, Inc. (a) 578,786
12,800 Horizon Lines, Inc. Class A 419,328
9,800 Knightsbridge Tankers Ltd. 298,998
10,200 Nordic American Tanker Shipping Ltd. (e) 416,568
11,700 Ship Finance International Ltd. 347,256
10,400 Star Maritime Acquisition Corp. (a) 127,504
4,000 TBS International Ltd. (a) 113,600
-------------
4,563,432
- -----------------------------------------------------------------------------------------------------------------------------
Shoes - 0.6% 8,500 DSW, Inc. Class A (a)(e) 295,970
5,600 Deckers Outdoor Corp. (a) 565,040
18,266 The Finish Line, Inc. Class A 166,403
2,800 Heelys, Inc. (a)(e) 72,408
22,100 Iconix Brand Group, Inc. (a) 491,062
11,196 K-Swiss, Inc. Class A 317,183
4,892 Kenneth Cole Productions, Inc. Class A 120,832
6,000 Shoe Carnival, Inc. (a) 164,940
8,455 Skechers U.S.A., Inc. Class A (a) 246,886
10,968 Steven Madden Ltd. 359,312
15,935 Stride Rite Corp. 322,843
20,600 Timberland Co. Class A (a) 518,914
700 Weyco Group, Inc. 18,851
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
23,608 Wolverine World Wide, Inc. $ 654,178
-------------
4,314,822
- -----------------------------------------------------------------------------------------------------------------------------
Steel - 0.3% 1,900 Claymont Steel, Inc. (a) 40,641
9,234 Gibraltar Industries, Inc. 204,533
3,800 Olympic Steel, Inc. 108,908
10,650 Schnitzer Steel Industries, Inc. Class A 510,561
3,700 Universal Stainless & Alloy Products, Inc. (a) 130,351
3,600 Wheeling-Pittsburgh Corp. (a) 68,508
33,300 Worthington Industries, Inc. 720,945
-------------
1,784,447
- -----------------------------------------------------------------------------------------------------------------------------
Sugar - 0.0% 5,100 Imperial Sugar Co. New Shares (e) 157,029
- -----------------------------------------------------------------------------------------------------------------------------
Telecommunications Equipment - 1.0% 67,600 Andrew Corp. (a) 976,144
47,400 Arris Group, Inc. (a) 833,766
7,285 Audiovox Corp. Class A (a) 94,486
20,361 Belden, Inc. 1,126,981
23,734 C-COR, Inc. (a) 333,700
22,200 Interdigital Communications Corp. (a) 714,174
14,900 Mastec, Inc. (a) 235,718
5,400 OpNext, Inc. (a) 71,496
20,699 Plantronics, Inc. 542,728
39,900 Polycom, Inc. (a) 1,340,640
56,677 Powerwave Technologies, Inc. (a) 379,736
400 Preformed Line Products Co. 19,204
20,200 Symmetricom, Inc. (a) 169,680
-------------
6,838,453
- -----------------------------------------------------------------------------------------------------------------------------
Textile Products - 0.1% 26,221 Interface, Inc. Class A 494,528
- -----------------------------------------------------------------------------------------------------------------------------
Textiles Apparel Manufacturers - 0.8% 22,900 Carter's, Inc. (a) 594,026
4,900 Cherokee, Inc. 179,046
6,100 Columbia Sportswear Co. 418,948
8,500 G-III Apparel Group, Ltd. (a) 134,215
16,070 J. Crew Group, Inc. (a) 869,226
11,282 Kellwood Co. 317,250
8,300 Maidenform Brands, Inc. (a) 164,838
6,542 Oxford Industries, Inc. 290,072
6,450 Perry Ellis International, Inc. (a) 207,496
54,100 Quiksilver, Inc. (a) 764,433
6,100 True Religion Apparel, Inc. (a) 124,013
10,700 Under Armour, Inc. Class A (a) 488,455
20,100 The Warnaco Group, Inc. (a) 790,734
-------------
5,342,752
- -----------------------------------------------------------------------------------------------------------------------------
Tires & Rubber - 0.2% 26,800 Cooper Tire & Rubber Co. 740,216
10,500 Titan International, Inc. 331,905
-------------
1,072,121
- -----------------------------------------------------------------------------------------------------------------------------
Tobacco - 0.2% 41,955 Alliance One International, Inc. (a) 421,648
6,820 Schweitzer-Mauduit International, Inc. 211,420
11,756 Universal Corp. 716,176
16,233 Vector Group Ltd. 365,729
-------------
1,714,973
- -----------------------------------------------------------------------------------------------------------------------------
Toys - 0.2% 13,730 Jakks Pacific, Inc. (a) 386,362
12,546 Leapfrog Enterprises, Inc. (a) 128,597
21,200 Marvel Entertainment, Inc. (a) 540,176
-------------
1,055,135
- -----------------------------------------------------------------------------------------------------------------------------
Transportation Miscellaneous - 0.2% 13,700 Celadon Group, Inc. (a) 217,830
4,600 Dynamex, Inc. (a) 117,438
16,300 HUB Group, Inc. Class A (a) 573,108
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
25,500 Odyssey Marine Exploration, Inc. (a) $ 153,255
16,000 Pacer International, Inc. 376,320
5,700 Ultrapetrol Bahamas Ltd. (a) 135,090
-------------
1,573,041
- -----------------------------------------------------------------------------------------------------------------------------
Truckers - 0.4% 11,541 Arkansas Best Corp. 449,753
13,132 Forward Air Corp. 447,670
25,173 Heartland Express, Inc. 410,320
22,762 Knight Transportation, Inc. 441,128
4,650 Marten Transport Ltd. (a) 83,747
12,325 Old Dominion Freight Line, Inc. (a) 371,599
100 Patriot Transportation Holding, Inc. (a) 8,670
6,181 Saia, Inc. (a) 168,494
1,800 Universal Truckload Services, Inc. (a) 35,766
23,700 Werner Enterprises, Inc. 477,555
-------------
2,894,702
- -----------------------------------------------------------------------------------------------------------------------------
Utilities: Cable TV & Radio - 0.0% 29,900 Mediacom Communications Corp. Class A (a) 289,731
- -----------------------------------------------------------------------------------------------------------------------------
Utilities: Electrical - 1.3% 12,466 Allete, Inc. 586,525
25,975 Avista Corp. 559,761
16,400 Black Hills Corp. 651,900
6,889 CH Energy Group, Inc. 309,798
2,800 Central Vermont Public Service Corp. 105,504
27,867 Cleco Corp. 682,741
22,608 El Paso Electric Co. (a) 555,252
13,168 The Empire District Electric Co. 294,568
19,100 IDACORP, Inc. 611,964
17,100 ITC Holdings Corp. 694,773
7,545 MGE Energy, Inc. 246,495
14,400 NorthWestern Corp. 458,064
11,586 Otter Tail Corp. 371,563
33,300 PNM Resources, Inc. 925,407
5,500 Pike Electric Corp. (a) 123,090
11,900 Portland General Electric Co. 326,536
12,967 UIL Holdings Corp. 429,208
17,283 Unisource Energy Corp. 568,438
39,400 Westar Energy, Inc. 956,632
-------------
9,458,219
- -----------------------------------------------------------------------------------------------------------------------------
Utilities: Gas Distributors - 0.8% 5,322 Cascade Natural Gas Corp. 140,554
2,900 EnergySouth, Inc. 147,900
9,348 The Laclede Group, Inc. 298,014
13,474 New Jersey Resources Corp. 687,443
21,100 Nicor, Inc. 905,612
13,199 Northwest Natural Gas Co. 609,662
32,400 Piedmont Natural Gas Co. (e) 798,660
6,900 SEMCO Energy, Inc. (a) 53,613
14,732 South Jersey Industries, Inc. 521,218
16,590 Southwest Gas Corp. 560,908
20,900 WGL Holdings, Inc. 682,176
-------------
5,405,760
- -----------------------------------------------------------------------------------------------------------------------------
Utilities: Miscellaneous - 0.1% 155,600 Aquila, Inc. (a) 636,404
- -----------------------------------------------------------------------------------------------------------------------------
Utilities: Telecommunications - 1.2% 22,700 Alaska Communications Systems Group, Inc. 359,568
5,900 Atlantic Tele-Network, Inc. 168,976
8,855 CT Communications, Inc. 270,166
8,026 Centennial Communications Corp. (a) 76,167
117,500 Cincinnati Bell, Inc. (a) 679,150
7,200 Consolidated Communications Holdings, Inc. 162,720
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Shares
Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------
68,000 Dobson Communications Corp. Class A (a) $ 754,800
3,400 Eschelon Telecom, Inc. (a) 100,640
15,400 FairPoint Communications, Inc. 273,350
55,550 FiberTower Corp. (a)(e) 240,531
23,339 General Communication, Inc. Class A (a) 298,973
13,000 Global Crossing Ltd. (a) 245,440
5,000 Globalstar, Inc. (a)(e) 51,750
6,792 Golden Telecom, Inc. (f) 373,628
57,000 ICO Global Communications Holdings Ltd. (a) 198,360
19,100 IDT Corp. Class B 197,112
10,200 Ibasis, Inc. (a) 102,510
16,700 Iowa Telecommunications Services, Inc. 379,591
7,100 iPCS, Inc. 240,477
9,900 NTELOS Holdings Corp. 273,636
9,521 North Pittsburgh Systems, Inc. 202,321
8,700 ORBCOMM, Inc. (a) 142,767
31,020 PAETEC Holding Corp. (a) 350,216
29,400 Premiere Global Services, Inc. (a) 382,788
12,700 RCN Corp. 238,633
4,200 Rural Cellular Corp. Class A (a) 184,002
2,200 Shenandoah Telecom Co. 111,826
4,900 SureWest Communications 133,476
62,900 Time Warner Telecom, Inc. Class A (a) 1,264,290
12,020 USA Mobility, Inc. 321,655
-------------
8,779,519
- -----------------------------------------------------------------------------------------------------------------------------
Utilities: Water - 0.2% 9,285 American States Water Co. 330,267
8,296 California Water Service Group 311,017
3,800 Consolidated Water Co., Inc. 111,378
5,248 SJW Corp. 174,758
14,883 Southwest Water Co. 190,056
-------------
1,117,476
- -----------------------------------------------------------------------------------------------------------------------------
Wholesale & International Trade - 0.1% 15,425 Central European Distribution Corp. (a)(e) 534,013
- -----------------------------------------------------------------------------------------------------------------------------
Wholesalers - 0.3% 25,230 Brightpoint, Inc. (a) 347,922
5,800 Houston Wire & Cable Co. (a) 164,778
19,700 LKQ Corp. (a) 485,802
3,700 MWI Veterinary Supply, Inc. (a) 147,593
11,500 Prestige Brands Holdings, Inc. (a) 149,270
12,569 United Stationers, Inc. (a) 837,598
-------------
2,132,963
- -----------------------------------------------------------------------------------------------------------------------------
Total Common Stocks
(Cost - $505,540,295) - 89.5% 629,324,552
- -----------------------------------------------------------------------------------------------------------------------------
Exchange-Traded Funds
- -----------------------------------------------------------------------------------------------------------------------------
169,590 iShares Russell 2000 Index Fund (e) 14,065,795
- -----------------------------------------------------------------------------------------------------------------------------
Total Exchange-Traded Funds
(Cost - $12,334,264) - 2.0% 14,065,795
- -----------------------------------------------------------------------------------------------------------------------------
Mutual Funds
- -----------------------------------------------------------------------------------------------------------------------------
Investment Management Companies - 0.1% 5,700 Gladstone Capital Corp. (e) 122,322
15,200 Hercules Technology Growth Capital, Inc. 205,352
2,700 Kayne Anderson Energy Development Co. 67,986
12,700 Patriot Capital Funding, Inc. 188,595
11,700 Pennantpark Investment Corp. 164,268
5,200 Prospect Capital Corp. 90,844
- -----------------------------------------------------------------------------------------------------------------------------
Total Mutual Funds (Cost - $834,885) - 0.1% 839,367
- -----------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series
Schedule of Investments as of June 30, 2007
Beneficial
Industry Interest Other Interests (b) Value
- -----------------------------------------------------------------------------------------------------------------------------
Oil: Crude Producers - 0.0% $ 500 PetroCorp Inc. (Escrow Shares) (a) $ 0
- -----------------------------------------------------------------------------------------------------------------------------
Total Other Interests (Cost -$ 0) - 0.0% 0
- -----------------------------------------------------------------------------------------------------------------------------
Short-Term Securities
- -----------------------------------------------------------------------------------------------------------------------------
58,707,799 BlackRock Liquidity Series, LLC Cash Sweep Series,
5.33% (c)(g) 58,707,799
79,242,375 BlackRock Liquidity Series, LLC
Money Market Series, 5.33% (c)(d)(g) 79,242,375
- -----------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -$ 137,950,174) - 19.6% 137,950,174
- -----------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost -$ 656,659,618*) - 111.2% 782,179,888
Liabilities in Excess of Other Assets - (11.2%) (79,137,700)
-------------
Net Assets - 100.0% $ 703,042,188
=============
* The cost and unrealized appreciation (depreciation) of investments, as of
June 30, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 661,793,190
==============
Gross unrealized appreciation $ 139,737,560
Gross unrealized depreciation (19,350,862)
--------------
Net unrealized appreciation $ 120,386,698
==============
(a) Non-income producing security.
(b) Other interests represent beneficial interest in liquidation trusts and
other reorganization entities and are non-income producing.
(c) Investments in companies considered to be an affiliate of the Series, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
------------------------------------------------------------------------------------------------------------
Interest/
Purchase Sale Realized Dividend
Affiliate Cost Cost Gain Income
------------------------------------------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series -- $ 50,105,151** -- $ 1,633,563
BlackRock Liquidity Series, LLC
Money Market Series $ 45,075,895* -- -- $ 372,569
Anthracite Capital, Inc. $ 44,389 $ 6,196 $ 119 $ 14,058
------------------------------------------------------------------------------------------------------------
* Represents net purchase cost.
** Represents net sale cost.
(d) Security was purchased with the cash proceeds from securities loans.
(e) Security, or a portion of security, is on loan.
(f) Depositary receipts.
(g) Represents the current yield as of June 30, 2007.
(h) Security held as collateral in connection with open future contracts.
o Financial futures contracts purchased as of June 30, 2007, were as
follows:
---------------------------------------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Value Depreciation
---------------------------------------------------------------------------------------------------------
141 Russell 2000 Index September 2007 $ 59,797,945 $ (429,895)
---------------------------------------------------------------------------------------------------------
o For Series compliance purposes, the Series' industry classifications refer
to any one or more of the sub-classifications used by one or more widely
recognized market indexes or ratings group indexes, and/or as defined by
Series management. This definition may not apply for purposes of this
report, which may combine such sub-classifications for reporting ease.
Industries are shown as a percent of net assets.
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Australia - 6.0% Air Freight & Logistics - 0.1% 57,345 Toll Holdings Ltd. $ 702,719
-----------------------------------------------------------------------------------------------------------------
Airlines - 0.1% 82,221 Qantas Airways Ltd. 390,105
-----------------------------------------------------------------------------------------------------------------
Beverages - 0.1% 43,836 Coca-Cola Amatil Ltd. 353,922
202,354 Foster's Group Ltd. 1,091,969
6,284 Lion Nathan Ltd. 49,318
--------------
1,495,209
-----------------------------------------------------------------------------------------------------------------
Biotechnology - 0.1% 15,178 CSL Ltd. 1,129,813
-----------------------------------------------------------------------------------------------------------------
Capital Markets - 0.1% 23,543 Macquarie Bank Ltd. 1,690,982
1,184 Perpetual Trustees Australia Ltd. 78,689
--------------
1,769,671
-----------------------------------------------------------------------------------------------------------------
Chemicals - 0.1% 31,019 Orica Ltd. 781,618
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.4% 153,040 Australia & New Zealand Banking Group Ltd. 3,758,844
111,239 Commonwealth Bank of Australia Ltd. 5,204,055
139,218 National Australia Bank Ltd. 4,838,191
166,417 Westpac Banking Corp. 3,613,707
--------------
17,414,797
-----------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 144,986 Brambles Ltd. (b) 1,494,719
0.1% 7,609 Downer EDI Ltd. 47,418
--------------
1,542,137
-----------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.1% 9,604 Leighton Holdings Ltd. 334,759
-----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.1% 32,839 Boral Ltd. 243,768
33,896 James Hardie Industries NV 250,135
--------------
493,903
-----------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.0% 55,191 Amcor Ltd. 349,492
-----------------------------------------------------------------------------------------------------------------
Distributors - 0.0% 87,190 Pacific Brands Ltd. 254,607
-----------------------------------------------------------------------------------------------------------------
Diversified Consumer Services - 51,906 ABC Learning Centres Ltd. 303,719
0.0%
-----------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 12,193 Australian Stock Exchange Ltd. 502,123
0.1% 21,814 Babcock & Brown Ltd. 591,347
49,792 Challenger Financial Services Group Ltd. 245,304
--------------
1,338,774
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 253,956 Telstra Corp. Ltd. 988,048
Services - 0.1% 117,168 Telstra Corp. Ltd. Installment Receipts 308,232
--------------
1,296,280
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.0% 9,755 WorleyParsons Ltd. $ 280,604
-----------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.3% 108,500 Coles Myer Ltd. 1,481,392
100,333 Woolworths Ltd. 2,292,903
--------------
3,774,295
-----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 61,294 Futuris Corp. Ltd. 144,368
75,440 Goodman Fielder Ltd. 155,250
--------------
299,618
-----------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 6,833 Ansell Ltd. 70,594
0.0% 2,469 Cochlear Ltd. 127,487
--------------
198,081
-----------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 92,818 Mayne Group Ltd. 320,793
0.1% 35,912 Sonic Healthcare Ltd. 457,718
--------------
778,511
-----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 23,055 Aristocrat Leisure Ltd. 280,337
0.1% 52,742 Tabcorp Holdings Ltd. 766,328
64,333 Tattersall's Ltd. 255,865
--------------
1,302,530
-----------------------------------------------------------------------------------------------------------------
IT Services - 0.0% 34,681 Computershare Ltd. 330,917
-----------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.1% 124,920 CSR Ltd. 367,664
29,516 Wesfarmers Ltd. 1,142,866
--------------
1,510,530
-----------------------------------------------------------------------------------------------------------------
Insurance - 0.5% 154,726 AMP Ltd. 1,324,749
53,968 AXA Asia Pacific Holdings Ltd. 339,320
161,803 Insurance Australia Group Ltd. 780,466
77,266 QBE Insurance Group Ltd. 2,038,663
84,436 Suncorp-Metway Ltd. 1,442,103
--------------
5,925,301
-----------------------------------------------------------------------------------------------------------------
Media - 0.1% 4,076 APN News & Media Ltd. 20,194
136,433 John Fairfax Holdings Ltd. 542,792
60,440 Macquarie Communications Infrastructure Group 323,441
47,474 Publishing and Broadcasting Ltd. 786,724
--------------
1,673,151
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 1.1% 106,550 Alumina Ltd. $ 705,662
296,625 BHP Billiton Ltd. 8,863,373
58,610 BlueScope Steel Ltd. 512,964
13,551 Fortescue Metals Group Ltd. (b) 387,123
28,055 Iluka Resources Ltd. 146,227
27,769 Newcrest Mining Ltd. 535,945
27,510 OneSteel Ltd. 149,644
23,834 Rio Tinto Ltd. 1,988,178
48,260 Zinifex Ltd. 765,337
--------------
14,054,453
-----------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.0% 12,485 Harvey Norman Holdings Ltd. 55,845
-----------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.1% 28,965 AGL Energy Ltd. 372,192
52,782 Alinta Ltd. 680,750
--------------
1,052,942
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.3% 10,809 Caltex Australia Ltd. 216,444
58,406 Origin Energy Ltd. 491,115
36,005 Paladin Resources Ltd. (b) 250,185
63,858 Santos Ltd. 754,004
44,107 Woodside Petroleum Ltd. 1,705,078
--------------
3,416,826
-----------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.0% 5,919 PaperlinX Ltd. 18,630
-----------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts 114,334 CFS Retail Property Trust 207,715
(REITs) - 0.5% 93,312 Centro Properties Group 671,000
166,094 Commonwealth Property Office Fund 235,627
163,730 DB RREEF Trust 271,815
99,888 Goodman Group 566,898
83,673 ING Industrial Fund 165,699
191,324 Investa Property Group 472,341
69,934 Macquarie Office Trust 98,900
70,450 Mirvac Group 339,814
77,826 Multiplex Group 323,987
131,926 Stockland 908,848
147,668 Westfield Group 2,491,641
--------------
6,754,285
-----------------------------------------------------------------------------------------------------------------
Real Estate Management & 194,005 General Property Trust 764,708
Development - 0.1% 22,466 Lend Lease Corp., Ltd. 352,656
--------------
1,117,364
-----------------------------------------------------------------------------------------------------------------
Road & Rail - 0.1% 58,392 Asciano Group (b) 501,484
- ------------------------------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 4,526 Billabong International Ltd. $ 68,720
0.0%
-----------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 30,724 Macquarie Airports Group 104,991
0.1% 184,082 Macquarie Infrastructure Group 560,698
98,073 Transurban Group 664,940
--------------
1,330,629
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Australia 74,042,319
- ------------------------------------------------------------------------------------------------------------------------------------
Austria - 0.7% Building Products - 0.1% 7,215 Wienerberger AG 530,523
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.1% 15,184 Erste Bank der Oesterreichischen Sparkassen AG 1,183,455
2,739 Raiffeisen International Bank Holding AG 432,623
--------------
1,616,078
-----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% 2,326 RHI AG (b) 126,962
-----------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.0% 509 Mayr-Melnhof Karton AG 115,449
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication
Services - 0.1% 33,399 Telekom Austria AG 831,729
-----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.0% 4,033 Verbund - Oesterreichische
Elektrizitaetswirtschafts AG 206,230
-----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 3,077 BetandWin.com Interactive Entertainment AG (b) 101,375
0.0%
-----------------------------------------------------------------------------------------------------------------
Insurance - 0.0% 796 Wiener Staedtische Allgemeine Versicherung AG 56,727
-----------------------------------------------------------------------------------------------------------------
Machinery - 0.0% 4,212 Andritz AG 277,389
-----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.1% 5,045 Boehler-Uddeholm AG 503,748
9,587 Voestalpine AG 805,888
--------------
1,309,636
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.1% 16,340 OMV AG 1,089,967
-----------------------------------------------------------------------------------------------------------------
Real Estate Management & 37,119 IMMOFINANZ Immobilien Anlagen AG (b) 540,572
Development - 0.2% 30,380 Immoeast Immobilien Anlagen AG (b) 428,715
32,559 Meinl European Land Ltd. (b) 933,241
--------------
1,902,528
-----------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 1,050 Flughafen Wien AG 103,557
0.0%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Austria 8,268,150
- ------------------------------------------------------------------------------------------------------------------------------------
Belgium - 1.2% Beverages - 0.1% 14,701 InBev NV 1,164,403
-----------------------------------------------------------------------------------------------------------------
Chemicals - 0.1% 4,760 Solvay SA 749,292
2,876 Umicore SA 623,577
--------------
1,372,869
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.3% 46,525 Dexia 1,453,261
16,035 KBC Bancassurance Holding 2,161,011
--------------
3,614,272
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Distributors - 0.0% 204 D'ieteren SA $ 91,194
-----------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 111,376 Fortis 4,720,541
0.4% 6,092 Groupe Bruxelles Lambert SA 757,235
--------------
5,477,776
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 17,512 Belgacom SA 775,054
Services - 0.1%
-----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.0% 927 Bekaert SA 135,953
-----------------------------------------------------------------------------------------------------------------
Electronic Equipment & 1,006 Barco NV 93,385
Instruments - 0.0%
-----------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.1% 921 Colruyt SA 192,239
7,134 Delhaize Group 700,712
714 Delhaize Group (a) 69,915
--------------
962,866
-----------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 1,461 Omega Pharma SA 126,476
0.0%
-----------------------------------------------------------------------------------------------------------------
Health Care Technology - 0.0% 14,189 AGFA-Gevaert NV 366,010
-----------------------------------------------------------------------------------------------------------------
Marine - 0.0% 1,787 Compagnie Maritime Belge SA (CMB) 124,741
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.0% 1,612 Euronav SA 58,638
-----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.1% 11,749 UCB SA 694,895
-----------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts 199 Cofinimmo SA 37,894
(REITs) - 0.0%
-----------------------------------------------------------------------------------------------------------------
Wireless Telecommunication 1,464 Mobistar SA 124,707
Services - 0.0%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Belgium 15,221,133
- ------------------------------------------------------------------------------------------------------------------------------------
Bermuda - 0.0% Energy Equipment & Services - 0.0% 17,248 SeaDrill Ltd. (b) 370,017
-----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods- 19,785 Yue Yuen Industrial Holdings Ltd. 61,332
0.0%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Bermuda 431,349
- ------------------------------------------------------------------------------------------------------------------------------------
Cayman Islands - Communications Equipment - 0.1% 150,416 Foxconn International Holdings Ltd. (b) 430,951
0.1% -----------------------------------------------------------------------------------------------------------------
Real Estate Management & 283,663 Shui On Land Ltd. 254,509
Development - 0.0%
-----------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.0% 266,518 Belle International Holdings Ltd. (b) 294,154
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in the Cayman Islands 979,614
- ------------------------------------------------------------------------------------------------------------------------------------
Denmark - 0.8% Beverages - 0.0% 2,762 Carlsberg A/S 333,864
-----------------------------------------------------------------------------------------------------------------
Chemicals - 0.1% 3,817 Novozymes A/S Class B 442,398
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.2% 43,551 Danske Bank A/S 1,780,896
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
3,350 Jyske Bank (b) $ 241,400
4,339 Sydbank A/S 207,473
--------------
2,229,769
-----------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.0% 3,467 FLS Industries A/S Class B 271,486
-----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.1% 17,655 Vestas Wind Systems A/S (b) 1,158,560
-----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 5,963 Danisco A/S 444,586
4,160 East Asiatic Co., Ltd. A/S 228,787
--------------
673,373
-----------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 671 Coloplast A/S Class B 54,362
0.0% 27,000 GN Store Nord A/S (b) 318,689
1,430 William Demant Holding (b) 141,630
--------------
514,681
-----------------------------------------------------------------------------------------------------------------
Household Durables - 0.0% 796 Bang & Olufsen A/S Class B 95,182
-----------------------------------------------------------------------------------------------------------------
Insurance - 0.0% 1,651 Topdanmark A/S (b) 281,524
1,391 TrygVesta A/S 109,302
--------------
390,826
-----------------------------------------------------------------------------------------------------------------
Machinery - 0.0% 1,620 NKT Holding A/S 160,813
-----------------------------------------------------------------------------------------------------------------
Marine - 0.1% 88 AP Moller - Maersk A/S 1,058,460
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.0% 1,800 D/S Torm A/S 67,164
-----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.2% 9,319 H Lundbeck A/S 236,104
20,326 Novo-Nordisk A/S B 2,210,964
--------------
2,447,068
-----------------------------------------------------------------------------------------------------------------
Road & Rail - 0.1% 24,928 Dsv A/S 488,260
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Denmark 10,331,904
- ------------------------------------------------------------------------------------------------------------------------------------
Finland - 1.6% Auto Components - 0.0% 9,415 Nokian Renkaat Oyj 329,842
-----------------------------------------------------------------------------------------------------------------
Building Products - 0.0% 3,128 Asko Oyj 121,611
-----------------------------------------------------------------------------------------------------------------
Communications Equipment - 0.8% 337,349 Nokia Oyj 9,474,543
-----------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.0% 13,931 YIT Oyj 437,208
-----------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 840 OKO Bank 15,565
0.0%
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 17,841 Elisa Corp. 486,336
Services - 0.0%
-----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.1% 38,445 Fortum Oyj 1,201,310
-----------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.1% 7,835 Kesko Oyj Class B 519,804
-----------------------------------------------------------------------------------------------------------------
IT Services - 0.0% 9,495 TietoEnator Oyj 305,079
-----------------------------------------------------------------------------------------------------------------
Insurance - 0.1% 41,601 Sampo Oyj 1,197,813
-----------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products - 0.0% 12,504 Amer Sports Corp. 308,622
-----------------------------------------------------------------------------------------------------------------
Machinery - 0.2% 2,051 Cargotec Corp. Class B 126,130
8,228 KCI Konecranes Oyj 343,846
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
4,302 Kone Oyj Class B $ 270,414
13,656 Metso Oyj 803,679
5,530 Wartsila Oyj 363,645
--------------
1,907,714
-----------------------------------------------------------------------------------------------------------------
Media - 0.0% 2,600 SanomaWSOY Oyj (Class B) 82,159
-----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.1% 12,568 Outokumpu Oyj 422,710
6,996 Rautaruukki Oyj 446,915
--------------
869,625
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.0% 14,359 Neste Oil Oyj 562,678
-----------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.2% 57,145 Stora Enso Oyj Class R 1,075,204
42,954 UPM-Kymmene Oyj 1,057,108
--------------
2,132,312
-----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.0% 3,062 Orion Oyj 76,630
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Finland 20,028,851
- ------------------------------------------------------------------------------------------------------------------------------------
France - 9.5% Aerospace & Defense - 0.2% 32,127 European Aeronautic Defense and Space Co. 1,042,641
9,174 Safran SA 234,607
9,925 Thales SA 606,488
2,001 Zodiac SA 153,732
--------------
2,037,468
-----------------------------------------------------------------------------------------------------------------
Airlines - 0.1% 10,976 Air France-KLM 510,709
-----------------------------------------------------------------------------------------------------------------
Auto Components - 0.2% 13,712 Compagnie Generale des Etablissements Michelin 1,916,171
8,665 Valeo SA 464,925
--------------
2,381,096
-----------------------------------------------------------------------------------------------------------------
Automobiles - 0.3% 15,274 Peugeot SA 1,230,484
14,436 Renault SA 2,315,377
--------------
3,545,861
-----------------------------------------------------------------------------------------------------------------
Beverages - 0.1% 8,377 Pernod-Ricard SA 1,849,536
-----------------------------------------------------------------------------------------------------------------
Building Products - 0.2% 27,530 Cie de Saint-Gobain SA 3,083,983
-----------------------------------------------------------------------------------------------------------------
Chemicals - 0.2% 20,167 Air Liquide 2,646,364
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.3% 70,204 BNP Paribas SA 8,339,084
56,271 Credit Agricole SA 2,283,366
29,633 Societe Generale SA 5,490,355
--------------
16,112,805
-----------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 1,788 Societe BIC SA 131,680
0.0%
-----------------------------------------------------------------------------------------------------------------
Communications Equipment - 0.2% 185,712 Alcatel SA 2,597,676
-----------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.2% 34,996 Vinci SA 2,611,999
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.2% 1,346 Imerys SA $ 136,257
13,321 Lafarge SA 2,427,791
--------------
2,564,048
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 139,218 France Telecom SA 3,818,253
Services - 0.3%
-----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.3% 9,116 Alstom (b) 1,520,118
19,047 Schneider Electric SA 2,668,642
--------------
4,188,760
-----------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.1% 9,408 Technip SA 777,595
-----------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.3% 48,481 Carrefour SA 3,405,005
5,058 Casino Guichard Perrachon SA 511,445
--------------
3,916,450
-----------------------------------------------------------------------------------------------------------------
Food Products - 0.2% 36,872 Groupe Danone 2,978,010
-----------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% 14,651 Gaz de France SA 739,070
-----------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 9,936 Cie Generale d'Optique Essilor International SA 1,183,435
0.1%
-----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 17,548 Accor SA 1,551,257
0.2% 6,609 Sodexho Alliance SA 472,590
--------------
2,023,847
-----------------------------------------------------------------------------------------------------------------
Household Durables - 0.1% 28,268 Thomson 540,606
-----------------------------------------------------------------------------------------------------------------
IT Services - 0.1% 6,356 Atos Origin SA (b) 397,243
13,467 Cap Gemini SA 984,555
--------------
1,381,798
-----------------------------------------------------------------------------------------------------------------
Insurance - 0.5% 128,703 AXA SA 5,532,384
2,829 CNP Assurances 361,487
8,310 Scor SE 225,576
--------------
6,119,447
-----------------------------------------------------------------------------------------------------------------
Machinery - 0.1% 3,816 Vallourec SA 1,220,074
-----------------------------------------------------------------------------------------------------------------
Media - 0.5% 12,405 Lagardere S.C.A. 1,075,869
1,796 M6-Metropole Television SA 58,381
7,450 PagesJaunes Groupe SA 156,825
15,664 Publicis Groupe 692,197
14,679 Societe Television Francaise 1 507,364
94,372 Vivendi SA 4,059,669
--------------
6,550,305
-----------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.1% 6,763 Pinault-Printemps-Redoute 1,179,705
-----------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.6% 84,609 Suez SA 4,836,963
29,040 Veolia Environnement SA 2,280,830
--------------
7,117,793
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Office Electronics - 0.0% 1,892 Neopost SA $ 276,836
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 1.2% 177,462 Total SA 14,388,304
-----------------------------------------------------------------------------------------------------------------
Personal Products - 0.2% 22,151 L'Oreal SA 2,618,263
-----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.5% 83,230 Sanofi-Aventis 6,723,927
-----------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts 492 Gecina SA 82,224
(REITs) - 0.2% 1,434 Klepierre 242,829
7,107 Unibail - Rodamco 1,817,532
--------------
2,142,585
-----------------------------------------------------------------------------------------------------------------
Real Estate Management & 1,974 Icade 152,054
Development - 0.0%
-----------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor 66,883 STMicroelectronics NV 1,288,978
Equipment - 0.1%
-----------------------------------------------------------------------------------------------------------------
Software - 0.1% 10,996 Business Objects SA (b) 429,526
3,307 Dassault Systemes SA 208,490
--------------
638,016
-----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 5,108 Hermes International 577,437
0.2% 21,402 LVMH Moet Hennessy Louis Vuitton SA 2,462,616
--------------
3,040,053
-----------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 2,184 Aeroports de Paris 253,449
0.1% 538 Societe Des Autoroutes Paris-Rhin-Rhone 54,670
--------------
308,119
-----------------------------------------------------------------------------------------------------------------
Wireless Telecommunication 20,903 Bouygues 1,751,363
Services - 0.1%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in France 117,136,871
- ------------------------------------------------------------------------------------------------------------------------------------
Germany - 7.7% Air Freight & Logistics - 0.2% 72,864 Deutsche Post AG 2,367,550
-----------------------------------------------------------------------------------------------------------------
Airlines - 0.1% 25,511 Deutsche Lufthansa AG 715,694
-----------------------------------------------------------------------------------------------------------------
Auto Components - 0.1% 11,534 Continental AG 1,628,306
-----------------------------------------------------------------------------------------------------------------
Automobiles - 0.8% 75,546 DaimlerChrysler AG 6,988,912
15,320 Volkswagen AG 2,445,480
--------------
9,434,392
-----------------------------------------------------------------------------------------------------------------
Capital Markets - 0.5% 42,330 Deutsche Bank AG Registered Shares 6,161,182
3,332 MLP AG 63,938
--------------
6,225,120
-----------------------------------------------------------------------------------------------------------------
Chemicals - 0.9% 11,169 Altana AG 269,776
40,667 BASF AG 5,341,373
58,479 Bayer AG 4,427,896
11,639 Linde AG 1,404,743
--------------
11,443,788
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.3% 52,619 Commerzbank AG $ 2,526,788
7,451 Deutsche Postbank AG 655,724
--------------
3,182,512
-----------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 0.0% 1,694 Wincor Nixdorf AG 156,325
-----------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.1% 2,333 Bilfinger Berger AG 207,370
4,632 Hochtief AG 504,969
--------------
712,339
-----------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 19,265 Deutsche Boerse AG 2,182,620
0.2%
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication
Services - 0.3% 228,534 Deutsche Telekom AG 4,224,455
-----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.7% 50,794 E.ON AG 8,528,735
-----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.0% 8,066 Solarworld AG 372,356
-----------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.1% 14,542 Metro AG 1,207,417
-----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 131 Suedzucker AG 2,910
-----------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 5,439 Celesio AG 353,439
0.1% 17,863 Fresenius Medical Care AG 823,447
--------------
1,176,886
-----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 23,537 TUI AG 652,306
0.1%
-----------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.8% 4,392 Rheinmetall AG 408,921
70,074 Siemens AG 10,083,919
--------------
10,492,840
-----------------------------------------------------------------------------------------------------------------
Insurance - 1.0% 37,185 Allianz AG Registered Shares 8,721,182
18,885 Muenchener Rueckversicherungs AG
Registered Shares 3,475,846
--------------
12,197,028
-----------------------------------------------------------------------------------------------------------------
Life Sciences Tools & Services - 7,219 Qiagen NV (b) 129,697
0.0%
-----------------------------------------------------------------------------------------------------------------
Machinery - 0.1% 2,865 Heidelberger Druckmaschn AG 138,979
10,854 MAN AG 1,562,097
--------------
1,701,076
-----------------------------------------------------------------------------------------------------------------
Media - 0.0% 11,543 Premiere AG (b) 273,360
-----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.2% 3,101 Salzgitter AG 600,122
33,270 ThyssenKrupp AG 1,981,591
--------------
2,581,713
-----------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.0% 2,978 KarstadtQuelle AG (b) 100,833
-----------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.3% 38,359 RWE AG 4,094,009
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Personal Products - 0.1% 5,837 Beiersdorf AG $ 416,335
-----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.1% 6,536 Merck KGaA 900,875
-----------------------------------------------------------------------------------------------------------------
Real Estate Management & 9,043 IVG Immobilien AG 352,455
Development - 0.0%
-----------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor 65,704 Infineon Technologies AG (b) 1,091,332
Equipment - 0.1%
-----------------------------------------------------------------------------------------------------------------
Software - 0.3% 71,443 SAP AG 3,672,934
-----------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.0% 3,720 Douglas Holding AG 242,433
-----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods- 17,886 Adidas-Salomon AG 1,130,476
0.1% 1,339 Puma AG Rudolf Dassler Sport 597,180
--------------
1,727,656
-----------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - 0.1% 14,117 Hypo Real Estate Holding AG 915,250
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Germany 95,103,537
- ------------------------------------------------------------------------------------------------------------------------------------
Greece - 0.7% Beverages - 0.1% 6,415 Coca-Cola Hellenic Bottling Co. SA 295,202
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.4% 39,931 Alpha Bank AE 1,251,843
26,716 EFG Eurobank Ergasias SA 870,373
37,993 National Bank of Greece SA 2,163,302
23,122 Piraeus Bank SA 842,577
--------------
5,128,095
-----------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.0% 3,355 Hellenic Technodomiki Tev SA 43,876
-----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% 2,911 Titan Cement Co. SA 167,817
-----------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 9,515 Hellenic Exchanges SA 248,309
0.0%
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 26,676 Hellenic Telecommunications Organization SA 826,799
Services - 0.1%
-----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.0% 9,295 Public Power Corp. 261,961
-----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 17,514 OPAP SA 618,827
0.1%
-----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.0% 4,010 Viohalco, Hellenic Copper and Aluminum
Industry SA 62,081
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.0% 854 Hellenic Petroleum SA 13,737
3,114 Motor Oil Hellas Corinth Refineries SA 81,588
--------------
95,325
-----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods- 4,357 Folli - Follie SA Registered Shares 176,361
0.0%
-----------------------------------------------------------------------------------------------------------------
Wireless Telecommunication 9,444 Cosmote Mobile Telecommunications SA 291,356
Services - 0.0%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Greece 8,216,009
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Hong Kong - 1.6% Airlines - 0.0% 61,263 Cathay Pacific Airways Ltd. $ 152,357
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.2% 344,400 BOC Hong Kong Holdings Ltd. 819,976
147,939 Bank of East Asia Ltd. 831,973
71,253 Hang Seng Bank Ltd. 964,163
3,500 Wing Hang Bank Ltd. 38,647
--------------
2,654,759
-----------------------------------------------------------------------------------------------------------------
Distributors - 0.1% 233,990 Li & Fung Ltd. 842,234
-----------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 97,348 Hong Kong Exchanges and Clearing Ltd. 1,374,262
0.1%
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 144,195 PCCW Ltd. 88,767
Services - 0.0%
-----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.1% 135,687 CLP Holdings Ltd. 910,832
1,500 Cheung Kong Infrastructure Holdings Ltd. 5,535
93,500 HongKong Electric Holdings Ltd. 471,645
--------------
1,388,012
-----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.0% 87,328 Johnson Electric Holdings Ltd. 48,497
-----------------------------------------------------------------------------------------------------------------
Electronic Equipment & 30,147 Kingboard Chemical Holdings Ltd. 138,751
Instruments - 0.0%
-----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 62,000 Tingyi (Cayman Islands) Holding Corporation 72,131
-----------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% 388,264 The Hong Kong & China Gas Ltd. 818,168
-----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 64,990 Shangri-La Asia Ltd. 157,089
0.0%
-----------------------------------------------------------------------------------------------------------------
Household Durables - 0.0% 170,060 Techtronic Industries Co. 227,066
-----------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.2% 201,176 Hutchison Whampoa Ltd. 1,997,084
56,773 Melco International Development Ltd. 84,407
--------------
2,081,491
-----------------------------------------------------------------------------------------------------------------
Internet Software & Services - 0.0% 55,407 Tencent Holdings Limited 222,734
-----------------------------------------------------------------------------------------------------------------
Marine - 0.0% 9,557 Orient Overseas International Ltd. 93,437
-----------------------------------------------------------------------------------------------------------------
Media - 0.0% 4,000 Television Broadcasts Ltd. 28,145
-----------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts 222,414 The Link REIT 492,299
(REITs) - 0.1%
-----------------------------------------------------------------------------------------------------------------
Real Estate Management & 141,835 Cheung Kong Holdings Ltd. 1,858,546
Development - 0.5% 223,000 Hang Lung Properties Ltd. 770,004
96,491 Henderson Land Development Co., Ltd. 657,771
5,791 Hysan Development Co. Ltd. 15,424
29,000 Kerry Properties Ltd. 182,136
185,484 New World Development Ltd. 464,187
20,000 Shun Tak Holdings Ltd. 29,436
52,421 Sino Land Co. 109,140
131,324 Sun Hung Kai Properties Ltd. 1,580,176
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
72,577 Swire Pacific Ltd. Class A $ 807,818
72,107 Wharf Holdings Ltd. 287,990
--------------
6,762,628
-----------------------------------------------------------------------------------------------------------------
Road & Rail - 0.0% 71,000 MTR Corp. 168,224
-----------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor 5,004 ASM Pacific Technology Ltd. 36,248
Equipment - 0.0%
-----------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.1% 94,000 Esprit Holdings Ltd. 1,194,313
392,394 Giordano International Ltd. 193,475
--------------
1,387,788
-----------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 23,349 Hopewell Holdings Ltd. 95,290
0.0%
-----------------------------------------------------------------------------------------------------------------
Wireless Telecommunication 176,647 Hutchison Telecommunications International Ltd. 227,520
Services - 0.1%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Hong Kong 19,557,897
- ------------------------------------------------------------------------------------------------------------------------------------
Ireland - 0.8% Airlines - 0.0% 49,611 Ryanair Holdings Plc (b) 330,975
-----------------------------------------------------------------------------------------------------------------
Beverages - 0.0% 33,042 C&C Group Plc 445,697
-----------------------------------------------------------------------------------------------------------------
Building Products - 0.0% 6,310 Kingspan Group Plc 176,984
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.4% 78,283 Allied Irish Banks Plc 2,138,451
83,518 Bank of Ireland 1,685,745
25,893 Depfa Bank Plc 458,531
--------------
4,282,727
-----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.2% 50,696 CRH Plc 2,505,356
-----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 20,458 Greencore Group Plc 154,846
5,153 Iaws Group Plc 108,041
7,105 Kerry Group Plc 198,858
--------------
461,745
-----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 663 Paddy Power Plc 20,669
0.0%
-----------------------------------------------------------------------------------------------------------------
Household Durables - 0.0% 54,122 Waterford Wedgwood Plc (b) 2,930
-----------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.0% 2,954 DCC Plc 99,673
-----------------------------------------------------------------------------------------------------------------
Insurance - 0.1% 24,915 Irish Life & Permanent Plc 624,945
-----------------------------------------------------------------------------------------------------------------
Media - 0.0% 70,727 Independent News & Media Plc 358,495
-----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.1% 37,376 Elan Corp. Plc (b) 813,041
-----------------------------------------------------------------------------------------------------------------
Trading Companies & 20,174 Grafton Group Plc 287,902
Distributors - 0.0%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Ireland 10,411,139
- ------------------------------------------------------------------------------------------------------------------------------------
Italy - 3.7% Aerospace & Defense - 0.1% 28,143 Finmeccanica SpA 864,661
-----------------------------------------------------------------------------------------------------------------
Automobiles - 0.1% 58,107 Fiat SpA 1,726,727
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 0.1% 48,981 Mediobanca SpA $ 1,112,400
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.4% 614,905 Banca Intesa SpA 4,584,570
64,173 Banca Intesa SpA (RNC) 448,849
77,015 Banca Monte dei Paschi di Siena SpA 520,872
32,031 Banca Popolare di Milano Scrl 488,141
63,915 Banco Popolare di Verona e Novara Scrl 1,837,716
159,530 Capitalia SpA 1,581,239
649,240 UniCredito Italiano SpA 5,797,880
59,070 Unione Di Banche Italiane SPCA 1,501,264
--------------
16,760,531
-----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% 6,019 Italcementi SpA 185,833
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 838,903 Telecom Italia SpA 2,296,748
Services - 0.3% 478,015 Telecom Italia SpA (RNC) 1,059,399
--------------
3,356,147
-----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.3% 347,974 Enel SpA 3,740,384
140,101 Terna SpA 483,158
--------------
4,223,542
-----------------------------------------------------------------------------------------------------------------
Food Products - 0.1% 122,230 Parmalat SpA 516,624
-----------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.0% 84,550 Snam Rete Gas SpA 499,953
-----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 4,375 Autogrill SpA 92,563
0.0% 8,091 Lottomatica SpA 321,012
--------------
413,575
-----------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.0% 364,370 Pirelli & C SpA 433,378
-----------------------------------------------------------------------------------------------------------------
Insurance - 0.4% 48,286 Alleanza Assicurazioni SpA 631,183
83,701 Assicurazioni Generali SpA 3,355,989
9,435 Fondiaria-Sai SpA 456,145
38,644 Mediolanum SpA 321,669
39,092 Unipol SpA (Preference Shares) 133,999
--------------
4,898,985
-----------------------------------------------------------------------------------------------------------------
Media - 0.1% 10,724 Arnoldo Mondadori Editore SpA 104,978
81,824 Mediaset SpA 844,902
158,897 Seat Pagine Gialle SpA 95,243
--------------
1,045,123
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.7% 215,605 Eni SpA 7,817,279
4,487 Eni SpA (a)(g) 324,634
--------------
8,141,913
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury 9,077 Bulgari SpA $ 145,581
Goods - 0.0% 8,388 Luxottica Group SpA 325,850
--------------
471,431
-----------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 21,098 Autostrade SpA 700,684
0.1%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Italy 45,351,507
- ------------------------------------------------------------------------------------------------------------------------------------
Japan - 20.4% Air Freight & Logistics - 0.0% 44,000 Yamato Transport Co., Ltd. 621,989
-----------------------------------------------------------------------------------------------------------------
Airlines - 0.0% 15,000 All Nippon Airways Co., Ltd. 57,067
114,000 Japan Airlines Corp. 214,447
--------------
271,514
-----------------------------------------------------------------------------------------------------------------
Auto Components - 0.5% 20,700 Aisin Seiki Co., Ltd. 759,485
59,000 Bridgestone Corp. 1,264,787
40,800 Denso Corp. 1,595,715
23,000 NGK Spark Plug Co., Ltd. 399,514
1,000 NHK Spring Co., Ltd. 9,625
14,300 NOK Corp. 301,823
11,900 Stanley Electric Co., Ltd. 258,287
24,100 Sumitomo Rubber Industries, Ltd. 287,643
1,800 Toyoda Gosei Co., Ltd. 50,753
1,500 Toyota Boshoku Corp. 37,910
13,700 Toyota Industries Corp. 636,544
--------------
5,602,086
-----------------------------------------------------------------------------------------------------------------
Automobiles - 1.8% 138,200 Honda Motor Co., Ltd. 5,018,352
193,200 Nissan Motor Co., Ltd. 2,068,379
230,500 Toyota Motor Corp. 14,536,804
16,200 Yamaha Motor Co., Ltd. 470,047
--------------
22,093,582
-----------------------------------------------------------------------------------------------------------------
Beverages - 0.2% 32,700 Asahi Breweries Ltd. 507,120
200 Coca-Cola West Holdings Co., Ltd. 4,645
6,200 ITO EN, Ltd. 203,701
66,000 Kirin Holdings Co., Ltd. 987,256
25,000 Sapporo Holdings Ltd. 158,913
35,000 Takara Holdings, Inc. 233,400
--------------
2,095,035
-----------------------------------------------------------------------------------------------------------------
Building Products - 0.2% 73,100 Asahi Glass Co., Ltd. 985,639
2,000 Central Glass Co., Ltd. 11,176
24,100 Daikin Industries Ltd. 877,796
16,300 JS Group Corp. 330,467
78,000 Nippon Sheet Glass Co., Ltd. 356,073
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
27,000 Sanwa Shutter Corp. $ 156,601
21,000 Toto Ltd. 181,792
--------------
2,899,544
-----------------------------------------------------------------------------------------------------------------
Capital Markets - 0.5% 128,000 Daiwa Securities Group, Inc. 1,360,847
1,000 Jafco Co., Ltd. 45,979
10,300 Matsui Securities Co., Ltd. 91,858
10,000 Mitsubishi UFJ Securities Co. 112,048
33,000 Nikko Cordial Corp. 430,410
144,200 Nomura Holdings, Inc. 2,800,849
214 SBI E*trade Securities Co. Ltd. 225,245
1,104 SBI Holdings, Inc. 350,218
43,300 Shinko Securities Co., Ltd. 223,619
--------------
5,641,073
-----------------------------------------------------------------------------------------------------------------
Chemicals - 0.9% 84,000 Asahi Kasei Corp. 551,874
3,000 Daicel Chemical Industries Ltd. 19,524
28,000 Dainippon Ink and Chemicals, Inc. 108,038
9,000 Denki Kagaku Kogyo Kabushiki Kaisha 40,507
2,800 Hitachi Chemical Co., Ltd. 63,321
20,900 JSR Corp. 504,317
13,000 Kaneka Corp. 108,874
2,000 Kansai Paint Co., Ltd. 17,482
40,000 Kuraray Co., Ltd. 468,878
86,500 Mitsubishi Chemical Holdings Corp. 794,061
20,000 Mitsubishi Gas Chemical Co., Inc. 182,576
68,000 Mitsubishi Rayon Co., Ltd. 484,352
37,000 Mitsui Chemicals, Inc. 281,022
16,000 Nippon Kayaku Co., Ltd. 126,719
6,000 Nippon Sanso Corp. 46,393
25,000 Nissan Chemical Industries Ltd. 294,156
16,910 Nitto Denko Corp. 852,322
37,500 Shin-Etsu Chemical Co., Ltd. 2,677,410
137,000 Showa Denko KK 495,453
13,000 Sumitomo Bakelite Co., Ltd. 91,018
135,000 Sumitomo Chemical Co., Ltd. 905,905
99,000 Teijin Ltd. 541,477
27,000 Tokuyama Corp. 350,990
133,700 Toray Industries, Inc. 987,965
40,000 Tosoh Corp. 221,874
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
99,000 Ube Industries Ltd. $ 304,759
15,000 Zeon Corp. 159,454
--------------
11,680,721
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 2.0% 11,000 The 77 Bank Ltd. 71,390
11,000 The Bank of Kyoto Ltd. 131,771
121,000 The Bank of Yokohama Ltd. 847,457
52,000 The Chiba Bank Ltd. 460,921
62,000 Fukuoka Financial Group, Inc. 409,892
13,000 The Gunma Bank Ltd. 87,390
15,000 The Hachijuni Bank Ltd. 105,645
18,000 The Hiroshima Bank Ltd. 99,677
78,100 Hokuhoku Financial Group, Inc. 252,476
34,000 The Joyo Bank Ltd. 211,267
677 Mitsubishi UFJ Financial Group, Inc. 7,461,006
48,000 Mitsui Trust Holdings, Inc. 417,624
797 Mizuho Financial Group, Inc. 5,506,102
34,000 The Nishi-Nippon City Bank Ltd. 124,416
531 Resona Holdings, Inc. 1,268,462
12 Sapporo Hokuyo Holdings, Inc. 132,268
158,000 Shinsei Bank Ltd. 638,562
63,000 The Shizuoka Bank Ltd. 639,241
568 Sumitomo Mitsui Financial Group, Inc. 5,295,127
95,000 The Sumitomo Trust & Banking Co., Ltd. 904,829
8,000 Suruga Bank Ltd. 100,820
--------------
25,166,343
-----------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 64,000 Dai Nippon Printing Co., Ltd. 955,085
0.2% 353 The Goodwill Group, Inc. 121,539
4,500 Kokuyo Co., Ltd. 52,785
8,300 Meitec Corp. 237,774
10,200 Park24 Co. Ltd. 102,401
21,500 Secom Co., Ltd. 1,014,302
48,000 Toppan Printing Co., Ltd. 515,794
--------------
2,999,680
-----------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 0.4% 144,000 Fujitsu Ltd. 1,060,740
9,700 Mitsumi Electric Co., Ltd. 347,599
198,000 NEC Corp. 1,019,326
8,000 Seiko Epson Corp. 231,580
245,000 Toshiba Corp. 2,134,633
--------------
4,793,878
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.2% 8,457 COMSYS Holdings Corp. $ 97,949
18,000 Chiyoda Corp. 342,987
23,000 JGC Corp. 430,987
105,800 Kajima Corp. 442,197
8,000 Kinden Corp. 69,460
38,000 Nishimatsu Construction Co., Ltd. 134,174
68,000 Obayashi Corp. 370,443
13,000 Okumura Corp. 66,531
34,000 Shimizu Corp. 196,980
119,000 Taisei Corp. 402,258
3,000 Toda Corp. 15,950
--------------
2,569,916
-----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% 83,000 Sumitomo Osaka Cement Co., Ltd. 219,865
78,000 Taiheiyo Cement Corp. 345,009
--------------
564,874
-----------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.3% 3,550 Acom Co., Ltd. 127,353
13,800 Aeon Credit Service Co., Ltd. 218,967
10,250 Aiful Corp. 294,308
19,500 Credit Saison Co., Ltd. 507,537
200 Hitachi Capital Corp. 3,049
7,430 ORIX Corp. 1,958,453
3,750 Promise Co., Ltd. 115,702
12,400 Takefuji Corp. 416,989
--------------
3,642,358
-----------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.0% 6,700 Toyo Seikan Kaisha Ltd. 129,512
-----------------------------------------------------------------------------------------------------------------
Distributors - 0.0% 1,000 Canon Marketing Japan Inc. 20,457
-----------------------------------------------------------------------------------------------------------------
Diversified Consumer Services - 2,300 Benesse Corp. 66,634
0.0%
-----------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 1,100 Diamond Lease Co., Ltd. 49,409
0.0%
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 463 Nippon Telegraph & Telephone Corp. 2,048,922
Services - 0.2%
-----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.7% 62,800 Chubu Electric Power Co., Inc. 1,666,279
9,900 Hokkaido Electric Power Co., Inc. 214,911
67,900 The Kansai Electric Power Co., Inc. 1,605,834
27,300 Kyushu Electric Power Co., Inc. 715,517
37,100 Tohoku Electric Power Co., Inc. 832,209
109,200 The Tokyo Electric Power Co., Inc. 3,512,627
--------------
8,547,377
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.3% 18,800 Fuji Electric Holdings Co., Ltd. $ 95,360
40,000 Fujikura Ltd. 297,080
41,000 Furukawa Electric Co., Ltd. 226,431
21,873 Matsushita Electric Works Ltd. 279,660
155,000 Mitsubishi Electric Corp. 1,435,840
53,800 Sumitomo Electric Industries Ltd. 801,015
2,900 Ushio, Inc. 64,331
--------------
3,199,717
-----------------------------------------------------------------------------------------------------------------
Electronic Equipment & 26,100 Alps Electric Co., Ltd. 260,774
Instruments - 1.0% 43,200 Citizens Holding Co. Ltd. 389,581
30,000 Dainippon Screen Manufacturing Co., Ltd. 226,401
1,600 Hirose Electric Co., Ltd. 210,403
306,000 Hitachi Ltd. 2,165,410
40,000 Hoya Corp. 1,326,925
12,700 Ibiden Co., Ltd. 819,448
2,600 Keyence Corp. 568,000
12,900 Kyocera Corp. 1,370,455
1,100 Mabuchi Motor Co., Ltd. 67,366
16,800 Murata Manufacturing Co., Ltd. 1,264,040
7,200 Nidec Corp. 422,417
35,500 Nippon Electric Glass Co. 625,895
96,000 Oki Electric Industry Co., Ltd. 178,175
13,700 Omron Corp. 359,613
12,300 TDK Corp. 1,190,433
15,000 Taiyo Yuden Co., Ltd. 346,974
10,000 Yaskawa Electric Corp. 113,666
9,500 Yokogawa Electric Corp. 127,348
--------------
12,033,324
-----------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.3% 61,600 Aeon Co., Ltd. 1,143,404
200 Circle K Sunkus Co., Ltd. 3,490
3,600 FamilyMart Co., Ltd. 94,878
7,900 Lawson, Inc. 273,250
3,000 Matsumotokiyoshi Co., Ltd. 65,868
69,300 Seven & I Holdings Co. Ltd. 1,980,967
4,000 UNY Co., Ltd. 47,415
--------------
3,609,272
-----------------------------------------------------------------------------------------------------------------
Food Products - 0.2% 66,000 Ajinomoto Co., Inc. 760,203
100 House Foods Corp. 1,535
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
22,000 Kikkoman Corp. $ 326,793
45,000 Meiji Dairies Corp. 286,658
26,000 Nichirei Corp. 133,776
6,000 Nippon Meat Packers, Inc. 72,575
11,000 Nisshin Seifun Group, Inc. 108,805
8,000 Nissin Food Products Co., Ltd. 268,165
12,500 QP Corp. 120,105
10,000 Toyo Suisan Kaisha, Ltd. 180,372
4,300 Yakult Honsha Co., Ltd. 108,730
6,000 Yamazaki Baking Co., Ltd. 51,224
--------------
2,418,941
-----------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% 163,000 Osaka Gas Co., Ltd. 605,668
224,000 Tokyo Gas Co., Ltd. 1,062,171
--------------
1,667,839
-----------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 16,000 Olympus Corp. 624,230
0.1% 18,000 Terumo Corp. 695,475
--------------
1,319,705
-----------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 900 Alfresa Holdings Corp. 62,826
0.0% 8,600 Mediceo Paltac Holdings Co. Ltd. 131,706
2,600 Suzuken Co., Ltd. 81,217
--------------
275,749
-----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 1,800 Oriental Land Co., Ltd. 93,993
0.0% 39 ROUND ONE Corp. 70,806
--------------
164,799
-----------------------------------------------------------------------------------------------------------------
Household Durables - 1.0% 28,000 Casio Computer Co., Ltd. 436,573
4,300 Daito Trust Construction Co., Ltd. 204,756
38,000 Daiwa House Industry Co., Ltd. 543,133
58,000 HASEKO Corp. (b) 171,517
12,600 Makita Corp. 561,320
166,000 Matsushita Electric Industrial Co., Ltd. 3,289,649
23,500 Pioneer Corp. 319,611
203,000 Sanyo Electric Co., Ltd. (b) 332,399
21,000 Sekisui Chemical Co., Ltd. 162,300
53,000 Sekisui House Ltd. 706,465
93,000 Sharp Corp. 1,763,047
83,400 Sony Corp. 4,281,071
--------------
12,771,841
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Household Products - 0.1% 49,000 Kao Corp. $ 1,268,678
2,200 Uni-Charm Corp. 124,726
--------------
1,393,404
-----------------------------------------------------------------------------------------------------------------
IT Services - 0.1% 8,200 CSK Holdings Corp. 288,770
700 Itochu Techno-Science Corp. 27,450
80 NTT Data Corp. 379,561
12,500 Nomura Research Institute Ltd. 367,687
100 Obic Co., Ltd. 19,751
400 Otsuka Shokai Co., Ltd. 37,936
7,400 TIS, Inc. 169,953
--------------
1,291,108
-----------------------------------------------------------------------------------------------------------------
Independent Power Producers & 11,400 Electric Power Development Co. 453,013
Energy Traders - 0.0%
-----------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.0% 79,000 Hankyu Hanshin Holdings, Inc. 417,162
-----------------------------------------------------------------------------------------------------------------
Insurance - 0.5% 65,200 Millea Holdings, Inc. 2,680,520
104,000 Mitsui Sumitomo Insurance Co., Ltd. 1,334,293
70,800 Sompo Japan Insurance, Inc. 865,935
18,900 T&D Holdings, Inc. 1,276,391
--------------
6,157,139
-----------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail - 0.0% 853 Rakuten, Inc. 286,769
-----------------------------------------------------------------------------------------------------------------
Internet Software & Services - 0.1% 55 Access Co. Ltd. (b) 165,885
267 eAccess Ltd. 159,308
1,045 Yahoo! Japan Corp. 354,285
--------------
679,478
-----------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products - 0.3% 45,400 Fuji Photo Film Co., Ltd. 2,029,175
11,100 Namco Bandai Holdings, Inc. 175,338
30,000 Nikon Corp. 835,478
6,700 Sankyo Co., Ltd. (Gunma) 282,132
20,832 Sega Sammy Holdings, Inc. 337,098
3,200 Shimano, Inc. 109,744
9,300 Yamaha Corp. 193,263
--------------
3,962,228
-----------------------------------------------------------------------------------------------------------------
Machinery - 1.1% 21,000 Amada Co., Ltd. 262,632
9,500 Daifuku Co., Ltd. 130,960
62,000 Ebara Corp. 284,397
17,100 Fanuc Ltd. 1,764,948
5,000 Hino Motors Ltd. 29,891
11,300 Hitachi Construction Machinery Co., Ltd. 392,629
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
80,000 IHI Corp. $ 291,770
8,700 JTEKT Corp. 157,127
38,000 The Japan Steel Works, Ltd. 578,218
152,000 Kawasaki Heavy Industries Ltd. 620,107
82,000 Komatsu Ltd. 2,376,614
114,000 Kubota Corp. 921,506
11,600 Kurita Water Industries Ltd. 364,194
31,000 Minebea Co., Ltd. 175,216
298,200 Mitsubishi Heavy Industries Ltd. 1,909,830
84,000 Mitsui Engineering & Shipbuilding Co., Ltd. 447,900
29,000 NGK Insulators Ltd. 712,213
24,000 NSK Ltd. 248,122
19,000 NTN Corp. 163,820
19,000 OKUMA Corp. 300,169
900 OSG Corp. 12,399
3,900 SMC Corp. 518,405
41,000 Sumitomo Heavy Industries Ltd. 463,521
6,000 THK Co., Ltd. 150,258
--------------
13,276,846
-----------------------------------------------------------------------------------------------------------------
Marine - 0.2% 55,000 Kawasaki Kisen Kaisha Ltd. 670,766
103,000 Mitsui OSK Lines Ltd. 1,396,569
112,000 Nippon Yusen Kabushiki Kaisha 1,027,199
--------------
3,094,534
-----------------------------------------------------------------------------------------------------------------
Media - 0.1% 600 Asatsu-DK, Inc. 20,337
117 Dentsu, Inc. 331,687
58 Fuji Television Network, Inc. 116,716
600 Hakuhodo DY Holdings, Inc. 39,616
29 Jupiter Telecommunications Co., Ltd. (b) 23,724
4,700 Toho Co., Ltd. 85,110
3,700 Tokyo Broadcasting System, Inc. 113,223
--------------
730,413
-----------------------------------------------------------------------------------------------------------------
Metals & Mining - 1.0% 26,000 DAIDO STEEL CO., LTD. 176,986
17,000 Dowa Mining Co., Ltd. 181,116
47,700 JFE Holdings, Inc. 2,964,849
261,000 Kobe Steel Ltd. 989,905
120,000 Mitsubishi Materials Corp. 654,233
68,000 Mitsui Mining & Smelting Co., Ltd. 317,278
87,800 Nippon Light Metal Co., Ltd. 229,092
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
505,000 Nippon Steel Corp. $ 3,552,426
47,000 Nisshin Steel Co., Ltd. 214,478
332,000 Sumitomo Metal Industries Ltd. 1,951,883
42,000 Sumitomo Metal Mining Co., Ltd. 910,506
1,600 Sumitomo Titanium Corp. 149,387
800 Toho Titanium Co. Ltd. 32,428
7,500 Tokyo Steel Manufacturing Co., Ltd. 117,452
--------------
12,442,019
-----------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.2% 9,000 Daimaru, Inc. 107,493
6,000 Hankyu Department Stores 63,878
21,400 Isetan Co., Ltd. 351,592
37,600 Marui Co., Ltd. 475,063
59,000 Mitsukoshi Ltd. 295,273
3,900 Ryohin Keikaku Co., Ltd. 241,407
36,000 Takashimaya Co., Ltd. 454,833
--------------
1,989,539
-----------------------------------------------------------------------------------------------------------------
Office Electronics - 0.6% 88,800 Canon, Inc. 5,207,501
51,000 Konica Minolta Holdings, Inc. 751,669
64,000 Ricoh Co., Ltd. 1,480,727
--------------
7,439,897
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.3% 800 Idemitsu Kosan Co. Ltd. 89,526
58 Inpex Holdings, Inc. 541,981
4,200 Japan Petrolleum Explora 296,557
77,500 Nippon Mining Holdings, Inc. 741,421
123,000 Nippon Oil Corp. 1,142,383
25,100 Showa Shell Sekiyu KK 311,249
11,000 TonenGeneral Sekiyu KK 107,289
--------------
3,230,406
-----------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.0% 97 Nippon Paper Group, Inc. 322,986
49,000 OJI Paper Co., Ltd. 238,208
--------------
561,194
-----------------------------------------------------------------------------------------------------------------
Personal Products - 0.1% 9,000 Aderans Co., Ltd. 189,508
25,000 Shiseido Co., Ltd. 533,660
--------------
723,168
-----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.9% 49,400 Astellas Pharma, Inc. 2,148,771
29,700 Chugai Pharmaceutical Co., Ltd. 533,671
65,300 Daiichi Sankyo Co. Ltd. 1,732,580
25,000 Eisai Co., Ltd. 1,091,682
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
43,000 Kyowa Hakko Kogyo Co., Ltd. $ 405,791
5,000 Santen Pharmaceutical Co., Ltd. 121,756
31,000 Shionogi & Co., Ltd. 505,305
6,000 Taisho Pharmaceutical Co., Ltd. 119,039
70,400 Takeda Pharmaceutical Co., Ltd. 4,547,942
13,000 Tanabe Seiyaku Co., Ltd. 154,567
--------------
11,361,104
-----------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts 70 Japan Prime Realty Investment Corp. 273,018
(REITs) - 0.2% 46 Japan Real Estate Investment Corp. 540,604
45 Japan Retail Fund Investment Corp. 390,028
51 Nippon Building Fund, Inc. 707,475
21 Nomura Real Estate Office Fund, Inc. 226,392
--------------
2,137,517
-----------------------------------------------------------------------------------------------------------------
Real Estate Management & 1,700 Aeon Mall Co. Ltd. 52,269
Development - 0.6% 188 KK DaVinci Advisors (b) 164,125
8,100 Leopalace21 Corp. 276,798
95,000 Mitsubishi Estate Co., Ltd. 2,577,411
77,000 Mitsui Fudosan Co., Ltd. 2,158,181
40 NTT Urban Development Co. 77,453
600 Nomura Real Estate Holdings, Inc. 19,487
30,000 Sumitomo Realty & Development Co., Ltd. 976,993
30,000 Tokyo Tatemono Co., Ltd. 373,490
28,000 Tokyu Land Corp. 297,727
--------------
6,973,934
-----------------------------------------------------------------------------------------------------------------
Road & Rail - 0.6% 149 Central Japan Railway Co. 1,572,032
312 East Japan Railway Co. 2,404,026
17,000 Keihin Electric Express Railway Co., Ltd. 112,232
28,000 Keio Electric Railway Co., Ltd. 186,430
33,000 Keisei Electric Railway Co., Ltd. 193,191
91,000 Kintetsu Corp. 274,096
72,000 Nippon Express Co., Ltd. 409,289
32,000 Odakyu Electric Railway Co., Ltd. 197,327
13,000 Seino Holdings Corp. 123,055
38,000 Tobu Railway Co., Ltd. 171,773
114,000 Tokyu Corp. 761,919
157 West Japan Railway Co. 731,029
--------------
7,136,399
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor 16,200 Advantest Corp. $ 705,349
Equipment - 0.3% 10,600 Elpida Memory, Inc. (b) 465,475
1,300 NEC Electronics Corp. (b) 34,142
7,600 Rohm Co., Ltd. 674,466
21,000 Sanken Electric Co., Ltd. 203,144
1,600 Shinko Electric Industries 34,434
10,800 Sumco Corp. 541,136
13,200 Tokyo Electron Ltd. 971,118
6,400 Tokyo Seimitsu Co. Ltd. 247,332
--------------
3,876,596
-----------------------------------------------------------------------------------------------------------------
Software - 0.3% 6,700 Fuji Soft, Inc. 157,598
4,100 Konami Corp. 94,163
8,600 Nintendo Co., Ltd. 3,137,653
900 Oracle Corp. Japan 39,722
11,500 Trend Micro, Inc. 371,291
--------------
3,800,427
-----------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.1% 2,600 Aoyama Trading Co., Ltd. 79,979
3,900 Autobacs Seven Co., Ltd. 121,686
200 EDION Corp. 2,598
3,300 Fast Retailing Co., Ltd. 234,879
950 Nitori Co., Ltd. 47,426
5,800 Shimachu Co., Ltd. 155,956
600 Shimamura Co., Ltd. 64,100
680 USS Co., Ltd. 43,294
8,500 Yamada Denki Co., Ltd. 887,717
--------------
1,637,635
-----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 13,000 Asics Corp. 160,624
0.1% 22,000 Gunze Ltd. 128,485
23,000 Nisshinbo Industries, Inc. 321,256
7,000 Onward Kashiyama Co., Ltd. 89,350
12,000 Toyobo Co., Ltd. 34,339
11,000 Wacoal Holdings Corp. 135,631
--------------
869,685
-----------------------------------------------------------------------------------------------------------------
Tobacco - 0.2% 416 Japan Tobacco, Inc. 2,050,566
-----------------------------------------------------------------------------------------------------------------
Trading Companies & 1,400 Hitachi High-Technologies Corp. 36,320
Distributors - 0.9% 142,000 Itochu Corp. 1,644,277
119,000 Marubeni Corp. 978,903
110,400 Mitsubishi Corp. 2,892,705
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
138,000 Mitsui & Co., Ltd. $ 2,754,067
106,300 Sojitz Corp. 475,122
86,000 Sumitomo Corp. 1,567,913
13,000 Toyota Tsusho Corp. 300,693
--------------
10,650,000
-----------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 6,000 Kamigumi Co., Ltd. 51,984
0.0% 7,000 Mitsubishi Logistics Corp. 115,230
--------------
167,214
-----------------------------------------------------------------------------------------------------------------
Wireless Telecommunication 227 KDDI Corp. 1,681,625
Services - 0.4% 1,493 NTT DoCoMo, Inc. 2,361,326
58,700 Softbank Corp. 1,264,954
--------------
5,307,905
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Japan 253,063,390
- ------------------------------------------------------------------------------------------------------------------------------------
Luxembourg - Personal Products - 0.0% 1,633 Oriflame Cosmetics SA 76,658
0.0% -----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Luxembourg 76,658
- ------------------------------------------------------------------------------------------------------------------------------------
Netherlands - Air Freight & Logistics - 0.2% 41,738 TNT NV 1,884,546
3.7% -----------------------------------------------------------------------------------------------------------------
Beverages - 0.1% 19,518 Heineken NV 1,144,180
-----------------------------------------------------------------------------------------------------------------
Chemicals - 0.2% 22,133 Akzo Nobel NV 1,910,504
15,917 Koninklijke DSM NV 783,917
--------------
2,694,421
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.5% 147,900 ABN AMRO Holding NV 6,781,561
-----------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 14,967 Corporate Express NV 229,510
0.1% 3,129 Randstad Holdings NV 247,656
18,456 Vedior NV 551,534
--------------
1,028,700
-----------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 152,241 ING Groep NV CVA 6,700,707
0.5%
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 169,444 Koninklijke KPN NV 2,811,210
Services - 0.2%
-----------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.1% 3,102 Fugro NV 196,518
16,480 SBM Offshore NV 628,547
--------------
825,065
-----------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.1% 131,893 Koninklijke Ahold NV (b) 1,654,319
-----------------------------------------------------------------------------------------------------------------
Food Products - 0.4% 17,009 Royal Numico NV 883,883
139,987 Unilever NV 4,344,332
--------------
5,228,215
-----------------------------------------------------------------------------------------------------------------
Household Durables - 0.3% 95,445 Koninklijke Philips Electronics NV 4,044,668
-----------------------------------------------------------------------------------------------------------------
Insurance - 0.2% 122,034 Aegon NV 2,401,875
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Media - 0.2% 69,999 Reed Elsevier NV $ 1,330,382
23,059 Wolters Kluwer NV 703,187
--------------
2,033,569
-----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.4% 81,778 Arcelor Mittal 5,111,306
-----------------------------------------------------------------------------------------------------------------
Office Electronics - 0.0% 283 OCE NV 5,520
-----------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts 1,928 Corio NV 151,014
(REITs) - 0.1% 2,822 Wereldhave NV 393,109
--------------
544,123
-----------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor 44,541 ASML Holding NV (b) 1,223,780
Equipment - 0.1%
-----------------------------------------------------------------------------------------------------------------
Trading Companies & 65,029 Hagemeyer NV 335,091
Distributors - 0.0%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in the Netherlands 46,452,856
- ------------------------------------------------------------------------------------------------------------------------------------
New Zealand - Construction Materials - 0.0% 32,024 Fletcher Building Ltd. 305,012
0.1% -----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 224,335 Telecom Corp. of New Zealand Ltd. 786,877
Services - 0.1%
-----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.0% 20,226 Contact Energy Ltd. 140,447
-----------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 41,926 Fisher & Paykel Healthcare Corp. 108,873
0.0%
-----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 28,925 Sky City Ltd. 113,285
0.0%
-----------------------------------------------------------------------------------------------------------------
Household Durables - 0.0% 27,665 Fisher & Paykel Appliances Holdings Ltd. 74,192
-----------------------------------------------------------------------------------------------------------------
Media - 0.0% 241 Sky Network Television Ltd. 1,046
-----------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts 12,534 Kiwi Income Property Trust 15,946
(REITs) - 0.0%
-----------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 58,991 Auckland International Airport Ltd. 149,054
0.0%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in New Zealand 1,694,732
- ------------------------------------------------------------------------------------------------------------------------------------
Norway - 1.0% Chemicals - 0.1% 18,250 Yara International ASA 547,245
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.1% 66,499 DnB NOR ASA 855,356
-----------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 19,529 Tomra Systems ASA 170,432
0.0%
-----------------------------------------------------------------------------------------------------------------
Communications Equipment - 0.0% 12,041 Tandberg ASA 268,635
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 42,395 Telenor ASA 828,690
Services - 0.1% 8,600 Telenor ASA (a) 505,617
--------------
1,334,307
-----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.1% 15,198 Renewable Energy Corp. AS (b) 588,594
-----------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.1% 13,190 Acergy SA 296,943
20,340 Aker Kvaerner ASA 514,851
16,804 Ocean RIG ASA (b) 124,750
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
13,236 Petroleum Geo-Services ASA $ 330,510
25,674 ProSafe ASA 410,526
8,780 TGS Nopec Geophysical Co. ASA (b) 179,642
--------------
1,857,222
-----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 317,344 Marine Harvest (b) 342,667
-----------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.1% 81,450 Orkla ASA 1,535,730
-----------------------------------------------------------------------------------------------------------------
Insurance - 0.0% 25,238 Storebrand ASA 390,943
-----------------------------------------------------------------------------------------------------------------
Marine - 0.0% 400 Stolt-Nielsen SA 13,323
-----------------------------------------------------------------------------------------------------------------
Media - 0.0% 3,218 Schibsted ASA 147,074
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.4% 114,678 DET Norske Oljeselskap (b) 239,759
6,794 Frontline Ltd. 312,286
59,658 Norsk Hydro ASA 2,288,205
52,007 Statoil ASA 1,613,558
--------------
4,453,808
-----------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.0% 15,197 Norske Skogindustrier ASA 218,711
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Norway 12,724,047
- ------------------------------------------------------------------------------------------------------------------------------------
Portugal - 0.4% Commercial Banks - 0.1% 23,822 Banco BPI SA 211,874
225,189 Banco Comercial Portugues SA Registered Shares 1,258,476
13,508 Banco Espirito Santo SA Registered Shares 301,165
--------------
1,771,515
-----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% 13,841 Cimpor Cimentos de Portugal SA 130,736
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 60,384 Portugal Telecom SGPS SA Registered Shares 834,937
Services - 0.1%
-----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.1% 183,690 Energias de Portugal SA 1,015,738
-----------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.0% 18,295 Jeronimo Martins SGPS SA 108,110
-----------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.1% 122,466 Sonae SGPS SA 347,668
-----------------------------------------------------------------------------------------------------------------
Media - 0.0% 3,893 PT Multimedia Servicos de Telecomunicacoes e
Multimedia SGPS SA 62,687
-----------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.0% 9,059 Sonae Industria SGPS SA (b) 131,681
-----------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 15,709 Brisa-Auto Estradas de Portugal SA Private Shares 211,157
0.0%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Portugal 4,614,229
- ------------------------------------------------------------------------------------------------------------------------------------
Singapore - 1.1% Aerospace & Defense - 0.0% 58,213 Singapore Technologies Engineering Ltd. 137,105
-----------------------------------------------------------------------------------------------------------------
Air Freight & Logistics - 0.0% 127,954 Singapore Post Ltd. 106,246
-----------------------------------------------------------------------------------------------------------------
Airlines - 0.1% 38,582 Singapore Airlines Ltd. 474,136
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.4% 105,605 DBS Group Holdings Ltd. 1,573,467
244,914 Oversea-Chinese Banking Corp. 1,464,094
111,572 United Overseas Bank Ltd. 1,603,908
--------------
4,641,469
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Distributors - 0.0% 3,529 Jardine Cycle & Carriage Ltd. $ 36,264
-----------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 93,000 Singapore Exchange Ltd. 596,670
0.1%
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 651,132 Singapore Telecommunications Ltd. 1,448,132
Services - 0.1%
-----------------------------------------------------------------------------------------------------------------
Electronic Equipment & 7,000 Venture Corp. Ltd. 71,759
Instruments - 0.0%
-----------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.0% 16,000 Olam International Ltd. 32,276
-----------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 79,800 Parkway Holdings Ltd. 208,920
0.0%
-----------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.1% 36,096 Fraser and Neave Ltd. 128,669
1,766 Haw Par Corp. Ltd. 8,832
115,616 Keppel Corp. Ltd. 945,802
43,590 SembCorp Industries Ltd. 162,474
--------------
1,245,777
-----------------------------------------------------------------------------------------------------------------
Machinery - 0.0% 95,427 SembCorp Marine Ltd. 306,028
-----------------------------------------------------------------------------------------------------------------
Marine - 0.0% 118,002 Cosco Corp. (Singapore) Ltd. 288,200
5,200 Neptune Orient Lines Ltd. 18,026
--------------
306,226
-----------------------------------------------------------------------------------------------------------------
Media - 0.0% 133,316 Singapore Press Holdings Ltd. 404,279
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.0% 16,194 Singapore Petroleum Co. Ltd. 60,909
-----------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts 125,152 Ascendas Real Estate Investment Trust 240,786
(REITs) - 0.1%
12,000 Capita Commercial Trust 22,979
37,000 CapitaMall Trust 102,163
198,000 Suntec Real Estate Investment Trust 251,420
--------------
617,348
-----------------------------------------------------------------------------------------------------------------
Real Estate Management & 172,000 Allgreen Properties Ltd. 235,389
Development - 0.2% 139,833 CapitaLand Ltd. 740,845
57,535 City Developments Ltd. 650,407
52,182 Keppel Land Ltd. 299,063
7,457 UOL Group Ltd. 28,353
83,100 Wing Tai Holdings Ltd. 216,438
--------------
2,170,495
-----------------------------------------------------------------------------------------------------------------
Road & Rail - 0.0% 95,816 ComfortDelgro Corp. Ltd. 136,611
-----------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor 160,122 Chartered Semiconductor Manufacturing Ltd. (b) 149,666
Equipment - 0.0%
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Trading Companies & 1,100 Noble Group Ltd. $ 1,239
Distributors - 0.0%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Singapore 13,151,555
- ------------------------------------------------------------------------------------------------------------------------------------
Spain - 3.8% Airlines - 0.0% 67,653 Iberia Lineas Aereas de Espana 336,721
-----------------------------------------------------------------------------------------------------------------
Biotechnology - 0.0% 25,288 Zeltia SA 237,347
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.5% 290,558 Banco Bilbao Vizcaya Argentaria SA 7,105,568
82,772 Banco Popular Espanol SA 1,540,407
517,105 Banco Santander Central Hispano SA 9,505,417
--------------
18,151,392
-----------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.3% 18,985 ACS Actividades de Construccion y Servicios, SA 1,207,033
2,030 Acciona SA 552,257
5,583 Fomento de Construcciones y Contratas SA 502,292
5,766 Grupo Ferrovial SA 566,827
6,344 Sacyr Vallehermoso SA 304,352
--------------
3,132,761
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 367,946 Telefonica SA 8,188,297
Services - 0.7%
-----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.6% 52,673 Endesa SA 2,866,592
68,748 Iberdrola SA 3,830,106
518 Iberdrola SA (a) 29,054
11,868 Union Fenosa SA 633,612
--------------
7,359,364
-----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.1% 17,768 Gamesa Corp. Tecnologica SA 642,774
-----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 1,411 Azucarera Ebro Agricolas, SA 30,333
-----------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% 16,225 Gas Natural SDG SA 985,758
-----------------------------------------------------------------------------------------------------------------
IT Services - 0.0% 16,111 Indra Sistemas SA 401,749
-----------------------------------------------------------------------------------------------------------------
Insurance - 0.0% 42,475 Corp. Mapfre SA 210,169
-----------------------------------------------------------------------------------------------------------------
Machinery - 0.0% 6,035 Zardoya Otis SA 236,450
-----------------------------------------------------------------------------------------------------------------
Media - 0.0% 8,519 Antena 3 de Television SA (b) 177,052
11,454 Gestevision Telecinco SA 324,062
673 Promotora de Informaciones SA 14,766
1,844 Sogecable SA (b) 77,061
--------------
592,941
-----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.0% 19,845 Acerinox SA 484,065
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.2% 62,481 Repsol YPF SA 2,473,532
-----------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.1% 17,098 Inditex SA 1,006,373
-----------------------------------------------------------------------------------------------------------------
Tobacco - 0.1% 24,766 Altadis SA 1,636,769
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 15,839 Abertis Infraestructuras SA $ 491,216
0.1% 27,029 Cintra Concesiones de Infraestructuras de
Transporte SA 429,429
--------------
920,645
-----------------------------------------------------------------------------------------------------------------
Water Utilities - 0.0% 32 Sociedad General de Aguas de Barcelona SA (b) 1,178
3,213 Sociedad General de Aguas de Barcelona SA Class A 117,813
--------------
118,991
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Spain 47,146,431
- ------------------------------------------------------------------------------------------------------------------------------------
Sweden - 2.5% Airlines - 0.0% 4,009 SAS AB (b) 92,198
-----------------------------------------------------------------------------------------------------------------
Building Products - 0.1% 31,777 Assa Abloy AB Series B 699,257
-----------------------------------------------------------------------------------------------------------------
Capital Markets - 0.0% 6,838 D Carnegie AB 119,192
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.4% 168,451 Nordea Bank AB 2,631,018
42,553 Skandinaviska Enskilda Banken AB Class A 1,370,064
48,812 Svenska Handelsbanken Class A 1,364,952
--------------
5,366,034
-----------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 31,048 Securitas AB 491,443
0.1% 23,048 Securitas Systems AB 78,288
--------------
569,731
-----------------------------------------------------------------------------------------------------------------
Communications Equipment - 0.4% 1,250,446 Telefonaktiebolaget LM Ericsson 4,987,896
-----------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.1% 37,605 Skanska AB Class B 805,257
-----------------------------------------------------------------------------------------------------------------
Diversified Consumer Services - 23,048 Securitas Direct AB (b) 62,170
0.0%
-----------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 6,410 OMHEX AB 190,907
0.0%
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 32,366 Tele2 AB 527,943
Services - 0.2% 188,701 TeliaSonera AB 1,384,335
--------------
1,912,278
-----------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.0% 20 Axfood AB 707
-----------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 7,749 Elekta AB 134,070
0.0% 9,320 Getinge AB Class B 200,788
--------------
334,858
-----------------------------------------------------------------------------------------------------------------
Household Durables - 0.1% 28,073 Electrolux AB 664,680
20,861 Husqvarna AB 295,305
--------------
959,985
-----------------------------------------------------------------------------------------------------------------
Machinery - 0.6% 7,167 Alfa Laval AB 431,814
26,954 Atlas Copco AB 421,639
64,717 Atlas Copco AB 1,077,943
42,146 SKB AB 881,823
88,940 Sandvik Ab 1,792,467
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
30,020 Scania AB $ 732,197
6,544 Trelleborg AB Class B 180,080
35,571 Volvo AB A Shares 728,556
90,132 Volvo AB B Shares 1,792,047
--------------
8,038,566
-----------------------------------------------------------------------------------------------------------------
Media - 0.0% 23,501 Eniro AB 298,054
2,986 Modern Times Group AB 192,455
--------------
490,509
-----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.1% 29,691 Boliden AB 615,543
2,520 Hoganas AB 74,938
17,193 SSAB Svenskt Stal AB Series A 702,588
1,832 SSAB Svenskt Stal AB Series B 69,421
--------------
1,462,490
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.0% 11,502 Lundin Petroleum AB (b) 114,579
-----------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.1% 6,721 Billerud AB 102,071
1,345 Holmen AB Class B 56,818
54,990 Svenska Cellulosa AB 919,595
--------------
1,078,484
-----------------------------------------------------------------------------------------------------------------
Real Estate Management & 3,889 Castellum AB 46,760
Development - 0.0% 3,636 Fabege AB 39,836
4,960 Kungsleden AB 61,727
6,033 Wihlborgs Fastigheter AB 106,414
--------------
254,737
-----------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.2% 42,880 Hennes & Mauritz AB B Shares 2,535,325
4,266 Nobia AB 53,130
--------------
2,588,455
-----------------------------------------------------------------------------------------------------------------
Tobacco - 0.1% 31,750 Swedish Match AB 612,454
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Sweden 30,740,744
- ------------------------------------------------------------------------------------------------------------------------------------
Switzerland - Auto Components - 0.0% 125 Rieter Holding AG 65,342
6.5% -----------------------------------------------------------------------------------------------------------------
Building Products - 0.1% 3,300 Geberit Ag 562,278
-----------------------------------------------------------------------------------------------------------------
Capital Markets - 1.4% 97,055 Credit Suisse Group 6,890,038
173,246 UBS AG 10,360,859
--------------
17,250,897
-----------------------------------------------------------------------------------------------------------------
Chemicals - 0.3% 6,646 Ciba Specialty Chemicals AG Registered Shares 431,826
16,739 Clariant AG 270,953
621 Givaudan SA 612,371
4,087 Lonza Group AG Registered Shares 374,985
9,925 Syngenta AG 1,934,886
--------------
3,625,021
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 13,034 Adecco SA Registered Shares $ 1,008,338
0.1% 301 SGS SA 355,922
--------------
1,364,260
-----------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 0.0% 14,198 Logitech International SA (b) 377,627
-----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.2% 19,025 Holcim Ltd. 2,054,655
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 2,427 Swisscom AG 829,745
Services - 0.1%
-----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.3% 178,156 ABB Ltd. 4,017,022
-----------------------------------------------------------------------------------------------------------------
Electronic Equipment & 4,444 Kudelski SA 155,392
Instruments - 0.0%
-----------------------------------------------------------------------------------------------------------------
Food Products - 1.1% 35,209 Nestle SA Registered Shares 13,378,488
-----------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 2,202 Nobel Biocare Holding AG 718,801
0.1% 2,994 Phonak Holding AG Registered Shares 268,380
864 Straumann Holding AG Registered Shares 242,210
4,117 Synthes, Inc. 493,589
--------------
1,722,980
-----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 83 Kuoni Reisen Holding AG Registered Shares 49,903
0.0%
-----------------------------------------------------------------------------------------------------------------
Insurance - 0.6% 2,667 Swiss Life Holding 703,149
32,875 Swiss Reinsurance Registered Shares 2,998,204
12,480 Zurich Financial Services AG 3,857,948
--------------
7,559,301
-----------------------------------------------------------------------------------------------------------------
Machinery - 0.1% 2,369 Schindler Holding AG 157,367
347 Sulzer AG 448,510
--------------
605,877
-----------------------------------------------------------------------------------------------------------------
Marine - 0.0% 3,237 Kuehne & Nagel International AG 298,137
-----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 1.8% 201,122 Novartis AG Registered Shares 11,291,107
62,542 Roche Holding AG 11,081,603
--------------
22,372,710
-----------------------------------------------------------------------------------------------------------------
Real Estate Management & 1,750 PSP Swiss Property AG 98,061
Development - 0.0%
-----------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor 735 Unaxis Holding AG 389,512
Equipment - 0.0%
-----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 45,231 Compagnie Financiere Richemont AG 2,703,514
0.3% 3,384 The Swatch Group Ltd. (Bearer Shares) 961,290
2,155 The Swatch Group Ltd. (Registered Shares) 121,887
--------------
3,786,691
- ------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Switzerland 80,563,899
- ------------------------------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
United Kingdom - Aerospace & Defense - 0.3% 278,738 BAE Systems Plc $ 2,249,274
22.2% 75,689 Cobham Plc 307,907
81,602 Meggitt Plc 501,416
153,881 Rolls-Royce Group Plc 1,656,914
--------------
4,715,511
-----------------------------------------------------------------------------------------------------------------
Airlines - 0.0% 47,703 British Airways Plc (b) 398,982
-----------------------------------------------------------------------------------------------------------------
Auto Components - 0.1% 61,413 GKN Plc 488,876
1,025 TI Automotive Ltd. Series A (b) 0
--------------
488,876
-----------------------------------------------------------------------------------------------------------------
Beverages - 0.6% 230,261 Diageo Plc 4,785,955
72,571 SABMiller Plc 1,837,374
77,436 Scottish & Newcastle Plc 992,646
--------------
7,615,975
-----------------------------------------------------------------------------------------------------------------
Capital Markets - 0.4% 45,768 3i Group Plc 1,065,370
78,838 Amvescap Plc 1,015,833
4,359 Close Brothers Group Plc 74,879
56,059 ICAP Plc 552,519
21,059 Investec Plc 270,436
152,407 Man Group Plc 1,853,867
5,199 Schroders Plc 132,822
7,338 Tullett Prebon Plc 65,557
--------------
5,031,283
-----------------------------------------------------------------------------------------------------------------
Chemicals - 0.2% 92,487 Imperial Chemical Industries Plc 1,150,488
22,181 Johnson Matthey Plc 749,915
--------------
1,900,403
-----------------------------------------------------------------------------------------------------------------
Commercial Banks - 3.9% 558,207 Barclays Plc 7,766,284
321,445 HBOS Plc 6,322,604
988,642 HSBC Holdings Plc 18,102,519
481,326 Lloyds TSB Group Plc 5,350,592
807,211 Royal Bank of Scotland Group Plc 10,214,033
--------------
47,756,032
-----------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 9,668 Aggreko Plc 110,717
0.4% 32,898 Biffa Plc 178,297
43,664 Capita Group Plc 633,863
3,467 Davis Service Group Plc 43,157
4,625 De La Rue Plc 71,951
99,631 Experian Group Ltd. 1,253,818
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
125,658 Group 4 Securicor Plc $ 529,860
86,430 Hays Plc 295,259
6,271 Intertek Group Plc 123,068
16,375 Michael Page International Plc 172,035
200,321 Rentokil Initial Plc 642,949
50,608 Serco Group Plc 456,213
--------------
4,511,187
-----------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.1% 42,533 Amec Plc 498,387
22,845 Balfour Beatty Plc 201,477
--------------
699,864
-----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.1% 67,697 Hanson Plc 1,460,524
-----------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.0% 14,252 Cattles Plc 111,619
13,214 Provident Financial Plc 184,951
--------------
296,570
-----------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.1% 59,697 Rexam Plc 594,550
-----------------------------------------------------------------------------------------------------------------
Distributors - 0.0% 26,225 Inchcape Plc 261,518
-----------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 19,496 London Stock Exchange Group Plc 527,103
0.0%
-----------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 706,730 BT Group Plc 4,703,674
Services - 0.4% 205,092 Cable & Wireless Plc 796,624
--------------
5,500,298
-----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.2% 87,627 British Energy Group Plc 945,310
73,584 Scottish & Southern Energy Plc 2,133,513
--------------
3,078,823
-----------------------------------------------------------------------------------------------------------------
Electronic Equipment & 17,536 Electrocomponents Plc 92,054
Instruments - 0.0% 4,873 Premier Farnell Plc 19,462
--------------
111,516
-----------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.6% 132,156 J Sainsbury Plc 1,544,865
678,089 Tesco Plc 5,673,366
--------------
7,218,231
-----------------------------------------------------------------------------------------------------------------
Food Products - 0.5% 178,973 Cadbury Schweppes Plc 2,429,097
50,300 Tate & Lyle Plc 570,818
110,210 Unilever Plc 3,558,665
--------------
6,558,580
-----------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 3,701 SSL International Plc 32,324
0.1% 92,698 Smith & Nephew Plc 1,148,528
--------------
1,180,852
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 16,477 Carnival Plc $ 787,465
0.5% 172,617 Compass Group Plc 1,191,926
41,756 Enterprise Inns Plc 575,345
61,268 First Choice Holidays Plc 389,148
20,426 Intercontinental Hotels Group Plc 507,386
55,246 Ladbrokes Plc 477,619
36,037 Mitchells & Butlers Plc 632,771
132,999 PartyGaming Plc 81,890
23,200 Punch Taverns Plc 569,175
70,061 Rank Group Plc 262,036
28,262 Thomas Cook Group Plc (b) 183,881
20,831 Whitbread Plc 736,720
26,415 William Hill Plc 324,176
--------------
6,719,538
-----------------------------------------------------------------------------------------------------------------
Household Durables - 0.2% 31,589 Barratt Developments Plc 626,164
5,238 Bellway Plc 131,868
4,004 Berkeley Group Holdings Plc 142,146
9,500 Bovis Homes Group Plc 169,525
19,510 Persimmon Plc 451,157
66,791 Taylor Wimpey Plc 480,839
45,362 Wimpey George Plc 454,077
--------------
2,455,776
-----------------------------------------------------------------------------------------------------------------
Household Products - 0.2% 50,589 Reckitt Benckiser Plc 2,769,523
-----------------------------------------------------------------------------------------------------------------
IT Services - 0.0% 143,406 LogicaCMG Plc 434,579
-----------------------------------------------------------------------------------------------------------------
Independent Power Producers & 127,400 International Power Plc 1,095,091
Energy Traders - 0.1%
-----------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.1% 17,160 Cookson Group Plc 243,036
37,325 Smiths Group Plc 885,181
92,890 Tomkins Plc 482,512
--------------
1,610,729
-----------------------------------------------------------------------------------------------------------------
Insurance - 1.0% 216,084 Aviva Plc 3,207,707
188,410 Friends Provident Plc 674,434
593,221 Legal & General Group Plc 1,779,699
474,557 Old Mutual Plc 1,599,130
208,608 Prudential Plc 2,969,389
58,472 Resolution Plc 731,740
227,193 Royal & Sun Alliance Insurance Group 660,961
162,594 Standard Life Plc 1,073,179
--------------
12,696,239
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail - 0.1% 86,582 Home Retail Group $ 793,892
-----------------------------------------------------------------------------------------------------------------
Machinery - 0.1% 7,565 Charter Plc (b) 166,930
10,160 FKI Plc 25,598
41,314 IMI Plc 489,352
84,098 Invensys Plc 640,555
--------------
1,322,435
-----------------------------------------------------------------------------------------------------------------
Media - 0.8% 74,833 Aegis Group Plc 205,092
96,811 British Sky Broadcasting Plc 1,241,230
17,377 Daily Mail & General Trust 265,734
70,300 EMI Group Plc 376,644
26,839 Emap Plc 440,440
282,651 ITV Plc 645,080
77,717 Pearson Plc 1,309,162
108,563 Reed Elsevier Plc 1,403,061
109,009 Reuters Group Plc 1,358,909
25,643 Trinity Mirror Plc 270,327
16,440 United Business Media Plc 260,058
100,379 WPP Group Plc 1,501,316
70,863 Yell Group Plc 654,575
--------------
9,931,628
-----------------------------------------------------------------------------------------------------------------
Metals & Mining - 1.8% 126,834 Anglo American Plc (b) 7,446,652
202,912 BHP Billiton Plc 5,636,662
86,423 Rio Tinto Plc Registered Shares 6,611,689
51,252 Xstrata Plc 3,051,184
--------------
22,746,187
-----------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.2% 137,958 Marks & Spencer Group Plc 1,732,631
20,290 Next Plc 814,588
--------------
2,547,219
-----------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.6% 311,426 Centrica Plc 2,419,556
229,324 National Grid Plc 3,383,746
74,913 United Utilities Plc 1,064,196
--------------
6,867,498
-----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 3.8% 291,060 BG Group Plc 4,771,221
1,652,954 BP Plc 19,888,862
314,244 Royal Dutch Shell Plc 12,793,170
235,510 Royal Dutch Shell Plc Class B 9,817,472
--------------
47,270,725
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 1.6% 130,352 AstraZeneca Plc $ 6,985,676
490,915 GlaxoSmithKline Plc 12,788,335
--------------
19,774,011
-----------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts 44,498 British Land Co. Plc 1,190,736
(REITs) - 0.4% 8,381 Brixton Plc 73,377
4,736 Great Portland Estates Plc 62,821
28,521 Hammerson Plc 816,747
40,146 Land Securities Group Plc 1,398,109
21,506 Liberty International Plc 491,955
50,917 Segro Plc 635,102
--------------
4,668,847
-----------------------------------------------------------------------------------------------------------------
Road & Rail - 0.1% 12,232 Arriva Plc 167,993
49,534 Firstgroup Plc 657,989
17,716 National Express Group Plc 377,131
43,699 Stagecoach Group Plc 159,119
--------------
1,362,232
-----------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor 115,101 ARM Holdings Plc 336,703
Equipment - 0.1% 20,291 CSR Plc (b) 317,873
--------------
654,576
-----------------------------------------------------------------------------------------------------------------
Software - 0.1% 70,946 Misys Plc 332,263
142,674 Sage Group Plc 668,447
--------------
1,000,710
-----------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.2% 26,867 The Carphone Warehouse Plc 176,599
193,068 DSG International Plc 611,945
24,803 Galiform Plc 67,523
50,995 Kesa Electricals Plc 319,989
199,555 Kingfisher Plc 903,879
90,190 Signet Group Plc 188,158
--------------
2,268,093
-----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 34,804 Burberry Group Plc 476,738
0.1%
-----------------------------------------------------------------------------------------------------------------
Tobacco - 0.6% 131,308 British American Tobacco Plc 4,478,322
57,827 Imperial Tobacco Group Plc 2,666,169
--------------
7,144,491
-----------------------------------------------------------------------------------------------------------------
Trading Companies & 38,803 Bunzl Plc 537,173
Distributors - 0.2% 6,634 Travis Perkins Plc 251,795
61,758 Wolseley Plc 1,482,174
--------------
2,271,142
-----------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation Infrastructure -
0.0% 42,037 BBA Aviation Plc $ 228,178
-----------------------------------------------------------------------------------------------------------------
Water Utilities - 0.1% 18,279 Kelda Group Plc 344,502
25,077 Severn Trent Plc 692,551
--------------
1,037,053
-----------------------------------------------------------------------------------------------------------------
Wireless Telecommunication 4,510,161 Vodafone Group Plc 15,112,699
Services - 1.2%
-----------------------------------------------------------------------------------------------------------------
Total Common Stocks in the United Kingdom 275,166,507
- ------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks
(Cost - $889,550,832) - 96.1% 1,190,475,328
-----------------------------------------------------------------------------------------------------------------
Exchange-Traded Funds
-----------------------------------------------------------------------------------------------------------------
284,277 iShares MSCI EAFE Index Fund (g) 22,921,255
-----------------------------------------------------------------------------------------------------------------
Total Exchange-Traded Funds
(Cost - $17,644,632) - 1.8% 22,921,255
-----------------------------------------------------------------------------------------------------------------
Preferred Stocks
- ------------------------------------------------------------------------------------------------------------------------------------
Germany - 0.3% Automobiles - 0.2% 855 Porsche AG 1,524,895
8,484 Volkswagen AG, 4.35% 884,604
--------------
2,409,499
-----------------------------------------------------------------------------------------------------------------
Household Products - 0.1% 18,180 Henkel KGaA, 1.75% 959,482
-----------------------------------------------------------------------------------------------------------------
Media - 0.0% 5,011 ProSieben SAT.1 Media AG, 2.24% 198,125
-----------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.0% 2,010 RWE AG, 3.50% 201,177
-----------------------------------------------------------------------------------------------------------------
Total Preferred Stocks
(Cost - $2,134,986) - 0.3%
3,768,283
-----------------------------------------------------------------------------------------------------------------
Rights
- ------------------------------------------------------------------------------------------------------------------------------------
Australia - 0.0% Real Estate Investment Trusts 11,579 Westfield Goup (d) 4,516
(REITs) - 0.0%
-----------------------------------------------------------------------------------------------------------------
Total Rights in Australia 4,516
- ------------------------------------------------------------------------------------------------------------------------------------
Hong Kong - 0.0% Real Estate Management & 1,019 New World Development Ltd. (e) 0
Development - 0.0%
-----------------------------------------------------------------------------------------------------------------
Total Rights in Hong Kong 0
- ------------------------------------------------------------------------------------------------------------------------------------
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Japan - 0.0% Metals & Mining - 0.0% 7,000 Dowa Mining Co., Ltd. (f) $ 0
-----------------------------------------------------------------------------------------------------------------
Total Rights in Japan 0
- ------------------------------------------------------------------------------------------------------------------------------------
Spain - 0.0% Machinery - 0.0% 6,035 Zardoya Otis SA (c) 23,116
-----------------------------------------------------------------------------------------------------------------
Total Rights in Spain 23,116
-----------------------------------------------------------------------------------------------------------------
Total Rights (Cost - $25,522) - 0.0% 27,632
-----------------------------------------------------------------------------------------------------------------
Total Investments
(Cost - $909,355,972*)- 98.2% 1,217,192,498
Other Assets Less Liabilities - 1.8% 22,239,999
--------------
Net Assets - 100.0% $1,239,432,497
==============
* The cost and unrealized appreciation (depreciation) of investments as of
June 30, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 918,449,793
=============
Gross unrealized appreciation $ 306,851,241
Gross unrealized depreciation (8,108,536)
-------------
Net unrealized appreciation $ 298,742,705
=============
(a) Depositary receipts.
(b) Non-income producing security.
(c) The rights may be exercised until 7/2/2007.
(d) The rights may be exercised until 7/5/2007.
(e) The rights may be exercised until 7/6/2007.
(f) The rights may be exercised until 1/29/2010.
(g) All of a portion of security held as collateral in connection with open
financial futures.
o For Series compliance purposes, the Series' industry classifications refer
to any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Series management. This definition may apply for purposes of
this report, which may combine industry sub-classifications for reporting
ease. Industries are shown as a percent of net assets.
o Financial futures contracts purchased as of June 30, 2007 were as follows:
Unrealized
Appreciation
Number of Contracts Issue Exchange Expiration Face Value (Depreciation)
- -----------------------------------------------------------------------------------------------------------------
4 Hang Seng Index Future Hong Kong July 2007 $ 561,201 $ (1,681)
43 OMX Stock Index Future Stockholm July 2007 $ 800,426 (11,215)
227 DJ Euro Stoxx 50 Eurex September 2007 $13,745,745 125,880
60 FTSE 100 Index Future LIFFE September 2007 $ 7,985,811 12,101
13 SPI 200 Index Future Sydney September 2007 $ 1,738,711 (9,173)
48 TOPIX Index Future Tokyo September 2007 $ 6,870,319 49,478
- -----------------------------------------------------------------------------------------------------------------
Total Unrealized Appreciation - Net $ 165,390
===========
Master International Index Series
Schedule of Investments as of June 30, 2007 (in U.S. dollars)
o Forward foreign exchange contracts purchased as of June 30, 2007 were as
follows:
--------------------------------------------------------------------------
Unrealized
Appreciation
Foreign Currency Purchased Settlement Date (Depreciation)
--------------------------------------------------------------------------
AUD 3,613,000 August 2007 $ 65,449
CHF 5,056,200 August 2007 (11,327)
EUR 11,882,900 August 2007 (5,249)
GBP 6,279,400 August 2007 117,900
JPY 1,517,444,700 August 2007 (313,481)
SEK 7,241,400 August 2007 (3,585)
--------------------------------------------------------------------------
Total Unrealized Depreciation on Forward Foreign
Exchange Contracts - Net (USD Commitment - $49,527,364) $ (150,293)
=============
o Forward foreign exchange contracts sold as of June 30, 2007 were as
follows:
--------------------------------------------------------------------------
Unrealized
Appreciation
Foreign Currency Sold Settlement Date (Depreciation)
--------------------------------------------------------------------------
AUD 3,613,000 August 2007 $ (33,654)
CHF 5,056,200 August 2007 (13,056)
EUR 11,882,900 August 2007 (52,855)
GBP 6,279,400 August 2007 (99,153)
JPY 1,517,444,700 August 2007 64,494
SEK 7,241,400 August 2007 (6,599)
--------------------------------------------------------------------------
Total Unrealized Depreciation on Forward Foreign
Exchange Contracts - Net (USD Commitment - $49,236,247) $ (140,823)
==============
o Investments in companies considered to be an affiliate of the Series, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------------------------
Affiliate Net Activity Interest Income
--------------------------------------------------------------------------------------------
BlackRock Liquidity Series, LLC Cash Sweep Series $ (25,751,297) $ 760,130
--------------------------------------------------------------------------------------------
o Currency Abbreviations:
AUD Australian Dollar JPY Japanese Yen
CHF Swiss Franc SEK Swedish Krona
EUR Euro USD U.S. Dollar
GBP British Pound
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/ Douglas G. Herring
--------------------
Douglas G. Herring
President
Date: September 7, 2007
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/ Douglas G. Herring
--------------------
Douglas G. Herring
President
Date: September 7, 2007
By /s/ Rebecca L. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: September 7, 2007